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Disciplined Growth
Investor Presentation March 2018
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”, and “objective” or similar terminology, concerning the company’s
future financial performance, business strategy, plans, goals and objectives. These expressions are intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning the Company’s possible or assumed future performance or
results of operations and are not guarantees. While these statements are based on assumptions and judgments that management has made in light of industry experience as
well as perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances, they are
subject to risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different. Such risks and
uncertainties include, but are not limited to, economic conditions, product and price competition, supplier and raw material prices, risks associated with acquisitions such as
integration of operations and achieving anticipated revenue and cost benefits, foreign currency exchange rate changes, interest rate changes, increased legal expenses and
litigation results, legal and regulatory developments and other risks and uncertainties described under Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K
and in other filings with the Securities and Exchange Commission. Such forward-looking statements are made as of the date hereof and we undertake no obligation to update
these forward-looking statements regardless of new developments or otherwise.
This presentation also contains certain measures that 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 substitute for, or superior to, financial measures
calculated in accordance with GAAP. The Company has provided this supplemental
information to investors, analysts, and other interested parties to enable them to
perform additional analyses of operating results, to illustrate the results of
operations giving effect to the non-GAAP adjustments shown in the
reconciliations, and to provide an additional measure of performance
which management considers in operating the business.
A reconciliation of these items to the most comparable
GAAP measures is provided in our filings with the SEC
and in the Appendix to this presentation.
About Federal Signal
• Founded in 1901, joined NYSE in 1969 (“FSS”)
• Diversified industrial manufacturer of
specialized environmental cleaning vehicles
such as street sweepers, sewer cleaners and
hydroexcavators; as well as safety and
security products including audible and visual
warning devices
• Acquired TBEI, a leading U.S. manufacturer of
dump truck bodies and trailers, on June 2,
2017
• Headquartered in Oak Brook, Illinois with 14
manufacturing facilities worldwide
• Leading brands of premium, value-adding
products and systems
3
An Experienced Leadership Team
4
Ian Hudson
Senior Vice President and Chief Financial Officer
Appointed October, 2017
Joined Federal Signal in August 2013 as Vice President and
Corporate Controller
Previously served as Director of Accounting – Latin America
and Asia Pacific at Groupon, Inc.
13+ years public accounting experience with Ernst & Young,
LLP
Jennifer Sherman
President and Chief Executive Officer
Appointed January, 2016
Previously Chief Operating Officer, Chief Administrative
Officer, Secretary and General Counsel, with operating
responsibilities for the Company’s Safety and Security
Systems Group
Joined Federal Signal in 1994 as Corporate Counsel
Svetlana Vinokur
Vice President, Treasurer and Corporate Development
Appointed April, 2015
Previously served as Assistant Treasurer for Illinois Tool
Works Inc., Finance Head of M&A Strategy at Mead Johnson
Nutrition Company, and Senior Associate for Robert W. Baird
& Company’s Consumer and Industrial Investment Banking
group
Mark D. Weber
Senior Vice President and Chief Operating Officer
Appointed January, 2018
Previously served as President and Chief Executive Officer
of Supreme Industries, Inc.
Prior to joining Supreme, Mr. Weber spent 17 years at
Federal Signal, initially as Vice President of Operations,
Elgin Sweeper, before progressing through multiple roles
of increasing responsibility, serving as President of the
Environmental Solutions Group for over a decade
Serves the needs of
municipalities and
industrial verticals for
audible and visual
safety and security
notification devices
and systems
Two Attractive Platforms
5
*Net Sales for 2017. ESG
includes 7 months of TBEI.
