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 ~~September 30, 2020~~March 31, 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) 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 ~~September~~April 30, ~~2020,~~2021, the number of shares outstanding of the registrant’s common stock was ~~60,523,414.~~61,007,413.

Table of Contents

FEDERAL SIGNAL CORPORATION

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2
	Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	3
	Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	4
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	6
	Notes to Condensed Consolidated Financial Statements	87
	Note 1 – Summary of Significant Accounting Policies	87
	Note 2 – Acquisitions	98
	Note 3 – Revenue Recognition	10
	Note 4 – Inventories	10
	Note 5 – Debt	11
	Note 6 – ~~Income Taxes~~Goodwill and Other Intangible Assets	12
	Note 7 – ~~Pension and Other Post-Employment Plans~~Income Taxes	1213
	Note 8 – Pensions	13
	Note 9 – Commitments and Contingencies	13
	Note 910 – Earnings Per Share	18
	Note 1011 – Stockholders’ Equity	19
	Note 1112 – Segment Information	2221
	Note 1213 – Fair Value Measurements	2221
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2523
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3529
Item 4.	Controls and Procedures	3529

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3630
Item 1A.	Risk Factors	3630
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3730
Item 3.	Defaults Upon Senior Securities	3730
Item 4.	Mine Safety Disclosures	3730
Item 5.	Other Information	3730
Item 6.	Exhibits	3831

SIGNATURE		3932

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 the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, which were filed with the SEC on April 29, 2020 and July 29, 2020, respectively, and 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 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).

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions, except per share data)	(in millions, except per share data)	2020		2019		2020		2019			(in millions, except per share data)	2021		2020
Net sales	Net sales	$	279.8	$	308.8	$	836.0	$	906.9		Net sales	$	278.8	$	286.1
Cost of sales	Cost of sales	207.2		226.8		618.3		665.6			Cost of sales	210.0		211.3
Gross profit	Gross profit	72.6		82.0		217.7		241.3			Gross profit	68.8		74.8
Selling, engineering, general and administrative expenses	Selling, engineering, general and administrative expenses	38.4		43.0		118.0		128.7			Selling, engineering, general and administrative expenses	40.8		42.2
Acquisition and integration-related expenses	Acquisition and integration-related expenses	0.2		0.4		0.8		1.9			Acquisition and integration-related expenses	0.2		0.3
Restructuring		0		0		1.3		0

Operating income	Operating income	34.0		38.6		97.6		110.7			Operating income	27.8		32.3
Interest expense	Interest expense	1.2		2.1		4.5		6.1			Interest expense	1.1		1.5

Other (income) expense, net	Other (income) expense, net	(0.1)		0.2		2.1		0.5			Other (income) expense, net	(0.5)		0.2
Income before income taxes	Income before income taxes	32.9		36.3		91.0		104.1			Income before income taxes	27.2		30.6
Income tax expense	Income tax expense	7.6		7.9		20.9		25.4			Income tax expense	5.0		7.2

Net income	Net income	$	25.3	$	28.4	$	70.1	$	78.7		Net income	$	22.2	$	23.4
Earnings per share:	Earnings per share:										Earnings per share:

Basic	Basic	$	0.42	$	0.47	$	1.16	$	1.31		Basic	$	0.37	$	0.39

Diluted	Diluted	0.41		0.46		1.14		1.28			Diluted	0.36		0.38
Weighted average common shares outstanding:	Weighted average common shares outstanding:										Weighted average common shares outstanding:
Basic	Basic	60.3		60.2		60.3		60.1			Basic	60.6		60.5
Diluted	Diluted	61.3		61.4		61.5		61.3			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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		2020		2019			(in millions)	2021		2020
Net income	Net income	$	25.3	$	28.4	$	70.1	$	78.7		Net income	$	22.2	$	23.4
Other comprehensive income (loss):	Other comprehensive income (loss):										Other comprehensive income (loss):
Change in foreign currency translation adjustment	Change in foreign currency translation adjustment	4.4		(3.8)		(0.5)		(3.0)			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, $0.2, $0.6 and $0.5, respectively		0.3		1.3		3.0		2.8
Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.0, $(0.1), $(1.1) and $(0.5), respectively		0.1		(0.1)		(3.3)		(1.3)
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											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 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)	4.8		(2.6)		(0.8)		(1.5)			Total other comprehensive income (loss)	0.3		(7.4)
Comprehensive income	Comprehensive income	$	30.1	$	25.8	$	69.3	$	77.2		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


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
(in millions, except per share data)	(in millions, except per share data)	(Unaudited)				(in millions, except per share data)	(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	66.2	$	31.6	Cash and cash equivalents	$	54.8	$	81.7
Accounts receivable, net of allowances for doubtful accounts of $3.0 and $2.4, respectively		145.0		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	Inventories	196.6		182.9		Inventories	204.6		185.0
Prepaid expenses and other current assets	Prepaid expenses and other current assets	9.9		12.0		Prepaid expenses and other current assets	9.2		11.8

Total current assets	Total current assets	417.7		360.7		Total current assets	404.9		405.5
Properties and equipment, net of accumulated depreciation of $133.0 and $125.5, respectively		105.6		91.9
Rental equipment, net of accumulated depreciation of $40.9 and $33.6, respectively		115.4		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	Operating lease right-of-use assets	22.4		27.6		Operating lease right-of-use assets	33.8		21.9
Goodwill	Goodwill	392.0		388.8		Goodwill	406.7		394.2
Intangible assets, net of accumulated amortization of $29.4 and $22.1, respectively		155.4		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	Deferred tax assets	7.7		10.0		Deferred tax assets	8.9		9.5
Deferred charges and other long-term assets	Deferred charges and other long-term assets	8.2		7.9		Deferred charges and other long-term assets	4.2		3.8
Long-term assets of discontinued operations	Long-term assets of discontinued operations	0.3		0.3		Long-term assets of discontinued operations	0.2		0.2
Total assets	Total assets	$	1,224.7	$	1,165.5	Total assets	$	1,266.1	$	1,208.8
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Current portion of long-term borrowings and finance lease obligations	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	Accounts payable	71.1		65.0		Accounts payable	71.2		51.6
Customer deposits	Customer deposits	11.5		11.5		Customer deposits	15.3		13.3

Accrued liabilities:	Accrued liabilities:					Accrued liabilities:
Compensation and withholding taxes	Compensation and withholding taxes	27.8		31.1		Compensation and withholding taxes	23.6		30.3
Current operating lease liabilities	Current operating lease liabilities	8.1		8.2		Current operating lease liabilities	9.9		8.2
Other current liabilities	Other current liabilities	39.7		44.0		Other current liabilities	46.0		44.7
Current liabilities of discontinued operations	Current liabilities of discontinued operations	0.2		0.2		Current liabilities of discontinued operations	0.1		0.1
Total current liabilities	Total current liabilities	158.6		160.2		Total current liabilities	166.7		148.4
Long-term borrowings and finance lease obligations	Long-term borrowings and finance lease obligations	238.7		220.3		Long-term borrowings and finance lease obligations	222.0		209.8
Long-term operating lease liabilities	Long-term operating lease liabilities	16.2		21.6		Long-term operating lease liabilities	25.8		15.5
Long-term pension and other postretirement benefit liabilities	Long-term pension and other postretirement benefit liabilities	44.6		50.9		Long-term pension and other postretirement benefit liabilities	52.9		54.0

Deferred tax liabilities	Deferred tax liabilities	58.1		52.7		Deferred tax liabilities	54.4		53.7
Other long-term liabilities	Other long-term liabilities	27.8		17.3		Other long-term liabilities	23.9		24.5
Long-term liabilities of discontinued operations	Long-term liabilities of discontinued operations	0.9		0.9		Long-term liabilities of discontinued operations	0.8		0.8
Total liabilities	Total liabilities	544.9		523.9		Total liabilities	546.5		506.7
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 67.8 and 66.9 shares issued, respectively		67.8		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	Capital in excess of par value	237.4		228.6		Capital in excess of par value	245.2		240.8
Retained earnings	Retained earnings	583.8		528.2		Retained earnings	621.7		605.0
Treasury stock, at cost, 7.3 and 6.4 shares, respectively		(119.3)		(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	Accumulated other comprehensive loss	(89.9)		(89.1)		Accumulated other comprehensive loss	(91.4)		(91.7)
Total stockholders’ equity	Total stockholders’ equity	679.8		641.6		Total stockholders’ equity	719.6		702.1
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,224.7	$	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)


		Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	70.1	$	78.7	Net income	$	22.2	$	23.4
Adjustments to reconcile net income to net cash provided by operating activities:	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	Depreciation and amortization	33.1		30.1		Depreciation and amortization	12.2		10.8

Stock-based compensation expense	Stock-based compensation expense	5.4		5.9		Stock-based compensation expense	1.3		1.0

Payments for acquisition-related activity		0		(3.1)

Deferred income taxes	Deferred income taxes	8.4		8.6		Deferred income taxes	0.5		2.8
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(37.4)		(61.6)		Changes in operating assets and liabilities	(10.2)		(32.8)

Net cash provided by operating activities	Net cash provided by operating activities	79.6		58.6		Net cash provided by operating activities	26.0		5.2
Investing activities:	Investing activities:					Investing activities:
Purchases of properties and equipment	Purchases of properties and equipment	(24.3)		(21.2)		Purchases of properties and equipment	(4.3)		(9.5)
Proceeds from sales of properties and equipment		0.5		0.3
Payments for acquisition-related activity		(6.2)		(49.6)

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	Proceeds from acquisition-related activity	0.8		0		Proceeds from acquisition-related activity	0		0.8
Other, net	Other, net	0		0.2		Other, net	0.1		0.3

Net cash used for investing activities	Net cash used for investing activities	(29.2)		(70.3)		Net cash used for investing activities	(56.4)		(8.4)
Financing activities:	Financing activities:					Financing activities:
Increase in revolving lines of credit, net	Increase in revolving lines of credit, net	20.5		37.5		Increase in revolving lines of credit, net	10.1		63.6

Payments of debt financing fees		0		(1.0)

Purchases of treasury stock	Purchases of treasury stock	(13.7)		(1.0)		Purchases of treasury stock	0		(13.5)
Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	(9.0)		(1.9)		Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	(4.0)		(4.0)
Payments for acquisition-related activity		0		(10.3)

