Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________  
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
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 incorporation or organization)
 
(I.R.S. Employer Identification No.)
1415 West 22nd Street,
Oak Brook, Illinois
 
60523
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number including area code: (630) 954-2000  
    ___________________________________
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   þ     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
 
Accelerated filer
¨
 
 
 
 
 
 
 
Non-accelerated filer
¨  
 
Smaller reporting company
¨
 (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   þ
As of June 30, 2016 , the number of shares outstanding of the registrant’s common stock was 59,933,310.
 

Table of Contents


FEDERAL SIGNAL CORPORATION
TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Table of Contents


FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) is being filed by Federal Signal Corporation and its subsidiaries (referred to collectively as the “Company,” “we,” “our” or “us” herein, unless the context otherwise indicates) with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”), and includes comments made by management that may contain words such as “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “project,” “estimate” and “objective” or similar terminology, or the negative thereof, 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 Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 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.
These risks and uncertainties, some of which are beyond the Company’s control, include the risk factors described under Part I, Item 1A, Risk Factors , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 , which was filed with the SEC on February 29, 2016. These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. The Company operates in a continually changing business environment and new factors emerge from time to time. The Company cannot predict such factors, nor can it assess the impact, if any, of such factors on its results of operations, financial condition or cash flow. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results. The Company disclaims any responsibility to update any forward-looking statement provided in this Form 10-Q.
ADDITIONAL INFORMATION
The Company is subject to the reporting and information requirements of the Exchange Act and, as a result, is obligated to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and information with the SEC, as well as amendments to those reports. The Company makes these filings available free of charge through our website at www.federalsignal.com as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC. Information on our website does not constitute part of this Form 10-Q. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically. All materials that we file with, or furnish to, the SEC may also be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

1
Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited).
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended 
 June 30,

Six Months Ended 
 June 30,
(in millions, except per share data)
2016

2015

2016

2015
Net sales
$
172.3


$
205.4


$
345.1


$
401.9

Cost of sales
127.3


144.7


252.7


286.3

Gross profit
45.0


60.7


92.4


115.6

Selling, engineering, general and administrative expenses
30.3


31.1


59.9


61.5

Acquisition and integration related expenses
0.4

 
—

 
0.9

 
—

Restructuring
—

 
0.4

 
1.2

 
0.4

Operating income
14.3

 
29.2

 
30.4

 
53.7

Interest expense
0.4

 
0.6

 
0.8

 
1.2

Debt settlement charges
—

 
—

 
0.3

 
—

Other (income) expense, net
(0.3
)

—


(1.0
)

1.2

Income from continuing operations before income taxes
14.2


28.6


30.3


51.3

Income tax expense
(4.8
)

(10.4
)

(10.5
)

(18.7
)
Income from continuing operations
9.4


18.2


19.8


32.6

(Loss) gain from discontinued operations and disposal, net of income tax (benefit) expense of $(0.3), $(0.1), $4.1 and $0.0, respectively
(0.3
)

0.1


2.9


0.6

Net income
$
9.1


$
18.3


$
22.7


$
33.2

Basic earnings per share:







Earnings from continuing operations
$
0.16


$
0.29


$
0.32


$
0.52

(Loss) gain from discontinued operations and disposal, net of tax
(0.01
)

—


0.05


0.01

Net earnings per share
$
0.15


$
0.29


$
0.37


$
0.53

Diluted earnings per share:







Earnings from continuing operations
$
0.15


$
0.29


$
0.32


$
0.51

(Loss) gain from discontinued operations and disposal, net of tax
—


—


0.05


0.01

Net earnings per share
$
0.15


$
0.29


$
0.37


$
0.52

Weighted average common shares outstanding:







Basic
60.1


62.6


61.1


62.5

Diluted
60.9


63.6


61.9


63.5

Cash dividends declared per common share
$
0.07


$
0.06


$
0.14


$
0.12

See notes to condensed consolidated financial statements.

2
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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
 
2016
 
2015
Net income
$
9.1

 
$
18.3

 
$
22.7

 
$
33.2

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Change in foreign currency translation adjustment
(3.1
)
 
4.6

 
6.0

 
(7.3
)
Change in unrecognized net actuarial losses related to pension benefit plans, net of income tax expense of $0.7, $0.4, $1.5 and $1.3, respectively
2.0

 
0.3

 
3.8

 
2.2

Change in unrealized net gain on derivatives, net of income tax
—

 
—

 
(0.1
)
 
—

Total other comprehensive (loss) income
(1.1
)
 
4.9

 
9.7

 
(5.1
)
Comprehensive income
$
8.0

 
$
23.2

 
$
32.4

 
$
28.1

See notes to condensed consolidated financial statements.

3
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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30,
2016
 
December 31,
2015
(in millions, except per share data)
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
38.7

 
$
76.0

Accounts receivable, net of allowances for doubtful accounts of $1.1 and $0.8, respectively
82.5

 
73.0

Inventories
119.5

 
87.2

Prepaid expenses and other current assets
13.0

 
15.1

Current assets of discontinued operations
—

 
63.8

Total current assets
253.7

 
315.1

Properties and equipment, net of accumulated depreciation of $102.6 and $100.2, respectively
46.2

 
45.0

Rental equipment, net of accumulated depreciation of $4.2 and $2.6, respectively
90.1

 
7.9

Goodwill
236.2

 
231.6

Intangible assets, net of accumulated amortization of $0.4 and $0.4, respectively
12.2

 
0.2

Deferred tax assets
6.4

 
20.1

Deferred charges and other assets
4.1

 
3.3

Long-term assets of discontinued operations
2.4

 
43.3

Total assets
$
651.3

 
$
666.5

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term borrowings and capital lease obligations
$
0.6

 
$
0.4

Accounts payable
40.9

 
38.0

Customer deposits
5.9

 
3.7

Accrued liabilities:
 
 
 
Compensation and withholding taxes
12.9

 
18.6

Other current liabilities
30.9

 
27.9

Current liabilities of discontinued operations
3.9

 
28.6

Total current liabilities
95.1

 
117.2

Long-term borrowings and capital lease obligations
66.3

 
43.7

Long-term pension and other postretirement benefit liabilities
50.7

 
55.2

Deferred gain
11.7

 
12.6

Other long-term liabilities
28.0

 
16.9

Long-term liabilities of discontinued operations
3.5

 
15.3

Total liabilities
255.3

 
260.9

Stockholders’ equity:
 
 
 
Common stock, $1 par value per share, 90.0 shares authorized, 65.3 and 64.8 shares issued, respectively
65.3

 
64.8

Capital in excess of par value
197.4

 
195.6

Retained earnings
289.0

 
274.9

Treasury stock, at cost, 5.4 and 2.6 shares, respectively
(76.6
)
 
(40.9
)
Accumulated other comprehensive loss
(79.1
)
 
(88.8
)
Total stockholders’ equity
396.0

 
405.6

Total liabilities and stockholders’ equity
$
651.3

 
$
666.5

See notes to condensed consolidated financial statements.

4
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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
Operating activities:



Net income
$
22.7


$
33.2

Adjustments to reconcile net income to net cash provided by operating activities:



Gain from discontinued operations and disposal
(2.9
)

(0.6
)
Depreciation and amortization
7.2


6.2

Deferred financing costs
0.5


0.2

Deferred gain
(0.9
)

(1.0
)
Stock-based compensation expense
2.2


3.1

Excess tax benefit from stock-based compensation
—


(0.3
)
Pension expense, net of funding
(2.2
)

(2.2
)
Deferred income taxes
7.0


14.6

Changes in operating assets and liabilities, net of effects of acquisitions and discontinued operations
(29.7
)

(22.4
)
Net cash provided by continuing operating activities
3.9


30.8

Net cash provided by (used for) discontinued operating activities
1.3


(3.4
)
Net cash provided by operating activities
5.2


27.4

Investing activities:



Purchases of properties and equipment
(3.6
)

(5.1
)
Payments for acquisitions, net of cash acquired
(102.6
)

—

Other, net
(0.5
)

0.1

Net cash used for continuing investing activities
(106.7
)

(5.0
)
Net cash provided by (used for) discontinued investing activities
88.0


(0.5
)
Net cash used for investing activities
(18.7
)

(5.5
)
Financing activities:



Increase in revolving lines of credit, net
64.8


—

Payments on long-term borrowings
(43.4
)

(1.4
)
Payments of debt financing fees
(1.1
)

—

Purchases of treasury stock
(33.1
)

(5.0
)
Redemptions of common stock to satisfy withholding taxes related to stock-based compensation
(2.6
)

(2.9
)
Cash dividends paid to stockholders
(8.6
)

(7.5
)
Proceeds from stock-based compensation activity
0.2


0.4

Excess tax benefit from stock-based compensation
—


0.3

Other, net
(0.4
)

(0.3
)
Net cash used for continuing financing activities
(24.2
)

(16.4
)
Net cash provided by discontinued financing activities
0.7


—

Net cash used for financing activities
(23.5
)

(16.4
)
Effects of foreign exchange rate changes on cash and cash equivalents
(0.3
)

—

(Decrease) increase in cash and cash equivalents
(37.3
)

5.5

Cash and cash equivalents at beginning of year
76.0


30.4

Cash and cash equivalents at end of period
38.7


35.9

Less: Cash and cash equivalents of discontinued operations at end of period
—


(2.5
)
Cash and cash equivalents of continuing operations at end of period
$
38.7


$
33.4

See notes to condensed consolidated financial statements.

5
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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(in millions)
Common
Stock
 
Capital in
Excess of
Par
Value
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balance at January 1, 2016
$
64.8

 
$
195.6

 
$
274.9

 
$
(40.9
)
 
$
(88.8
)
 
$
405.6

Net income
 
 
 
 
22.7

 
 
 
 
 
22.7

Total other comprehensive income
 
 
 
 
 
 
 
 
9.7

 
9.7

Cash dividends declared
 
 
 
 
(8.6
)
 
 
 
 
 
(8.6
)
Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
1.7

 
 
 
 
 
 
 
1.7

Stock option exercises and other
0.1

 
0.5

 
 
 
(0.2
)
 
 
 
0.4

Performance share unit transactions
0.4

 
(0.4
)
 
 
 
(2.4
)
 
 
 
(2.4
)
Stock repurchase program
 
 
 
 
 
 
(33.1
)
 
 
 
(33.1
)
Balance at June 30, 2016
$
65.3

 
$
197.4

 
$
289.0

 
$
(76.6
)
 
$
(79.1
)
 
$
396.0

(in millions)
Common
Stock
 
Capital in
Excess of
Par
Value
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balance at January 1, 2015
$
64.2

 
$
187.0

 
$
227.0

 
$
(27.1
)
 
$
(79.5
)
 
$
371.6

Net income
 
 
 
 
33.2

 
 
 
 
 
33.2

Total other comprehensive loss
 
 
 
 
 
 
 
 
(5.1
)
 
(5.1
)
Cash dividends declared
 
 
 
 
(7.5
)
 
 
 
 
 
(7.5
)
Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
2.7

 
 
 
 
 
 
 
2.7

Stock option exercises and other
 
 
1.0

 
 
 
 
 
 
 
1.0

Performance share unit transactions
0.5

 
(0.5
)
 
 
 
(2.9
)
 
 
 
(2.9
)
Stock repurchase program
 
 
 
 
 
 
(5.0
)
 
 
 
(5.0
)
Balance at June 30, 2015
$
64.7

 
$
190.2

 
$
252.7

 
$
(35.0
)
 
$
(84.6
)
 
$
388.0


See notes to condensed consolidated financial statements.

6
Table of Contents


FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of the Business
Federal Signal Corporation was founded in 1901 and was reincorporated as a Delaware corporation in 1969. References herein to the “Company,” “we,” “our” or “us” refer collectively to Federal Signal Corporation and its subsidiaries.
Products manufactured and services rendered by the Company are divided into two major operating segments: the Environmental Solutions Group and the Safety and Security Systems Group. The individual operating businesses are organized as such because they share certain characteristics, including technology, marketing, distribution and product application, which create long-term synergies. The Company’s reportable segments are consistent with its operating segments. These segments are discussed in Note 12 – Segment Information.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements represent the consolidation of Federal Signal Corporation and its subsidiaries included herein and have been prepared by the Company pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to ensure the information presented is not misleading. These condensed consolidated financial statements have been prepared in accordance with the Company’s accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 , and should be read in conjunction with those consolidated financial statements and the notes thereto. As discussed in Note  15 – Discontinued Operations, on January 29, 2016 , the Company completed the sale of its Bronto Skylift ® business (“Bronto”) that represented its Fire Rescue Group. The consolidated financial statements for all periods presented have been recast to present the operating results of previously divested or exited businesses as discontinued operations, including the Fire Rescue Group. See Note  15 – Discontinued Operations for further details.
In addition, as discussed in Note 2 – Acquisitions, on June 3, 2016 , the Company completed the acquisition of substantially all of the assets and operations of Joe Johnson Equipment, Inc. and Joe Johnson Equipment (USA), Inc. (collectively, “JJE”), a Canadian-based distributor of maintenance equipment for municipal and industrial markets. The Condensed Consolidated Balance Sheet as of June 30, 2016 includes preliminary fair values assigned to the assets acquired and liabilities assumed in connection with the acquisition, whereas the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 include the post-acquisition operating results of JJE.
These condensed consolidated financial statements include all normal and recurring adjustments that we considered necessary to present a fair statement of our results of operations, financial condition and cash flow. Intercompany balances and transactions have been eliminated in consolidation. In addition, certain prior year amounts have been reclassified to conform to the current year presentation. These include adjustments to present the Fire Rescue Group as a discontinued operation, as well as certain reclassifications made to prior-year balance sheet information to conform to the current-year presentation, after giving effect to the JJE acquisition.
The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. While we label our quarterly information using a calendar convention whereby our first, second and third quarters are labeled as ending on March 31, June 30 and September 30, respectively, it is our longstanding practice to establish interim quarterly closing dates based on a 13-week period ending on a Saturday, with our fiscal year ending on December 31. The effects of this practice are not material and exist only within a reporting year.
Recent Accounting Pronouncements and Accounting Changes
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets

7
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

recognized from costs incurred to obtain or fulfill a contract. The ASU allows either a “full retrospective” adoption, in which the standard is applied to all periods presented in the financial statements, or a “modified retrospective” adoption, in which the guidance is applied retrospectively only to the most current period presented in the financial statements, with the cumulative effect of initially applying the new standard being recognized as an adjustment to the opening balance of retained earnings. As originally proposed, this guidance was effective for annual reporting periods beginning on or after December 15, 2016, including interim periods within that reporting period, and early adoption was not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which deferred the effective date of the new revenue recognition requirements to annual reporting periods beginning on or after December 15, 2017, including interim periods within that reporting period. Under ASU 2015-14, companies are permitted to adopt the guidance early, but no earlier than the original effective date outlined in ASU 2014-09. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs be presented in the balance sheets as a direct deduction from the carrying amount of the related debt liability. The new requirement is effective for fiscal years beginning on or after December 15, 2015, and for interim periods within those fiscal years. Retrospective presentation is required for all comparable periods presented. The Company’s adoption of this guidance on January 1, 2016 did not have a material impact on its consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-15, Interest – Imputation of Interest (Subtopic 855-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements , which presents the SEC staff’s opinion, in response to ASU No. 2015-03, that debt issuance costs associated with line-of-credit arrangements may be deferred, presented as an asset, and subsequently amortized ratably over the respective term, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The effective date of this guidance, and the expected impact upon adoption, is consistent with that discussed above with respect to ASU No. 2015-03. The Company’s adoption of this guidance on January 1, 2016 did not have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) , which requires organizations that are lessees in operating leases to recognize right-of-use assets and lease liabilities on the balance sheet and requires disclosure of key qualitative and quantitative information about leasing agreements by both lessors and lessees. For a lease to meet the requirements for accounting under a sale-leaseback transaction, it must meet the criteria for a sale in ASC 606, Revenue from Contracts with Customers . Entities are required to recognize and measure operating leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting , which impacts amounts recorded in the statements of operations, the classification of awards as equity or liability on the balance sheets, and the classification of related activities on the statement of cash flows. The ASU requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) be recognized as income tax expense or benefit in the income statement and are to be recognized regardless of whether the benefit reduces taxes payable in the current period. The tax effects of exercised or vested awards are to be treated as discrete items in the reporting period in which they occur. The Company may now elect to account for award forfeitures as they occur rather than as part of the compensation expense as the awards are vesting. The requirements for withholding now allow withholding at the maximum statutory tax rate of the beneficiary’s jurisdiction. On the statement of cash flows, excess tax benefits are to be classified under operating activities and shares withheld for tax-withholding purposes are to be classified as a financing activity. These new requirements and options are effective for fiscal years beginning on or after December 15, 2016. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value are to be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement are to be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

8
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but are not limited to, revenue recognition, workers’ compensation and product liability reserves, asset impairment, pension and other post-retirement benefit obligations, income tax contingency accruals and valuation allowances, and litigation-related accruals. Actual results could differ from those estimates.
As described in Note 2 – Acquisitions, amounts allocated to certain assets acquired and liabilities assumed in connection with current-year acquisitions are considered preliminary as of June 30, 2016 and are subject to change during the measurement period.
Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 , with the exception of the following accounting policies associated with the acquisition of substantially all of the assets and operations of JJE:
Rental Equipment
The Company enters into lease agreements with customers related to the rental of certain equipment. All of these leasing agreements are classified as operating leases, and are for periods generally not to exceed  5 years . In accounting for these leases, the cost of the equipment purchased or manufactured by the Company is recorded as an asset, and is depreciated over its estimated useful life. Rental income is recognized ratably over the term of the underlying leases.
Rental equipment is depreciated to an estimated residual value on a straight line basis over the estimated useful lives and is reviewed for potential impairment whenever an event occurs or circumstances change that indicate the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares non-discounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an non-discounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Rental equipment includes certain equipment that is manufactured by the Company and subsequently transferred to the rental fleet, as well as equipment purchased from third-party manufacturers, for the purpose of renting to end-customers. The related cash flow activity associated with these transactions is reflected within operating activities on the Consolidated Statements of Cash Flows. Non-cash transfers from Inventories to Rental equipment totaled  $7.1 million  and $2.2 million for the six months ended   June 30, 2016  and  2015 , respectively. The rental income associated with this activity was  $4.0 million and $2.2 million for the three months ended June 30, 2016 and 2015 , respectively, and $5.7 million  and $3.9 million for the six months ended June 30, 2016  and  2015 , respectively.
Intangible assets
Definite-lived intangible assets are amortized on a straight line basis over the estimated useful lives and are tested for impairment if indicators exist in a manner similar to that described above for Rental Equipment .
Indefinite-lived intangible assets are tested for impairment on an annual basis at year-end, or more frequently if an event occurs or circumstances change that indicate the fair value of an indefinite-lived intangible asset could be below its carrying amount. The impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using the relief from royalty method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.

9
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

NOTE 2 – ACQUISITIONS
Acquisition of Westech Vac Systems Ltd.
On January 5, 2016 , the Company completed the acquisition of 100% of the stock of Westech Vac Systems, Ltd. (“Westech”), a Canadian manufacturer of high-quality, rugged vacuum trucks, from Advance Engineered Products Ltd. The Company expects that Westech will provide an efficient entry into a new line of product offerings and access to new markets. As the acquisition closed on January 5, 2016 , the assets and liabilities of Westech have been consolidated into the Condensed Consolidated Balance Sheet as of June 30, 2016 , while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations, within the Environmental Solutions Group.
Cash consideration paid by the Company to acquire Westech was approximately $6.0 million . The assets acquired and liabilities assumed in the Westech acquisition have been measured at their fair values at the acquisition date, resulting in a preliminary assignment of $1.6 million  to goodwill, which is not deductible for tax purposes, and $1.5 million to intangible assets. These amounts are considered preliminary and are subject to change within the measurement period as the Company finalizes its fair value estimates. The Company expects to finalize the purchase price allocation by the end of the third quarter of 2016.
The acquisition was not, and would not have been, material to the Company’s results of operations, financial condition or cash flow during any period presented. Accordingly, the Company’s consolidated results from operations do not differ materially from historical performance as a result of the acquisition, and therefore, pro-forma results are not presented.
Acquisition of JJE
On June 3, 2016 , the Company completed the acquisition of substantially all of the assets and operations of JJE, a Canadian-based distributor of maintenance equipment for municipal and industrial markets. The Company expects that JJE will facilitate sales of its existing products into new markets, expand the Company’s product and service offerings and increase the Company’s footprint across North America. As the acquisition closed on June 3, 2016 , the assets and liabilities of JJE have been consolidated into the Condensed Consolidated Balance Sheet as of June 30, 2016 , while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations, within the Environmental Solutions Group.
The initial cash consideration paid by the Company to acquire JJE was approximately $96.6 million , inclusive of a payment of a preliminary working capital adjustment. Any additional working capital adjustment is expected to be finalized before the end of the fourth quarter of 2016. In addition, there is a deferred payment of C $8.0 million (approximately $6.2 million ) and a contingent earn-out payment of up to C $10.0 million (approximately $7.7 million ). The earn-out payment is contingent upon the achievement of certain financial targets and objectives. The deferred payment, and any contingent earn-out payment, are due to be paid in June 2019.
The acquisition is being accounted for in accordance with Accounting Standards Codification (“ASC”) 805,  Business Combinations . Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the completion of the acquisition. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. Due to the proximity of the date of acquisition to the date of issuance of the condensed consolidated financial statements, the Company’s purchase price allocation as of June 30, 2016 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the subsequent filing date of this Form 10-Q. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable.

10
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:
(in millions)
 
Purchase price, inclusive of preliminary working capital adjustment (a)
$
96.6

Estimated fair value of additional consideration (b)
10.3

Settlement of pre-existing contractual relationship (c)
11.4

Total consideration
118.3

 
 
Accounts receivable
12.2

Inventories
29.2

Prepaid expenses and other current assets
0.8

Rental equipment
75.9

Properties and equipment
2.0

Intangible assets (d)
9.9

Capital lease obligations
(0.5
)
Accounts payable  (c)
(11.5
)
Customer deposits
(0.8
)
Accrued liabilities
(2.0
)
Net assets acquired
115.2

 
 
Goodwill (e)
$
3.1

(a)
The initial purchase price was funded with existing cash on hand and borrowings under the Company’s revolving credit facility.
(b)
Includes estimated fair value of contingent earn-out payment ( $4.9 million ) and the deferred payment ( $5.4 million ) as of the acquisition date. Included as a component of Other long-term liabilities on the Condensed Consolidated Balance Sheet. See Note 14 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.
(c)
Represents the non-cash settlement of accounts receivable due from JJE to the Company as of the acquisition date. Corresponding amount payable by JJE to the Company is not included in accounts payable assumed in the table above, and the amount was settled at fair value with no impact on the Condensed Consolidated Statement of Operations.
(d)
Represents the preliminary fair value assigned to the JJE trade name, which is considered to be an indefinite-lived intangible asset.
(e)
All expected to be deductible for tax purposes.
Under ASC 805-10, acquisition related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. The Company incurred  $0.4 million and $0.9 million  of acquisition related costs in the three and six months ended June 30, 2016 , which have been recorded in Acquisition and integration related expenses on the Condensed Consolidated Statement of Operations. The Company expects to incur additional integration expenses during the remainder of 2016.

In the period between the June 3, 2016 closing date and June 30, 2016 , JJE generated approximately  $10.6 million  of net sales and  $0.9 million  of operating income. The Company has included the operating results of JJE within the Environmental Solutions Group in its condensed consolidated financial statements since the closing date.
In connection with the acquisition of JJE, the Company entered into lease agreements for two facilities owned by affiliates of the sellers of JJE. Both agreements include a lease term of five years at an annual rent that is considered to be market-based. In the three and six months ended June 30, 2016 , total rent paid under these agreements to the former shareholders of JJE, some of whom are now employees of the Company, was less than $0.1 million .
The Company’s net sales to JJE were $5.5 million and $15.9 million for the three months ended June 30, 2016 and 2015 , respectively, and $21.6 million and $29.7 million for the six months ended June 30, 2016  and  2015 , respectively.
The Company has not presented unaudited pro forma combined results of operations of the Company and JJE for the three and six months ended June 30, 2016 and 2015 , because it is considered impracticable to do so, primarily because of the revenue and profit deferral impacts associated with the Company’s historical sales to JJE. Under common ownership, the timing of revenue and profit recognition will change, in that revenue and profit will no longer be recognized on sales from the Company to JJE when delivery has occurred, and all other revenue recognition criteria have been satisfied, as was the case prior to the acquisition. Quantification of the revenue and profit deferral impacts of such historical sales and reflecting pro forma combined results assuming the transaction occurred on January 1, 2016 and 2015 with any reasonable level of accuracy is considered

11
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

impracticable as it would require significant estimates, including estimating the mix of such historical sales (i.e. sales of units to JJE that were subsequently sold to end customers, sales of units to JJE that were not yet sold through to end customers or sales of units to JJE that were placed in the rental fleet), as well as estimating the timing and amounts of any of JJE’s subsequent sale or rental activity.
NOTE 3 – INVENTORIES
The following table summarizes the components of Inventories :
(in millions)
June 30,
2016
 
December 31,
2015
Finished goods
$
75.2

 
$
45.2

Raw materials
36.1

 
35.3

Work in progress
8.2

 
6.7

Total inventories
$
119.5

 
$
87.2

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes the carrying amount of goodwill, and the changes in the carrying amount of goodwill in the six months ended June 30, 2016 , by segment:
(in millions)
Environmental
Solutions
 
Safety & Security
Systems
 
Total
Balance at December 31, 2015
$
120.4

 
$
111.2

 
$
231.6

Translation adjustments
(0.2
)
 
0.1

 
(0.1
)
Acquisitions
4.7

 
—

 
4.7

Balance at June 30, 2016
$
124.9

 
$
111.3

 
$
236.2

The following table summarizes the gross carrying amount and accumulated amortization of intangible assets for each major class of intangible assets:
 
June 30, 2016
 
December 31, 2015
(in millions)
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
Definite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships  (a)
$
0.8

 
$
—

 
$
0.8

 
$
—

 
$
—

 
$
—

Other  (a)
1.1

 
(0.4
)
 
0.7

 
0.6

 
(0.4
)
 
0.2

Total definite-lived intangible assets
1.9

 
(0.4
)
 
1.5

 
0.6

 
(0.4
)
 
0.2

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Trade name
10.7

 
—

 
10.7

 
—

 
—

 
—

Total indefinite-lived intangible assets
10.7

 
—

 
10.7

 
—

 
—

 
—

Total intangible assets
$
12.6

 
$
(0.4
)
 
$
12.2

 
$
0.6

 
$
(0.4
)
 
$
0.2

(a)
Average useful life of customer relationships and other definite-lived intangible assets is estimated at 10 years .
The table above includes preliminary estimates of the fair value and useful lives of certain definite and indefinite-lived intangible assets related to the acquisitions made during 2016 . As further described in Note 2 – Acquisitions, the preliminary measurements of fair value included in the table above are subject to change during the measurement period as valuations are finalized.
Amortization expense for the three and six months ended June 30, 2016 and 2015 was immaterial. The Company currently estimates that aggregate amortization expense will not exceed $0.2 million in any future year.

