UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~March 31,~~June 30, 2023


☐			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 ~~April~~June 30, 2023, the number of shares outstanding of the registrant’s common stock was ~~60,888,266.~~60,992,684.

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 Six Months Ended ~~March 31, 202~~3 June 30, 2023 and ~~202~~20222	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended ~~March 31,~~June 30, 2023 and 2022	3
	Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended ~~March 31,~~June 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	78
	Note 1 – Summary of Significant Accounting Policies	78

	Note 2 – Acquisitions	89
	Note 3 – Revenue Recognition	1013
	Note 4 – Inventories	1013
	Note 5 – Debt	1114

	Note 6 – Goodwill and Other Intangible Assets	1215
	Note 7 – Income Taxes	1316
	Note 8 – Pensions	1316
	Note 9 – Commitments and Contingencies	1316
	Note 10 – Earnings Per Share	1922
	Note 11 – Stockholders’ Equity	1923
	Note 1 2 12 – Segment Information	2125
	Note 1 3 13 – Fair Value Measurements	2126
	~~Note 14~~ – ~~Subsequent Events~~	23


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2428
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3037
Item 4.	Controls and Procedures	3037

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3138
Item 1A.	Risk Factors	3138
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3138
Item 3.	Defaults Upon Senior Securities	3138
Item 4.	Mine Safety Disclosures	3138
Item 5.	Other Information	3138
Item 6.	Exhibits	3239

SIGNATURE		3340

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, 2022, which was filed with the SEC on March 1, 2023. 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 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. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	(in millions, except per share data)	2023		2022			(in millions, except per share data)	2023		2022		2023		2022
Net sales	Net sales	$	385.5	$	330.2		Net sales	$	442.4	$	366.7	$	827.9	$	696.9
Cost of sales	Cost of sales	289.7		254.5			Cost of sales	325.1		276.9		614.8		531.4
Gross profit	Gross profit	95.8		75.7			Gross profit	117.3		89.8		213.1		165.5
Selling, engineering, general and administrative expenses	Selling, engineering, general and administrative expenses	52.0		43.6			Selling, engineering, general and administrative expenses	53.4		42.1		105.4		85.7
Amortization expense	Amortization expense	3.6		3.3			Amortization expense	3.9		3.2		7.5		6.5
Acquisition and integration-related expenses		0.7		0.3
Acquisition and integration-related expenses (benefits)							Acquisition and integration-related expenses (benefits)	0.6		(1.7)		1.3		(1.4)

Operating income	Operating income	39.5		28.5			Operating income	59.4		46.2		98.9		74.7
Interest expense	Interest expense	4.7		1.3			Interest expense	5.6		1.9		10.3		3.2

Other expense (income), net	Other expense (income), net	0.1		(0.4)			Other expense (income), net	1.1		(0.3)		1.2		(0.7)
Income before income taxes	Income before income taxes	34.7		27.6			Income before income taxes	52.7		44.6		87.4		72.2
Income tax expense	Income tax expense	7.3		7.1			Income tax expense	12.4		11.1		19.7		18.2

Net income	Net income	$	27.4	$	20.5		Net income	$	40.3	$	33.5	$	67.7	$	54.0
Earnings per share:	Earnings per share:						Earnings per share:

Basic	Basic	$	0.45	$	0.34		Basic	$	0.66	$	0.55	$	1.12	$	0.89

Diluted	Diluted	0.45		0.33			Diluted	0.66		0.55		1.10		0.88
Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic	60.7		60.7			Basic	60.7		60.4		60.7		60.6
Diluted	Diluted	61.3		61.4			Diluted	61.4		60.9		61.4		61.1

See notes to condensed consolidated financial statements.

Table of Contents

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)	2023		2022			(in millions)	2023		2022		2023		2022
Net income	Net income	$	27.4	$	20.5		Net income	$	40.3	$	33.5	$	67.7	$	54.0
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Change in foreign currency translation adjustment	Change in foreign currency translation adjustment	1.5		(1.6)			Change in foreign currency translation adjustment	3.2		(8.6)		4.7		(10.2)
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.0 and $0.4 respectively		—		1.0
Change in unrealized gain or loss on interest rate swaps, net of income tax (benefit) expense of $(0.3) and $0.7, respectively		(0.9)		2.1
Total other comprehensive income		0.6		1.5
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.0, $0.1, $0.0,and $0.5 respectively							Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.0, $0.1, $0.0,and $0.5 respectively	(0.1)		2.1		(0.1)		3.1
Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.2, $0.1, $(0.1) and $0.8, respectively							Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.2, $0.1, $(0.1) and $0.8, respectively	0.6		0.2		(0.3)		2.3
Total other comprehensive income (loss)							Total other comprehensive income (loss)	3.7		(6.3)		4.3		(4.8)
Comprehensive income	Comprehensive income	$	28.0	$	22.0		Comprehensive income	$	44.0	$	27.2	$	72.0	$	49.2

See notes to condensed consolidated financial statements.

Table of Contents

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
(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	$	38.4	$	47.5	Cash and cash equivalents	$	48.8	$	47.5
Accounts receivable, net of allowances for doubtful accounts of $2.8 and $2.5, respectively	Accounts receivable, net of allowances for doubtful accounts of $2.8 and $2.5, respectively	191.6		173.8		Accounts receivable, net of allowances for doubtful accounts of $2.8 and $2.5, respectively	193.4		173.8
Inventories	Inventories	317.6		292.7		Inventories	339.4		292.7
Prepaid expenses and other current assets	Prepaid expenses and other current assets	18.7		17.4		Prepaid expenses and other current assets	24.4		17.4

Total current assets	Total current assets	566.3		531.4		Total current assets	606.0		531.4
Properties and equipment, net of accumulated depreciation of $161.6 and $156.4, respectively		180.8		179.3
Rental equipment, net of accumulated depreciation of $46.1 and $45.4, respectively		121.9		109.1
Properties and equipment, net of accumulated depreciation of $167.2 and $156.4, respectively						Properties and equipment, net of accumulated depreciation of $167.2 and $156.4, respectively	189.1		179.3
Rental equipment, net of accumulated depreciation of $49.0 and $45.4, respectively						Rental equipment, net of accumulated depreciation of $49.0 and $45.4, respectively	129.8		109.1
Operating lease right-of-use assets	Operating lease right-of-use assets	25.8		24.7		Operating lease right-of-use assets	25.1		24.7
Goodwill	Goodwill	458.4		453.4		Goodwill	475.4		453.4
Intangible assets, net of accumulated amortization of $59.0 and $55.4, respectively		212.8		208.2
Intangible assets, net of accumulated amortization of $63.0 and $55.4, respectively						Intangible assets, net of accumulated amortization of $63.0 and $55.4, respectively	216.7		208.2
Deferred tax assets	Deferred tax assets	8.6		8.8		Deferred tax assets	8.4		8.8
Other long-term assets	Other long-term assets	9.7		9.4		Other long-term assets	10.2		9.4

Total assets	Total assets	$	1,584.3	$	1,524.3	Total assets	$	1,660.7	$	1,524.3
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	$	2.3	$	1.5	Current portion of long-term borrowings and finance lease obligations	$	3.1	$	1.5
Accounts payable	Accounts payable	95.6		72.4		Accounts payable	86.7		72.4
Customer deposits	Customer deposits	26.1		25.4		Customer deposits	26.6		25.4

Accrued liabilities:	Accrued liabilities:					Accrued liabilities:
Compensation and withholding taxes	Compensation and withholding taxes	21.8		31.1		Compensation and withholding taxes	30.2		31.1
Current operating lease liabilities	Current operating lease liabilities	7.5		6.9		Current operating lease liabilities	7.8		6.9
Other current liabilities	Other current liabilities	49.8		43.2		Other current liabilities	44.0		43.2

Total current liabilities	Total current liabilities	203.1		180.5		Total current liabilities	198.4		180.5
Long-term borrowings and finance lease obligations	Long-term borrowings and finance lease obligations	373.2		361.5		Long-term borrowings and finance lease obligations	406.1		361.5
Long-term operating lease liabilities	Long-term operating lease liabilities	19.4		18.5		Long-term operating lease liabilities	18.3		18.5
Long-term pension and other postretirement benefit liabilities	Long-term pension and other postretirement benefit liabilities	39.9		38.9		Long-term pension and other postretirement benefit liabilities	40.3		38.9

Deferred tax liabilities	Deferred tax liabilities	50.3		51.0		Deferred tax liabilities	52.6		51.0
Other long-term liabilities	Other long-term liabilities	16.4		13.0		Other long-term liabilities	21.1		13.0

Total liabilities	Total liabilities	702.3		663.4		Total liabilities	736.8		663.4
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 69.7 and 69.5 shares issued, respectively		69.7		69.5
Common stock, $1 par value per share, 90.0 shares authorized, 69.9 and 69.5 shares issued, respectively						Common stock, $1 par value per share, 90.0 shares authorized, 69.9 and 69.5 shares issued, respectively	69.9		69.5
Capital in excess of par value	Capital in excess of par value	274.7		271.8		Capital in excess of par value	280.9		271.8
Retained earnings	Retained earnings	804.1		782.2		Retained earnings	838.3		782.2
Treasury stock, at cost, 8.8 and 8.8 shares, respectively		(183.1)		(178.6)
Treasury stock, at cost, 8.9 and 8.8 shares, respectively						Treasury stock, at cost, 8.9 and 8.8 shares, respectively	(185.5)		(178.6)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(83.4)		(84.0)		Accumulated other comprehensive loss	(79.7)		(84.0)
Total stockholders’ equity	Total stockholders’ equity	882.0		860.9		Total stockholders’ equity	923.9		860.9
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,584.3	$	1,524.3	Total liabilities and stockholders’ equity	$	1,660.7	$	1,524.3

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
(in millions)	(in millions)	2023		2022		(in millions)	2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	27.4	$	20.5	Net income	$	67.7	$	54.0
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	14.3		13.4		Depreciation and amortization	29.8		27.1

Stock-based compensation expense	Stock-based compensation expense	2.0		2.4		Stock-based compensation expense	5.8		5.4

Changes in fair value of contingent consideration	Changes in fair value of contingent consideration	(0.2)		—		Changes in fair value of contingent consideration	(0.2)		—

Amortization of interest rate swap settlement gain	Amortization of interest rate swap settlement gain	(0.6)		—		Amortization of interest rate swap settlement gain	(1.2)		—
Deferred income taxes	Deferred income taxes	(0.3)		0.3		Deferred income taxes	2.2		3.2
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(35.5)		(29.6)		Changes in operating assets and liabilities	(61.1)		(67.3)

Net cash provided by operating activities	Net cash provided by operating activities	7.1		7.0		Net cash provided by operating activities	43.0		22.4
Investing activities:	Investing activities:					Investing activities:
Purchases of properties and equipment	Purchases of properties and equipment	(6.0)		(33.7)		Purchases of properties and equipment	(15.7)		(41.5)

Payments for acquisition-related activity, net of cash acquired	Payments for acquisition-related activity, net of cash acquired	(13.5)		(1.0)		Payments for acquisition-related activity, net of cash acquired	(56.0)		(5.9)

Other, net	Other, net	0.1		0.4		Other, net	0.3		1.4

Net cash used for investing activities	Net cash used for investing activities	(19.4)		(34.3)		Net cash used for investing activities	(71.4)		(46.0)
Financing activities:	Financing activities:					Financing activities:
Increase in revolving lines of credit, net	Increase in revolving lines of credit, net	12.6		46.8		Increase in revolving lines of credit, net	44.7		44.1

Purchases of treasury stock	Purchases of treasury stock	—		(13.6)		Purchases of treasury stock	—		(16.1)
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	(3.8)		(1.5)		Redemptions of common stock to satisfy withholding taxes related to stock-based compensation	(5.4)		(2.5)
Payments for acquisition-related activity	Payments for acquisition-related activity	(0.5)		—		Payments for acquisition-related activity	(0.5)		—
Cash dividends paid to stockholders	Cash dividends paid to stockholders	(5.5)		(5.5)		Cash dividends paid to stockholders	(11.6)		(10.9)
Proceeds from stock-based compensation activity	Proceeds from stock-based compensation activity	0.4		—		Proceeds from stock-based compensation activity	2.0		0.1

Other, net	Other, net	(0.1)		(0.1)		Other, net	—		0.2

Net cash provided by financing activities	Net cash provided by financing activities	3.1		26.1		Net cash provided by financing activities	29.2		14.9
Effects of foreign exchange rate changes on cash and cash equivalents	Effects of foreign exchange rate changes on cash and cash equivalents	0.1		(0.1)		Effects of foreign exchange rate changes on cash and cash equivalents	0.5		(0.6)
Decrease in cash and cash equivalents		(9.1)		(1.3)
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	1.3		(9.3)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	47.5		40.5		Cash and cash equivalents at beginning of year	47.5		40.5
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	38.4	$	39.2	Cash and cash equivalents at end of period	$	48.8	$	31.2