Environmental Solutions
Group
(ESG)
Safety and Security Systems
Group
(SSG)
$693 M*
$206 M*
Serves municipal,
industrial, and utility
markets for surface
and sub-surface
cleaning, safe-digging,
infrastructure
maintenance and
material hauling
5
Positioned for Long-Term Growth
Two platforms poised for profitable growth
Attractive mix of municipal and industrial end markets
Revitalized new product development initiative
Active M&A pipeline
Strong cash flow and healthy financial position
Ongoing focus on continuous improvement utilizing “80/20” principles
2010 - 2015 2016 - 2017 2018 and beyond
• Introduced 80/20 and continuous
improvement focus
• Started portfolio realignment with the
divestiture of FSTech Group
• Executed successful turnaround
• Implemented planned CEO transition
• Completed portfolio realignment with the
divestiture of Fire Rescue Group
• Completed three strategic acquisitions –
JJE, Westech, and TBEI
• Strategic debt refinancing
• Established growth platform in
maintenance and infrastructure markets
• Poised for sustained long-term growth
• Delivering on strategic initiatives
• Active M&A process
• Targeting 12-16% consolidated EBITDA
margin
6
Federal Signal Strategic Focus
Optimize Existing
End-Markets
Invest to grow revenue
faster than GDP
Continue to improve
manufacturing efficiencies
and costs
Leverage our existing plants
and invested capital
Organic Growth in New
End-Markets
Innovate to develop new product
applications for adjacent end-
markets
Build new sources of profitability,
including service, rental and after-
market revenue streams
Targeting North American utility and
global signaling markets
Execute on Acquisition Objectives
and Continue to Grow through
Disciplined M&A
Profitably growing our revenues in
excess of $1 billion by 2020;
anticipate early achievement with
acquisition of TBEI
Successfully integrate acquired
businesses
Deliver on strategic objectives for
recent acquisitions
Maintain active M&A pipeline
7
Safety and Security Systems Group (SSG)
8
Serves the needs of government and industrial verticals for audible and
visual safety and security notification devices
Public Safety and Security Signaling Systems
Brands
Lights and siren products for Police, Fire and
Heavy Duty (HD) end-markets
Audible and visual
signaling devices
Municipal
Distributor
Industrial
Oil & Gas
Commercial
Heavy Industry
Manufacturing
Indirect
Warning Systems
Public Address General Alarming (PAGA)
Municipal
Oil & Gas
Commercial
Direct
Application
End Markets
and Channels
Products
* Management estimates
Addressable
Market *
$1.0 B $600 M $1.0 B
SSG: Market Influencers and Where We Play
9
66%
34%
2017 Sales by Geography
U.S.
Non-U.S.
Municipal/Government
Construction & Industrial
Utility
Oil and Gas
Other
2017 End Markets by Users
Increased national focus on issues of public
safety and law enforcement, and rising
public expectations for transparency and
accountability driving demand for safety and
security products
Recovery in oil & gas will benefit signaling
products and systems applications for
hazardous areas
Rising occurrence of natural and man-made
disasters
Shift in customer preference towards inter-
connected platforms expected to drive
demand for security systems integration
Market Dynamics
Source: Management Estimates
SSG Strategic Initiatives
10
Defend and expand leading market
share positions in police, signaling
and outdoor warning markets
New products and portfolio
optimization
Grow presence in heavy-duty and fire
adjacencies
“Go to Market” initiatives
Capture higher share of municipal
spending by police departments
Selective expansion into upfitting
“Metal Products” initiative
Focus on “Next Generation” police
vehicle offerings
Incorporate interconnectivity amongst
disparate systems, streamline
installation, reduce overall weight of
vehicle
11
Environmental Solutions Group (ESG)
Have successfully established a platform serving maintenance and infrastructure markets in order to provide
customers with a comprehensive suite of products and services
ESG
Rental/Aftermarket Distribution
Brands
End Markets and
Channels
Street
sweeping
Municipal
Dealer
Sewer
cleaning
Municipal
Dealer
Safe
digging
Industrial
Utility
Oil & Gas
Dealer / Direct
Industrial
cleaning
Industrial
Direct
Application
Products
Provide parts / service / refurbishment / rental
offering through the network of 20+ locations in US
and Canada
Largest Canadian
distributor of
maintenance equipment
to municipalities
For ESG products and
other OEM’s products
such as snow equipment
and garbage trucks
Materials Hauling
Dump Bodies & Trailers
Dealer Network
Municipal, Construction, Industrial,
Landscaping, Waste / Rendering
Dealer / Direct
Addressable
Market ~$2B ~$1.6B
Routes to Market
Dealers and Distributors
Established TBEI network of 600+
dealers / distribution partnerships
across the U.S.
