UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

(Mark One)



☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-6003

_____________________________________________

FEDERAL SIGNAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware						36-1063330
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1415 West 22nd Street,, Oak Brook,, Illinois

(Address of principal executive offices)

60523

(Zip code)

(~~630~~) (630) 954-2000

(Registrant’s telephone number, including area code)

_____________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	FSS	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~March 31, 2020,~~April 30, 2021, the number of shares outstanding of the registrant’s common stock was ~~60,242,620.~~

61,007,413.

Table of Contents

FEDERAL SIGNAL CORPORATION

TABLE OF CONTENTS


				Page
PART I.			FINANCIAL INFORMATION	~~Page~~
~~PART I.~~Item 1.			~~FINANCIAL INFORMATION~~
~~Item 1.~~	Financial Statements (Unaudited)	2
			Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	2
			Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	3
			Condensed Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020	4
			Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	5
			Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	6
			Notes to Condensed Consolidated Financial Statements	7
			Note 1 – Summary of Significant Accounting Policies	7
			Note 2 – ~~Revenue Recognition~~Acquisitions	98
			Note 3 – ~~Inventories~~Revenue Recognition	910
			Note 4 – ~~Debt~~Inventories	10
			Note 5 – ~~Income Taxes~~Debt	11
			Note 6 – ~~Pensions~~Goodwill and Other Intangible Assets	1112
			Note 7 – Income Taxes	13
			Note 8 – Pensions	13
			Note 9 – Commitments and Contingencies	1113
			Note 810 – Earnings Per Share	1718
			Note 911 – Stockholders’ Equity	1719
			Note 1012 – Segment Information	1921
			Note 1113 – Fair Value Measurements	2021
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.			Controls and Procedures	29

PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings	30
Item 1A.			Risk Factors	30
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	3130
Item 3.			Defaults Upon Senior Securities	3130
Item 4.			Mine Safety Disclosures	3130
Item 5.			Other Information	3130
Item 6.			Exhibits	3231

SIGNATURE				3332

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) is being filed by Federal Signal Corporation and its subsidiaries (referred to collectively as the “Company,” “we,” “our” or “us” herein, unless the context otherwise indicates) with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”), and includes comments made by management that may contain words such as “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “project,” “estimate” and “objective” or similar terminology, or the negative thereof, 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 Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 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 risk factors described under Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the SEC on February ~~27, 2020, and as updated in Part II, Item 1A,~~ ~~Risk Factors~~ ~~of this Form 10-Q.~~25, 2021. 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, including, for example, the ~~recent~~ongoing coronavirus (“COVID-19”) pandemic and the government response to the pandemic. The Company cannot predict such factors, nor can it assess the impact, if any, of such factors on its results of operations, financial condition or cash flow. 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-Q.

ADDITIONAL INFORMATION

The Company is subject to the reporting and information requirements of the Exchange Act and, as a result, is obligated to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and information with the SEC, as well as amendments to those reports. The Company makes these filings available free of charge through our website at www.federalsignal.com as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC. Information on our website does not constitute part of this Form 10-Q.

Table of Contents

PART I. FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements (Unaudited).~~

Item 1. Financial Statements (Unaudited).

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended March 31,					Three Months Ended March 31,
(in millions, except per share data)	2020		2019		(in millions, except per share data)	2021		2020
Net sales	$	286.1	$	273.8	Net sales	$	278.8	$	286.1
Cost of sales	211.3		203.5		Cost of sales	210.0		211.3
Gross profit	74.8		70.3		Gross profit	68.8		74.8
Selling, engineering, general and administrative expenses	42.2		43.9		Selling, engineering, general and administrative expenses	40.8		42.2
Acquisition and integration-related expenses	0.3		0.6		Acquisition and integration-related expenses	0.2		0.3

Operating income	32.3		25.8		Operating income	27.8		32.3
Interest expense	1.5		2.0		Interest expense	1.1		1.5
Other expense, net	0.2		0.4

Other (income) expense, net					Other (income) expense, net	(0.5)		0.2
Income before income taxes	30.6		23.4		Income before income taxes	27.2		30.6
Income tax expense	7.2		5.9		Income tax expense	5.0		7.2

Net income	$	23.4	$	17.5	Net income	$	22.2	$	23.4
Earnings per share:					Earnings per share:

Basic	$	0.39	$	0.29	Basic	$	0.37	$	0.39

Diluted	0.38		0.29		Diluted	0.36		0.38
Weighted average common shares outstanding:					Weighted average common shares outstanding:
Basic	60.5		60.1		Basic	60.6		60.5
Diluted	61.7		61.2		Diluted	61.7		61.7

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	2020			2019			(in millions)	2021		2020
Net income	$	23.4		$	17.5		Net income	$	22.2	$	23.4
Other comprehensive (loss) income:
Other comprehensive income (loss):							Other comprehensive income (loss):
Change in foreign currency translation adjustment	(6.1		)	—			Change in foreign currency translation adjustment	(1.2)		(6.1)
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.2 and $0.2, respectively	1.8			0.2			Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.2 and $0.2, respectively	0.7		1.8
Change in unrealized gain or loss on interest rate swaps, net of income tax benefit of $(1.0) and $(0.2), respectively	(3.1		)	(0.5		)
Total other comprehensive loss	(7.4		)	(0.3		)
Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.3 and $(1.0), respectively							Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.3 and $(1.0), respectively	0.8		(3.1)
Total other comprehensive income (loss)							Total other comprehensive income (loss)	0.3		(7.4)
Comprehensive income	$	16.0		$	17.2		Comprehensive income	$	22.5	$	16.0

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2020			December 31, 2019				March 31, 2021		December 31, 2020
(in millions, except per share data)	(Unaudited)						(in millions, except per share data)	(Unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	69.4		$	31.6		Cash and cash equivalents	$	54.8	$	81.7
Accounts receivable, net of allowances for doubtful accounts of $2.3 and $2.4, respectively	141.4			134.2
Accounts receivable, net of allowances for doubtful accounts of $2.7 and $2.9, respectively							Accounts receivable, net of allowances for doubtful accounts of $2.7 and $2.9, respectively	136.3		127.0
Inventories	201.4			182.9			Inventories	204.6		185.0
Prepaid expenses and other current assets	10.7			12.0			Prepaid expenses and other current assets	9.2		11.8

Total current assets	422.9			360.7			Total current assets	404.9		405.5
Properties and equipment, net of accumulated depreciation of $127.5 and $125.5, respectively	98.1			91.9
Rental equipment, net of accumulated depreciation of $34.6 and $33.6, respectively	115.9			115.4
Properties and equipment, net of accumulated depreciation of $140.8 and $136.2, respectively							Properties and equipment, net of accumulated depreciation of $140.8 and $136.2, respectively	112.5		106.9
Rental equipment, net of accumulated depreciation of $44.0 and $43.5, respectively							Rental equipment, net of accumulated depreciation of $44.0 and $43.5, respectively	116.2		113.3
Operating lease right-of-use assets	25.8			27.6			Operating lease right-of-use assets	33.8		21.9
Goodwill	387.9			388.8			Goodwill	406.7		394.2
Intangible assets, net of accumulated amortization of $24.5 and $22.1, respectively	159.8			162.9
Intangible assets, net of accumulated amortization of $34.4 and $31.9, respectively							Intangible assets, net of accumulated amortization of $34.4 and $31.9, respectively	178.7		153.5
Deferred tax assets	9.2			10.0			Deferred tax assets	8.9		9.5
Deferred charges and other long-term assets	7.2			7.9			Deferred charges and other long-term assets	4.2		3.8
Long-term assets of discontinued operations	0.3			0.3			Long-term assets of discontinued operations	0.2		0.2
Total assets	$	1,227.1		$	1,165.5		Total assets	$	1,266.1	$	1,208.8
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:

Current portion of long-term borrowings and finance lease obligations	$	0.2		$	0.2		Current portion of long-term borrowings and finance lease obligations	$	0.6	$	0.2
Accounts payable	78.0			65.0			Accounts payable	71.2		51.6
Customer deposits	15.6			11.5			Customer deposits	15.3		13.3

Accrued liabilities:							Accrued liabilities:
Compensation and withholding taxes	23.0			31.1			Compensation and withholding taxes	23.6		30.3
Current operating lease liabilities							Current operating lease liabilities	9.9		8.2
Other current liabilities	50.1			52.2			Other current liabilities	46.0		44.7
Current liabilities of discontinued operations	0.2			0.2			Current liabilities of discontinued operations	0.1		0.1
Total current liabilities	167.1			160.2			Total current liabilities	166.7		148.4
Long-term borrowings and finance lease obligations	278.7			220.3			Long-term borrowings and finance lease obligations	222.0		209.8
Long-term operating lease liabilities	19.8			21.6			Long-term operating lease liabilities	25.8		15.5
Long-term pension and other postretirement benefit liabilities	48.9			50.9			Long-term pension and other postretirement benefit liabilities	52.9		54.0

Deferred tax liabilities	54.3			52.7			Deferred tax liabilities	54.4		53.7
Other long-term liabilities	21.2			17.3			Other long-term liabilities	23.9		24.5
Long-term liabilities of discontinued operations	0.9			0.9			Long-term liabilities of discontinued operations	0.8		0.8
Total liabilities	590.9			523.9			Total liabilities	546.5		506.7
Stockholders’ equity:							Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 67.2 and 66.9 shares issued, respectively	67.2			66.9
Common stock, $1 par value per share, 90.0 shares authorized, 68.4 and 67.8 shares issued, respectively							Common stock, $1 par value per share, 90.0 shares authorized, 68.4 and 67.8 shares issued, respectively	68.4		67.8
Capital in excess of par value	230.1			228.6			Capital in excess of par value	245.2		240.8
Retained earnings	546.8			528.2			Retained earnings	621.7		605.0
Treasury stock, at cost, 7.0 and 6.4 shares, respectively	(111.4		)	(93.0		)
Treasury stock, at cost, 7.4 and 7.3 shares, respectively							Treasury stock, at cost, 7.4 and 7.3 shares, respectively	(124.3)		(119.8)
Accumulated other comprehensive loss	(96.5		)	(89.1		)	Accumulated other comprehensive loss	(91.4)		(91.7)
Total stockholders’ equity	636.2			641.6			Total stockholders’ equity	719.6		702.1
Total liabilities and stockholders’ equity	$	1,227.1		$	1,165.5		Total liabilities and stockholders’ equity	$	1,266.1	$	1,208.8

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	2020			2019			(in millions)	2021		2020
Operating activities:							Operating activities:
Net income	$	23.4		$	17.5		Net income	$	22.2	$	23.4
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Net gain on sales of properties and equipment	(0.2		)	—
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	10.8			9.5			Depreciation and amortization	12.2		10.8
Deferred financing costs	0.1			0.1

Stock-based compensation expense	1.0			1.4			Stock-based compensation expense	1.3		1.0
Pension (benefit) expense, net of funding	(0.4		)	(0.1		)
Changes in fair value of contingent consideration and deferred payment	—			0.3

Deferred income taxes	2.8			1.2			Deferred income taxes	0.5		2.8
Changes in operating assets and liabilities	(32.3		)	(38.7		)	Changes in operating assets and liabilities	(10.2)		(32.8)
Net cash provided by (used for) operating activities	5.2			(8.8		)

Net cash provided by operating activities							Net cash provided by operating activities	26.0		5.2
Investing activities:							Investing activities:
Purchases of properties and equipment	(9.5		)	(4.5		)	Purchases of properties and equipment	(4.3)		(9.5)
Proceeds from sales of properties and equipment	0.3			—

Payments for acquisition-related activity, net of cash acquired							Payments for acquisition-related activity, net of cash acquired	(52.2)		0
Proceeds from acquisition-related activity	0.8			—			Proceeds from acquisition-related activity	0		0.8
Other, net							Other, net	0.1		0.3

Net cash used for investing activities	(8.4		)	(4.5		)	Net cash used for investing activities	(56.4)		(8.4)
Financing activities:							Financing activities:
Increase in revolving lines of credit, net	63.6			5.5			Increase in revolving lines of credit, net	10.1		63.6

Purchases of treasury stock	(13.5		)	(1.0		)	Purchases of treasury stock	0		(13.5)
Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	(4.0		)	(1.1		)	Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	(4.0)		(4.0)

Cash dividends paid to stockholders	(4.8		)	(4.8		)	Cash dividends paid to stockholders	(5.5)		(4.8)
Proceeds from stock-based compensation activity							Proceeds from stock-based compensation activity	3.3		0

Other, net	0.1			—			Other, net	0.1		0.1
Net cash provided by (used for) financing activities	41.4			(1.4		)

Net cash provided by financing activities							Net cash provided by financing activities	4.0		41.4
Effects of foreign exchange rate changes on cash and cash equivalents	(0.4		)	—			Effects of foreign exchange rate changes on cash and cash equivalents	(0.5)		(0.4)
Increase (decrease) in cash and cash equivalents	37.8			(14.7		)
(Decrease) increase in cash and cash equivalents							(Decrease) increase in cash and cash equivalents	(26.9)		37.8
Cash and cash equivalents at beginning of year	31.6			37.4			Cash and cash equivalents at beginning of year	81.7		31.6
Cash and cash equivalents at end of period	$	69.4		$	22.7		Cash and cash equivalents at end of period	$	54.8	$	69.4

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


	Three Months Ended March 31, 2021
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2021	$	67.8	$	240.8	$	605.0	$	(119.8)	$	(91.7)	$	702.1
Net income					22.2						22.2
Total other comprehensive income									0.3		0.3
Cash dividends declared ($0.09 per share)					(5.5)						(5.5)
Stock-based payments:
Stock-based compensation			1.3								1.3
Stock option exercises and other	0.4		3.3				(0.7)				3.0
Performance share unit transactions	0.2		(0.2)				(3.8)				(3.8)

Balance at March 31, 2021	$	68.4	$	245.2	$	621.7	$	(124.3)	$	(91.4)	$	719.6

Three Months Ended March 31, 2020
(in millions) Common
Stock Capital in
Excess of
Par
Value Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total
Balance at January 1, 2020 $ 66.9
$ 228.6
$ 528.2
$ (93.0 ) $ (89.1 ) $ 641.6
Net income 23.4
23.4
Total other comprehensive loss (7.4 ) (7.4 )
Cash dividends declared ($0.08 per share) (4.8 ) (4.8 )
Stock-based payments:
Stock-based compensation 1.0
1.0
Stock option exercises and other 0.1
0.7
(2.0 ) (1.2 )
Performance share unit transactions 0.2
(0.2 ) (2.9 ) (2.9 )
Stock repurchase program (13.5 ) (13.5 )
Balance at March 31, 2020 $ 67.2
$ 230.1
$ 546.8
$ (111.4 ) $ (96.5 ) $ 636.2


	Three Months Ended March 31, 2019																		Three Months Ended March 31, 2020
(in millions)	Common Stock		Capital in Excess of Par Value			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total			(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2019	$	66.4	$	217.0		$	432.5		$	(88.5	)	$	(97.3	)	$	530.1
Balance at January 1, 2020																		Balance at January 1, 2020	$	66.9	$	228.6	$	528.2	$	(93.0)	$	(89.1)	$	641.6
Net income						17.5									17.5			Net income					23.4						23.4
Total other comprehensive loss												(0.3		)	(0.3		)	Total other comprehensive loss									(7.4)		(7.4)
Cash dividends declared ($0.08 per share)						(4.8		)							(4.8		)	Cash dividends declared ($0.08 per share)					(4.8)						(4.8)
Impact of adoption of ASU 2016-02						6.5									6.5

Stock-based payments:																		Stock-based payments:
Stock-based compensation			1.4												1.4			Stock-based compensation			1.0								1.0
Stock option exercises and other	—		0.1						(0.2		)				(0.1		)	Stock option exercises and other	0.1		0.7				(2.0)				(1.2)
Performance share unit transactions	0.1		(0.1		)				(0.9		)				(0.9		)	Performance share unit transactions	0.2		(0.2)				(2.9)				(2.9)
Stock repurchase program									(1.0		)				(1.0		)	Stock repurchase program							(13.5)				(13.5)
Balance at March 31, 2019	$	66.5	$	218.4		$	451.7		$	(90.6	)	$	(97.6	)	$	548.4
Balance at March 31, 2020																		Balance at March 31, 2020	$	67.2	$	230.1	$	546.8	$	(111.4)	$	(96.5)	$	636.2

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of the Business

Federal Signal Corporation was founded in 1901 and was reincorporated as a Delaware corporation in 1969. References herein to the “Company,” “we,” ~~“our”~~“our�� or “us” refer collectively to Federal Signal Corporation and its subsidiaries.

