Exhibit 99.1
NEWS FROM
[FEDERAL SIGNAL
CORPORATION LOGO]
REGENCY TOWERS, 1415 W. 22ND ST., OAK BROOK, ILLINOIS 60523
- --------------------------------------------------------------------------------
CONTACT: Stephanie Kushner RELEASE DATE: IMMEDIATE
630-954-2020
FEDERAL SIGNAL CORPORATION ANNOUNCES
FIRST PHASE OF STRATEGIC RESTRUCTURING INITIATIVES
Actions expected to improve company's competitive positioning,
enhance productivity, and drive profitable growth
Oak Brook, Illinois, June 30, 2004 - Federal Signal Corporation (NYSE: FSS)
today announced the implementation of the first steps of a broad restructuring
initiative identified earlier this year. The plan is aimed at enhancing the
company's competitive profile and creating a solid foundation for annual revenue
growth targeted in the high single digits. The measures announced today address
three key issues: improving the profitability of the Fire Rescue Group and
refuse truck body business, divesting non-strategic business activities, and
improving the company's overhead cost structure. The company has initiated seven
restructuring transactions during the second quarter, and expects to announce
others before year-end.
Robert D. Welding, president and chief executive officer, stated, "Through a
combination of divestitures, plant consolidations, and product rationalization
moves, we will reduce the scope of our product offerings, exit businesses where
we lack competitive advantage sufficient to achieve our growth targets, and
unwind ourselves from activities that are not creating shareholder value. This
will provide us with a stronger, more focused platform on which to build our
company." The company's proactive plan to redefine its business and streamline
its operational structure occurs after six months of evaluation of the company's
portfolio of products and services. Welding added, "Our goal is to create a
portfolio of businesses that can achieve sustained, profitable revenue growth,
to the point that economic returns comfortably exceed the cost of capital going
forward. We believe we can do this by focusing our attention on fewer businesses
that exhibit strong inherent growth characteristics and significant competitive
advantages either in technology, product design or distribution."
The initiatives include the following restructuring plans and divestitures:
FIRE RESCUE GROUP
o Closure of Preble, New York plant - The company will close its 120,000
square foot production facilities in Preble, New York and consolidate US
production of fire rescue vehicles into its Ocala, Florida operations.
The consolidation is possible because successful lean manufacturing
initiatives have reduced manufacturing space requirements throughout the
Fire Rescue Group, and because of progress being made to rationalize and
structure the company's broad array of vehicle configurations. The
consolidation will be complete before year-end and will reduce fixed
costs by about $3 million per year
beginning in 2005. The closure of the Preble plants and the disposition
of excess assets are expected to result in after-tax restructuring
charges aggregating $4.1 million in 2004.
o Sale of interest in Plastisol B.V. Holdings - The company has signed a
definitive agreement to sell its 54% majority ownership interest in
Plastisol B.V. Holdings to its minority partner. The company acquired
the ownership interest in 2001. Plastisol manufactures glassfiber
reinforced polyester (GRP) fire truck cabs and bodies mainly for the
European and Asian markets. Plastisol incurred a small loss on revenue
of $14 million in 2003. The company has determined this business to be
non-strategic, and will realize an after-tax loss of approximately $4.2
million on the sale. The transaction is expected to close in the third
quarter of 2004.
REFUSE RESTRUCTURING
o Sale of Kelowna components production site - The company is in
discussions with respect to the sale of its Kelowna production facility
in British Columbia to a management-led buyout group. The Kelowna
facility, which produces components for Class 8 trucks and also supplied
certain components for Wittke refuse truck bodies, was acquired as part
of the Wittke refuse truck acquisition in 2002. Wittke has outsourced
the majority of its refuse body component parts previously produced in
Kelowna to third party providers. There is expected to be no material
income statement impact from this transaction.
o Closure of Leach production facility - The company has made a tentative
decision to close its Leach production facility in Oshkosh, Wisconsin,
and consolidate production of rear-loading refuse vehicles into its
facility in Medicine Hat, Alberta. Concurrent with this move, production
of Wittke Road Wizard sweepers will be transferred to the company's
sweeper plant in Elgin, Illinois. The Refuse Customer and Technical
Center will remain in Oshkosh to support our customer base in the United
States. This consolidation is expected to improve pre-tax income by $7-8
million per year and position this business to achieve an acceptable
profit level. The company is discussing the closure plans with the
United Auto Workers, who represent the Leach employees, and is in
discussion with provincial and local Canadian leadership regarding the
terms of the expansion of the Medicine Hat activities. Assuming
successful resolution of these negotiations, the company expects to
complete the plant closure and transfer production by early 2005. Total
restructuring charges associated with this consolidation are estimated
at $7.6 million after tax.