See notes to condensed consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


		Three Months Ended March 31, 2023													Three Months Ended June 30, 2023
(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, 2023		$	69.5	$	271.8	$	782.2	$	(178.6)	$	(84.0)	$	860.9
Balance at April 1, 2023														Balance at April 1, 2023	$	69.7	$	274.7	$	804.1	$	(183.1)	$	(83.4)	$	882.0
Net income	Net income					27.4						27.4		Net income					40.3						40.3
Total other comprehensive income	Total other comprehensive income									0.6		0.6		Total other comprehensive income									3.7		3.7
Cash dividends declared ($0.09 per share)						(5.5)						(5.5)
Cash dividends declared ($0.10 per share)														Cash dividends declared ($0.10 per share)					(6.1)						(6.1)
Stock-based payments:	Stock-based payments:													Stock-based payments:
Stock-based compensation	Stock-based compensation			2.0								2.0		Stock-based compensation			3.1								3.1
Stock option exercises and other	Stock option exercises and other	0.1		1.0				(1.2)				(0.1)		Stock option exercises and other	0.2		3.1				(2.4)				0.9
Performance share unit transactions		0.1		(0.1)				(3.3)				(3.3)

Balance at March 31, 2023		$	69.7	$	274.7	$	804.1	$	(183.1)	$	(83.4)	$	882.0

Balance at June 30, 2023														Balance at June 30, 2023	$	69.9	$	280.9	$	838.3	$	(185.5)	$	(79.7)	$	923.9


		Three Months Ended March 31, 2022													Three Months Ended June 30, 2022
(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, 2022		$	68.9	$	256.7	$	683.6	$	(151.0)	$	(74.2)	$	784.0
Balance at April 1, 2022														Balance at April 1, 2022	$	69.1	$	259.3	$	698.6	$	(166.5)	$	(72.7)	$	787.8
Net income	Net income					20.5						20.5		Net income					33.5						33.5
Total other comprehensive income										1.5		1.5
Total other comprehensive loss														Total other comprehensive loss									(6.3)		(6.3)
Cash dividends declared ($0.09 per share)	Cash dividends declared ($0.09 per share)					(5.5)						(5.5)		Cash dividends declared ($0.09 per share)					(5.4)						(5.4)

Stock-based payments:	Stock-based payments:													Stock-based payments:
Stock-based compensation	Stock-based compensation			2.4								2.4		Stock-based compensation			2.3								2.3
Stock option exercises and other	Stock option exercises and other	0.1		0.3				(0.6)				(0.2)		Stock option exercises and other	0.1		0.8				(1.2)				(0.3)
Performance share unit transactions		0.1		(0.1)				(1.3)				(1.3)

Stock repurchase program	Stock repurchase program							(13.6)				(13.6)		Stock repurchase program							(2.5)				(2.5)
Balance at March 31, 2022		$	69.1	$	259.3	$	698.6	$	(166.5)	$	(72.7)	$	787.8
Balance at June 30, 2022														Balance at June 30, 2022	$	69.2	$	262.4	$	726.7	$	(170.2)	$	(79.0)	$	809.1


	Six Months Ended June 30, 2023
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2023	$	69.5	$	271.8	$	782.2	$	(178.6)	$	(84.0)	$	860.9
Net income					67.7						67.7
Total other comprehensive income									4.3		4.3
Cash dividends declared ($0.19 per share)					(11.6)						(11.6)
Stock-based payments:
Stock-based compensation			5.1								5.1
Stock option exercises and other	0.3		4.1				(3.6)				0.8
Performance share unit transactions	0.1		(0.1)				(3.3)				(3.3)

Balance at June 30, 2023	$	69.9	$	280.9	$	838.3	$	(185.5)	$	(79.7)	$	923.9

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	Six Months Ended June 30, 2022
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2022	$	68.9	$	256.7	$	683.6	$	(151.0)	$	(74.2)	$	784.0
Net income					54.0						54.0
Total other comprehensive loss									(4.8)		(4.8)
Cash dividends declared ($0.18 per share)					(10.9)						(10.9)
Stock-based payments:
Stock-based compensation			4.7								4.7
Stock option exercises and other	0.2		1.1				(1.8)				(0.5)
Performance share unit transactions	0.1		(0.1)				(1.3)				(1.3)
Stock repurchase program							(16.1)				(16.1)
Balance at June 30, 2022	$	69.2	$	262.4	$	726.7	$	(170.2)	$	(79.0)	$	809.1

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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” or “us” refer collectively to Federal Signal Corporation and its subsidiaries.

Products manufactured and services rendered by the Company are divided into two 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 12 – 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, 2022, and should be read in conjunction with those consolidated financial statements and the notes thereto.

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

The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year, which may differ materially due to, among other things, the risk factors described under Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023. 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

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

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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, 2022.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

NOTE 2 – ACQUISITIONS

Acquisitions Completed in 2023

Acquisition of ~~Blasters~~Trackless

On ~~January~~April 3, 2023, the Company completed the acquisition of substantially all the assets and operations of ~~Blasters, Inc.~~Trackless Vehicles Limited and ~~Blasters Technologies, LLC~~Trackless Vehicles Asset Corp, including the wholly-owned subsidiary Work Equipment Ltd. (collectively, ~~“Blasters”~~“Trackless”), a leading ~~U.S.~~Canadian manufacturer of ~~truck-mounted waterblasting equipment.~~multi-purpose, off-road multi-purpose tractors and attachments. The Company expects that the ~~Blasters~~Trackless acquisition will further bolster its position as an industry leading diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets with leading brands of premium, value-adding products, and a strong supporting aftermarket platform.

The assets and liabilities of ~~Blasters~~Trackless have been consolidated into the Company’s Condensed Consolidated Balance Sheet as of ~~March 31,~~June 30, 2023, 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 ~~Blasters~~Trackless was ~~$13.4~~C$57.3 million (approximately $42.6 million), inclusive of certain preliminary closing adjustments, and was funded through existing cash and borrowings under the Company’s credit agreement. In addition, there is a contingent earn-out payment of up to ~~$8.0~~C$6.0 million (approximately $4.5 million), based upon the achievement of certain financial targets over a specified performance period. Any additional closing adjustments are expected to be finalized before the end ~~of the third quarter~~ of 2023.

The acquisition is being accounted for in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the completion of the acquisition. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. Due to the proximity of the date of acquisition to the date of issuance of the condensed consolidated financial statements, the Company’s purchase price allocation as of ~~March 31,~~June 30, 2023 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the filing date of this Form 10-Q. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

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


(in millions)
Purchase price, inclusive of preliminary closing adjustments	$	~~13.4~~42.6
Estimated fair value of additional consideration (a)	4.5
Total consideration	47.1


Accounts receivable	4.7
Inventories	14.3
Prepaid expenses and other current assets	0.1
Rental equipment	1.6
Properties and equipment	4.4



Customer relationships (b)	10.5
Trade names (c)	2.8
Other intangible assets	1.3
Accounts payable	(1.5)
Accrued liabilities	(0.5)



Net assets acquired	37.7

Goodwill (d)	$	9.4

(a) Represents the preliminary estimated fair value of the contingent earn-out payment as of the acquisition date, which is included in Other long-term liabilities on the Condensed Consolidated Balance Sheets. See Note 13 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.

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

In the period between the April 3, 2023 closing date and June 30, 2023, Trackless generated $10.9 million of net sales and $2.7 million of operating income, before elimination of intercompany transactions. The acquisition was not, and would not have been, material to the Company’s net sales or results of operations for the three and six months ended June 30, 2022. Accordingly, the Company’s consolidated results do not differ materially from historical performance as a result of the acquisition, and therefore, unaudited pro-forma results are not presented.

Acquisition of Blasters

On January 3, 2023, the Company completed the acquisition of substantially all the assets and operations of Blasters, Inc. and Blasters Technologies, LLC (collectively, “Blasters”), a leading U.S. manufacturer of truck-mounted waterblasting equipment. The Company expects that the Blasters acquisition will further bolster its position as an industry leading diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets with leading brands of premium, value-adding products, and a strong supporting aftermarket platform.

The assets and liabilities of Blasters have been consolidated into the Company’s Condensed Consolidated Balance Sheet as of June 30, 2023, 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 Blasters was $13.2 million, inclusive of certain closing adjustments, of which $0.2 million was received in July 2023. In addition, there is a contingent earn-out payment of up to $8.0 million, based upon the achievement of certain financial targets over a specified performance period. The purchase price was funded through existing cash and borrowings under the Company’s credit agreement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

measurement period as valuations are finalized. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable.

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


(in millions)
Purchase price, inclusive of closing adjustments	$	13.2
Estimated fair value of additional consideration (a)	4.0
Total consideration	~~17.4~~17.2


Accounts receivable	0.7
Inventories	4.6
Prepaid expenses and other current assets	0.1

Properties and equipment	1.1

Operating lease right-of-use assets (b)	1.1

Customer relationships (c)	5.3
Trade names (d)	2.6
Other intangible assets	0.3
Operating lease liabilities (b)	(1.1)
Accounts payable	(0.9)
Accrued liabilities	(0.3)
Customer deposits	(0.5)
Finance lease obligations	(0.1)
Net assets acquired	12.9

Goodwill (e)	$	~~4.5~~4.3

(a) Represents the preliminary estimated fair value of the contingent earn-out payment as of the acquisition date, of which $1.0 million is included in Other current liabilities and $3.0 million is included in Other long-term liabilities on the Condensed Consolidated Balance Sheets. See Note 13 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.

(b) In connection with the acquisition, the Company entered into a lease agreement for the Blasters facility, which is owned by affiliates of the sellers. The related-party lease contains a market-based annual rent of $0.2 million, an initial lease term of five years, and options to renew.

(c) 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.

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

(e) Goodwill, 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 the period between the January 3, 2023 closing date and ~~March 31,~~June 30, 2023, Blasters generated ~~$5.9~~$10.3 million of net sales and ~~$0.6~~$1.0 million of operating income. The acquisition was not, and would not have been, material to the Company’s net sales or results of operations for the three and six months ended ~~March 31,~~June 30, 2022. Accordingly, the Company’s consolidated results do not differ materially from historical performance as a result of the acquisition, and therefore, unaudited pro-forma results are not presented.

Acquisitions Completed in 2022

On October 3, 2022, the Company completed the acquisition of substantially all the assets and operations of TowHaul

Corporation (“TowHaul”). TowHaul is a leading manufacturer of off-road towing and hauling equipment. The TowHaul acquisition bolstered the Company’s position as an industry leading diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets with leading brands of premium, value-adding products, and a strong supporting aftermarket platform.

The cash consideration paid by the Company to acquire TowHaul was $43.3 million, which was funded through existing cash and borrowings under the Company’s credit facility.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

The acquisition is being accounted for in accordance with ASC 805, Business Combinations. The Company’s purchase price allocation as of June 30, 2023 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the filing date of this Form 10-Q. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized. During the three months ended June 30, 2023, the Company recognized measurement period adjustments, which primarily resulted from obtaining a third-party valuation of acquired intangible assets, that resulted in a $7.2 million increase to the carrying value of Goodwill from the $12.9 million previously recorded as of December 31, 2022, with a corresponding reduction in the carrying value of acquired intangible assets. The measurement period adjustments did not have a material impact on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable.

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


(in millions)
Purchase price, inclusive of closing adjustments	$	43.3

Total consideration	43.3


Accounts receivable	1.5
Inventories	4.7

Properties and equipment	6.4



Customer relationships (a)	6.9
Trade names (b)	5.7
Other intangible assets	1.0
Accounts payable	(0.1)
Accrued liabilities	(0.5)
Customer deposits	(2.4)


Net assets acquired	23.2

Goodwill (c)	$	20.1

(a) 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 6 years.

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

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

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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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)	2023		2022			(in millions)	2023		2022		2023		2022
Geographic Region:	Geographic Region:						Geographic Region:
U.S.	U.S.	$	309.1	$	264.4		U.S.	$	338.9	$	299.8	$	648.0	$	564.2
Canada	Canada	43.9		42.3			Canada	69.4		44.0		113.3		86.3
Europe/Other	Europe/Other	32.5		23.5			Europe/Other	34.1		22.9		66.6		46.4
Total net sales	Total net sales	$	385.5	$	330.2		Total net sales	$	442.4	$	366.7	$	827.9	$	696.9
Major Product Line:	Major Product Line:						Major Product Line:
Environmental Solutions	Environmental Solutions						Environmental Solutions
Vehicles and equipment (a)	Vehicles and equipment (a)	$	245.3	$	217.4		Vehicles and equipment (a)	$	285.0	$	235.8	$	530.3	$	453.2
Parts	Parts	54.8		40.8			Parts	59.6		45.1		114.4		85.9
Rental income (b)	Rental income (b)	11.0		9.7			Rental income (b)	16.9		16.1		27.9		25.8
Other (c)	Other (c)	7.7		6.3			Other (c)	11.5		9.3		19.2		15.6
Total	Total	318.8		274.2			Total	373.0		306.3		691.8		580.5
Safety and Security Systems	Safety and Security Systems						Safety and Security Systems
Public safety and security equipment	Public safety and security equipment	40.2		36.1			Public safety and security equipment	42.4		37.5		82.6		73.6
Industrial signaling equipment	Industrial signaling equipment	18.6		14.2			Industrial signaling equipment	18.7		15.1		37.3		29.3
Warning systems	Warning systems	7.9		5.7			Warning systems	8.3		7.8		16.2		13.5

Total	Total	66.7		56.0			Total	69.4		60.4		136.1		116.4
Total net sales	Total net sales	$	385.5	$	330.2		Total net sales	$	442.4	$	366.7	$	827.9	$	696.9

(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 $29.8 million and $28.9 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, 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)	March 31, 2023		December 31, 2022		(in millions)	June 30, 2023		December 31, 2022
Finished goods	Finished goods	$	107.0	$	97.5	Finished goods	$	131.4	$	97.5
Raw materials	Raw materials	175.0		164.3		Raw materials	173.6		164.3
Work in process	Work in process	35.6		30.9		Work in process	34.4		30.9
Total inventories(a)	Total inventories(a)	$	317.6	$	292.7	Total inventories(a)	$	339.4	$	292.7

(a) Amounts at June 30, 2023 include inventories acquired in the acquisitions of Blasters and Trackless - See Note 2 - Acquisitions.

1013

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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)	March 31, 2023		December 31, 2022		(in millions)	June 30, 2023		December 31, 2022

2022 Credit Agreement (a)	2022 Credit Agreement (a)	$	373.6	$	361.0	2022 Credit Agreement (a)	$	407.4	$	361.0
Finance lease obligations	Finance lease obligations	1.9		2.0		Finance lease obligations	1.8		2.0
Total borrowings and finance lease obligations, including current portion	Total borrowings and finance lease obligations, including current portion	375.5		363.0		Total borrowings and finance lease obligations, including current portion	409.2		363.0
Less: Current borrowings	Less: Current borrowings	1.6		0.8		Less: Current borrowings	2.4		0.8
Less: Current finance lease obligations	Less: Current finance lease obligations	0.7		0.7		Less: Current finance lease obligations	0.7		0.7
Total long-term borrowings and finance lease obligations	Total long-term borrowings and finance lease obligations	$	373.2	$	361.5	Total long-term borrowings and finance lease obligations	$	406.1	$	361.5

(a) Defined as the Third Amended and Restated Credit Agreement, dated October 21, 2022, as amended.

As more fully described within Note 13 – 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 the Company’s borrowings and finance lease obligations 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 carrying amounts of the Company’s borrowings and finance lease obligations approximate their fair values as of ~~March 31,~~June 30, 2023 and December 31, 2022.

The 2022 Credit Agreement is a senior secured credit facility which provides the Company and certain of its foreign subsidiaries access to an aggregate principal amount of $800 million, consisting of (i) a revolving credit facility in an amount up to $675 million (the “Revolver”) and (ii) a term loan facility in an amount up to $125 million.

Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a base rate or an Adjusted Term Secured Overnight Financing Rate (“SOFR”), Adjusted Eurocurrency Rate or Adjusted Daily Simple SONIA Rate (as each is defined in the 2022 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from zero to 0.75% for base rate borrowings and 1.00% to 1.75% for Adjusted Term SOFR, Adjusted Eurocurrency Rate or Adjusted Daily Simple SONIA Rate 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 ~~$675 million~~ Revolver along with other standard fees. Applicable margin, issuance fees and other customary expenses are payable on outstanding letters of credit.

The Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2022 Credit Agreement that are measured at each fiscal quarter-end. The Company was in compliance with all such covenants as of ~~March 31,~~June 30, 2023.

As of ~~March 31,~~June 30, 2023, there was ~~$373.6~~$407.4 million of cash drawn and $11.2 million of undrawn letters of credit under the 2022 Credit Agreement, with ~~$415.2~~$381.4 million of net availability for borrowings. As of December 31, 2022, there was $361.0 million cash drawn and $11.2 million of undrawn letters of credit under the 2022 Credit Agreement, with $427.8 million of net availability for borrowings.

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


		Three Months Ended March 31,					Six Months Ended June 30,
(in millions)	(in millions)	2023		2022		(in millions)	2023		2022
Gross borrowings	Gross borrowings	$	37.6	$	55.0	Gross borrowings	$	115.7	$	67.0
Gross payments	Gross payments	25.0		8.2		Gross payments	71.0		22.9

Interest Rate Swaps

On October 21, 2022, the Company entered into an interest rate swap (the “2022 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 2022 Swap is designated as a cash flow hedge, with an original maturity date of October 31, 2025.

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. Hedge effectiveness is assessed quarterly. The Company does not use derivative instruments for trading or speculative purposes.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

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.

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~~FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

At ~~March 31,~~June 30, 2023 and December 31, 2022, the fair value of the 2022 Swap was an asset of $0.6 million and a liability of ~~$0.8 million and~~ $0.3 million, ~~respectively,~~ which ~~was~~were included in Other long-term assets and Other long-term liabilities on the Condensed Consolidated Balance ~~Sheets.~~Sheets, respectively. During the three and six months ended ~~March 31,~~June 30, 2023, ~~and 2022, unrealized pre-tax losses of $0.5 million and~~ unrealized pre-tax gains of ~~$2.9~~$1.4 million and $0.9 million, respectively, were recorded in Accumulated other comprehensive loss. During the three and six months ended June 30, 2022, unrealized pre-tax gains $0.2 million and $3.1 million, respectively, were recorded in Accumulated other comprehensive loss. No ineffectiveness was recorded in either period.

In connection with entering into the 2022 Credit Agreement in October 2022, the Company terminated an interest rate swap initially entered into in 2019, receiving proceeds of $4.3 million upon settlement. The settlement gain was recorded in Accumulated other comprehensive loss and is being amortized into earnings ratably through the original maturity date of July 30, 2024. During the three and six months ended ~~March 31,~~June 30, 2023, the Company recognized anon-cash settlement gains of $0.6 million ~~non-cash settlement gain~~and $1.2 million, respectively, as a component of Interest expense on the Condensed Consolidated Statements of Operations. At ~~March 31,~~June 30, 2023 and December 31, 2022, an unrealized settlement gain of ~~$3.2~~$2.6 million and $3.8 million, respectively, was included in Accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets.

On July 11, 2023, the Company entered into an additional interest rate swap (the “2023 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 2023 Swap is designated as a cash flow hedge, with an original maturity date of August 1, 2025.

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~~six months ended ~~March 31,~~June 30, 2023, by segment:


(in millions)	(in millions)	Environmental Solutions		Safety & Security Systems		Total		(in millions)	Environmental Solutions		Safety & Security Systems		Total
Balance at January 1, 2023	Balance at January 1, 2023	$	343.8	$	109.6	$	453.4	Balance at January 1, 2023	$	343.8	$	109.6	$	453.4
Acquisitions		4.5		—		4.5
Acquisitions, including measurement period adjustments								Acquisitions, including measurement period adjustments	20.9		—		20.9
Translation adjustments	Translation adjustments	—		0.5		0.5		Translation adjustments	0.3		0.8		1.1
Balance at March 31, 2023		$	348.3	$	110.1	$	458.4
Balance at June 30, 2023								Balance at June 30, 2023	$	365.0	$	110.4	$	475.4

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


		March 31, 2023						December 31, 2022							June 30, 2023						December 31, 2022
(in millions)	(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value		(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Definite-lived intangible assets:	Definite-lived intangible assets:													Definite-lived intangible assets:
Customer relationships (a)	Customer relationships (a)	$	159.0	$	(55.4)	$	103.6	$	153.7	$	(52.0)	$	101.7	Customer relationships (a)	$	162.6	$	(59.1)	$	103.5	$	153.7	$	(52.0)	$	101.7
Other (a)	Other (a)	6.0		(3.6)		2.4		5.7		(3.4)		2.3		Other (a)	8.3		(3.9)		4.4		5.7		(3.4)		2.3
Total definite-lived intangible assets	Total definite-lived intangible assets	165.0		(59.0)		106.0		159.4		(55.4)		104.0		Total definite-lived intangible assets	170.9		(63.0)		107.9		159.4		(55.4)		104.0
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:													Indefinite-lived intangible assets:
Trade names	Trade names	102.5		—		102.5		99.9		—		99.9		Trade names	104.5		—		104.5		99.9		—		99.9
Other	Other	4.3		—		4.3		4.3		—		4.3		Other	4.3		—		4.3		4.3		—		4.3
Total indefinite-lived intangible assets	Total indefinite-lived intangible assets	106.8		—		106.8		104.2		—		104.2		Total indefinite-lived intangible assets	108.8		—		108.8		104.2		—		104.2
Total intangible assets	Total intangible assets	$	271.8	$	(59.0)	$	212.8	$	263.6	$	(55.4)	$	208.2	Total intangible assets	$	279.7	$	(63.0)	$	216.7	$	263.6	$	(55.4)	$	208.2

(a) Average useful life of customer relationships and other definite-lived intangible assets are estimated to be approximately 12 years and 76 years, respectively. The average useful life across all definite-lived intangible assets is estimated to be approximately 1211 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 acquisitions of Trackless, Blasters, and TowHaul, ~~Corporation (“TowHaul”),~~ which were completed during the second

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quarter of 2023, the first quarter of 2023, and the fourth quarter of 2022, respectively. 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 the applicable third-party valuations are finalized.

Amortization expense for the three months ended ~~March 31,~~June 30, 2023 and 2022 was ~~$3.6~~$3.9 million and ~~$3.3~~$3.2 million, respectively.

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Amortization expense for the six months ended June 30, 2023 and 2022 was $7.5 million and $6.5 million, respectively.

The Company currently estimates that aggregate amortization expense will be approximately ~~$10.7~~$8.0 million for the remainder of 2023, ~~$14.2~~$15.9 million in 2024, ~~$14.2~~$15.9 million in 2025, ~~$14.1~~$15.7 million in 2026, ~~$13.1~~$14.5 million in 2027, and ~~$39.7~~$37.9 million thereafter. Actual amounts of amortization may differ from estimated amounts due to ~~acquisitions completed after the three months ended March 31, 2023,~~ changes in foreign currency rates, measurement period adjustments for the ~~TowHaul~~Trackless, Blasters, and ~~Blasters~~TowHaul acquisitions, impairment of intangible assets and other events.

NOTE 7 – INCOME TAXES

For the three months ended ~~March 31,~~June 30, 2023, the Company recognized income tax expense of ~~$7.3~~$12.4 million, resulting in an effective tax rate of ~~21.0%~~23.5%. For the three months ended ~~March 31,~~June 30, 2022, the Company recognized income tax expense of ~~$7.1~~$11.1 million, resulting in an effective tax rate of ~~25.7%~~24.9%. The Company’s effective tax rate in the current-year quarter was lower than the prior-year quarter, primarily due to a ~~$0.9~~$0.7 million increase in excess tax benefits associated with stock-based compensation activity.

For the six months ended June 30, 2023, the Company recognized income tax expense of $19.7 million, resulting in an effective tax rate of 22.5%. For the six months ended June 30, 2022, the Company recognized income tax expense of $18.2 million, resulting in an effective tax rate of 25.2%. The Company’s effective tax rate in the current-year period was lower than the prior-year period, primarily due to a $1.6 million increase in excess tax benefits associated with stock-based compensation activity and a $0.5 million benefit associated with changes in tax reserves.

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company filed amended U.S. federal income tax returns for the 2015 through 2018 tax years to claim a worthless stock deduction. The aggregate refund claim associated with the worthless stock deduction was $13.2 million, including interest of $1.4 million, and the Company recognized an offsetting increase to its liability for unrecognized tax benefits.