Products manufactured and services rendered by the Company are divided into 2 reportable segments: Environmental Solutions Group and Safety and Security Systems Group. 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. These segments are discussed in Note 1012 – Segment Information.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements represent the consolidation of Federal Signal Corporation and its subsidiaries included herein and have been prepared by the Company pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures presented herein are adequate to ensure the information presented is not misleading. Except as otherwise noted, these condensed consolidated financial statements have been prepared in accordance with the Company’s accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, and should be read in conjunction with those consolidated financial statements and the notes thereto.

In addition, as discussed in Note 2 – Acquisitions, on February 17, 2021, the Company completed the acquisition of all of the outstanding equity of OSW Equipment & Repair, LLC (“OSW”), a leading manufacturer of dump truck bodies and custom upfitter of truck equipment and trailers. The acquisition also includes OSW’s wholly-owned subsidiaries, Northend Truck Equipment, LLC and Western Truck Body Mfg. ULC. The Condensed Consolidated Balance Sheet as of March 31, 2021 includes preliminary fair values assigned to the assets acquired and liabilities assumed in connection with the acquisition, and the Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 include the post-acquisition operating results of OSW.

These condensed consolidated financial statements include all normal and recurring adjustments that we considered necessary to present a fair statement of our results of operations, financial condition and cash flow. Intercompany balances and transactions have been eliminated in consolidation.

The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year, which may differ materially due to, among other things, the risk factors described under Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the SEC on February ~~29, 2020, and as updated in Part II, Item 1A,~~ ~~Risk Factors, in this Form 10-Q.~~25, 2021. While we label our quarterly information using a calendar convention whereby our first, second and third quarters are labeled as ending on March 31, June 30 and September 30, respectively, it is our longstanding practice to establish interim quarterly closing dates based on a 13-week period ending on a Saturday, with our fiscal year ending on December 31. The effects of this practice are not material and exist only within a reporting year.

Recent Accounting Pronouncements and Accounting Changes

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ~~(the “FASB”)~~ issued Accounting Standards Update (“ASU”) ~~No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements~~, which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions, and reasonable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The amendments in this ASU should be applied on a modified retrospective basis. The Company adopted this guidance effective January 1, 2020. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820)~~, which eliminates certain disclosure requirements, such as the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy. This ASU adds new disclosure requirements for Level 3 measurements, and is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2020. The adoption of this ASU did not have a material impact on the Company’s disclosures in its consolidated financial statements.

~~In December 2019, the FASB issued ASU~~ No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020 and interim periods

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within those fiscal ~~years. Early~~years, with early adoption is permitted. The amendments ~~in this ASU~~ should be applied on a retrospective, modified retrospective or prospective basis, depending on the area covered by the update. The Company ~~currently expects to adopt~~adopted this guidance on a prospective basis effective January 1, ~~2021 and does~~2021. The adoption of this ASU did not ~~expect that its adoption will~~ have a material impact on the Company’s consolidated financial statements.

~~In March 2020, the FASB issued ASU No. 2020-04,~~ ~~Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Among other things, for all types of hedging relationships, the guidance allows an entity to change the reference rate and other critical terms related to reference rate reform without having to remeasure the value or reassess a previous accounting determination. The amendments in this guidance should be applied on a prospective basis and, for companies with a fiscal year ending December 31, are effective from January 1, 2020 through December 31, 2022. The Company adopted this guidance effective January 1, 2020. When the transition occurs, the Company expects to apply this expedient to its existing interest rate swap that references LIBOR, and to any other new transactions that reference LIBOR or another reference rate that is discontinued, through December 31, 2022. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.

~~No other~~There are no new accounting pronouncements issued, but not yet adopted, that are expected to have a material impact on the Company’s results of operations, financial position or cash flow.

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Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results ~~could~~and outcomes may differ, ~~from those estimates.~~including as a result of the risks and uncertainties associated with the COVID-19 pandemic and its effect on the global economy.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

NOTE 2 – ACQUISITIONS

Acquisition of OSW

On February 17, 2021, the Company completed the acquisition of all of the outstanding equity of OSW, a leading manufacturer of dump truck bodies and custom upfitter of truck equipment and trailers. The acquisition also includes OSW’s wholly-owned subsidiaries, Northend Truck Equipment, LLC and Western Truck Body Mfg. ULC. The Company expects that the OSW acquisition will strengthen its specialty vehicle market position by expanding its geographic footprint and enhancing its portfolio of dump truck body and trailer product offerings. The assets and liabilities of OSW have been consolidated into the Company’s Condensed Consolidated Balance Sheet as of March 31, 2021, and the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations, within the Environmental Solutions Group.

The initial cash consideration paid by the Company to acquire OSW was approximately $53.5 million, inclusive of certain preliminary closing adjustments. Any additional closing adjustments are expected to be finalized before the end of the third quarter of 2021.

The acquisition is being accounted for in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the completion of the acquisition. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. Due to the proximity of the date of acquisition to the date of issuance of the condensed consolidated financial statements, the Company’s purchase price allocation as of March 31, 2021 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the filing date of this Form 10-Q. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable.

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The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


(in millions)
Purchase price, inclusive of preliminary closing adjustments (a)	$	53.5
Total consideration	53.5

Cash	1.3
Accounts receivable	3.6
Inventories	8.7
Prepaid expenses and other current assets	0.7

Properties and equipment	5.8

Operating lease right-of-use assets	12.3

Customer relationships (b)	16.9
Trade names (c)	10.3
Other intangible assets	0.4
Operating lease liabilities	(12.3)
Accounts payable	(3.8)
Accrued liabilities	(1.4)
Customer deposits	(0.8)
Finance lease obligations	(1.7)
Net assets acquired	40.0

Goodwill (d)	$	13.5

(a) The initial purchase price, which is subject to certain post-closing adjustments, including working capital, was funded through existing cash and borrowings under the Company’s revolving credit facility.

(b) Represents the preliminary fair value assigned to customer relationships, which are considered to be definite-lived intangible assets, with a preliminary estimated useful life of approximately 12 years.

(c) Represents the preliminary fair value assigned to trade names, which are considered to be indefinite-lived intangible assets.

(d) Goodwill, the majority of which is tax-deductible, has been allocated to the Environmental Solutions Group on the basis that the synergies identified will primarily benefit this segment.

In connection with the acquisition of OSW, the Company entered into a lease agreement for a facility owned by an entity affiliated with the sellers of OSW. The agreement includes an initial term of 10 years, with options to renew, and an annual rent that is considered market-based. During the three months ended March 31, 2021, total rent paid under this agreement to such entity, which is owned by individuals, certain of whom are now employees of the Company, was approximately $0.1 million, and the total lease liability as of March 31, 2021 was $9.9 million.

In the period between the February 17, 2021 closing date and March 31, 2021, OSW generated approximately $7.1 million of net sales and $0.4 million of operating income. The Company has included the operating results of OSW within the Environmental Solutions Group in its condensed consolidated financial statements since the closing date.

The acquisition was not, and would not have been, material to the Company’s net sales, results of operations or total assets during any period presented. Accordingly, the Company’s consolidated results from operations do not differ materially from historical performance as a result of the acquisition, and therefore, pro-forma results are not presented.

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NOTE 23 – REVENUE RECOGNITION

The following table presents the Company’s Net sales disaggregated by geographic region, based on the location of the end customer, and by major product line:


	Three Months Ended March 31,
(in millions)	2021		2020
Geographic Region:
U.S.	$	215.5	$	226.6
Canada	40.6		33.5
Europe/Other	22.7		26.0
Total net sales	$	278.8	$	286.1
Major Product Line:
Environmental Solutions
Vehicles and equipment (a)	$	179.0	$	186.1
Parts	35.7		33.4
Rental income (b)	7.5		8.8
Other (c)	5.9		4.7
Total	228.1		233.0
Safety and Security Systems
Public safety and security equipment	31.3		31.8
Industrial signaling equipment	13.4		14.3
Warning systems	6.0		7.0

Total	50.7		53.1
Total net sales	$	278.8	$	286.1

(a)

Three Months Ended
March 31,
(in millions) 2020 2019
Geographic Region:
U.S. $ 226.6
$ 204.8
Canada 33.5
44.4
Europe/Other 26.0
24.6
Total net sales $ 286.1
$ 273.8
Major Product Line:
Environmental Solutions
Vehicles and equipment ^(a)
$ 186.1
$ 173.7
Parts 33.4
31.1
Rental income ^(b)
8.8
9.6
Other ^(c)
4.7
5.1
Total 233.0
219.5
Safety and Security Systems
Public safety and security equipment 31.8
32.4
Industrial signaling equipment 14.3
13.8
Warning systems 7.0
8.1
Total 53.1
54.3
Total net sales $ 286.1
$ 273.8

Includes net sales from the sale of new and used vehicles and equipment, including sales of rental equipment.


~~(a)~~	~~Includes net sales from the sale of new and used vehicles and equipment, including sales of rental equipment.~~


~~(b)~~	~~Represents income from vehicle and equipment lease arrangements with customers.~~


~~(c)~~	~~Primarily includes revenues from services, such as maintenance and repair work, and the sale of extended warranty contracts.~~

(b) Represents income from vehicle and equipment lease arrangements with customers.

(c) Primarily includes revenues from services, such as maintenance and repair work, and the sale of extended warranty contracts.

Contract Balances

The Company recognizes contract liabilities when cash payments, such as customer deposits, are received in advance of the Company’s satisfaction of the related performance obligations. Contract liabilities are recognized as Net sales when the related performance obligations are satisfied, which generally occurs within three to six months of the cash receipt. Contract liability balances are not materially impacted by any other factors. The Company’s contract liabilities were ~~$18.4~~$18.5 million and ~~$13.9~~$17.0 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.Contract assets, such as unbilled receivables, were not material as of any of the periods presented herein.

NOTE 34 – INVENTORIES

The following table summarizes the components of Inventories:

(in millions) March 31,
2020 December 31,
2019
Finished goods $ 93.7
$ 86.8
Raw materials 86.6
79.5
Work in process 21.1
16.6
Total inventories $ 201.4
$ 182.9


(in millions)	March 31, 2021		December 31, 2020
Finished goods	$	99.2	$	95.3
Raw materials	86.2		76.6
Work in process	19.2		13.1
Total inventories (a)	$	204.6	$	185.0

(a) Amounts at March 31, 2021 include inventories acquired in the OSW acquisition - see Note 2 – Acquisitions.

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NOTE 45 – DEBT

The following table summarizes the components of Long-term borrowings and finance lease obligations:


(in millions)	March 31, 2021		December 31, 2020

2019 Credit Agreement (a)	$	220.1	$	209.4
Finance lease obligations (b)	2.5		0.6
Total long-term borrowings and finance lease obligations, including current portion	222.6		210.0

Less: Current finance lease obligations (b)	0.6		0.2
Total long-term borrowings and finance lease obligations	$	222.0	$	209.8

(in millions) March 31,
2020 December 31, 2019
2019 Credit Agreement^(a)
$ 278.2
$ 219.9
Finance lease obligations 0.7
0.6
Total long-term borrowings and finance lease obligations, including current portion 278.9
220.5
Less: Current finance lease obligations 0.2
0.2
Total long-term borrowings and finance lease obligations $ 278.7
$ 220.3
(a) Defined as the Second Amended and Restated Credit Agreement, dated July 30, 2019. Amounts at March 31, 2021 include incremental borrowings to fund a portion of the OSW acquisition - see Note 2 – Acquisitions.

(b) Amounts at March 31, 2021 include finance lease obligations acquired in connection with the OSW acquisition - see Note 2 – Acquisitions.


~~(a)~~	~~Defined as the Second Amended and Restated Credit Agreement, dated July 30, 2019.~~

As more fully described within Note 1113 – Fair Value Measurements, the Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. 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 estimated fair values of the Company’s long-term borrowings:


	March 31, 2021				December 31, 2020
(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value

Long-term borrowings (a)	$	222.6	$	222.6	$	210.0	$	210.0

March 31, 2020 December 31, 2019
(in millions)
Notional
Amount

Fair
Value

Notional
Amount

Fair
Value
Long-term borrowings^(a)
$ 278.9
$ 278.9
$ 220.5
$ 220.5
(a) Long-term borrowings includes current finance lease obligations of $0.6 million and $0.2 million as of March 31, 2021 and December 31, 2020, respectively.


~~(a)~~	~~Long-term borrowings includes current finance lease obligations of $0.2 million and $0.2 million as of March 31, 2020 and December 31, 2019, respectively.~~

Borrowings under the 2019 Credit Agreement 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 0 to 0.75% for base rate borrowings and 1.00% to 1.75% for LIBOR borrowings. The Company must also pay a commitment fee to the lenders ranging between 0.10% to 0.25% per annum on the unused portion of the $500 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 Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2019 Credit Agreement that are to be measured at each fiscal quarter-end. The Company was in compliance with all such covenants as of March 31, ~~2020.~~2021.