TBEI
US Dealer
Network
ESG+TBEI: Market Influencers and Where We Play
12
2017 End Markets by Users
Economic recovery supports state and local
funding for sweepers and sewer cleaners
Funding for sewer cleaners through water tax
revenues adds further stability
Recovering oil & gas markets expected to benefit
hydro-excavation and industrial cleaning business
Aging infrastructure, pipeline expansion, and
increasing urbanization support long-term demand
for safe digging products, dump bodies and trailers
Continuing recovery in the housing market and
improving industrial activity supports growth
opportunities for dump bodies and trailers
Near-term upsides from prospective infrastructure
spending
Market Dynamics
Source: Management Estimates
2017 Sales by Geography
80%
20%
U.S. Non-U.S.
Pro forma (ESG with TBEI)
Municipal/Government
Construction & Industrial
Industrial Cleaning
Utility
Oil and Gas
ESG Strategic Initiatives
13
Maintain or achieve leading market
position in all product categories for
North American governmental market
Refocus on dealer development
Renewed focus on product development
Increase equipment sales in North
American non-governmental markets
Utility market initiative
Geographic expansion in Canada
Further diversification of end markets
Become a provider of choice for all
customer needs
New rental offering
Used equipment
Parts and service
2016-2020 CAGR ≥ 9%
Our 2020 Revenue Goal
14
$1.0 B+
$708 M
Key Drivers
• TBEI acquisition essentially achieves our previously
announced $250 M revenue goal by 2018
• Modest recovery in our end markets
• GDP growth
• Strategic initiatives that drive growth above
GDP growth rates
2020 Goal
Anticipate early achievement of our $1.0 B revenue goal due to progress on our
strategic initiatives and the acquisition of TBEI
2016 2017
$899 M
Eighty–Twenty Improvement (“ETI”) Culture
Each of our businesses are targeting savings from our ETI program in 2018, which are
intended to reduce the impact of material/wage inflation
15
Manufacturing
Efficiency
Working
Capital
Optimization
Pricing
Strategy
Material Cost
Reduction
Manufacturing Efficiency
• Lean manufacturing focus
• Throughput flexibility
• Labor pool management
Working Capital Optimization
• Derived benefits from
manufacturing efficiencies &
SKU rationalization
• Improved cycle times to drive
inventory reductions
Material Cost Reduction
• Waste reduction
• SKU rationalization
• Savings through volume
aggregation
• Sourcing optimization
Pricing Strategy
• Parts pricing strategy
• Effective “options” pricing
EBITDA Margin Targets
16
• EBITDA margin targets:
ESG: 15% - 18%
SSG: 15% - 17%
Consolidated: 12% - 16%
• Underlying assumptions:
Absence of extraordinary factors affecting demand from end-markets
No unusual hearing loss litigation expenses
• Historical EBITDA margins and targets place Federal Signal in the top tier
of its peer group of specialty vehicle manufacturers
2017: Year in Review
2017 Highlights:
Acquisition of TBEI on June 2, 2017
Strategic initiatives and benefits from acquisitions contributed to
significant year-over-year growth in orders, sales and earnings
Total orders for the year exceeded $1 B, and were up $343.6 M, or 51%,
compared to last year
Net sales of $898.5 M, up $190.6 M, or 27%; 4% organic sales growth
Adjusted EBITDA of $113.1 M, up 35%, from $83.5 M in 2016
Improved EBITDA margin of 12.6%, up from 11.8% in 2016, and within our
target range
Adjusted EPS of $0.85, up 23% from $0.69 last year
$73.5 M of operating cash flow facilitated pay down $34 M of debt
subsequent to TBEI acquisition and cash dividends of $16.8 M
Year-end backlog, up $120.5 M, or 88%
17
Historical Adjusted EBITDA Margins
(Consolidated)
Revenue
Orders
474 537 534 491
693
239
243 234 217
206 713
779 768
708
899
2013 2014 2015 2016 2017
$
in
m
ill
io
ns
ESG SSG
470 555 449 474
806
236
252
237 200
212
706
807
686 674
1,018
2013 2014 2015 2016 2017
$
in
m
ill
io
ns
ESG SSG
10.3%
12.9%
15.1%
11.8%
12.6%
2013 2014 2015 2016 2017
A
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IT
D
A
M
ar
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%
Balance Sheet and Liquidity Remain Strong
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TBEI acquisition was financed with cash on hand and borrowings available under
our existing credit facility
Although increasing our leverage in the short-term, we expect that the healthy
cash flows generated by combining our existing businesses with TBEI will facilitate
debt reduction, while maintaining strong liquidity and continued investment in
our businesses
Pro forma debt leverage of ~2.2x at end of Q4, down from ~2.7x at beginning
of June, when we completed the TBEI acquisition
While we are committed to de-levering quickly, our long-term capital allocation
strategy remains unchanged
~$106 M of availability under credit facility at December 31, 2017
Priority Driven Long-Term Capital Allocation
19
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
Reinvest in the
Business
Opportunistic share buybacks as a return of cash to our shareholders
No repurchases in 2017; spent $37.8M in 2016 (average price of $12.75/share)
and $10.6M in 2015
Remaining repurchase authorization is $31M
Share
Repurchase
Dividend Policy
Provide a competitive dividend yield while funding business growth
At $0.07 per share, dividend yield is ~1.3%
Paid dividends of $16.8M in 2017
Acquisitions
Completed acquisition of TBEI for $270M on June 2, 2017
TBEI acquisition is expected to accelerate our goal of profitably growing our
revenues in excess of $1B by 2020
Focused primarily on acquisitions that fit closely within our existing products
and services, manufacturing competencies, channels and customers
Capex
5%
Acquisitions
75%
Dividends
10%
Share
Repurchase
10%
Cash Deployment
(2015-17)1
1) Chart depicts use of cash for each category, relative
to the total cash used on all four activities, for the
cumulative period 2015-17; excludes investment in
rental fleet, which is reported as part of operating
cash flows
2018 Outlook
20
▲Full-year impact of TBEI
▲Acquisitions remain on track to deliver on previously-announced accretion estimates
▲Strong backlog, particularly for sewer cleaners and vacuum trucks
▲Positive economic conditions in most end markets
▲Amount of used vacuum trucks in end markets appears to have stabilized at more “normal” levels
▲Continued momentum with our strategic initiative to expand into utility end-market
▲Favorable impact of U.S. tax reform
▲Ongoing focus on ETI principles to drive operational improvements
▼Continue to vigorously defend hearing loss litigation, which could result in higher legal costs
▼New accounting rules expected to reduce revenues by ~$10 M (no impact on income)
▼Fluidity of political situation in Spain
▼Uncertainty in Middle East may result in further deferral of large fleet orders
▼Potential increases in material costs associated with proposed tariffs on imports
2018 Outlook
Adjusted EPS* ranging from $1.10 to $1.20
Represents increase of 29% - 41% over 2017
21
Adjustments to include items related to
acquisitions
Depreciation and amortization expense
to increase by ~$8 M to $10 M
• Reflects full year of TBEI and additional
investment in rental fleet
Increase in capital expenditures of
between $7 M - $12 M vs. 2017 levels
Interest expense of ~4%
Key Assumptions
Additional operating expenses to accelerate
longer-term growth initiatives are expected to
reduce EPS by up to $0.03
Effective income tax rate of ~26%-27%
Meaningful year-over-year improvement
expected in Q1, although seasonal effects
typically result in Q1 earnings being lower
than subsequent quarters
• Expect Q1 earnings to represent ~16% to 18% of
full-year earnings
* Adjusted earnings per share (“EPS”) is a non-GAAP measure, which includes certain adjustments to reported GAAP net income and diluted EPS. In 2017, we made adjustments to exclude the impact of restructuring activity,
executive severance costs, acquisition and integration-related expenses, purchase accounting effects, pension settlement charges, hearing loss settlement charges and special tax items, where applicable. Should any similar
items occur in 2018, we would expect to exclude them from the determination of adjusted EPS. However, because of the underlying uncertainty in quantifying amounts which may not yet be known, a reconciliation of our
Adjusted EPS outlook to the most applicable GAAP measure is excluded based on the unreasonable efforts exception in Item 10(e)(1)(i)(B).