Cash dividends paid to stockholders	Cash dividends paid to stockholders	(14.5)		(14.5)		Cash dividends paid to stockholders	(5.5)		(4.8)
Proceeds from stock-based compensation activity	Proceeds from stock-based compensation activity	0.6		1.7		Proceeds from stock-based compensation activity	3.3		0

Other, net	Other, net	0.1		0		Other, net	0.1		0.1

Net cash (used for) provided by financing activities		(16.0)		10.5
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	Effects of foreign exchange rate changes on cash and cash equivalents	0.2		(0.3)		Effects of foreign exchange rate changes on cash and cash equivalents	(0.5)		(0.4)
Increase (decrease) in cash and cash equivalents		34.6		(1.5)
(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	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	Cash and cash equivalents at end of period	$	66.2	$	35.9	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 September 30, 2020													Three Months Ended March 31, 2021
(in millions)	(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 July 1, 2020		$	67.5	$	234.7	$	563.3	$	(115.4)	$	(94.7)	$	655.4
Balance at January 1, 2021														Balance at January 1, 2021	$	67.8	$	240.8	$	605.0	$	(119.8)	$	(91.7)	$	702.1
Net income	Net income					25.3						25.3		Net income					22.2						22.2
Total other comprehensive income	Total other comprehensive income									4.8		4.8		Total other comprehensive income									0.3		0.3
Cash dividends declared ($0.08 per share)						(4.8)						(4.8)
Cash dividends declared ($0.09 per share)														Cash dividends declared ($0.09 per share)					(5.5)						(5.5)
Stock-based payments:	Stock-based payments:													Stock-based payments:
Stock-based compensation	Stock-based compensation			1.5								1.5		Stock-based compensation			1.3								1.3
Stock option exercises and other	Stock option exercises and other	0.3		1.2				(3.7)				(2.2)		Stock option exercises and other	0.4		3.3				(0.7)				3.0
Performance share unit transactions														Performance share unit transactions	0.2		(0.2)				(3.8)				(3.8)

Stock repurchase program								(0.2)				(0.2)
Balance at September 30, 2020		$	67.8	$	237.4	$	583.8	$	(119.3)	$	(89.9)	$	679.8
Balance at March 31, 2021														Balance at March 31, 2021	$	68.4	$	245.2	$	621.7	$	(124.3)	$	(91.4)	$	719.6

Three Months Ended September 30, 2019
(in millions) Common
Stock Capital in
Excess of
Par
Value Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total
Balance at July 1, 2019 $ 66.7 $ 221.3 $ 479.7 $ (91.4) $ (96.2) $ 580.1
Net income 28.4 28.4
Total other comprehensive loss (2.6) (2.6)
Cash dividends declared ($0.08 per share) (4.9) (4.9)
Stock-based payments:
Stock-based compensation 1.7 1.7
Stock option exercises and other 0.2 2.5 (1.2) 1.5
Balance at September 30, 2019 $ 66.9 $ 225.5 $ 503.2 $ (92.6) $ (98.8) $ 604.2


		Nine Months Ended September 30, 2020													Three Months Ended March 31, 2020
(in millions)	(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, 2020	Balance at January 1, 2020	$	66.9	$	228.6	$	528.2	$	(93.0)	$	(89.1)	$	641.6	Balance at January 1, 2020	$	66.9	$	228.6	$	528.2	$	(93.0)	$	(89.1)	$	641.6
Net income	Net income					70.1						70.1		Net income					23.4						23.4
Total other comprehensive loss	Total other comprehensive loss									(0.8)		(0.8)		Total other comprehensive loss									(7.4)		(7.4)
Cash dividends declared ($0.24 per share)						(14.5)						(14.5)
Cash dividends declared ($0.08 per share)														Cash dividends declared ($0.08 per share)					(4.8)						(4.8)

Stock-based payments:	Stock-based payments:													Stock-based payments:
Stock-based compensation	Stock-based compensation			5.4								5.4		Stock-based compensation			1.0								1.0
Stock option exercises and other	Stock option exercises and other	0.7		3.6				(9.7)				(5.4)		Stock option exercises and other	0.1		0.7				(2.0)				(1.2)
Performance share unit transactions	Performance share unit transactions	0.2		(0.2)				(2.9)				(2.9)		Performance share unit transactions	0.2		(0.2)				(2.9)				(2.9)
Stock repurchase program	Stock repurchase program							(13.7)				(13.7)		Stock repurchase program							(13.5)				(13.5)
Balance at September 30, 2020		$	67.8	$	237.4	$	583.8	$	(119.3)	$	(89.9)	$	679.8
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~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)~~

Nine Months Ended September 30, 2019
(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
Net income 78.7 78.7
Total other comprehensive loss (1.5) (1.5)
Cash dividends declared ($0.24 per share) (14.5) (14.5)
Impact of adoption of ASU 2016-02 6.5 6.5
Stock-based payments:
Stock-based compensation 5.2 5.2
Stock option exercises and other 0.4 3.4 (2.2) 1.6
Performance share unit transactions 0.1 (0.1) (0.9) (0.9)
Stock repurchase program (1.0) (1.0)
Balance at September 30, 2019 $ 66.9 $ 225.5 $ 503.2 $ (92.6) $ (98.8) $ 604.2

~~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 1112 – 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. ~~In addition, certain prior-year amounts have been reclassified to conform to current-year presentation.~~

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 ~~27, 2020, and as updated in Part II, Item 1A,~~ ~~Risk Factors~~, of the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, which were filed with the SEC on April 29, 2020 and July 29, 2020, respectively, and 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.

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

~~(Unaudited)~~

~~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 within those fiscal years, with early adoption permitted. The amendments 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 London Interbank Offered Rate (“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,There 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 impact the Company’s consolidated financial statements.

~~No other~~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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

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 and outcomes may differ, 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 ~~Public Works Equipment and Supply, Inc.~~OSW

On ~~June 12, 2020,~~February 17, 2021, the Company ~~acquired certain assets~~completed the acquisition of all of the outstanding equity of OSW, a leading manufacturer of dump truck bodies and ~~operations~~custom upfitter of ~~Public Works Equipment~~truck equipment and ~~Supply, Inc. (“PWE”), a distributor of maintenance and infrastructure equipment covering North Carolina, South Carolina and parts of Tennessee.~~trailers. The acquisition ~~included cash consideration~~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 ~~$6.2 million, which included a payment to acquire certain inventory~~dump truck body and ~~fixed assets at closing. As the acquisition closed on June 12, 2020, the~~trailer product offerings. The assets and liabilities of ~~PWE~~OSW have been consolidated into the Company’s Condensed Consolidated Balance Sheet as of ~~September 30, 2020,~~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 ~~PWE~~ acquisition ~~have been measured at~~based on their estimated fair values atas 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 ~~resulting~~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 ~~$2.5 million of goodwill, which is deductible for tax purposes. Due to~~ the ~~timing of the acquisition, these amounts are preliminary and~~table below are subject to change ~~within~~during the measurement period as ~~the Company finalizes its fair value estimates.~~valuations are finalized. The Company ~~currently~~ expects to finalize the valuation and complete the purchase price allocation byas soon as practicable.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

The following table summarizes the ~~end~~preliminary fair value of assets acquired and liabilities assumed as of the ~~current year.~~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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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

NOTE 3 – 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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		2020		2019			(in millions)	2021		2020
Geographic Region:	Geographic Region:										Geographic Region:
U.S.	U.S.	$	219.1	$	252.6	$	650.7	$	705.6		U.S.	$	215.5	$	226.6
Canada	Canada	41.6		35.6		113.4		131.2			Canada	40.6		33.5
Europe/Other	Europe/Other	19.1		20.6		71.9		70.1			Europe/Other	22.7		26.0
Total net sales	Total net sales	$	279.8	$	308.8	$	836.0	$	906.9		Total net sales	$	278.8	$	286.1
Major Product Line:	Major Product Line:										Major Product Line:
Environmental Solutions	Environmental Solutions										Environmental Solutions
Vehicles and equipment (a)	Vehicles and equipment (a)	$	179.1	$	198.3	$	531.1	$	585.7		Vehicles and equipment (a)	$	179.0	$	186.1
Parts	Parts	32.4		34.4		96.7		101.0			Parts	35.7		33.4
Rental income (b)	Rental income (b)	9.2		12.1		27.3		35.1			Rental income (b)	7.5		8.8
Other (c)	Other (c)	10.3		9.2		23.1		18.9			Other (c)	5.9		4.7
Total	Total	231.0		254.0		678.2		740.7			Total	228.1		233.0
Safety and Security Systems	Safety and Security Systems										Safety and Security Systems
Public safety and security equipment	Public safety and security equipment	29.5		31.6		97.6		98.6			Public safety and security equipment	31.3		31.8
Industrial signaling equipment	Industrial signaling equipment	11.6		15.1		38.0		45.1			Industrial signaling equipment	13.4		14.3
Warning systems	Warning systems	7.7		8.1		22.2		22.5			Warning systems	6.0		7.0

Total	Total	48.8		54.8		157.8		166.2			Total	50.7		53.1
Total net sales	Total net sales	$	279.8	$	308.8	$	836.0	$	906.9		Total net sales	$	278.8	$	286.1

(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.

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 ~~$14.7~~$18.5 million and ~~$13.9~~$17.0 million as of ~~September 30, 2020~~March 31, 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 4 ��– INVENTORIES

The following table summarizes the components of Inventories:


(in millions)	(in millions)	September 30, 2020		December 31, 2019		(in millions)	March 31, 2021		December 31, 2020
Finished goods	Finished goods	$	99.8	$	86.8	Finished goods	$	99.2	$	95.3
Raw materials	Raw materials	79.5		79.5		Raw materials	86.2		76.6
Work in process	Work in process	17.3		16.6		Work in process	19.2		13.1
Total inventories(a)	Total inventories(a)	$	196.6	$	182.9	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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

NOTE 5 – DEBT

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


(in millions)	(in millions)	September 30, 2020		December 31, 2019		(in millions)	March 31, 2021		December 31, 2020

2019 Credit Agreement (a)	2019 Credit Agreement (a)	$	238.2	$	219.9	2019 Credit Agreement (a)	$	220.1	$	209.4
Finance lease obligations(b)	Finance lease obligations(b)	0.7		0.6		Finance lease obligations(b)	2.5		0.6
Total long-term borrowings and finance lease obligations, including current portion	Total long-term borrowings and finance lease obligations, including current portion	238.9		220.5		Total long-term borrowings and finance lease obligations, including current portion	222.6		210.0

Less: Current finance lease obligations(b)	Less: Current finance lease obligations(b)	0.2		0.2		Less: Current finance lease obligations(b)	0.6		0.2
Total long-term borrowings and finance lease obligations	Total long-term borrowings and finance lease obligations	$	238.7	$	220.3	Total long-term borrowings and finance lease obligations	$	222.0	$	209.8

(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.