As of March 31, ~~2020,~~2021, there was ~~$278.2~~$220.1 million of cash drawn and ~~$11.2~~$10.3 million of undrawn letters of credit under the 2019 Credit Agreement, with ~~$210.6~~$269.6 million of net availability for borrowings. As of December 31, ~~2019,~~2020, there was ~~$219.9~~$209.4 million cash drawn and ~~$11.2~~$10.3 million of undrawn letters of credit under the 2019 Credit Agreement, with ~~$268.9~~$280.3 million of net availability for borrowings.

The following table summarizes the gross borrowings and gross payments under the Company’s revolving credit facilities:

Three Months Ended
March 31,
(in millions) 2020 2019
Gross borrowings $ 81.1
$ 7.0
Gross payments 17.5
1.5


	Three Months Ended March 31,
(in millions)	2021		2020
Gross borrowings	$	45.0	$	81.1
Gross payments	34.9		17.5

Interest Rate Swap

On June 2, 2017, the Company entered into an interest rate swap (the “2017 Swap”) with a notional amount of $150.0 million, as a means of fixing the floating interest rate component on $150.0 million of its variable-rate debt. In the third quarter of 2019, the Company terminated the 2017 Swap and received $0.2 million in connection with its settlement. The 2017 Swap was previously designated as a cash flow hedge, with an original termination date of June 2, 2020.

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On October 2, 2019, the Company entered into an interest rate swap (the ~~“2019 Swap”~~“Swap”) with a notional amount of $75.0 million, as a means of fixing the floating interest rate component on $75.0 million of its variable-rate debt. The ~~2019~~ Swap is designated as a cash flow hedge, with a maturity date of July 30, 2024.

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As a result of the application of hedge accounting treatment, all unrealized gains and losses related to the derivative instrument are recorded in Accumulated other comprehensive loss and are reclassified into operations in the same period in which the hedged transaction affects earnings. ~~The gain on the termination of the 2017 Swap has been included in Accumulated other comprehensive loss and will be reclassified into earnings ratably through June 2, 2020.~~ Hedge effectiveness is assessed quarterly. The Company does not use derivative instruments for trading or speculative purposes.

The fair value of the Company’s interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve (Level 2 inputs) and measured on a recurring basis in our Condensed Consolidated Balance Sheets. At March 31, ~~2020,~~2021, the fair value of the ~~2019~~ Swap was a liability of ~~$3.1~~$1.9 million, which was included in Other long-term liabilities on the Condensed Consolidated Balance Sheet. At December 31, ~~2019,~~2020, the fair value of the ~~2019~~ Swap was ~~an asset~~a liability of ~~$0.9~~$3.0 million, which was included in ~~Deferred charges and other~~Other long-term ~~assets~~liabilities on the Condensed Consolidated Balance Sheet. During the three months ended March 31, ~~2020 and 2019,~~2021, an unrealized pre-tax ~~losses~~gain of ~~$4.0~~$1.1 million ~~and $0.6 million, respectively, were~~was recorded in Accumulated other comprehensive loss, ~~and no~~whereas during the three months ended March 31, 2020, an unrealized pre-tax loss of $4.0 million was recorded. NaN ineffectiveness was ~~recorded.~~recorded in either period.

NOTE 56 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the carrying amount of goodwill, and the changes in the carrying amount of goodwill in the three months ended March 31, 2021, by segment:


(in millions)	Environmental Solutions		Safety & Security Systems		Total
Balance at January 1, 2021	$	279.9	$	114.3	$	394.2
Acquisitions	13.5		0		13.5
Translation adjustments	0.1		(1.1)		(1.0)
Balance at March 31, 2021	$	293.5	$	113.2	$	406.7

The following table summarizes the gross carrying amount and accumulated amortization of intangible assets for each major class of intangible assets:


	March 31, 2021						December 31, 2020
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Definite-lived intangible assets:
Customer relationships (a)	$	125.5	$	(32.0)	$	93.5	$	108.6	$	(29.6)	$	79.0
Other (a)	4.8		(2.4)		2.4		4.4		(2.3)		2.1
Total definite-lived intangible assets	130.3		(34.4)		95.9		113.0		(31.9)		81.1
Indefinite-lived intangible assets:
Trade names	82.8		—		82.8		72.4		—		72.4
Total indefinite-lived intangible assets	82.8		—		82.8		72.4		—		72.4
Total intangible assets	$	213.1	$	(34.4)	$	178.7	$	185.4	$	(31.9)	$	153.5

(a) Average useful life of customer relationships and other definite-lived intangible assets are estimated to be approximately 12 years and seven years, respectively. The average useful life across all definite-lived intangible assets is estimated to be approximately 12 years.

The table above includes preliminary estimates of the fair value and useful lives of certain definite and indefinite-lived intangible assets related to the OSW acquisition completed during 2021. As further described in Note 2 – Acquisitions, the preliminary measurements of fair value included in the table above are subject to change during the measurement period as valuations are finalized.

Amortization expense for the three months ended March 31, 2021 and 2020 was $2.6 million and $2.4 million, respectively.

The Company currently estimates that aggregate amortization expense will be approximately $8.4 million for the remainder of 2021, $11.0 million in 2022, $10.9 million in 2023, $10.8 million in 2024, $10.7 million in 2025, and $44.1 million thereafter. Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency rates, measurement period adjustments for the OSW acquisition, impairment of intangible assets and other events.

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NOTE 7 – INCOME TAXES

The Company recognized income tax expense of ~~$7.2~~$5.0 million and ~~$5.9~~$7.2 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~increase~~decrease in tax expense in the current-year quarter was largely due to ~~higher~~lower pre-tax income levels, ~~partially offset by~~and the recognition of ~~a $0.7~~$1.1 million more excess tax ~~benefit~~benefits from stock compensation ~~activity.~~activity compared to the prior-year quarter. The Company’s effective tax rate for the three months ended March 31, ~~2020~~2021 was ~~23.5%~~18.4%, compared to ~~25.2%~~23.5% in the prior-year quarter.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The income tax provisions of the CARES Act had limited applicability to the Company as of March 31, 2020, and therefore, the enactment of the CARES Act did not have a material impact on the Company’s consolidated financial statements as of, and for the three months ended, March 31, 2020.

NOTE 68 – PENSIONS

The following table summarizes the components of ~~net~~Net periodic pension ~~(benefit) expense:~~benefit:

U.S. Benefit Plan Non-U.S. Benefit Plan
Three Months Ended
March 31, Three Months Ended
March 31,
(in millions) 2020 2019 2020 2019
Service cost $ —
$ —
$ 0.1
$ 0.1
Interest cost 1.4
1.7
0.3
0.3
Amortization of actuarial loss 0.8
0.6
0.1
0.2
Expected return on plan assets (2.3 ) (2.2 ) (0.5 ) (0.5 )
Net periodic pension (benefit) expense $ (0.1 ) $ 0.1
$ —
$ 0.1


	U.S. Benefit Plan				Non-U.S. Benefit Plan
	Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	2021		2020				2021		2020
Service cost	$	0	$	0			$	0.1	$	0.1
Interest cost	1.2		1.4				0.2		0.3
Amortization of actuarial loss	1.0		0.8				0.2		0.1
Amortization of prior service cost	0		0				0.0		0.0
Expected return on plan assets	(2.4)		(2.3)				(0.5)		(0.5)
Net periodic pension benefit	$	(0.2)	$	(0.1)			$	0	$	0

The items that comprise Net periodic pension ~~(benefit) expense,~~benefit, other than service cost, are included as a component of Other (income) expense, net on the Condensed Consolidated Statements of Operations.

NOTE 79 – COMMITMENTS AND CONTINGENCIES

Financial Commitments

The Company provides indemnifications and other guarantees in the ordinary course of business, the terms of which range in duration and often are not explicitly defined. Specifically, the Company is occasionally required to provide letters of credit and bid and performance bonds to various customers, principally to act as security for retention levels related to casualty insurance policies and to guarantee the performance of subsidiaries that engage in export and domestic transactions. At March 31, ~~2020,~~2021, the Company had outstanding performance and financial standby letters of credit, as well as outstanding bid and performance bonds, aggregating to ~~$23.5~~$33.4 million. If any such letters of credit or bonds are called, the Company would be obligated to

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reimburse the issuer of the letter of credit or bond. The Company believes the likelihood of any currently outstanding letter of credit or bond being called is remote.

The Company has transactions involving the sale of equipment to certain of its customers which include (i) guarantees to repurchase the equipment for a fixed price at a future date and (ii) guarantees to repurchase the equipment from the third-party lender in the event of default by the customer. As of March 31, ~~2020,~~2021, both the single year and maximum potential cash payments the Company could be required to make to repurchase equipment under these agreements ~~were $3.5 million and $3.7 million, respectively.~~amounted to $3.9 million. The Company’s risk under these repurchase arrangements would be partially mitigated by the value of the products repurchased as part of the transaction. Historical cash requirements and losses associated with these obligations have not been significant, but could increase if customer defaults exceed current expectations, including as a result of the current COVID-19 pandemic and its effect on the global economy.

Product Warranties

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 five 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 (i) the number of units under warranty, (ii) historical and anticipated rates of warranty claims and (iii) costs per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

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The following table summarizes the changes in the Company’s warranty liabilities during the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

(in millions) 2020 2019
Balance at January 1 $ 11.2
$ 9.8
Provisions to expense 1.6
1.3
Payments (1.8 ) (1.5 )
Balance at March 31 $ 11.0
$ 9.6

As of March 31, 2020 and December 31, 2019, an estimated liability was recorded within the Environmental Solutions Group in connection with a specific warranty matter. It is reasonably possible that the Company’s estimate may change in the future as more information becomes available; however, the ultimate resolution of this matter is not expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

~~Liabilities of Discontinued Operations~~

The Company retains certain liabilities for operations discontinued in prior periods, primarily for environmental remediation and product liability. Included in liabilities of discontinued operations on the Condensed Consolidated Balance Sheets as of both March 31, 2020 and December 31, 2019, were reserves of $0.3 million, related to environmental remediation at the Pearland, Texas facility previously used by the Company’s discontinued Pauluhn business, and $0.8 million, related to estimated product liability obligations of the discontinued North American refuse truck body business.


(in millions)	2021		2020
Balance at January 1	$	10.2	$	11.2
Provisions to expense	1.6		1.6

Payments	(2.4)		(1.8)
Balance at March 31	$	9.4	$	11.0

Legal Proceedings

The Company is subject to various claims, including pending and possible legal actions for product liability and other damages, and other matters arising in the ordinary course of the Company’s business. On a quarterly basis, the Company reviews uninsured material legal claims against the Company and accrues for the costs of such claims as appropriate in the exercise of management’s 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 claims, the Company cannot reasonably 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 results of operations or financial condition. 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, financial condition or cash flow.

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Hearing Loss Litigation

The Company has been sued for monetary damages by firefighters who claim 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. In 2009, 6 additional cases were filed in Cook County, involving 299 Pennsylvania firefighter plaintiffs. During 2013, another case was filed in Cook County involving 74 Pennsylvania firefighter plaintiffs.

The trial of the first 27 of these plaintiffs’ claims occurred in 2008, whereby 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 9. The trial for these 9 plaintiffs concluded with a verdict 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. The Company thereafter filed a petition for rehearing with the Illinois Appellate Court, which was denied on February 7, 2013. The Company sought further review by filing a petition for leave to appeal with the Illinois Supreme Court on March 14, 2013. On May 29, 2013, the Illinois Supreme Court issued a summary order declining to accept review of this case. On July 1, 2013, the Company satisfied the judgments entered for these plaintiffs, which resulted in final dismissal of these cases.

A third consolidated trial involving 8 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, on March 12, 2012 the trial court 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 Illinois Appellate Court reversed the trial court’s certification order.

Thereafter, the trial court scheduled a fourth consolidated trial involving 3 firefighter plaintiffs, which began in December 2012. Prior to the start of this trial, the claims of 2 of the 3 firefighter plaintiffs were dismissed. On December 17, 2012, the jury entered a complete defense verdict for the Company.

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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 and scheduled a class action trial to begin on June 10, 2013. The Company filed a petition for review with the Illinois Appellate Court on March 29, 2013 seeking reversal of the class certification order.

On June 25, 2014, a unanimous three-judge panel of the First District Illinois Appellate Court issued its opinion reversing the class certification order of the trial court. Specifically, the Appellate Court determined that the trial court’s ruling failed to satisfy the class-action requirements that the common issues of the firefighters’ claims predominate over the individual issues and that there is an adequate representative for the class. During a status hearing on October 8, 2014, plaintiffs represented to the Court that they would again seek to certify a class of firefighters on the issue of whether the Company’s sirens were defective and unreasonably dangerous. On January 12, 2015, plaintiffs filed motions to amend their complaints to add class action allegations with respect to Chicago firefighter plaintiffs, as well as the approximately 1,800 firefighter plaintiffs from locations outside of Chicago. On March 11, 2015, the trial court granted plaintiffs’ motions to amend their complaints. On April 24, 2015, the cases were transferred to Cook County chancery court, which will decide all class certification issues. On March 23, 2018, plaintiffs filed a motion to certify as a class all firefighters from the Chicago Fire Department who have filed lawsuits in this matter. The court has not yet ruled on this motion as the parties ~~have requested~~continue to engage in discovery ~~from each~~and other matters related to this motion. The Company intends to continue its objections to any attempt at certification.

The Company has also filed motions to dismiss cases involving firefighters who worked for fire departments located outside of the State of Illinois based on improper venue. On February 24, 2017, the Circuit Court of Cook County entered orders dismissing the cases of 1,770 such firefighter plaintiffs from the jurisdiction of the State of Illinois. Pursuant to these orders, these plaintiffs had six months thereafter to refile their cases in jurisdictions where these firefighters are located. Prior to this six-month deadline, attorneys representing some of these plaintiffs contacted the Company regarding possible settlement of

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their cases. During the year ended December 31, 2017, the Company entered into a global settlement agreement with two attorneys who represented approximately 1,090 of these plaintiffs. Under the terms of the settlement agreement, the Company offered $700 per plaintiff to settle these cases and 717 plaintiffs accepted this offer as a final settlement. The attorneys representing these plaintiffs agreed to withdraw from representing plaintiffs who did not respond to the settlement offer. It is the Company’s position that the non-settling plaintiffs who failed to timely refile their cases following the February 2017 dismissal by the Circuit Court of Cook County are now barred from doing so by the statute of limitations. The Company filed a venue motion seeking to transfer to DuPage County cases involving 10 plaintiffs who reside and work in Illinois but outside of Cook County. The Court granted this motion on June 28, 2017.