Positioned for Long-Term Growth
Two platforms poised for profitable growth
Attractive mix of municipal and industrial end markets
Revitalized new product development initiative
Active M&A pipeline
Strong cash flow and healthy financial position
• Profitably growing our revenues in excess of $1 billion by 2020; anticipate early achievement with acquisition
of TBEI
• Focus on organic growth
• Deliver on strategic initiatives
• Maintain active M&A pipeline
22
2018 and Beyond
Appendix
23
I. New Product Development
II. M&A Target Evaluation
III. Company Products
IV. Adjusted EBITDA Margins
V. TBEI Transaction Summary
VI. Investor Information
Appendix I: New Product Development
24
Kicked off innovation refocus in late 2013
Re-allocated engineering resources toward innovation
Implemented innovation development processes and project management –
several projects underway that have originated from
customer & market-based needs assessment
Created first ESG Innovation Project Team in 2014
Successful launch of the ParaDIGm vacuum excavator
Most successful new product launch in over a decade
Initial market demand exceeding expectations
Announced a Winner of 2016 Chicago Innovation Awards
Spending will vary year-to-year with project staging
R&D spend is focused on product line extensions, cost optimization, product
portfolio redesign, and other current business model demands
Appendix I: New Product Development
Environmental Solutions Group
(ESG)
Safety and Security Systems Group
(SSG)New Markets
Optimize
Existing
Markets
• ParaDIGm Vacuum Excavator
• Vehicle-based monitoring and
reporting solutions
• Sewer Cleaner productivity
improvements such as new boom design
and upgraded control panel
• Enhanced Air Sweeper Models
• All-New HXX Hydro-Excavator with
improved weight distribution
• Jetstream portfolio of attachments
• Automatic License Plate
Recognition (ALPR) Systems
• Police Metal Products
• CommanderOne Direct Messaging
(SMS/Phone)
• IP-Enabled Warning Devices
• Next-Generation PAGA
• Optimized Lightbar Production
• Global Series Signaling Devices
25
• Niche market leader (product, geography, end-market)
• Sustainable competitive advantage
• Deep domain expertise (technology, application, manufacturing)
• Strong management team
• Leverages our distribution and manufacturing capabilities
• Solid growth potential
• Through-the-cycle margins comparable to or higher than our target margins
• Ideally, identifiable synergies and recurring revenue opportunities
• Return on capital greater than our cost of capital, appropriately adjusted for risk
Appendix II: M&A Target Evaluation
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Target companies that accelerate our current strategic initiatives or provide
a platform for growth in adjacent markets or new geographies
Appendix III: Company Products
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Appendix III: Company Products
Products
Class 6 – 8 Standard Dump Bodies
Class 6 – 8 Custom Dump Bodies
Dump & Transfer Trailers
Class 3 – 5 Standard Dump Bodies & Hoists
Class 3 – 8 Custom Dump Bodies & Hoists
Class 3 – 8 Custom Dump Bodies & Hoists
Ox Bodies
J-Craft
Rugby Manufacturing
DuraClass
Crysteel
Travis Trailers
Appendix III: Company Products
29
The Company uses adjusted EBITDA and the ratio of adjusted EBITDA to net sales (“adjusted EBITDA margin”) as additional measures which are representative of its underlying performance and to improve the comparability of results
across reporting periods. We believe that investors use versions of these metrics in a similar manner. For these reasons, the Company believes that adjusted EBITDA and adjusted EBITDA margin are meaningful metrics to investors in
evaluating the Company’s underlying financial performance. Consolidated adjusted EBITDA is a non-GAAP measure that represents the total of income from continuing operations, interest expense, pension settlement charges, hearing