12
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

NOTE 5 – DEBT
The following table summarizes the components of Long-term borrowings and capital lease obligations :
(in millions)
June 30,
2016
 
December 31, 2015
2016 Credit Agreement:
 
 
 
Revolving credit facility
$
65.8

 
$
—

2013 Credit Agreement:
 
 
 
Term loan
—

 
43.4

Capital lease obligations
1.1

 
0.7

Total long-term borrowings and capital lease obligations, including current portion
66.9

 
44.1

Less: Current capital lease obligations
0.6

 
0.4

Total long-term borrowings and capital lease obligations, net
$
66.3

 
$
43.7

As more fully described within Note 14 – Fair Value Measurements, the Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value of long-term debt is based on interest rates that we believe are currently available to us for issuance of debt with similar terms and remaining maturities (Level 2 input).
The following table summarizes the carrying amounts and estimated fair values of the Company’s financial instruments:
 
June 30, 2016
 
December 31, 2015
  (in millions)
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
Long-term borrowings  (a)
$
66.9

 
$
66.9

 
$
44.1

 
$
44.1

(a)
Long-term borrowings includes current portions of long-term debt and current portions of capital lease obligations of $0.6 million and $0.4 million as of June 30, 2016 and December 31, 2015 , respectively.
On January 27, 2016 , the Company entered into an Amended and Restated Credit Agreement (the “2016 Credit Agreement”), by and among the Company and certain of its foreign subsidiaries (collectively, the “Borrowers”), Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, JPMorgan Chase Bank, N.A. as syndication agent, KeyBank National Association, as documentation agent, Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint bookrunners, and the other lenders and parties signatory thereto.
The 2016 Credit Agreement is a $325.0 million revolving credit facility, maturing on January 27, 2021 , that provides for borrowings in the form of loans or letters of credit up to the aggregate availability under the facility, with a sub-limit of $50.0 million for letters of credit. The 2016 Credit Agreement allows for the Borrowers to borrow in denominations of U.S. Dollars, Canadian Dollars (up to a maximum of C $85.0 million ) or euros (up to a maximum of € 20.0 million ). In addition, the Company may cause the commitments to increase by up to an additional $75.0 million , subject to the approval of the applicable lenders providing such additional financing. Borrowings under the 2016 Credit Agreement may be used for working capital and general corporate purposes, including permitted acquisitions.
The Company’s domestic subsidiaries provide guarantees for all obligations of the Borrowers under the 2016 Credit Agreement, which is secured by a first priority security interest in all now or hereafter acquired domestic property and assets and the stock or other equity interests in each of the domestic subsidiaries and 65% of the outstanding voting capital stock of certain first-tier foreign subsidiaries, subject to certain exclusions.
Borrowings under the 2016 Credit Agreement bear interest, at the Company’s option, at a base rate or a LIBOR rate, plus, in each case, an applicable margin. The applicable margin ranges from 0.00% to 1.25% for base rate borrowings and 1.00% to 2.25% for LIBOR borrowings. The Company must also pay a commitment fee to the lenders ranging between 0.15% to 0.30%  per annum on the unused portion of the $325.0 million revolving credit facility along with other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to the applicable LIBOR margin plus other customary fees.
The Company is subject to certain leverage ratio and interest coverage ratio financial covenants under the 2016 Credit Agreement that are to be measured at each fiscal quarter-end. The Company was in compliance with all such covenants as of June 30, 2016 . The 2016 Credit Agreement also includes a “covenant holiday” period, which allows for the temporary increase of the minimum leverage ratio following the completion of a permitted acquisition, or a series of permitted acquisitions, when the total consideration exceeds a specified threshold. In addition, the 2016 Credit Agreement includes customary negative

13
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

covenants, subject to certain exceptions, restricting or limiting the Company’s and its subsidiaries’ ability to, among other things: (i) make non-ordinary course dispositions of assets, (ii) make certain fundamental business changes, such as merge, consolidate or enter into any similar combination, (iii) make restricted payments, including dividends and stock repurchases, (iv) incur indebtedness, (v) make certain loans and investments, (vi) create liens, (vii) transact with affiliates, (viii) enter into sale/leaseback transactions, (ix) make negative pledges and (x) modify subordinated debt documents.
Under the 2016 Credit Agreement, restricted payments, including dividends and stock repurchases, shall be permitted if (i) the Company’s leverage ratio is less than or equal to 2.50 , (ii) the Company is in compliance with all other financial covenants and (iii) there are no existing defaults under the 2016 Credit Agreement. If its leverage ratio is more than 2.50 , the Company is still permitted to fund (i) up to $30.0 million of dividend payments, (ii) stock repurchases sufficient to offset dilution created by the issuance of equity as compensation to its officer, directors, employees and consultants and (iii) an incremental $30.0 million of other cash payments.
The 2016 Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2016 Credit Agreement and the commitments from the lenders may be terminated.
The 2016 Credit Agreement amends and restates the Company’s March 13, 2013 Credit Agreement (the “2013 Credit Agreement”), which provided the Company with a $225.0 million senior secured credit facility comprised of a five -year fully funded term loan of $75.0 million and a five -year $150.0 million revolving credit facility.
Under the terms of the 2013 Credit Agreement, the Company was required to make quarterly installment payments against the $75.0 million term loan, with any remaining balance due on the maturity date of March 13, 2018. As a result of executing the 2016 Credit Agreement subsequent to December 31, 2015 , but prior to the issuance of the financial statements for the year then ended, the $6.9 million current portion of term loan debt outstanding as of December 31, 2015 was reflected as a component of long-term borrowings and capital lease obligations on the Condensed Consolidated Balance Sheets. Under the 2013 Credit Agreement, the Company was allowed to prepay the term loan in whole or in part prior to maturity without premium or penalty. In the first quarter of 2016, the Company repaid the remaining $43.4 million of principal outstanding under the 2013 Credit Agreement.
In the first quarter of 2016, approximately $0.3 million of unamortized deferred financing fees associated with the 2013 Credit Agreement were written off in connection with executing the 2016 Credit Agreement. The Company incurred $1.1 million of debt issuance costs in connection with the execution of the 2016 Credit Agreement. Such fees have been deferred and are being amortized over the five -year term.
As of June 30, 2016 , there was $65.8 million of cash drawn and $19.5 million of undrawn letters of credit under the 2016 Credit Agreement, with $239.7 million of net availability for borrowings. As of December 31, 2015 , there was no cash drawn and $19.2 million of undrawn letters of credit under the $150.0 million revolving credit facility portion of the 2013 Credit Agreement, with $130.8 million of net availability for borrowings.
As of June 30, 2016 and December 31, 2015 , there were no borrowings against the Company’s non-U.S. lines of credit which provide for borrowings of up to $1.3 million .
For the six months ended June 30, 2016 , gross borrowings and gross payments under the 2016 Credit Agreement were $69.8 million and $5.0 million , respectively. For the six months ended June 30, 2015 , there were no gross borrowings or gross payments under the Company’s domestic revolving credit facility portion of the 2013 Credit Agreement.
NOTE 6 – INCOME TAXES
The Company recognized income tax expense of $4.8 million and $10.4 million for the three months ended June 30, 2016 and 2015 , respectively. The decrease in tax expense in the current-year quarter is largely due to lower pre-tax income levels. The effective tax rate for the three months ended June 30, 2016 was 33.8% , compared to 36.4% in the prior-year quarter.
For the  six months ended June 30, 2016  and  2015 , the Company recognized income tax expense of  $10.5 million  and  $18.7 million , respectively. The decrease in tax expense in the first half of 2016 is largely due to lower pre-tax income levels. The effective tax rate was  34.7%  and  36.5%  for the  six months ended June 30, 2016  and 2015 , respectively.

14
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

NOTE 7 – PENSIONS
The following table summarizes the components of net postretirement pension expense:  
 
U.S. Benefit Plan
 
Non-U.S. Benefit Plan
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
—

 
$
—

 
—

 
—

 
$
0.1

 
$
0.1

 
$
0.1

 
$
0.1

Interest cost
1.9

 
1.9

 
3.9

 
3.8

 
0.5

 
0.5

 
1.0

 
1.0

Amortization of actuarial loss
1.4

 
1.8

 
2.8

 
3.4

 
0.1

 
0.2

 
0.3

 
0.4

Expected return on plan assets
(2.6
)
 
(2.6
)
 
(5.2
)
 
(5.1
)
 
(0.7
)
 
(0.7
)
 
(1.3
)
 
(1.4
)
Net postretirement pension expense
$
0.7

 
$
1.1

 
1.5

 
2.1

 
$
—

 
$
0.1

 
$
0.1

 
$
0.1

During the six months ended June 30, 2016 and 2015 , the Company contributed $3.1 million and $3.3 million to its U.S. defined benefit plan, respectively, and $0.7 million and $1.1 million to its non-U.S. defined benefit plan, respectively.
For the year ended December 31, 2016 , the Company expects to contribute up to $7.2 million to the U.S. benefit plan and up to $1.4 million to the non-U.S. benefit plan.
During the six months ended June 30, 2015 , the Company repurchased all of the remaining shares of its common stock from its U.S benefit plan for a total cost of $3.6 million . The repurchases were made under the stock repurchase program discussed further in Note 11 – Stockholders’ Equity.
In connection with the completion of the sale of Bronto, the Company recognized $0.4 million of actuarial losses in the first quarter of 2016, which were previously included in Accumulated other comprehensive loss, as a component of the calculation of the gain on disposal recorded in the six months ended June 30, 2016 .
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Financial Commitments
The Company provides indemnifications and other guarantees in the ordinary course of business, the terms of which range in duration and often are not explicitly defined. Specifically, the Company is occasionally required to provide letters of credit and bid and performance bonds to various customers, principally to act as security for retention levels related to casualty insurance policies and to guarantee the performance of subsidiaries that engage in export and domestic transactions. At June 30, 2016 , the Company had outstanding performance and financial standby letters of credit, as well as outstanding bid and performance bonds, aggregating $23.6 million . If any such letters of credit or bonds are called, the Company would be obligated to reimburse the issuer of the letter of credit or bond. The Company believes the likelihood of any currently outstanding letter of credit or bond being called is remote.
For certain independent Environmental Solutions Group dealers that purchase products financed by a third-party lender (the “Lender”), the Company historically provided a limited repurchase agreement to the Lender. In the event of a default by the applicable dealer and ultimate repossession of the underlying products by the Lender, the Company was obligated to repurchase those products from the Lender. The arrangement was subject to a maximum repurchase amount and the Company’s repurchase obligation was generally limited to products purchased by the dealer, and financed by the Lender, for a period of one year. The Company’s risk under the repurchase arrangement was partially mitigated by the value of the products repurchased under the agreement. In the first quarter of 2016 , the Company and the Lender executed an amendment to the agreement that removed the Company’s repurchase obligation effective January 1, 2016 . As of June 30, 2016 , the remaining potential cash payments the Company could be required to make under the agreement were $2.7 million , and any remaining repurchase obligation would be fully expired by December 31, 2016 .
The Company has recorded the fair value of its estimated net liability associated with losses from these guarantee and repurchase obligations on its Consolidated Balance Sheets based on historical experience and current facts and circumstances. Historical cash requirements and losses associated with these obligations have not been significant, but could increase if dealer defaults exceed current expectations. The Company’s repurchase accrual represents the expected losses resulting from obligations to repurchase products, after giving effect to proceeds anticipated to be received from the resale of

15
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

those products to alternative customers. At June 30, 2016 and December 31, 2015 , the Company’s accrual for potential losses related to repurchase exposure was insignificant.
In addition, prior to the June 3, 2016 acquisition date, JJE entered into certain transactions involving the sale of equipment to certain of its customers which included (i) guarantees to repurchase the equipment for a fixed price at a future date and (ii) guarantees to repurchase the equipment from the third-party lender in the event of default by the customer. As of June 30, 2016 , the single year and maximum potential cash payments the Company could be required to make to repurchase equipment under these agreements were $2.3 million and $4.4 million , respectively. The Company’s risk under these repurchase arrangements would be partially mitigated by the value of the products repurchased as part of the transaction. In addition, the former owners of JJE have agreed to reimburse the Company for certain losses incurred resulting from the requirement to repurchase any such equipment. Any such reimbursement would be withheld from the C $8.0 million deferred payment to be made on the third anniversary of the acquisition date. In the preliminary purchase price allocation, described further in Note 2 – Acquisitions, the Company has included an immaterial accrual for potential losses related to the repurchase exposures associated with JJE’s historical practices. The Company’s repurchase accrual represents the expected losses that could result from obligations to repurchase products, after giving effect to proceeds anticipated to be received from the resale of those products to alternative customers, as well as to the reimbursement of any losses incurred. The Company has recorded its estimated net liability associated with losses from these guarantee and repurchase obligations on its Consolidated Balance Sheet based on historical experience and current facts and circumstances. Historical cash requirements and losses associated with these obligations have not been significant, but could increase if customer defaults exceed current expectations.
Product Warranties
The Company issues product performance warranties to customers with the sale of its products. The specific terms and conditions of these warranties vary depending upon the product sold and country in which the Company does business, with warranty periods generally ranging from one to five years. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time the sale of the related product is recognized. Factors that affect the Company’s warranty liability include (i) the number of units under warranty, (ii) historical and anticipated rates of warranty claims and (iii) costs per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
The following table summarizes the changes in the Company’s warranty liabilities:
(in millions)
2016
 
2015
Balance at January 1
$
7.4

 
$
7.7

Provisions to expense
2.8

 
3.3

Payments
(3.0
)
 
(3.2
)
Balance at June 30
$
7.2

 
$
7.8

Environmental Liabilities
Reserves of $0.6 million and $0.9 million related to the environmental remediation of the Pearland, Texas facility are included in liabilities of discontinued operations on the Condensed Consolidated Balance Sheets at June 30, 2016 and December 31, 2015 , respectively. The facility was previously used by the Company’s discontinued Pauluhn business and manufactured marine, offshore and industrial lighting products. The Company sold the facility in May 2012 and while the Company has not finalized its plans, it is probable that the site will require remediation. The recorded reserves are based on an undiscounted estimate of the range of costs to remediate the site, depending upon the remediation approach and other factors. The Company’s estimate may change in the near-term as more information becomes available; however, the costs are not expected to have a material adverse effect on the Company’s results of operations, financial position or cash flow.
Legal Proceedings
The Company is subject to various claims, including pending and possible legal actions for product liability and other damages, and other matters arising in the ordinary course of the Company’s business. On a quarterly basis, the Company reviews uninsured material legal claims against the Company and accrues for the costs of such claims as appropriate in the exercise of management’s best judgment and experience. However, due to a lack of factual information available to the Company about a claim, or the procedural stage of a claim, it may not be possible for the Company to reasonably assess either the probability of a favorable or unfavorable outcome of the claim or to reasonably estimate the amount of loss should there be an unfavorable outcome. Therefore, for many claims, the Company cannot reasonably estimate a range of loss.

16
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

The Company believes, based on current knowledge and after consultation with counsel, that the outcome of such claims and actions will not have a material adverse effect on the Company’s results of operations or financial condition. However, in the event of unexpected future developments, it is possible that the ultimate resolution of such matters, if unfavorable, could have a material adverse effect on the Company’s results of operations, financial condition or cash flow.
Hearing Loss Litigation
The Company has been sued for monetary damages by firefighters who claim that exposure to the Company’s sirens has impaired their hearing and that the sirens are therefore defective. There were 33 cases filed during the period of 1999 through 2004, involving a total of 2,443 plaintiffs, in the Circuit Court of Cook County, Illinois. These cases involved more than 1,800 firefighter plaintiffs from locations outside of Chicago. In 2009, six additional cases were filed in Cook County, involving 299 Pennsylvania firefighter plaintiffs. During 2013, another case was filed in Cook County involving 74 Pennsylvania firefighter plaintiffs.
The trial of the first 27 of these plaintiffs’ claims occurred in 2008, whereby a Cook County jury returned a unanimous verdict in favor of the Company.
An additional 40 Chicago firefighter plaintiffs were selected for trial in 2009. Plaintiffs’ counsel later moved to reduce the number of plaintiffs from 40 to nine . The trial for these nine plaintiffs concluded with a verdict against the Company and for the plaintiffs in varying amounts totaling $0.4 million . The Company appealed this verdict. On September 13, 2012, the Illinois Appellate Court rejected this appeal. The Company thereafter filed a petition for rehearing with the Illinois Appellate Court, which was denied on February 7, 2013. The Company sought further review by filing a petition for leave to appeal with the Illinois Supreme Court on March 14, 2013. On May 29, 2013, the Illinois Supreme Court issued a summary order declining to accept review of this case. On July 1, 2013, the Company satisfied the judgments entered for these plaintiffs, which has resulted in final dismissal of these cases.
A third consolidated trial involving eight Chicago firefighter plaintiffs occurred during November 2011. The jury returned a unanimous verdict in favor of the Company at the conclusion of this trial.
Following this trial, on March 12, 2012 the trial court entered an order certifying a class of the remaining Chicago Fire Department firefighter plaintiffs for trial on the sole issue of whether the Company’s sirens were defective and unreasonably dangerous. The Company petitioned the Illinois Appellate Court for interlocutory appeal of this ruling. On May 17, 2012, the Illinois Appellate Court accepted the Company’s petition. On June 8, 2012, plaintiffs moved to dismiss the appeal, agreeing with the Company that the trial court had erred in certifying a class action trial in this matter. Pursuant to plaintiffs’ motion, the Illinois Appellate Court reversed the trial court’s certification order.
Thereafter, the trial court scheduled a fourth consolidated trial involving three firefighter plaintiffs, which began in December 2012. Prior to the start of this trial, the claims of two of the three firefighter plaintiffs were dismissed. On December 17, 2012, the jury entered a complete defense verdict for the Company.
Following this defense verdict, plaintiffs again moved to certify a class of Chicago Fire Department plaintiffs for trial on the sole issue of whether the Company’s sirens were defective and unreasonably dangerous. Over the Company’s objection, the trial court granted plaintiffs’ motion for class certification on March 11, 2013 and scheduled a class action trial to begin on June 10, 2013. The Company filed a petition for review with the Illinois Appellate Court on March 29, 2013 seeking reversal of the class certification order.
On June 25, 2014, a unanimous three-judge panel of the First District Illinois Appellate Court issued its opinion reversing the class certification order of the trial court. Specifically, the Appellate Court determined that the trial court’s ruling failed to satisfy the class-action requirements that the common issues of the firefighters’ claims predominate over the individual issues and that there is an adequate representative for the class. During a status hearing on October 8, 2014, plaintiffs represented to the Court that they would again seek to certify a class of firefighters on the issue of whether the Company’s sirens were defective and unreasonably dangerous. On January 12, 2015, plaintiffs filed motions to amend their complaints to add class action allegations with respect to Chicago firefighter plaintiffs as well as the approximately 1,800 firefighter plaintiffs from locations outside of Chicago. On March 11, 2015, the trial court granted plaintiff’s motions to amend their complaints. Plaintiffs have indicated that they will now file motions to certify classes in these cases. On April 24, 2015, the cases were transferred to Cook County chancery court, which will decide all class certification issues. The Company intends to continue its objections to any attempt at certification. The Company also has filed motions to dismiss cases involving firefighters located outside of Cook County based on improper venue. Plaintiffs have requested discovery from the Company related to these venue motions. The Court has scheduled a further status hearing regarding venue matters for August 10, 2016.

17
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

The Company has also been sued on this issue outside of the Cook County, Illinois venue. Many of these cases have involved lawsuits filed by a single attorney in the Court of Common Pleas, Philadelphia County, Pennsylvania. During 2007 and through 2009, this attorney filed a total of 71 lawsuits involving 71 plaintiffs in this jurisdiction. Three of these cases were dismissed pursuant to pretrial motions filed by the Company. Another case was voluntarily dismissed. Prior to trial in four cases, the Company paid nominal sums to obtain dismissals.
Three trials occurred in Philadelphia involving these cases filed in 2007 through 2009. The first trial involving one of these plaintiffs occurred in 2010, when the jury returned a verdict for the plaintiff. In particular, the jury found that the Company’s siren was not defectively designed, but that the Company negligently constructed the siren. The jury awarded damages in the amount of $0.1 million , which was subsequently reduced to $0.08 million . The Company appealed this verdict. Another trial, involving nine Philadelphia firefighter plaintiffs, also occurred in 2010 when the jury returned a defense verdict for the Company as to all claims and all plaintiffs involved in that trial. The third trial, also involving nine Philadelphia firefighter plaintiffs, was completed during 2010 when the jury returned a defense verdict for the Company as to all claims and all plaintiffs involved in that trial.
Following defense verdicts in the last two Philadelphia trials, the Company negotiated settlements with respect to all remaining filed cases in Philadelphia at that time, as well as other firefighter claimants represented by the attorney who filed the Philadelphia cases. On January 4, 2011, the Company entered into a Global Settlement Agreement (the “Settlement Agreement”) with the law firm of the attorney representing the Philadelphia claimants, on behalf of 1,125 claimants the firm represented (the “Claimants”) and who had asserted product claims against the Company (the “Claims”). Three hundred eight of the Claimants had lawsuits pending against the Company in Cook County, Illinois.
The Settlement Agreement, as amended, provided that the Company pay a total amount of $3.8 million (the “Settlement Payment”) to settle the Claims (including the costs, fees and other expenses of the law firm in connection with its representation of the Claimants), subject to certain terms, conditions and procedures set forth in the Settlement Agreement. In order for the Company to be required to make the Settlement Payment: (i) each Claimant who agreed to settle his or her claims had to sign a release acceptable to the Company (a “Release”), (ii) each Claimant who agreed to the settlement and who was a plaintiff in a lawsuit, had to dismiss his or her lawsuit with prejudice, (iii) by April 29, 2011, at least 93% of the Claimants identified in the Settlement Agreement must have agreed to settle their claims and provide a signed Release to the Company and (iv) the law firm had to withdraw from representing any Claimants who did not agree to the settlement, including those who filed lawsuits. If the conditions to the settlement were met, but less than 100% of the Claimants agreed to settle their Claims and sign a Release, the Settlement Payment would be reduced by the percentage of Claimants who did not agree to the settlement.
On April 22, 2011, the Company confirmed that the terms and conditions of the Settlement Agreement had been met and made a payment of $3.6 million to conclude the settlement. The amount was based upon the Company’s receipt of 1,069 signed releases provided by Claimants, which was 95.02% of all Claimants identified in the Settlement Agreement.
The Company generally denies the allegations made in the claims and lawsuits by the Claimants and denies that its products caused any injuries to the Claimants. Nonetheless, the Company entered into the Settlement Agreement for the purpose of minimizing its expenses, including legal fees, and avoiding the inconvenience, uncertainty and distraction of the claims and lawsuits.
During April through October 2012, 20 new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. These cases were filed on behalf of 20 Philadelphia firefighters and involve various defendants in addition to the Company. Five of these cases were subsequently dismissed. The first trial involving these 2012 Philadelphia cases occurred during December 2014 and involved three firefighter plaintiffs. The jury returned a verdict in favor of the Company. Following this trial, all of the parties agreed to settle cases involving seven firefighter plaintiffs set for trial during January 2015 for nominal amounts per plaintiff. In January 2015, plaintiffs’ attorneys filed two new complaints in the Court of Common Pleas, Philadelphia, Pennsylvania on behalf of approximately 70 additional firefighter plaintiffs. The vast majority of the firefighters identified in these complaints are located outside of Pennsylvania. One of the complaints in these cases, which involves 11 firefighter plaintiffs from the District of Columbia, was removed to federal court in the Eastern District of Pennsylvania. Plaintiffs voluntarily dismissed all claims in this case on May 31, 2016. With respect to claims of other out-of-state firefighters involved in these two cases, the Company moved to dismiss these claims as improperly filed in Pennsylvania. The Court granted this motion and dismissed these claims on November 5, 2015. During August through December 2015, another nine new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania. These cases involve a total of 193 firefighters, most of whom are located outside of Pennsylvania. The Company again moved to dismiss all claims filed by out-of-state firefighters in these cases as improperly filed in Pennsylvania. On May 24, 2016, the Court granted this motion and dismissed these claims. Plaintiffs have filed a notice of appeal regarding this decision. On May 13, 2016, four new cases were

18
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

filed in Philadelphia state court, involving a total of 55 Philadelphia firefighters who live in Pennsylvania. The next trial in Philadelphia is scheduled to begin on September 12, 2016 and will involve four Philadelphia firefighters who filed lawsuits in 2012.
During April through July 2013, additional cases were filed in Allegheny County, Pennsylvania. These cases involve 247 plaintiff firefighters from Pittsburgh and various defendants, including the Company. After the Company filed pretrial motions, the Court dismissed claims of 55 Pittsburgh firefighter plaintiffs. The first trials of these Pittsburgh firefighters were scheduled to occur in May, September and November 2016. Each trial will involve eight firefighters. On April 14, 2016, the Court granted the Company’s motion for summary judgment regarding strict liability claims asserted by all plaintiff firefighters involved in the initial trial scheduled for May 2016. The Company also has moved to dismiss remaining negligence claims asserted by these firefighters. It is anticipated that the Court will rule on this motion sometime during July 2016 and the next trial involving any Pittsburgh firefighters will occur during November 2016. During March 2014, an action also was brought in the Court of Common Pleas of Erie County, Pennsylvania on behalf of 61 firefighters. This case likewise involves various defendants in addition to the Company. After the Company filed pretrial motions, 33 Erie County firefighter plaintiffs voluntarily dismissed their claims.
On September 17, 2014, 20 lawsuits, involving a total of 193 Buffalo Fire Department firefighters, were filed in the Supreme Court of the State of New York, Erie County. Several product manufacturers, including the Company, have been named as defendants in these cases. All of the cases filed in Erie County, New York have been removed to federal court in the Western District of New York. During February 2015, a lawsuit involving one New York City firefighter plaintiff was filed in the Supreme Court of the State of New York, New York County. The plaintiff named the Company as well as several other parties as defendants. That case has been transferred to federal court in the Northern District of New York. Plaintiffs agreed to voluntarily dismiss this case during May 2016. The Company also is aware that a lawsuit involving eight New York City firefighters was filed in New York County, New York, on April 24, 2015. The Company has not yet been served in that case. During November 2015 through January 2016, 28 new cases involving a total of 227 firefighters were filed in various counties in the New York City area. A total of 428 firefighters are currently involved in cases filed in the state of New York.
During November 2015, the Company was served with a complaint filed in Union County, New Jersey state court, involving 34 New Jersey firefighters. This case has been transferred to federal court in the District of New Jersey. During January through May 2016, eight additional cases were filed in various New Jersey state courts. Most of the firefighters in these cases reside in New Jersey and work or worked at New Jersey fire departments. A total of 104 firefighters are currently involved in cases filed in New Jersey.
From 2007 through 2009, firefighters also brought hearing loss claims against the Company in New Jersey, Missouri, Maryland and Kings County, New York. All of those cases, however, were dismissed prior to trial, including four cases in the Supreme Court of Kings County, New York that were dismissed upon the Company’s motion in 2008. On appeal, the New York appellate court affirmed the trial court’s dismissal of these cases. Plaintiffs’ attorneys have threatened to file additional lawsuits. The Company intends to vigorously defend all of these lawsuits, if filed.
The Company’s ongoing negotiations with its insurer, CNA, over insurance coverage on these claims have resulted in reimbursements of a portion of the Company’s defense costs. These reimbursements are recorded as a reduction of corporate operating expenses. For the six months ended June 30, 2016 and 2015 , the Company recorded $ 0.1 million and $0.1 million of reimbursements from CNA related to legal costs, respectively.
Latvian Commercial Dispute
On June 12, 2014, a Latvian trial court issued a summary ruling against the Company’s former Bronto subsidiary in a lawsuit relating to a commercial dispute. The dispute involves a transaction for the 2008 sale of three Bronto units that were purchased by a financing company for lease to a Latvian fire department. The lessor and the Latvian fire department sought to rescind the contract after delivery, despite the fact that an independent third party, selected by the lessor, had certified that the vehicles satisfied the terms of the contract. The adverse judgment requires Bronto to refund the purchase price and pay interest and attorneys’ fees. The trial court denied the lessor’s claim against Bronto for alleged damages relating to lost lease income.
Believing that the claims against Bronto were invalid and that Bronto fully satisfied the terms of the subject contract, on July 10, 2014, the Company filed an appeal with the Civil Chamber of the Supreme Court of Latvia seeking a reversal of the trial court’s ruling. In April 2016, the Supreme Court heard the Company’s appeal and upheld the trial court’s ruling against Bronto. The Company is currently evaluating its further options for appeal.

