Federal Signal Corporation · NYSE:FSS
Federal Signal — Proxy Contest (April 2009)
33 slides from Federal Signal's proxy contest presentation, Apr 6, 2009
Slide 1: Schedule 14A Information Required in Proxy Statement
SCHEDULE 14A (RULE 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant: Filed by a Party other than the Registrant: X Check the appropriate box: Preliminary Proxy Statement
Slide 2: Federal Signal Corporation Investor Presentation by Kanders Group
FEDERAL SIGNAL CORPORATION Investor Presentation By Kanders Group April 2009
Slide 3: Contents
Contents Overview of Kanders Group 3 Federal Signal – Situation Analysis 7 Federal Signal Governance Profile 20 Our Approach 24 Summary 31 2
Slide 4: Overview of the Kanders Group
Overview of the Kanders Group 3
Slide 5: Overview of Kanders Group
Overview of Kanders Group Our approach is to invest in undervalued public companies with Track Record of significant upside potential in industries with which we are familiar. Creating Shareholder Value We are long-term investors who bring a disciplined approach to building public companies through
Slide 6: Armor Holdings: Building a Multi-Billion Dollar Diversified Defense Company
Armor Holdings (formerly NYSE:AH) Building a Multi-Billion Dollar Diversified Defense Company Business Description: Leading manufacturer and supplier of military vehicles and safety and survivability products to the global law enforcement and aerospace and defense markets, competing directly with Fe
Slide 7: Comparable Stock Price Performance
Comparable Stock Price Performance Oct 2007 – Armor sold to BAE Systems for $4.5 billion or $88 per share Value of $100 invested in each company at 1/2/2003 to present, including reinvestment of dividends Comparable companies include diversified industrials covered by Goldman Sachs Source: Prices fr
Slide 8: Federal Signal – Situation Analysis
Federal Signal – Situation Analysis 7
Slide 9: Chronology of Events Leading to the Solicitation
Chronology of Events Leading to the Solicitation We originally invested in Federal Signal in November 2007 because it met our investment criteria: Undervalued relative to its peers Operating in an industry with which we are familiar as FSS competed with Armor Holdings Significant upside potential to
Slide 10: Capital Allocation Compared with Cash Flows and Market Capitalization
Capital Allocation Compared with Cash Flows and Market Capitalization – Where Did the Cash Go? Feb 2006 - FSS announces new growth strategy in $229 million spent on continuation of “shrink to grow” 2007 to present – 2/3 of senior management exits the Company CapEx and Acquisitions between 2006-2008
Slide 11: Comparable Company Return on Equity
Comparable Company Return on Equity Company’s strategic plan indicated that acquisitions and business portfolio changes would improve profitability metrics… Comparable companies include diversified industrials covered by Goldman Sachs Source: CapitalIQ. 10
Slide 12: Comparable Company Return on Assets
Comparable Company Return on Assets However, investments in capital expenditures and acquisitions have not yielded improvements…. Comparable companies include diversified industrials covered by Goldman Sachs Source: CapitalIQ. 11
Slide 13: Comparable Company Return on Capital
Comparable Company Return on Capital And Federal Signal significantly lags its peers when measured by the ability to employ capital to produce financial results. Comparable companies include diversified industrials covered by Goldman Sachs Source: CapitalIQ. 12
Slide 14: Federal Signal Stock Price Indexed Against its Peers
Federal Signal Stock Price Indexed Against its Peers Federal Signal has produced a negative total return (including reinvestment of dividends) of -61%, while its peer group has declined an average of -29%. While we acknowledge difficulties in the current market environment, we believe Federal Signal
Slide 15: Federal Signal Balance Sheet Optionality Relative to Its Peers
Federal Signal Balance Sheet Optionality Relative to Its Peers Federal Signal’s balance sheet position relative to its earnings power leaves it with less flexibility to respond opportunistically to growth initiatives. Balance sheet optionality defined as (2009 FCF less Dividend + Debt Capacity) / Cu
Slide 16: Management Turnover at Federal Signal
Management Turnover at Federal Signal Position Time of departure Key to this 1. James Janning – Chairman of the Board April 2009 underperformance 2. David McConnaughey – President, Safety Products Group February 2009 has been the 3. Stephanie Kushner – CFO December 2008 exceedingly high 4. John Grub
Slide 17: A Page from September 2007 Federal Signal Investor Presentation