loss settlement charges, debt settlement charges, acquisition and integration-related expenses, restructuring activity, executive severance costs, purchase accounting effects, other income/expense, income tax expense, and depreciation
and amortization expense. Consolidated adjusted EBITDA margin is a non-GAAP measure that represents the total of income from continuing operations, interest expense, pension settlement charges, debt settlement charges,
acquisition and integration-related expenses, restructuring activity, executive severance costs, purchase accounting effects, other income/expense, income tax expense, and depreciation and amortization expense divided by net sales for
the applicable period(s). Other companies may use different methods to calculate adjusted EBITDA and adjusted EBITDA margin. The following table summarizes the Company’s consolidated adjusted EBITDA and adjusted EBITDA margin
and reconciles income from continuing operations to consolidated adjusted EBITDA for each of the five years in the period ended December 31, 2017:
Appendix IV: Adjusted EBITDA Margins
30
($ in millions) 2013 2014 2015 2016 2017
Total Sales, as reported 712.9$ 779.1$ 768.0$ 707.9$ 898.5$
Income from continuing operations 152.5 59.7 65.8 39.4 60.5
Add:
Interest expense 8.9 3.6 2.3 1.9 7.3
Pension settlement charges - - - - 6.1
Hearing loss settlement charges - - - - 1.5
Debt settlement charges 8.7 - - 0.3 -
Acquisition and integration-related expenses - - - 1.4 2.7
Restructuring 0.7 - 0.4 1.7 0.6
Executive Severance Costs - - - - 0.7
Purchase accounting effects* - - - 3.6 4.4
Other (income) expense, net 0.1 1.7 1.0 (1.3) (1.2)
Income tax expense (108.6) 23.7 34.1 17.4 0.5
Depreciation and amortization 11.0 11.5 12.3 19.1 30.0
Adjusted EBITDA 73.3$ 100.2$ 115.9$ 83.5$ 113.1$
Adjusted EBITDA Margin 10.3% 12.9% 15.1% 11.8% 12.6%
*Excludes purchase accounting effects reflected in depreciation and amortization of $0.4 million and $0.3 million for the years ended 2017 and 2016, respectively.
31
Appendix V: TBEI Transaction Summary
Strong strategic fit with ESG businesses and broadens focus on maintenance and
infrastructure markets
Diversifies into non-oil and gas, higher growth end-markets, while balancing municipal
vs. industrial exposure
Provides strong platform to drive future growth, organically and through M&A
Strong cash flows with low capital requirements
Immediately accretive to margins and EPS1
Expands Federal Signal’s operational expertise and depth of talent through the addition
of an experienced management team
Strategic acquisition of TBEI, a leading U.S. based manufacturer of dump
truck bodies and trailers
1) Accretion includes non-cash amortization of acquired intangible assets, but excludes transaction costs and identified synergies
Deal Size and Implied
Valuation
Purchase Price of US$ 270M, subject to customary closing adjustments
7.2x multiple of FY 2016 EBITDA, before synergies
Financial Impact
TBEI contributed approximately $0.03 of accretion in 2017
Expected to be $0.07-0.12 accretive by year 2 and $0.12-0.17 accretive by
year 3
Annual synergies of $3-4M by year 3
Financing
Financed with cash on hand and borrowings from our existing credit facility
Efficient use of Federal Signal’s strong balance sheet
Pro forma Leverage at ~2.7x at close and ~2.2x as of December 31, 2017
Appendix V: TBEI Transaction Summary
Acquisition of TBEI was completed on June 2, 2017
32
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Appendix VI: Investor Information
Stock Ticker: NYSE:FSS
Company website: federalsignal.com/investors
HEADQUARTERS
1415 West 22nd Street, Suite 1100
Oak Brook, IL 60523
INVESTOR RELATIONS CONTACTS
630-954-2000
Ian Hudson
SVP & Chief Financial Officer
IHudson@federalsignal.com
Svetlana Vinokur
VP, Treasurer and Corporate Development
SVinokur@federalsignal.com
