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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950137-01-501578.txt : 20010516
<SEC-HEADER>0000950137-01-501578.hdr.sgml : 20010516
ACCESSION NUMBER:		0000950137-01-501578
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010331
FILED AS OF DATE:		20010515

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FEDERAL SIGNAL CORP /DE/
		CENTRAL INDEX KEY:			0000277509
		STANDARD INDUSTRIAL CLASSIFICATION:	MOTOR VEHICLES & PASSENGER CAR BODIES [3711]
		IRS NUMBER:				361063330
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	001-06003
		FILM NUMBER:		1638706

	BUSINESS ADDRESS:	
		STREET 1:		1415 W 22ND ST STE 1100
		CITY:			OAK BROOK
		STATE:			IL
		ZIP:			60523
		BUSINESS PHONE:		7089542000

	MAIL ADDRESS:	
		STREET 1:		1415 W 22ND ST STE 1100
		CITY:			OAK BROOK
		STATE:			IL
		ZIP:			60523

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FEDERAL SIGN & SIGNAL CORP /DE/
		DATE OF NAME CHANGE:	19600201
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c62518e10-q.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>

<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended March 31, 2001

                                       OR

[ ] 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                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

1415 West 22nd Street
Oak Brook, IL  60523
(Address of principal executive offices)  (Zip code)

                                 (630) 954-2000
               (Registrant's telephone number including area code)

                                 Not applicable
              (Former name, former address, and former fiscal year,
                         if changed since last report)

         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  X  No
           ----
         Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.

Title
Common Stock, $1.00 par value    45,510,000 shares outstanding at April 30, 2001


<PAGE>   2


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

INTRODUCTION


The consolidated condensed financial statements of Federal Signal Corporation
and subsidiaries included herein have been prepared by the Registrant, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.


                                       2
<PAGE>   3
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


<TABLE>
<CAPTION>
                                                       Three Months Ended March 31,
                                                    -------------------------------
                                                         2001              2000
                                                    -------------     -------------
<S>                                                 <C>               <C>
Net sales                                           $ 258,007,000     $ 260,181,000

Costs and expenses:

    Cost of sales                                     178,067,000       177,374,000
    Selling, general and administrative                56,084,000        54,155,000

    Other (income) and expenses:
      Interest expense                                  7,810,000         6,970,000
      Other (income) and expense, net                     (96,000)        1,242,000
                                                    -------------     -------------
                                                      241,865,000       239,741,000

Income before income taxes                             16,142,000        20,440,000

Income taxes                                            4,516,000         6,677,000
                                                    -------------     -------------

Income from continuing operations                   $  11,626,000        13,763,000

Income from discontinued operations,
  net of taxes                                                              939,000

Cumulative effect of change in accounting                                  (844,000)
                                                    -------------     -------------

Net income                                          $  11,626,000        13,858,000
                                                    =============     =============

COMMON STOCK DATA:

Basic and diluted net income per share
    Income from continuing operations               $         .26     $         .30
    Income from discontinued operations, net of
      taxes                                                                     .02
    Cumulative effect of change in accounting                                  (.02)
                                                    -------------     -------------
    Net income                                      $         .26     $         .30
                                                    =============     =============

Weighted average common shares outstanding
  Basic                                                45,412,000        45,613,000
  Diluted                                              45,573,000        45,674,000

Cash dividends per share of common stock            $        .195     $        .190
</TABLE>


See notes to condensed consolidated financial statements.


                                       3
<PAGE>   4
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


                                                 Three Months Ended March 31,
                                               ------------------------------
                                                   2001              2000
                                               ------------      ------------

Net income                                     $ 11,626,000      $ 13,858,000

Other comprehensive loss, net of tax -
  Foreign currency translation adjustments       (4,172,000)       (2,295,000)
                                               ------------      ------------

Comprehensive income                           $  7,454,000      $ 11,563,000
                                               ============      ============



See notes to condensed consolidated financial statements.


                                       4
<PAGE>   5
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                               March 31,           December 31,
                                                 2001                2000 (a)
                                            ---------------      ---------------
                                              (Unaudited)
<S>                                         <C>                  <C>
ASSETS

Manufacturing activities -
  Current assets:

      Cash and cash equivalents             $    15,336,000      $    13,556,000

      Trade accounts receivable, net of
       allowances for doubtful accounts         162,878,000          167,964,000

      Inventories:
        Raw materials                            70,596,000           66,856,000
        Work in process                          51,060,000           45,127,000
        Finished goods                           55,236,000           45,636,000

      Prepaid expenses                           10,745,000            9,797,000
                                            ---------------      ---------------