As more fully described within Note 1213 – 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:


		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
(in millions)	(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value		(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value

Long-term borrowings (a)	Long-term borrowings (a)	$	238.9	$	238.9	$	220.5	$	220.5	Long-term borrowings (a)	$	222.6	$	222.6	$	210.0	$	210.0

(a) Long-term borrowings includes current finance lease obligations of ~~$0.2~~$0.6 million and $0.2 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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 ~~September 30, 2020.~~March 31, 2021.

As of ~~September 30, 2020,~~March 31, 2021, there was ~~$238.2~~$220.1 million of cash drawn and ~~$11.2~~$10.3 million of undrawn letters of credit under the 2019 Credit Agreement, with ~~$250.6~~$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:


		Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Gross borrowings	Gross borrowings	$	82.6	$	80.1	Gross borrowings	$	45.0	$	81.1
Gross payments	Gross payments	62.1		42.6		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.

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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

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 was included in Accumulated other comprehensive loss and was 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 ~~September 30, 2020,~~March 31, 2021, the fair value of the ~~2019~~ Swap was a liability of ~~$3.4~~$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 ~~September 30, 2020,~~March 31, 2021, an unrealized pre-tax gain of ~~$0.1~~$1.1 million was recorded in Accumulated other comprehensive loss, whereas during the ~~nine~~three months ended ~~September 30,~~March 31, 2020, an unrealized pre-tax loss of ~~$4.3~~$4.0 million was recorded. NaN ineffectiveness was recorded in either period. During the three and nine months ended September 30, 2019, unrealized pre-tax losses of $0.2 million and $1.8 million, respectively, were recorded in Accumulated other comprehensive loss, and 0 ineffectiveness was recorded.

NOTE 6 – 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 ~~$7.6~~$5.0 million and ~~$7.9~~$7.2 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The decrease in tax expense in the current-year quarter was largely due to lower pre-tax income levels, and the recognition of ~~$0.7~~$1.1 million more excess tax benefits from stock compensation activity compared to the prior-year quarter. The Company’s effective tax rate for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~23.1%~~18.4%, compared to ~~21.8%~~23.5% in the prior-year ~~quarter, when the Company also recognized a $0.6 million benefit associated with the completion of a tax audit.~~

For the nine months ended September 30, 2020 and 2019, the Company recognized income tax expense of $20.9 million and $25.4 million, respectively. The decrease in tax expense in the current year was largely due to lower pre-tax income levels, and the recognition of $2.3 million more excess tax benefits from stock compensation activity, compared to the prior-year period. The Company’s effective tax rate for the nine months ended September 30, 2020 was 23.0%, compared to 24.4% in the prior-year period.

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 and, therefore, did not have a material impact on the Company’s income tax expense for the three and nine months ended September 30, 2020. However, as permitted under the CARES Act, the Company elected to defer approximately $3.3 million of federal income tax payments, that would have otherwise been paid during the second quarter of 2020, to the third quarter of 2020.quarter.

NOTE 78 – ~~PENSION AND OTHER POST-EMPLOYMENT PLANS~~

~~Defined Benefit Pension Plans~~PENSIONS

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


		U.S. Benefit Plan								Non-U.S. Benefit Plan									U.S. Benefit Plan				Non-U.S. Benefit Plan
		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		2020		2019		2020		2019		2020		2019		(in millions)	2021		2020				2021		2020
Service cost	Service cost	$	0	$	0	$	0	$	0	$	0	$	0	$	0.1	$	0.1	Service cost	$	0	$	0			$	0.1	$	0.1
Interest cost	Interest cost	$	1.5	1.7		4.3		5.1		0.2		0.3		0.7		1.0		Interest cost	1.2		1.4				0.2		0.3
Amortization of actuarial loss	Amortization of actuarial loss	0.8		0.8		2.4		2.0		0.2		0.2		0.4		0.5		Amortization of actuarial loss	1.0		0.8				0.2		0.1
Amortization of prior service cost	Amortization of prior service cost	0		0		0		0		0		0		0.1		0.1		Amortization of prior service cost	0		0				0.0		0.0
Expected return on plan assets	Expected return on plan assets	(2.3)		(2.1)		(6.9)		(6.5)		(0.5)		(0.5)		(1.4)		(1.5)		Expected return on plan assets	(2.4)		(2.3)				(0.5)		(0.5)
Net periodic pension (benefit) expense		$	0	$	0.4	(0.2)		0.6		$	(0.1)	$	0	(0.1)		0.2
Net periodic pension benefit																		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.

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In the nine months ended September 30, 2020, the Company contributed $5.0 million to its U.S. defined benefit plan. The Company did not make any contributions to its U.S. defined benefit plan in 2019. In each of the nine months ended September 30, 2020 and 2019, the Company contributed $1.0 million to its non-U.S. defined benefit plan.

~~During the remainder of 2020, the Company expects to make additional contributions of up to $0.3 million to the non-U.S. benefit plan.~~

~~Multi-Employer Pension Plans~~

During the second quarter of 2020, the Company decided to withdraw from the Sheet Metal Workers’ National Pension Fund. In connection with the issuance of the Company’s intention to withdraw from the plan, the Company recorded an estimated liability of $2.4 million as a component of Other current liabilities on the Condensed Consolidated Balance Sheet as of September 30, 2020. The related expense was included as a component of Other (income) expense, net on the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020.

NOTE 89 – 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 ~~September 30, 2020,~~March 31, 2021, the Company had outstanding performance and financial standby letters of credit, as well as outstanding bid and performance bonds, aggregating to ~~$28.1~~$33.4 million. If any such letters of credit or bonds are called, the Company would be obligated to 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 ~~September 30, 2020,~~March 31, 2021, both the single year and maximum potential cash payments the Company could be required to make to repurchase equipment under these agreements ~~were each~~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.

~~The following table summarizes the changes in the Company’s warranty liabilities during the nine months ended September 30, 2020 and 2019:~~

(in millions) 2020 2019
Balance at January 1 $ 11.2 $ 9.8
Provisions to expense 5.2 4.9
Acquisitions 0 0.2
Payments (6.3) (4.8)
Balance at September 30 $ 10.1 $ 10.1

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~~As of September 30, 2020 and December 31, 2019, an estimated liability was recorded within~~The following table summarizes the ~~Environmental Solutions Group~~changes in ~~connection with a specific warranty matter. It is reasonably possible that~~ the Company’s ~~estimate may change in~~warranty liabilities during 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.three months ended March 31, 2021 and 2020:

~~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 September 30, 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.

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.

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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. A settlement conference related to the Cook County cases occurred on October 20, 2020, which was not successful in resolving these cases. Another status hearing has been scheduled for November 19, 2020.

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 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

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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.

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 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. On June 25, 2020, ~~after further briefing,~~ the ~~appellate court~~Court issued a decision 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

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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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(Unaudited)

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 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 ~~September 30, 2020,~~March 31, 2021, the Company has recognized an estimated liability for the potential settlement ~~amount under the Framework Agreement.~~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 September 30, 2020, a total of 263 firefighters are involved in cases filed in Allegheny and Lackawanna counties in Pennsylvania.

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

~~(Unaudited)~~

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.

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 910 – 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 ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ 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.

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

~~(Unaudited)~~

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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

For ~~both~~ the three ~~and nine~~ months ended ~~September 30,~~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, options to purchase ~~0.5~~0.2 million shares of the Company’s common stock ~~respectively,~~ had an anti-dilutive effect on EPS, and accordingly, are excluded from the calculation of diluted EPS. For the three and nine months ended September 30, 2019, options to purchase 0.2 million and 0.5 million shares of the Company’s common stock, respectively, had an anti-dilutive effect on EPS, and accordingly, arewere excluded from the calculation of diluted EPS.

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


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions, except per share data)	(in millions, except per share data)	2020		2019		2020		2019			(in millions, except per share data)	2021		2020

Net income	Net income	$	25.3	$	28.4	$	70.1	$	78.7		Net income	$	22.2	$	23.4
Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	60.3		60.2		60.3		60.1			Weighted average shares outstanding – Basic	60.6		60.5
Dilutive effect of common stock equivalents	Dilutive effect of common stock equivalents	1.0		1.2		1.2		1.2			Dilutive effect of common stock equivalents	1.1		1.2
Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted	61.3		61.4		61.5		61.3			Weighted average shares outstanding – Diluted	61.7		61.7
Earnings per share:	Earnings per share:										Earnings per share:

Basic	Basic	$	0.42	$	0.47	$	1.16	$	1.31		Basic	$	0.37	$	0.39

Diluted	Diluted	0.41		0.46		1.14		1.28			Diluted	0.36		0.38

NOTE 1011 – 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, 2020, dividends of $4.8 million were paid to stockholders.

On April ~~21, 2020,~~27, 2021, the Board declared a quarterly cash dividend of ~~$0.08~~$0.09 per common ~~share. The dividend totaled $4.9 million and was distributed~~share payable on June 2, ~~2020~~2021 to ~~holders~~stockholders of record at the close of business on May ~~15, 2020.~~

On July 27, 2020, the Board declared a quarterly cash dividend of $0.08 per common share. The dividend totaled $4.8 million and was distributed on September 4, 2020 to holders of record at the close of business on August 21, ~~2020.~~

~~During the three and nine months ended September 30, 2019, dividends of $4.9 million and $14.5 million were paid to stockholders.~~

~~On October 27, 2020, the Board declared a quarterly cash dividend of $0.08 per common share payable on December 1, 2020 to holders of record at the close of business on November 19, 2020.~~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.

