Federal Signal Corporation · NYSE:FSS
Federal Signal — Investor Presentation (August 2016)
34 slides from Federal Signal's investor presentation, Aug 9, 2016
Slide 1: Disciplined Growth Investor Presentation August 2016
Disciplined Growth Investor Presentation August 2016
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 This presentation contains unaudited financial information and forward-looking statements. Statements that are not historical are forward-looking statements and may contain words such as “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “project,” “estimate,
Slide 3: Our Mission, Values and Numbers
3 Our Mission Providing products and services to protect people and our planet Our Values We operate with the highest principles and deliver results through - Customer focus - Innovation - Continuous improvement - Teamwork and investing in our people Our Numbers $711 M revenue, $80 M operating inc
Slide 4: Experienced Management Team
Experienced Management Team Dennis Martin Executive Chairman President and Chief Executive Officer October 2010 – December 2015 Previously served as Chairman, President and CEO of General Binding Corporation 35+ years operational and leadership experience, primarily at Illinois Tool Works and
Slide 5: Federal Signal Businesses
Federal Signal Businesses Environmental Solutions (ESG) Vactor sewer cleaners and hydro-excavators, and Guzzler vacuum trucks Elgin street sweepers Jetstream waterblasters Safety and Security Systems (SSG) Vehicle lights and sirens (U.S. PSS and Vama) Indoor and outdoor mass warning and no
Slide 6: Federal Signal Business Groups
6 Environmental Solutions (ESG) Market Share: ≈30-50% U.S. 81% 19% Sales by Geography U.S. Non-U.S. Federal Signal Business Groups Note: Sales-by-Georraphy data represents Q2 2016 TTM End Markets by Users* 61% 39% Sales by Geography U.S. Non-U.S. Safety and Security Systems (SSG) Market Share: ≈30%
Slide 7: Positioning for Profitable Growth
Positioning for Profitable Growth Dennis Martin named Executive Chairman; Jennifer Sherman Appointed President and CEO Completion of acquisition of Westech Vac Systems Ltd. Close of transaction to acquire substantially all of the assets and operations of Joe Johnson Equipment Execution of new $325 m
Slide 8: Strengthened Growth Platform
Strengthened Growth Platform Federal Signal is well positioned to take advantage of business cycles and grow long term Succession planning and talent development Flexible manufacturing model New product development Portfolio realignment, Bronto divestiture Reinstated dividend Disciplined M&A process
Slide 9: Strong Financial Performance
Strong Financial Performance 9 Targeting 12% Company Margin Cash Returns to Shareholders Revenue Headwinds in 2016 Strong Balance Sheet Net Sales Total Orders 4.6% 6.6% 8.7% 11.4% 13.5% 11.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2011 2012 2013 2014 2015 TTM Q2 2016 Op era tin g M arg in Tot al
Slide 10: Balance Sheet and Cash Flow
• Strong cash flow * TTM cash flow from continuing operations of $64 M Q2 included $11 M use of operating cash to settle JJE intercompany • Robust financial position * Cash balance of $39 M, up from $36 M a year ago Debt total of $67 M, compared to $49 M of debt a year ago • Healthy cash ret
Slide 11: Create Disciplined Growth / Shareholder Value Creation
11 Create Disciplined Growth Organic & Acquisitions Diversify Customer Base Leverage Invested Capital Improve Manufacturing Efficiencies and Costs Long-term operating margin targets Grow revenue faster than GDP Grow EPS at an average % rate in low to mid teens Increase industrial revenue share Stron
Slide 12: 2016 Priorities
• Continue our focus on refreshing products and developing new product opportunities • Continue investing in sales resources to capture new market opportunities and offset soft markets • Closely monitor our costs and performance metrics against our targets • Smoothly integrate the Joe Johnson Equipm
Slide 13: Innovating for Growth – New Product Development
13 Innovating for Growth – New Product Development ParaDIGm (ESG) G-Series (SSG) Targeted global expansion in higher- margin industrial markets Developed the Global Signaling (“G-Series”) line of internationally certified (ATEX or IECEx) products for rugged, hazardous industrial applications P
Slide 14: Innovating for Growth – New Product Development
14 Innovating for Growth – New Product Development Water Recycler (ESG) Introduced in February 2016 Saves water, re-using sewer water instead of clean water Increases productivity up to 100% – uninterrupted cleaning of more lines in less time Appears superior to existing competitive products
Slide 15: Joe Johnson Equipment Acquisition
15 Joe Johnson Equipment Acquisition (a) Estimate based on unaudited financial statements prepared in accordance with Canadian Accounting Standards for Private Enterprises (ASPE). (b) ~US$70 M incremental revenue, net of pro forma intercompany eliminations for Federal Signal’s sales to JJE of ~US$55
Slide 16: JJE Acquisition: Staying Close to the Core