A Page from September 2007 Federal Signal Investor Presentation The Company has been pursuing a strategy of “shrink to grow” since 2004. Results: Unfulfilled promises Lack of integration - No Board oversight 16
Slide 18: Statements by Company Executives Over Time
Statements by Company Executives Over Time What they said? The reality A long series of broken “We were able to extract $38 million of If true, this should have been disclosed commitments to working capital from E-One prior to its when they sold the business. Not shareholders and sale” discernible o
Slide 19: Analyst Reports Mirror Federal Signal's Legacy of Unfulfilled Promises
Analyst Reports Mirror Federal Signal’s Legacy of Unfulfilled Promises Inconsistent performance, Report Takeaway unrealistic expectations, and an June 13, 2007 Goldman Sachs “Federal Signal has been an underperformer for inability to deliver about a decade” even short-term results is reflected July
Slide 20: The Company Needs a Big Internal Merger
CEO Bill Osborne was recently interviewed by Bloomberg news Mr. Osborne’s The Company “needs a big internal statements confirm that the Board of merger” to improve operating margins… Directors has failed to effectively “Given our history of acquisitions without oversee execution of the Company’s cor
Slide 21: Federal Signal Governance Profile
Federal Signal Governance Profile 20
Slide 22: Federal Signal Board Deficiencies
Federal Signal Board Deficiencies Issue The Facts A significant and No Transparency Former CEO Joseph Ross was removed without troubling number of severance following an allegation by a former governance General Counsel of insider trading by his family improprieties have members. The Board did not d
Slide 23: Federal Signal Board Deficiencies (continued)
Federal Signal Board Deficiencies (continued) Issue The Facts A significant and Classified Board of Classified boards are unfriendly to shareholders and troubling number of Directors serve to entrench board members and governance managements. improprieties have arisen which we believe are By-Law Cha
Slide 24: The Board of Directors in Action
The Board of Directors in Action What has this Board been doing? The statistics speak for themselves. 3 of 10 Board seats ensures a meaningful change. 23
Slide 25: Our Approach
Our Approach 24
Slide 26: Kanders Group Nominees: Warren B. Kanders
Kanders Group Nominees Industry Experience and Success, Proven Track Record 1,382,356 Shares Owned, 2.9% of Outstanding Shares Warren B. Kanders Mr. Kanders has served as the President of Kanders & Company since 1990. Prior to the acquisition by BAE Systems, plc on July 31, 2007 of Armor Holdings, I
Slide 27: Kanders Group Nominees: Nicholas Sokolow
Kanders Group Nominees Industry Experience and Success, Proven Track Record 1,382,356 Shares Owned, 2.9% of Outstanding Shares Nicholas Sokolow Since 2007, Mr. Sokolow has been in private law practice as a partner in the firm of Lebow & Sokolow LLP. From 1994 to 2007, Mr. Sokolow was a partner in th
Slide 28: Kanders Group Nominees: Steven R. Gerbsman
Kanders Group Nominees Industry Experience and Success, Proven Track Record 1,382,356 Shares Owned, 2.9% of Outstanding Shares Steven R. Gerbsman Since 1980, Mr. Gerbsman has been a principal of Gerbsman Partners, a company providing consulting, management, advisory and investment banking services t
Slide 29: FSS Nominees: No Industry Experience, No Track Record
FSS Nominees No Industry Experience, No Track Record, No Stock Ownership 38,317 Shares Owned, 0.08% of Outstanding Shares Bill Osborne Untested as a manager of an independent company. No experience in industries in which Federal Signal operates. 10,000 shares No experience as the CEO of a public com
Slide 30: What Our Solicitation Means
What our solicitation means… We are here to help, not take the Company over. What we are and are not trying to If elected, our nominees will only be 3 of 10 Board members accomplish…… Federal Signal faces significant challenges and requires fresh input at the Board level to restore accountability, s
Slide 31: Kanders Governance Platform
Kanders Governance Platform Returning Accountability to Board and Management Strategic Vision and Execution Federal Signal requires a fresh Provide fresh perspective informed by experience in strategy, perspective at the acquisitions, integration, capital allocation, legal matters, and Board of Dire
Slide 32: Summary
Summary 31
Slide 33: Summary of the Kanders Group Solicitation
Summary of the Kanders Group Solicitation Returning Accountability to Board and Management Federal Signal’s Board of Directors requires new blood to navigate current challenges. The current Board has presided over destruction of shareholder value and declining financial performance, and has been unr