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

~~(Unaudited)~~

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 ~~and nine~~ months ended ~~September 30,~~March 31, 2020, the Company repurchased ~~7,227 and 498,217~~490,990 shares for a total of ~~$0.2 million and $13.7 million, respectively, under the stock repurchase program.~~$13.5 million.

~~During the nine months ended September 30, 2019, the Company repurchased 48,409 shares for a total~~

Table of ~~$1.0 million under the stock repurchase program.~~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 ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


(in millions) (a)	(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 July 1, 2020		$	(77.8)	$	(2.3)	$	(12.0)	$	(2.6)	$	(94.7)
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	(0.4)		0		4.4		0		4.0		Other comprehensive (loss) income before reclassifications	(0.2)		0		(1.2)		1.0		(0.4)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	0.7		0		0		0.1		0.8		Amounts reclassified from accumulated other comprehensive loss	0.9		0		0		(0.2)		0.7
Net current-period other comprehensive income		0.3		0		4.4		0.1		4.8
Balance at September 30, 2020		$	(77.5)	$	(2.3)	$	(7.6)	$	(2.5)	$	(89.9)
Net current-period other comprehensive income (loss)												Net current-period other comprehensive income (loss)	0.7		0		(1.2)		0.8		0.3
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 July 1, 2019 $ (86.0) $ (2.4) $ (8.1) $ 0.3 $ (96.2)
Other comprehensive income (loss) before reclassifications 0.5 0 (3.8) 0.1 (3.2)
Amounts reclassified from accumulated other comprehensive loss 0.8 0 0 (0.2) 0.6
Net current-period other comprehensive income (loss) 1.3 0 (3.8) (0.1) (2.6)
Balance at September 30, 2019 $ (84.7) $ (2.4) $ (11.9) $ 0.2 $ (98.8)

~~The following tables summarize the changes in each component of Accumulated other comprehensive loss, net of tax in the nine months ended September 30, 2020 and 2019:~~

(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 0.8 0 (0.5) (3.4) (3.1)
Amounts reclassified from accumulated other comprehensive loss 2.1 0.1 0 0.1 2.3
Net current-period other comprehensive income (loss) 2.9 0.1 (0.5) (3.3) (0.8)
Balance at September 30, 2020 $ (77.5) $ (2.3) $ (7.6) $ (2.5) $ (89.9)

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

~~(Unaudited)~~


(in millions) (a)	(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, 2019		$	(87.4)	$	(2.5)	$	(8.9)	$	1.5	$	(97.3)
Balance at January 1, 2020												Balance at January 1, 2020	$	(80.4)	$	(2.4)	$	(7.1)	$	0.8	$	(89.1)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	0.7		0		(3.0)		(0.6)		(2.9)		Other comprehensive income (loss) before reclassifications	1.1		0		(6.1)		(3.0)		(8.0)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	2.0		0.1		0		(0.7)		1.4		Amounts reclassified from accumulated other comprehensive loss	0.7		0		0		(0.1)		0.6
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	2.7		0.1		(3.0)		(1.3)		(1.5)		Net current-period other comprehensive income (loss)	1.8		0		(6.1)		(3.1)		(7.4)
Balance at September 30, 2019		$	(84.7)	$	(2.4)	$	(11.9)	$	0.2	$	(98.8)
Balance at March 31, 2020												Balance at March 31, 2020	$	(78.6)	$	(2.4)	$	(13.2)	$	(2.3)	$	(96.5)

(a) Amounts in parentheses indicate losses.

The following table summarizes the amounts reclassified from Accumulated other comprehensive loss, net of tax, in the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ and the affected line item in the Condensed Consolidated Statements of Operations:


Details about Accumulated Other Comprehensive Loss Components	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)						(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans	Amortization of actuarial losses of defined benefit pension plans	$	(1.0)	$	(1.0)	Other (income) expense, net	Amortization of actuarial losses of defined benefit pension plans	$	(1.2)	$	(0.9)	Other (income) expense, net
Amortization of prior service costs of defined benefit pension plans	Amortization of prior service costs of defined benefit pension plans	0		0		Other (income) expense, net	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)		0.2		Interest expense	Interest rate swaps	0.2		0.1		Interest expense
Total before tax	Total before tax	(1.2)		(0.8)			Total before tax	(1.0)		(0.8)
Income tax benefit	Income tax benefit	0.4		0.2		Income tax expense	Income tax benefit	0.3		0.2		Income tax expense
Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	(0.8)	$	(0.6)		Total reclassifications for the period, net of tax	$	(0.7)	$	(0.6)

(a) Amounts in parentheses indicate losses.

The following table summarizes the amounts reclassified from Accumulated other comprehensive loss, net of tax, in the nine months ended September 30, 2020 and 2019 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
2020 2019
(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans $ (2.8) $ (2.5) Other (income) expense, net
Amortization of prior service costs of defined benefit pension plans (0.1) (0.1) Other (income) expense, net
Interest rate swaps (0.2) 0.9 Interest expense
Total before tax (3.1) (1.7)
Income tax benefit 0.8 0.3 Income tax expense
Total reclassifications for the period, net of tax $ (2.3) $ (1.4)

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

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(Unaudited)

NOTE 1112 – 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020
Net sales:	Net sales:									Net sales:
Environmental Solutions	Environmental Solutions	$	231.0	$	254.0	$	678.2	$	740.7	Environmental Solutions	$	228.1	$	233.0
Safety and Security Systems	Safety and Security Systems	48.8		54.8		157.8		166.2		Safety and Security Systems	50.7		53.1
Total net sales	Total net sales	$	279.8	$	308.8	$	836.0	$	906.9	Total net sales	$	278.8	$	286.1
Operating income (loss):	Operating income (loss):									Operating income (loss):
Environmental Solutions	Environmental Solutions	$	33.0	$	35.9	$	91.0	$	106.4	Environmental Solutions	$	27.1	$	29.4
Safety and Security Systems	Safety and Security Systems	7.4		8.6		25.2		26.8		Safety and Security Systems	7.2		7.4
Corporate and eliminations	Corporate and eliminations	(6.4)		(5.9)		(18.6)		(22.5)		Corporate and eliminations	(6.5)		(4.5)
Total operating income	Total operating income	34.0		38.6		97.6		110.7		Total operating income	27.8		32.3
Interest expense	Interest expense	1.2		2.1		4.5		6.1		Interest expense	1.1		1.5

Other (income) expense, net	Other (income) expense, net	(0.1)		0.2		2.1		0.5		Other (income) expense, net	(0.5)		0.2
Income before income taxes	Income before income taxes	$	32.9	$	36.3	$	91.0	$	104.1	Income before income taxes	$	27.2	$	30.6


(in millions)	(in millions)	As of September 30, 2020		As of December 31, 2019		(in millions)	As of March 31, 2021		As of December 31, 2020
Total assets:	Total assets:					Total assets:
Environmental Solutions	Environmental Solutions	$	940.9	$	908.1	Environmental Solutions	$	1,013.0	$	926.8
Safety and Security Systems	Safety and Security Systems	226.5		222.6		Safety and Security Systems	222.0		225.5
Corporate and eliminations	Corporate and eliminations	57.0		34.5		Corporate and eliminations	30.9		56.3
Total assets of continuing operations	Total assets of continuing operations	1,224.4		1,165.2		Total assets of continuing operations	1,265.9		1,208.6
Total assets of discontinued operations	Total assets of discontinued operations	0.3		0.3		Total assets of discontinued operations	0.2		0.2
Total assets	Total assets	$	1,224.7	$	1,165.5	Total assets	$	1,266.1	$	1,208.8

NOTE 1213 – 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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(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 5 – 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 ~~September 30, 2020,~~March 31, 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 ~~September 30, 2020:~~March 31, 2021:

Fair Value Measurement at Reporting Date Using
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 34.4 $ 0 $ 0 $ 34.4
Liabilities:
Contingent consideration 0 0 4.4 4.4
Interest rate swap 0 3.4 0 3.4

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

~~(Unaudited)~~


	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

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

(in millions) 2020
2019 (a) (b)
Contingent consideration liability, at July 1 $ 4.4 $ 7.6
Issuance of contingent consideration in connection with acquisitions 0 7.9
Settlements of contingent consideration liabilities 0 (7.6)
Foreign currency translation 0 0
Total losses included in earnings 0.0 0.1
Contingent consideration liability, at September 30 $ 4.4 $ 8.0


(in millions)	2021		2020
Contingent consideration liability, at January 1	$	4.2	$	4.3



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

~~The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the nine months ended September 30, 2020 and 2019:~~

(in millions) 2020
2019 (a) (b)
Contingent consideration liability, at January 1 $ 4.3 $ 6.7
Issuance of contingent consideration in connection with acquisitions 0 7.9
Settlements of contingent consideration liabilities 0 (7.6)
Foreign currency translation 0 0.3
Total losses included in earnings 0.1 0.7
Contingent consideration liability, at September 30 $ 4.4 $ 8.0

(a) Activity in the three and nine months ended September 30, 2019 includes a contingent obligation to provide additional consideration to the former owners of Joe Johnson Equipment, Inc. and Joe Johnson Equipment (USA), Inc. based on the achievement of specified financial results over the three-year period following the closing of the acquisition. During the third quarter of 2019, the Company paid $7.6 million to settle this contingent consideration liability.

(b) The $7.9 million of contingent consideration that was issued in connection with acquisitions during the three and nine months ended September 30, 2019 represented the Company’s preliminary estimate of the fair value of the contingent consideration issued in connection with the acquisition of MRL. Upon finalizing the Company’s purchase price allocation during the fourth quarter of 2019, the estimated fair value of the contingent consideration was determined to be $4.1 million.

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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 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 ~~27, 2020, and as updated in Part II, Item 1A,~~ ~~Risk Factors~~, of the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, which were filed with the SEC on April 29, 2020 and July 29, 2020, respectively, and 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 1112 – 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.

COVID-19 Update

We continue to closely monitor the impact of the ~~coronavirus (“COVID-19”)~~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 remained substantially operational to date. Given that, our primary focus has been on the safety and well-being of our employees. We were proactive in procuring personal protective equipment and sanitizing supplies for our facilities. We also implemented a series of enhanced health and safety measures across the organization, such as reconfiguring work spaces and staggering manufacturing shifts to allow for social distancing, introducing temperature screening protocols, enhancing facility cleaning, limiting non-essential travel and restricting the number of visitors to our facilities. Further, we established remote working arrangements, where possible, supported by the use of virtual meeting capabilities. As many of the government-mandated stay-at-home orders were lifted throughout the course of the second quarter, the majority of our telecommuting employees have gradually returned to the workplace, following our enhanced safety protocols. 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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), we experienced a decrease in labor availability at several of our facilities during the second quarter. While labor availability improved during the third quarter, we continued to experience labor-related disruptions, including several COVID-19-related quarantine absences. As we had anticipated, this resulted in a variety of challenges in running our operations efficiently, and we adjusted our production schedules, accordingly. We saw similar issues within our supply chain, with certain suppliers temporarily shut down. Our procurement teams have worked diligently with our key suppliers to effectively secure safety stock and manage inventory levels and, in some circumstances, have identified alternate suppliers and in-sourcing opportunities in order to mitigate the impact of supply-chain disruptions on production.

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The government-mandated stay-at-home orders and travel and visitor restrictions significantly impacted the Company’s sales and marketing activities during the second quarter, with limited ability to attend trade shows and conduct equipment demonstrations and in-person sales meetings. In addition, certain customers were unable to take delivery of equipment given travel restrictions and the limited personnel that they had available. These factors significantly impacted order intake and operating results during the second quarter. However, as the second quarter progressed, many of the government-mandated restrictions that were imposed in states across the U.S. started to ease, albeit at different times, and at different levels. With business-related travel steadily increasing during the third quarter, our sales teams have been able to increase the amount of equipment demonstrations. That has helped contribute to sequential order improvement, with our third quarter orders up $64.5 million, or 32%, compared to the second quarter.

The timing of production and realization of our backlog, which totaled $319.7 million as of September 30, 2020, 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 return to our normal production capacity, faced with the ongoing 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 have adversely affected the comparability of our operating and financial results for the three and nine months ended September 30, 2020 with the corresponding periods of the prior year, and may continue to impact comparability in subsequent quarters. We are responding accordingly, taking steps to manage through these challenging 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.

~~In an effort to mitigate the financial statement impact of these pandemic-related operational challenges, we implemented the following cost-saving actions:~~

•~~Temporary salary reductions ranging from 20% to 25% during the second quarter for approximately 60 members of the Company’s enterprise leadership team, including executive officers;~~

•~~Temporary reduction in Board of Directors fees ranging from 22.5% to 25% during the second quarter;~~

•~~Roll-back of 2020 merit-based salary increases for most domestic salaried employees, effective in the third quarter;~~

•~~Temporary furloughs of approximately 400 employees, primarily within the second quarter;~~

•~~Permanent reductions in force impacting approximately 200 employees; and~~

•~~Limited discretionary spending, primarily within Selling, engineering, general and administrative (“SEG&A”) expenses, including travel and entertainment expenses.~~

We are continuing to approach the uncertainty and challenges with resolve and from a position of strength given our current financial position. As of September 30, 2020, we had $66.2 million of cash and cash equivalents and $250.6 million of availability for borrowings under our five-year revolving credit facility, which we executed in July 2019.

~~However, 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 ~~decreased by $29.0 million, or 9%, in~~for the three months ended ~~September 30, 2020 as~~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 ~~$23.0~~$4.9 million, or 9%2%, primarily due to ~~decreases~~a $14.3 million reduction in ~~shipments~~sales of industrial vacuum loaders, road-marking and line-removal equipment, street sweepers, dump truck bodies, and waterblasting equipment of $10.4 million, $6.1 million, $5.1 million, $2.9 million, and $2.3 million, respectively,safe-digging trucks, partially offset by a ~~$4.1~~$7.3 million increase in ~~shipments~~sales of sewer cleaners. In addition, aftermarket revenues increased by $3.1 million. Within our Safety and Security Systems Group, net sales decreased by ~~$6.0 million, or 11%, primarily due to lower sales of industrial signaling equipment and public safety equipment.~~

For the nine months ended September 30, 2020, net sales decreased by $70.9 million, or 8%, as compared to the corresponding period of the prior year. Within our Environmental Solutions Group, net sales decreased by $62.5 million, or 8%, largely due to decreases in shipments of safe-digging trucks, industrial vacuum loaders, street sweepers, sewer cleaners, waterblasting equipment, trailers, and dump truck bodies of $18.2 million, $13.8 million, $10.7 million, $8.1 million, $7.7 million, $4.4 million, and $3.8 million, respectively, and an unfavorable foreign currency translation impact of $1.9 million. In addition, aftermarket revenues decreased by $4.4 million. Partially offsetting these reductions was a $15.1 million increase in shipments of road-marking and line-removal equipment, associated with the acquisition of Mark Rite Lines Equipment Company, Inc. (“MRL”), which was completed in the third quarter of 2019. In our Safety and Security Systems Group, net sales decreased by $8.4$2.4 million, or 5%, primarily due to ~~lower domestic~~reductions in sales of public safety equipment, industrial signaling equipment and ~~public safety equipment,~~warning systems of $1.2 million, $1.0 million and $1.0 million, respectively, partially offset by ~~higher international sales~~a favorable foreign currency translation impact of ~~public safety equipment.~~

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$0.8 million.

Operating income ~~decreased by $4.6 million, or 12%, to $34.0 million in~~for the three months ended ~~September 30, 2020 as~~March 31, 2021 decreased by $4.5 million, or 14%, compared to the prior-year quarter, primarily driven by reductions of ~~$2.9~~$2.3 million and ~~$1.2~~$0.2 million within our Environmental Solutions Group and our Safety and Security Systems Group, respectively, and a ~~$0.5~~$2.0 million increase in Corporate expenses, primarily due to higher post-employment expenses. Consolidated operating margin for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~12.2%~~10.0%, compared to ~~12.5%~~11.3% in the prior-year quarter.

For the nine months ended September 30, 2020, operating income decreased by $13.1 million, or 12%, as compared to the corresponding period of the prior year, primarily driven by reductions of $15.4 million and $1.6 million within our Environmental Solutions Group and our Safety and Security Systems Group, respectively, partially offset by a $3.9 million decrease in Corporate expenses. Consolidated operating margin for the nine months ended September 30, 2020 was 11.7%, compared to 12.2% in the prior-year period.

Income before income taxes for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by $3.4 million, or 9%11%, compared to the prior-year quarter. The decrease resulted from the reduced operating income, partially offset by a ~~$0.3~~$0.7 million increase in other income and a ~~$0.9 million reduction in interest expense.~~

For the nine months ended September 30, 2020, income before income taxes decreased by $13.1 million, or 13%, compared to the prior-year period. The decrease resulted from the reduced operating income and a $1.6 million increase in other expense, partially offset by a $1.6$0.4 million reduction in interest expense.

Net income for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$3.1~~$1.2 million compared to the prior-year ~~period,~~quarter, largely due to the ~~aforementioned decrease~~reduction in operating income, ~~before income taxes,~~ partially offset by a ~~$0.3~~$2.2 million ~~reduction in income tax expense.~~

For the nine months ended September 30, 2020, net income decreased by $8.6 million compared to the corresponding period of the prior year, largely due to the aforementioned decrease in income before income taxes, partially offset by a $4.5 million reduction in income tax expense. The 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 ~~$2.3~~$1.1 million more excess tax benefits from stock compensation activity

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compared to the prior-year ~~period. The~~quarter. Our effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was ~~23.1% and 23.0%~~18.4%, ~~respectively.~~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 ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021 were ~~$265.8~~$384 million, ~~and $771.0~~an increase of $80 million, ~~respectively,~~or 26%, compared to ~~$328.8 million and $935.8 million, respectively, in the corresponding periods of the prior year. Orders in each of~~ the prior-year ~~periods included $26.7 million of backlog acquired in connection with the MRL transaction.~~quarter.

Our consolidated backlog at ~~September 30, 2020~~March 31, 2021 was ~~$319.7~~$410 million, ~~a decrease~~an increase of ~~$47.2~~$106 million, or ~~13%~~35%, compared to the end of 2020, and improvement of $9 million, or 2%, compared to the prior-year quarter.

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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 September 30,									Nine Months Ended September 30,										Three Months Ended March 31,
($ in millions, except per share data)	($ in millions, except per share data)	2020			2019			Change			2020			2019			Change			($ in millions, except per share data)	2021			2020			Change
Net sales	Net sales	$	279.8		$	308.8		$	(29.0)		$	836.0		$	906.9		$	(70.9)		Net sales	$	278.8		$	286.1		$	(7.3)
Cost of sales	Cost of sales	207.2			226.8			(19.6)			618.3			665.6			(47.3)			Cost of sales	210.0			211.3			(1.3)
Gross profit	Gross profit	72.6			82.0			(9.4)			217.7			241.3			(23.6)			Gross profit	68.8			74.8			(6.0)
Selling, engineering, general and administrative expenses	Selling, engineering, general and administrative expenses	38.4			43.0			(4.6)			118.0			128.7			(10.7)			Selling, engineering, general and administrative expenses	40.8			42.2			(1.4)
Acquisition and integration-related expenses	Acquisition and integration-related expenses	0.2			0.4			(0.2)			0.8			1.9			(1.1)			Acquisition and integration-related expenses	0.2			0.3			(0.1)
Restructuring		—			—			—			1.3			—			1.3

Operating income	Operating income	34.0			38.6			(4.6)			97.6			110.7			(13.1)			Operating income	27.8			32.3			(4.5)
Interest expense	Interest expense	1.2			2.1			(0.9)			4.5			6.1			(1.6)			Interest expense	1.1			1.5			(0.4)

Other (income) expense, net	Other (income) expense, net	(0.1)			0.2			(0.3)			2.1			0.5			1.6			Other (income) expense, net	(0.5)			0.2			(0.7)
Income before income taxes	Income before income taxes	32.9			36.3			(3.4)			91.0			104.1			(13.1)			Income before income taxes	27.2			30.6			(3.4)
Income tax expense	Income tax expense	7.6			7.9			(0.3)			20.9			25.4			(4.5)			Income tax expense	5.0			7.2			(2.2)