OTHER TRANSACTIONS
o Safety Storage Inc. joint venture - On June 28, 2004, the company
concluded the sale of its 30% minority ownership interest in Safety
Storage, Inc. to the majority owner. Safety Storage makes mobile
buildings for the off-site storage of hazardous waste. Federal Signal
has experienced modest annual net losses on its minority share totaling
$1.3 million since the joint venture was formed in 1999. The company is
selling its share at a nominal value, and will incur a $2.9 million
after-tax loss on the transaction.
o Leasing portfolio - In 2001, the company made the strategic decision to
exit the leasing business for industrial customers. This business, at
its peak, represented approximately 20% of the company's total lease
portfolio. The taxable leasing business has been in run-off mode since
the 2001 decision, and now totals $26 million, or about 10% of the total
portfolio. The company is in discussions to sell a $10 million portion
of the open leases to a financial institution; proceeds will be used to
pay down debt. The company expects the industrial portfolio to continue
to decline during the balance of 2004, and will otherwise focus on
growing its non-taxable portfolio.
o Dayton France manufacturing consolidation - The company will cease
manufacturing activities at Dayton France and consolidate production
into its facility in Portugal, which started up in 2003. The transfer is
part of a broader plan to reduce fixed overhead and shift the
manufacturing footprint to lower-cost locations. The closure will result
in after-tax
restructuring charges of $.9 million, about half of which is cash;
payback on the transaction is less than eighteen months.
FINANCIAL IMPLICATIONS
In total, the net financial impact of the aforementioned transactions is
estimated to result in $20 million of after-tax charges, and generate $5 million
in cash, which will be applied to reduce outstanding debt. The quarter by
quarter financial implications will depend on specific transaction details, such
as the timing of plant closures, and will be communicated over the next several
quarters.
"These initiatives mark phase one of our transformation. Our end goal is to
create a business that is more narrowly focused than it is today and better
suited to generate long-term shareholder value," said Welding. "We will continue
to systematically rationalize our product lines and refine our business
processes in the coming year. We are entering a 'shrink-to-grow' phase of our
history, and I look forward to leading a leaner and more focused company as we
now turn our attention to growth initiatives."
The company will host a conference call tomorrow, Thursday, July 1st, at 9:30
a.m. Eastern Time to discuss its first phase of strategic restructuring
initiatives. The conference call will be available to all interested parties
through a webcast from the company's website, www.federalsignal.com. If you are
unable to participate during the live webcast, the call will be archived on the
company's website shortly after the conclusion of the call through July 31st.
Federal Signal is a global manufacturer of leading niche products in four
operating groups: environmental vehicles and related products, fire rescue
vehicles, safety and signaling products, and consumable industrial tooling.
Based in Oak Brook, Illinois, the company's shares are traded on the New York
Stock Exchange under the symbol FSS.
This release contains various forward-looking statements as of the date hereof
and we undertake no obligation to update these statements regardless of new
developments or otherwise. Statements in this release that are not historical
are forward-looking statements. Such statements are subject to various risks and
uncertainties that could cause actual results to vary materially from those
stated. Such risks and uncertainties include but are not limited to: economic
conditions in various regions, product and price competition, supplier and raw
material prices, foreign currency exchange rate changes, interest rate changes,
increased legal expenses and litigation results, legal and regulatory
developments such as the FIRE Act grant program and other risks and
uncertainties described in filings with the Securities and Exchange Commission.
# # # # # #
FEDERAL SIGNAL CORPORATION
SUMMARY OF ESTIMATED AFTER-TAX RESTRUCTURING CHARGES
AND LOSSES ON DIVESTITURES (1)
Estimated After-
Estimated After- Tax Cash
(in millions of $) Tax (Charge) (Cost)/Proceeds (2)
------------ -------------------
Closure of Preble, NY plant $(4.1) $(2.5)
Sale of interest in Plastisol B.V. Holdings (4.2) 2.4
Sale of Kelowna components production site -- --
Closure of Leach production facility (7.6) (4.4)
Safety Storage Inc. joint venture divestiture (2.9) --
Leasing portfolio (.4) 9.8
Dayton France manufacturing consolidation (.9) (.5)
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Total $(20.1) $4.8
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(1) estimates of after-tax charges and cash costs are for the related identified
action and are expected to be recognized or incurred during the period beginning
with the second quarter of 2004 and ending with the fourth quarter of 2005
(2) estimated cash costs do not include estimated net proceeds from sales of
properties and equipment from plant closures