19
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

In connection with the sale of Bronto to Morita Holdings Corporation (“Morita”), discussed further in Note 15 – Discontinued Operations, the Company and Morita agreed that the Company will remain in control of negotiations and proceedings relating to the appeal and fund the legal costs associated therewith. The Company also agreed to compensate Morita for 50% of any liability resulting from a final and non-appealable decision of a court of competent jurisdiction, net of any actual income tax benefit to Bronto as a result of the judgment, and less 50% of legal fees incurred by the Company between the January 29, 2016 date of sale and the date of receiving such non-appealable decision.
At December 31, 2015 , the Company had not accrued any liability within its consolidated financial statements for this lawsuit. In evaluating whether a charge to record a reserve was previously necessary, the Company analyzed all of the available information, including the legal reasoning applied by the judge of the trial court in reaching its decision. Based on the Company’s analysis, and consultations with external counsel, the Company assessed the likelihood of a successful appeal to be more likely than not and therefore did not believe that a probable loss had been incurred. However, as the Company’s appeal of the initial judgment was unsuccessful, a charge of $1.5 million was recorded as a component of (Loss) gain from discontinued operations and disposal, net of tax in the six months ended June 30, 2016 , to reflect the Company’s share of the liability.
NOTE 9 – EARNINGS PER SHARE
The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share , which requires that non-vested restricted stock containing non-forfeitable dividend rights should be treated as participating securities pursuant to the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. The amounts of distributed and undistributed earnings allocated to participating securities for the three and six months ended June 30, 2016 and 2015 were insignificant and did not materially impact the calculation of basic or diluted EPS.
Basic EPS is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock and non-vested restricted stock awards outstanding for the period.
Diluted EPS is computed using the weighted average number of shares of common stock and non-vested restricted stock awards outstanding for the year plus the effect of dilutive potential common shares outstanding during the period. The dilutive effect of common stock equivalents is determined using the more dilutive of the two-class method or alternative methods. The Company uses the treasury stock method to determine the potentially dilutive impact of our employee stock options and restricted stock units, and the contingently issuable method for our performance-based restricted stock unit awards.
For the three and six months ended June 30, 2016 and 2015 , options to purchase 1.3 million and 0.8 million shares of the Company’s common stock, respectively, had an anti-dilutive effect on EPS, and accordingly, are excluded from the calculation of diluted EPS.

20
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

The following table reconciles Net income to basic and diluted EPS:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions, except per share data)
2016
 
2015
 
2016
 
2015
Income from continuing operations
$
9.4

 
$
18.2

 
$
19.8

 
$
32.6

(Loss) gain from discontinued operations and disposal, net of tax
(0.3
)
 
0.1

 
2.9

 
0.6

Net income
$
9.1

 
$
18.3

 
$
22.7

 
$
33.2

Weighted average shares outstanding – Basic
60.1

 
62.6

 
61.1

 
62.5

Dilutive effect of common stock equivalents
0.8

 
1.0

 
0.8

 
1.0

Weighted average shares outstanding – Diluted
60.9

 
63.6

 
$
61.9

 
$
63.5

Basic earnings per share:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.16

 
$
0.29

 
$
0.32

 
$
0.52

(Loss) gain from discontinued operations and disposal, net of tax
(0.01
)
 
—

 
0.05

 
0.01

Net earnings per share
$
0.15

 
$
0.29

 
$
0.37

 
$
0.53

Diluted earnings per share:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.15

 
$
0.29

 
$
0.32

 
$
0.51

(Loss) gain from discontinued operations and disposal, net of tax
—

 
—

 
0.05

 
0.01

Net earnings per share
$
0.15

 
$
0.29

 
$
0.37

 
$
0.52

NOTE 10 – STOCK-BASED COMPENSATION
On December 31, 2015 and 2014 , performance share units (“PSUs”) granted in 2013 and 2012, respectively, became fully vested. The EPS threshold associated with each of these awards was achieved at the maximum level, and 200% of the target shares were earned. In addition, during the three months ended June 30, 2016 and 2015 , various restricted stock awards granted in 2013 and 2012, respectively, became fully vested. These vested PSUs and restricted stock awards were net share settled. In connection with the issuance of the shares underlying these PSUs during the six months ended June 30, 2016 and 2015 , and with the vesting of restricted stock, the Company transferred 0.2 million and 0.2 million shares, respectively, into Treasury stock, based upon the Company’s closing stock price on the vesting date, to satisfy the employees’ minimum statutory withholding obligation for applicable income and other employment taxes. The Company then remitted the equivalent cash value to the appropriate taxing authorities.
Total payments for the employees’ tax obligations to the relevant taxing authorities were $2.6 million and $2.9 million for the six months ended June 30, 2016 and 2015 , respectively, and are reflected as a financing activity within the Condensed Consolidated Statements of Cash Flows.
NOTE 11 – STOCKHOLDERS’ EQUITY
Dividends
On February 9, 2016 , the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.07 per common share. The dividend totaled $4.3 million and was distributed on March 17, 2016 to holders of record at the close of business on March 1, 2016 .
On April 26, 2016 , the Board declared a quarterly cash dividend of $0.07 per common share. The dividend totaled $4.3 million and was distributed on June 7, 2016 to holders of record at the close of business on May 17, 2016 . During the three and six months ended June 30, 2015 , dividends of $3.7 million and $7.5 million , respectively, were paid to stockholders.
On July 26, 2016 , the Board declared a quarterly cash dividend of $0.07 per common share payable on August 26, 2016 to holders of record at the close of business on August 16, 2016 .
Stock Repurchase Program
In April 2014, the Board authorized a stock repurchase program (the “April 2014 program”) of up to $15.0 million of the Company’s common stock. The April 2014 program was intended primarily to facilitate a reduction in the investment in

21
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

Company stock within the Company’s U.S. defined benefit pension plan portfolio and to reduce dilution resulting from issuances of stock under the Company’s employee equity incentive programs.
In November 2014, the Board authorized an additional stock repurchase program (the “November 2014 program”) of up to $75.0 million of the Company’s common stock. The November 2014 program is intended primarily to facilitate opportunistic purchases of Company stock as a means to provide cash returns to stockholders, enhance stockholder returns and manage the Company’s capital structure.
During the three and six months ended June 30, 2015 , the Company repurchased 96,725 and 330,362 shares for a total of $1.4 million and $5.0 million , respectively, under the authorized stock repurchase programs. As cumulative stock repurchases under the April 2014 program, including those made in the three months ended June 30, 2015 , totaled $15.0 million as of June 30, 2015 , the April 2014 program was considered to be completed as of June 30, 2015 .
During the three and six months ended June 30, 2016 , the Company repurchased 1,288,751 and 2,580,725 shares for a total of $16.8 million and $33.1 million , respectively, under the November 2014 program.
Under its stock repurchase programs, the Company is authorized to repurchase, from time to time, shares of its outstanding common stock in the open market or through privately negotiated transactions. Stock repurchases by the Company are subject to market conditions and other factors and may be commenced, suspended or discontinued at any time.
Accumulated Other Comprehensive Loss
The following tables summarize the changes in each component of Accumulated other comprehensive loss , net of tax:
(in millions) (a)
Actuarial Losses  (b)
 
Foreign
Currency Translation  (c)
 
Unrealized
Gain on
Derivatives
 
Total
Balance at April 1, 2016
$
(73.8
)
 
$
(4.2
)
 
$
—

 
$
(78.0
)
Other comprehensive income (loss) before reclassifications
1.0

 
(2.8
)
 
—

 
(1.8
)
Amounts reclassified from accumulated other comprehensive loss
1.0

 
(0.3
)
 
—

 
0.7

Net current-period other comprehensive income (loss)
2.0

 
(3.1
)
 
—

 
(1.1
)
Balance at June 30, 2016
$
(71.8
)
 
$
(7.3
)
 
$
—

 
$
(79.1
)
(in millions) (a)
Actuarial Losses
 
Foreign
Currency Translation
 
Unrealized
Gain on
Derivatives
 
Total
Balance at April 1, 2015
$
(77.9
)
 
$
(11.7
)
 
$
0.1

 
$
(89.5
)
Other comprehensive income (loss) before reclassifications
(1.0
)
 
4.6

 
—

 
3.6

Amounts reclassified from accumulated other comprehensive loss
1.3

 
—

 
—

 
1.3

Net current-period other comprehensive income
0.3

 
4.6

 
—

 
4.9

Balance at June 30, 2015
$
(77.6
)
 
$
(7.1
)
 
$
0.1

 
$
(84.6
)
(in millions) (a)
Actuarial Losses  (b)
 
Foreign
Currency Translation  (c)
 
Unrealized
Gain on
Derivatives
 
Total
Balance at January 1, 2016
$
(75.6
)
 
$
(13.3
)
 
$
0.1

 
$
(88.8
)
Other comprehensive income (loss) before reclassifications
1.4

 
(1.4
)
 
—

 
—

Amounts reclassified from accumulated other comprehensive loss
2.4

 
7.4

 
(0.1
)
 
9.7

Net current-period other comprehensive income (loss)
3.8

 
6.0

 
(0.1
)
 
9.7

Balance at June 30, 2016
$
(71.8
)
 
$
(7.3
)
 
$
—

 
$
(79.1
)

22
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

(in millions) (a)
Actuarial Losses
 
Foreign
Currency Translation
 
Unrealized
Gain on
Derivatives
 
Total
Balance at January 1, 2015
$
(79.8
)
 
$
0.2

 
$
0.1

 
$
(79.5
)
Other comprehensive loss before reclassifications
(0.2
)
 
(7.3
)
 
—

 
(7.5
)
Amounts reclassified from accumulated other comprehensive loss
2.4

 
—

 
—

 
2.4

Net current-period other comprehensive income (loss)
2.2

 
(7.3
)
 
—

 
(5.1
)
Balance at June 30, 2015
$
(77.6
)
 
$
(7.1
)
 
$
0.1

 
$
(84.6
)
(a)
Amounts in parenthesis indicate debits.
(b)
In connection with the sale of Bronto, the Company recognized an actuarial loss of $0.4 million attributable to Bronto’s defined benefit plan and included it in the calculation of the associated gain on disposal in the six months ended June 30, 2016 .
(c)
The Company recognized a foreign currency gain of $0.3 million and a foreign currency translation loss of $7.4 million in the three and six months ended June 30, 2016 , respectively, in connection with the sale of Bronto. The recognition of the translation gain (loss), which represented the cumulative translation effects attributable to the Fire Rescue Group, was included in Gain (loss) from discontinued operations and disposal for the applicable period.
The following table summarizes the amounts reclassified from  Accumulated other comprehensive loss , net of tax, in the three months ended June 30, 2016 and 2015 and the affected line item in the Condensed Consolidated Statements of Operations:
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in Condensed Consolidated Statements of Operations  (a)
 
2016
 
2015
 
 
 
(in millions)  (b)
 
 
Amortization of actuarial losses of defined benefit pension plans
 
$
(1.5
)
 
$
(2.0
)
 
(c)
Total before tax
 
(1.5
)
 
(2.0
)
 
 
Income tax benefit
 
0.5

 
0.7

 
Income tax expense
Total reclassifications for the period, net of tax
 
$
(1.0
)
 
$
(1.3
)
 
 
(a)
Continuing operations only.
(b)
Amount in parenthesis indicate debits to profit/loss.
(c)
The actuarial loss components of Accumulated other comprehensive loss are included in the computation of net periodic pension cost for the three months ended June 30, 2016 and 2015 , as disclosed in Note 7 – Pensions.
The following table summarizes the amounts reclassified from  Accumulated other comprehensive loss , net of tax, in the six months ended June 30, 2016 and 2015 and the affected line item in the Condensed Consolidated Statements of Operations:
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in Condensed Consolidated Statements of Operations  (a)
 
2016
 
2015
 
 
 
(in millions)  (b)
 
 
Amortization of actuarial losses of defined benefit pension plans
 
$
(3.1
)
 
$
(3.8
)
 
(c)
Recognition of deferred gain on interest rate swap
 
0.1

 
—

 
Other (income) expense, net
Total before tax
 
(3.0
)
 
(3.8
)
 
 
Income tax benefit
 
1.0

 
1.4

 
Income tax expense
Total reclassifications for the period, net of tax
 
$
(2.0
)
 
$
(2.4
)
 
 
(a)
Continuing operations only.
(b)
Amount in parenthesis indicate debits to profit/loss.
(c)
The actuarial loss components of Accumulated other comprehensive loss are included in the computation of net periodic pension cost for the six months ended June 30, 2016 and 2015 , as disclosed in Note 7 – Pensions.
NOTE 12 – SEGMENT INFORMATION
The Company has two operating segments as defined under ASC Topic 280 , Segment Reporting (“ASC 280”) . The Company’s reportable segments are consistent with its operating segments. Business units are organized under each segment because they

23
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

share certain characteristics, such as technology, marketing, distribution and product application, which create long-term synergies. The principal activities of the Company’s operating segments are as follows:
Environmental Solutions  — Our Environmental Solutions Group is a leading manufacturer and supplier of a full range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and high-performance waterblasting equipment. The Group manufactures vehicles and equipment in the U.S. and Canada that are sold under the Elgin®, Vactor®, Guzzler®, Westech TM and Jetstream TM brand names. Products are sold to both municipal and industrial customers either through a dealer network or direct sales to service customers generally depending on the type and geographic location of the customer. The acquisition of JJE extends the Environmental Solutions Group’s existing sales channel and increases the number of service centers through which the Company can expand its parts and service offerings to current and potential customers. The acquisition also broadens the Environmental Solutions Group’s product offerings to include other products, such as refuse and recycling collection vehicles, camera systems, ice-making equipment and snow-removal equipment.
Safety and Security Systems  — Our Safety and Security Systems Group is a leading manufacturer and supplier of comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities and industrial sites use to protect people and property. Offerings include systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, as well as command and municipal networked security. Specific products include vehicle lightbars and sirens, public warning sirens, general alarm systems, public address systems and public safety software. Products are sold under the Federal Signal TM , Federal Signal VAMA TM and Victor TM brand names. The Group operates manufacturing facilities in the U.S., Europe and South Africa.
Corporate contains those items that are not included in our operating segments.
Net sales by operating segment reflect sales of products and services to external customers, as reported in the Company’s Consolidated Statements of Operations. Intersegment sales are insignificant. The Company evaluates performance based on operating income of the respective segment. Operating income includes all revenues, costs and expenses directly related to the segment involved. In determining operating segment income, neither corporate nor interest expenses are included. Operating segment depreciation expense, identifiable assets and capital expenditures relate to those assets that are utilized by the respective operating segment. Corporate assets consist principally of cash and cash equivalents, deferred tax assets and fixed assets. The accounting policies of each operating segment are the same as those described in Note 1 – Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 , in addition to those updates described in Note 1 – Summary of Significant Accounting Policies of this Form 10-Q. The results for the interim periods are not necessarily indicative of results for a full year.
As discussed in Note 2 – Acquisitions, the assets and liabilities of JJE and Westech have been consolidated into the Condensed Consolidated Balance Sheet as of June 30, 2016 , while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations subsequent to their respective closing dates. JJE and Westech are included within the Environmental Solutions Group. The following tables summarize the Company’s continuing operations by segment, including Net sales , Operating income (loss), and Total assets :
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
 
2016
 
2015
Net sales:
 
 
 
 
 
 
 
Environmental Solutions
$
119.4

 
$
146.6

 
$
234.8

 
$
286.8

Safety and Security Systems
52.9

 
58.8

 
110.3

 
115.1

Total net sales
$
172.3

 
$
205.4

 
$
345.1

 
$
401.9

Operating income (loss):
 
 
 
 
 
 
 
Environmental Solutions
$
14.9

 
$
29.2

 
$
31.4

 
$
53.1

Safety and Security Systems
6.6

 
7.3

 
11.5

 
13.9

Corporate and eliminations
(7.2
)
 
(7.3
)
 
(12.5
)
 
(13.3
)
Total operating income
14.3

 
29.2

 
30.4

 
53.7

Interest expense
0.4

 
0.6

 
0.8

 
1.2

Debt settlement charges
—

 
—

 
0.3

 
—

Other (income) expense, net
(0.3
)
 
—

 
(1.0
)
 
1.2

Income from continuing operations before income taxes
$
14.2

 
$
28.6

 
$
30.3

 
$
51.3


24
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

(in millions)
As of 
 June 30, 2016
 
As of December 31, 2015
Total assets:
 
 
 
Environmental Solutions
$
396.1

 
$
250.6

Safety and Security Systems
208.3

 
209.6

Corporate and eliminations
44.5

 
99.2

Total assets of continuing operations
648.9

 
559.4

Total assets of discontinued operations
2.4

 
107.1

Total assets
$
651.3

 
$
666.5

NOTE 13 – RESTRUCTURING
The Company continues to review its businesses for opportunities to reduce operating expenses and focus on executing its strategy based on core competencies and cost efficiencies.
During the six months ended June 30, 2016 , the Company recorded expenses of $1.2 million related to severance costs incurred in connection with a cost reduction plan within the Safety and Security Systems Group. The Company expects to incur up to $2.0 million of additional restructuring charges throughout the remainder of 2016 in completing this plan.
In the three and six months ended June 30, 2015 , the Company recorded expenses of $0.4 million related to severance costs incurred in connection with the completion of a voluntary reduction-in-force within the Safety and Security Systems Group.
The following tables summarize the changes in the Company’s restructuring reserves, which are included within other current liabilities on the Company’s Consolidated Balance Sheets:
 
2016
 
2015
Balance at January 1
$
—

 
$
—

Charge to expense
1.2

 
—

Cash payments
(0.2
)
 
—

Balance at March 31
$
1.0

 
$
—

Charge to expense
—

 
0.4

Cash payments
(0.8
)
 
(0.1
)
Balance at June 30
$
0.2

 
$
0.3

NOTE 14 – FAIR VALUE MEASUREMENTS
The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. The three levels of inputs are classified as follows:
•
Level 1 — quoted prices in active markets for identical assets or liabilities;
•
Level 2 — observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and
•
Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company's assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:

25
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

Cash Equivalents
Cash equivalents primarily consist of time-based deposits with maturities of three months or less and highly liquid AAA-rated money market funds. The Company classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.
Contingent Consideration
The Company has a contingent obligation to transfer cash to the former owners of JJE if specified financial results are met over future reporting periods (i.e., an earn-out). Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred. Any subsequent changes in fair value after the finalization of the purchase price allocation would be recorded as a component of Acquisition and integration related expenses on the Condensed Consolidated Statements of Operations. As indicated in Note 2 – Acquisitions, the JJE purchase price allocation as of June 30, 2016 is not yet finalized and, as such, there were no changes in the fair value of the contingent consideration in the six months ended June 30, 2016 .
The Company uses an income approach to value the contingent consideration obligation based on future financial performance, which is determined based on the present value of expected future cash flows. Due to the lack of relevant observable market data over fair value inputs, the Company has classified the contingent consideration liability within Level 3 of the fair value hierarchy outlined in ASC 820, Fair Value Measurements . Increases in the expected payout under a contingent consideration arrangement contribute to increases in the fair value of the related liability. Conversely, decreases in the expected payout under a contingent consideration arrangement contribute to decreases in the fair value of the related liability. Changes in assumptions could have an impact on the fair value of the contingent consideration, which has a maximum payout of C $10.0 million (approximately $7.7 million ).
The following tables summarize the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2016 :
 
Fair Value Measurement at Reporting Date Using
Description
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
12.3

 
$
—

 
$
—

 
$
12.3

Liabilities:
 
 
 
 
 
 
 
Contingent consideration
$
—

 
$
—

 
$
5.0

 
$
5.0

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements for the  six months ended June 30, 2016 :
(in millions)
Six Months Ended June 30, 2016
Contingent consideration liability at January 1
$
—

Issuance of contingent consideration in connection with acquisitions
4.9

Settlements of contingent consideration liabilities
—

Foreign currency translation
0.1

Total losses (gains) included in earnings (a)
—

Contingent consideration liability at June 30
$
5.0

(a)
Changes in the fair value of contingent consideration liabilities subsequent to the finalization of the purchase price allocation, if any, would be included as a component of Acquisition and integration related expenses within the Condensed Consolidated Statements of Operations.
NOTE 15 – DISCONTINUED OPERATIONS
The Company recorded a net loss from discontinued operations and disposal of $0.3 million in the three months ended June 30, 2016 , primarily related to adjustments of estimated product liability obligations of previously discontinued businesses, resulting from updated actuarial valuations.

In the three months ended June 30, 2015 , the Company recorded a net gain from discontinued operations and disposal of $0.1 million , primarily driven by net income generated by the operations of the Fire Rescue Group.

26
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

The Company recorded a net gain from discontinued operations and disposal of $2.9 million in the six months ended June 30, 2016 , primarily driven by the $4.0 million net gain on disposal of the Fire Rescue Group, which was discontinued in 2015, partially offset by the $0.6 million net loss that the Fire Rescue Group realized in its 2016 operations up to the January 29, 2016 sale completion date. The net gain on disposal includes a $1.5 million charge to recognize a liability in connection with a Latvian commercial dispute.
In the six months ended June 30, 2015 , the Company recorded a net gain from discontinued operations and disposal of $0.6 million , primarily driven by net income generated by the operations of the Fire Rescue Group.
The activity of the Company’s discontinued operations in the three and six months ended June 30, 2016 and 2015 is described further below:
Fire Rescue Group
On January 29, 2016 , the Company completed the sale of Bronto to Morita, initially receiving proceeds of € 76 million in cash at closing (approximately $82.3 million ), with an additional € 5.1 million in cash (approximately $5.7 million ) being received in connection with the payment of the final working capital and net debt adjustments in the three months ended June 30, 2016 .
Prior to sale, Bronto was the only remaining operation in the Company’s Fire Rescue Group, which was previously identified as an operating segment of the Company as defined under ASC 280. Upon completion of the transaction, the Company will no longer operate the Fire Rescue Group, which the Company considers a significant strategic shift in the Company’s operations. The Fire Rescue Group is being presented as a discontinued operation in the Company’s condensed consolidated financial statements.
Under the terms of the sale, the Company and Morita agreed that the Company will remain in control of negotiations and proceedings relating to the appeal of the ruling issued in the Latvian commercial dispute, discussed further in Note 8 – Commitments and Contingencies, and also fund the legal costs associated therewith. The Company also agreed to compensate Morita for 50% of any liability resulting from a final and non-appealable decision of a court of competent jurisdiction, net of any actual income tax benefit to Bronto as a result of the judgment, and less 50% of legal fees incurred by the Company between the January 29, 2016 date of sale and the date of receiving such non-appealable decision. The Company’s appeal of the initial judgment, heard in April 2016, was unsuccessful, and a charge of $1.5 million was recorded as a component of (Loss) gain from discontinued operations and disposal, net of tax in the six months ended June 30, 2016 to reflect the Company’s share of the liability. The Company is currently evaluating its further options for appeal.
On December 16, 2015 , the Company entered into a foreign currency forward contract with a notional contract value of € 76.0 million to mitigate its foreign exchange exposure related to the receipt of the euro-denominated sales proceeds. Prior to its settlement on January 29, 2016 , the derivative was being marked-to-market, with related gains or losses reported in the Company’s Consolidated Statement of Operations. The forward contract had a fair value of $0.9 million on settlement, and a gain of $0.3 million was recorded as a component of Other (income) expense, net in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2016 . The forward contract had a fair value of $0.6 million at  December 31, 2015 . An asset of $0.6 million was included as a component of Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of December 31, 2015 . The fair value of the forward contract was determined using readily available pricing sources for comparable instruments (Level 2 input).
In accordance with ASC 740, a tax liability should be recognized for the excess of the financial reporting basis over the tax basis (or the tax benefit when the tax basis exceeds the financial reporting basis) of an investment in a subsidiary (outside basis difference) when it is apparent that the temporary differences will reverse in the foreseeable future. In connection with presenting the Fire Rescue Group as a discontinued operation as of December 31, 2015 , the Company was required to re-evaluate its position related to the recognition of a deferred tax asset or liability for the outside basis differences of the Bronto entities being sold to Morita. In prior years, deferred taxes for such outside basis differences had not been recognized, either because of the Company’s assertion of permanent reinvestment, or because recognition was not required applying one of the exceptions provided for in ASC 740. Due to the pending sale, these exceptions no longer applied at December 31, 2015 , as the outside basis differences were expected to reverse in the foreseeable future. As a result, a net deferred tax liability of $6.3 million was recorded as a component of long-term liabilities of discontinued operations on the Condensed Consolidated Balance Sheets as of December 31, 2015 . Upon completion of the sale in the first quarter of 2016, this net deferred tax liability was recognized as a component of the tax expense on the gain on disposal.
After recognition of the accumulated foreign currency translation loss attributable to the Fire Rescue Group, as described in Note 11 – Stockholders’ Equity, the actuarial losses described in Note 7 – Pensions, the $1.5 million liability recorded in

27
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

connection with the Latvian commercial dispute, as well as $4.6 million of net income tax expense, the Company recognized a net gain of $4.0 million on disposal of the Fire Rescue Group upon completion of the sale in the six months ended June 30, 2016 .
The following table presents the operating results of the Company’s discontinued Fire Rescue Group for the three months ended June 30, 2015 and the six months ended June 30, 2016 and 2015 :
 
Three Months Ended 
 June 30, 2015
 
Six Months Ended 
 June 30,
(in millions)
 
2016  (a)
 
2015
Net sales
$
25.4

 
$
4.2

 
$
50.5

Cost of sales
20.4

 
3.9

 
41.2

Gross profit
5.0

 
0.3

 
9.3

Selling, engineering, general and administrative expenses
5.0

 
1.1

 
9.0

Operating (loss) income
—

 
(0.8
)
 
0.3

Other expense (income), net
0.1

 
—

 
(0.2
)
(Loss) income before income taxes
(0.1
)
 
(0.8
)
 
0.5

Income tax benefit
(0.2
)
 
(0.2
)
 
(0.1
)
Net income (loss) from operations
$
0.1

 
$
(0.6
)
 
$
0.6

(a)
Only includes activity in the period up to the completion of the sale on January 29, 2016 .

28
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(Unaudited)

Assets and liabilities of discontinued operations
The following table presents the assets and liabilities of the Company’s discontinued operations, which include the Fire Rescue Group, as well as other operations discontinued in prior periods, as of June 30, 2016 and December 31, 2015 :
 
June 30, 2016
 
December 31, 2015
(in millions)
Fire Rescue
 
Other
 
Total
 
Fire Rescue
 
Other
 
Total
Cash and cash equivalents
$
—

 
$
—

 
$
—

 
$
5.0

 
$
—

 
$
5.0

Accounts receivable, net
—

 
—

 
—

 
15.5

 
—

 
15.5

Inventories
—

 
—

 
—

 
40.4

 
—

 
40.4

Prepaid expenses
—

 
—

 
—

 
2.7

 
—

 
2.7

Other current assets
—

 
—

 
—

 
0.2

 
—

 
0.2

Current assets of discontinued operations
$
—

 
$
—

 
$
—

 
$
63.8

 
$
—

 
$
63.8

 
 
 
 
 
 
 
 
 
 
 
 
Properties and equipment, net
$
—

 
$
—

 
$
—

 
$
13.4

 
$
—

 
$
13.4

Goodwill
—

 
—

 
—

 
28.3

 
—

 
28.3

Deferred tax assets
0.7

 
1.7

 
2.4

 
—

 
1.6

 
1.6

Long-term assets of discontinued operations
$
0.7

 
$
1.7

 
$
2.4

 
$
41.7

 
$
1.6

 
$
43.3

 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
—

 
$
—

 
$
—

 
$
7.3

 
$
—

 
$
7.3

Customer deposits
—

 
—

 
—

 
10.6

 
—

 
10.6

Accrued liabilities:


 


 


 


 


 


Compensation and withholding taxes
—

 
—

 
—

 
4.3

 
—

 
4.3

Other current liabilities
1.5

 
2.4

 
3.9

 
4.0

 
2.4

 
6.4

Current liabilities of discontinued operations
$
1.5

 
$
2.4

 
$
3.9

 
$
26.2

 
$
2.4

 
$
28.6

 
 
 
 
 
 
 
 
 
 
 
 
Long-term pension and other post-retirement benefit liabilities
$
—

 
$
—

 
$
—

 
$
0.7

 
$
—

 
$
0.7

Other long-term liabilities
0.7

 
2.8

 
3.5

 
5.5

 
9.1

 
14.6

Long-term liabilities of discontinued operations
$
0.7

 
$
2.8

 
$
3.5

 
$
6.2

 
$
9.1

 
$
15.3

The Company retains certain liabilities for other operations discontinued in prior periods, primarily for environmental remediation and product liability. Included in liabilities of discontinued operations at June 30, 2016 and December 31, 2015 is $0.6 million and $0.9 million , respectively, related to environmental remediation at the Pearland, Texas facility, and $2.3 million and $2.3 million , respectively, relating to estimated product liability obligations of the discontinued North American refuse truck body business.
Long-term assets of discontinued operations at June 30, 2016 and December 31, 2015 include gross deferred tax assets of $4.3 million and $3.5 million , respectively, offset by a full valuation allowance. These assets primarily relate to Canadian net operating loss carryforwards that were largely generated by the discontinued North American refuse truck body business. These net operating loss carryforwards begin to expire in 2026. As it is currently not considered more likely than not that such deferred tax assets will be realized, a full valuation allowance has been recorded, such that the net deferred tax assets included assets of discontinued operations is zero at June 30, 2016 and December 31, 2015 . However, tax planning strategies or acquisitions may result in these assets being realized as part of the Company’s continuing operations in future periods. Given the proximity of the JJE acquisition date to June 30, 2016 , management has concluded that it is premature to release the valuation allowance against the net deferred tax assets in Canada in the three months ended June 30, 2016 . However, management will continue to evaluate the impact that the acquisition of JJE will have on the need to record a full valuation allowance throughout the remainder of 2016 .

29


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide information that is supplemental to, and should be read together with, the condensed consolidated financial statements and the accompanying notes contained in this Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . Information in MD&A is intended to assist the reader in obtaining an understanding of (i) the condensed consolidated financial statements, (ii) the Company’s business segments and how the results of those segments impact the Company’s results of operations and financial condition as a whole and (iii) how certain accounting principles affect the Company’s condensed consolidated financial statements. The Company’s results for interim periods are not necessarily indicative of annual operating results.
Executive Summary
The Company is a leading global manufacturer and supplier of (i) sewer cleaners, vacuum trucks, street sweepers and other environmental vehicles and equipment and (ii) safety, security and communication equipment. We also are a designer and supplier of technology-based products and services for the public safety market. In addition, we sell parts and provide service, repair, equipment rentals and training as part of a comprehensive offering to our customer base. We operate nine manufacturing facilities in four countries around the world and provide products and integrated solutions to municipal, governmental, industrial and commercial customers in all regions of the world.
As described in Note 12 – Segment Information to the accompanying condensed consolidated financial statements, the Company’s business units are organized and managed in two operating segments: the Environmental Solutions Group and the Safety and Security Systems Group.
On June 3, 2016 , the Company completed the acquisition of JJE. The Company expects that JJE will facilitate sales of its existing products into new markets, expand the Company’s product and service offerings and increase the Company’s footprint across North America.
Net sales decreased by $33.1 million , or 16% , in the three months ended June 30, 2016 as compared to the prior-year quarter. Our Environmental Solutions Group reported a net sales reduction of $27.2 million , or 19% , due to lower sales of vacuum trucks and street sweepers. Within our Safety and Security Systems Group, net sales decreased by $5.9 million , or 10% , primarily due to lower sales of industrial products into oil and gas markets, partially offset by higher sales into domestic public safety markets.
For the six months ended June 30, 2016 , net sales decreased by $56.8 million , or 14% , largely due to reductions in sales of vacuum trucks and street sweepers within our Environmental Solutions Group. In the Safety and Security Systems Group, net sales decreased by $4.8 million , or 4% , primarily due to lower sales into industrial markets, partially offset by improved sales into domestic public safety markets.
Operating income decreased by $14.9 million , or 51% , to $14.3 million in the three months ended June 30, 2016 as compared to the prior-year quarter, primarily driven by a $14.3 million decline within our Environmental Solutions Group associated with lower sales volumes. Also contributing to the lower operating income in the current-year quarter was a $0.7 million decrease in operating income within our Safety and Security Systems Group and $0.4 million of acquisition and integration related expenses, partially offset by a $0.4 million favorable change from restructuring activity. Consolidated operating margin for the three months ended June 30, 2016 , inclusive of the aforementioned acquisition costs, was 8.3% , down from 14.2% in the prior year.
For the six months ended June 30, 2016 , operating income decreased by $23.3 million , or 43% , compared to the same period of the prior year, primarily driven by a $21.7 million reduction within the Environmental Solutions Group, associated with lower sales volumes. Also contributing to the lower operating income in the current-year period was $0.9 million of acquisition and integration related expenses and a $0.8 million increase in restructuring charges within the Safety and Security Systems Group. Consolidated operating margin for the six months ended June 30, 2016 , inclusive of the aforementioned acquisition and restructuring costs, was 8.8% , down from 13.4% in the prior year.
Income before income taxes decreased by $14.4 million , or 50% , to $14.2 million for the three months ended June 30, 2016 as compared to the prior-year quarter. The decrease resulted from the reduced operating income, partially offset by a $0.3 million favorable change in other (income) expense, net, and a $0.2 million reduction in interest expense.
For the six months ended June 30, 2016 , income before income taxes decreased by $21.0 million as compared to the prior-year period. The decrease resulted from the reduced operating income, as well as a $0.3 million write-off of deferred financing fees resulting from the debt refinancing completed in the six months ended June 30, 2016 , partially offset by a $2.2 million favorable change in other (income) expense, net, and a $0.4 million reduction in interest expense.

30
Table of Contents


Net income from continuing operations for the three and six months ended June 30, 2016 also benefited from reductions in income tax expense of $5.6 million and $8.2 million , respectively, largely due to lower pre-tax income levels. The effective tax rate for the three months ended June 30, 2016 was 33.8% , compared to 36.4% in the prior-year quarter. The effective tax rate was  34.7%  and  36.5%  for the  six months ended June 30, 2016  and 2015 , respectively.
Total orders for the three months ended June 30, 2016 increased by $12.7 million , or 7% , compared to the prior-year quarter. Orders in our Environmental Solutions Group increased by $21.1 million , primarily due to the inclusion of orders acquired in the JJE acquisition. Orders in our Safety and Security Systems Group were down $8.4 million , driven by reduced orders from industrial markets. For the six months ended June 30, 2016 , total orders decreased by $15.6 million as compared to the prior-year period, largely due to a $13.6 million order reduction in the Safety and Security Systems Group, which was primarily attributable to lower orders from industrial markets. Within the Environmental Solutions Group, lower U.S. orders for street sweepers and vacuum trucks were largely offset by orders acquired in connection with the JJE acquisition. Our consolidated backlog at June 30, 2016 was $149.8 million , up $14.3 million, or 11%, compared with the first quarter of 2016, but down $41.1 million , from $190.9 million at June 30, 2015 .
Results of Operations
The following table summarizes our Condensed Consolidated Statements of Operations and illustrates the key financial indicators used to assess our consolidated financial results:  
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions, except per share data)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net sales
$
172.3

 
$
205.4

 
$
(33.1
)
 
$
345.1

 
$
401.9

 
$
(56.8
)
Cost of sales
127.3

 
144.7

 
(17.4
)
 
252.7

 
286.3

 
(33.6
)
Gross profit
45.0

 
60.7

 
(15.7
)
 
92.4

 
115.6

 
(23.2
)
Selling, engineering, general and administrative expenses
30.3

 
31.1

 
(0.8
)
 
59.9

 
61.5

 
(1.6
)
Acquisition and integration related expenses
0.4

 
—

 
0.4

 
0.9

 
—

 
0.9

Restructuring
—

 
0.4

 
(0.4
)
 
1.2

 
0.4

 
0.8

Operating income
14.3

 
29.2

 
(14.9
)
 
30.4

 
53.7

 
(23.3
)
Interest expense
0.4

 
0.6

 
(0.2
)
 
0.8

 
1.2

 
(0.4
)
Debt settlement charges
—

 
—

 
—

 
0.3

 
—

 
0.3

Other (income) expense, net
(0.3
)
 
—

 
(0.3
)
 
(1.0
)
 
1.2

 
(2.2
)
Income from continuing operations before income taxes
14.2

 
28.6

 
(14.4
)
 
30.3

 
51.3

 
(21.0
)
Income tax expense
(4.8
)
 
(10.4
)
 
5.6

 
(10.5
)
 
(18.7
)
 
8.2

Income from continuing operations
9.4

 
18.2

 
(8.8
)
 
19.8

 
32.6

 
(12.8
)
(Loss) gain from discontinued operations and disposal, net of tax
(0.3
)
 
0.1

 
(0.4
)
 
2.9

 
0.6

 
2.3

Net income
$
9.1

 
$
18.3

 
$
(9.2
)
 
$
22.7

 
$
33.2

 
$
(10.5
)
Operating data:
 
 
 
 
 
 
 
 
 
 
 
Operating margin
8.3
%
 
14.2
%
 
(5.9
)%
 
8.8
%
 
13.4
%
 
(4.6
)%
Diluted earnings per share – Continuing operations
$
0.15

 
$
0.29

 
$
(0.14
)
 
$
0.32

 
$
0.51

 
$
(0.19
)
Total orders
187.3

 
174.6

 
12.7

 
323.0

 
338.6

 
(15.6
)
Backlog
149.8

 
190.9

 
(41.1
)
 
149.8

 
190.9

 
(41.1
)
Depreciation and amortization
4.2

 
3.2

 
1.0

 
7.2

 
6.2

 
1.0

Net sales
Net sales decreased by $33.1 million , or 16% , for the three months ended June 30, 2016 compared to the prior-year quarter. In the Environmental Solutions Group, net sales decreased by $27.2 million , or 19% , primarily due to reductions in sales of vacuum trucks and street sweepers of $18.4 million and $10.5 million, respectively. In the Safety and Security Systems Group, net sales decreased by $5.9 million , or 10% , largely due to lower sales into industrial markets, partially offset by improved sales into U.S. public safety markets.

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For the six months ended June 30, 2016 , net sales decreased by $56.8 million , or 14.1% , largely due to reductions in sales of vacuum trucks and street sweepers of $37.8 million and $14.7 million, respectively. In the Safety and Security Systems Group, net sales decreased by $4.8 million largely due to lower sales into industrial markets, partially offset by a $6.1 million improvement in sales into U.S. public safety markets.
Cost of sales
Cost of sales decreased by $17.4 million , or 12% , for the three months ended June 30, 2016 compared to the prior-year quarter, largely due to a decrease of $13.8 million , or 13% , within the Environmental Solutions Group, primarily driven by reductions in sales volumes. In addition, cost of sales within the Safety and Security Systems Group decreased by $3.6 million , or 9% , largely driven by lower sales volumes partially offset by unfavorable sales mix effects.
For the six months ended June 30, 2016 , cost of sales decreased by $33.6 million , or 12% , for reasons similar to those described above for the three-month period.
Gross profit
Gross profit decreased by $15.7 million , or 26% , for the three months ended June 30, 2016 , compared to the prior-year quarter, consisting of reductions within the Environmental Solutions Group and the Safety and Security Systems Group of $13.4 million and $2.3 million , respectively. Gross margin for the three months ended June 30, 2016 was 26.1% , compared to 29.6% in the prior-year quarter. The decrease in gross margin was primarily the result of lower sales volumes and unfavorable sales mix within the Environmental Solutions Group, with fewer sales into industrial markets.
For the six months ended June 30, 2016 , gross profit decreased by $23.2 million , or 20% , primarily represented by a $20.5 million decline in the Environmental Solutions Group. Gross margin for the six months ended June 30, 2016 was 26.8% , compared to 28.8% in the prior-year period. As in the three-month period, the decrease in gross margin was primarily the result of lower sales volumes and unfavorable sales mix within the Environmental Solutions Group, with fewer sales into industrial markets.
Selling, engineering, general and administrative expenses
Selling, engineering, general and administrative (“SEG&A”) expenses for the three months ended June 30, 2016 decreased by $0.8 million , or 3% , compared to the prior-year quarter, largely due to decreases of $1.2 million and $0.5 million within the Safety and Security Systems Group and Corporate, respectively, partially offset by a $0.9 million increase within the Environmental Solutions Group.
For the six months ended June 30, 2016 , SEG&A expenses decreased by $1.6 million , or 3% , largely due to decreases of $1.7 million and $1.1 million within Corporate and the Safety and Security Systems Group, respectively, partially offset by a $1.2 million increase within the Environmental Solutions Group.
Operating income
Operating income decreased by $14.9 million , or 51% , to $14.3 million in the three months ended June 30, 2016 as compared to the prior-year quarter, primarily driven by a $14.3 million decline within our Environmental Solutions Group associated with lower sales volumes. Also contributing to the lower operating income in the current-year quarter was a $0.7 million decrease in operating income within our Safety and Security Systems Group, and $0.4 million of acquisition and integration related expenses, partially offset by a $0.4 million favorable change from restructuring activity. Consolidated operating margin for the three months ended June 30, 2016 , inclusive of the aforementioned acquisition costs, was 8.3% , down from 14.2% in the prior year.
For the six months ended June 30, 2016 , operating income decreased by $23.3 million , or 43% , primarily driven by a $21.7 million reduction within the Environmental Solutions Group, associated with lower sales volumes. Also contributing to the lower operating income in the current-year period was $0.9 million of acquisition and integration related expenses and a $0.8 million increase in restructuring charges within the Safety and Security Systems Group. Consolidated operating margin for the six months ended June 30, 2016 , inclusive of the aforementioned acquisition and restructuring costs, was 8.8% , down from 13.4% in the prior year.

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Interest expense
Compared with the same period of the prior year, interest expense for the three and six months ended June 30, 2016 decreased by $0.2 million and $0.4 million , respectively, largely due to reductions in the average debt levels in the respective periods.
Other (income) expense, net
Other income, net, increased by $0.3 million in the three months ended June 30, 2016 , compared to the prior-year quarter, which included realized losses from foreign currency transactions.
For the six months ended June 30, 2016 , other (income) expense, net, totaled $1.0 million of income, and largely related to a gain on the settlement of a foreign currency forward contract, whereas for the the six months ended June 30, 2015 , $1.2 million of expense was reported, represented primarily by realized losses from foreign currency transactions.
Income tax expense
The Company recognized income tax expense of $4.8 million and $10.4 million for the three months ended June 30, 2016 and 2015 , respectively. The decrease in tax expense in the current-year quarter is largely due to lower pre-tax income levels. The effective tax rate for the three months ended June 30, 2016 was 33.8% , compared to 36.4% in the prior-year quarter.
For the  six months ended June 30, 2016  and  2015 , the Company recognized income tax expense of  $10.5 million  and  $18.7 million , respectively. The decrease in tax expense in the first half of 2016 is largely due to lower pre-tax income levels. The effective tax rate was  34.7%  and  36.5%  for the  six months ended June 30, 2016  and 2015 , respectively.
Income from continuing operations
Income from continuing operations for the three months ended June 30, 2016 decreased by $8.8 million compared to the prior-year period, largely due to the reduced operating income, partially offset by a $0.3 million favorable change in other (income) expense, net, and the reductions in interest expense and income tax expense, described above.
For the six months ended June 30, 2016 , income from continuing operations decreased by $12.8 million compared to the same period of the prior year, largely due to the reduced operating income, as well as a $0.3 million write-off of deferred financing fees, partially offset by a $2.2 million favorable change in other (income) expense, net, and the reductions in interest expense and income tax expense, described above.
Gain (loss) from discontinued operations and disposal
The Company recorded a net loss from discontinued operations and disposal of $0.3 million in the three months ended June 30, 2016 , primarily related to adjustments of estimated product liability obligations of previously discontinued businesses, resulting from updated actuarial valuations.
In the three months ended June 30, 2015 , the Company recorded a net gain from discontinued operations and disposal of $0.1 million , primarily driven by net income generated by the operations of the Fire Rescue Group.
The Company recorded a net gain from discontinued operations and disposal of $2.9 million in the six months ended June 30, 2016 , primarily driven by the $4.0 million net gain on disposal of the Fire Rescue Group, which was discontinued in 2015, partially offset by the $0.6 million net loss that the Fire Rescue Group realized in its 2016 operations up to the January 29, 2016 sale completion date. The net gain on disposal includes a $1.5 million charge to recognize a liability in connection with a Latvian commercial dispute.
In the six months ended June 30, 2015 , the Company recorded a net gain from discontinued operations and disposal of $0.6 million , primarily driven by net income generated by the operations of the Fire Rescue Group.
Orders
The Company’s historical order information presented herein includes orders received from JJE. Subsequent to the completion of the acquisition of JJE, such orders are no longer included in total orders. Instead, total orders reported subsequent to the completion of the acquisition will include orders that JJE receives from end customers. Such orders may include orders for products manufactured or supplied by the Company’s Environmental Solutions Group, as well as for products manufactured or supplied by third-party vendors.
During the three months ended June 30, 2016 and 2015 , orders that were received from JJE prior to the acquisition date, which were included in total orders, totaled $0.7 million and $11.1 million , respectively. During the six months ended June 30, 2016

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and 2015 , orders that were received from JJE prior to the acquisition date, which were included in total orders, totaled $3.7 million and $24.3 million , respectively.
As of the June 3, 2016 acquisition date, the Company’s backlog included $6.9 million of orders from JJE. Such orders are no longer reported in the Company’s backlog as of June 30, 2016 and have been presented as a reduction of total orders for the three and six months ended June 30, 2016 .
On the date of acquisition, JJE had a backlog of orders from its end customers of $33.4 million . These acquired orders have been included in total orders reported for the three and six months ended June 30, 2016 , and any of those orders that had not shipped prior to the end of the second quarter are included in reported backlog as of June 30, 2016 .
Three months ended June 30, 2016 vs. three months ended June 30, 2015
Total orders increased by $12.7 million , or 7% , for the three months ended June 30, 2016 , largely driven by a $21.1 million increase in orders in the Environmental Solutions Group. The increase in orders in the Environmental Solutions Group was primarily reflective of increased Canadian orders associated with the JJE acquisition. Orders in the Safety and Security Systems Group decreased by $8.4 million , largely due to lower orders from industrial markets, partially offset by improved orders from public safety markets.
U.S. municipal and governmental orders increased by 1%, primarily due to a $2.6 million improvement in municipal orders within the Environmental Solutions Group, partially offset by a $2.0 million decline in orders within the Safety and Security Systems Group, largely driven by reduced orders of outdoor warning systems.
U.S. industrial orders decreased by 17%, largely driven by a $6.1 million reduction within the Environmental Solutions Group. Vacuum truck orders declined by $3.0 million, associated with softness in oil and gas markets, and there was also a $1.8 million decrease in orders for waterblasting equipment. Industrial orders in the Safety and Security Systems Group declined by $1.6 million.
Non-U.S. orders increased by 47% and were driven by a $24.5 million increase within the Environmental Solutions Group, largely reflective of increased Canadian orders resulting from the JJE acquisition. Within the Safety and Security Systems Group, non-U.S. orders decreased by $4.8 million, primarily due to lower orders from global industrial markets.
Six Months Ended June 30, 2016 vs. six months ended June 30, 2015
Total orders decreased by $15.6 million , or 5% , for the six months ended June 30, 2016 , largely driven by a $13.6 million order reduction in the Safety and Security Systems Group, which was primarily due to lower orders from global industrial markets, partially offset by improved orders from public safety markets. Within the Environmental Solutions Group, reduced U.S. orders for street sweepers, vacuum trucks and waterblasting equipment were largely offset by increased orders from Canada, inclusive of those orders acquired in connection with the JJE acquisition.
U.S. municipal and governmental orders increased by 1%, primarily due to a $1.2 million improvement in orders from public safety markets within the Safety and Security Systems Group.
U.S. industrial orders decreased by 15%, largely driven by a $12.3 million reduction within the Environmental Solutions Group, resulting from reductions in orders for vacuum trucks, used equipment and waterblasting equipment of $6.6 million, $3.0 million and $1.8 million, respectively. Industrial orders in the Safety and Security Systems Group decreased by $1.2 million.
Non-U.S. orders decreased by 4%, primarily due to a $13.6 million decrease within the Safety and Security Systems Group, largely due to lower orders from industrial markets. Within the Environmental Solutions Group, non-U.S. orders increased by $9.9 million, largely reflective of increased Canadian orders resulting from the JJE acquisition, partially offset by lower orders from the Middle East and Mexico.
Backlog
Backlog was $149.8 million at June 30, 2016 compared to $190.9 million at June 30, 2015 . The decrease of $41.1 million , or 22% , was primarily due to an $35.0 million reduction in backlog at the Environmental Solutions Group, which reflects lower demand for vacuum trucks, including the impact directly from soft oil and gas markets and the impact of used equipment reducing demand for new equipment in adjacent industrial markets. It also reflects lower backlog for street sweepers, as a result of higher levels of fleet orders in the prior year. These decreases were partially offset by the addition of $32.8 million of backlog as of June 30, 2016 resulting from the acquisition of JJE.

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Environmental Solutions
The following table summarizes the Environmental Solutions Group’s operating results as of and for the three and six months ended June 30, 2016 and 2015 :  
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net sales
$
119.4

 
$
146.6

 
$
(27.2
)
 
$
234.8

 
$
286.8

 
$
(52.0
)
Operating income
14.9

 
29.2

 
(14.3
)
 
31.4

 
53.1

 
(21.7
)
Operating data:
 
 
 
 
 
 
 
 
 
 
 
Operating margin
12.5
%
 
19.9
%
 
(7.4
)%
 
13.4
%
 
18.5
%
 
(5.1
)%
Total orders
$
135.3

 
$
114.2

 
$
21.1

 
$
218.5

 
$
220.5

 
$
(2.0
)
Backlog
117.0

 
152.0

 
(35.0
)
 
117.0

 
152.0

 
(35.0
)
Depreciation and amortization
3.1

 
2.0

 
1.1

 
4.9

 
3.8

 
1.1

Three months ended June 30, 2016 vs. three months ended June 30, 2015
Total orders increased by $21.1 million , or 18% , for the three months ended June 30, 2016 . U.S. orders decreased by $3.5 million largely due to decreases in orders for street sweepers, vacuum trucks and waterblasting equipment of $2.9 million, $1.9 million and $1.8 million, respectively. These decreases were partially offset by a $2.1 million improvement in orders for sewer cleaners. Non-U.S. orders increased by $24.5 million for the three months ended June 30, 2016 primarily attributable to a $31.2 million increase in orders from Canada, inclusive of $26.5 million of net orders acquired in connection with the JJE acquisition, as well as orders received in the three months ended June 30, 2016 subsequent to the acquisition date.
N et sales decreased by $27.2 million , or 19% , for the three months ended June 30, 2016 . U.S. sales decreased by $25.0 million, or 21%, primarily due to reductions in sales of vacuum trucks, street sweepers and waterblasting equipment of $11.8 million, $7.8 million, and $3.3 million, respectively. Vacuum truck shipment declines are directly related to the ongoing softness in oil and gas markets, while street sweeper orders from our municipal markets decreased primarily due to fewer fleet orders when compared with the prior-year quarter. Non-U.S. sales decreased by $2.2 million, or 8%, for the three months ended June 30, 2016 primarily due to lower sales of street sweepers, with reductions in the Middle East partially offset by improvements in Mexico.
Cost of sales decreased by $13.8 million for the three months ended June 30, 2016 , while gross margin decreased to 22.1% from 27.1% in the prior-year quarter. The reduction in cost of sales and gross margin was primarily attributable to lower sales volumes, with the margin reduction impacted by unfavorable sales mix, with fewer sales into industrial markets.
SEG&A expenses increased by $0.9 million for the three months ended June 30, 2016 , largely due to expenses associated with our current-year acquisitions of JJE and Westech.
Operating income for the three months ended June 30, 2016 decreased by $14.3 million , largely due to a $13.4 million decrease in gross profit and the $0.9 million increase in SEG&A expenses.
Six Months Ended June 30, 2016 vs. six months ended June 30, 2015
Total orders decreased by $2.0 million , or 1% , for the six months ended June 30, 2016 . U.S. orders decreased by $11.9 million largely due to decreases in orders for street sweepers, vacuum trucks and waterblasting equipment of $5.5 million, $4.4 million and $1.7 million, respectively. Street sweeper orders from our municipal markets decreased primarily due to fewer fleet orders when compared with the prior-year period, while the decline in orders for vacuum trucks is reflective of softness in oil and gas markets. Non-U.S. orders increased by $9.9 million for the six months ended June 30, 2016 driven by a $23.7 million increase in orders from Canada, inclusive of $26.5 million of net orders acquired in connection with the JJE acquisition, as well as orders received in the six months ended June 30, 2016 subsequent to the acquisition date. Partially offsetting the increased Canadian orders were reductions in orders from the Middle East and Mexico of $5.7 million and $2.4 million, respectively.
N et sales decreased by $52.0 million , or 18% , for the six months ended June 30, 2016 . U.S. sales decreased by $46.4 million, or 20%, primarily due to reductions in sales of vacuum trucks and street sweepers of $33.5 million and $11.0 million, respectively. Partially offsetting this decline was a $1.7 million improvement in sales of sewer cleaners. Non-U.S. sales decreased by $5.6 million, or 11%, for the six months ended June 30, 2016 primarily due to a $6.1 million sales decrease in the Middle East, partially offset by a $1.7 million improvement in sales into Canada, inclusive of sales to JJE prior to the acquisition date.

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Cost of sales decreased by $31.5 million for the six months ended June 30, 2016 , while gross margin decreased to 23.1% from 26.1% in the prior-year period. The reduction in cost of sales and gross margin was primarily attributable to lower sales volumes, with the margin reduction impacted by unfavorable sales mix, with fewer sales into industrial markets.
SEG&A expenses increased by $1.2 million for the six months ended June 30, 2016 , largely due to expenses associated with our current-year acquisitions of JJE and Westech.
Operating income for the six months ended June 30, 2016 decreased by $21.7 million , largely due to a $20.5 million decrease in gross profit and the $1.2 million increase in SEG&A expenses.
Backlog was $117.0 million at June 30, 2016 compared to $152.0 million at June 30, 2015 , primarily due to a lower backlog for vacuum trucks, reflecting the direct impact from soft oil and gas markets and the impact of used equipment reducing demand for new equipment in adjacent industrial markets. The reduction also reflects lower backlog for street sweepers, as a result of higher levels of fleet orders in the prior year. These decreases were partially offset by the addition of $32.8 million of backlog as of June 30, 2016 resulting from the acquisition of JJE.
Safety and Security Systems
The following table summarizes the Safety and Security Systems Group’s operating results as of and for the three and six months ended June 30, 2016 and 2015 :  
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net sales
$
52.9

 
$
58.8

 
$
(5.9
)
 
$
110.3

 
$
115.1

 
$
(4.8
)
Operating income
6.6

 
7.3

 
(0.7
)
 
11.5

 
13.9

 
(2.4
)
Operating data:
 
 
 
 
 
 
 
 
 
 
 
Operating margin
12.5
%
 
12.4
%
 
0.1
%
 
10.4
%
 
12.1
%
 
(1.7
)%
Total orders
$
52.0

 
$
60.4

 
$
(8.4
)
 
$
104.5

 
$
118.1

 
$
(13.6
)
Backlog
32.8

 
38.9

 
(6.1
)
 
32.8

 
38.9

 
(6.1
)
Depreciation and amortization
1.1

 
1.2

 
(0.1
)
 
2.2

 
2.3

 
(0.1
)
Three months ended June 30, 2016 vs. three months ended June 30, 2015
Total orders decreased by $8.4 million or 14% , for the three months ended June 30, 2016 . U.S. orders decreased by $3.6 million, or 10%, primarily due to reductions in orders for outdoor warning systems and industrial products of $2.3 million and $1.9 million, respectively. The decrease in industrial orders is reflective of lower demand from domestic oil, gas and coal markets. These decreases were partially offset by a $0.8 million improvement in orders from public safety markets. Non-U.S. orders decreased by $4.8 million, or 20%, compared to the prior-year quarter and were adversely impacted by a $4.7 million decline in industrial orders, primarily due to softness in international oil and gas markets, and a $0.6 million reduction in orders for products sold into international coal markets. These reductions were partially offset by a $0.5 million increase in orders from international public safety markets.
Net sales decreased by $5.9 million , or 10% , for the three months ended June 30, 2016 . U.S. sales decreased by $0.3 million, largely due to a $2.3 million reduction in sales of industrial products into domestic oil, gas and coal markets, and a $1.0 million decrease in sales of outdoor warning systems. These decreases were largely offset by a $3.1 million improvement in sales into public safety markets, inclusive of a number of large sales to major municipalities. Non-U.S. sales decreased by $5.6 million, principally due to lower demand for industrial products in international oil and gas, and coal markets, as well as a $0.6 million reduction in sales into international public safety markets.
Cost of sales decreased by $3.6 million , or 9% , for the three months ended June 30, 2016 , largely due to the effects of lower sales volume. Gross margin for the three months ended June 30, 2016 was 35.2% compared to 35.5% in the prior-year period.
SEG&A expenses for the three months ended June 30, 2016 were $1.2 million lower than the prior-year quarter, largely due to lower employee costs, inclusive of the effects of previously implemented restructuring activity.
Operating income decreased by $0.7 million for the three months ended June 30, 2016 , largely due to a $2.3 million decrease in gross profit, offset by the $1.2 million reduction in SEG&A expenses and a $0.4 million favorable change in restructuring activity when compared to the prior-year quarter, which included $0.4 million of severance costs incurred in connection with the completion of a voluntary reduction-in-force at our U.K. coal mining business.

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Six Months Ended June 30, 2016 vs. six months ended June 30, 2015
Total orders decreased by $13.6 million or 12% , for the six months ended June 30, 2016 . In the aggregate, U.S. orders were flat as compared to the prior-year period, with decreases in orders of industrial products and outdoor warning systems of $2.6 million and $2.2 million, respectively, being offset by a $4.8 million improvement in orders from public safety markets. Non-U.S. orders decreased by $13.6 million, or 27%, primarily due to a $13.8 million decrease in orders from industrial markets, including international oil, gas and coal markets, as well as a $1.7 million reduction in orders from international public safety markets. Partially offsetting these decreases was a $2.0 million improvement in non-U.S. orders for outdoor warning systems, largely due to a significant order from the Middle East.
Net sales decreased by $4.8 million , or 4% , for the six months ended June 30, 2016 . U.S. sales increased by $2.5 million, driven by a $6.1 million improvement in sales into public safety markets, inclusive of a number of large sales to major municipalities, partially offset by a $4.2 million reduction in sales into domestic industrial markets. Non-U.S. sales decreased by $7.3 million, or 16%, primarily related to a $7.7 million decrease in sales into international industrial markets.
Cost of sales decreased by $2.1 million , or 3% , for the six months ended June 30, 2016 , largely due to the effects of decreased sales volume, partially offset by an unfavorable sales mix impact of $1.3 million associated with lower sales of products into industrial markets. Gross margin for the six months ended June 30, 2016 was 34.5% compared to 35.4% in the prior-year period, largely due to the unfavorable sales mix effects.
SEG&A expenses for the three months ended June 30, 2016 were $1.1 million lower than the prior-year quarter, largely due to lower employee costs, inclusive of the effects of previously implemented restructuring activity.
Operating income decreased by $2.4 million for the six months ended June 30, 2016 , largely due to a $2.7 million decrease in gross profit and a $0.8 million increase in restructuring expenses, primarily due to the completion of headcount reductions in the U.S. in the first quarter of 2016, partially offset by a $1.1 million decrease in SEG&A expenses.
Backlog was $32.8 million at June 30, 2016 compared to $38.9 million at June 30, 2015 . The decrease was primarily due to lower orders of industrial products in the first half of 2016.
Corporate Expenses
Corporate operating expenses for the three months ended June 30, 2016 were $7.2 million , compared to $7.3 million in the prior-year quarter, largely due to lower employee incentive compensation costs, offset by increased professional service and legal fees incurred in connection with acquisition and integration related activity.
For the six months ended June 30, 2016 , corporate operating expenses were $12.5 million , compared to $13.3 million in the prior-year period, for similar reasons to those described above for the three-month period.
Seasonality of Company’s Business
Certain of the Company’s businesses are susceptible to the influences of seasonal factors, including buying patterns, delivery patterns and productivity influences from holiday periods and weather. The Company tends to have lower sales in the first calendar quarter of each year compared to other quarters as a result of these factors.
Financial Condition, Liquidity and Capital Resources
The Company uses its cash flow from operations to fund growth and to make capital investments that sustain its operations, reduce costs, or both. Beyond these uses, remaining cash is used to pay down debt, repurchase shares, fund dividend payments and make pension contributions. The Company may also choose to invest in the acquisition of businesses. In the absence of significant unanticipated cash demands, we believe that the Company’s existing cash balances, cash flow from operations and borrowings available under the 2016 Credit Agreement will provide funds sufficient for these purposes. The net cash flows associated with the Company’s rental equipment transactions are included in cash flow from operating activities. Subsequent to the acquisition of JJE, such net cash flows may become more significant, and as such, cash flow from operating activities may not be directly comparable with amounts reported in periods prior to the acquisition.
The Company’s cash and cash equivalents totaled $38.7 million and $76.0 million as of June 30, 2016 and December 31, 2015 , respectively. As of June 30, 2016 , $16.2 million of cash and cash equivalents was held by foreign subsidiaries. Cash and cash equivalents held by subsidiaries outside the U.S. typically are held in the currency of the country in which it is located. This cash is used to fund the operating activities of our foreign subsidiaries and for further investment in foreign operations. Generally, we consider such cash to be permanently reinvested in our foreign operations and our current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. However, in the event that these funds were needed to fund

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U.S. operations or to satisfy U.S. obligations, they generally could be repatriated. The repatriation of these funds may then cause us to incur additional U.S. income tax expense, which would be dependent on income tax laws and other circumstances at the time any such amounts were repatriated.
As discussed further in Note 15 – Discontinued Operations to the accompanying condensed consolidated financial statements, the Company recorded a net deferred tax liability of $6.3 million at December 31, 2015 associated with recognizing the outside basis differences of entities being sold in connection with the sale of Bronto. The deferred tax liability recorded at December 31, 2015 included a liability for U.S. income tax effects associated with the repatriation of the related sales proceeds. The initial sales proceeds of € 76 million (approximately $ 82.3 million ) were received on January 29, 2016 , with an additional € 5.1 million in cash (approximately $5.7 million ) being received in connection with the payment of the final working capital and net debt adjustments in the three months ended June 30, 2016 .
Net cash of $3.9 million and $30.8 million was provided by continuing operating activities in the six months ended June 30, 2016 and 2015 , respectively. The reduction in cash generated by continuing operating activities in the six months ended June 30, 2016 compared to the same period of the prior year was largely the result of lower earnings. The operating cash flow in both current-year periods was also lower by approximately $11 million as a result of the non-cash settlement, in connection with the acquisition, of accounts receivable due from JJE.
Net cash of $106.7 million and $5.0 million was used for continuing investing activities in the six months ended June 30, 2016 and 2015 , respectively. Capital expenditures in the six months ended June 30, 2016 and 2015 were $3.6 million and $5.1 million , respectively. As discussed in Note 2 – Acquisitions, in the six months ended June 30, 2016 , the Company paid an initial $96.6 million to acquire substantially all the assets and operations of JJE, and also used $6.0 million to acquire Westech. Net cash provided by discontinued investing activities totaled $88.0 million in the six months ended June 30, 2016 , represented by the initial sales proceeds received in January 2016 for the sale of Bronto, as well as the final working capital adjustment payment of $5.7 million which the Company received in the three months ended June 30, 2016 .
Net cash of $24.2 million was used for continuing financing activities in the six months ended June 30, 2016 , compared with $16.4 million in the prior year. In the six months ended June 30, 2016 , the Company borrowed $64.8 million against its revolving credit facility, funded cash dividends of $8.6 million , repurchased $33.1 million of treasury stock, and redeemed $2.6 million of stock in order to remit funds to tax authorities to satisfy employees’ minimum tax withholdings following the vesting of stock-based compensation. The Company also paid the remaining $43.4 million of term loan debt outstanding under the 2013 Credit Agreement and spent $1.1 million on fees in connection with its debt refinancing. In the prior-year period, the Company paid down $1.4 million of term loan debt, funded cash dividends of $7.5 million , repurchased $5.0 million of treasury stock, and redeemed $2.9 million of stock in order to remit funds to tax authorities to satisfy employees’ minimum tax withholdings following the vesting of stock-based compensation.
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 continuing operations before interest expense, debt settlement charges, acquisition and integration related expenses, restructuring charges, other (income) expense, income tax expense, and depreciation and amortization expense. The Company uses the ratio to calibrate the magnitude of its debt and its debt capacity against adjusted EBITDA, which is used as an operating performance measure. We believe that investors use a version of this ratio in a similar manner. In addition, financial institutions (including the Company’s lenders) use the ratio in connection with debt agreements to set pricing and covenant limitations. For these reasons, the Company believes that the ratio is a meaningful metric to investors in evaluating the Company’s long-term financial performance and stability. Other companies may use different methods to calculate total debt to EBITDA. The following table summarizes the Company’s ratio of total debt to adjusted EBITDA and reconciles income from continuing operations to adjusted EBITDA as of and for the trailing 12-month periods ended June 30, 2016 and 2015 :

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Trailing Twelve 
 Months Ending 
 June 30,
(in millions)
2016
 
2015
Total debt
$
66.9

 
$
48.6

 
 
 
 
Income from continuing operations
53.0

 
67.5

Add:
 
 
 
Interest expense
1.9

 
2.9

Debt settlement charges
0.3

 
—

Acquisition and integration related expenses
0.9

 
—

Restructuring
1.2

 
0.5

Other (income) expense, net
(1.2
)
 
2.7

Income tax expense
25.9

 
31.6

Depreciation and amortization
13.3

 
12.1

Adjusted EBITDA
$
95.3

 
$
117.3

 
 
 
 
Total debt to adjusted EBITDA ratio
0.7

 
0.4

On January 27, 2016 , the Company entered into an Amended and Restated Credit Agreement (the “2016 Credit Agreement”), by and among the Company and certain of its foreign subsidiaries (collectively, the “Borrowers”), Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, JPMorgan Chase Bank, N.A. as syndication agent, KeyBank National Association, as documentation agent, Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint bookrunners, and the other lenders and parties signatory thereto.
The 2016 Credit Agreement is a $325.0 million revolving credit facility, maturing on January 27, 2021 , that provides for borrowings in the form of loans or letters of credit up to the aggregate availability under the facility, with a sub-limit of $50.0 million for letters of credit. The 2016 Credit Agreement allows for the Borrowers to borrow in denominations of U.S. Dollars, Canadian Dollars (up to a maximum of C $85.0 million ) or euros (up to a maximum of € 20.0 million ). In addition, the Company may cause the commitments to increase by up to an additional $75.0 million , subject to the approval of the applicable lenders providing such additional financing. Borrowings under the 2016 Credit Agreement may be used for working capital and general corporate purposes, including permitted acquisitions.
The Company’s domestic subsidiaries provide guarantees for all obligations of the Borrowers under the 2016 Credit Agreement, which is secured by a first priority security interest in all now or hereafter acquired domestic property and assets and the stock or other equity interests in each of the domestic subsidiaries and 65% of the outstanding voting capital stock of certain first-tier foreign subsidiaries, subject to certain exclusions.
Borrowings under the 2016 Credit Agreement bear interest, at the Company’s option, at a base rate or a LIBOR rate, plus, in each case, an applicable margin. The applicable margin ranges from 0.00% to 1.25% for base rate borrowings and 1.00% to 2.25% for LIBOR borrowings. The Company must also pay a commitment fee to the lenders ranging between 0.15% to 0.30%  per annum on the unused portion of the $325.0 million revolving credit facility along with other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to the applicable LIBOR margin plus other customary fees.
The Company is subject to certain leverage ratio and interest coverage ratio financial covenants under the 2016 Credit Agreement that are to be measured at each fiscal quarter-end. The Company was in compliance with all such covenants as of June 30, 2016 . The 2016 Credit Agreement also includes a “covenant holiday” period, which allows for the temporary increase of the minimum leverage ratio following the completion of a permitted acquisition, or a series of permitted acquisitions, when the total consideration exceeds a specified threshold. In addition, the 2016 Credit Agreement includes customary negative covenants, subject to certain exceptions, restricting or limiting the Company’s and its subsidiaries’ ability to, among other things: (i) make non-ordinary course dispositions of assets, (ii) make certain fundamental business changes, such as merge, consolidate or enter into any similar combination, (iii) make restricted payments, including dividends and stock repurchases, (iv) incur indebtedness, (v) make certain loans and investments, (vi) create liens, (vii) transact with affiliates, (viii) enter into sale/leaseback transactions, (ix) make negative pledges and (x) modify subordinated debt documents.
Under the 2016 Credit Agreement, restricted payments, including dividends and stock repurchases, shall be permitted if (i) the Company’s leverage ratio is less than or equal to 2.50 , (ii) the Company is in compliance with all other financial covenants and (iii) there are no existing defaults under the 2016 Credit Agreement. If its leverage ratio is more than 2.50 , the Company is still permitted to fund (i) up to $30.0 million of dividend payments, (ii) stock repurchases sufficient to offset dilution created by the

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issuance of equity as compensation to its officer, directors, employees and consultants and (iii) an incremental $30.0 million of other cash payments.
The 2016 Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2016 Credit Agreement and the commitments from the lenders may be terminated.
The 2016 Credit Agreement amends and restates the Company’s March 13, 2013 Credit Agreement (the “2013 Credit Agreement”), which provided the Company with a $225.0 million senior secured credit facility comprised of a five -year fully funded term loan of $75.0 million and a five -year $150.0 million revolving credit facility.
Under the terms of the 2013 Credit Agreement, the Company was required to make quarterly installment payments against the $75.0 million term loan, with any remaining balance due on the maturity date of March 13, 2018. As a result of executing the 2016 Credit Agreement subsequent to December 31, 2015 , but prior to the issuance of the financial statements for the year then ended, the $6.9 million current portion of term loan debt outstanding as of December 31, 2015 was reflected as a component of long-term borrowings and capital lease obligations on the Condensed Consolidated Balance Sheets. Under the 2013 Credit Agreement, the Company was allowed to prepay the term loan in whole or in part prior to maturity without premium or penalty. In the six months ended June 30, 2016 , the Company repaid the remaining $43.4 million of principal outstanding under the 2013 Credit Agreement.
In the six months ended June 30, 2016 , approximately $0.3 million of unamortized deferred financing fees associated with the 2013 Credit Agreement were written off in connection with executing the 2016 Credit Agreement. The Company incurred $1.1 million of debt issuance costs in connection with the execution of the 2016 Credit Agreement. Such fees have been deferred and are being amortized over the five-year term.
As of June 30, 2016 , there was $65.8 million of cash drawn and $19.5 million of undrawn letters of credit under the 2016 Credit Agreement, with $239.7 million of net availability for borrowings. As of December 31, 2015 , there was no cash drawn and $19.2 million of undrawn letters of credit under the $150.0 million revolving credit facility portion of the 2013 Credit Agreement, with $130.8 million of net availability for borrowings.
As of June 30, 2016 and December 31, 2015 , there were no borrowings against the Company’s non-U.S. lines of credit which provide for borrowings of up to $1.3 million .
For the six months ended June 30, 2016 , gross borrowings and gross payments under the 2016 Credit Agreement were $69.8 million and $5.0 million , respectively. For the six months ended June 30, 2015 , there were no gross borrowings or gross payments under the Company’s domestic revolving credit facility portion of the 2013 Credit Agreement.
The Company anticipates that capital expenditures for 2016 will be in the range of $10 million to $15 million.
Contractual Obligations and Off-Balance Sheet Arrangements
There have been no material changes in the Company’s contractual obligations and off-balance sheet arrangements as described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 , with exception to purchase obligations, as described below.
Following the acquisition of JJE, the Company’s purchase obligations, which primarily relate to commercial chassis, vehicle bodies and other contracts in the ordinary course of business, have increased from the $55.0 million reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . As of June 30, 2016 , purchase obligations totaled $82.5 million, with $75.3 million in payments due in less than one year and $7.2 million in payments due in two to three years.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
The Company is subject to market risk associated with changes in interest rates and foreign exchange rates. To mitigate this risk, the Company may utilize derivative financial instruments, including interest rate swaps and foreign currency forward contracts. The Company does not hold or issue derivative financial instruments for trading or speculative purposes and is not party to leveraged derivatives contracts.

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Interest Rate Risk
See Item 7A, Quantitative and Qualitative Disclosures about Market Risk , of our Annual Report on Form 10-K for the year ended December 31, 2015 . During the six months ended June 30, 2016 , there have been no material changes in our market risk associated with movements in interest rates.
Foreign Exchange Rate Risk
Although the majority of the Company’s sales, expenses and cash flow are transacted in U.S. dollars, the Company has exposure to changes in foreign exchange rates, primarily the Canadian Dollar, Euro and British pound. The impact of currency movements on our financial results is largely mitigated by natural hedges in our operations. As discussed in Note 2 – Acquisitions to the accompanying condensed consolidated financial statements, the Company completed the acquisition of substantially all of the assets and operations of JJE during the six months ended June 30, 2016 . The Canadian operations of JJE primarily conduct business in Canadian dollars. Almost all other sales of product from the U.S. to other parts of the world are denominated in U.S. dollars. Sales from and within other currency zones are predominantly transacted in the currency of the country sourcing the product or service. Management estimates that a 10% appreciation of the U.S. dollar against other currencies would reduce full-year net sales and operating income by less than 1%.
The Company may also have foreign currency exposures related to buying and selling in currencies other than the local currency in which it operates and to certain balance sheet positions. If such transactional or balance sheet exposures are material, the Company may enter into matching foreign currency forward contracts from time to time to protect against variability in exchange rates.
Item 4.
Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of June 30, 2016 . Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2016 .
As a matter of practice, the Company’s management continues to review and document internal control and procedures for financial reporting. From time to time, the Company may make changes aimed at enhancing the effectiveness of the controls and ensuring that the systems evolve with the business. SEC guidance permits management to omit an assessment of internal control over financial reporting for an acquired business from management’s assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. During the  three months ended June 30, 2016 , the Company completed the acquisition of JJE. As of  June 30, 2016 , management has not yet fully assessed JJE’s internal control over financial reporting. Excluding the acquisition of JJE, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the  three months ended June 30, 2016 .

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PART II. OTHER INFORMATION
Item 1.
Legal Proceedings.
The information set forth under the heading “Legal Proceedings” in Note 8 – Commitments and Contingencies to the accompanying condensed consolidated financial statements as included in Part I of this Form 10-Q is incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes in the Company’s risk factors as described in Item 1A, Risk Factors , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 .
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
Restrictions upon the Payment of Dividends
On January 27, 2016, the Company entered into the 2016 Credit Agreement. Under the terms of the 2016 Credit Agreement, restricted payments, including dividends and stock repurchases, shall be permitted if (i) the Company’s leverage ratio is less than or equal to 2.50 , (ii) the Company is in compliance with all other financial covenants and (iii) there are no existing defaults under the 2016 Credit Agreement. If the leverage ratio is more than 2.50 , the Company is still permitted to fund (i) up to $ 30.0 million of dividend payments, (ii) stock repurchases sufficient to offset dilution created by the issuance of equity as compensation to its officers, directors, employees and consultants and (iii) an incremental $ 30.0 million of other cash payments.
The Company is able to declare dividends at current levels under the restricted payment guidelines set forth above.
Purchases of Equity Securities
Period
 
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a) (b)
April 2016 (4/3/16 – 5/7/16)
 
847,874

 
$
13.1144

 
847,874

 
$
41,695,931

May 2016 (5/8/16 – 6/4/16)
 
440,072

 
12.8207

 
440,072

 
36,053,900

June 2016 (6/5/16 – 7/2/16)
 
805

 
12.2456

 
805

 
36,044,042

(a)
On April 22, 2014, the Board authorized a stock repurchase program of up to $15 million of the Company’s common stock. During the second quarter of 2015, cumulative stock repurchases under the April 2014 program reached the maximum authorized level of $15.0 million. No additional stock repurchases will be made under that program.
(b)
On November 4, 2014, the Board authorized an additional stock repurchase program of up to $75 million of the Company’s common stock.
Item 3.
Defaults upon Senior Securities.
None.
Item 4.
Mine Safety Disclosures.
Not applicable.
Item 5.
Other Information.
On July 28, 2016 , the Company issued a press release announcing its financial results for the three and six months ended June 30, 2016 . The full text of the second quarter financial results press release is attached hereto as Exhibit 99.1 to this Form 10-Q.

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Item 6.
Exhibits.
3.1
 
Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed April 30, 2010.
 
 
 
3.2
 
Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed February 9, 2016.
 
 
 
10.1 *
 
Form of Nonqualified Stock Option Award Agreement
 
 
 
10.2 *
 
Form of Performance Share Unit Award Agreement – Non-U.S.
 
 
 
10.3 *
 
Form of Performance Share Unit Award Agreement – U.S.
 
 
 
10.4 *
 
Form of Restricted Stock Award Agreement – U.S.
 
 
 
10.5 *
 
Form of Restricted Stock Unit Award Agreement – Non-U.S.
 
 
 
10.6
 
Joint Issues and Reverse Earn Out Payment Agreement, dated as of June 3, 2016, by and among Federal
Signal Corporation, FST Canada Inc., Joe Johnson Equipment LLC, Vactor Manufacturing Inc., Joe Johnson
Equipment Inc., JJE Limited Partnership, Joe Johnson Equipment (USA) Inc., and the Shareholders of
Seller named therein. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 3, 2016.
 
 
 
31.1
 
CEO Certification under Section 302 of the Sarbanes-Oxley Act.
 
 
 
31.2
 
CFO Certification under Section 302 of the Sarbanes-Oxley Act.
 
 
 
32.1
 
CEO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.
 
 
 
32.2
 
CFO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.
 
 
 
99.1
 
Second Quarter Financial Results Press Release Dated July 28, 2016.
 
 
 
101.INS
 
XBRL Instance Document.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Label Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document.
*
Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

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SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) 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
 
 
 
Date:
July 28, 2016
/s/ Brian S. Cooper
 
 
Brian S. Cooper
 
 
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

44
EXHIBIT 10.1 NQSO US 1/2016 ____ __, 201_ Federal Signal Corporation 2015 Executive Incentive Compensation Plan Nonqualified Stock Option Award Agreement You have been selected to receive this Nonqualified Stock Option Award (“Award”) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (the “Plan”), as specified below: Participant: Date of Grant: Date of Expiration: Number of Option Shares: Exercise Price: Vesting Schedule: Options shall vest at the times and in the amounts set forth below: ___ on __/__/1_ ___ on __/__/1- ___ on __/__/__ [3-year ratable] This Award is subject to the terms and conditions prescribed in the Plan and in the Federal Signal Corporation Nonqualified Stock Option Award Agreement No. 2016 attached hereto and incorporated herein. Together, this Award and the attached award agreement shall be referred to throughout each as the “Award Agreement.” IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed as of the Date of Grant. PARTICIPANT: FEDERAL SIGNAL CORPORATION By: Print Name Chief Executive Officer Signature Address Participant agrees to execute this Award Agreement and return one copy to Lana Noel at Federal Signal Corporation, 1415 W. 22nd Street, Suite 1100, Oak Brook, IL 60523 within 45 days of the above date or forfeit the stock option award. Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

 
NQSO US 1/2016 6302300.4 This document constitutes part of the prospectus covering securities that have been registered under the Securities Act of 1933, as amended. FEDERAL SIGNAL CORPORATION NONQUALIFIED STOCK OPTION AWARD AGREEMENT NO. 2016 This Award Agreement, which includes the attached cover page, effective as of the Date of Grant, represents the grant of nonqualified stock options (the “Options”) by the Company to the Participant named in this Award Agreement, pursuant to the provisions of the Plan. The Company established the Plan pursuant to which, among other things, options, stock appreciation rights, restricted stock and stock units, stock bonus awards, dividend equivalents and/or performance compensation awards may be granted to eligible persons. The Plan and this Award Agreement provide a complete description of the terms and conditions governing the Options. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Award Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The Board of Directors and the Committee have determined that the interests of the Company will be advanced by encouraging and enabling certain of its employees to own shares of the Stock and that Participant is one of those employees. NOW, THEREFORE, in consideration of services rendered and the mutual covenants herein contained, the parties agree as follows: Section 1. Certain Definitions As used in this Award Agreement, the following terms shall have the following meanings: A. “Affiliate” means with respect to any Person, any other Person (other than an individual) that controls, is controlled by, or is under common control with such Person. The term “control,” as used in this Award Agreement, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. B. “Board of Directors” means the board of directors of the Company. C. “Code” means the Internal Revenue Code of 1986, as amended. D. “Committee” means the Compensation and Benefits Committee of the Board of Directors or a subcommittee or other committee appointed to administer the Plan in accordance with the Plan. E. “Company” means Federal Signal Corporation, a Delaware corporation. F. “Date of Expiration” means the date set forth on this Award Agreement. G. “Date of Grant” means the date set forth on this Award Agreement. H. “Disability” shall have the meaning ascribed to that term in the Company’s long-term disability plan applicable to Participant, or if no such plan exists, at the discretion of the Committee and as determined by the Committee. I. “Exercise Price” means the exercise price set forth on this Award Agreement. J. “Option” means the Company’s nonqualified stock options.

 
NQSO US 1/2016 2 K. “Participant” means the individual shown as the recipient of an award of Options, as set forth on this Award Agreement. L. “Person” means a “person” as such term is used for purposes of 13(d) or 14(d), or any successor section thereto, of the Securities Exchange Act of 1934, as amended, and any successor thereto. M. “Stock” means the common stock of the Company. Section 2. Grant of Stock Options The Company hereby grants to Participant Options to purchase the number of shares of Stock (“Shares”) set forth in this Award Agreement, at the stated Exercise Price, which is equal to 100% of the closing market value of a share of Stock on the Date of Grant, in the manner and subject to the terms and conditions of the Plan and this Award Agreement. Subject to Section 12, each Option shall be exercisable into one Share. This grant of Options shall not confer any right to Participant (or any other participant) to be granted Options or other awards in the future under the Plan. Section 3. Exercise of Stock Options Except as hereinafter provided, Participant may exercise Options held by Participant at any time after the Date of Grant, provided that any such Options have vested according to the vesting schedule set forth in this Award Agreement, and provided that no exercise may occur subsequent to the close of business on the Date of Expiration. Vested Options held by Participant may be exercised in whole or in part, but not for fewer than 100 Shares at any one time, unless fewer than 100 Shares then remain subject to the Options, and the Options are then being exercised as to all such remaining Shares. Participant bears sole responsibility for ensuring that he or she exercises any vested Options prior to the expiration thereof. Section 4. Option Period/Limitations on Exercise Except as set otherwise set forth in this Award Agreement, Participant must exercise all rights under this Award Agreement prior to the tenth anniversary of the Date of Grant (i.e., the Options will expire upon the tenth anniversary if not exercised prior to that date). Participant may sell the Shares acquired via these Options at any time, subject to Company policy on insider trading and stockholding requirements. Section 5. Termination of Employment by Death In the event the employment of Participant is terminated by reason of death, all outstanding Options not yet vested shall become immediately fully vested and, along with all previously vested Options, shall remain exercisable at any time prior to the Date of Expiration, or for one year after the date of death, whichever period is shorter, by such person or persons as shall have been named as Participant’s beneficiary(ies), or by such persons that have acquired Participant’s rights under the Options by will or by the laws of descent and distribution. Section 6. Termination of Employment by Disability In the event the employment of Participant is terminated by reason of Disability, all outstanding Options not yet vested shall become immediately fully vested and, along with all previously vested Options, shall remain exercisable at any time prior to the Date of Expiration, or for one year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. Section 7. Termination of Employment by Retirement In the event the employment of Participant is terminated by reason of Participant’s retirement on terms and conditions authorized in writing by the Committee, the Committee may exercise its discretion at or near Participant’s retirement date to provide that some or all outstanding Options not yet vested shall become immediately fully vested and, along with all previously vested Options, shall remain exercisable at any time prior to the Date of Expiration, or for five years after the date of retirement, whichever period is shorter. In exercising its discretion under this Section 7, the Committee shall consider whether Participant: (A) remained employed in good standing with the Company through Participant’s retirement date; (B) provided reasonable written notice to the Company of Participant’s intention to retire of no less than 12 weeks; (C) materially breached any statutory, contractual, or common law duties owed to Company or any material Company policy, including but not limited to

 
NQSO US 1/2016 3 post-employment non-competition, non-solicitation and confidentiality obligations; and (D) failed in good faith to provide to and perform for Company all reasonably requested duties and responsibilities in connection with the transition of Participant’s duties and responsibilities. In exercising its discretion, the Committee shall also consider: (1) the financial status of the Company; (2) Company performance; (3) Company stock performance; and (4) where appropriate, input from Company management. In the event the Committee does not so exercise its discretion, Participant’s termination of employment by reason of retirement shall be considered a termination of employment for other reasons and Section 8 of this Award Agreement shall govern. Section 8. Termination of Employment for Other Reasons If the employment of Participant shall terminate for any reason other than the reasons set forth in Sections 5, 6 or 7 herein, all previously vested Options shall remain exercisable for a period of three months from the effective date of termination. For the avoidance of doubt, termination of employment on account of a Divestiture of a Business Segment shall result in any vested Options remaining exercisable for a period of three months from the Divestiture Date. Any Options not yet vested as of the date of termination (after first taking into account the accelerated vesting provisions of Sections 5, 6, 7, and 10) shall be forfeited. The transfer of employment of Participant between the Company and any Affiliate (or between Affiliates) shall not be deemed a termination of employment for purposes of this Award Agreement. For the avoidance of doubt, in instances involving the termination of Participant’s employment, the reason for the termination of Participant’s employment (i.e., death, Disability, retirement, for other reasons, or Divestiture of Business Segment) shall control the vesting and exercising implications. For example, Participant’s death or Disability following Participant’s termination of employment by reason of retirement shall not impact the vesting or exercising of Options which shall continue to be governed by Section 7. Section 9. Change-in-Control In the event Participant is employed by the Company or its Affiliates on a date when a Change-in-Control occurs, Participant’s right to exercise these Options shall become immediately fully vested as of the date of the Change-In-Control, and shall remain exercisable until the Date of Expiration; unless such right of exercisability is terminated early pursuant to Sections 5 through 8 of this Award Agreement. Section 10. Acceleration of Vesting of Options in the Event of Divestiture of Business Segment If the “Business Segment” (as that term is defined in this Section) in which Participant is primarily employed as of the “Divestiture Date” (as that term is defined in this Section) is the subject of a “Divestiture of a Business Segment” (as that term is defined in this Section), and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason, Participant shall immediately vest in any Options subject to this Award Agreement that have not previously vested and any such Options shall become immediately exercisable as of the Divestiture Date. In accordance with Section 8 above, any Options for which vesting is accelerated under this Section 10, and any Options that have vested prior to the Divestiture Date, shall remain exercisable for a period of three months from the Divestiture Date For purposes of this Award Agreement, the term “Business Segment” shall mean a business line which the Company treats as a separate operating segment under the segment reporting rules under U.S. generally accepted accounting principles, which currently includes the following: Safety and Security Systems Group and Environmental Solutions Group. Likewise, the term “Divestiture Date” shall mean the date that a transaction constituting a Divestiture of a Business Segment is finally consummated. For purposes of this Award Agreement, the term “Divestiture of a Business Segment” means the following: A. When used with a reference to the sale of stock or other securities of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company or one of its Affiliates to “Nonaffiliated Persons” (as that term is defined in this Section) of 100% of either (i) the then-outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; B. When used with reference to the merger or consolidation of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, any such transaction

 
NQSO US 1/2016 4 that results in Nonaffiliated Persons owning, either beneficially or of record or both, 100% of either (i) the then- outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; or C. When used with reference to the sale of the assets of the Business Segment, the sale, exchange, transfer, liquidation, distribution or other disposition of all or substantially all of the assets of the Business Segment necessary or required to operate the Business Segment in the manner that the Business Segment had been operated prior to the Divestiture Date. For purposes of this Award Agreement, the term “Nonaffiliated Persons” shall mean any persons or business entities which do not control, or which are not controlled by or under common control with, the Company. Section 11. Restrictions on Transfer Unless determined otherwise by the Committee pursuant to the terms of the Plan, these Options may not be sold, transferred, alienated, assigned, pledged, encumbered or otherwise hypothecated, other than by will or by the laws of descent and distribution. Further, these Options shall be exercisable during Participant’s lifetime only by Participant or Participant’s legal representative. Section 12. Adjustment in Certain Events If there is any change in the Stock by reason of stock dividends or other distribution (whether in the form of securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Shares or other securities of the Company, or other similar corporate transaction or event, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, the Committee may, in its sole discretion, make such adjustments to these Options that it deems necessary or appropriate and as it may deem equitable in Participant’s rights. Section 13. Method of Exercise and Form of Payment Options that have become exercisable may be exercised by delivery of timely written notice to the Company at its executive offices, addressed to the attention of the Company’s Corporate Secretary. Such notice: (A) shall be signed by Participant or his or her legal representative; (B) shall specify the number of Options being exercised and thus the number of full Shares then elected to be purchased with respect to the Options; and (C) shall be accompanied by payment (or promise to pay, as applicable) in full of the Exercise Price of the Shares to be purchased (along with an amount equal to any federal, state, local, and non-U.S. income and employment taxes required to be withheld). The Exercise Price shall be payable: (a) in cash, check, cash equivalent and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Stock in lieu of actual delivery of such shares to the Company); or (b) by such other method as the Committee may permit in its sole discretion, including without limitation: (i) in other property having a fair market value on the date of exercise equal to the Exercise Price, (ii) if there is a public market for the shares of Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price, or (iii) by a “net exercise” method whereby the Company withholds from the delivery of the Shares for which the Option was exercised that number of Shares having a Fair Market Value equal to the aggregate Exercise Price for the Shares for which the Option was exercised. Any fractional Shares shall be settled in cash. The Company shall deliver to Participant evidence of book entry Shares, or upon Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option. The Company shall maintain a record of all information pertaining to Participant’s rights under this Award Agreement, including the number of Shares for which the Options are exercisable. If all of the Options granted pursuant to this Award Agreement have been exercised, this Award Agreement shall be null and void.

 
NQSO US 1/2016 5 Section 14. Beneficiary Designation Participant may designate a beneficiary or beneficiaries (contingently or successively) to receive any benefits that may be payable under this Award Agreement in the event of Participant’s death and, from time to time, may change his or her designated beneficiary (a “Beneficiary”). A Beneficiary may be a trust. A Beneficiary designation shall be made in writing in a form prescribed by the Company and delivered to the Company while Participant is alive. Section 15. Stockholder Rights Participant shall have no rights as a stockholder of the Company with respect to the Shares subject to this Award Agreement until such time as the Exercise Price has been paid, and the Shares have been issued and delivered to Participant. Section 16. Tax Withholding The Company shall have the power and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including Participant’s FICA obligation), domestic or foreign, required by law to be withheld with respect to any exercise of Participant’s rights under this Award Agreement. Participant may elect, subject to any procedural rules adopted by the Committee, to satisfy the minimum statutory withholding requirement, in whole or in part, by having the Company withhold Shares having an aggregate fair market value on the date the tax is to be determined, equal to such minimum statutory withholding tax. Section 17. Section 409A This Award Agreement shall be construed consistent with the intention that it be exempt from Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”) as a stock right. However, notwithstanding any other provision of the Plan or this Award Agreement, if at any time the Committee determines that this Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Award Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for this Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Section 18. Continuation of Employment This Award Agreement shall not confer upon Participant any right to continuation of employment by the Company or its Affiliates, nor shall this Award Agreement interfere in any way with the Company’s or its Affiliates’ right to terminate Participant’s employment at any time. Section 19. Entire Award; Amendment This Award Agreement and the Plan constitute the entire agreement between the parties with respect to the terms and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The terms and conditions set forth in this Award Agreement may only be modified or amended in writing, signed by both parties. Section 20. Severability In the event any one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in any way be affected or impaired thereby. Section 21. Miscellaneous A. This Award Agreement and the rights of Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions

 
NQSO US 1/2016 6 on any Shares acquired pursuant to these Options, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under applicable federal and state tax law, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon Participant. B. The Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may materially and adversely affect Participant’s rights under this Award Agreement, without the written consent of Participant. C. Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities and tax laws in exercising his or her rights under this Award Agreement. D. This Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. E. This Award (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any clawback policy currently or subsequently implemented by the Company to the extent set forth in such policy. F. All obligations of the Company under the Plan and this Award Agreement, with respect to these Options, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. G. To the extent not preempted by federal law, this Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflict of law.

 
NQSO US 1/2016 7 FEDERAL SIGNAL CORPORATION NONQUALIFIED STOCK OPTION AWARD BENEFICIARY DESIGNATION Participant: Social Security No.: Address: Date of Birth: Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust): Primary Beneficiary(ies) Contingent Beneficiary(ies) Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when the Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by the Company, all in such manner as specified by the Company from time to time, or on a future date specified by any such new or amended Beneficiary Designation form. IN WITNESS WHEREAS, the parties have executed this Beneficiary Designation on the date designated below. Date: , Signature of Participant Received: FEDERAL SIGNAL CORPORATION Date: , By:

 
EXHIBIT 10.2 PSU non-US 1/2016 ___ __, 201_ Federal Signal Corporation 2015 Executive Incentive Compensation Plan Performance Share Unit Award Agreement You have been selected to receive this Performance Share Units (“PSUs”) award (“Award”) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (the “Plan”), as specified below: Participant: Date of Grant: Number of PSUs Subject to this Award Agreement: Performance and Vesting Periods: January 1, 201_ through December 31, 201_ [3-year period] This Award is subject to the terms and conditions prescribed in the Plan and in the Federal Signal Corporation Performance Share Unit Award Agreement No. 2016 attached hereto and incorporated herein. Together, this Award and the attached award agreement shall be referred to throughout each as the “Award Agreement.” Calculations of performance versus target, threshold and maximum values set forth in Appendix A are made by the Committee in accordance with the terms of the Plan and are final and binding. IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed as of the Date of Grant. PARTICIPANT FEDERAL SIGNAL CORPORATION By: Print Name Chief Executive Officer Signature Address Participant agrees to execute this Award Agreement and return one copy to Lana Noel at Federal Signal Corporation, 1415 W. 22nd Street, Suite 1100, Oak Brook, IL 60523 within 45 days of the above date or forfeit the performance share unit award. Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

 
PSU non-US 1/2016 6302307.4 This document constitutes part of the prospectus covering securities that have been registered under the Securities Act of 1933, as amended. FEDERAL SIGNAL CORPORATION PERFORMANCE SHARE UNIT AWARD AGREEMENT NO. 2016 This Award Agreement, which includes the attached cover page and Appendix A, effective as of the Date of Grant, represents the grant of PSUs by the Company to Participant, pursuant to the provisions of the Plan. The Company established the Plan pursuant to which, among other things, options, stock appreciation rights, restricted stock and stock units, stock bonus awards, dividend equivalents and/or performance compensation awards may be granted to eligible persons. The Plan and this Award Agreement provide a complete description of the terms and conditions governing the PSUs. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Award Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The Board of Directors and the Committee have determined that the interests of the Company will be advanced by encouraging and enabling certain of its employees to own shares of Stock, and that Participant is one of those employees. NOW, THEREFORE, in consideration of services rendered and the mutual covenants herein contained, the parties agree as follows: Section 1. Certain Definitions As used in this Award Agreement, the following terms shall have the following meanings: A. “Affiliate” means with respect to any Person, any other Person (other than an individual) that controls, is controlled by, or is under common control with such Person. The term “control,” as used in this Award Agreement, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. B. “Award” means the award provided for in Section 2. C. “Board of Directors” means the board of directors of the Company. D. “Code” means the Internal Revenue Code of 1986, as amended. E. “Committee” means the Compensation and Benefits Committee of the Board of Directors or a subcommittee or other committee appointed to administer the Plan in accordance with the Plan. F. “Company” means Federal Signal Corporation, a Delaware corporation. G. “Date of Grant” means the date set forth on this Award Agreement. H. “Disability” shall have the meaning ascribed to that term in the Company’s long-term disability plan applicable to Participant, or if no such plan exists, at the discretion of the Committee and as determined by the Committee. I. “Participant” means the individual shown as the recipient of an award of PSUs, as set forth on this Award Agreement. J. “Performance Period” means the three consecutive calendar year period set forth in this Award Agreement. K. “Performance Share Units” or “PSUs” means the obligation of the Company to transfer the number of shares of Stock to Participant determined under Section 2, Section 4A (in the case of death or termination of employment by Disability), Section 4B (in the case of Change-in-Control), or Section 5 (in the case of Divestiture of a Business Segment) of this Award Agreement, as applicable, at the time provided in Section 6 of this Award Agreement, to the extent that the rights to such shares are vested at such time.

 
PSU non-US 1/2016 2 6302307.4 L. “Person” means a “person” as such term is used for purposes of 13(d) or 14(d), or any successor section thereto, of the Securities Exchange Act of 1934, as amended, and any successor thereto. M. “Stock” means the common stock of the Company. N. “Vesting Period” means the three consecutive calendar year period set forth in this Award Agreement. Section 2. Award Subject to the terms of this Award Agreement, the Company awarded to Participant the number of PSUs set forth on this Award Agreement, effective as of the Date of Grant set forth on such instrument. This Award entitles Participant to receive a whole number of shares of Stock as set forth on this Award Agreement equal to a percentage, from zero to 200%, based on the Company’s performance against the performance goals set forth, and as calculated in, Appendix A. The number of shares of Stock determined based on the Company’s performance against the performance goals set forth in Appendix A (or, if applicable, the formula set forth in Section 4A (in the case of death or termination of employment by Disability), the formula set forth in Section 4B (in the case of a Change-in-Control), or Section 5 (in the case of Divestiture of a Business Segment)), shall be distributable as provided in Section 6 of this Award Agreement, but only to the extent the rights to such shares are vested under either Section 4 or Section 5 of this Award Agreement. This grant of PSUs shall not confer any right to Participant (or any other participant) to be granted PSUs or other awards in the future under the Plan. It is intended that this Award qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything to the contrary in this Award Agreement, the number of shares of Stock that may be earned under this Award Agreement cannot exceed the maximum number of shares of Stock provided for under the Plan. Section 3. Bookkeeping Account The Company shall record the number of PSUs subject to this Award Agreement to a bookkeeping account for Participant (the “Performance Share Unit Account”), subject to adjustment based on performance as set forth in Section 2 above. Participant’s Performance Share Unit Account shall be reduced by the number of PSUs, if any, forfeited in accordance with Section 4 and by the number of PSUs with respect to which shares of Stock were transferred to Participant in accordance with Section 6. Section 4. Vesting Subject to the accelerated vesting provisions provided below, the number of PSUs determined under Section 2 above shall vest on the last day of the Vesting Period, if Participant remains employed by the Company or its Affiliate through such date. For the avoidance of doubt, if the Company fails to achieve a performance goal at the threshold level, Participant shall be entitled to receive no shares of Stock subject to such performance goal, unless the deemed performance provisions in this Section specifically modify such result. If, during the Performance and Vesting Periods, while employed by the Company or its Affiliates: A. Participant dies or his or her employment terminates by reason of Disability, the number of vested PSUs subject to the Award shall be equal to the product of: (1) the number of full and partial months of Participant’s employment during the Performance Period divided by 36 and (2) the greater of (a) 100% of the PSUs subject to this Award Agreement, regardless of actual performance or (b) the number of PSUs that Participant would have been payable to Participant at the end of Performance Period based on actual Company performance during the entire Performance Period. B. A Change-in-Control occurs, the number of vested PSUs subject to this Award shall be the greater of (1) 100% of the PSUs subject to this Award Agreement, regardless of actual performance or (2) the number of PSUs that would have been payable to Participant for the Performance Period based on the Company’s best estimate of projected Company performance through the end of the Performance Period, determined at the date of the Change-in-Control. In the event of a Change-in-Control following an event that would otherwise enable vesting at

 
PSU non-US 1/2016 3 6302307.4 the end of the Performance and Vesting Periods under Section 4A, the provisions of this Section 4B shall control. For the avoidance of doubt, vesting under this Section 4B is not calculated on a pro-rata basis. C. Except as provided in Section 5 below, and in certain limited instances where the Committee may exercise its discretion in determining the vesting implications of PSUs, if Participant’s employment with the Company and its Affiliates terminates for any other reason before the end of the Performance and Vesting Periods, all PSUs that are not vested at the time of such termination of employment (after first taking into account the accelerated vesting provisions of this Section 4) shall be forfeited. In the event of termination of employment (whether or not in breach of local labor laws), the Company shall have the exclusive discretion to determine the date of termination of employment for purposes of this Award. Such termination date shall be the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law). Section 5. Acceleration of Vesting of Shares in the Event of Divestiture of Business Segment If the “Business Segment” (as that term is defined in this Section) in which Participant is primarily employed as of the “Divestiture Date” (as that term is defined in this Section) is the subject of a “Divestiture of a Business Segment” (as that term is defined in this Section) during the Performance and Vesting Periods, and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason during the Performance Period, the number of vested PSUs subject to the Award shall be equal to the product of: (1) the number of full and partial months of Participant’s employment during the Performance Period before the Divestiture Date, divided by 36 and (2) 100% of the PSUs subject to this Award Agreement, regardless of actual performance. For purposes of this Award Agreement, the term “Business Segment” shall mean a business line which the Company treats as a separate operating segment under the segment reporting rules under U.S. generally accepted accounting principles, which currently includes the following: Safety and Security Systems Group and Environmental Solutions Group. Likewise, the term “Divestiture Date” shall mean the date that a transaction constituting a Divestiture of a Business Segment is finally consummated. For purposes of this Award Agreement, the term “Divestiture of a Business Segment” means the following: A. When used with a reference to the sale of stock or other securities of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company or one of its Affiliates to “Nonaffiliated Persons” (as that term is defined in this Section) of 100% of either (i) the then-outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; B. When used with reference to the merger or consolidation of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, any such transaction that results in Nonaffiliated Persons owning, either beneficially or of record or both, 100% of either (i) the then- outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; or C. When used with reference to the sale of the assets of the Business Segment, the sale, exchange, transfer, liquidation, distribution or other disposition of all or substantially all of the assets of the Business Segment necessary or required to operate the Business Segment in the manner that the Business Segment had been operated prior to the Divestiture Date. For purposes of this Award Agreement, the term “Nonaffiliated Persons” shall mean any persons or business entities which do not control, or which are not controlled by or under common control with, the Company. Section 6. Distribution of Shares A. Except as specifically provided to the contrary in Section 6B, the number of shares of Stock payable with respect to PSUs, as determined under Section 2 above, that become vested under this Award shall become distributable as of the end of the Vesting Period and shall be paid not later than March 15, 2019; provided however, that if it is impracticable to pay such shares of Stock by such date (e.g., due to the unavailability of audited

 
PSU non-US 1/2016 4 6302307.4 financial statements or a Form S-8 registration statement for the shares), then the Committee may delay payment until it becomes administratively practicable to do so later that same year. B. The number of shares of Stock payable with respect to PSUs, as determined under Section 2 above, that vest prior to the end of the Vesting Period under either Section 4B or Section 5 of this Award Agreement shall become distributable on an accelerated basis as follows: (1) If a Change-in-Control occurs at any time before the end of the Vesting Period, then the number of earned shares of Stock with respect to PSUs that become vested under Section 4B of this Award Agreement shall become distributable on the date of the Change-in-Control. (2) If a Divestiture of a Business Segment occurs at any time before the end of the Vesting Period, and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason, then the number of earned shares of Stock with respect to PSUs that become vested under this Award Agreement shall become distributable on the Divestiture Date, but only if that payment on that date is permissible under Section 409A of the Code. Section 7. Stockholder Rights Participant shall not have any of the rights of a stockholder of the Company with respect to PSUs until shares of Stock are issued to Participant. No dividend equivalent rights are provided under this Award Agreement. Section 8. Beneficiary Designation Participant may designate a beneficiary or beneficiaries (contingently or successively) to receive any benefits that may be payable under this Award Agreement in the event of Participant’s death and, from time to time, may change his or her designated beneficiary (a “Beneficiary”). A Beneficiary may be a trust. A Beneficiary designation shall be made in writing in a form prescribed by the Company and delivered to the Company while Participant is alive. In lieu of payment to Participant, a Beneficiary shall be paid shares of Stock under Section 6 at the same time and in the same form as Participant would have been paid but for Participant’s death. Section 9. Restrictions on Transfer PSUs awarded hereunder shall not be transferable by Participant. Except as may be required by the federal income tax withholding provisions of the Code or by the tax laws of any state or foreign sovereign, the interests of Participant and his or her Beneficiary(ies) under this Award Agreement are not subject to the claims of their respective creditors and may not be voluntarily or involuntarily sold, assigned, transferred, alienated, pledged, attached, encumbered or charged. Any attempt by Participant or a Beneficiary to sell, assign, transfer, alienate, pledge, attach, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. Section 10. Adjustment in Certain Events If there is any change in the Stock by reason of stock dividends or other distribution (whether in the form of securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Stock or other securities of the Company, or other similar corporate transaction or event, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, the Committee may, in its sole discretion, make such adjustments to the number of PSUs credited to Participant’s Performance Share Unit Account that it deems necessary or appropriate and as it may deem equitable in Participant’s rights. Section 11. Tax Withholding Regardless of any action the Company, any of its Affiliates and/or Participant's employer takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or any of its affiliates. Participant further acknowledges that the Company and/or its Affiliates: (i) make no representations or undertakings regarding the treatment of any Tax- Related Items in connection with any aspect of the Performance Share Units, including, but not limited to, the grant, vesting or exercise of the Performance Share Units, the delivery of shares of Stock, the subsequent sale of shares acquired pursuant to such delivery and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of any award to reduce or eliminate Participant’s liability for Tax-Related Items or

 
PSU non-US 1/2016 5 6302307.4 achieve any particular tax result. Further, if Participant becomes subject to tax in more than one jurisdiction between the Date of Grant and the date of any relevant taxable event, Participant acknowledges that the Company and/or its Affiliates may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Prior to any relevant taxable or tax withholding event, as applicable, Participant will pay or make adequate arrangements satisfactory to the Company and/or its Affiliates to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or its Affiliates, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: A. withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or its Affiliates; or B. withholding in shares of Stock to be delivered upon distribution of the Performance Share Units. To avoid negative accounting treatment, the Company and/or its Affiliates may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in shares of Stock, for tax purposes, Participant is deemed to have been issued the full number of shares attributable to the Performance Share Units, notwithstanding that a number of shares of Stock are held back solely for the purpose of paying the Tax- Related Items due as a result of any aspect of Participant’s participation in the Plan. Finally, Participant shall pay to the Company and/or its Affiliates any amount of Tax-Related Items that the Company and/or its Affiliates may be required to withhold or account for as a result of Participant’s participation in the Plan that are not satisfied by the means previously described. The Company may refuse to issue or deliver the Shares if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items. Section 12. Section 409A This Award Agreement shall be construed consistent with the intention that it be exempt from Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan or this Award Agreement, if at any time the Committee determines that this Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Award Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for this Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Section 13. Source of Payment Shares of Stock transferable to Participant, or Participant’s Beneficiary, under this Award Agreement may be either Treasury shares, authorized but unissued shares, or any combination of such stock. The Company shall have no duties to segregate or set aside any assets to secure Participant’s right to receive shares of Stock under this Award Agreement. Participant shall not have any rights with respect to transfer of shares of Stock under this Award Agreement other than the unsecured right to receive shares of Stock from the Company. Section 14. Continuation of Employment This Award Agreement shall not confer upon Participant any right to continuation of employment by the Company or its Affiliates, nor shall this Award Agreement interfere in any way with the Company’s or its Affiliates’ right to terminate t Participant’s employment at any time. Section 15. English Language Participant acknowledges and agrees that it is Participant’s express intent that this Award Agreement, the Plan and all other documents, rules, procedures, forms, notices and legal proceedings entered into, given or instituted pursuant to the Award, be drawn up in English. If Participant has received this Award Agreement, the Plan or any other rules, procedures, forms or documents related to the Award translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control.

 
PSU non-US 1/2016 6 6302307.4 Section 16. Entire Award; Amendment This Award Agreement and the Plan constitute the entire agreement between the parties with respect to the terms and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The terms and conditions set forth in this Award Agreement may only be modified or amended in writing, signed by both parties. Section 17. Severability In the event any one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in any way be affected or impaired thereby. Section 18. Miscellaneous A. This Award Agreement and the rights of Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Stock acquired pursuant to this Award Agreement, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under applicable federal and state tax law, under the requirements of any stock exchange or market upon which such Stock is then listed and/or traded, and under any blue sky or state securities laws applicable to such Stock. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon Participant. B. The Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may materially and adversely affect Participant’s vested rights under this Award Agreement, without the written consent of Participant. C. Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities and tax laws in exercising his or her rights under this Award Agreement. D. This Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. E. This Award (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Stock underlying the Award) shall be subject to the provisions of any clawback policy currently or subsequently implemented by the Company to the extent set forth in such policy. F. All obligations of the Company under the Plan and this Award Agreement, with respect to these PSUs, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. G. To the extent not preempted by federal law, this Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflict of law.

 
PSU non-US 1/2016 7 6302307.4 FEDERAL SIGNAL CORPORATION PERFORMANCE SHARE UNIT BENEFICIARY DESIGNATION Participant: Social Security No.: Address: Date of Birth: Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust): Primary Beneficiary(ies) Contingent Beneficiary(ies) Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when the Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by the Company, all in such manner as specified by the Company from time to time, or on a future date specified by any such new or amended Beneficiary Designation form. IN WITNESS WHEREOF, the parties have executed this Beneficiary Designation on the date designated below. Date: _________________, ____ Signature of Participant Received: FEDERAL SIGNAL CORPORATION Date: _________________, ____ By:

 
EXHIBIT 10.3 PSU US 1/2016 ____ ___, 201_ Federal Signal Corporation 2015 Executive Incentive Compensation Plan Performance Share Unit Award Agreement You have been selected to receive this Performance Share Units (“PSUs”) award (“Award”) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (the “Plan”), as specified below: Participant: Date of Grant: Number of PSUs Subject to this Award Agreement: Performance and Vesting Periods: January 1, 201_ through December 31, 201_ [3-year period] This Award is subject to the terms and conditions prescribed in the Plan and in the Federal Signal Corporation Performance Share Unit Award Agreement No. 2016 attached hereto and incorporated herein. Together, this Award and the attached award agreement shall be referred to throughout each as the “Award Agreement.” Calculations of performance versus target, threshold and maximum values set forth in Appendix A are made by the Committee in accordance with the terms of the Plan and are final and binding. IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed as of the Date of Grant. PARTICIPANT FEDERAL SIGNAL CORPORATION By: Print Name Chief Executive Officer Signature Address Participant agrees to execute this Award Agreement and return one copy to Lana Noel at Federal Signal Corporation, 1415 W. 22nd Street, Suite 1100, Oak Brook, IL 60523 within 45 days of the above date or forfeit the performance share unit award. Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

 
PSU US 1/20-16 This document constitutes part of the prospectus covering securities that have been registered under the Securities Act of 1933, as amended. FEDERAL SIGNAL CORPORATION PERFORMANCE SHARE UNIT AWARD AGREEMENT NO. 2016 This Award Agreement, which includes the attached cover page and Appendix A, effective as of the Date of Grant, represents the grant of PSUs by the Company to Participant, pursuant to the provisions of the Plan. The Company established the Plan pursuant to which, among other things, options, stock appreciation rights, restricted stock and stock units, stock bonus awards, dividend equivalents and/or performance compensation awards may be granted to eligible persons. The Plan and this Award Agreement provide a complete description of the terms and conditions governing the PSUs. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Award Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The Board of Directors and the Committee have determined that the interests of the Company will be advanced by encouraging and enabling certain of its employees to own shares of Stock, and that Participant is one of those employees. NOW, THEREFORE, in consideration of services rendered and the mutual covenants herein contained, the parties agree as follows: Section 1. Certain Definitions As used in this Award Agreement, the following terms shall have the following meanings: A. “Affiliate” means with respect to any Person, any other Person (other than an individual) that controls, is controlled by, or is under common control with such Person. The term “control,” as used in this Award Agreement, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. B. “Award” means the award provided for in Section 2. C. “Board of Directors” means the board of directors of the Company. D. “Code” means the Internal Revenue Code of 1986, as amended. E. “Committee” means the Compensation and Benefits Committee of the Board of Directors or a subcommittee or other committee appointed to administer the Plan in accordance with the Plan. F. “Company” means Federal Signal Corporation, a Delaware corporation. G. “Date of Grant” means the date set forth on this Award Agreement. H. “Disability” shall have the meaning ascribed to that term in the Company’s long-term disability plan applicable to Participant, or if no such plan exists, at the discretion of the Committee and as determined by the Committee. I. “Participant” means the individual shown as the recipient of an award of PSUs, as set forth on this Award Agreement. J. “Performance Period” means the three consecutive calendar year period set forth in this Award Agreement. K. “Performance Share Units” or “PSUs” means the obligation of the Company to transfer the number of shares of Stock to Participant determined under Section 2, Section 4A (in the case of death or termination of employment by Disability), Section 4B (in the case of Change-in-Control), or Section 5 (in the case of Divestiture of a Business Segment) of this Award Agreement, as applicable, at the time provided in Section 6 of this Award Agreement, to the extent that the rights to such shares are vested at such time.

 
PSU US 1/2016 2 L. “Person” means a “person” as such term is used for purposes of 13(d) or 14(d), or any successor section thereto, of the Securities Exchange Act of 1934, as amended, and any successor thereto. M. “Stock” means the common stock of the Company. N. “Vesting Period” means the three consecutive calendar year period set forth in this Award Agreement. Section 2. Award Subject to the terms of this Award Agreement, the Company awarded to Participant the number of PSUs set forth on this Award Agreement, effective as of the Date of Grant set forth on such instrument. This Award entitles Participant to receive a whole number of shares of Stock as set forth on this Award Agreement equal to a percentage, from zero to 200%, based on the Company’s performance against the performance goals set forth, and as calculated in, Appendix A. The number of shares of Stock determined based on the Company’s performance against the performance goals set forth in Appendix A (or, if applicable, the formula set forth in Section 4A (in the case of death or termination of employment by Disability), the formula set forth in Section 4B (in the case of a Change-in-Control), or Section 5 (in the case of Divestiture of a Business Segment)), shall be distributable as provided in Section 6 of this Award Agreement, but only to the extent the rights to such shares are vested under either Section 4 or Section 5 of this Award Agreement. This grant of PSUs shall not confer any right to Participant (or any other participant) to be granted PSUs or other awards in the future under the Plan. It is intended that this Award qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything to the contrary in this Award Agreement, the number of shares of Stock that may be earned under this Award Agreement cannot exceed the maximum number of shares of Stock provided for under the Plan. Section 3. Bookkeeping Account The Company shall record the number of PSUs subject to this Award Agreement to a bookkeeping account for Participant (the “Performance Share Unit Account”), subject to adjustment based on performance as set forth in Section 2 above. Participant’s Performance Share Unit Account shall be reduced by the number of PSUs, if any, forfeited in accordance with Section 4 and by the number of PSUs with respect to which shares of Stock were transferred to Participant in accordance with Section 6. Section 4. Vesting Subject to the accelerated vesting provisions provided below, the number of PSUs determined under Section 2 above shall vest on the last day of the Vesting Period, if Participant remains employed by the Company or its Affiliate through such date. For the avoidance of doubt, if the Company fails to achieve a performance goal at the threshold level, Participant shall be entitled to receive no shares of Stock subject to such performance goal, unless the deemed performance provisions in this Section specifically modify such result. If, during the Performance and Vesting Periods, while employed by the Company or its Affiliates: A. Participant dies or his or her employment terminates by reason of Disability, the number of vested PSUs subject to the Award shall be equal to the product of: (1) the number of full and partial months of Participant’s employment during the Performance Period divided by 36 and (2) the greater of (a) 100% of the PSUs subject to this Award Agreement, regardless of actual performance or (b) the number of PSUs that Participant would have been payable to Participant at the end of Performance Period based on actual Company performance during the entire Performance Period. B. A Change-in-Control occurs, the number of vested PSUs subject to this Award shall be the greater of (1) 100% of the PSUs subject to this Award Agreement, regardless of actual performance or (2) the number of PSUs that would have been payable to Participant for the Performance Period based on the Company’s best estimate of projected Company performance through the end of the Performance Period, determined at the date of the Change-in-Control. In the event of a Change-in-Control following an event that would otherwise enable vesting at

 
PSU US 1/2016 3 the end of the Performance and Vesting Periods under Section 4A, the provisions of this Section 4B shall control. For the avoidance of doubt, vesting under this Section 4B is not calculated on a pro-rata basis. C. Except as provided in Section 5 below, and in certain limited instances where the Committee may exercise its discretion in determining the vesting implications of PSUs, if Participant’s employment with the Company and its Affiliates terminates for any other reason before the end of the Performance and Vesting Periods, all PSUs that are not vested at the time of such termination of employment (after first taking into account the accelerated vesting provisions of this Section 4) shall be forfeited. Section 5. Acceleration of Vesting of Shares in the Event of Divestiture of Business Segment If the “Business Segment” (as that term is defined in this Section) in which Participant is primarily employed as of the “Divestiture Date” (as that term is defined in this Section) is the subject of a “Divestiture of a Business Segment” (as that term is defined in this Section) during the Performance and Vesting Periods, and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason during the Performance Period, the number of vested PSUs subject to the Award shall be equal to the product of: (1) the number of full and partial months of Participant’s employment during the Performance Period before the Divestiture Date, divided by 36 and (2) 100% of the PSUs subject to this Award Agreement, regardless of actual performance. For purposes of this Award Agreement, the term “Business Segment” shall mean a business line which the Company treats as a separate operating segment under the segment reporting rules under U.S. generally accepted accounting principles, which currently includes the following: Safety and Security Systems Group and Environmental Solutions Group. Likewise, the term “Divestiture Date” shall mean the date that a transaction constituting a Divestiture of a Business Segment is finally consummated. For purposes of this Award Agreement, the term “Divestiture of a Business Segment” means the following: A. When used with a reference to the sale of stock or other securities of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company or one of its Affiliates to “Nonaffiliated Persons” (as that term is defined in this Section) of 100% of either (i) the then-outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; B. When used with reference to the merger or consolidation of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, any such transaction that results in Nonaffiliated Persons owning, either beneficially or of record or both, 100% of either (i) the then- outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; or C. When used with reference to the sale of the assets of the Business Segment, the sale, exchange, transfer, liquidation, distribution or other disposition of all or substantially all of the assets of the Business Segment necessary or required to operate the Business Segment in the manner that the Business Segment had been operated prior to the Divestiture Date. For purposes of this Award Agreement, the term “Nonaffiliated Persons” shall mean any persons or business entities which do not control, or which are not controlled by or under common control with, the Company. Section 6. Distribution of Shares A. Except as specifically provided to the contrary in Section 6B, the number of shares of Stock payable with respect to PSUs, as determined under Section 2 above, that become vested under this Award shall become distributable as of the end of the Vesting Period and shall be paid not later than March 15, 2019 provided however, that if it is impracticable to pay such shares of Stock by such date (e.g., due to the unavailability of audited financial statements or a Form S-8 registration statement for the shares), then the Committee may delay payment until it becomes administratively practicable to do so later that same year.

 
PSU US 1/2016 4 B. The number of shares of Stock payable with respect to PSUs, as determined under Section 2 above, that vest prior to the end of the Vesting Period under either Section 4B or Section 5 of this Award Agreement shall become distributable on an accelerated basis as follows: (1) If a Change-in-Control occurs at any time before the end of the Vesting Period, then the number of earned shares of Stock with respect to PSUs that become vested under Section 4B of this Award Agreement shall become distributable on the date of the Change-in-Control. (2) If a Divestiture of a Business Segment occurs at any time before the end of the Vesting Period, and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason, then the number of earned shares of Stock with respect to PSUs that become vested under this Award Agreement shall become distributable on the Divestiture Date, but only if that payment on that date is permissible under Section 409A of the Code. Section 7. Stockholder Rights Participant shall not have any of the rights of a stockholder of the Company with respect to PSUs until shares of Stock are issued to Participant. No dividend equivalent rights are provided under this Award Agreement. Section 8. Beneficiary Designation Participant may designate a beneficiary or beneficiaries (contingently or successively) to receive any benefits that may be payable under this Award Agreement in the event of Participant’s death and, from time to time, may change his or her designated beneficiary (a “Beneficiary”). A Beneficiary may be a trust. A Beneficiary designation shall be made in writing in a form prescribed by the Company and delivered to the Company while Participant is alive. In lieu of payment to Participant, a Beneficiary shall be paid shares of Stock under Section 6 at the same time and in the same form as Participant would have been paid but for Participant’s death. Section 9. Restrictions on Transfer PSUs awarded hereunder shall not be transferable by Participant. Except as may be required by the federal income tax withholding provisions of the Code or by the tax laws of any State, the interests of Participant and his or her Beneficiary(ies) under this Award Agreement are not subject to the claims of their respective creditors and may not be voluntarily or involuntarily sold, assigned, transferred, alienated, pledged, attached, encumbered or charged. Any attempt by Participant or a Beneficiary to sell, assign, transfer, alienate, pledge, attach, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. Section 10. Adjustment in Certain Events If there is any change in the Stock by reason of stock dividends or other distribution (whether in the form of securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Stock or other securities of the Company, or other similar corporate transaction or event, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, the Committee may, in its sole discretion, make such adjustments to the number of PSUs credited to Participant’s Performance Share Unit Account that it deems necessary or appropriate and as it may deem equitable in Participant’s rights. Section 11. Tax Withholding The Company shall not be obligated to transfer any shares of Stock until Participant pays to the Company or any of its Affiliates in cash, or any other form of property, including Stock, acceptable to the Company, the amount required to be withheld from the wages or other amounts owing to Participant with respect to such shares. Participant may elect to have such withholding satisfied by a reduction of the number of shares of Stock otherwise transferable under this Award Agreement at such time, such reduction to be calculated based on the closing market price of the Stock on the day Participant gives written notice of such election to the Company. Section 12. Section 409A This Award Agreement shall be construed consistent with the intention that it be exempt from Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan or this Award Agreement, if at any time the Committee determines that this Award (or any portion thereof) may be subject to Section 409A, the

 
PSU US 1/2016 5 Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Award Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for this Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Section 13. Source of Payment Shares of Stock transferable to Participant, or Participant’s Beneficiary, under this Award Agreement may be either Treasury shares, authorized but unissued shares, or any combination of such stock. The Company shall have no duties to segregate or set aside any assets to secure Participant’s right to receive shares of Stock under this Award Agreement. Participant shall not have any rights with respect to transfer of shares of Stock under this Award Agreement other than the unsecured right to receive shares of Stock from the Company. Section 14. Continuation of Employment This Award Agreement shall not confer upon Participant any right to continuation of employment by the Company or its Affiliates, nor shall this Award Agreement interfere in any way with the Company’s or its Affiliates’ right to terminate Participant’s employment at any time. Section 16. Entire Award; Amendment This Award Agreement and the Plan constitute the entire agreement between the parties with respect to the terms and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The terms and conditions set forth in this Award Agreement may only be modified or amended in writing, signed by both parties. Section 17. Severability In the event any one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in any way be affected or impaired thereby. Section 18. Miscellaneous A. This Award Agreement and the rights of Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Stock acquired pursuant to this Award Agreement, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under applicable federal and state tax law, under the requirements of any stock exchange or market upon which such Stock is then listed and/or traded, and under any blue sky or state securities laws applicable to such Stock. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon Participant. B. The Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may materially and adversely affect Participant’s rights under this Award Agreement, without the written consent of Participant. C. Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities and tax laws in exercising his or her rights under this Award Agreement. D. This Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. E. This Award (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Stock underlying the Award) shall be subject to the provisions of any clawback policy currently or subsequently implemented by the Company to the extent set forth in such policy.

 
PSU US 1/2016 6 F. All obligations of the Company under the Plan and this Award Agreement, with respect to these PSUs, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. G. To the extent not preempted by federal law, this Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflict of law.

 
PSU US 1/2016 7 FEDERAL SIGNAL CORPORATION PERFORMANCE SHARE UNIT BENEFICIARY DESIGNATION Participant: Social Security No.: Address: Date of Birth: Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust): Primary Beneficiary(ies) Contingent Beneficiary(ies) Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by the Company, all in such manner as specified by the Company from time to time, or on a future date specified by any such new or amended Beneficiary Designation form. IN WITNESS WHEREOF, the parties have executed this Beneficiary Designation on the date designated below. Date: _________________, ____ Signature of Participant Received: FEDERAL SIGNAL CORPORATION Date: _________________, ____ By:

 
EXHIBIT 10.4 RS US 1/2016 ____ __, 201__ Federal Signal Corporation 2015 Executive Incentive Compensation Plan Restricted Stock Award Agreement You have been selected to receive this grant of Restricted Stock (“Award”) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (the “Plan”), as specified below: Participant: Date of Grant: Number of Shares of Restricted Stock Granted: Lapse of Restriction Date: Restrictions placed on the shares of Restricted Stock shall lapse on the date and in the amount listed below: ___ on ___ ___, 201__ [3-year cliff vesting] This Award is subject to the terms and conditions prescribed in the Plan and in the Federal Signal Corporation Restricted Stock Unit Award Agreement No. 2016 attached hereto and incorporated herein. Together, this Award and the attached award agreement shall be referred to throughout each as the “Award Agreement.” IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed as of the Date of Grant. PARTICIPANT FEDERAL SIGNAL CORPORATION By: Print Name Chief Executive Officer Signature Address Participant agrees to execute this Award Agreement and return one copy to Lana Noel at Federal Signal Corporation, 1415 W. 22nd Street, Suite 1100, Oak Brook, IL 60523 within 45 days of the above date or forfeit the restricted stock award. Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

 
RS US 1/2016 This document constitutes part of the prospectus covering securities that have been registered under the Securities Act of 1933, as amended. FEDERAL SIGNAL CORPORATION RESTRICTED STOCK AWARD AGREEMENT NO. 2016 This Award Agreement, which includes the attached cover page, effective as of the Date of Grant, represents the grant of shares of restricted stock (the “Restricted Stock”) by the Company to the Participant named in this Award Agreement, pursuant to the provisions of the Plan. The Company established the Plan pursuant to which, among other things, options, stock appreciation rights, restricted stock and stock units, stock bonus awards, dividend equivalents and/or performance compensation awards may be granted to eligible persons. The Plan and this Award Agreement provide a complete description of the terms and conditions governing the Restricted Stock. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Award Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The Board of Directors and the Committee have determined that the interests of the Company will be advanced by encouraging and enabling certain of its employees to own shares of the Stock, and that Participant is one of those employees. NOW, THEREFORE, in consideration of services rendered and the mutual covenants herein contained, the parties agree as follows: Section 1. Certain Definitions As used in this Award Agreement, the following terms shall have the following meanings: A. “Affiliate” means with respect to any Person, any other Person (other than an individual) that controls, is controlled by, or is under common control with such Person. The term “control,” as used in this Award Agreement, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. B. “Board of Directors” means the board of directors of the Company. C. “Code” means the Internal Revenue Code of 1986, as amended. D. “Committee” means the Compensation and Benefits Committee of the Board of Directors or a subcommittee or other committee appointed to administer the Plan in accordance with the Plan. E. “Company” means Federal Signal Corporation, a Delaware corporation. F. “Date of Grant” means the date set forth on this Award Agreement. G. “Disability” shall have the meaning ascribed to that term in the Company’s long-term disability plan applicable to Participant, or if no such plan exists, at the discretion of the Committee and as determined by the Committee. H. “Lapse of Restriction Date” means the date set forth on this Award Agreement. I. “Participant” means the individual shown as the recipient of an award of Restricted Stock, as set forth on this Award Agreement. J. “Person” means a “person” as such term is used for purposes of 13(d) or 14(d), or any successor section thereto, of the Securities Exchange Act of 1934, as amended, and any successor thereto. K. “Stock” means the common stock of the Company.