         Total current assets                   365,851,000          348,936,000

  Properties and equipment:
      Land                                        5,334,000            5,291,000
      Buildings and improvements                 56,369,000           51,755,000
      Machinery and equipment                   191,557,000          184,990,000
      Accumulated depreciation                 (132,492,000)        (129,440,000)
                                            ---------------      ---------------
         Net properties and equipment           120,768,000          112,596,000

  Intangible assets, net of
    accumulated amortization                    279,886,000          274,925,000

  Other deferred charges and assets              27,190,000           25,873,000
                                            ---------------      ---------------

         Total manufacturing assets             793,695,000          762,330,000
                                            ---------------      ---------------
Net assets of discontinued operations,
  including financial assets                     16,755,000           14,558,000

Financial services activities -
  Lease financing receivables, net of
    allowances for doubtful accounts            220,100,000          214,230,000
                                            ---------------      ---------------

         Total assets                       $ 1,030,550,000      $   991,118,000
                                            ===============      ===============
</TABLE>


See notes to condensed consolidated financial statements.

(a) The balance sheet at December 31, 2000 has been derived from the audited
    financial statements at that date.


                                       5
<PAGE>   6

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS -- Continued

                                               March 31,          December 31,
                                                 2001               2000 (a)
                                           ---------------      ---------------
                                             (Unaudited)
LIABILITIES

Manufacturing activities -
  Current liabilities:

     Short-term borrowings                 $   162,440,000      $   145,813,000
     Trade accounts payable                     70,985,000           60,878,000
     Accrued liabilities and income taxes       93,032,000           82,229,000
                                           ---------------      ---------------

        Total current liabilities              326,457,000          288,920,000

  Long-term borrowings                         125,148,000          125,449,000
  Deferred income taxes                         25,385,000           27,835,000
                                           ---------------      ---------------

        Total manufacturing liabilities        476,990,000          442,204,000

Financial services activities - Borrowings     196,434,000          191,483,000
                                           ---------------      ---------------

        Total liabilities                      673,424,000          633,687,000

SHAREHOLDERS' EQUITY

     Common stock - par value                   47,133,000           47,067,000
     Capital in excess of par value             69,559,000           68,693,000
     Retained earnings                         302,750,000          299,985,000
     Treasury stock                            (34,230,000)         (34,302,000)
     Deferred stock awards                      (1,749,000)          (1,847,000)
     Accumulated other comprehensive income    (26,337,000)         (22,165,000)
                                           ---------------      ---------------
        Total shareholders' equity             357,126,000          357,431,000
                                           ---------------      ---------------

        Total liabilities and
         shareholders' equity              $ 1,030,550,000      $   991,118,000
                                           ===============      ===============

See notes to condensed consolidated financial statements.

(a) The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date.


                                       6
<PAGE>   7
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended March 31,
                                                   ------------------------------
                                                       2001              2000
                                                   ------------      ------------
<S>                                                <C>               <C>
Operating activities:
   Net income                                      $ 11,626,000      $ 13,858,000
   Cumulative effect of change in accounting                              844,000
   Depreciation                                       5,067,000         4,750,000
   Amortization                                       2,666,000         2,406,000
   Working capital changes and other                  2,554,000        (5,025,000)
                                                   ------------      ------------

     Net cash provided by operating activities       21,913,000        16,833,000

Investing activities:
   Purchases of properties and
     equipment                                       (7,020,000)       (5,399,000)
   Principal extensions under
     lease financing agreements                     (40,679,000)      (34,869,000)
   Principal collections under
     lease financing agreements                      35,041,000        30,713,000
   Payments for purchases of companies,
     net of cash acquired                           (18,457,000)      (24,401,000)
   Other, net                                        (1,204,000)       (1,229,000)
                                                   ------------      ------------

     Net cash used for investing
       activities                                   (32,319,000)      (35,185,000)

Financing activities:
   Additional short-term borrowings, net             21,578,000        61,313,000
   Reduction of long-term borrowings                 (1,230,000)       (1,758,000)
   Purchases of treasury stock                                        (17,284,000)
   Cash dividends paid to shareholders               (8,619,000)      (17,243,000)
   Other, net                                           457,000           142,000
                                                   ------------      ------------

     Net cash provided by financing
       activities                                    12,186,000        25,170,000
                                                   ------------      ------------

Increase in cash and cash equivalents                 1,780,000         6,818,000

Cash and cash equivalents at
   beginning of period                               13,556,000         8,764,000
                                                   ------------      ------------

Cash and cash equivalents at
   end of period                                   $ 15,336,000      $ 15,582,000
                                                   ============      ============
</TABLE>


See notes to condensed consolidated financial statements.