NOTE 8 – PENSIONS

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


		U.S. Benefit Plan				Non-U.S. Benefit Plan				U.S. Benefit Plan							Non-U.S. Benefit Plan
		Three Months Ended March 31,					Three Months Ended March 31,						Three Months Ended June 30,		Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)	2023		2022				2023			2022			(in millions)	2023			2022		2023		2022		2023		2022		2023		2022

Interest cost	Interest cost	$	1.5	$	1.1			$	0.4		$	0.2		Interest cost	$	1.5		$	1.0	3.0		2.1		$	0.4	$	0.2	0.8		0.4
Amortization of actuarial loss	Amortization of actuarial loss	0.3		0.5				0.2			0.2			Amortization of actuarial loss	0.3			0.6		0.6		1.1		0.3		0.1		0.5		0.3

Amortization of prior service cost														Amortization of prior service cost	—			—		—		—		—		0.1		—		0.1
Expected return on plan assets	Expected return on plan assets	(1.9)		(1.7)				(0.5)			(0.5)			Expected return on plan assets	(1.9)			(1.8)		(3.8)		(3.5)		(0.5)		(0.5)		(1.0)		(1.0)
Net periodic pension (benefit) expense	Net periodic pension (benefit) expense	$	(0.1)	$	(0.1)			$	0.1		$	(0.1)		Net periodic pension (benefit) expense	$	(0.1)		$	(0.2)	$	(0.2)	$	(0.3)	$	0.2	$	(0.1)	$	0.3	$	(0.2)

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

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Financial Commitments

The Company provides indemnifications and other guarantees in the ordinary course of business, the terms of which range in duration and often are not explicitly defined. Specifically, the Company is occasionally required to provide letters of credit and bid and performance bonds to various customers, principally to act as security for retention levels related to casualty insurance policies and to guarantee the performance of subsidiaries that engage in export and domestic transactions. At ~~March 31,~~June 30, 2023, the Company had outstanding performance and financial standby letters of credit, as well as outstanding bid and performance

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bonds, aggregating to ~~$30.5~~$25.0 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 ~~March 31,~~June 30, 2023, both the single year and maximum potential cash payments the Company could be required to make to repurchase equipment under these agreements amounted to $1.9 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.

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The Company has certain lease agreements for facilities owned by affiliates which include provisions requiring the Company to guarantee any remaining lease payments in the event of default. As of ~~March 31,~~June 30, 2023, the total amount of future payments guaranteed under these agreements was approximately ~~$1.1~~$1.0 million. The Company believes the likelihood of defaulting on these leases is remote.

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 ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022:


(in millions)	(in millions)	2023		2022		(in millions)	2023		2022
Balance at January 1	Balance at January 1	$	9.3	$	9.7	Balance at January 1	$	9.3	$	9.7
Provisions to expense	Provisions to expense	1.8		1.4		Provisions to expense	3.8		3.5
Acquisitions	Acquisitions	0.1		—		Acquisitions	0.1		—
Payments	Payments	(2.0)		(1.8)		Payments	(3.8)		(3.9)
Balance at March 31		$	9.2	$	9.3
Balance at June 30						Balance at June 30	$	9.4	$	9.3

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

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firefighter plaintiffs from locations outside of Chicago. In 2009, six 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 nine. The trial for these nine 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

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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 eight Chicago firefighter plaintiffs occurred during November 2011. The jury returned a unanimous verdict in favor of the Company at the conclusion of this trial.

Following this trial, on March 12, 2012 the trial court entered an order certifying a class of the remaining Chicago Fire Department firefighter plaintiffs for trial on the sole issue of whether the Company’s sirens were defective and unreasonably dangerous. The Company petitioned the Illinois Appellate Court for interlocutory appeal of this ruling. On May 17, 2012, the Illinois Appellate Court accepted the Company’s petition. On June 8, 2012, plaintiffs moved to dismiss the appeal, agreeing with the Company that the trial court had erred in certifying a class action trial in this matter. Pursuant to plaintiffs’ motion, the Illinois Appellate Court reversed the trial court’s certification order.

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

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 to decide the 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 Company objected to certification and the parties engaged in discovery and other matters related to this motion.

Thereafter, on December 20, 2021, the parties executed a settlement agreement to resolve claims of approximately 462 firefighters still involved in the Cook County litigation, as well as the DuPage County litigation discussed below. Under the

terms of the settlement agreement, the Company agreed to pay a lump sum of $0.2 million to resolve the claims of these firefighters. The estimated settlement amount was accrued by the Company. The Company agreed to pay this lump sum amount based upon its assessment of firefighters who meet minimal bilateral hearing loss standards, which is a subset of the larger group referenced above. The settlement agreement did not require the payment of any attorney fees by the Company. The settlement agreement also provided that plaintiffs’ attorney would withdraw from representing firefighters who do not agree to the settlement. The Company had discretion to void the settlement agreement if less than 93% of these firefighters agreed to settle their claims; the settlement agreement would also be voided if less than 70% of eligible firefighters agreed to the settlement. The settlement agreement was subject to review and approval by the Court. In July 2022, the Company issued the ~~$0.2~~

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$0.2 million settlement payment for eligible plaintiffs who submitted a release. The claims of all other eligible plaintiffs were dismissed for want of prosecution on August 5, 2022.

The Company 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 settlement agreement did

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not require the payment of any attorney fees by the Company. 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 was also 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. Three of these cases were dismissed pursuant to pretrial motions filed by the Company. Another case was voluntarily dismissed. Prior to trial in four cases, the Company paid nominal sums to obtain dismissals.

Three trials occurred in Philadelphia involving these cases filed in 2007 through 2009. The first trial involving one of these plaintiffs occurred in 2010, when the jury returned a verdict for the plaintiff. 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 less than $0.1 million. The Company appealed this verdict. Another trial, involving nine Philadelphia firefighter plaintiffs, also occurred in 2010 when the jury returned a defense verdict for the Company as to all claims and all plaintiffs involved in that trial. The third trial, also involving nine Philadelphia firefighter plaintiffs, was completed during 2010 when the jury returned a defense verdict for the Company as to all claims and all plaintiffs involved in that trial.

Following defense verdicts in the last two Philadelphia trials, the Company negotiated settlements with respect to all remaining filed cases in Philadelphia at that time, as well as other firefighter claimants represented by the attorney who filed the Philadelphia cases. On January 4, 2011, the Company entered into a Global Settlement Agreement (the “Settlement Agreement”) with the law firm of the attorney representing the Philadelphia claimants, on behalf of 1,125 claimants the firm represented (the “Claimants”) and who had asserted product claims against the Company (the “Claims”). Three hundred eight 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 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.

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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 involved various defendants in addition to the Company. Five of these cases were subsequently dismissed. The first trial involving these 2012 Philadelphia cases occurred during December 2014 and involved three firefighter plaintiffs. The jury returned a verdict in favor of the Company. Following this trial, all of the parties agreed to settle cases involving seven firefighter plaintiffs set for trial during January 2015 for nominal amounts per plaintiff.

In January 2015, plaintiffs’ attorneys filed two 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 were located outside of Pennsylvania. One of the complaints in these cases, which involved 11 firefighter plaintiffs from the District of Columbia, was removed to federal court in the Eastern District of Pennsylvania. Plaintiffs voluntarily dismissed all

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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 (the “Order”). 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 two 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 nine new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. These cases involved a total of 193 firefighters, most of whom were 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. On June 25, 2020, the Court issued a decision affirming the trial court’s dismissal of these cases with prejudice.

On May 13, 2016, four 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 for nominal amounts involving four 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 filed an opposition to this motion. These cases were then transferred to the mass tort program in Philadelphia for pretrial purposes. Plaintiffs’ counsel thereafter dismissed several plaintiffs. During November 2017, a trial involving one 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.

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. 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, five 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 non conveniens 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 were removed to federal court in the Western District of New York. Plaintiffs 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 filed an opposition to the motion. During February 2015, a lawsuit involving one 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 involved one plaintiff. Prior to a

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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 was transferred to federal court in the District of New Jersey. During the period from January through May 2016, eight additional cases were filed in various New Jersey state courts. Most of the firefighters in these cases resided in New Jersey and worked at New Jersey fire departments. During December 2016, a case involving one 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 denied the motion as premature. Pursuant to a petition filed by both parties,

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~~(Unaudited)~~

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 were a total of 61 firefighters involved in cases filed in New Jersey.

During May through October 2016, nine cases were filed in Suffolk County, Massachusetts state court, naming the Company as a defendant. These cases involved 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 resided and worked. 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 was the only named defendant. These cases were filed in several different counties in Florida, including Tampa, Miami and Orlando municipalities. 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, two 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 eight 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 six 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 to 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 six 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 on September 27, 2017 in Allegheny County, Pennsylvania. Prior to and during trial, two plaintiffs were dismissed, resulting in four 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 one case involving one firefighter in New York City. The firefighters excluded from the Settlement Framework are represented by different attorneys. The Company settled the cases in Lackawanna County and settled the case involving one firefighter in New York City for nominal amounts. Pursuant to the Settlement Framework, the Company would pay $700 to each firefighter who 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. The settlement agreement does not include the payment of any attorney fees by the Company. To be eligible for settlement, among other things, firefighters must provide proof that they have high frequency noise-induced hearing loss. There are approximately 2,160 firefighters whose claims may be considered as part of this settlement, including approximately 921 firefighters who have ongoing filed lawsuits. This Settlement Framework was finalized in a global settlement agreement

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(Unaudited)

executed on November 4, 2019. Pursuant to this global settlement agreement, the parties are now in the process of determining how many of the approximately 2,160 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 global settlement agreement on November 4, 2019. After execution of the global settlement agreement, the Allegheny County (Pittsburgh) cases were dismissed. The global settlement agreement requires plaintiffs’ attorneys to withdraw from representing firefighters who elect not to participate in this settlement.

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~~(Unaudited)~~

As of ~~March 31,~~June 30, 2023, the Company has recognized an estimated liability for the potential settlement amount under the Settlement Framework. 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.

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 four 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.

NOTE 10 – EARNINGS PER SHARE

The Company computes earnings per share (“EPS”) in accordance with 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 six months ended ~~March 31,~~June 30, 2023 and 2022 were insignificant and did not materially impact the calculation of basic or diluted EPS.

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

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

For the three and six months ended ~~March 31,~~June 30, 2023, ~~the number of~~ options to purchase 0.1 million and 0.0 million shares, respectively, of the Company’s common stock ~~that~~ had an ~~antidilutive~~anti-dilutive effect on EPS, ~~was immaterial.~~and accordingly, were excluded from the calculation of diluted EPS. For the three and six months ended ~~March 31,~~June 30, 2022, options to purchase 0.3 million and 0.2 million shares, respectively, of the Company’s common stock had an anti-dilutive effect on EPS, and accordingly, were excluded from the calculation of diluted EPS.

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	(in millions, except per share data)	2023		2022			(in millions, except per share data)	2023		2022		2023		2022

Net income	Net income	$	27.4	$	20.5		Net income	$	40.3	$	33.5	$	67.7	$	54.0
Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	60.7		60.7			Weighted average shares outstanding – Basic	60.7		60.4		60.7		60.6
Dilutive effect of common stock equivalents	Dilutive effect of common stock equivalents	0.6		0.7			Dilutive effect of common stock equivalents	0.7		0.5		0.7		0.5
Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted	61.3		61.4			Weighted average shares outstanding – Diluted	61.4		60.9		61.4		61.1
Earnings per share:	Earnings per share:						Earnings per share:

Basic	Basic	$	0.45	$	0.34		Basic	$	0.66	$	0.55	$	1.12	$	0.89

Diluted	Diluted	0.45		0.33			Diluted	0.66		0.55		1.10		0.88

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(Unaudited)

NOTE 11 – STOCKHOLDERS’ EQUITY

Dividends

On February 14, 2023, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.09 per common share. The dividend totaled $5.5 million and was distributed on March 31, 2023 to stockholders of record at the close of business on March 17, 2023.

On April 25, 2023, the Board declared a quarterly cash dividend of $0.10 per common ~~share payable~~share. The dividend totaled $6.1 million and was distributed on June 2, 2023 to stockholders of record at the close of business on May 19, 2023.

~~Table~~During the three and six months ended June 30, 2022, dividends of ~~Contents~~$5.4 million and $10.9 million, respectively, were paid to stockholders.

~~FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

On July 24, 2023, the Board declared a quarterly cash dividend of $0.10 per common share payable on September 1, 2023 to stockholders of record at the close of business on August 18, 2023.

Stock Repurchase Program

In March 2020, the Board authorized a stock repurchase program of up to $75.0 million of the Company’s common stock, with the remaining authorization under our previously described repurchase program adopted in 2014 being subject to the March 2020 program. The stock repurchase program is 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 program, 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.

