• Full-year operating income of $103.2 million, up 16% from $88.7 million in 2014
• GAAP EPS of $0.27 per share for the quarter and $1.04 for the year
• Adjusted EPS of $1.02 for the year, up 16% compared to $0.88 last year
• Full-year operating margin of 13.4%, up 200 basis points from 11.4% in 2014
• Full-year operating cash flow of $91 million, up 12% from $81 million last year
• Signing announced today for acquisition of Joe Johnson Equipment
Oak Brook, Illinois, February 29, 2016 — Federal Signal Corporation (NYSE:FSS), a leader in environmental and safety solutions, today reported results for the fourth quarter and year ended December 31, 2015.
Consolidated net sales for the fourth quarter were $186.4 million, down 11% versus the same quarter a year ago. Fourth quarter income from continuing operations was $17.4 million, equal to $0.27 per diluted share, compared to $19.9 million, or $0.31 per share, in the prior-year quarter. The Company also reported adjusted net income from continuing operations for the fourth quarter of $16.0 million, equal to $0.25 per diluted share, unchanged from the same quarter a year ago.
Consolidated net sales for the year ended December 31, 2015 were $768.0 million, down 1% compared to the prior year. Income from continuing operations for the year was $65.8 million, equal to $1.04 per diluted share, compared to $59.7 million, or $0.94 per share, in the prior year.
Adjusted net income from continuing operations for the year was $64.7 million, equal to $1.02 per diluted share, an increase of 16% compared to $55.8 million, or $0.88 per diluted share, in the prior year.
All results presented herein are for continuing operations, and previously reported results have been recast to reflect the Fire Rescue Group as a discontinued operation following the sale of the Bronto Skylift business. In addition, the Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. Adjusted net income and adjusted earnings per share from continuing operations in both years exclude the effects of certain special tax items. A reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release.
Improved Fourth Quarter Margin Despite Softer Sales
“We wrapped up another year of impressive performance with solid fourth quarter results, in spite of weakening industrial market conditions,” said Jennifer L. Sherman, President and Chief Executive Officer. “We continue to benefit from our longrunning 80/20 efforts and lean initiatives that drive profitability, and in spite of softer sales, we reported an improved consolidated operating margin for the quarter. Our cash flow for the year was outstanding, and our balance sheet is stronger than ever.”
Net sales were $186.4 million for the quarter, down 11% compared to the fourth quarter of 2014. Environmental Solutions Group sales were down $18.3 million, or 13%, due to reduced sales of domestic vacuum trucks and sewer cleaners, while Safety and Security Systems Group sales were $4.4 million lower than the prior-year quarter.
On lower sales, consolidated fourth quarter operating income of $24.3 million was down 6% compared to the fourth quarter of 2014. Consolidated fourth quarter operating margin improved to 13.0%, compared to 12.3% last year. The improvement is largely attributable to the Environmental Solutions Group, with an operating margin of 17.9%, up 240 basis points compared to last year. Corporate expenses of $7.1 million were in line with prior-year levels.
Net sales of $768.0 million for the year ended December 31, 2015 were down 1% compared to the prior year. Net sales in the Safety and Security Systems Group were $8.6 million lower than the prior year, but were essentially flat after excluding adverse foreign currency translation effects of $8.2 million. The Environmental Solutions Group reported a nominal year-over2 year net sales decrease on lower shipments of vacuum trucks and sewer cleaners, partially offset by improved sales of street sweepers.
Consolidated full-year operating income was $103.2 million, up 16% compared to the prior year. Consolidated full-year operating margin improved to 13.4%, compared to 11.4% in 2014. Excluding special tax items, the effective income tax rate for the year was approximately 36%.
Orders were $179.3 million for the quarter, down 15% compared to last year. Consolidated backlog was $171 million, down 4% from the level at the end of the third quarter, but down 33% when compared to $255 million last year. The year-over-year reduction in backlog is associated primarily with lower orders for our products within the Environmental Solutions Group, resulting from reduced demand from oil and gas markets and the absence of certain large fleet orders received in the prior year.
Increased Financial Flexibility
Cash flow from continuing operations for the year was $91.1 million, up 12% from $81.1 million last year. On this strong cash flow, cash balances exceeded total debt by $31.9 million at the end of the year. This is a $58.0 million increase from December 31, 2014, when total debt exceeded cash balances by $26.1 million. Cash and cash equivalents at December 31, 2015 were $76.0 million, compared to $24.1 million a year ago.
The Company funded $4.3 million for dividends during the quarter and $15.6 million during the year. The Company also funded $10.6 million of share repurchases in 2015. In addition, as recently announced, the Board of Directors declared a dividend of $0.07 per share that will be payable in the first quarter of 2016.
2016 Changes Set Platform for Profitable Growth
“Our recent actions demonstrate and support our continued commitment to profitable growth,” noted Sherman. The Company has taken the following strategic actions since the beginning of the year:
• Announced today in a separate news release the signing of a definitive agreement to acquire substantially all of the assets and operations of Joe Johnson Equipment (“JJE”), a leading Canadian-based distributor of maintenance equipment for municipal and industrial markets.
• Completed the sale of its Bronto Skylift business for approximately $87 million.
• Executed a new five-year $325 million revolving credit facility.
• Closed the acquisition of Westech Vac Systems, Ltd., a Canadian manufacturer of high-quality, rugged vacuum trucks.
“We continue to believe in our long-term operating margin targets,” Sherman continued. “Our municipal markets, which represent about 60% of our revenues, remain healthy. However, similar to other companies that have recently provided guidance, we expect 2016 industrial markets to be challenging. The broader impacts of the oil and gas downturn are expected to reduce our 2016 operating income by $12 to $14 million. In addition, we are entering the year with a diminished backlog and a less favorable mix. Considering these headwinds and the ongoing uncertainty in industrial markets, we currently expect adjusted earnings per share for the year to be between $0.70 and $0.80, including a modest contribution from JJE.
“As we move forward, we are expanding our focus on new markets, accelerating the introduction of new product offerings, managing our costs and maintaining our 80/20 efforts. Our strong cash flow, healthy balance sheet, Bronto sale proceeds and new credit agreement give us significant financial flexibility to invest in these growth initiatives, pursue strategic acquisitions and continue to return value to shareholders through dividends and share repurchases.”
Federal Signal will host its fourth quarter conference call on Monday, February 29, 2016 at 11:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet through Federal Signal’s website at www.federalsignal.com or by dialing phone number 1-888-505-4369 and entering the pin number 5375493. An archived replay will be available on Federal Signal’s website shortly after the call.
View the complete release