                                       7
<PAGE>   8
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- ---------------------------------------------------------------------


1.       It is suggested that the condensed consolidated financial statements be
         read in conjunction with the financial statements and the notes thereto
         included in the Registrant's Annual Report on Form 10-K for the fiscal
         year ended December 31, 2000.

2.       In the opinion of the Registrant, the information contained herein
         reflects all adjustments necessary to present fairly the Registrant's
         financial position, results of operations and cash flows for the
         interim periods. Such adjustments are of a normal recurring nature. The
         operating results for the three months ended March 31, 2001 are not
         necessarily indicative of the results to be expected for the full year
         of 2001.

3.       Interest paid for the three-month periods ended March 31, 2001 and 2000
         was $6,877,000 and $6,358,000, respectively. Income taxes paid for
         these same periods were $685,000 and $830,000, respectively.

4.       The following table summarizes the information used in computing basic
         and diluted income per share:


                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                     2001             2000
                                                 -----------      -----------

         Numerator for both basic
           and diluted income per share
           computations - net income             $11,626,000      $13,858,000
                                                 ===========      ===========

         Denominator for basic income
           per share - weighted average
           shares outstanding                     45,412,000       45,613,000
         Effect of employee stock options
          (dilutive potential common shares)         161,000           61,000
                                                 -----------      -----------
         Denominator for diluted income
           per share - adjusted shares            45,573,000       45,674,000
                                                 ===========      ===========


                                       8
<PAGE>   9
5.       The following table summarizes the Registrant's operations by segment
         for the three-month periods ended March 31, 2001 and 2000.



                                 Three months ended March 31,
                               --------------------------------
                                    2001               2000
                               -------------      -------------
Net sales
  Environmental Products       $  64,842,000      $  62,521,000
  Fire Rescue                     83,839,000         79,282,000
  Safety Products                 64,380,000         69,990,000
  Tool                            44,946,000         48,388,000
                               -------------      -------------
  Total net sales              $ 258,007,000      $ 260,181,000
                               =============      =============


Operating income
  Environmental Products       $   4,523,000      $   6,017,000
  Fire Rescue                      5,387,000          4,012,000
  Safety Products                  9,710,000         11,229,000
  Tool                             7,317,000         10,152,000
  Corporate expense               (3,081,000)        (2,758,000)
                               -------------      -------------
  Total operating income          23,856,000         28,652,000
Interest expense                  (7,810,000)        (6,970,000)
Other income                          96,000         (1,242,000)
                               -------------      -------------
Income before income taxes     $  16,142,000      $  20,440,000
                               =============      =============


         The basis of segmentation and the basis of measurement of segment
         profit or loss are consistent with those used in the Registrant's last
         annual report. There have been no material changes in total assets from
         the amount disclosed in the Registrant's last annual report except the
         Environmental Products Group assets increased from $218,677,000 at
         December 31, 2000 to $238,200,000 at March 31, 2001 principally as a
         result of the acquisition of the operating assets of Athey Products
         Corporation, a manufacturer of sweeping products mostly for sale in
         North America.


                                       9
<PAGE>   10
         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS.


FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
FIRST QUARTER 2001
- --------------------------------------------------------------

Comparison with First Quarter 2000

Federal Signal Corporation reported diluted earnings per share from continuing
operations of $.26 for the first quarter, compared to $.30 last year. First
quarter net sales were $258 million compared to $260 million in 2000. Diluted
net income per share was also $.26 compared to $.30 last year. Backlog increased
3% from year-end 2000 to a record $373 million.

Operations

First quarter Environmental Products Group new orders were up 8%. Sales
increased 4%, while earnings declined 25%. The U.S. municipal marketplace for
street sweepers and sewer cleaning vehicles remained strong. U.S. demand for the
group's industrial product offering was moderate. Non-U.S. demand for the
group's sweeping products was mixed, with Europe remaining strong and the Middle
East and Far East remaining weak. The group's income decreased from the prior
year's first quarter as a result of higher expenses for new sweeping and vacuum
truck products to be introduced this year and two shorter-term influences:
productivity loss from training the many new employees hired in the second half
of 2000 as a result of the vacuum truck manufacturing plant consolidation, and a
lower margin product mix during the quarter. While the first quarter operating
margin was 7%, the group anticipates good improvement beginning in the second
quarter. The group strengthened its presence in the U.S. sweeping market with
the acquisition of the operating assets of Athey Products Corporation, a
manufacturer of sweeping products for sale mainly in the North American
marketplace.

Fire Rescue Group earnings rose sharply, up 34% on a 6% sales increase.
Operating margin rose to 6.4% from 5.1% last year. U.S. municipal market demand
remained strong while demand was also good outside the U.S. for the group's
aerial product line manufactured in Finland. Overall, new orders were 5% below
an unusually strong first quarter of 2000; the decline is not representative of
market strength since 2000's first quarter was bolstered by orders deferred from
the fourth quarter of 1999. Operating margin rose significantly over last year's
first quarter as North American operations continued to see significant
improvement.