Net income	Net income	$	25.3		$	28.4		$	(3.1)		$	70.1		$	78.7		$	(8.6)		Net income	$	22.2		$	23.4		$	(1.2)
Operating data:	Operating data:																			Operating data:
Operating margin	Operating margin	12.2		%	12.5		%	(0.3)		%	11.7		%	12.2		%	(0.5)		%	Operating margin	10.0		%	11.3		%	(1.3)		%
Diluted earnings per share	Diluted earnings per share	$	0.41		$	0.46		$	(0.05)		$	1.14		$	1.28		$	(0.14)		Diluted earnings per share	$	0.36		$	0.38		$	(0.02)
Total orders	Total orders	265.8			328.8			(63.0)			771.0			935.8			(164.8)			Total orders	384.1			303.9			80.2
Backlog	Backlog	319.7			366.9			(47.2)			319.7			366.9			(47.2)			Backlog	409.5			400.8			8.7
Depreciation and amortization	Depreciation and amortization	11.2			10.8			0.4			33.1			30.1			3.0			Depreciation and amortization	12.2			10.8			1.4

Net sales

Net sales ~~decreased by $29.0 million, or 9%, in~~for the three months ended ~~September 30, 2020 as~~March 31, 2021 decreased by $7.3 million, or 3%, compared to the prior-year quarter. The Environmental Solutions Group reported a net sales decrease of ~~$23.0~~$4.9 million, or 9%2%, primarily due to ~~decreases~~a $14.3 million reduction in ~~shipments~~sales of industrial vacuum loaders, road-marking and line-removal equipment, street sweepers, dump truck bodies, and waterblasting equipment of $10.4 million, $6.1 million, $5.1 million, $2.9 million, and $2.3 million, respectively,safe-digging trucks, partially offset by a ~~$4.1~~$7.3 million increase in ~~shipments~~sales of sewer cleaners. In addition, aftermarket revenues increased by $3.1 million. Within the Safety and Security Systems Group, net sales decreased by ~~$6.0 million, or 11%, primarily due to lower sales of industrial signaling equipment and public safety equipment.~~

For the nine months ended September 30, 2020, net sales decreased by $70.9 million, or 8%, as compared to the corresponding period of the prior year. Within the Environmental Solutions Group, net sales decreased by $62.5 million, or 8%, largely due to decreases in shipments of safe-digging trucks, industrial vacuum loaders, street sweepers, sewer cleaners, waterblasting equipment, trailers, and dump truck bodies of $18.2 million, $13.8 million, $10.7 million, $8.1 million, $7.7 million, $4.4 million, and $3.8 million, respectively, and an unfavorable foreign currency translation impact of $1.9 million. In addition, aftermarket revenues decreased by $4.4 million. Partially offsetting these reductions was a $15.1 million increase in shipments of road-marking and line-removal equipment. In the Safety and Security Systems Group, net sales decreased by $8.4$2.4 million, or 5%, primarily due to ~~lower domestic~~reductions in sales of public safety equipment, industrial signaling equipment and ~~public safety equipment,~~warning systems of $1.2 million, $1.0 million and $1.0 million, respectively, partially offset by ~~higher international sales~~a favorable foreign currency translation impact of ~~public safety equipment.~~$0.8 million.

Cost of sales

Cost of sales ~~decreased by $19.6 million, or 9%,~~ for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by $1.3 million, or 1%, compared to the prior-year quarter, largely due to a decrease of ~~$17.6~~$1.2 million, or 9%4%, within ~~the Environmental Solutions Group, primarily attributable to lower sales volumes. Within~~ the Safety and Security Systems Group, ~~cost of sales decreased by $2.0 million, or 6%, primarily related to lower sales volumes.~~

For the nine months ended September 30, 2020, cost of sales decreased by $47.3 million, or 7%, largely due to an decrease of $44.8 million, or 8%, within the Environmental Solutions Group, primarily attributable to lower sales volumes and a favorable foreign currency translation impact of $1.8 million, partially offset by the recognition of additional cost of sales from the MRL acquisition. Within the Safety and Security Systems Group, cost of sales decreased by $2.5 million, or 2%, for the nine months

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~~ended September 30, 2020,~~ primarily related to lower sales volumes, ~~and~~partially offset by a ~~favorable~~$0.7 million unfavorable foreign currency translation ~~impact of $0.4 million.~~impact.

Gross profit

Gross profit ~~decreased by $9.4 million, or 11%,~~ for the three months ended ~~September 30, 2020,~~March 31, 2021 decreased by $6.0 million, or 8%, compared to the prior-year quarter, primarily due to reductions of ~~$5.4~~$4.8 million and ~~$4.0~~$1.2 million within the Environmental Solutions Group and the Safety and Security Systems Group, respectively. Gross ~~margin~~profit as a percentage of revenues (“gross profit margin”) for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~25.9%~~24.7%, compared to ~~26.6%~~26.1% in the prior-year quarter, primarily due to the ~~impact~~effects of lower ~~sales volumes~~operating leverage and unfavorable ~~sales mix within the Safety and Security Systems Group.~~

~~For the nine months ended September 30, 2020, gross profit decreased by $23.6 million, or 10%, primarily due to reductions of $17.7 million and $5.9 million~~overhead absorption within the Environmental Solutions Group and the Safety and Security Systems Group, respectively. Gross margin for the nine months ended September 30, 2020 was 26.0%, compared to 26.6% in the prior-year period, primarily driven by reductions within the Safety and Security Group and Environmental Solutions GroupGroup.

Table of ~~170 basis points and 40 basis points, respectively.~~Contents

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

SEG&A expenses for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$4.6~~$1.4 million, or ~~11%~~3%, compared to the prior-year quarter, primarily due to reductions in SEG&A expenses within the Environmental Solutions Group and Safety and Security Systems Group ~~and the Environmental Solutions Group~~ of ~~$2.8~~$2.4 million and ~~$2.5~~$1.0 million, respectively, partially offset by a ~~$0.7~~$2.0 million increase in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were ~~13.7%~~14.6% in the current-year quarter, down from ~~13.9%~~14.8% in the prior-year quarter.

For the nine months ended September 30, 2020, SEG&A expenses decreased by $10.7 million, or 8%, primarily due to reductions in SEG&A expenses within the Safety and Security Systems Group, Corporate, and the Environmental Solutions Group of $4.6 million, $3.9 million, and $2.2 million, respectively. Such reductions were due, in part, to cost-saving actions implemented in response to the COVID-19 pandemic. As a percentage of net sales, SEG&A expenses were 14.1% in the current-year period, down from 14.2% in the prior-year period.

Operating income

Operating income ~~decreased by $4.6 million, or 12%, to $34.0 million in~~for the three months ended ~~September 30, 2020 as~~March 31, 2021 decreased by $4.5 million, or 14%, compared to the prior-year quarter, primarily driven by reductions of ~~$2.9~~$2.3 million and ~~$1.2~~$0.2 million within the Environmental Solutions Group and the Safety and Security Systems Group, respectively, and a ~~$0.5~~$2.0 million increase in Corporate expenses. Consolidated operating margin for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~12.2%~~10.0%, compared to ~~12.5%~~11.3% in the prior-year quarter.

For the nine months ended September 30, 2020, operating income decreased by $13.1 million, or 12%, as compared to the corresponding period of the prior year, primarily driven by reductions of $15.4 million and $1.6 million within the Environmental Solutions Group and the Safety and Security Systems Group, respectively, partially offset by a $3.9 million decrease in Corporate expenses. Consolidated operating margin for the nine months ended September 30, 2020 was 11.7%, compared to 12.2% in the prior-year period.

Interest expense

Interest expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$0.9~~$0.4 million ~~and $1.6 million, respectively, in comparison~~compared to the ~~corresponding periods in the prior year. The reductions in both periods were~~prior-year quarter, largely due to lower ~~interest rates when compared to the prior-year periods.~~average debt levels.

Other (income) expense, net

For the three months ended ~~September 30, 2020,~~March 31, 2021, other income of ~~$0.1~~$0.5 million was realized, whereas in the prior-year quarter, other expense of $0.2 million was recognized.

For the nine months ended September 30, 2020, other expense totaled $2.1 million, compared to $0.5 million in the prior-year period, with the increase largely due to the recognition of a $2.5 million charge associated with the withdrawal from a multi-employer pension plan.

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Income tax expense

Net income

Net income for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$3.1~~$1.2 million compared to the prior-year ~~period,~~quarter, largely due to the aforementioned reduction in operating income, partially offset by the ~~$0.9~~$2.2 million ~~reduction~~decrease in ~~interest~~income tax expense, the ~~$0.3~~$0.7 million increase in other income and the ~~$0.3 million decrease in income tax expense.~~

For the nine months ended September 30, 2020, net income decreased by $8.6 million compared to the corresponding period of the prior year, largely due to the aforementioned reduction in operating income and the $1.6 million increase in other expense, partially offset by the $1.6$0.4 million reduction in interest ~~expense, and the $4.5 million decrease in income tax~~ expense.