No shares were repurchased during the three and six months ended ~~March 31,~~June 30, 2023. During the three months ended ~~March 31,~~June 30, 2022, the Company repurchased ~~395,370~~77,011 shares for a total of ~~$13.6~~$2.5 million. During the six months ended June 30, 2022, the Company repurchased 472,381 shares for a total of $16.1 million.

Accumulated Other Comprehensive Loss

The following tables summarize the changes in each component of Accumulated other comprehensive loss, net of tax in the three months ended ~~March 31,~~June 30, 2023 and 2022:


(in millions) (a)	(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total		(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total
Balance at January 1, 2023		$	(68.6)	$	(2.0)	$	(16.0)	$	2.6	$	(84.0)
Balance at April 1, 2023												Balance at April 1, 2023	$	(68.6)	$	(2.0)	$	(14.5)	$	1.7	$	(83.4)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(0.4)		—		1.5		(0.4)		0.7		Other comprehensive (loss) income before reclassifications	(0.5)		—		3.2		1.1		3.8
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	0.4		—		—		(0.5)		(0.1)		Amounts reclassified from accumulated other comprehensive loss	0.4		—		—		(0.5)		(0.1)
Net current-period other comprehensive income (loss)		—		—		1.5		(0.9)		0.6
Balance at March 31, 2023		$	(68.6)	$	(2.0)	$	(14.5)	$	1.7	$	(83.4)
Net current-period other comprehensive (loss) income												Net current-period other comprehensive (loss) income	(0.1)		—		3.2		0.6		3.7
Balance at June 30, 2023												Balance at June 30, 2023	$	(68.7)	$	(2.0)	$	(11.3)	$	2.3	$	(79.7)


(in millions) (a)	(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total		(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total
Balance at January 1, 2022		$	(67.9)	$	(2.4)	$	(3.4)	$	(0.5)	$	(74.2)
Balance at April 1, 2022												Balance at April 1, 2022	$	(66.9)	$	(2.4)	$	(5.0)	$	1.6	$	(72.7)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	0.5		—		(1.6)		1.9		0.8		Other comprehensive income (loss) before reclassifications	1.3		0.2		(8.6)		0.1		(7.0)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	0.5		—		—		0.2		0.7		Amounts reclassified from accumulated other comprehensive loss	0.5		0.1		—		0.1		0.7
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	1.0		—		(1.6)		2.1		1.5		Net current-period other comprehensive income (loss)	1.8		0.3		(8.6)		0.2		(6.3)
Balance at March 31, 2022		$	(66.9)	$	(2.4)	$	(5.0)	$	1.6	$	(72.7)
Balance at June 30, 2022												Balance at June 30, 2022	$	(65.1)	$	(2.1)	$	(13.6)	$	1.8	$	(79.0)

(a) Amounts in parentheses indicate losses.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

The following tables summarize the changes in each component of Accumulated other comprehensive loss, net of tax in the six months ended June 30, 2023 and 2022:


(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total
Balance at January 1, 2023	$	(68.6)	$	(2.0)	$	(16.0)	$	2.6	$	(84.0)
Other comprehensive (loss) income before reclassifications	(0.9)		—		4.7		0.7		4.5
Amounts reclassified from accumulated other comprehensive loss	0.8		—		—		(1.0)		(0.2)
Net current-period other comprehensive (loss) income	(0.1)		—		4.7		(0.3)		4.3
Balance at June 30, 2023	$	(68.7)	$	(2.0)	$	(11.3)	$	2.3	$	(79.7)


(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total
Balance at January 1, 2022	$	(67.9)	$	(2.4)	$	(3.4)	$	(0.5)	$	(74.2)
Other comprehensive income (loss) before reclassifications	1.8		0.2		(10.2)		2.0		(6.2)
Amounts reclassified from accumulated other comprehensive loss	1.0		0.1		—		0.3		1.4
Net current-period other comprehensive income (loss)	2.8		0.3		(10.2)		2.3		(4.8)
Balance at June 30, 2022	$	(65.1)	$	(2.1)	$	(13.6)	$	1.8	$	(79.0)

(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 ~~March 31,~~June 30, 2023 and 2022 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
		2023		2022				2023		2022
(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	$	(0.5)	$	(0.7)	Other expense (income), net	Amortization of actuarial losses of defined benefit pension plans	$	(0.6)	$	(0.7)	Other expense (income), net

Amortization of prior service costs of defined benefit pension plans							Amortization of prior service costs of defined benefit pension plans	—		(0.1)		Other expense (income), net
Interest rate swaps	Interest rate swaps	0.7		(0.2)		Interest expense	Interest rate swaps	0.7		(0.1)		Interest expense
Total before tax	Total before tax	0.2		(0.9)			Total before tax	0.1		(0.9)
Income tax (expense) benefit	Income tax (expense) benefit	(0.1)		0.2		Income tax expense	Income tax (expense) benefit	—		0.2		Income tax expense
Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	0.1	$	(0.7)		Total reclassifications for the period, net of tax	$	0.1	$	(0.7)

(a) Amounts in parentheses indicate losses.

2024

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

(Unaudited)

The following table summarizes the amounts reclassified from Accumulated other comprehensive loss, net of tax, in the six months ended June 30, 2023 and 2022 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
	2023		2022
(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans	$	(1.1)	$	(1.4)	Other expense (income), net
Amortization of prior service costs of defined benefit pension plans	—		(0.1)		Other expense (income), net
Interest rate swaps	1.4		(0.3)		Interest expense
Total before tax	0.3		(1.8)
Income tax (expense) benefit	(0.1)		0.4		Income tax expense
Total reclassifications for the period, net of tax	$	0.2	$	(1.4)

(a) Amounts in parentheses indicate losses.

NOTE 12 – SEGMENT INFORMATION

The Company has two 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.

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)	2023		2022			(in millions)	2023		2022		2023		2022
Net sales:	Net sales:						Net sales:
Environmental Solutions	Environmental Solutions	$	318.8	$	274.2		Environmental Solutions	$	373.0	$	306.3	$	691.8	$	580.5
Safety and Security Systems	Safety and Security Systems	66.7		56.0			Safety and Security Systems	69.4		60.4		136.1		116.4
Total net sales	Total net sales	$	385.5	$	330.2		Total net sales	$	442.4	$	366.7	$	827.9	$	696.9
Operating income (loss):	Operating income (loss):						Operating income (loss):
Environmental Solutions	Environmental Solutions	$	37.6	$	26.8		Environmental Solutions	$	56.2	$	39.1	$	93.8	$	65.9
Safety and Security Systems	Safety and Security Systems	12.1		7.9			Safety and Security Systems	14.1		10.3		26.2		18.2
Corporate and eliminations	Corporate and eliminations	(10.2)		(6.2)			Corporate and eliminations	(10.9)		(3.2)		(21.1)		(9.4)
Total operating income	Total operating income	39.5		28.5			Total operating income	59.4		46.2		98.9		74.7
Interest expense	Interest expense	4.7		1.3			Interest expense	5.6		1.9		10.3		3.2

Other expense (income), net	Other expense (income), net	0.1		(0.4)			Other expense (income), net	1.1		(0.3)		1.2		(0.7)
Income before income taxes	Income before income taxes	$	34.7	$	27.6		Income before income taxes	$	52.7	$	44.6	$	87.4	$	72.2


(in millions)	(in millions)	March 31, 2023		December 31, 2022		(in millions)	June 30, 2023		December 31, 2022
Total assets:	Total assets:					Total assets:
Environmental Solutions	Environmental Solutions	$	1,265.5	$	1,206.4	Environmental Solutions	$	1,334.2	$	1,206.4
Safety and Security Systems	Safety and Security Systems	283.3		279.3		Safety and Security Systems	283.6		279.3
Corporate and eliminations	Corporate and eliminations	35.5		38.6		Corporate and eliminations	42.9		38.6

Total assets	Total assets	$	1,584.3	$	1,524.3	Total assets	$	1,660.7	$	1,524.3

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(Unaudited)

NOTE 13 – 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

At ~~March 31,~~June 30, 2023, the Company had contingent obligations to transfer up to $7.5 million, ~~and~~ $8.0 million, and C$6.0 million (approximately $4.5 million), to the former owners of Deist Industries, Inc. and certain of its affiliates (collectively, “Deist”), Blasters, and ~~Blasters,~~Trackless, respectively, if specified financial results are met over future reporting periods (i.e., an earn-out). The Deist, Blasters, and ~~Blasters~~Trackless acquisitions were completed on December 30, 2021, January 3, 2023, and ~~January~~April 3, 2023, respectively. The Deist and Trackless contingent earn-out ~~payment,~~payments, if earned, would be due to be paid following the third anniversary of the closing date. The Blasters contingent earn-out payments, if earned, would be due to paid annually, in each of the three years following the anniversary of the closing date. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company paid $0.5 million to settle the contingent consideration obligation due to the former owners of Mark Rite Lines Equipment Company, Inc. (“MRL”), which was acquired on July 1, 2019.

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 (benefits) on the Condensed Consolidated Statements of Operations.

The Company uses an income approach to value the contingent consideration liability based on the present value of risk-adjusted future cash flows under either a scenario-based or option-pricing method, as appropriate. Due to the lack of relevant observable market data over fair value inputs, such as prospective financial information or probabilities of future events as of ~~March 31,~~June 30, 2023, the Company has classified the contingent consideration liability within Level 3 of the fair value hierarchy outlined in ASC 820, Fair Value Measurements. As further described in Note 2 – Acquisitions, the Company has recognized a preliminary estimate of the fair value of the Blasters and Trackless contingent consideration ~~liability~~liabilities as of the applicable acquisition ~~date, which is~~date. Such preliminary estimates are subject to change during the measurement period as the applicable third-party ~~valuation is~~valuations are finalized.

~~The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023:~~

Fair Value Measurement at Reporting Date Using
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 16.3 $ — $ — $ 16.3
Liabilities:
Contingent consideration — — 6.0 6.0
Interest rate swaps — 0.8 — 0.8

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(Unaudited)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023:


	Fair Value Measurement at Reporting Date Using
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	13.5	$	—	$	—	$	13.5
Interest rate swaps	—		0.6		—		0.6
Liabilities:
Contingent consideration	—		—		10.5		10.5

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the three months ended ~~March 31,~~June 30, 2023 and 2022:

(in millions) 2023 2022
Contingent consideration liability, at January 1 $ 2.7 $ 2.7
Issuance of contingent consideration in connection with acquisitions 4.0 —
Settlements of contingent consideration liabilities (0.5) —
Total gains included in earnings (a)
(0.2) —
Contingent consideration liability, at March 31 $ 6.0 $ 2.7


(in millions)	2023		2022
Contingent consideration liability, at April 1	$	6.0	$	2.7
Issuance of contingent consideration in connection with acquisitions	4.5		—


Contingent consideration liability, at June 30	$	10.5	$	2.7

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the six months ended June 30, 2023 and 2022:


(in millions)	2023		2022
Contingent consideration liability, at January 1	$	2.7	$	2.7
Issuance of contingent consideration in connection with acquisitions	8.5		—
Settlements of contingent consideration liabilities	(0.5)		—
Total gains included in earnings (a)	(0.2)		—
Contingent consideration liability, at June 30	$	10.5	$	2.7

(a) Included as a component of acquisition and integration-related expenses on the Condensed Consolidated Statements of Operations.

~~NOTE 14 – SUBSEQUENT EVENTS~~

~~Acquisition of Trackless~~

On April 3, 2023, the Company completed the acquisition of substantially all the assets and operations of Trackless Vehicles Limited and Trackless Vehicles Asset Corp, including the wholly-owned subsidiary Work Equipment Ltd. (collectively, “Trackless”) for an initial purchase price of C$54.0 million (approximately $40.0 million). The initial purchase price, which is subject to certain post-closing adjustments, was funded through existing cash and borrowings under the Company’s revolving credit facility. In addition, there is a contingent earn-out payment of up to C$6.0 million (approximately $4.4 million), based upon the achievement of certain financial targets over a specified performance period.

Trackless is a leading Canadian manufacturer of multi-purpose, off-road municipal tractors and attachments. The Company expects that the Trackless acquisition will further bolster its position as an industry leading diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets with leading brands of premium, value-adding products, and a strong supporting aftermarket platform.

The preliminary purchase price allocation has not been completed at this time due to the proximity of the date of acquisition to the date of issuance of the condensed consolidated financial statements. The post-acquisition operating results of Trackless are expected to be included within the Environmental Solutions Group.