The Company has also been sued on this issue outside of the Cook County, Illinois venue. Between 2007 and 2009, a total of 71 lawsuits involving 71 plaintiffs were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. NaN of these cases were dismissed pursuant to pretrial motions filed by the Company. Another case was voluntarily dismissed. Prior to trial in 4 cases, the Company paid nominal sums to obtain dismissals.

NaN trials occurred in Philadelphia involving these cases filed in 2007 through 2009. The first trial involving 1 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 9 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, also involving 9 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 2 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 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 represented (the “Claimants”) and who had asserted product claims against the Company (the “Claims”). NaN of the Claimants had lawsuits pending against the Company in Cook County, Illinois.

The Settlement Agreement provided that the Company pay a total amount of $3.8 million (the “Settlement Payment”) 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

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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% 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 through October 2012, 20 new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. These cases were filed on behalf of 20 Philadelphia firefighters and ~~involve~~involved various defendants in addition to the Company. NaN of these cases were subsequently dismissed. The first trial involving these 2012 Philadelphia cases occurred during December 2014 and involved 3 firefighter plaintiffs. The jury returned a verdict in favor of the Company. Following this trial, all of the parties agreed to settle cases involving 7 firefighter plaintiffs set for trial during January 2015 for nominal amounts per plaintiff.

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In January 2015, plaintiffs’ attorneys filed 2 new complaints in the Court of Common Pleas, Philadelphia, Pennsylvania on behalf of approximately 70 additional firefighter plaintiffs. The vast majority of the firefighters identified in these complaints are located outside of Pennsylvania. NaN of the complaints in these cases, which involves 11 firefighter plaintiffs from the District of Columbia, was removed to federal court in the Eastern District of Pennsylvania. Plaintiffs voluntarily dismissed all claims in this case on May 31, 2016. The Company thereafter moved to recover various fees and costs in this case, asserting that plaintiffs’ counsel failed to properly investigate these claims prior to filing suit. The Court granted this motion on April 25, 2017, awarding $0.1 million to the Company. After plaintiffs appealed this Order, the United States Court of Appeals for the Third Circuit affirmed the lower court decision awarding fees and costs to the Company.

With respect to claims of other out-of-state firefighters involved in these 2 cases, the Company moved to dismiss these claims as improperly filed in Pennsylvania. The Court granted this motion and dismissed these claims on November 5, 2015. During August through December 2015, another 9 new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. These cases involve a total of 193 firefighters, most of whom are located outside of Pennsylvania. The Company again moved to dismiss all claims filed by out-of-state firefighters in these cases as improperly filed in Pennsylvania. On May 24, 2016, the Court granted this motion and dismissed these claims. Plaintiffs appealed this decision and, on September 25, 2018, the appellate court reversed this dismissal. The Company ~~has~~then filed a petition with the appellate court requesting that the court reconsider its ruling. On December 7, 2018, the appellate court granted the Company’s petition and withdrew its prior decision. The Court has ordered that the parties file additional briefs and a new panel of appellate judges issue a decision. ~~The parties have supplied briefs to~~On June 25, 2020, the Court ~~and the Court has heard oral argument on this case. The Company is awaiting~~issued a decision ~~in this case.~~affirming the trial court’s dismissal of these cases.

On May 13, 2016, 4 new cases were filed in Philadelphia state court, involving a total of 55 Philadelphia firefighters who live in Pennsylvania. During August 2016, the Company settled a case involving 4 Philadelphia firefighters that had been set for trial in Philadelphia state court during September 2016. During 2017, plaintiffs filed additional cases in the Court of Common Pleas, Philadelphia County, involving over 100 Philadelphia firefighter plaintiffs. During January 2017, plaintiffs filed a motion to consolidate and bifurcate, similar to a motion filed in the Pittsburgh hearing loss cases, as described below. The Company has filed an opposition to this motion. These cases were then transferred to the mass tort program in Philadelphia for pretrial purposes. Plaintiffs’ counsel thereafter dismissed several plaintiffs. During November 2017, a trial involving 1 Philadelphia firefighter occurred. The jury returned a verdict in favor of the Company in this trial. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 75 firefighters involved in cases pending in the Philadelphia mass tort program.

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motions, 33 Erie County firefighter plaintiffs voluntarily dismissed their claims. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 28 firefighters involved in cases filed in Erie County.

During August 2017, 5 cases involving 70 firefighter plaintiffs were filed in Lackawanna County, Pennsylvania. These cases involve firefighter plaintiffs who originally filed in Cook County several years ago and were dismissed pursuant to the Company’s forum nonconveniens motion.

On September 17, 2014, 20 lawsuits, involving a total of 193 Buffalo Fire Department firefighters, were filed in the Supreme Court of the State of New York, Erie County. All of the cases filed in Erie County, New York have been removed to federal court in the Western District of New York. Plaintiffs have filed a motion to consolidate and bifurcate these cases, similar to the motion filed in the Pittsburgh hearing loss cases, as described below. The Company has filed an opposition to the motion. During February 2015, a lawsuit involving 1 New York City firefighter plaintiff was filed in the Supreme Court of the State of New York, New York County. The plaintiff named the Company as well as several other parties as defendants. That case subsequently was transferred to federal court in the Northern District of New York and thereafter dismissed. During April 2015 through January 2016, 29 new cases involving a total of 235 firefighters were filed in various counties in the New York City area. During December 2016 through October 2017, additional cases were filed in these jurisdictions. On February 5, 2018, the Company was served with a complaint in an additional case filed in Kings County, New York. This case involves 1 plaintiff. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 536 firefighters involved in cases filed in the State of New York.

During November 2015, the Company was served with a complaint filed in Union County, New Jersey state court, involving 34 New Jersey firefighters. This case has been transferred to federal court in the District of New Jersey. During the period from January through May 2016, 8 additional cases were filed in various New Jersey state courts. Most of the firefighters in these cases reside in New Jersey and work or worked at New Jersey fire departments. During December 2016, a case involving 1 New Jersey firefighter was filed in the United States District Court of New Jersey. On May 2, 2017, plaintiffs filed a motion to consolidate and bifurcate in the pending federal court case in New Jersey. This motion was similar to bifurcation motions filed by plaintiffs in Pittsburgh, Buffalo and Philadelphia. The Court has denied this motion as premature. Pursuant to a petition filed by both parties, all New Jersey state court cases were consolidated for pretrial purposes. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 61 firefighters involved in cases filed in New Jersey.

During May through October 2016, 9 cases were filed in Suffolk County, Massachusetts state court, naming the Company as a defendant. These cases involve 194 firefighters who lived and worked in the Boston area. During August 2017, plaintiffs filed additional cases in Suffolk County court. The Company moved to transfer various cases filed in Suffolk County to other counties in Massachusetts where plaintiffs reside and work. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 218 firefighters involved in cases filed in Massachusetts.

During August and September 2017, plaintiffs’ attorneys filed additional hearing loss cases in Florida. The Company is the only named defendant. These cases were filed in several different counties in Florida, including Tampa, Miami and Orlando municipalities. Plaintiffs have agreed to stipulate that they will not seek more than $75,000 in damages in any individual plaintiff case. Prior to a dismissal of these cases pursuant to the Tolling Agreement, discussed below, there was a total of 166 firefighters involved in cases filed in Florida.

During April through July 2013, additional cases were filed in Allegheny County, Pennsylvania on behalf of 247 plaintiff firefighters from Pittsburgh and against various defendants, including the Company. During May 2016, 2 additional cases were filed against the Company in Allegheny County involving 19 Pittsburgh firefighters. After the Company filed pretrial motions, the Court dismissed claims of 55 Pittsburgh firefighter plaintiffs. The Court scheduled trials for May, September and November 2016, for 8 firefighters per trial. Prior to the first scheduled trial in Pittsburgh, the Court granted the Company’s motion for summary judgment and dismissed all claims asserted by plaintiff firefighters involved in this trial. Following an appeal by the plaintiff firefighters, the appellate court affirmed this dismissal. The next trial for 6 Pittsburgh firefighters started on November 7, 2016. Shortly after this trial began, plaintiffs’ counsel moved for a mistrial because a key witness suddenly became unavailable. The Court granted this motion and rescheduled this trial for March 6, 2017. During January 2017, plaintiffs also moved to consolidate and bifurcate trials involving Pittsburgh firefighters. In particular, plaintiffs sought one trial involving liability issues which will apply to all Pittsburgh firefighters who filed suit against the Company. The Company filed an opposition to this motion. On April 18, 2017, the trial court granted plaintiffs’ motion to bifurcate the next Pittsburgh trial. Pursuant to a motion for clarification filed by the Company, the Court ruled that the bifurcation order would only apply to 6 plaintiffs who were part of the next trial group in Pittsburgh. The Company thereafter sought an interlocutory appeal of the Court’s bifurcation order. The appellate court declined to accept the appeal at that time. A bifurcated trial began

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on September 27, 2017 in Allegheny County, Pennsylvania. Prior to and during trial, 2 plaintiffs were dismissed, resulting in 4 plaintiffs remaining for trial. After approximately two weeks of trial, the jury found that the Company’s siren product was not defective or unreasonably dangerous and rendered a verdict in favor of the Company.

A second trial involving Pittsburgh firefighters began during January 2018. At the outset of this trial, plaintiffs’ attorneys, who represent all firefighters who have filed cases in Allegheny County, Philadelphia, Buffalo, New Jersey, Massachusetts, and Florida, as described above, requested that the Company consider settlement of various cases. This trial was continued to allow the parties to further discuss possible settlement. During March 2018, the parties agreed in principle on a framework (the “Settlement Framework”) to resolve hearing loss claims and cases in all jurisdictions involved in the hearing loss litigation except in Cook County and Lackawanna County, and excluding 1 case involving 1 firefighter in New York City. The firefighters excluded from the Settlement Framework are represented by different attorneys. The Company has agreed in principle to settle the cases in

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Lackawanna County and has settled the case involving 1 firefighter in New York City for nominal amounts. Pursuant to the Settlement Framework, the Company would pay $700 to each firefighter who has filed a lawsuit and is eligible to be part of the settlement. The Company would pay $300 to each firefighter who has not yet filed a case and is eligible to be part of the settlement. To be eligible for settlement, among other things, firefighters must provide proof that they have high frequency noise-induced hearing loss. There are approximately 3,700 firefighters whose claims may be considered as part of this settlement, including approximately 1,320 firefighters who have ongoing filed lawsuits. This Settlement Framework was finalized in a global settlement agreement executed on November 4, ~~2019 (the “Framework Agreement”).~~2019. Pursuant to ~~the Framework Agreement,~~this global settlement agreement, the parties are now in the process of determining how many of the approximately 3,700 firefighters will be eligible to participate in the settlement. In order to minimize the parties’ respective legal costs and expenses during this settlement process, on July 5, 2018, the parties entered into a tolling agreement (the “Tolling Agreement”). Pursuant to the Tolling Agreement, counsel for the settling firefighters agreed to dismiss the pending lawsuits in all jurisdictions except for the Allegheny County (Pittsburgh), Pennsylvania cases, and the Company agreed to a tolling of any statute of limitations applicable to the dismissed cases. The Tolling Agreement continued in place until the parties executed the ~~Framework Agreement~~global settlement agreement on November 4, 2019. After execution of the ~~Framework Agreement,~~global settlement agreement, the Allegheny County (Pittsburgh) cases were dismissed. The ~~Framework Agreement~~global settlement agreement requires plaintiffs’ attorneys to withdraw from representing firefighters who elect not to participate in this settlement.

As of March 31, ~~2020,~~2021, the Company has recognized an estimated liability for the potential settlement amount. While it is reasonably possible that the ultimate resolution of this matter may result in a loss in excess of the amount accrued, the incremental loss is not expected to be material.

During March 2014, an action also was brought in the Court of Common Pleas of Erie County, Pennsylvania on behalf of 61 firefighters. This case likewise involves various defendants in addition to the Company. After the Company filed pretrial motions, 33 Erie County firefighter plaintiffs voluntarily dismissed their claims. During August 2017, 5 cases involving 70 firefighter plaintiffs were filed in Lackawanna County, Pennsylvania. These cases involve firefighter plaintiffs who originally filed in Cook County and were dismissed pursuant to the Company’s forum nonconveniens motion. As of March 31, 2020, a total of 263 firefighters are involved in cases filed in Allegheny and Lackawanna counties in Pennsylvania.

On September 17, 2014, 20 lawsuits, involving a total of 193 Buffalo Fire Department firefighters, were filed in the Supreme Court of the State of New York, Erie County. All of the cases filed in Erie County, New York have been removed to federal court in the Western District of New York. Plaintiffs have filed a motion to consolidate and bifurcate these cases, similar to the motion filed in the Pittsburgh hearing loss cases, as described above. The Company has filed an opposition to the motion. During February 2015, a lawsuit involving 1 New York City firefighter plaintiff was filed in the Supreme Court of the State of New York, New York County. The plaintiff named the Company as well as several other parties as defendants. That case subsequently was transferred to federal court in the Northern District of New York and thereafter dismissed. During April 2015 through January 2016, 29 new cases involving a total of 235 firefighters were filed in various counties in the New York City area. During December 2016 through October 2017, additional cases were filed in these jurisdictions. On February 5, 2018, the Company was served with a complaint in an additional case filed in Kings County, New York. This case involves 1 plaintiff. Prior to a dismissal of these cases pursuant to the Tolling Agreement, there was a total of 536 firefighters involved in cases filed in the State of New York.

During November 2015, the Company was served with a complaint filed in Union County, New Jersey state court, involving 34 New Jersey firefighters. This case has been transferred to federal court in the District of New Jersey. During the period from January through May 2016, 8 additional cases were filed in various New Jersey state courts. Most of the firefighters in these cases reside in New Jersey and work or worked at New Jersey fire departments. During December 2016, a case involving 1 New Jersey firefighter was filed in the United States District Court of New Jersey. On May 2, 2017, plaintiffs filed a motion to consolidate and bifurcate in the pending federal court case in New Jersey. This motion was similar to bifurcation motions filed by plaintiffs in Pittsburgh, Buffalo and Philadelphia. The Court has denied this motion as premature. Pursuant to a petition filed by both parties, all New Jersey state court cases were consolidated for pretrial purposes. Prior to a dismissal of these cases pursuant to the Tolling Agreement, there was a total of 61 firefighters involved in cases filed in New Jersey.

During May through October 2016, 9 cases were filed in Suffolk County, Massachusetts state court, naming the Company as a defendant. These cases involve 194 firefighters who lived and worked in the Boston area. During August 2017, plaintiffs filed additional cases in Suffolk County court. The Company moved to transfer various cases filed in Suffolk County to other counties in Massachusetts where plaintiffs reside and work. Prior to a dismissal of these cases pursuant to the Tolling Agreement, there was a total of 218 firefighters involved in cases filed in Massachusetts.