Environmental Solutions

The following table summarizes the Environmental Solutions Group’s operating results as of and for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2020 2019 Change 2020 2019 Change
Net sales $ 231.0 $ 254.0 $ (23.0) $ 678.2 $ 740.7 $ (62.5)
Operating income 33.0 35.9 (2.9) 91.0 106.4 (15.4)
Operating data:
Operating margin 14.3 % 14.1 % 0.2 % 13.4 % 14.4 % (1.0) %
Total orders $ 220.0 $ 270.2 $ (50.2) $ 615.2 $ 767.1 $ (151.9)
Backlog 292.6 337.8 (45.2) 292.6 337.8 (45.2)
Depreciation and amortization 10.4 10.0 0.4 30.6 27.5 3.1

~~Three months ended September 30, 2020 vs. three months ended September 30, 2019~~


	Three Months Ended March 31,
($ in millions)	2021			2020			Change
Net sales	$	228.1		$	233.0		$	(4.9)
Operating income	27.1			29.4			(2.3)
Operating data:
Operating margin	11.9		%	12.6		%	(0.7)		%
Total orders	$	324.2		$	237.5		$	86.7
Backlog	379.3			358.4			20.9
Depreciation and amortization	11.3			10.0			1.3

Total orders infor the three months ended ~~September 30, 2020 decreased~~March 31, 2021 increased by ~~$50.2~~$86.7 million, or ~~19%~~37%, ~~in comparison~~compared to the prior-year ~~quarter, which included $26.7~~quarter. U.S. orders increased by $65.0 million, or 33%, primarily due to the inclusion of $20.9 million of backlog acquired in connection with the ~~MRL transaction. U.S. orders decreased by $66.3 million, or 30%~~acquisition of OSW Equipment & Repair, LLC (“OSW”), ~~primarily due to reductions~~as well as improvements in orders for ~~street sweepers, road-marking equipment,~~dump truck bodies, sewer cleaners, and ~~safe-digging trucks~~industrial vacuum loaders of ~~$20.6~~$11.7 million, ~~$17.1 million, $14.9~~$7.8 million and ~~$9.4~~$7.6 million, respectively. ~~In addition,~~Additionally, aftermarket demand ~~decreased~~increased by ~~$10.8 million. Partially offsetting these reductions were increases in orders for trailers and dump truck bodies of $7.1~~$6.0 million, ~~and $2.7 million, respectively.~~including a large road-striping service contract awarded during the quarter. Non-U.S. orders increased by ~~$16.1~~$21.7 million, or ~~35%~~52%, primarily due to an ~~$18.6~~$8.7 million improvement in aftermarket demand, a $3.0 million favorable foreign currency translation impact, a $2.9 million increase in orders for ~~refuse trucks and a $3.6 million improvement in aftermarket demand, partially offset by decreases in orders for street sweepers and~~ sewer cleaners, ~~of $3.4 million~~ and ~~$2.3 million, respectively.~~

Net sales decreased by $23.0 million, or 9%, for the three months ended September 30, 2020. U.S. sales decreased by $29.6 million, or 14%, largely due to decreases in shipments of industrial vacuum loaders, road-marking equipment, street sweepers, dump truck bodies, and waterblasting equipment of $10.4 million, $6.1 million, $4.0 million, $3.0 million and $2.3 million, respectively. In addition, aftermarket revenues decreased by $5.8 million. Partially offsetting these reductions was a $3.1 million increase in shipments of sewer cleaners. Non-U.S. sales increased by $6.6 million, or 18%, primarily due to a $6.3 million increase in aftermarket demand, largely attributable to higher used equipment sales.

Cost of sales decreased by $17.6 million, or 9%, for the three months ended September 30, 2020, primarily due to lower sales volumes. Gross margin for the three months ended September 30, 2020 was 23.7%, unchanged from the prior-year quarter.

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~~SEG&A expenses decreased by $2.5~~the inclusion of $2.9 million of backlog acquired in connection with the OSW transaction.

Net sales for the three months ended ~~September 30, 2020,~~March 31, 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 decreased by $9.9 million, or 5%, largely due to lower shipments of safe-digging trucks of $13.9 million, partially offset by higher sales of sewer cleaners of $5.6 million. Non-U.S. sales increased by $5.0 million, or 13%, primarily due to a $4.1 million improvement in aftermarket revenues.

Cost of sales for the ~~effects of cost-saving actions~~three months ended March 31, 2021 decreased by $0.1 million compared to the prior-year quarter, primarily due to lower sales volumes, partially offset by a $1.1 million increase in depreciation expense and unfavorable overhead absorption from temporary weather-related disruptions to production. Including these factors, gross profit margin for the three months ended March 31, 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 cost reduction initiatives implemented in ~~response to~~ the ~~COVID-19 pandemic, which included reductions in travel and entertainment expenses, and marketing expenses.~~second half of 2020. As a percentage of net sales, SEG&A expenses ~~were 9.4%~~decreased from 10.9% in the ~~current-year~~prior-year quarter, ~~compared~~ to ~~9.5%~~10.0% in the ~~prior-year~~current-year quarter.

Operating income for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$2.9~~$2.3 million compared to the prior-year quarter, largely due to a ~~$5.4~~$4.8 million reduction in gross profit, partially offset by the ~~$2.5 million reduction in SEG&A expenses.~~

~~Nine months ended September 30, 2020 vs. nine months ended September 30, 2019~~

Total orders decreased by $151.9 million, or 20%, for the nine months ended September 30, 2020. U.S. orders decreased by $140.7 million, or 23%, primarily due to reductions in orders for safe-digging trucks, sewer cleaners, street sweepers, industrial vacuum loaders and dump truck bodies of $45.2 million, $40.9 million, $25.1 million, $22.5 million, and $7.6 million, respectively. In addition, aftermarket demand decreased by $8.7 million. Partially offsetting these reductions was a $12.3 million increase in orders for trailers. Non-U.S. orders decreased by $11.2 million, or 7%, primarily due to decreases in orders for safe-digging trucks, sewer cleaners, street sweepers, snow-removal equipment, and waterblasting equipment of $7.3 million, $6.9 million, $4.2 million, $2.0 million, and $1.9 million, respectively, and an unfavorable foreign currency translation impact of $1.7 million. In addition, aftermarket demand decreased by $2.4 ~~million. Partially offsetting these reductions was a $15.2 million increase in orders for refuse equipment.~~

Net sales decreased by $62.5 million, or 8%, for the nine months ended September 30, 2020. U.S. sales decreased by $44.4 million, or 7%, largely due to decreases in shipments of industrial vacuum loaders, street sweepers, safe-digging trucks, waterblasting equipment, dump truck bodies, and trailers of $13.8 million, $11.4 million, $9.8 million, $5.9 million, $4.4 million, and $4.4 million, respectively. In addition, aftermarket revenues decreased by $4.7 million. Partially offsetting these reductions was a $14.0 million increase in shipments of road-marking and line-removal equipment. Non-U.S. sales decreased by $18.1 million, or 13%, primarily due to decreases in sales of safe-digging trucks and sewer cleaners of $8.4 million and $5.7 million, respectively, and an unfavorable foreign currency translation impact of $1.9 million.

Cost of sales decreased by $44.8 million, or 8%, for the nine months ended September 30, 2020, primarily attributable to lower sales volumes and a favorable foreign currency translation impact of $1.8 million, partially offset by the recognition of additional cost of sales from the MRL acquisition. Gross margin for the nine months ended September 30, 2020 was 23.3%, compared to 23.7% in the prior-year period, with the decrease primarily attributable to a reduction in operating leverage with lower sales volumes.

SEG&A expenses decreased by $2.2 million for the nine months ended September 30, 2020, primarily due to cost saving actions implemented in response to the COVID-19 pandemic, partially offset by the addition of expenses of businesses acquired in the prior year and a $0.8 million increase in amortization expense. As a percentage of net sales, SEG&A expenses were 9.8% in the current-year period, compared to 9.2% in the prior-year period.

Operating income for the nine months ended September 30, 2020 decreased by $15.4 million, largely due to a $17.7 million reduction in gross profit and the recognition of $0.7 million of restructuring charges, partially offset by the $2.2 million reduction in SEG&A expenses and ~~an $0.8~~a $0.1 million decrease in acquisition-related expenses.

Backlog was ~~$292.6~~$379.3 million at ~~September 30, 2020,~~March 31, 2021, compared to ~~$337.8~~$358.4 million at ~~September 30, 2019.~~March 31, 2020.

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Safety and Security Systems

The following table summarizes the Safety and Security Systems Group’s operating results as of and for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
($ in millions)	($ in millions)	2020			2019			Change			2020			2019			Change				($ in millions)	2021			2020			Change
Net sales	Net sales	$	48.8		$	54.8		$	(6.0)		$	157.8		$	166.2		$	(8.4)			Net sales	$	50.7		$	53.1		$	(2.4)
Operating income	Operating income	7.4			8.6			(1.2)			25.2			26.8			(1.6)				Operating income	7.2			7.4			(0.2)
Operating data:	Operating data:																				Operating data:
Operating margin	Operating margin	15.2		%	15.7		%	(0.5)		%	16.0		%	16.1		%	(0.1)		%		Operating margin	14.2		%	13.9		%	0.3		%
Total orders	Total orders	$	45.8		$	58.6		$	(12.8)		$	155.8		$	168.7		$	(12.9)			Total orders	$	59.9		$	66.4		$	(6.5)
Backlog	Backlog	27.1			29.1			(2.0)			27.1			29.1			(2.0)				Backlog	30.2			42.4			(12.2)
Depreciation and amortization	Depreciation and amortization	0.8			0.8			—			2.5			2.5			—				Depreciation and amortization	0.9			0.8			0.1

~~Three months ended September 30, 2020 vs. three months ended September 30, 2019~~

Total orders for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$12.8~~$6.5 million, or ~~22%~~10%, compared with the prior-year quarter. U.S. orders ~~decreased~~increased by ~~$7.9~~$2.4 million, primarily ~~due to reductions~~driven by improvements in orders for industrial signaling equipment and public safety equipment ~~warning systems and industrial signaling equipment~~ of ~~$3.7 million, $2.3~~$1.9 million and ~~$1.9~~$0.6 million, respectively. Non-U.S. orders decreased by ~~$4.9~~$8.9 million, largely due to reductions in orders for public safety equipment ~~industrial signaling equipment~~ and warning systems of ~~$3.7 million, $0.8~~$8.4 million and ~~$0.6~~$1.3 million, ~~respectively.~~respectively, partially offset by a favorable foreign currency translation impact of $1.0 million.

Net sales ~~decreased by $6.0 million, or 11%,~~ for the three months ended ~~September 30, 2020.~~March 31, 2021 decreased by $2.4 million, or 5%, compared to the prior-year quarter. U.S. sales decreased by ~~$3.8~~$1.3 million, primarily driven by reductions in sales of warning systems and industrial signaling equipment ~~and public safety equipment~~ of ~~$2.2~~$0.8 million and ~~$2.0~~$0.5 million, ~~respectively, partially offset by a $0.4 million increase in sales of warning systems.~~respectively. Non-U.S. sales decreased by ~~$2.2~~$1.1 million, largely due to reductions in sales of public safety equipment and industrial signaling equipment ~~and warning systems~~ of ~~$1.1~~$1.2 million and ~~$0.9~~$0.5 million, respectively, partially offset by a favorable foreign currency translation impact of $0.8 million.

