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Federal Signal announces Q1 profit despite challenging economic conditions

Published on 1 May 2009

Federal Signal have announced their Q1 earnings: the company has reported income despite the continuing economic downturn
Federal Signal Corp have announced a Q1 profit despite the economic downturn
Company perform strongly throughout downturn

Federal Signal Corporation reported income from continuing operations of $1.1 million, or $0.02 per share, for the first quarter of 2009 on revenue of $204 million.

For the same period of 2008, the company earned $4.1 million from continuing operations, or $0.09 per share, on revenue of $226 million. The year-over-year first quarter income reduction is primarily the result of volume reductions at the Environmental Solutions Group and the Safety and Security Systems Group, offset somewhat by revenue and margin improvement in the Fire Rescue Segment, lower overhead costs and lower interest expense. First quarter revenue declined 10% versus last year, due in part to a 4% negative currency impact.

The company recorded net income including discontinued operations of $1.0 million in the first quarter of 2009 compared to a net loss of $84.9 million in the prior year period. The net loss in 2008 was associated with the discontinuations of the unprofitable E-ONE business and the non-strategic and cyclical Tool Group business, both of which were sold in 2008.

Cash flow from continuing operations for the first three months of 2009 totaled $6.4 million, a $13.1 million improvement versus the prior year, primarily due to improved working capital management. The Company had $20 million of cash and CDs and $128 million of availability under its revolving credit agreement at the end of the quarter.

Group results - Fire Rescue:

  • Q1 orders were down $36.9 million, to $20.8 million. The economic weakness impacted orders across markets in the current quarter, while 2008 order demand was at record levels in all segments. A strong order backlog of $128 million at the end of Q1 will provide revenue stability in 2009.
  • Net sales were up 41%, or $9.4 million, over the prior year as a result of a strong order backlog and the completion in late 2008 of a factory expansion that allowed for higher volumes. This increase is net of an 18% unfavorable currency effect.
  • Operating income more than tripled in the quarter to $2.4 million. Operating margin increased from 3.0% in Q1 2008 to 7.4% in Q1 2009 as a result of higher volumes coupled with efficiencies associated with the plant expansion.

William H. Osborne, president and chief executive officer, stated, "I am pleased to report that we were able to generate a profit in the first quarter despite the extremely challenging economic environment. Our management teams have worked hard to reduce our fixed cost structure, which is a key part of our strategy to reduce overall costs and increase margins. We reduced our overhead costs - fixed manufacturing costs and SG&A - by $4 million in the quarter. We are well on our way to achieving our cost reduction targets, and we remain committed to continuing to improve the company's operational and financial performance."

Mr. Osborne continued, "In addition, we continued to see growth in some of our key public safety businesses, as our PIPS automated license plate recognition (ALPR) cameras and warning systems business both generated double-digit revenue increases in the quarter. We begin the second quarter with an order backlog of $273 million, and are beginning to see some preliminary signs of stability in some of our markets."

"Although first quarter orders were down 29% versus last year, March orders were down only 8%, and we saw order increases in March for some of our businesses. With strong brands, a global presence and leadership positions in most of our markets, the company is well positioned to benefit from an improvement in the global economy."

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