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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, 2022. 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, 2022, which was filed with the SEC on March 1, 2023.

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, waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers, ~~and~~ metal extraction support equipment and multi-purpose tractors, and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems and general alarm/public address systems. In addition, we engage in the sale of parts, service and repair, equipment rentals and training as part of a comprehensive aftermarket offering to our customer base. We operate 2223 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 12 – 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.

Operating Results

Net sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$55.3~~$75.7 million, or ~~17%~~21%, compared to the prior-year quarter, inclusive of the effects of acquisitions, pricing actions and ~~pricing actions.~~increased chassis sales. Our Environmental Solutions Group reported a net sales increase of ~~$44.6~~$66.7 million, or ~~16%~~22%, primarily due to increases in sales of sewer cleaners, refuse trucks, street sweepers, multi-purpose tractors and metal extraction support equipment ~~street sweepers, sewer cleaners and safe-digging trucks~~ of ~~$8.5~~$14.9 million, ~~$7.3~~$13.9 million, ~~$6.2~~$9.4 million, $7.8 million and ~~$2.6~~$4.7 million, respectively. In addition, aftermarket revenues improved by ~~$15.8~~$15.6 million. Partially offsetting these improvements was a ~~$2.2~~$2.5 million unfavorable foreign currency translation impact. Within our Safety and Security Systems Group, net sales increased by ~~$10.7~~$9.0 million, or 15%, due to improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $4.7 million, $4.0 million and $0.5 million, respectively, partially offset by a $0.2 million unfavorable foreign currency translation impact.

Net sales for the six months ended June 30, 2023 increased by $131.0 million, or 19%, compared to the prior-year period, inclusive of the effects of acquisitions, pricing actions and increased chassis sales. Our Environmental Solutions Group reported a net sales increase of $111.3 million, or 19%, primarily due to increases in sales of sewer cleaners, street sweepers, refuse trucks, metal extraction support equipment and multi-purpose tractors of $21.1 million, $16.7 million, $16.0 million, $13.2 million and $8.2 million, respectively. In addition, aftermarket revenues improved by $31.4 million. Partially offsetting these improvements was a $4.7 million unfavorable foreign currency translation impact. Within our Safety and Security Systems Group, net sales increased by $19.7 million, or 17%, due to improvements in sales of public safety equipment, industrial signaling ~~equipment, public safety~~ equipment and warning systems of ~~$5.0~~$9.2 million, ~~$4.5~~$9.0 million and ~~$2.2~~$2.7 million, respectively, partially offset by a ~~$1.0~~$1.2 million unfavorable foreign currency translation impact.

Operating income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$11.0~~$13.2 million, or ~~39%~~29%, compared to the prior-year quarter, primarily driven by ~~an $20.1~~a $27.5 million improvement in gross profit, partially offset by ~~a $8.4~~an $11.3 million increase in Selling, Engineering, General and Administrative (“SEG&A”) expenses, a ~~$0.4~~$2.3 million increase in acquisition and integration-related expenses, and a ~~$0.3~~$0.7 million increase in amortization expense. Consolidated operating margin for the three months ended ~~March 31,~~June 30, 2023 was ~~10.2%~~13.4%, compared to ~~8.6%~~12.6% in the prior-year quarter.

Operating income for the six months ended June 30, 2023 increased by $24.2 million, or 32%, compared to the prior-year period, primarily driven by the $47.6 million improvement in gross profit, partially offset by the $19.7 million increase in SEG&A expenses, a $2.7 million increase in acquisition and integration-related expenses, and a $1.0 million increase in amortization expense. Consolidated operating margin for the six months ended June 30, 2023 was 11.9%, compared to 10.7% in the prior-year period.

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Income before income taxes for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$7.1~~$8.1 million, or ~~26%~~18%, compared to the prior-year quarter. The increase resulted from the higher operating income, partially offset by a ~~$3.4~~$3.7 million increase in interest expense and a ~~$0.5~~$1.4 million ~~decrease~~increase in other ~~income.~~expense.

Income before income taxes for the six months ended June 30, 2023 increased by $15.2 million, or 21%, compared to the prior-year period. The increase resulted from the higher operating income, partially offset by a $7.1 million increase in interest expense and a $1.9 million increase in other expense.

Net income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$6.9~~$6.8 million compared to the prior-year quarter, largely due to the aforementioned increase in income before taxes, partially offset by a ~~$0.2~~$1.3 million increase in income tax expense. The effective tax rate for the three months ended ~~March 31,~~June 30, 2023 was ~~21.0%~~23.5%, compared to ~~25.7%~~24.9% in the prior-year quarter.

Net income for the six months ended June 30, 2023 increased by $13.7 million compared to the prior-year period, largely due to the aforementioned increase in income before taxes, partially offset by a $1.5 million increase in income tax expense. The effective tax rate for the six months ended June 30, 2023 was 22.5%, compared to 25.2% in the prior-year period. We currently expect our full-year effective tax rate to be ~~between~~approximately 24% ~~and 25%~~.

Total orders for the three months ended ~~March 31,~~June 30, 2023 were ~~$475~~$480 million, an increase of ~~$22~~$67 million, or 5%16%, as compared to the prior-year quarter. Our Environmental Solutions Group reported total orders of ~~$396~~$409 million in the three months ended ~~March 31,~~June 30, 2023, an increase of $8$57 million, or 2%16% in comparison to the prior-year quarter. Orders in the three months ended ~~March 31,~~June 30, 2023 within our Safety and Security Systems Group were ~~$79~~$72 million, an increase of ~~$14~~$10 million, or ~~21%~~16%, compared to the prior-year quarter.

Total orders for the six months ended June 30, 2023 were $955 million, an increase of $89 million, or 10%, as compared to the prior-year period. Our Environmental Solutions Group reported total orders of $804 million in the six months ended June 30, 2023, an increase of $65 million, or 9% in comparison to the prior-year period. Orders in the six months ended June 30, 2023 within our Safety and Security Systems Group were $151 million, an increase of $24 million, or 19%, compared to the prior-year period.

Our consolidated backlog at June 30, 2023 was $1.01 billion, an increase of $212 million, or 27%, compared to the prior-year quarter.

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~~Our consolidated backlog at March 31, 2023 was $968 million, an increase of $216 million, or 29%, compared to the prior-year quarter.~~

Results of Operations

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


		Three Months Ended March 31,									Three Months Ended June 30,					Six Months Ended June 30,
($ in millions, except per share data)	($ in millions, except per share data)	2023			2022			Change				($ in millions, except per share data)	2023			2022			Change			2023			2022			Change
Net sales	Net sales	$	385.5		$	330.2		$	55.3			Net sales	$	442.4		$	366.7		$	75.7		$	827.9		$	696.9		$	131.0
Cost of sales	Cost of sales	289.7			254.5			35.2				Cost of sales	325.1			276.9			48.2			614.8			531.4			83.4
Gross profit	Gross profit	95.8			75.7			20.1				Gross profit	117.3			89.8			27.5			213.1			165.5			47.6
Selling, engineering, general and administrative expenses	Selling, engineering, general and administrative expenses	52.0			43.6			8.4				Selling, engineering, general and administrative expenses	53.4			42.1			11.3			105.4			85.7			19.7
Amortization expense	Amortization expense	3.6			3.3			0.3				Amortization expense	3.9			3.2			0.7			7.5			6.5			1.0
Acquisition and integration-related expenses		0.7			0.3			0.4
Acquisition and integration-related expenses (benefits)												Acquisition and integration-related expenses (benefits)	0.6			(1.7)			2.3			1.3			(1.4)			2.7

Operating income	Operating income	39.5			28.5			11.0				Operating income	59.4			46.2			13.2			98.9			74.7			24.2
Interest expense	Interest expense	4.7			1.3			3.4				Interest expense	5.6			1.9			3.7			10.3			3.2			7.1

Other expense (income), net	Other expense (income), net	0.1			(0.4)			0.5				Other expense (income), net	1.1			(0.3)			1.4			1.2			(0.7)			1.9
Income before income taxes	Income before income taxes	34.7			27.6			7.1				Income before income taxes	52.7			44.6			8.1			87.4			72.2			15.2
Income tax expense	Income tax expense	7.3			7.1			0.2				Income tax expense	12.4			11.1			1.3			19.7			18.2			1.5

Net income	Net income	$	27.4		$	20.5		$	6.9			Net income	$	40.3		$	33.5		$	6.8		$	67.7		$	54.0		$	13.7
Operating data:	Operating data:											Operating data:
Operating margin	Operating margin	10.2		%	8.6		%	1.6		%		Operating margin	13.4		%	12.6		%	0.8		%	11.9		%	10.7		%	1.2		%
Diluted earnings per share	Diluted earnings per share	$	0.45		$	0.33		$	0.12			Diluted earnings per share	$	0.66		$	0.55		$	0.11		$	1.10		$	0.88		$	0.22
Total orders	Total orders	474.7			452.6			22.1				Total orders	480.2			413.3			66.9			954.9			865.9			89.0
Backlog	Backlog	967.6			751.2			216.4				Backlog	1,006.5			795.0			211.5			1,006.5			795.0			211.5
Depreciation and amortization	Depreciation and amortization	14.3			13.4			0.9				Depreciation and amortization	15.5			13.7			1.8			29.8			27.1			2.7

Net sales

Net sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$55.3~~$75.7 million, or ~~17%~~21%, compared to the prior-year quarter, inclusive of the effects of acquisitions, pricing actions and ~~pricing actions.~~increased chassis sales. The Environmental Solutions Group reported a net sales increase of ~~$44.6~~$66.7 million, or ~~16%~~22%, primarily due to increases in sales of sewer cleaners, refuse trucks, street sweepers, multi-purpose tractors and metal extraction support equipment ~~street sweepers, sewer cleaners and safe-digging trucks~~ of ~~$8.5~~$14.9 million, ~~$7.3~~$13.9 million, ~~$6.2~~$9.4 million, $7.8 million and ~~$2.6~~$4.7 million, respectively. In addition, aftermarket revenues improved by ~~$15.8~~$15.6 million. Partially offsetting these improvements was a ~~$2.2~~$2.5 million unfavorable foreign currency translation impact. Within the Safety and Security Systems Group, net sales increased by ~~$10.7~~$9.0 million, or 15%, due to improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $4.7 million, $4.0 million and $0.5 million, respectively, partially offset by a $0.2 million unfavorable foreign currency translation impact.

Net sales for the six months ended June 30, 2023 increased by $131.0 million, or 19%, compared to the prior-year period, inclusive of the effects of acquisitions, pricing actions and increased chassis sales. The Environmental Solutions Group reported a net sales increase of $111.3 million, or 19%, primarily due to increases in sales of sewer cleaners, street sweepers, refuse trucks, metal extraction support equipment and multi-purpose tractors of $21.1 million, $16.7 million, $16.0 million, $13.2 million and $8.2 million, respectively. In addition, aftermarket revenues improved by $31.4 million. Partially offsetting these improvements was a $4.7 million unfavorable foreign currency translation impact. Within the Safety and Security Systems Group, net sales increased by $19.7 million, or 17%, due to improvements in sales of public safety equipment, industrial signaling ~~equipment, public safety~~ equipment and warning systems of ~~$5.0~~$9.2 million, ~~$4.5~~$9.0 million and ~~$2.2~~$2.7 million, respectively, partially offset by a ~~$1.0~~$1.2 million unfavorable foreign currency translation impact.

Cost of sales

Cost of sales increased by ~~$35.2~~$48.2 million, or ~~14%~~17%, for the three months ended ~~March 31,~~June 30, 2023 compared to the prior-year quarter, largely due to an increase of ~~$29.9~~$44.3 million, or ~~14%~~18%, within the Environmental Solutions Group, primarily related to higher sales volumes, additional costs from ~~prior-year~~the TowHaul, Blasters, and Trackless acquisitions and increases in ~~material~~chassis costs, partially offset by a ~~$2.1~~$2.3 million favorable foreign currency translation impact. Within the Safety and Security Systems Group, cost of sales

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increased by $3.9 million, or 10%, primarily related to higher sales volumes, partially offset by a $0.1 million favorable foreign currency translation impact.

Cost of sales increased by $83.4 million, or 16%, for the six months ended June 30, 2023 compared to the prior-year period, largely due to an increase of $74.2 million, or 16%, within the Environmental Solutions Group, primarily related to higher sales volumes, additional costs from the TowHaul, Blasters, and Trackless acquisitions and increases in chassis costs, partially offset by a $4.4 million favorable foreign currency translation impact. Within the Safety and Security Systems Group, cost of sales increased by ~~$5.3~~$9.2 million, or ~~15%~~13%, primarily related to higher sales volumes, partially offset by a ~~$0.8~~$0.9 million favorable foreign currency translation impact.