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During August and September 2017, plaintiffs’ attorneys filed additional hearing loss cases in Florida. The Company is the only named defendant. These cases were filed in several different counties in Florida, including Tampa, Miami and Orlando municipalities. Plaintiffs have agreed to stipulate that they will not seek more than $75,000 in damages in any individual plaintiff case. Prior to a dismissal of these cases pursuant to the Tolling Agreement, there was a total of 166 firefighters involved in cases filed in Florida.

From 2007 through 2009, firefighters also brought hearing loss claims against the Company in New Jersey, Missouri, Maryland and Kings County, New York. All of those cases, however, were dismissed prior to trial, including 4 cases in the Supreme Court of Kings County, New York that were dismissed upon the Company’s motion in 2008. On appeal, the New York 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.

NOTE 810 – EARNINGS PER SHARE

The Company computes earnings per share (“EPS”) in accordance with ~~Accounting Standards Codification (“ASC”)~~ASC 260, Earnings per Share, which requires that non-vested restricted stock containing non-forfeitable dividend rights should be treated as participating securities pursuant to the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. The amounts of distributed and undistributed earnings allocated to participating securities for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were insignificant and did not materially impact the calculation of basic or diluted EPS.

Basic EPS is computed by dividing income available to common stockholders by the weighted average number of shares of common stock and non-vested restricted stock awards outstanding for the period.

Diluted EPS is computed using the weighted average number of shares of common stock and non-vested restricted stock awards outstanding for the year, plus the effect of dilutive potential common shares outstanding during the period. The dilutive effect of common stock equivalents is determined using the more dilutive of the two-class method or alternative methods. The Company uses the treasury stock method to determine the potentially dilutive impact of our employee stock options and restricted stock units, and the contingently issuable method for our performance-based restricted stock unit awards.

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For the three months ended March 31, 2021, the number of options to purchase shares of the Company’s stock that had an anti-dilutive effect on EPS was immaterial. For the three months ended March 31, 2020, ~~and 2019,~~ options to purchase 0.2 ~~million and 0.3~~ million shares of the Company’s common stock ~~respectively,~~ had an anti-dilutive effect on EPS, and accordingly, ~~are~~were excluded from the calculation of diluted EPS.

The following table reconciles Net income to basic and diluted EPS:

Three Months Ended
March 31,
(in millions, except per share data) 2020 2019
Net income $ 23.4
$ 17.5

Weighted average shares outstanding – Basic 60.5
60.1
Dilutive effect of common stock equivalents 1.2
1.1
Weighted average shares outstanding – Diluted 61.7
61.2
Earnings per share:
Basic $ 0.39
$ 0.29
Diluted 0.38
0.29


	Three Months Ended March 31,
(in millions, except per share data)	2021		2020


Net income	$	22.2	$	23.4
Weighted average shares outstanding – Basic	60.6		60.5
Dilutive effect of common stock equivalents	1.1		1.2
Weighted average shares outstanding – Diluted	61.7		61.7
Earnings per share:


Basic	$	0.37	$	0.39



Diluted	0.36		0.38

NOTE 911 – STOCKHOLDERS’ EQUITY

Dividends

On February ~~19, 2020,~~18, 2021, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of ~~$0.08~~$0.09 per common share. The dividend totaled ~~$4.8~~$5.5 million and was distributed on March 31, ~~2020~~2021 to ~~holders~~stockholders of record at the close of business on March ~~18, 2020.~~19, 2021. During the three months ended March 31, ~~2019,~~2020, dividends of $4.8 million were paid to stockholders.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)~~

~~(Unaudited)~~

On April ~~21, 2020,~~27, 2021, the Board declared a quarterly cash dividend of ~~$0.08~~$0.09 per common share payable on June 2, ~~2020~~2021 to ~~holders~~stockholders of record at the close of business on May ~~15, 2020.~~21, 2021.

Stock Repurchase Program

In November 2014, the Board authorized a stock repurchase program (the “November 2014 program”) of up to $75.0 million of the Company’s common stock.

On March 13, 2020, the Board authorized an additional stock repurchase program (the “March 2020 program”) of up to $75.0 million of the Company’s common stock. The March 2020 program supplements the Board’s prior authorization under the November 2014 program, which remains in effect.

The stock repurchase programs are intended primarily to facilitate purchases of Company stock as a means to provide cash returns to stockholders, enhance stockholder returns and manage the Company’s capital structure. Under its stock repurchase programs, the Company is authorized to repurchase, from time to time, shares of its outstanding common stock. Stock repurchases by the Company are subject to market conditions and other factors and may be commenced, suspended or discontinued at any time.

NaN shares were repurchased under the stock repurchase program during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company repurchased 490,990 shares for a total of $13.5 ~~million under the stock repurchase program. During the three months ended March 31, 2019, the Company repurchased 48,409 shares for a total~~million.

Table of $1.0 million under the stock repurchase program. In light of the current uncertainty and volatility resulting from the COVID-19 pandemic, the Company has elected to suspend stock repurchases but may resume such repurchases in the future.Contents

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

Accumulated Other Comprehensive Loss

The following tables summarize the changes in each component of Accumulated other comprehensive loss, net of tax in the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


(in millions) ^(a)	Actuarial Losses			Prior Service Costs			Foreign Currency Translation			Unrealized Gain (Loss) on Interest Rate Swaps			Total			(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Total
Balance at January 1, 2020	$	(80.4	)	$	(2.4	)	$	(7.1	)	$	0.8		$	(89.1	)
Other comprehensive income (loss) before reclassifications	1.1			—			(6.1		)	(3.0		)	(8.0		)
Balance at January 1, 2021																Balance at January 1, 2021	$	(88.2)	$	(2.6)	$	1.3	$	(2.2)	$	(91.7)
Other comprehensive (loss) income before reclassifications																Other comprehensive (loss) income before reclassifications	(0.2)		0		(1.2)		1.0		(0.4)
Amounts reclassified from accumulated other comprehensive loss	0.7			—			—			(0.1		)	0.6			Amounts reclassified from accumulated other comprehensive loss	0.9		0		0		(0.2)		0.7
Net current-period other comprehensive income (loss)	1.8			—			(6.1		)	(3.1		)	(7.4		)	Net current-period other comprehensive income (loss)	0.7		0		(1.2)		0.8		0.3
Balance at March 31, 2020	$	(78.6	)	$	(2.4	)	$	(13.2	)	$	(2.3	)	$	(96.5	)
Balance at March 31, 2021																Balance at March 31, 2021	$	(87.5)	$	(2.6)	$	0.1	$	(1.4)	$	(91.4)

(in millions) ^(a)
Actuarial Losses Prior Service Costs Foreign
Currency Translation Unrealized Gain (Loss) on Interest Rate Swaps Total
Balance at January 1, 2019 $ (87.4 ) $ (2.5 ) $ (8.9 ) $ 1.5
$ (97.3 )
Other comprehensive loss before reclassifications (0.4 ) —
—
(0.2 ) (0.6 )
Amounts reclassified from accumulated other comprehensive loss 0.6
—
—
(0.3 ) 0.3
Net current-period other comprehensive income (loss) 0.2
—
—
(0.5 ) (0.3 )
Balance at March 31, 2019 $ (87.2 ) $ (2.5 ) $ (8.9 ) $ 1.0
$ (97.6 )


~~(a)~~	~~Amounts in parentheses indicate losses.~~


(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Total
Balance at January 1, 2020	$	(80.4)	$	(2.4)	$	(7.1)	$	0.8	$	(89.1)
Other comprehensive income (loss) before reclassifications	1.1		0		(6.1)		(3.0)		(8.0)
Amounts reclassified from accumulated other comprehensive loss	0.7		0		0		(0.1)		0.6
Net current-period other comprehensive income (loss)	1.8		0		(6.1)		(3.1)		(7.4)
Balance at March 31, 2020	$	(78.6)	$	(2.4)	$	(13.2)	$	(2.3)	$	(96.5)

~~Table of Contents~~(a) Amounts in parentheses indicate losses.

~~FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)~~

~~(Unaudited)~~

The following table summarizes the amounts reclassified from Accumulated other comprehensive loss, net of tax, in the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 and the affected line item in the Condensed Consolidated Statements of Operations:


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in Condensed Consolidated Statements of Operations	Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item in Condensed Consolidated Statements of Operations
	2020			2019					2021		2020
(in millions)^(a)								(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans	$	(0.9	)	$	(0.8	)	Other expense, net	Amortization of actuarial losses of defined benefit pension plans	$	(1.2)	$	(0.9)	Other (income) expense, net
Interest income on interest rate swaps	0.1			0.4			Interest expense
Amortization of prior service costs of defined benefit pension plans								Amortization of prior service costs of defined benefit pension plans	0.0		0.0		Other (income) expense, net
Interest rate swaps								Interest rate swaps	0.2		0.1		Interest expense
Total before tax	(0.8		)	(0.4		)		Total before tax	(1.0)		(0.8)
Income tax benefit	0.2			0.1			Income tax expense	Income tax benefit	0.3		0.2		Income tax expense
Total reclassifications for the period, net of tax	$	(0.6	)	$	(0.3	)		Total reclassifications for the period, net of tax	$	(0.7)	$	(0.6)

(a) Amounts in parentheses indicate losses.


~~(a)~~	~~Amounts in parentheses indicate losses.~~

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

NOTE 1012 – SEGMENT INFORMATION

The Company has 2 reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group. Business units are organized under each reportable segment because they share certain characteristics, such as technology, marketing, distribution and product application, which create long-term synergies.

As discussed in Note 2 – Acquisitions, the assets and liabilities of OSW have been consolidated into the Condensed Consolidated Balance Sheet as of March 31, 2021, while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations subsequent to the February 17, 2021 closing date. OSW’s post-acquisition results of operations are included within the Environmental Solutions Group.

The following tables summarize the Company’s operations by segment, including Net sales, Operating income (loss), and Total assets:

Three Months Ended
March 31,
(in millions) 2020 2019
Net sales:
Environmental Solutions $ 233.0
$ 219.5
Safety and Security Systems 53.1
54.3
Total net sales $ 286.1
$ 273.8
Operating income (loss):
Environmental Solutions $ 29.4
$ 25.7
Safety and Security Systems 7.4
8.7
Corporate and eliminations (4.5 ) (8.6 )
Total operating income 32.3
25.8
Interest expense 1.5
2.0
Other expense, net 0.2
0.4
Income before income taxes $ 30.6
$ 23.4


	Three Months Ended March 31,
(in millions)	2021		2020
Net sales:
Environmental Solutions	$	228.1	$	233.0
Safety and Security Systems	50.7		53.1
Total net sales	$	278.8	$	286.1
Operating income (loss):
Environmental Solutions	$	27.1	$	29.4
Safety and Security Systems	7.2		7.4
Corporate and eliminations	(6.5)		(4.5)
Total operating income	27.8		32.3
Interest expense	1.1		1.5


Other (income) expense, net	(0.5)		0.2
Income before income taxes	$	27.2	$	30.6

(in millions) As of
March 31, 2020 As of December 31, 2019
Total assets:
Environmental Solutions $ 939.0
$ 908.1
Safety and Security Systems 223.4
222.6
Corporate and eliminations 64.4
34.5
Total assets of continuing operations 1,226.8
1,165.2
Total assets of discontinued operations 0.3
0.3
Total assets $ 1,227.1
$ 1,165.5


(in millions)	As of March 31, 2021		As of December 31, 2020
Total assets:
Environmental Solutions	$	1,013.0	$	926.8
Safety and Security Systems	222.0		225.5
Corporate and eliminations	30.9		56.3
Total assets of continuing operations	1,265.9		1,208.6
Total assets of discontinued operations	0.2		0.2
Total assets	$	1,266.1	$	1,208.8

~~Table of Contents~~

~~FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)~~

~~(Unaudited)~~

NOTE 1113 – FAIR VALUE MEASUREMENTS

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. The three levels of inputs are classified as follows:

•Level 1 — quoted prices in active markets for identical assets or liabilities;

•Level 2 — observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

•Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company’s assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:

Cash Equivalents

Cash equivalents primarily consist of time-based deposits and interest-bearing instruments with maturities of three months or less. The Company classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.

Interest Rate Swaps

As described in Note 45 – Debt, the Company may, from time to time, execute interest rate swaps as a means of fixing the floating interest rate component on a portion of its floating-rate debt. The Company classifies its interest rate swaps as Level 2 due to the use of a discounted cash flow model based on the terms of the contract and the interest rate curve (Level 2 inputs) to calculate the fair value of the swaps.

Contingent Consideration

The Company has a contingent obligation to ~~transfer~~pay up to $15.5 million to the former owners of Mark Rite Lines Equipment Company, Inc. (“MRL”), a U.S. manufacturer of truck-mounted and ride-on road-marking and line-removal equipment acquired by the Company on July 1, 2019, if specified financial results are met over future reporting periods (i.e., an earn-out). Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred. Subsequent changes in fair value are included as a component of Acquisition and integration-related expenses on the Condensed Consolidated Statements of Operations.

The Company uses an income approach to value the contingent consideration obligation based on the present value of risk-adjusted future cash flows under either a scenario-based or option-pricing method, as appropriate. Due to the lack of relevant observable market data over fair value inputs, such as prospective financial information or probabilities of future events as of March 31, ~~2020,~~2021, the Company has classified the contingent consideration liability within Level 3 of the fair value hierarchy outlined in ASC 820, Fair Value Measurements.

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, ~~2020:~~2021:

Fair Value Measurement at Reporting Date Using
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 3.2
$ —
$ —
$ 3.2
Liabilities:
Contingent consideration —
—
4.3
4.3
Interest rate swap —
3.1
—
3.1


	Fair Value Measurement at Reporting Date Using
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	3.1	$	0	$	0	$	3.1

Liabilities:
Contingent consideration	0		0		4.2		4.2
Interest rate swap	0		1.9		0		1.9

~~Table of Contents~~

~~FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)~~

~~(Unaudited)~~

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


(in millions)	2020		2019 ^(a)		(in millions)	2021		2020
Contingent consideration liability, at January 1	$	4.3	$	6.7	Contingent consideration liability, at January 1	$	4.2	$	4.3
Foreign currency translation	—		0.2

Total losses included in earnings	0.0		0.2		Total losses included in earnings	0.0		0.0
Contingent consideration liability, at March 31	$	4.3	$	7.1	Contingent consideration liability, at March 31	$	4.2	$	4.3

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Item 2. 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 should be read together with, the condensed consolidated financial statements and the accompanying notes contained in this Form 10-Q, as well as ~~the Company’s~~Federal Signal Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. References herein to the “Company,” “we,” “our,” or “us” refer collectively to Federal Signal Corporation and its subsidiaries. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) the condensed consolidated financial statements, (ii) 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 (iii) how certain accounting principles affect the Company’s condensed consolidated financial statements. The Company’s results for interim periods should not be regarded as necessarily indicative of results that may be expected for the entire year, which may differ materially due to, among other things, the risk factors described under Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the SEC on February ~~29, 2020, and as updated in Part II, Item 1A,~~ ~~Risk Factors, in this Form 10-Q.~~25, 2021.

Executive Summary

The Company is a leading global manufacturer and supplier of (i) vehicles and equipment for maintenance and infrastructure end-markets, including sewer cleaners, industrial vacuum loaders, vacuum- and hydro-excavation trucks (collectively, “safe-digging trucks”), street sweepers, road-marking and line-removal equipment, waterblasting equipment, dump truck bodies and trailers, and (ii) safety, security and communication equipment, such as lights, sirens and warning systems. In addition, we sell parts and provide service, repair, equipment rentals and training as part of a comprehensive aftermarket offering to our customer base. We operate 1517 principal manufacturing facilities in five countries and provide products and integrated solutions to municipal, governmental, industrial and commercial customers in all regions of the world.

As described in Note 1012 – Segment Information to the accompanying condensed consolidated financial statements, the Company’s business units are organized in two reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group.

~~Results for the three months ended March 31, 2020 vs. the three months ended March 31, 2019~~

Net sales increased by $12.3 million, or 4%, in the three months ended March 31, 2020 as compared to the prior-year quarter. Our Environmental Solutions Group reported a net sales increase of $13.5 million, or 6%, primarily due to increases in shipments of road-marking and line-removal equipment, dump truck bodies, safe-digging trucks and street sweepers of $8.0 million, $3.6 million, $2.9 million and $1.3 million, respectively. In addition, aftermarket revenues increased by $4.0 million. Partially offsetting these improvements were reductions in shipments of waterblasting equipment, trailers, and snow removal trucks of $2.9 million, $2.3 million, and $1.6 million, respectively. Within our Safety and Security Systems Group, net sales decreased by $1.2 million, or 2%, primarily due to lower sales of warning systems and public safety equipment, partially offset by higher sales of industrial signaling equipment.

Operating income increased by $6.5 million, or 25%, to $32.3 million in the three months ended March 31, 2020 as compared to the prior-year quarter, primarily driven by a $3.7 million increase within our Environmental Solutions Group and a $4.1 million reduction in Corporate expenses, partially offset by a $1.3 million decrease in operating income within our Safety and Security Systems Group. Consolidated operating margin for the three months ended March 31, 2020 was 11.3%, up from 9.4% in the prior-year quarter.

Income before income taxes increased by $7.2 million, or 31%, to $30.6 million for the three months ended March 31, 2020 as compared to the prior-year quarter. The increase resulted from the higher operating income and reductions in interest expense and other expense of $0.5 million and $0.2 million, respectively.

Net income for the three months ended March 31, 2020 increased by $5.9 million compared to the prior-year period, largely due to the aforementioned increase in income before income taxes, partially offset by a $1.3 million increase in income tax expense. The increase in income tax expense was primarily due to higher income tax levels, partially offset by the recognition of a $0.7 million excess tax benefit from stock compensation activity, which lowered the effective tax rate for the three months ended March 31, 2020 to 23.5%. We currently expect our full-year effective tax rate to be within the range of 25% to 26%.

Total orders for the three months ended March 31, 2020 were $303.9 million, an increase of $4.9 million, or 2%, as compared to the prior-year quarter. Our Environmental Solutions Group reported total orders of $237.5 million in the first quarter of 2020, down $6.2 million, or 3% in comparison to the prior-year quarter. Orders in the three months ended March 31, 2020 within our Safety and Security Systems Group were $66.4 million, up $11.1 million, or 20%, compared to the prior-year quarter.

~~Table of Contents~~

Our consolidated backlog at March 31, 2020 was $400.8 million, up $37.3 million, or 10%, compared to the end of the prior-year quarter. The increase was primarily due to a $23.0 million increase in backlog within the Environmental Solutions Group, largely due to increased demand for sewer cleaners, as well as higher orders for road-marking and line-removal equipment and refuse trucks. In addition, backlog within the Safety and Security Systems Group improved by $14.3 million, with the improvement largely due to higher global demand for public safety equipment.

COVID-19 Update

We ~~are~~continue to closely ~~monitoring~~monitor the ~~potential~~ impact of the COVID-19 pandemic on all aspects of our business, including how it is affecting our employees, customers, supply chain and distribution network. ~~In February 2020, we established a cross-functional task force to monitor ongoing developments, implement mitigation plans and centrally coordinate our response to the pandemic.~~

Our businesses are considered to be essential in supporting critical infrastructure needs and public safety. While certain of our operations have been affected by temporary facility closures, either due to government-issued mandates or other concerns related to COVID-19, our facilities have so far remained substantially operational during the pandemic. Given that, our primary focus has been on the safety and wellbeing of our employees. We were proactive in implementing enhanced health and safety measures across the organization, establishing remote working arrangements, where possible, and increasing the frequency of communications to reinforce health and safety guidelines. We also modified our employee attendance policies and provided employees with additional paid time off in order to encourage those who were sick, had health concerns, or were otherwise adversely impacted by the pandemic, to remain at home.

As a result of the combination of these factors and the enactment of the CARES Act, in recent weeks we have experienced a decrease in labor availability at several of our facilities. This has resulted in a variety of challenges in running our operations efficiently, which has adversely affected productivity levels. We are also seeing similar issues within our supply chain, with certain suppliers temporarily shut down. In addition, certain customers are unable to take delivery of equipment given the limited personnel that they currently have available. Although these factors had a limited impact on our first-quarter results, we are expecting a more significant impact in the second quarter as we adjust our production schedules accordingly.

Our backlog as of March 31, 2020 was at a record level. However, the timing of production and realization of our backlog may be delayed or otherwise negatively impacted by our ability to continue to run our operations as an essential business during the COVID-19 pandemic and/or to maintain our normal production capacity, faced with the potential for adverse impacts associated with decreased labor availability, the temporary suspension of production activity mandated or otherwise made necessary by governmental authorities, weakened demand, supply chain disruptions, or other production delays. Such factors may adversely affect the comparability of our operating and financial results in subsequent quarters. We are responding accordingly, taking additional steps to manage through these times, including implementing measures to reduce costs and manage our capital prudently. At the same time, we are maintaining our focus on our eighty-twenty improvement initiatives.

We are approaching the uncertainty and challenges with resolve and from a position of strength given our current financial position. As of March 31, 2020, we had $69.4 million of cash and cash equivalents and $210.6 million of availability for borrowings under our five-year revolving credit facility, which we executed in July 2019.

~~However, the~~The overall magnitude of the impact of the pandemic on our operating and financial results remains uncertain and will largely depend on the duration of the pandemic and the measures implemented in response, as well as the effect on our ~~customers.~~customers and suppliers. Given these factors, we are unable to reliably forecast the effect that the pandemic will have on our financial condition, results of operations or cash flows, which could be material.

Operating Results

Net sales for the three months ended March 31, 2021 decreased by $7.3 million, or 3%, compared to the prior-year quarter. Our Environmental Solutions Group reported a net sales decrease of $4.9 million, or 2%, primarily due to a $14.3 million reduction in sales of safe-digging trucks, partially offset a $7.3 million increase in sales of sewer cleaners. In addition, aftermarket revenues increased by $3.1 million. Within our Safety and Security Systems Group, net sales decreased by $2.4 million, or 5%, primarily due to reductions in sales of public safety equipment, industrial signaling equipment and warning systems of $1.2 million, $1.0 million and $1.0 million, respectively, partially offset by a favorable foreign currency translation impact of $0.8 million.

Operating income for the three months ended March 31, 2021 decreased by $4.5 million, or 14%, compared to the prior-year quarter, primarily driven by reductions of $2.3 million and $0.2 million within our Environmental Solutions Group and our Safety and Security Systems Group, respectively, and a $2.0 million increase in Corporate expenses, primarily due to higher post-employment expenses. Consolidated operating margin for the three months ended March 31, 2021 was 10.0%, compared to 11.3% in the prior-year quarter.

Income before income taxes for the three months ended March 31, 2021 decreased by $3.4 million, or 11%, compared to the prior-year quarter. The decrease resulted from the reduced operating income, partially offset by a $0.7 million increase in other income and a $0.4 million reduction in interest expense.

Net income for the three months ended March 31, 2021 decreased by $1.2 million compared to the prior-year quarter, largely due to the reduction in operating income, partially offset by a $2.2 million decrease in income tax expense, the reduction in interest expense and the increase in other income. The decrease in tax expense in the current-year quarter was largely due to lower pre-tax income levels, and the recognition of $1.1 million more excess tax benefits from stock compensation activity

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compared to the prior-year quarter. Our effective tax rate for the three months ended March 31, 2021 was 18.4%, compared to 23.5% in the prior-year quarter. We currently expect our full-year effective tax rate to be approximately 24%.

Total orders for the three months ended March 31, 2021 were $384 million, an increase of $80 million, or 26%, compared to the prior-year quarter.

Our consolidated backlog at March 31, 2021 was $410 million, an increase of $106 million, or 35%, compared to the end of 2020, and improvement of $9 million, or 2%, compared to the prior-year quarter.

Results of Operations

The following table summarizes our Condensed Consolidated Statements of Operations and illustrates the key financial indicators used to assess our consolidated financial results:


	Three Months Ended March 31,
($ in millions, except per share data)	2021			2020			Change
Net sales	$	278.8		$	286.1		$	(7.3)
Cost of sales	210.0			211.3			(1.3)
Gross profit	68.8			74.8			(6.0)
Selling, engineering, general and administrative expenses	40.8			42.2			(1.4)
Acquisition and integration-related expenses	0.2			0.3			(0.1)

Operating income	27.8			32.3			(4.5)
Interest expense	1.1			1.5			(0.4)


Other (income) expense, net	(0.5)			0.2			(0.7)
Income before income taxes	27.2			30.6			(3.4)
Income tax expense	5.0			7.2			(2.2)


Net income	$	22.2		$	23.4		$	(1.2)
Operating data:
Operating margin	10.0		%	11.3		%	(1.3)		%
Diluted earnings per share	$	0.36		$	0.38		$	(0.02)
Total orders	384.1			303.9			80.2
Backlog	409.5			400.8			8.7
Depreciation and amortization	12.2			10.8			1.4

Three Months Ended March 31,
($ in millions, except per share data) 2020 2019 Change
Net sales $ 286.1
$ 273.8
$ 12.3
Cost of sales 211.3
203.5
7.8
Gross profit 74.8
70.3
4.5
Selling, engineering, general and administrative expenses 42.2
43.9
(1.7 )
Acquisition and integration-related expenses 0.3
0.6
(0.3 )
Operating income 32.3
25.8
6.5
Interest expense 1.5
2.0
(0.5 )
Other expense, net 0.2
0.4
(0.2 )
Income before income taxes 30.6
23.4
7.2
Income tax expense 7.2
5.9
1.3
Net income $ 23.4
$ 17.5
$ 5.9
Operating data:
Operating margin 11.3 % 9.4 % 1.9 %
Diluted earnings per share $ 0.38
$ 0.29
$ 0.09
Total orders 303.9
299.0
4.9
Backlog 400.8
363.5
37.3
Depreciation and amortization 10.8
9.5
1.3

Net sales

Net sales ~~increased by $12.3 million, or 4%, in~~for the three months ended March 31, ~~2020 as~~2021 decreased by $7.3 million, or 3%, compared to the prior-year quarter. The Environmental Solutions Group reported a net sales ~~increase~~decrease of ~~$13.5~~$4.9 million, or 6%2%, primarily due to ~~increases~~a $14.3 million reduction in ~~shipments~~sales of ~~road-marking and line-removal equipment, dump truck bodies,~~ safe-digging trucks, ~~and street sweepers~~partially offset a $7.3 million increase in sales of ~~$8.0 million, $3.6 million, $2.9 million and $1.3 million, respectively.~~sewer cleaners. In addition, aftermarket revenues increased by ~~$4.0~~$3.1 million. ~~Partially offsetting these improvements were reductions in shipments of waterblasting equipment, trailers, and snow removal trucks of $2.9 million, $2.3 million, and $1.6 million, respectively.~~ Within the Safety and Security Systems Group, net sales decreased by ~~$1.2~~$2.4 million, or 2%5%, primarily due to ~~lower~~reductions in sales of ~~warning systems and~~ public safety equipment, industrial signaling equipment and warning systems of $1.2 million, $1.0 million and $1.0 million, respectively, partially offset by ~~higher sales~~a favorable foreign currency translation impact of ~~industrial signaling equipment.~~

~~Cost of sales~~$0.8 million.

Cost of sales ~~increased by $7.8 million, or 4%,~~

Cost of sales for the three months ended March 31, ~~2020~~2021 decreased by $1.3 million, or 1%, compared to the prior-year quarter, largely due to ~~an increase~~a decrease of ~~$7.8~~$1.2 million, or 5%4%, within the ~~Environmental Solutions~~Safety and Security Systems Group, primarily ~~attributable~~related to ~~increased~~lower sales volumes, ~~additional cost of sales from the MRL acquisition, and~~partially offset by a ~~$1.0~~$0.7 million ~~increase in depreciation expense.~~

~~Gross profit~~unfavorable foreign currency translation impact.

Gross profit ~~increased by $4.5 million, or 6%,~~

Gross profit for the three months ended March 31, ~~2020,~~2021 decreased by $6.0 million, or 8%, compared to the prior-year quarter, primarily due to ~~a $5.7~~reductions of $4.8 million ~~improvement~~and $1.2 million within the Environmental Solutions Group ~~partially offset by a $1.2 million reduction within~~and the Safety and Security Systems ~~Group.~~Group, respectively. Gross ~~margin~~profit as a percentage of revenues (“gross profit margin”) for the three months ended March 31, ~~2020 improved~~2021 was 24.7%, compared to 26.1%~~, from 25.7%~~ in the prior-year quarter, primarily ~~driven by a 110-basis point improvement~~due to the effects of lower operating leverage and unfavorable overhead absorption within the Environmental Solutions ~~Group, primarily attributable to improved operating leverage, benefits from pricing actions and favorable sales mix.~~Group.

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~~Selling, engineering, general and administrative expenses~~

Selling, engineering, general and administrative expenses (“SEG&A”)

SEG&A expenses for the three months ended March 31, ~~2020~~2021 decreased by ~~$1.7~~$1.4 million, or 4%3%, compared to the prior-year quarter, primarily due to ~~a $4.1 million reduction~~reductions in ~~Corporate~~ SEG&A expenses within the Environmental Solutions Group and Safety and Security Systems Group of $2.4 million and $1.0 million, respectively, partially offset by a ~~$2.3~~$2.0 million increase ~~within the Environmental Solutions Group.~~in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses ~~decreased~~were 14.6% in the current-year quarter, down from ~~16.0%~~14.8% in the prior-year ~~quarter, to 14.8% in the current-year~~ quarter.

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Operating income

Operating income ~~increased by $6.5 million, or 25%, to $32.3 million in~~for the three months ended March 31, ~~2020 as~~2021 decreased by $4.5 million, or 14%, compared to the prior-year quarter, primarily driven by ~~a $3.7~~reductions of $2.3 million ~~increase~~and $0.2 million within the Environmental Solutions Group and ~~a $4.1 million reduction in Corporate expenses, partially offset by a $1.3 million decrease in operating income within~~ the Safety and Security Systems ~~Group.~~Group, respectively, and a $2.0 million increase in Corporate expenses. Consolidated operating margin for the three months ended March 31, ~~2020~~2021 was ~~11.3%~~10.0%, ~~up from 9.4%~~compared to 11.3% in the prior-year quarter.

Interest expense

Interest expense for the three months ended March 31, ~~2020~~2021 decreased by ~~$0.5~~$0.4 million ~~or 25%,~~compared to the prior-year quarter, largely due to lower average debt ~~levels and interest rates when compared to the same period of the prior year.~~levels.

Other (income) expense, net

For the three months ended March 31, ~~2020,~~2021, other ~~expense totaled $0.2~~income of $0.5 million ~~while~~was realized, whereas in the prior-year quarter, other expense of $0.2 million was ~~$0.4 million. The decrease in expense was primarily due to lower pension expense in comparison to the prior-year quarter.~~recognized.

Income tax expense

Net income

Net income for the three months ended March 31, ~~2020 increased~~2021 decreased by ~~$5.9~~$1.2 million compared to the prior-year ~~period,~~quarter, largely due to the aforementioned ~~increase~~reduction in operating income, partially offset by the ~~$0.5~~$2.2 million decrease in income tax expense, the $0.7 million increase in other income and the $0.4 million reduction in interest ~~expense and the $0.2 million decrease in other expense, partially offset by the $1.3 million increase in income tax~~ expense.

Environmental Solutions

The following table summarizes the Environmental Solutions Group’s operating results as of and for the three months endedMarch 31, ~~2020~~2021 and ~~2019~~:2020:


	Three Months Ended March 31,										Three Months Ended March 31,
($ in millions)	2020			2019			Change			($ in millions)	2021			2020			Change
Net sales	$	233.0		$	219.5		$	13.5		Net sales	$	228.1		$	233.0		$	(4.9)
Operating income	29.4			25.7			3.7			Operating income	27.1			29.4			(2.3)
Operating data:										Operating data:
Operating margin	12.6		%	11.7		%	0.9		%	Operating margin	11.9		%	12.6		%	(0.7)		%
Total orders	$	237.5		$	243.7		$	(6.2	)	Total orders	$	324.2		$	237.5		$	86.7
Backlog	358.4			335.4			23.0			Backlog	379.3			358.4			20.9
Depreciation and amortization	10.0			8.6			1.4			Depreciation and amortization	11.3			10.0			1.3

Total orders ~~decreased by $6.2 million, or 3%,~~ for the three months ended March 31, ~~2020.~~2021 increased by $86.7 million, or 37%, compared to the prior-year quarter. U.S. orders increased by ~~$3.7~~$65.0 million, or 2%33%, primarily due to the inclusion of $20.9 million of backlog acquired in connection with the acquisition of OSW Equipment & Repair, LLC (“OSW”), as well as improvements in orders for ~~road-marking and line-removal equipment,~~ dump truck bodies, ~~trailers,~~sewer cleaners, and ~~street sweepers~~industrial vacuum loaders of ~~$11.0~~$11.7 million, $7.8 million ~~$5.1 million,~~ and ~~$2.6~~$7.6 million, respectively. Additionally, aftermarket demand increased by ~~$5.2 million. Partially offsetting these improvements were reductions in orders for safe-digging trucks, industrial vacuum loaders, sewer cleaners, and waterblasting equipment of $14.3~~$6.0 million, ~~$9.1 million, $3.3 million, and $2.4 million, respectively.~~including a large road-striping service contract awarded during the quarter. Non-U.S. orders ~~decreased~~increased by ~~$9.9~~$21.7 million, or ~~19%~~52%, primarily due to ~~decreases~~an $8.7 million improvement in ~~orders for safe-digging trucks, snow removal trucks, and sewer cleaners of $4.4 million, $2.2 million, and $1.6 million, respectively. In addition,~~ aftermarket demand, ~~decreased by $2.5 million. Partially offsetting these reductions was~~ a $3.0 million favorable foreign currency translation impact, a $2.9 million increase in orders for ~~refuse trucks.~~sewer cleaners, and

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the inclusion of $2.9 million of backlog acquired in connection with the OSW transaction.

Net sales ~~increased by $13.5 million, or 6%,~~ for the three months ended March 31, ~~2020.~~2021 decreased by $4.9 million, or 2%, compared to the prior-year quarter. For the three months ended March 31, 2021, U.S. sales ~~increased~~decreased by ~~$21.5~~$9.9 million, or ~~12%~~5%, largely due to ~~increases in~~lower shipments of ~~road-marking and line-removal equipment,~~ safe-digging trucks of $13.9 million, partially offset by higher sales of sewer cleaners ~~dump truck bodies, and industrial vacuum loaders~~ of ~~$7.9 million, $6.1 million, $4.4 million, $3.3 million, and $1.1 million, respectively. In addition, aftermarket revenues~~$5.6 million. Non-U.S. sales increased by ~~$4.3 million. Partially offsetting these improvements were~~

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~~reductions in shipments of waterblasting equipment, trailers, and street sweepers of $2.4 million, $2.3 million, and $1.4 million, respectively. Non-U.S. sales decreased by $8.0~~$5.0 million, or ~~17%~~13%, primarily due to ~~decreases in sales of sewer cleaners, safe-digging trucks, snow removal trucks, and refuse trucks of~~a $4.1 million ~~$3.2 million, $1.3 million, and $1.2 million, respectively, which were partially offset by a $2.7 million increase~~improvement in ~~shipments of street sweepers.~~aftermarket revenues.

Cost of sales ~~increased by $7.8 million, or 5%,~~ for the three months ended March 31, ~~2020, primarily attributable~~2021 decreased by $0.1 million compared to ~~increased sales volumes, additional cost of sales from the MRL acquisition, and a $1.0 million increase in depreciation expense. Gross margin improved to 23.5% from 22.4% in~~ the prior-year quarter, primarily due to ~~improved operating leverage, benefits~~lower sales volumes, partially offset by a $1.1 million increase in depreciation expense and unfavorable overhead absorption from ~~pricing actions, and favorable sales mix.~~

~~SEG&A expenses increased by $2.3 million~~temporary weather-related disruptions to production. Including these factors, gross profit margin for the three months ended March 31, ~~2020,~~2021 was 21.9%, compared to 23.5% in the prior-year quarter.

SEG&A expenses for the three months ended March 31, 2021 decreased by $2.4 million compared to the prior-year quarter, primarily due to ~~the addition of expenses of businesses acquired~~cost reduction initiatives implemented in the ~~prior year and a $0.4 million increase in amortization expense.~~second half of 2020. As a percentage of net sales, SEG&A expenses ~~were~~decreased from 10.9% in the ~~current-year~~prior-year quarter, ~~compared~~ to ~~10.5%~~10.0% in the ~~prior-year~~current-year quarter.

Operating income for the three months ended March 31, ~~2020 increased~~2021 decreased by ~~$3.7~~$2.3 million compared to the prior-year quarter, largely due to a ~~$5.7~~$4.8 million ~~increase~~reduction in gross profit, partially offset by the $2.4 million reduction in SEG&A expenses and a ~~$0.3~~$0.1 million decrease in acquisition-related ~~expenses, partially offset by the $2.3 million increase in SEG&A~~ expenses.

Backlog was $379.3 million at March 31, 2021, compared to $358.4 million at March 31, 2020, up $23.0 million, or 7% compared to $335.4 million at March 31, 2019. The increase was largely due to increased demand for sewer cleaners, as well as higher orders for road-marking and line-removal equipment and refuse trucks.2020.

Safety and Security Systems

The following table summarizes the Safety and Security Systems Group’s operating results as of and for the three months endedMarch 31, ~~2020~~2021 and ~~2019~~:2020:


	Three Months Ended March 31,										Three Months Ended March 31,
($ in millions)	2020			2019			Change			($ in millions)	2021			2020			Change
Net sales	$	53.1		$	54.3		$	(1.2	)	Net sales	$	50.7		$	53.1		$	(2.4)
Operating income	7.4			8.7			(1.3		)	Operating income	7.2			7.4			(0.2)
Operating data:										Operating data:
Operating margin	13.9		%	16.0		%	(2.1		)%	Operating margin	14.2		%	13.9		%	0.3		%
Total orders	$	66.4		$	55.3		$	11.1		Total orders	$	59.9		$	66.4		$	(6.5)
Backlog	42.4			28.1			14.3			Backlog	30.2			42.4			(12.2)
Depreciation and amortization	0.8			0.9			(0.1		)	Depreciation and amortization	0.9			0.8			0.1

Total orders for the three months ended March 31, ~~2020 increased~~2021 decreased by ~~$11.1~~$6.5 million, or ~~20%~~10%, compared with the prior-year quarter. U.S. orders increased by ~~$1.7~~$2.4 million, primarily driven by improvements in orders for ~~warning systems~~industrial signaling equipment and public safety equipment of ~~$1.7~~$1.9 million and ~~$1.3~~$0.6 million, ~~respectively, partially offset by a $1.3 million reduction in orders for industrial signaling equipment.~~respectively. Non-U.S. orders ~~increased~~decreased by ~~$9.4~~$8.9 million, largely due to ~~improvements~~reductions in orders for public safety equipment and warning systems of ~~$9.3~~$8.4 million and ~~$0.7~~$1.3 million, respectively, partially offset by ~~an unfavorable~~a favorable foreign currency translation impact of ~~$0.7~~$1.0 million.

Net sales ~~decreased by $1.2 million, or 2%,~~ for the three months ended March 31, ~~2020.~~2021 decreased by $2.4 million, or 5%, compared to the prior-year quarter. U.S. sales decreased by ~~$1.5~~$1.3 million, primarily driven by reductions in sales of ~~public safety equipment,~~warning systems and industrial signaling equipment ~~and warning systems~~ of ~~$0.9 million, $0.4~~$0.8 million and ~~$0.2~~$0.5 million, respectively. Non-U.S. sales ~~increased~~decreased by ~~$0.3~~$1.1 million, largely due to ~~increase~~reductions in sales of public safety equipment and industrial signaling equipment ~~and public safety equipment~~ of ~~$1.1~~$1.2 million and $0.5 million, respectively, partially offset by a ~~$0.9 million reduction in sales of warning systems and an unfavorable~~favorable foreign currency translation impact of ~~$0.4~~$0.8 million.

Cost of sales for the three months ended March 31, ~~2020 were unchanged from~~2021 decreased by $1.2 million, or 4%, compared to the prior-year quarter, ~~with the effects of~~primarily related to lower sales volumes, ~~and~~partially offset by a ~~$0.3~~$0.7 million ~~favorable~~unfavorable foreign currency translation ~~impact being partially offset by unfavorable sales mix in comparison to the prior-year quarter.~~impact. Gross profit margin for the three months ended March 31, ~~2020~~2021 was ~~37.7%~~37.1%, compared to ~~39.0%~~37.7% in the prior-year ~~quarter.~~quarter, with the decrease primarily attributable to unfavorable sales mix.

SEG&A expenses for the three months ended March 31, ~~2020 increased~~2021 decreased by ~~$0.1~~$1.0 million, or 1%8%, ~~in comparison~~compared to the prior-year ~~quarter.~~quarter, mostly related to cost reduction initiatives implemented in the prior year, as well as lower sales commissions. As a percentage of net sales, SEG&A expenses ~~increased~~decreased from ~~23.0%~~23.7% in the prior-year quarter, to ~~23.7%~~22.9% in the current-year quarter.

Operating income ~~decreased by $1.3 million, or 15%,~~ for the three months ended March 31, ~~2020. The decrease was~~2021 decreased by $0.2 million, or 3%, compared to the prior-year quarter, primarily ~~attributable~~due to ~~the~~a $1.2 million reduction in gross profit, ~~and~~partially offset by the ~~$0.1~~$1.0 million ~~increase~~reduction in SEG&A expenses.

Backlog was $30.2 million at March 31, 2021, compared to $42.4 million at March 31, ~~2020, compared to $28.1 million at March 31, 2019, with the improvement largely due to higher global demand for public safety equipment.~~2020.

Corporate operating expenses for the three months ended March 31, ~~2020~~2021 were ~~$4.5~~$6.5 million, ~~down~~up from ~~$8.6~~$4.5 million in the prior-year ~~quarter. The $4.1 million decrease was~~quarter, with the increase primarily ~~due~~due to ~~reductions in~~higher post-employment ~~expenses, stock-based compensation expense costs and incentive-based compensation costs.~~expenses.

Seasonality of Company’s Business

Certain of the Company’s businesses are susceptible to the influences of seasonal factors, including buying patterns, delivery patterns and productivity influences from holiday periods and weather. In general, the Company tends to have lower equipment sales in the first calendar quarter of each year compared to other quarters as a result of these factors. In addition, rental income and parts sales are generally higher in the second and third quarters of the year, because many of the Company’s products are used for maintenance activities in North America, where usage is typically lower during periods of harsher weather conditions. ~~Due to the potential for adverse impacts associated with the current COVID-19 pandemic, the Company’s results in 2020 may not reflect the same seasonal trends as in prior years.~~

Financial Condition, Liquidity and Capital Resources

The Company uses its cash flow from operations to fund growth and to make capital investments that sustain its operations, reduce costs, or both. Beyond these uses, remaining cash is used to pay down debt, repurchase shares, fund dividend payments and make pension contributions. The Company may also choose to invest in the acquisition of businesses. In the absence of significant unanticipated cash demands, we believe that the Company’s existing cash balances, cash flow from operations and borrowings available under the 2019 Credit Agreement will provide funds sufficient for these purposes. As of March 31, ~~2020,~~2021, there was ~~$278.2~~$220.1 million of cash drawn and ~~$11.2~~$10.3 million of undrawn letters of credit under the 2019 Credit Agreement, with ~~$210.6~~$269.6 million of availability for borrowings. ~~However, as described in Part II, Item 1A,~~ ~~Risk Factors, the current COVID-19 pandemic may materially adversely affect the Company’s business, financial condition and operating results, including its cash flows.~~ The net cash flows associated with the Company’s rental equipment transactions are included in cash flow from operating activities.