First quarter Safety Products Group sales fell 8% and earnings declined 14%. The
Safety Products Group's global warning and signaling markets remained healthy;
however, new orders and sales were lower when compared to last year's unusually
strong first quarter. U.S. industrial markets were considerably weaker than last
year. Parking systems sales were lower as very strong new orders called for
delivery starting in the second quarter. Overall, the group's new orders were
down 3%.

Tool Group earnings were down 28% on a 7% sales decline. New orders declined
14%. Excluding the effect of acquisitions, total new orders for the group were
down 24% and sales were down 16%. Tool Group sales were broadly weak in the U.S.
Non-U.S. sales were also lower as a significant decline in Japan offset the
combined growth of other non-U.S. markets.

Cost of sales as a percent of net sales increased from 68.2% in the first
quarter of 2000 to 69.0% in the first quarter of 2001. The percentage increase
was largely attributable to increased sales in the Fire Rescue Group coupled
with lower sales in the Tool and Safety Products groups, lower margin product
mix and productivity losses associated with the vacuum truck manufacturing plant
consolidation. Selling, general and administrative expenses as a percent of net
sales increased to 21.7% from 20.8% reflecting a slight decrease in sales volume
coupled with increased product introduction expenses and plant consolidation
expenses in the Environmental Products Group. Interest expense increased to $7.8
million from $7.0 million largely as a result of increased financial services
assets. The effective tax rate for the first quarter of 2001 decreased to 28.0%
from 32.7% in 2000 largely as a result of favorable benefits from research and
development credits.


                                       10
<PAGE>   11


Cash Flow

Net cash provided by operations for the first quarter was $21.9 million, up 30%
from $16.8 million last year. The company generated EBITDA of $31.7 million in
the quarter compared to $34.6 million in 2000.

Seasonality of Registrant's Business

Certain of the Registrant's businesses are susceptible to the influences of
seasonal buying or delivery patterns. The Registrant's businesses which tend to
have lower sales in the first calendar quarter compared to other quarters as a
result of these influences are street sweeping, outdoor warning, municipal
emergency signal products, parking systems, fire rescue products and signage.

Financial Position and Liquidity at March 31, 2001

The current ratio applicable to manufacturing activities was 1.1 at March 31,
2001 compared to 1.2 at December 31, 2000. Working capital (manufacturing
operations) at March 31, 2001 was $39.4 million compared to $60.0 million at the
most recent year-end. The debt-to-capitalization ratio applicable to
manufacturing activities was 47% at March 31, 2001 compared to 45% at December
31, 2000. The increased debt-to-capitalization ratio and decline in working
capital since December 31, 2000 is primarily attributable to an increase in
short-term debt incurred to fund acquisitions of a small tool company and the
operating assets of Athey Products Corporation, a manufacturer of sweeping
products in the North American marketplace. The debt-to-capitalization ratio
applicable to financial services activities was 87% at March 31, 2001 and
December 31, 2000.

Current financial resources and anticipated funds from the Registrant's
operations are expected to be adequate to meet future cash requirements
including capital expenditures and modest amounts of additional stock
repurchases.


PART II.  OTHER INFORMATION

Responses to items one, two, three and five are omitted since these items are
either inapplicable or the response thereto would be negative.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At its Annual Meeting of Stockholders on April 19, 2001, the stockholders of the
Registrant voted to elect one director. Out of the 45,420,730 shares entitled to
vote, holders of 40,075,645 shares voted.

Shareholders elected Richard R. Thomas a director for a three-year term. Holders
of 38,275,229 shares voted for his election, while holders of 1,800,416 shares
withheld votes.

ITEM 6.  REPORTS ON FORM 8-K

A current report on Form 8-K dated January 16, 2001 pursuant to Item 9 -
"Regulation FD" confirmed previous guidance on fourth quarter 2000 and years
ending 2000 and 2001 earnings per share.

A current report on Form 8-K dated February 20, 2001 pursuant to Item 9 -
"Regulation FD" reiterated previous guidance on first quarter 2001 market
conditions.

A current report on Form 8-K dated March 9, 2001 pursuant to Item 9 -
"Regulation FD" disclosed the Registrant's annual report for informational
purposes only.


                                       11
<PAGE>   12
                                   SIGNATURES

Pursuant to the requirements 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

05/15/01                             By: /s/ Henry L. Dykema
- --------                                -----------------------------------
Date                                    Henry L. Dykema, Vice President and
                                        Chief Financial Officer


                                       12

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