Gross profit

Gross profit increased by ~~$20.1~~$27.5 million, or ~~27%~~31%, for the three months ended ~~March 31,~~June 30, 2023 compared to the prior-year quarter, primarily due to a ~~$14.7~~$22.4 million improvement within the Environmental Solutions Group and a ~~$5.4~~$5.1 million increase within the Safety and Security Systems Group. Gross profit as a percentage of revenues (“gross profit margin”) for the three months ended

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~~March 31,~~ June 30, 2023 was ~~24.9%~~26.5%, compared to ~~22.9%~~24.5% in the prior-year quarter, primarily due to improvements within the Safety and Security Systems Group and the Environmental Solutions Group of 240 basis points and 210 basis points, respectively.

Gross profit increased by $47.6 million, or 29%, for the six months ended June 30, 2023 compared to the prior-year period, primarily due to a $37.1 million improvement within the Environmental Solutions Group and a $10.5 million increase within the Safety and Security Systems Group. Gross profit as a percentage of revenues (“gross profit margin”) for the six months ended June 30, 2023 was 25.7%, compared to 23.7% in the prior-year period, primarily due to improvements within the Safety and Security Systems Group and the Environmental Solutions Group of 230 basis points and ~~180~~190 basis points, respectively.

SEG&A ~~Expenses~~expenses

SEG&A expenses for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$8.4~~$11.3 million, or ~~19%~~27%, compared to the prior-year quarter, primarily due to increases of ~~$3.3~~$4.3 million and ~~$1.2~~$1.3 million within the Environmental Solutions Group and the Safety and Security Systems Group, respectively, in addition to a ~~$3.9~~$5.7 million increase in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were ~~13.5%~~12.1% in the current-year quarter, compared to ~~13.2%~~11.5% in the prior-year quarter.

SEG&A expenses for the six months ended June 30, 2023 increased by $19.7 million, or 23%, compared to the prior-year quarter, primarily due to increases of $7.6 million and $2.5 million within the Environmental Solutions Group and the Safety and Security Systems Group, respectively, in addition to a $9.6 million increase in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were 12.7% in the current-year period, compared to 12.3% in the prior-year period.

Operating income

Operating income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$11.0~~$13.2 million, or ~~39%~~29%, compared to the prior-year quarter, primarily driven by ~~the $20.1~~a $27.5 million improvement in gross profit, partially offset by ~~the $8.4~~an $11.3 million increase in SEG&A expenses, a ~~$0.4~~$2.3 million increase in acquisition and integration-related expenses, and a ~~$0.3~~$0.7 million increase in amortization expense. Consolidated operating margin for the three months ended ~~March 31,~~June 30, 2023 was ~~10.2%~~13.4%, compared to ~~8.6%~~12.6% in the prior-year quarter.

Interest expense

Interest expense for the three and six months ended ~~March 31,~~June 30, 2023 increased by ~~$3.4~~$3.7 million and $7.1 million, respectively, compared to the ~~prior-year quarter,~~corresponding periods of the prior year, largely due to an increase in average debt levels and higher interest rates.

Other expense (income), net

Other ~~income,~~expense, net, for the three months ended ~~March 31,~~June 30, 2023 ~~decreased~~increased by ~~$0.5~~$1.4 million, compared to the prior-year quarter, primarily due to ~~increases~~an $0.8 million increase in estimated environmental remediation costs associated with a business discontinued in 2009, a $0.4 million increase in net periodic pension expense and higher foreign currency transaction losses.

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Other expense, net, for the six months ended June 30, 2023 increased by $1.9 million, compared to the prior-year period, primarily due to an $0.8 million increase in estimated environmental remediation costs associated with a business discontinued in 2009, a $0.6 million increase in net periodic pension expense and higher foreign currency transaction losses.

Income tax expense

Net income

Net income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$6.9~~$6.8 million compared to the prior-year quarter, largely due to the aforementioned improvement in operating income, partially offset by the ~~$3.4~~$3.7 million increase in interest expense, a ~~$0.2~~$1.3 million increase in income tax expense and the ~~$0.5~~$1.4 million decrease in other income.

Net income for the six months ended June 30, 2023 increased by $13.7 million compared to the prior-year quarter, largely due to the aforementioned improvement in operating income, partially offset by the $7.1 million increase in interest expense, a $1.5 million increase in income tax expense and the $1.9 million decrease in other income.

Environmental Solutions

The following table summarizes the Environmental Solutions Group’s operating results as of and for the three and six months ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,									Three Months Ended June 30,					Six Months Ended June 30,
($ in millions)	($ in millions)	2023			2022			Change				($ in millions)	2023			2022			Change			2023			2022			Change
Net sales	Net sales	$	318.8		$	274.2		$	44.6			Net sales	$	373.0		$	306.3		$	66.7		$	691.8		$	580.5		$	111.3
Operating income	Operating income	37.6			26.8			10.8				Operating income	56.2			39.1			17.1			93.8			65.9			27.9
Operating data:	Operating data:											Operating data:
Operating margin	Operating margin	11.8		%	9.8		%	2.0		%		Operating margin	15.1		%	12.8		%	2.3		%	13.6		%	11.4		%	2.2		%
Total orders	Total orders	$	395.8		$	387.6		$	8.2			Total orders	$	408.6		$	351.7		$	56.9		$	804.4		$	739.3		$	65.1
Backlog	Backlog	901.8			690.1			211.7				Backlog	939.7			733.5			206.2			939.7			733.5			206.2
Depreciation and amortization	Depreciation and amortization	13.2			12.4			0.8				Depreciation and amortization	14.3			12.6			1.7			27.5			25.0			2.5

Three months ended June 30, 2023 vs. three months ended June 30, 2022

Total orders for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$8.2~~$56.9 million, or 2%16%, compared to the prior-year quarter. U.S. orders increased by ~~$2.0~~$23.7 million, primarily due to improvements in orders for ~~street sweepers and~~multi-purpose tractors, sewer cleaners, road-marking and line-removal equipment and safe-digging trucks of ~~$19.0~~$8.4 million, $7.5 million, $6.8 million and ~~$2.5~~$5.9 million, respectively. Additionally, aftermarket demand increased by ~~$6.2~~$8.7 million. Partially offsetting these improvements were reductions in orders for ~~dump truck bodies, sewer cleaners and~~ trailers of

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~~$11.5 million, $8.0 million and $5.4 million, respectively.~~ $18.3 million. Non-U.S. orders increased by ~~$6.2~~$33.2 million, primarily due to improvements in orders for refuse trucks, ~~and~~ metal extraction support equipment, sewer cleaners and multi-purpose tractors of ~~$15.1~~$15.2 million, $8.8 million, $4.8 million and ~~$6.7~~$2.6 million, respectively. Additionally, aftermarket demand increased by $6.4 million. Partially offsetting these improvements ~~were reductions~~was a $3.4 million reduction in orders for ~~safe-digging trucks, sewer cleaners and~~ street sweepers, ~~of $6.4 million, $4.9 million and $2.9 million, respectively,~~ as well as a ~~$3.2~~$3.1 million unfavorable foreign currency translation impact.

Net sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$44.6~~$66.7 million, or ~~16%~~22%, compared to the prior-year quarter, inclusive of the effects of the TowHaul, Blasters, and ~~Blasters~~Trackless acquisitions, pricing actions and ~~pricing actions.~~increased chassis sales. For the three months ended ~~March 31,~~June 30, 2023, U.S. sales increased by ~~$37.0~~$33.9 million, largely due to increases in sales of sewer cleaners, street sweepers and ~~safe-digging trucks~~multi-purpose tractors of ~~$8.1~~$10.6 million, ~~$7.4~~$8.3 million and ~~$5.2~~$5.1 million, ~~respectively, and a $9.4 million improvement in~~respectively. Additionally, aftermarket ~~revenues.~~revenues increased by $8.1 million. Non-U.S. sales increased by ~~$7.6~~$32.8 million, largely due to a ~~$6.4~~$7.5 million

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increase in aftermarket revenues, and ~~a $6.4 million increase~~increases in sales of refuse trucks, metal extraction support ~~equipment.~~equipment, sewer cleaners and multi-purpose tractors of $10.5 million, $5.5 million, $4.3 million and $2.7 million, respectively. Partially offsetting these improvements ~~were reductions in shipments of safe-digging trucks and sewer cleaners of $2.6 million and $1.9 million, respectively, as well as~~was a ~~$2.2~~$2.5 million unfavorable foreign currency translation impact.

Cost of sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$29.9~~$44.3 million, or ~~14%~~18%, compared to the prior-year quarter, primarily related to higher sales ~~volumes,~~volume, additional costs from the TowHaul, Blasters, and ~~Blasters~~Trackless acquisitions and increases in ~~material~~chassis costs, partially offset by a ~~$2.1~~$2.3 million favorable foreign currency translation impact. Gross profit margin for the three months ended ~~March 31,~~June 30, 2023 was ~~22.0%~~23.9%, compared to ~~20.2%~~21.8% in the prior-year quarter, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions, ~~and more favorable sales mix, associated with the increase in aftermarket demand, being~~ partially offset by ~~the impact of higher material costs.~~an increase in lower margin chassis sales.

SEG&A expenses for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$3.3~~$4.3 million, or ~~13%~~18%, compared to the prior-year quarter, primarily due to additional costs from the TowHaul, Blasters, and ~~Blasters~~Trackless acquisitions, as well as increases in sales commissions and incentive-based compensation expenses. As a percentage of net sales, SEG&A expenses were ~~9.0%~~7.7% in the current-year quarter, ~~compared to 9.2%~~down from 8.0% in the prior-year quarter.

Operating income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$10.8~~$17.1 million, or ~~40%~~44%, compared to the prior-year quarter, largely due to a ~~$14.7~~$22.4 million improvement in gross profit, partially offset by the ~~$3.3~~$4.3 million increase in SEG&A expenses, a ~~$0.3~~$0.7 million increase in amortization expense, and a $0.3 million increase in acquisition and integration-related costs.

Six months ended June 30, 2023 vs. six months ended June 30, 2022

Total orders for the six months ended June 30, 2023 increased by $65.1 million, or 9%, compared to the prior-year period. U.S. orders increased by $25.7 million, primarily due to improvements in orders for street sweepers, road-marking and line-removal equipment and multi-purpose tractors of $21.8 million, $9.3 million and $8.4 million, respectively. Additionally, aftermarket demand increased by $14.9 million. Partially offsetting these improvements were reductions in orders for trailers and dump truck bodies of $23.7 million and $7.4 million, respectively. Non-U.S. orders increased by $39.4 million, primarily due to improvements in orders for refuse trucks, metal extraction support equipment and multi-purpose tractors of $30.3 million, $15.5 million and $2.6 million, respectively. Additionally, aftermarket demand increased by $7.0 million. Partially offsetting these improvements were reductions in orders for safe-digging trucks and street sweepers of $6.6 million and $6.3 million, respectively, as well as a $6.3 million unfavorable foreign currency translation impact.

Net sales for the six months ended June 30, 2023 increased by $111.3 million, or 19%, compared to the prior-year period, inclusive of the effects of the TowHaul, Blasters, and Trackless acquisitions, pricing actions and increased chassis sales. For the six months ended June 30, 2023, U.S. sales increased by $70.9 million, largely due to increases in sales of sewer cleaners, street sweepers and trailers of $18.7 million, $15.7 million and $6.4 million, respectively, as well as a $17.5 million improvement in aftermarket revenues. Non-U.S. sales increased by $40.4 million, largely due to a $13.9 million improvement in aftermarket revenues and increases in sales of metal extraction support equipment, refuse trucks and multi-purpose tractors of $11.9 million, $10.6 million and $3.1 million, respectively. Partially offsetting these improvements was a $4.7 million unfavorable foreign currency translation impact.

Cost of sales for the six months ended June 30, 2023 increased by $74.2 million, or 16%, compared to the prior-year period, primarily related to higher sales volumes and additional costs from the TowHaul, Blasters, and Trackless acquisitions and increases in chassis costs, partially offset by a $4.4 million favorable foreign currency translation impact. Gross profit margin for the six months ended June 30, 2023 was 23.0%, compared to 21.1% in the prior-year period, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions, partially offset by an increase in lower margin chassis sales.

SEG&A expenses for the six months ended June 30, 2023 increased by $7.6 million, or 15%, compared to the prior-year period, primarily due to additional costs from the TowHaul, Blasters, and Trackless acquisitions, as well as increases in sales commissions and incentive-based compensation expenses. As a percentage of net sales, SEG&A expenses were 8.3% in the current-year period, down from 8.6% in the prior-year period.