Cost of sales ~~decreased by $2.0 million, or 6%,~~for the three months ended ~~September 30, 2020,~~March 31, 2021 decreased by $1.2 million, or 4%, compared to the prior-year quarter, primarily related to lower sales ~~volumes.~~volumes, partially offset by a $0.7 million unfavorable foreign currency translation impact. Gross profit margin for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~36.7%~~37.1%, compared to ~~40.0%~~37.7% in the prior-year quarter, with the decrease primarily attributable to unfavorable sales mix.

SEG&A expenses for the three months ended ~~September 30, 2020~~March 31, 2021 decreased by ~~$2.8~~$1.0 million, or ~~21%~~8%, ~~in comparison~~compared to the prior-year quarter, ~~primarily as a result of cost-saving actions~~mostly related to cost reduction initiatives implemented in ~~response to~~ the ~~COVID-19 pandemic~~prior year, as well as lower sales commissions. As a percentage of net sales, SEG&A expenses decreased from ~~24.3%~~23.7% in the prior-year quarter, to ~~21.5%~~22.9% in the current-year quarter.

Operating income ~~decreased by $1.2 million, or 14%,~~ for the three months ended ~~September 30, 2020,~~March 31, 2021 decreased by $0.2 million, or 3%, compared to the prior-year quarter, primarily due to ~~the $4.0~~a $1.2 million reduction in gross profit, partially offset by the ~~$2.8~~$1.0 million reduction in SEG&A expenses.

~~Nine months ended September 30, 2020 vs. nine months ended September 30, 2019~~

Total orders decreased by $12.9 million, or 8%, for the nine months ended September 30, 2020. U.S. orders decreased by $10.0 million, primarily due to reductions in orders for industrial signaling equipment and public safety equipment of $6.0 million and $5.2 million, respectively, partially offset by a $1.2 million improvement in orders for warning systems. Non-U.S. orders decreased by $2.9 million, primarily due to reductions in orders for industrial signaling equipment and warning systems of $1.4 million and $1.0 million, respectively, and an unfavorable foreign currency translation impact of $0.8 million. These reductions were partially offset by a $0.3 million improvement in orders for public safety equipment.

~~Net sales decreased by $8.4 million, or 5%, for the nine months ended September 30, 2020.~~U.S. sales decreased by $10.3 million, primarily driven by reductions in sales of public safety equipment and industrial signaling equipment of $6.1 million and $5.5 million, respectively, partially offset by a $1.3 million increase in sales of warning systems. Non-U.S. sales increased by $1.9 million, largely due to a $5.3 million increase in sales of public safety equipment, partially offset by reductions in sales of warning systems and industrial signaling equipment of $1.7 million and $1.1 million, respectively, and an unfavorable foreign currency translation impact of $0.6 million.

Cost of sales decreased by $2.5 million, or 2%, for the nine months ended September 30, 2020, primarily related to lower sales volumes and a favorable foreign currency translation impact of $0.4 million. Gross margin for the nine months ended September 30, 2020 was 37.7%, compared to 39.4% in the prior-year period, with the decrease primarily attributable to unfavorable sales mix.

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SEG&A expenses for the nine months ended September 30, 2020 decreased by $4.6 million, or 12%, in comparison to the prior-year period, primarily as a result of cost-saving actions implemented in response to the COVID-19 pandemic. As a percentage of net sales, SEG&A expenses decreased from 23.2% in the prior-year period, to 21.5% in the current-year period.

Operating income decreased by $1.6 million, or 6%, for the nine months ended September 30, 2020. The decrease was primarily attributable to the $5.9 million reduction in gross profit and restructuring charges of $0.3 million, partially offset by the $4.6 million reduction in SEG&A expenses.

Backlog was ~~$27.1~~$30.2 million at ~~September 30, 2020,~~March 31, 2021, compared to ~~$29.1~~$42.4 million at ~~September 30, 2019.~~March 31, 2020.

Corporate Expenses

Corporate operating expenses for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$6.4~~$6.5 million, up from ~~$5.9~~$4.5 million in the prior-year quarter, with the increase primarily ~~due~~due to higher post-employment expenses.

Corporate operating expenses for the nine months ended September 30, 2020 were $18.6 million, down from $22.5 million in the prior-year quarter. The $3.9 million decrease was primarily due to reductions in post-employment expenses, incentive-based compensation costs and employee costs, including the effects of cost-saving actions implemented in response to the COVID-19 pandemic.

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 ~~September 30, 2020,~~March 31, 2021, there was ~~$238.2~~$220.1 million of cash drawn and ~~$11.2~~$10.3 million of undrawn letters of credit under the 2019 Credit Agreement, with ~~$250.6~~$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 ~~$66.2~~$54.8 million and ~~$31.6~~$81.7 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As of ~~September 30, 2020, $21.4~~March 31, 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 ~~$79.6~~$26.0 million was provided by operating activities in the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$58.6~~$5.2 million in the prior-year period. The year-over-year improvement in operating cash flow was primarily due to working capital timing differences, ~~inclusive of actions taken to preserve short-term liquidity in response to the COVID-19 pandemic,~~ lower rental fleet investment in comparison to the prior year and ~~the deferral of certain payments in the current year in accordance with the provisions of the CARES Act, including $4.8 million of payroll~~lower tax payments. Partially offsetting these improvements was a ~~$5.0~~$0.9 million increase in pension contributions in comparison to the prior-year period.

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Net cash of ~~$29.2~~$56.4 million was used for investing activities in the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$70.3~~$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 ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were ~~$24.3~~$4.3 million and ~~$21.2~~$9.5 million, respectively. During the ~~prior-year period, the Company paid an initial sum of $49.6 million to acquire MRL. In addition, during the nine~~three months ended ~~September 30,~~March 31, 2020, the Company ~~paid $6.2 million to acquire certain assets and operations of Public Works Equipment and Supply, Inc. and~~ received $0.8 million as part of the finalization of certain post-closing adjustments in connection with the acquisition of MRL.

Net cash of ~~$16.0~~$4.0 million was ~~used for~~provided by financing activities in the ~~nine~~three months ended ~~September 30, 2020, whereas~~March 31, 2021, compared with $41.4 million in the prior-year ~~period, $10.5 million of net cash was provided by financing activities.~~quarter. In the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company borrowed ~~$20.5~~$10.1 million against its revolving credit facility, primarily to ~~bolster~~fund the ~~Company’s cash position in the short-term in light~~acquisition of ~~the current uncertainty relating to the COVID-19 pandemic.~~OSW, and received $3.3 million from stock option exercises. The Company also funded cash dividends ~~and share repurchases~~ of ~~$14.5~~$5.5 million, and ~~$13.7 million, respectively, and~~ redeemed ~~$9.0~~$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 and the exercise of stock options. In the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company borrowed ~~$37.5~~$63.6 million ~~of debt, primarily to fund the acquisition of MRL,~~against its revolving credit facility, funded share repurchases and cash dividends ~~and share repurchases~~ of ~~$14.5~~$13.5 million and ~~$1.0~~$4.8 million, respectively, and redeemed ~~$1.9~~$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.~~compensation and the exercise of stock options.

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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 ~~$30~~$20 million to ~~$35~~$25 million.

Contractual Obligations and Off-Balance Sheet Arrangements

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 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.

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 ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there have been no significant changes in our exposure to market risk.

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 ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020~~March 31, 2021.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth under the heading “Legal Proceedings” in Note 89 – 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, continue to be and may in the future 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.

The following table provides a summary of the Company’s repurchase activity for its common stock during the three months ended ~~September 30, 2020:~~March 31, 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)
July 2020 (6/28/20 – 8/1/20) 7,227 $ 27.71 7,227 $ 90,524,049
August 2020 (8/2/20 – 8/29/20) — — — 90,524,049
September 2020 (8/30/20 – 9/26/20) — — — 90,524,049


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 2021 (1/1/21 – 2/6/21)	—	$	—	—	$	90,524,049
February 2021 (2/7/21 – 3/6/21)	—	—		—	90,524,049
March 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.

(b) On March 13, 2020, the Board authorized an additional 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.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On ~~October 29, 2020,~~May 4, 2021, the Company issued a press release announcing its financial results for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021. The presentation slides for the ~~third~~first quarter ~~2020~~2021 earnings call were also posted on the Company’s website at that time. The full text of the ~~third~~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.

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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*						Second Amendment to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan. Incorporated by reference to Appendix B to the Company’s 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						~~Third~~First Quarter Financial Results Press Release, Dated ~~October 29, 2020.~~May 4, 2021.

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

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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:	~~October 29, 2020~~May 4, 2021	/s/ Ian A. Hudson
		Ian A. Hudson
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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	Three Months Ended September 30, 2019
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at July 1, 2019	$	66.7	$	221.3	$	479.7	$	(91.4)	$	(96.2)	$	580.1
Net income					28.4						28.4
Total other comprehensive loss									(2.6)		(2.6)
Cash dividends declared ($0.08 per share)					(4.9)						(4.9)

Stock-based payments:
Stock-based compensation			1.7								1.7
Stock option exercises and other	0.2		2.5				(1.2)				1.5


Balance at September 30, 2019	$	66.9	$	225.5	$	503.2	$	(92.6)	$	(98.8)	$	604.2


	Nine Months Ended September 30, 2019
(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
Net income					78.7						78.7
Total other comprehensive loss									(1.5)		(1.5)
Cash dividends declared ($0.24 per share)					(14.5)						(14.5)
Impact of adoption of ASU 2016-02					6.5						6.5
Stock-based payments:
Stock-based compensation			5.2								5.2
Stock option exercises and other	0.4		3.4				(2.2)				1.6
Performance share unit transactions	0.1		(0.1)				(0.9)				(0.9)
Stock repurchase program							(1.0)				(1.0)
Balance at September 30, 2019	$	66.9	$	225.5	$	503.2	$	(92.6)	$	(98.8)	$	604.2


(in millions)	2020		2019 (a) (b)
Contingent consideration liability, at July 1	$	4.4	$	7.6
Issuance of contingent consideration in connection with acquisitions	0		7.9
Settlements of contingent consideration liabilities	0		(7.6)
Foreign currency translation	0		0
Total losses included in earnings	0.0		0.1
Contingent consideration liability, at September 30	$	4.4	$	8.0