JJE Acquisition: Staying Close to the Core Significantly expands our industrial footprint from 13 to 25 service centers throughout Canada and US Expands our share of after-market activity Allows capture of additional customer base Attractive margin profile Product offering to capture more
Slide 17: Priority Driven Capital Allocation
Priority Driven Capital Allocation Organic projects leverage existing assets, generally require limited cash investment Innovation R&D efforts target new and updated products Generally, already funded within operating results, cash flow and normal capital expenditures Desire to add $250 M fr
Slide 18: Acquisition Strategy – Stay Close To The Core
18 Acquisition Strategy – Stay Close To The Core Geographies Products Desire to add $250 M of revenue from acquisitions within three years • Complementary product/services offerings that better meet customer requirements • Channel access for FSC products to new or extended markets • Complementary of
Slide 19: 2016 Outlook
2016 Outlook Adjusted EPS ranging from $0.65 to $0.75 Major Assumptions 19 Reduced from previous outlook range of $0.70 to $0.80 New range reflects: Higher than anticipated revenue and profit deferral related to JJE which could range up to a $0.05 impact on adjusted 2016 EPS (effect should nor
Slide 20: Protecting People And Our Planet
20 Protecting People And Our Planet
Slide 21: Appendix
Appendix • Company Products (Pictured) • Group and Corporate Results • Consolidated Historical Financial Performance • Adjusted EPS • Total Debt to Adjusted EBITDA • Operating Margins • Estimated Global Sales • Joe Johnson Equipment (JJE) Background • Investor Information 21
Slide 22: Environmental Solutions Group Products
Environmental Solutions Group Products 22
Slide 23: Safety and Security Systems Group Products
Safety and Security Systems Group Products 23
Slide 24: Safety and Security Integrated Systems Products
Safety and Security Integrated Systems Products SmartMsg Enabled Systems Enterprise Integrated Command Solution Sensors/Detectors Cameras Networked PAGASYS Rack Control Modules/Nodes Control Modules/Nodes Control Modules/Nodes 24
Slide 25: Appendix 2: Group and Corporate Results
25 Appendix 2: Group and Corporate Results $ millions, except % Q2 2016 Q2 2015 % Chg ESG Orders 135.3 114.2 18% Sales 119.4 146.6 -19% Operating income 14.9 29.2 -49% Operating margin 12.5% 19.9% SSG Orders 52.0 60.4 -14% Sales 52.9 58.8 -10% Operating income 6.6 7.3 -10% Operating margin 12.5% 12.
Slide 26: Appendix 3: Consolidated Historical Financial Performance
Appendix 3: Consolidated Historical Financial Performance* 26 ($ in millions) 2011 2012 2013 2014 2015 Q2 2016 YTD Net sales $ 579.2 $ 668.1 $ 712.9 $ 779.1 $ 768.0 $ 345.1 % Growth, Year over Year 10.5% 15.3% 6.7% 9.3% -1.4% -14.1% Cost of sales 447.2 506.7 536.9 570.4 542.4 252.7 Gross profit $ 13
Slide 27: Appendix 4: Adjusted Earnings per Share
Appendix 4: Adjusted Earnings per Share* * The adjusted financial measures presented above are unaudited and are not in accordance with U.S. generally accepted accounting principles (“GAAP”). The non-GAAP financial information presented herein should be considered supplemental to, and not a substitu
Slide 28: Appendix 5: Total Debt to Adjusted EBITDA
Appendix 5: Total Debt to Adjusted EBITDA The Company uses the ratio of total debt to adjusted EBITDA as one measure of its long-term financial stability. The ratio of debt to adjusted EBITDA is a non-GAAP measure that represents total debt divided by the trailing 12-month total of income from conti
Slide 29: Appendix 6: Operating Margins
Appendix 6: Operating Margins 29 Operating margin excludes the impact of restructuring charges in all periods Business Segment FY 2011 Operating Margin FY 2012 Operating Margin FY 2013 Operating Margin FY 2014 Operating Margin FY 2015 Operating Margin Q2 YTD 2016 Operating Margin ESG 6.8% 9.8% 12.3%
Slide 30: Appendix 7: Estimated Global Sales
Appendix 7: Estimated Global Sales (in $US) 30 75% 18% 7% Sales by domestic subsidiaries within U.S. Sales by domestic subsidiaries outside of U.S. * Sales by non-U.S. subsidiaries outside of U.S. ** Estimated trailing 12 month sales allocations as of June 30, 2016 * Sales from the U.S. are predomin
Slide 31: Joe Johnson Equipment Full Product and Service Offering
Rental of Equipment Sewer & Street Maintenance Hydro Excavation, DOT & Industrial Vacuum Snow & Ice Control Refuse & Recycling Indoor Recreational Ice Products Industrial Service Sale of New Equipment Sale of Used Equipment Parts Full Maintenance Lease Programs Premier Infrastructure Maintenance Equ
Slide 32: JJE – Expanding ESG Industrial Reach
JJE – Expanding ESG Industrial Reach North American Industrial Market Coverage 32 Expands our after- market reach Increases service center locations from 13 to 25 Serves majority of our end-customer concentrations
Slide 33: Investor Information
Investor Information 33 Stock Ticker NYSE: FSS Website www.federalsignal.com/investors Headquarters 1415 W. 22nd Street, Suite 1100 Oak Brook, IL 60523 Investor Relations Contacts: Telephone: 630-954-2000 Brian Cooper BCooper@federalsignal.com SVP, Chief Financial Officer Svetlana Vinokur SVinokur@f
Slide 34: Federal Signal
FEDERAL SIGNAL Protecti: