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Acquisitions
 12 Months Ended
Dec. 31, 2011
Acquisitions [Abstract]  
ACQUISITIONS

NOTE 2 — ACQUISITIONS

Sirit Inc. and Subsidiaries

On March 5, 2010, the Company acquired all of the issued and outstanding common shares of Sirit Inc. and its Subsidiaries (“Sirit”) for total cash consideration of CDN $77.1 million (USD $74.9 million). Sirit designs, develops and manufactures radio frequency identification device technology for applications such as tolling, electronic vehicle registration, parking and access control, cashless payments, supply chain management and asset tracking solutions. The results of Sirit are included within the FSTech operating segment. The following table summarizes the fair values of the assets acquired and liabilities assumed from the acquisition of Sirit:

 

         
($ in millions)   Final
Purchase  Price
Allocation		  

Purchase Price

   $ 74.9  

Fair Value of Assets Acquired:

        

Current assets

     7.0  

Fixed assets

     1.6  

Intangible assets

     37.1  

Other assets

     0.4  
   

 

 

  

Total Assets Acquired

     46.1  
   

 

 

  

Fair Value of Liabilities Assumed:

        

Current liabilities

     13.1  

Deferred tax liabilities, net

     2.7  
   

 

 

  

Total Liabilities Assumed

     15.8  
   

 

 

  

Goodwill (1)

     44.6  
   

 

 

  

 

(1) The goodwill of $44.6 million is non-deductible for tax purposes.

VESystems, LLC and Subsidiaries

On March 2, 2010, the Company acquired all of the equity interests in VESystems, LLC and its Subsidiaries (“VESystems”) for an aggregate purchase price of $34.8 million. The consideration transferred consisted of cash in the amount of approximately $24.6 million and 1,220,311 shares of Federal Signal common stock with an acquisition date fair value of $10.2 million. VESystems designs, develops and deploys advanced software applications and customer management systems and services for the electronic toll collection and port industries. The results of VESystems are included within the FSTech operating segment. The following table summarizes the fair values of the assets acquired and liabilities assumed from the acquisition of VESystems:

 

         
($ in millions)   Final
Purchase  Price
Allocation		  

Purchase Price

   $ 34.8  

Fair Value of Assets Acquired:

        

Current assets

     2.2  

Fixed assets

     0.1  

Intangible assets

     16.1  

Other assets

     0.5  
   

 

 

  

Total Assets Acquired

     18.9  
   

 

 

  

Fair Value of Liabilities Assumed:

        

Current liabilities

     2.2  
   

 

 

  

Total Liabilities Assumed

     2.2  
   

 

 

  

Goodwill (2)

     18.1  
   

 

 

  

 

(2) The goodwill of $18.1 million is deductible for tax purposes over 15 years, starting in 2010.

Diamond Consulting Services Ltd.

On December 9, 2009, the Company acquired all equity interests of Diamond Consulting Services Ltd. (“Diamond”) for total consideration of $13.9 million. In addition to the consideration paid, the Company was required to pay up to $3.2 million of retention payments in future years if certain contingencies were met. The deferred retention expense was calculated in accordance with the sale and purchase agreement of Diamond. A sum of £1,000,000 (one million pounds sterling) was payable to the former owners of Diamond on or before January 31, 2011 in the event that the former owners of Diamond were employed by the Company on December 31, 2010 and were at that time actively engaged in the business. An additional amount of £1,000,000 (one million pounds sterling) was payable to the former owners of Diamond on or before January 31, 2012 in the event that former owners of Diamond were employed by the Company on December 31, 2011 and were at that time actively engaged in the business. The former owners of Diamond did maintain employment through December 31, 2011 and as of January 31, 2012 have been paid both contingent payments totaling £2,000,000 (two million pounds sterling).

In accordance with ASC 805-10-55-25, the deferred retention payments are being treated as compensation expense for post-combination services as the contingent payments were to be automatically forfeited if employment was terminated. The total contingency of £2,000,000 (two million pounds sterling) was expensed ratably over the two-year period that the employees were required to stay in order to earn the retention payment.

Diamond specializes in vehicle classification systems for tolling and other intelligent transportation systems. The results of Diamond are included in the FSTech operating segment.

 

The following table summarizes the fair value of Sirit and VESystems amortizable and indefinite-lived intangible assets as of their respective acquisition dates:

 

                                 
    Sirit     VESystems  
($ in millions)   Fair Value     Estimated useful
life (in  years)		     Fair Value     Estimated useful
life (in years)		  

Amortizable intangible assets:

                                

Patents

   $ -                 $ -              

Customer relationships

     18.0       18       9.5       17  

Technology

     12.1       9       4.9       16  

Non-compete

     2.9       5       0.4       5  
   

 

 

            

 

 

          

Total amortizable intangible assets

   $ 33.0             $ 14.8          

Indefinite-lived intangibles:

                                

Trade names

   $ 4.1             $ 1.3          
   

 

 

            

 

 

          

Total intangible assets

   $ 37.1             $ 16.1          
   

 

 

            

 

 

          

The Company determined the useful life of its customer relationship intangible assets in accordance with ASC 350, Goodwill and Other. In accordance with ASC 350-30-35-2, the useful lives are based on the period during which 95% of the undiscounted cash flows of the assets will be realized. In addition to analyzing the pattern of benefit demonstrated by the asset’s cash flow stream, the Company also considered factors discussed in ASC 350-30-35-3 and determined that the useful lives are appropriate.

Subsequent to the completion of the aforementioned acquisitions and in association with the Company’s annual impairment assessments, the Company recorded charges of $78.9 million and $20.6 million to impair goodwill and certain trade names within the FSTech Group in 2010 and 2011, respectively. See Note 5 for additional information.

Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information presents the results of operations of the Company as they may have appeared if the closing of Sirit and VESystems, presented in the aggregate, had been completed on January 1, 2010 and January 1, 2009, respectively:

 

                 
    December 31,  
($ in millions, except per share data)   2010     2009  

Net sales

   $ 734.8     $ 797.0  

(Loss) income from continuing operations

     (160.3 )      14.0  

(Loss) earnings from continuing operations — per basic and diluted share

   $ (2.78 )    $ 0.28  

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the actual financial results of the Company had the closing of Sirit and VESystems been completed on January 1, 2010 and January 1, 2009, respectively, nor is it indicative of the results of operations in future periods. Included in the unaudited pro forma combined financial information for the years ended December 31, 2010 and 2009 were pro forma adjustments to reflect the results of operations of Sirit and VESystems as well as the impact of amortizing certain acquisition accounting adjustments such as amortizable intangible assets. The pro forma condensed financial information does not indicate the impact of possible business model changes, nor does it consider any potential impacts of current market conditions, expense efficiencies or other factors. The combined net sales and net loss for the year ended December 31, 2010 was $30.2 million and $(40.7) million, respectively.

 

Acquisition and Integration Related Expenses

For the year ended December 31, 2010, pretax charges totaling $3.9 million were recorded for acquisition and integration related costs. For the years ended December 31, 2011 and 2009, there were no charges recorded for acquisitions and integration related costs. These charges, which were expensed in accordance with the accounting guidance for business combinations, were recorded in “acquisition and integration related costs” and are included as a component of corporate expenses.