Operating income for the six months ended June 30, 2023 increased by $27.9 million, or 42%, compared to the prior-year period, largely due to a $37.1 million improvement in gross profit, partially offset by the $7.6 million increase in SEG&A expenses, a $1.0 million increase in amortization expense, and a $0.6 million increase in acquisition and integration-related costs.

Backlog was ~~$902~~$940 million at ~~March 31,~~June 30, 2023, compared to ~~$690~~$734 million at ~~March 31,~~June 30, 2022.

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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 six months ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,									Three Months Ended June 30,					Six Months Ended June 30,
($ in millions)	($ in millions)	2023			2022			Change				($ in millions)	2023			2022			Change			2023			2022			Change
Net sales	Net sales	$	66.7		$	56.0		$	10.7			Net sales	$	69.4		$	60.4		$	9.0		$	136.1		$	116.4		$	19.7
Operating income	Operating income	12.1			7.9			4.2				Operating income	14.1			10.3			3.8			26.2			18.2			8.0
Operating data:	Operating data:											Operating data:
Operating margin	Operating margin	18.1		%	14.1		%	4.0		%		Operating margin	20.3		%	17.1		%	3.2		%	19.3		%	15.6		%	3.7		%
Total orders	Total orders	$	78.9		$	65.0		$	13.9			Total orders	$	71.6		$	61.6		$	10.0		$	150.5		$	126.6		$	23.9
Backlog	Backlog	65.8			61.1			4.7				Backlog	66.8			61.5			5.3			66.8			61.5			5.3
Depreciation and amortization	Depreciation and amortization	1.1			1.0			0.1				Depreciation and amortization	1.1			1.1			—			2.2			2.1			0.1

Three months ended June 30, 2023 vs. three months ended June 30, 2022

Total orders for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$13.9~~$10.0 million, or ~~21%~~16%, compared with the prior-year quarter. U.S. orders increased by ~~$1.0~~$5.5 million, primarily due to improvements in orders for public safety equipment, warning systems and industrial signaling equipment of ~~$1.7~~$3.8 million, $1.2 million and $0.5 million, respectively. Non-U.S. orders increased by $4.5 million, largely due to improvements in orders for public safety equipment and warning systems of $5.2 million and $0.5 million, respectively, partially offset by a $1.2 million reduction in orders for public safety equipment. Non-U.S. orders increased by $12.9 million, largely due to an $11.6 million improvement in orders for public safety equipment, inclusive of a large fleet order from a customer in Mexico, as well as increases in orders for industrial signaling ~~equipment and warning systems of $1.5 million and $0.7 million, respectively, partially offset by a $0.9 million unfavorable foreign currency translation impact.~~equipment.

Net sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$10.7~~$9.0 million, or ~~19%~~15%, compared to the prior-year quarter, inclusive of the effects of higher sales volumes and pricing actions. U.S. sales increased by ~~$7.7~~$5.2 million, driven by improvements in sales of public safety equipment, industrial signaling equipment and warning systems of ~~$3.5~~$2.2 million, ~~$2.7~~$1.7 million and ~~$1.5~~$1.3 million, respectively. Non-U.S. sales increased by ~~$3.0~~$3.8 million, largely due to improvements in sales of ~~industrial signaling equipment,~~ public safety equipment and ~~warning systems~~industrial signaling equipment of ~~$2.3 million, $1.0~~$2.5 million and ~~$0.7~~$2.3 million, respectively, partially offset by a ~~$1.0~~$0.8 million reduction in sales of warning systems and a $0.2 million unfavorable foreign currency translation impact.

Cost of sales for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$5.3~~$3.9 million, or ~~15%~~10%, compared to the prior-year quarter, primarily related to higher sales volumes, partially offset by a ~~$0.8~~$0.1 million favorable foreign currency translation impact. Gross profit margin for the three months ended ~~March 31,~~June 30, 2023 was ~~38.4%~~40.6%, compared to ~~36.1%~~38.2% in the prior-year quarter, with the improvement primarily attributable to improved operating leverage from higher sales volumes, ~~and~~ benefits from pricing ~~actions.~~actions and lower freight costs.

SEG&A expenses for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$1.2~~$1.3 million, or 10%, compared to the prior-year quarter, primarily due to higher sales commissions and incentive-based compensation expense. As a percentage of net sales, SEG&A expenses decreased from ~~22.0%~~21.2% in the prior-year quarter, to ~~20.2%~~20.3% in the current-year quarter.

Operating income for the three months ended ~~March 31,~~June 30, 2023 increased by ~~$4.2~~$3.8 million, or ~~53%~~37%, compared to the prior-year quarter, primarily due to a ~~$5.4~~$5.1 million improvement in gross profit, partially offset by the $1.3 million increase in SEG&A expenses.

Six months ended June 30, 2023 vs. six months ended June 30, 2022

Total orders for the six months ended June 30, 2023 increased by $23.9 million, or 19%, compared with the prior-year period. U.S. orders increased by $6.5 million, primarily due to improvements in orders for warning systems, public safety equipment and industrial signaling equipment of $2.9 million, $2.6 million and $1.0 million, respectively. Non-U.S. orders increased by $17.4 million, largely due to an $16.8 million improvement in orders for public safety equipment, inclusive of a large fleet order from a customer in Mexico, as well as increases in orders for warnings systems and industrial signaling equipment of $1.2 million and $0.3 million, respectively. Partially offsetting these improvements was a $0.9 million unfavorable foreign currency translation impact.

Net sales for the six months ended June 30, 2023 increased by $19.7 million, or 17%, compared to the prior-year period, inclusive of the effects of higher sales volumes and pricing actions.U.S. sales increased by $12.9 million, driven by improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $5.7 million, $4.4 million and $2.8 million, respectively. Non-U.S. sales increased by $6.8 million, largely due to improvements in sales of industrial signaling equipment and public safety equipment of $4.6 million and $3.5 million, respectively, partially offset by a $1.2 million unfavorable foreign currency translation impact.

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Cost of sales for the six months ended June 30, 2023 increased by $9.2 million, or 13%, compared to the prior-year period, primarily related to higher sales volumes, partially offset by a $0.9 million favorable foreign currency translation impact. Gross profit margin for the six months ended June 30, 2023 was 39.5%, compared to 37.2% in the prior-year period, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions and lower freight costs.

SEG&A expenses for the six months ended June 30, 2023 increased by $2.5 million, or 10%, compared to the prior-year period, primarily due to higher sales commissions and incentive-based compensation expense. As a percentage of net sales, SEG&A expenses decreased from 21.6% in the prior-year period, to 20.3% in the current-year period.

Operating income for the six months ended June 30, 2023 increased by $8.0 million, or 44%, compared to the prior-year period, primarily due to a $10.5 million improvement in gross profit, partially offset by the $2.5 million increase in SEG&A expenses.

Backlog was ~~$66~~$67 million at ~~March 31,~~June 30, 2023, compared to ~~$61~~$62 million at ~~March 31,~~June 30, 2022.

Corporate Expenses

Corporate operating expenses for the three months ended ~~March 31,~~June 30, 2023 were ~~$10.2~~$10.9 million, compared to ~~$6.2~~$3.2 million in the prior-year quarter, with thethe increase primarily due to higher post-retirement ~~and~~expenses, increases in stock compensation, incentive-based compensation, medical and information technology (“IT”) costs, as well as a $2.0 million increase in acquisition-related expenses. During the three months ended June 30, 2022, the Company received a favorable settlement of $1.9 million in a post-closing adjustment dispute associated with the 2021 acquisition of OSW Equipment & Repair, LLC (“OSW”). The related benefit was included as a component of Acquisition and integration-related expenses (benefits) on the Condensed Consolidated Statements of Operations.

Corporate operating expenses for the six months ended June 30, 2023 were $21.1 million, compared to $9.4 million in the prior-year period, with the increase primarily due to higher post-retirement expenses, increases in medical, incentive-based compensation and IT costs, as well as a $2.1 million increase in acquisition-related expenses, primarily driven by the benefit recorded in the prior-year period relating to the OSW settlement.

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.

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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 Company’s credit facility will provide funds sufficient for these purposes. As of ~~March 31,~~June 30, 2023, there was ~~$373.6~~$407.4 million of cash drawn and $11.2 million of undrawn letters of credit under the 2022 Credit Agreement, with ~~$415.2~~$381.4 million of availability for borrowings. 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 ~~$38.4~~$48.8 million and $47.5 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. As of ~~March 31,~~June 30, 2023, ~~$15.9~~$22.3 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 ~~$7.1~~$43.0 million was provided by operating activities in the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared to ~~$7.0~~$22.4 million in the prior-year period, with the year-over-year ~~change~~increase primarily due to working capital improvements and higher net income, partially offset by increased rental fleet investments to support ~~seasonal demand.~~strong demand for rentals and used equipment and higher tax payments.

Net cash of ~~$19.4~~$71.4 million was used for investing activities in the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared to ~~$34.3~~$46.0 million in the prior-year period. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company paid initial consideration of $42.6 million and $13.4 million to acquire Trackless and Blasters, respectively, and funded ~~$6.0~~$15.7 million of capital expenditures. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company completed the purchase of its University Park, Illinois manufacturing facility for $27.8 million, ~~and~~ funded ~~$5.9~~$13.7 million of other capital ~~expenditures.~~expenditures, paid $4.3 million to acquire certain distribution rights from dealers, and paid $1.6 million to fund a post-closing adjustment related to the Deist acquisition.

Net cash of ~~$3.1~~$29.2 million was provided by financing activities in the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared to ~~$26.1~~$14.9 million in the prior-year period. In the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company increased debt borrowings by ~~$12.6~~$44.7 million, funded cash dividends of ~~$5.5~~$11.6 million and redeemed ~~$3.8~~$5.4 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. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company also paid $0.5 million to settle the contingent consideration obligation due to the former owners of ~~MRL.~~MRL, and received $2.0 million from stock option exercises. In the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company increased debt borrowings by ~~$46.8~~$44.1 million, funded cash dividends and share repurchases of ~~$5.5~~$10.9 million and ~~$13.6~~$16.1 million, respectively, and redeemed ~~$1.5~~$2.5 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.

The Company anticipates that capital expenditures for 2023 will be in the range of ~~$25~~$27 million to $30 million.

~~On April 3, 2023, the Company completed the acquisition of Trackless for an initial purchase price of C$54.0 million (approximately $40.0 million).~~

The Company believes that its financial resources and major sources of liquidity, including cash flow from operations and increased borrowing capacity, will be adequate to meet its operating needs, capital needs and financial commitments.

Contractual Obligations and Off-Balance Sheet Arrangements

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, 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, 2022.

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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, 2022. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, 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 ~~March 31,~~June 30, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2023.

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. 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~~six months ended ~~March 31,~~June 30, 2023, the Company completed the ~~acquisition~~acquisitions of Trackless and Blasters. As of ~~March 31,~~June 30, 2023, management has not yet fully assessed Trackless’ or Blasters’ internal control over financial reporting. Excluding the ~~acquisition~~acquisitions of Trackless and Blasters, 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~~six months ended ~~March 31,~~June 30, 2023.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth under the heading “Legal Proceedings” in Note 9 – 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, 2022.

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

The following table provides a summary of the Company’s repurchase activity for its common stock during the three months ended ~~March 31,~~June 30, 2023:


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)
~~January~~April 2023 ~~(1/1/~~(4/2/23 - ~~2/4/~~5/6/23)	—	$	—	—	$	59,052,829
~~February~~May 2023 ~~(2/5/~~(5/7/23 - 6/3/4/23)	—	—		—	59,052,829
~~March~~June 2023 ~~(3/5/~~(6/4/23 - 4/7/1/23)	—	—		—	59,052,829

(a) In March 2020, the Board authorized a stock repurchase program of up to $75.0 million of the Company’s common stock, with the remaining authorization under our previously described repurchase program adopted in 2014 being subject to the March 2020 program.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On ~~May 2,~~July 27, 2023, the Company issued a press release announcing its financial results for the three and six months ended ~~March 31,~~June 30, 2023. The presentation slides for the ~~first~~second quarter 2023 earnings call were also posted on the Company’s website at that time. The full text of the ~~first~~second 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.


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

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

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

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

99.1						~~First~~S econd Quarter Financial Results Press Release, Dated ~~May 2, 202~~3July . 27 , 2023.

99.2						~~First~~ Se cond 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).

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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:	~~May 2,~~July 27, 2023	/s/ Ian A. Hudson
		Ian A. Hudson
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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