The Company’s cash and cash equivalents totaled ~~$69.4~~$54.8 million and ~~$31.6~~$81.7 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of March 31, ~~2020, $18.2~~2021, $24.7 million of cash and cash equivalents was held by foreign subsidiaries. Cash and cash equivalents held by subsidiaries outside the U.S. typically are held in the currency of the country in which it is located. The Company uses this cash to fund the operating activities of its foreign subsidiaries and for further investment in foreign operations. Generally, the Company has considered such cash to be permanently reinvested in its foreign operations and the Company’s current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. However, in the event that these funds are needed to fund U.S. operations or to satisfy U.S. obligations, they generally could be repatriated. The repatriation of these funds may cause the Company to incur additional U.S. income tax expense, dependent on income tax laws and other circumstances at the time any such amounts are repatriated.

Net cash of ~~$5.2~~$26.0 million was provided by operating activities in the three months ended March 31, ~~2020, whereas~~2021, compared to $5.2 million in the three months ended March 31, 2019, net cash of $8.8 million was used for operating activities. The first quarter is typically a period in which our businesses fund seasonal increases in working capital requirements.prior-year period. The year-over-year improvement in operating cash flow was primarily due to ~~higher earnings and~~working capital timing differences, lower rental fleet ~~and working capital investments~~investment in comparison to the prior year ~~partially offset by higher~~and lower tax payments. Partially offsetting these improvements was a $0.9 million increase in pension contributions in comparison to the prior-year period.

Net cash of ~~$8.4~~$56.4 million was used for investing activities in the three months ended March 31, ~~2020,~~2021, compared to ~~$4.5~~$8.4 million in the prior-year period. During the three months ended March 31, 2021, the Company paid initial consideration of $53.5 million to acquire OSW. Capital expenditures in the three months ended March 31, 2021 and 2020 were $4.3 million and ~~2019 were~~ $9.5 million, ~~and $4.5 million, respectively, with the increase largely related to the ongoing plant expansions at our Vactor and Rugby facilities.~~respectively. During the three months ended March 31, 2020, the Company ~~also~~ received $0.8 million as part of the finalization of certain post-closing adjustments in connection with the acquisition of MRL.

Net cash of ~~$41.4~~$4.0 million was provided by financing activities in the three months ended March 31, ~~2020, whereas~~2021, compared with $41.4 million in the prior-year ~~period, $1.4~~quarter. In the three months ended March 31, 2021, the Company borrowed $10.1 million against its revolving credit facility, primarily to fund the acquisition of OSW, and received $3.3 million from stock option exercises. The Company also funded cash dividends of $5.5 million, and redeemed $4.0 million of ~~net cash was used for financing activities.~~stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation and the exercise of stock options. In the three months ended March 31, 2020, the Company borrowed $63.6 million against its revolving credit facility, ~~primarily to bolster the Company’s cash position in the short-term in light of the current uncertainty relating to the COVID-19 pandemic. The Company also~~ funded share repurchases and cash dividends ~~and share~~

~~repurchases of $4.8~~$13.5 million and ~~$13.5~~$4.8 million, respectively, and redeemed $4.0 million of stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based ~~compensation. In~~compensation and the three months ended March 31, 2019, the Company borrowed $5.5 million against its revolving credit facility. The Company also funded cash dividends and share repurchases of $4.8 million and $1.0 million, respectively, and redeemed $1.1 millionexercise of stock ~~in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation.~~options.

The Company ~~currently~~ anticipates that capital expenditures for ~~2020,~~2021, including investments associated with ~~its~~certain ongoing plant expansions, will be in the range of ~~$25~~$20 million to ~~$30~~$25 million. While this range reflects the Company’s decision to temporarily delay certain non-essential capital expenditures, actual capital expenditures for 2020 may differ materially depending on the duration and severity of the COVID-19 pandemic and its resulting impact on the Company’s liquidity.

Contractual Obligations and Off-Balance Sheet Arrangements

During the three months ended March 31, ~~2020,~~2021, there have been no material changes in the Company’s contractual obligations and off-balance sheet arrangements as described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. During the three months ended March 31, ~~2020,~~2021, there have been no significant changes in our exposure to market risk.


~~Item 4.~~	~~Controls and Procedures.~~

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of March 31, ~~2020.~~2021. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2020.~~2021.

As a matter of practice, the Company’s management continues to review and document internal control and procedures for financial reporting. From time to time, the Company may make changes aimed at enhancing the effectiveness of the controls and ensuring that the systems evolve with the business. ~~There~~SEC guidance permits management to omit an assessment of internal control over financial reporting for an acquired business from management’s assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. During the three months ended March 31, 2021, the Company completed the acquisition of OSW. As of March 31, 2021, management has not yet fully assessed OSW’s internal control over financial reporting. Excluding the acquisition of OSW, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the three months ended March 31, ~~2020~~2021.

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PART II. OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings.~~

Item 1. Legal Proceedings.

The information set forth under the heading “Legal Proceedings” in Note 79 – Commitments and Contingencies to the accompanying condensed consolidated financial statements as included in Part I of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors.

There have been no material changes in the Company’s risk factors as described in Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019, except as described below.~~2020.

~~The extent to which the COVID-19 pandemic will adversely impact our business, financial condition and operating results is highly uncertain and cannot be predicted but could be material.~~

The COVID-19 pandemic has created significant worldwide volatility, uncertainty and disruption. In particular, the COVID-19 pandemic and the governmental response to the pandemic has resulted in a substantial curtailment of business activities, a significant number of business closures, slowdowns, suspensions or delays of production and commercial activity, and weakened economic conditions, both in the United States and many foreign countries. As such, the COVID-19 pandemic has directly and indirectly adversely impacted the Company and such adverse impact will likely continue. However, the extent to which the COVID-19 pandemic will ultimately adversely impact the Company’s business, financial condition and operating results, which could be material, will depend on numerous evolving factors that are highly uncertain, rapidly changing and cannot be predicted at this time, including:

~~the duration and scope of the COVID-19 pandemic;~~

governmental, business and individual actions that have been, and continue to be, taken in response to the COVID-19 pandemic, including business and travel restrictions, “stay-at-home” and “shelter-in-place” directives, quarantines, and slowdowns, suspensions or delays of commercial activity;

the effect of the COVID-19 pandemic and the government response on our dealers, distributors and other channel partners and customers, including their ability to remain open, continue to sell and service our products, pay for the products purchased from us and obtain vehicle chassis, to the extent that they source such components directly;

~~the effect of the COVID-19 pandemic and the governmental response on the budgets of our municipal customers;~~

our ability to continue to run our operations as an essential business during the COVID-19 pandemic and/or to maintain our normal production capacity, in light of the potential for adverse impacts associated with decreased labor availability, the temporary suspension of production activity mandated or otherwise made necessary by governmental authorities, weakened demand, supply chain disruptions, or other production delays;

~~significant reductions or volatility in demand for one or more of our products or services;~~

~~the effect of the COVID-19 pandemic on our suppliers and our ability to obtain commodities, components and parts, on a timely basis through our supply chain and at previously anticipated costs;~~

~~logistics costs and challenges, including availability of transportation and at previously anticipated costs;~~

costs incurred as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including remote working accommodations, enhanced cleaning processes, protocols designed to implement appropriate social distancing practices, and/or adoption of additional wage and benefit programs to assist employees;

~~potential future restructuring, impairment and other charges;~~

availability of employees, their ability to conduct work away from normal working locations and/or under revised work environment protocols and the general willingness of employees to come to and perform work;

~~the impact of the COVID-19 pandemic on the financial and credit markets and economic activity generally;~~

~~our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all;~~

our ability to comply with the financial covenants in our debt agreements if a material economic downturn as a result of the COVID-19 pandemic results in substantially increased indebtedness and/or lower earnings; and

~~the exacerbation of negative impacts resulting from the occurrence of a global or national recession, depression or other sustained adverse market event as a result of the COVID-19 pandemic.~~

In addition to its potential to cause a direct adverse affect on our business, operations, financial condition and operating results, the COVID-19 pandemic may also have the effect of heightening many of the other risks described in Item 1A, ~~Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.~~

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~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides a summary of the Company’s repurchase activity for its common stock during the three months ended March 31, ~~2020:~~

2021:

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ^{(a) (b)}
January 2020 (1/1/20 – 2/1/20) —
$ —
—
$ 29,198,155
February 2020 (2/2/20 – 2/29/20) —
—
—
29,198,155
March 2020 (3/1/20 – 3/28/20) 490,990
27.4422
490,990
90,724,309

~~(a)~~Period

~~On November 4, 2014,~~

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Dollar Value of Shares That May Yet Be Purchased Under the ~~Board authorized a stock repurchase program of up to $75.0 million of the Company’s common stock.~~Plans or Programs (a) (b)

January 2021 (1/1/21 – 2/6/21)		—	$	—	—	$	90,524,049
~~(b)~~February 2021 (2/7/21 – 3/6/21)	On	—	—		—	90,524,049
March ~~13, 2020, the Board authorized an additional~~2021 (3/7/21 – 4/3/21)		—	—		—	90,524,049

(a) On November 4, 2014, the Board authorized a stock repurchase program of up to $75.0 million ~~of the Company’s common stock. This program supplements the November 2014 stock repurchase program, which remains in effect.~~

~~In light~~ of the ~~current uncertainty and volatility resulting from~~Company’s common stock.

(b) On March 13, 2020, the ~~COVID-19 pandemic,~~Board authorized an additional stock repurchase program of up to $75.0 million of the ~~Company has elected to suspend~~Company’s common stock. This program supplements the November 2014 stock ~~repurchases but may resume such repurchases~~repurchase program, which remains in ~~the future.~~effect.


~~Item 3.~~	~~Defaults upon Senior Securities.~~

Item 3. Defaults upon Senior Securities.

None.


~~Item 4.~~	~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

Not applicable.


~~Item 5.~~	~~Other Information.~~

Item 5. Other ~~Events~~Information.

On ~~April 29, 2020,~~May 4, 2021, the Company issued a press release announcing its financial results for the three months ended March 31, ~~2020.~~2021. The presentation slides for the first quarter ~~2020~~2021 earnings call were also posted on the Company’s website at that time. The full text of the first quarter financial results press release and earnings presentation are attached hereto as Exhibits 99.1 and 99.2, respectively, to this Form 10-Q.

~~Reduction in Officer and Director Compensation~~

On April 27, 2020, the Company’s Compensation and Benefits Committee (the “Committee”) of the Board and Jennifer L. Sherman, President and Chief Executive Officer, each of the Company’s other named executive officers included in the Company’s most recent proxy statement (the “2020 Proxy Statement”) filed with the SEC on March 12, 2020 (Mark D. Weber, Senior Vice President and Chief Operating Officer, Ian A. Hudson, Senior Vice President and Chief Financial Officer, Robert E. Fines, Vice President and General Manager of Truck Bodies and Equipment International, and Daniel A. DuPré, Vice President and General Counsel), and certain other executive officers of the Company agreed to voluntary reductions in such executive officers’ base salaries for a period of ten consecutive weeks beginning on, or around, April 16, 2020. Each of the Company’s non-employee directors also agreed to corresponding reductions in cash compensation for the same period. The Company’s officers and directors volunteered these reductions in compensation to support the Company’s cost reduction efforts in response to the economic impact of the current COVID-19 pandemic.

~~As a result of these reductions, for a period of ten consecutive weeks beginning on, or around, April 16, 2020:~~

~~Ms. Sherman’s base salary will be reduced by 25%;~~

~~The base salaries of Mr. Weber and Mr. Hudson will be reduced by 22.5%;~~

~~Each of the other named executive officers’ base salaries will be reduced by 20%;~~

~~Each of the other executive officers’ base salaries will be reduced by 20%;~~

~~As Chairman of the Board, Dennis J. Martin’s annual retainer will be reduced by 25%; and~~

~~All other non-employee directors’ annual retainers will be reduced by 22.5%.~~

~~At the end of the ten-week period, the compensation in effect before the reductions will be reinstated without further action by the Committee or the Board.~~

Table of Contents

Item 6. Exhibits.


~~Item 6.~~	~~Exhibits.~~



3.1						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.

3.2						Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed February 9, 2016.

10.1*						~~Seventh~~Second Amendment to the Federal Signal Corporation ~~Savings Restoration Plan, effective as of January 1, 2020.~~2015 Executive Incentive Compensation Plan. Incorporated by reference to ~~Exhibit 10.ccc~~Appendix B to the Company’s ~~Form 10-K for the year ended December 31, 2019.~~Definitive Proxy Statement filed on Schedule 14A filed March 17, 2021.

31.1						CEO Certification under Section 302 of the Sarbanes-Oxley Act.

31.2						CFO Certification under Section 302 of the Sarbanes-Oxley Act.

32.1						CEO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.

32.2						CFO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.

99.1						First Quarter Financial Results Press Release, Dated ~~April 29, 2020.~~May 4, 2021.

99.2						First Quarter Earnings Call Presentation Slides.

101.INS						XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Management contract or compensatory plan or ~~arrangement.~~

arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

Table of Contents

SIGNATURE

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.


				Federal Signal Corporation

Date:			May 4, 2021	~~Federal Signal Corporation~~

~~Date:~~	~~April 29, 2020~~	/s/ Ian A. Hudson
				Ian A. Hudson
				Senior Vice President and Chief Financial Officer (Principal Financial Officer)

3332



(in millions)	March 31, 2020		December 31, 2019
2019 Credit Agreement^(a)	$	278.2	$	219.9
Finance lease obligations	0.7		0.6
Total long-term borrowings and finance lease obligations, including current portion	278.9		220.5
Less: Current finance lease obligations	0.2		0.2
Total long-term borrowings and finance lease obligations	$	278.7	$	220.3



	March 31, 2020				December 31, 2019
(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value
Long-term borrowings^(a)	$	278.9	$	278.9	$	220.5	$	220.5



(in millions)	As of March 31, 2020		As of December 31, 2019
Total assets:
Environmental Solutions	$	939.0	$	908.1
Safety and Security Systems	223.4		222.6
Corporate and eliminations	64.4		34.5
Total assets of continuing operations	1,226.8		1,165.2
Total assets of discontinued operations	0.3		0.3
Total assets	$	1,227.1	$	1,165.5



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ^{(a) (b)}
January 2020 (1/1/20 – 2/1/20)	—	$	—	—	$	29,198,155
February 2020 (2/2/20 – 2/29/20)	—	—		—	29,198,155
March 2020 (3/1/20 – 3/28/20)	490,990	27.4422		490,990	90,724,309