 
RS US 1/2016 2 Section 2. Employment with the Company Except as may otherwise be provided in Sections 6A, 6B, 7 or 8, the Restricted Stock granted hereunder is granted on the condition that Participant remains an Employee of the Company from the Date of Grant through (and including) the Lapse of Restriction Date set forth in this Award Agreement (the “Period of Restriction”). This grant of Restricted Stock shall not confer any right to Participant (or any other participant) to be granted Restricted Stock or other awards in the future under the Plan. Section 3. Issuance of Restricted Stock; Certificate Legend Evidence of the issuance of the Restricted Stock pursuant to this Award Agreement may be accomplished in such manner as the Company or its authorized representatives shall deem appropriate, including, without limitation, electronic registration, book entry registration or issuance of a stock certificate or stock certificates in the name of Participant. In the event the Restricted Stock is issued in book-entry form, the depository and the Company's transfer agent shall be provided with appropriate notice referring to the terms, conditions and restrictions applicable to the Restricted Stock, together with such stop-transfer instructions as the Company deems appropriate. The Company may retain, at its option, the physical custody of any stock certificate representing any Restricted Stock, or require that such certificates be placed in escrow or trust, until all restrictions applicable thereto are removed or lapse. Participant shall promptly surrender to the Company for cancellation any stock certificate representing Restricted Stock that has been forfeited. Any stock certificates representing the Restricted Stock, when issued, shall bear appropriate legends with respect to the restrictions on transferability contained in the Plan and this Award Agreement and shall also bear appropriate legends required under the Securities Act of 1933, as amended. Section 4. Removal of Restrictions Except as may otherwise be provided herein and in the Plan, the shares of Restricted Stock granted pursuant to this Award Agreement shall become freely transferable by Participant on the date and in the amount set forth under the Lapse of Restriction Date set forth in this Award Agreement, subject to applicable federal and state securities laws. Once shares of Restricted Stock are no longer subject to any restrictions, Participant shall be entitled to have the legend or book entry registration required by Section 3 of this Award Agreement removed from the applicable stock certificates. Section 5. Voting Rights and Dividends During the Period of Restriction, Participant may exercise full voting rights and shall accrue all dividends and other distributions paid with respect to the shares of Restricted Stock while they are held. If any such dividends or distributions are paid in shares, such shares shall be subject to the same restrictions on transferability as are the shares of Restricted Stock with respect to which they were paid. Section 6. Termination of Employment A. If Participant dies or his or her employment is terminated by reason of Disability during the Period of Restriction, the Period of Restriction and the restrictions imposed on the shares of Restricted Stock held by Participant at the time of Participant’s death or Disability shall immediately lapse with all such Restricted Stock vesting and becoming freely transferable by Participant or his or her estate, subject to applicable federal and state securities laws. B. If Participant’s employment is terminated by reason of Participant’s retirement during the Period of Restriction on terms and conditions authorized in writing by the Committee, the Committee may exercise its discretion at or near Participant’s retirement date to provide that the Period of Restriction and restrictions imposed on some or all of the shares of Restricted Stock shall lapse on a dated determined by Committee, with such shares of Restricted Stock vesting and becoming freely transferable by Participant, subject to applicable federal and state securities laws. In exercising its discretion under this Section 6B, the Committee shall consider whether Participant: (1) remained employed in good standing with the Company through Participant’s retirement date; (2) provided reasonable written notice to the Company of Participant’s intention to retire of no less than 12 weeks; (3) materially breached any statutory, contractual, or common law duties owed to Company or any material Company policy, including but not limited to post-employment non-competition, non-solicitation and confidentiality obligations; and (4) failed in good faith to provide to and perform for Company all reasonably requested duties and responsibilities in connection with the transition of Participant’s duties and responsibilities. In exercising its discretion, the Committee

 
RS US 1/2016 3 shall also consider: (a) the financial status of the Company; (b) Company performance: (c) Company stock performance; and (d) where appropriate, input from Company management. In the event the Committee does not so exercise its discretion, Participant’s termination of employment by reason of retirement shall be considered a termination of employment for other reasons and Section 6C shall govern. C. If Participant’s employment terminates for any reason other than the reasons set forth in Sections 6A, 6B, 7 or 8, during the Period of Restriction, all shares of Restricted Stock held by Participant at the time of employment termination and still subject to a Period of Restriction or other restrictions shall be forfeited by Participant to the Company. The transfer of employment of Participant between the Company and any Affiliate (or between Affiliates) shall not be deemed a termination of employment for the purposes of this Award Agreement. Section 7. Change-in-Control In the event of a Change-in-Control of the Company during the Period of Restriction and prior to the Participant’s termination of employment with the Company and its Affiliates, the Period of Restriction and restrictions imposed on the shares of Restricted Stock shall immediately lapse, with all such shares of Restricted Stock vesting and becoming freely transferable by Participant, subject to applicable federal and state securities laws. Section 8. Acceleration of Vesting of Shares in the Event of Divestiture of Business Segment If the “Business Segment” (as that term is defined in this Section) in which Participant is primarily employed as of the “Divestiture Date” (as that term is defined in this Section) is the subject of a “Divestiture of a Business Segment” (as that term is defined in this Section), and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason, the Period of Restriction and restrictions imposed on the shares of Restricted Stock subject to this Award Agreement shall immediately lapse, with all such shares of Restricted Stock vesting and becoming freely transferable by Participant, subject to applicable federal and state securities laws. For purposes of this Award Agreement, the term “Business Segment” shall mean a business line which the Company treats as a separate operating segment under the segment reporting rules under U.S. generally accepted accounting principles, which currently includes the following: Safety and Security Systems Group and Environmental Solutions Group. Likewise, the term “Divestiture Date” shall mean the date that a transaction constituting a Divestiture of a Business Segment is finally consummated. For purposes of this Award Agreement, the term “Divestiture of a Business Segment” means the following: A. When used with reference to the sale of stock or other securities of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company or one of its Affiliates to “Nonaffiliated Persons” (as that term is defined in this Section) of 100% of either (a) the then-outstanding common stock (or the equivalent equity interests) of the Business Segment or (b) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; B. When used with reference to the merger or consolidation of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, any such transaction that results in Nonaffiliated Persons owning, either beneficially or of record or both, 100% of either (a) the then- outstanding common stock (or the equivalent equity interests) of the Business Segment or (b) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; or C. When used with reference to the sale of the assets of the Business Segment, the sale, exchange, transfer, liquidation, distribution or other disposition of all or substantially all of the assets of the Business Segment necessary or required to operate the Business Segment in the manner that the Business Segment had been operated prior to the Divestiture Date. For purposes of this Award Agreement, the term “Nonaffiliated Persons” shall mean any persons or business entities which do not control, or which are not controlled by or under common control with, the Company.

 
RS US 1/2016 4 Section 9. Restrictions on Transfer Unless determined otherwise by the Committee pursuant to the terms of the Plan, during the Period of Restriction, shares of Restricted Stock granted pursuant to this Award Agreement may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (a “Transfer”), other than by will or by the laws of descent and distribution, except as provided in the Plan. If any Transfer, whether voluntary or involuntary, of shares of Restricted Stock is made, or if any attachment, execution, garnishment, or lien shall be issued against or placed upon the shares of Restricted Stock, Participant’s right to such shares of Restricted Stock shall be immediately forfeited by Participant to the Company, and this Award Agreement shall terminate. Section 10. Adjustment in Certain Events If there is any change in the Stock by reason of stock dividends or other distribution (whether in the form of securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Stock or other securities of the Company, or other similar corporate transaction or event, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, the Committee may, in its sole discretion, make such adjustments to the Restricted Stock that it deems necessary or appropriate and as it may deem equitable in Participant’s rights. Section 11. Tax Withholding The Company shall have the power and the right to deduct or withhold, or require Participant or beneficiary to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including Participant’s FICA obligation), domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Award Agreement. Participant may elect, subject to any procedural rules adopted by the Committee, to satisfy the minimum statutory withholding tax requirement, in whole or in part, by having the Company withhold shares having an aggregate Fair Market Value on the date the tax is to be determined, equal to such minimum statutory withholding tax. Section 12. Other Tax Matters Participant shall review with his or her own tax advisors the federal, state, local and other tax consequences, including those in addition to any tax withholding obligations, of the investment in the Restricted Shares and the transactions contemplated by this Award Agreement. Participant has the right to file an election under Section 83 of the Code. The filing of the 83(b) election is the responsibility of Participant. Participant must notify the Company of the filing on or prior to the day of making the filing. Section 13. Section 409A This Award Agreement shall be construed consistent with the intention that it be exempt from Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan or this Award Agreement, if at any time the Committee determines that this Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Award Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for this Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Section 14. Source of Payment Shares of Stock transferable to Participant, or Participant’s Beneficiary, under this Award Agreement may be either Treasury shares, authorized but unissued shares, or any combination of such stock. The Company shall have no duties to segregate or set aside any assets to secure Participant’s right to receive shares of Stock under this Award Agreement. Participant shall not have any rights with respect to transfer of shares of Stock under this Award Agreement other than the unsecured right to receive shares of Stock from the Company

 
RS US 1/2016 5 Section 15. Continuation of Employment This Award Agreement shall not confer upon Participant any right to continuation of employment by the Company or its Affiliates, nor shall this Award Agreement interfere in any way with the Company’s or its Affiliates’ right to terminate Participant’s employment at any time. Section 16. Beneficiary Designation Participant may designate a beneficiary or beneficiaries (contingently or successively) to receive any benefits that may be payable under this Award Agreement in the event of Participant’s death and, from time to time, may change his or her designated beneficiary (“Beneficiary”). A Beneficiary may be a trust. A Beneficiary designation shall be made in writing in a form prescribed by the Company and delivered to the Company while Participant is alive. Section 17. Entire Award; Amendment This Award Agreement and the Plan constitute the entire agreement between the parties with respect to the terms and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The terms and conditions set forth in this Award Agreement may only be modified or amended in writing, signed by both parties. Section 18. Severability In the event any one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in any way be affected or impaired thereby. Section 19. Miscellaneous A. This Award Agreement and the rights of Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Stock acquired pursuant to this Award Agreement, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under applicable federal and state tax law, under the requirements of any stock exchange or market upon which such Stock is then listed and/or traded, and under any blue sky or state securities laws applicable to such Stock. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon Participant. B. The Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may materially and adversely affect Participant’s rights under this Award Agreement, without the written consent of Participant. C. Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities and tax laws in exercising his or her rights under this Award Agreement. D. This Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. E. This Award (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any award or upon the receipt or resale of any Stock underlying the Award) shall be subject to the provisions of any clawback policy currently or subsequently implemented by the Company to the extent set forth in such policy. F. All obligations of the Company under the Plan and this Award Agreement, with respect to the Restricted Stock, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 
RS US 1/2016 6 G. To the extent not preempted by federal law, this Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflict of law.

 
RS US 1/2016 7 FEDERAL SIGNAL CORPORATION RESTRICTED STOCK AWARD BENEFICIARY DESIGNATION Participant: Social Security No.: Address: Date of Birth: Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust): Primary Beneficiary(ies) Contingent Beneficiary(ies) Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by the Company, all in such manner as specified by the Company from time to time, or on a future date specified by any such new or amended Beneficiary Designation form. IN WITNESS WHEREOF, the parties have caused this Beneficiary Designation to be executed on the date designated below. Date: Signature of Participant Received: FEDERAL SIGNAL CORPORATION Date: By: Participant

 
EXHIBIT 10.5 RSU NON-US 1/2016 _____ __, 201_ Federal Signal Corporation 2015 Executive Incentive Compensation Plan Restricted Stock Unit Award Agreement You have been selected to receive this grant of Restricted Stock Units (“Award”) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (the “Plan”), as specified below: Participant: Date of Grant: Number of Shares of Restricted Stock Units Granted: Vesting Date: Restricted stock units shall vest at the time and in the amount set forth below: ____ on _____ ___, 201__ [3-year cliff vesting] This Award is subject to the terms and conditions prescribed in the Plan and in the Federal Signal Corporation Restricted Stock Unit Award Agreement No. 2016 attached hereto and incorporated herein. Together, this Award and the attached award agreement shall be referred to throughout each as the “Award Agreement.” IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed as of the Date of Grant. PARTICIPANT FEDERAL SIGNAL CORPORATION By: Print Name Chief Executive Officer Signature Address: Participant agrees to execute this Award Agreement and return one copy to Lana Noel at Federal Signal Corporation, 1415 W. 22nd Street, Suite 1100, Oak Brook, IL 60523 within 45 days of the above date or forfeit the restricted stock units award. Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

 
RSU NON-US 6302311.4 This document constitutes part of the prospectus covering securities that have been registered under the Securities Act of 1933, as amended. FEDERAL SIGNAL CORPORATION RESTRICTED STOCK UNIT AWARD AGREEMENT NO. 2016 This Award Agreement, which includes the attached cover page, effective as of the Date of Grant, represents the grant of Restricted Stock Units by the Company, to the Participant named in this Award Agreement, pursuant to the provisions of the Plan. The Company established the Plan pursuant to which, among other things, options, stock appreciation rights, restricted stock and stock units, stock bonus awards, dividend equivalents and/or performance compensation awards may be granted to eligible persons. The Plan and this Award Agreement provide a complete description of the terms and conditions governing the Restricted Stock Units. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Award Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The Board of Directors and the Committee have determined that the interests of the Company will be advanced by encouraging and enabling certain of its employees to own shares of the Stock, and that Participant is one of those employees. NOW, THEREFORE, in consideration of services rendered and the mutual covenants herein contained, the parties agree as follows: Section 1. Certain Definitions As used in this Award Agreement, the following terms shall have the following meanings: A. “Affiliate” means with respect to any Person, any other Person (other than an individual) that controls, is controlled by, or is under common control with such Person. The term “control,” as used in this Award Agreement, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. B. “Award” means the award provided for in Section 2. C. “Board of Directors” means the board of directors of the Company. D. “Code” means the Internal Revenue Code of 1986, as amended. E. “Committee” means the Compensation and Benefits Committee of the Board of Directors or a subcommittee or other committee appointed to administer the Plan in accordance with the Plan. F. “Company” means Federal Signal Corporation, a Delaware corporation. G. “Date of Grant” means the date set forth on this Award Agreement. H. “Disability” shall have the meaning ascribed to that term in the Company’s long-term disability plan applicable to Participant, or if no such plan exists, at the discretion of the Committee and as determined by the Committee. I. “Participant” means the individual shown as the recipient of the Restricted Stock Units, as set forth on this Award Agreement. J. “Person” means a “person” as such term is used for purposes of 13(d) or 14(d), or any successor section thereto, of the Securities Exchange Act of 1934, as amended, and any successor thereto. K. “Restricted Stock Unit” means the obligation of the Company to transfer one share of Stock to Participant at the time provided in Section 6 of this Award Agreement, provided such Restricted Stock Unit is vested at such time.

 
RSU NON-US 1/2016 2 L. “Stock” means the common stock of the Company. M. “Vesting Date” means the date upon which the Restricted Stock Unit becomes vested as set forth in either Section 4 or 5 of this Award Agreement. Section 2. Award Subject to the terms of this Award Agreement, the Company hereby grants to Participant the number of Restricted Stock Units set forth on this Award Agreement, effective as of the Date of Grant set forth on such instrument. This grant of Restricted Stock Units shall not confer any right to Participant (or any other participant) to be granted Restricted Stock Units or other awards in the future under the Plan. Section 3. Bookkeeping Account The Company shall record the number of Restricted Stock Units granted hereunder to a bookkeeping account for Participant (the “Restricted Stock Unit Account”). Participant’s Restricted Stock Unit Account shall be reduced by the number of Restricted Stock Units, if any, forfeited in accordance with Section 4 and by the number of shares of Stock transferred to Participant in accordance with Section 6 with respect to such Restricted Stock Units. Section 4. Vesting Subject to the accelerated vesting provisions provided below, the Restricted Stock Units shall vest on the third anniversary of the Date of Grant, if Participant remains employed by the Company or its Affiliates through such date. If, while employed by the Company or its Affiliates, Participant dies or his or her employment terminates by reason of Disability before the third anniversary of the Date of Grant, all of the Restricted Stock Units granted pursuant to Section 2 shall become fully vested on the date of such death or Disability, as applicable. If, while Participant is employed by the Company or its Affiliate, a Change-in-Control occurs, all of the Restricted Stock Units granted pursuant to Section 2 shall become fully vested on the date of such Change-in- Control. Except as provided in Section 5 below, if Participant’s employment with the Company and its Affiliates is terminated for any other reason before the third anniversary of the Date of Grant, all Restricted Stock Units that are not vested at the time of such termination of employment (after first taking into account the accelerated vesting provisions of this Section 4 and Section 5 below) shall be forfeited. Section 5. Acceleration of Vesting of Shares in the Event of Divestiture of Business Segment If the “Business Segment” (as that term is defined in this Section) in which Participant is primarily employed as of the “Divestiture Date” (as that term is defined in this Section) is the subject of a “Divestiture of a Business Segment” (as that term is defined in this Section), and such divestiture results in the termination of Participant’s employment with the Company and its Affiliates for any reason, the Restricted Stock Units shall become fully vested on the Divestiture Date. For purposes of this Award Agreement, the term “Business Segment” shall mean a business line which the Company treats as a separate operating segment under the segment reporting rules under U.S. generally accepted accounting principles, which currently includes the following: Safety and Security Systems Group and Environmental Solutions Group. Likewise, the term “Divestiture Date” shall mean the date that a transaction constituting a Divestiture of a Business Segment is finally consummated. For purposes of this Award Agreement, the term “Divestiture of a Business Segment” means the following: A. When used with a reference to the sale of stock or other securities of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company or one of its Affiliates to “Nonaffiliated Persons” (as that term is defined in this Section) of 100% of either (i) the then-outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment;

 
RSU NON-US 1/2016 3 B. When used with reference to the merger or consolidation of a Business Segment that is or becomes a separate corporation, limited liability company, partnership or other separate business entity, any such transaction that results in Nonaffiliated Persons owning, either beneficially or of record or both, 100% of either (i) the then- outstanding common stock (or the equivalent equity interests) of the Business Segment or (ii) the combined voting power of the then-outstanding voting securities of the Business Segment entitled to vote generally in the election of the board of directors or the equivalent governing body of the Business Segment; or C. When used with reference to the sale of the assets of the Business Segment, the sale, exchange, transfer, liquidation, distribution or other disposition of all or substantially all of the assets of the Business Segment necessary or required to operate the Business Segment in the manner that the Business Segment had been operated prior to the Divestiture Date. For purposes of this Award Agreement, the term “Nonaffiliated Persons” shall mean any persons or business entities which do not control, or which are not controlled by or under common control with, the Company. Section 6. Distribution of Shares Subject to the provisions below, shares of Stock equal to the number of Restricted Stock Units credited to the Restricted Stock Unit Account of Participant shall become distributable on the Vesting Date. Actual distribution of shares of Stock with respect to vested Restricted Stock Units will occur as soon as administratively feasible, but in no event more than 60 days after such shares become distributable as described in this Section 6. Section 7. Stockholder Rights Participant shall not have any of the rights of a stockholder of the Company with respect to Restricted Stock Units. No dividend equivalent rights are provided under this Award Agreement. Section 8. Beneficiary Designation Participant may designate a beneficiary or beneficiaries (contingently, consecutively, or successively) to receive any benefits that may be payable under this Award Agreement in the event of Participant’s death and, from time to time, may change his or her designated beneficiary (a “Beneficiary”). A Beneficiary may be a trust. A Beneficiary designation shall be made in writing in a form prescribed by the Company and delivered to the Company while Participant is alive. In lieu of payment to Participant, a Beneficiary shall be paid shares of Stock under Section 6. Section 9. Restrictions on Transfer Restricted Stock Units awarded hereunder shall not be transferable by Participant. Except as may be required by the federal income tax withholding provisions of the Code or by the tax laws of any state or foreign sovereign, the interests of Participant and his or her Beneficiary(ies) under this Award Agreement are not subject to the claims of their respective creditors and may not be voluntarily or involuntarily sold, assigned, transferred, alienated, pledged, attached, encumbered or charged. Any attempt by Participant or a Beneficiary to sell, assign, transfer, alienate, pledge, attach, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. Section 10. Adjustment in Certain Events If there is any change in the Stock by reason of stock dividends or other distribution (whether in the form of securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Stock or other securities of the Company, or other similar corporate transaction or event, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, the Committee may, in its sole discretion, make such adjustments to the number of Restricted Stock Units credited to Participant’s Restricted Stock Unit Account that it deems necessary or appropriate and as it may deem equitable in Participant’s rights. Section 11. Tax Withholding The Company shall not be obligated to transfer any shares of Stock until Participant pays to the Company or any of its Affiliates in cash, or any other form of property, including Stock, acceptable to the Company, the amount required to be withheld from the wages or other amounts owing to Participant with respect to such shares.

 
RSU NON-US 1/2016 4 Participant may elect to have such withholding satisfied by a reduction of the number of shares of Stock otherwise transferable under this Award Agreement at such time, such reduction to be calculated based on the closing market price of the Stock on the day Participant gives written notice of such election to the Company. Section 12. Section 409A This Award Agreement shall be construed consistent with the intention that it be exempt from Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan or this Award Agreement, if at any time the Committee determines that this Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Award Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for this Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Section 13. Source of Payment Shares of Stock transferable to Participant, or Participant’s Beneficiary, under this Award Agreement may be either Treasury shares, authorized but unissued shares, or any combination of such stock. The Company shall have no duties to segregate or set aside any assets to secure Participant’s right to receive shares of Stock under this Award Agreement. Participant shall not have any rights with respect to transfer of shares of Stock under this Award Agreement other than the unsecured right to receive shares of Stock from the Company. Section 14. Continuation of Employment This Award Agreement shall not confer upon Participant any right to continuation of employment by the Company or its Affiliates, nor shall this Award Agreement interfere in any way with the Company’s or its Affiliates’ right to terminate Participant’s employment at any time. Section 15. English Language Participant acknowledges and agrees that it is Participant’s express intent that this Award Agreement, the Plan and all other documents, rules, procedures, forms, notices and legal proceedings entered into, given or instituted pursuant to the Award, be drawn up in English. If Participant has received this Award Agreement, the Plan or any other rules, procedures, forms or documents related to the Award translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control. Section 15. Entire Award; Amendment This Award Agreement and the Plan constitute the entire agreement between the parties with respect to the terms and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The terms and conditions set forth in this Award Agreement may only be modified or amended in writing, signed by both parties. Section 16. Severability In the event any one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in any way be affected or impaired thereby. Section 17. Miscellaneous A. This Award Agreement and the rights of Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Stock acquired pursuant to this Award Agreement, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under applicable federal and state tax law, under the

 
RSU NON-US 1/2016 5 requirements of any stock exchange or market upon which such Stock is then listed and/or traded, and under any blue sky or state securities laws applicable to such Stock. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon Participant. B. The Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may materially and adversely affect Participant’s rights under this Award Agreement, without the written consent of Participant. C. Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities and tax laws in exercising his or her rights under this Award Agreement. D. This Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. E. This Award (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Stock underlying the Award) shall be subject to the provisions of any clawback policy currently or subsequently implemented by the Company to the extent set forth in such policy. F. All obligations of the Company under the Plan and this Award Agreement, with respect to these Restricted Stock Units, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. G. To the extent not preempted by federal law, this Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflict of law.

 
RSU NON-US 1/2016 6 FEDERAL SIGNAL CORPORATION RESTRICTED STOCK UNIT BENEFICIARY DESIGNATION Participant: Social Security No.: Address: Date of Birth: Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the Federal Signal Corporation 2015 Executive Incentive Compensation Plan (Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust): Primary Beneficiary(ies) Contingent Beneficiary(ies) Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when the Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by the Company, all in such manner as specified by the Company from time to time, or on a future date specified by any such new or amended Beneficiary Designation form. IN WITNESS WHEREAS, the parties have executed this Beneficiary Designation on the date designated below. Date: _________________, ____ Signature of Participant Received: FEDERAL SIGNAL CORPORATION Date: _________________, ____ By:

 


EXHIBIT 31.1
CEO Certification under Section 302 of the Sarbanes-Oxley Act
I, Jennifer L. Sherman, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Federal Signal Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 28, 2016
 
 
/s/ Jennifer L. Sherman
 
 
Jennifer L. Sherman
 
President and Chief Executive Officer
 
(Principal Executive Officer)





EXHIBIT 31.2
CFO Certification under Section 302 of the Sarbanes-Oxley Act
I, Brian S. Cooper, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Federal Signal Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 28, 2016
 
 
/s/ Brian S. Cooper
 
 
Brian S. Cooper
 
Senior Vice President and Chief Financial Officer
 
(Principal Financial Officer)





EXHIBIT 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Federal Signal Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jennifer L. Sherman, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o (d)); and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 28, 2016
 
 
/s/ Jennifer L. Sherman
 
 
Jennifer L. Sherman
 
President and Chief Executive Officer
 
( Principal Executive Officer)
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.





EXHIBIT 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Federal Signal Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian S. Cooper, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o (d)); and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 28, 2016
 
 
/s/ Brian S. Cooper
 
 
Brian S. Cooper
 
Senior Vice President and Chief Financial Officer
 
(Principal Financial Officer)
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.



EXHIBIT 99.1
 
 
 
 
 

FOR IMMEDIATE RELEASE
Federal Signal Corporation Reports Second Quarter Earnings

•
GAAP earnings per share of $0.15 for the quarter
•
Adjusted earnings per share of $0.17 for the quarter
•
Completed acquisition of Joe Johnson Equipment (“JJE”)
•
Total reported orders of $187 million , up 38% compared to the first quarter of 2016 and 7% compared to last year
◦
ESG orders, excluding the JJE acquisition impact, up 36% compared to the first quarter of 2016 and up 6% compared to last year
•
Returned $21.1 million to shareholders, the most in any quarter in nearly 15 years
Oak Brook, Illinois, July 28, 2016 — Federal Signal Corporation (NYSE:FSS), a leader in environmental and safety solutions, today reported results for the second quarter ended June 30, 2016 .
During the second quarter, the Company completed the acquisition of substantially all the assets and operations of JJE for an initial payment of $96.6 million .
“This time last year, we talked about our appetite for adding at least $250 million from acquisitions to our revenue run-rate by 2018. With that goal in mind, we were delighted to complete the acquisition of JJE during the quarter as a meaningful step along that path,” said Jennifer L. Sherman, President and Chief Executive Officer.
Consolidated net sales for the second quarter were $172.3 million , down 16% versus the same quarter a year ago. Second quarter income from continuing operations was $9.4 million , equal to $0.15 per diluted share, compared to $18.2 million , equal to $0.29 per share, in the prior-year quarter.
The Company also reported adjusted net income from continuing operations for the second quarter of $10.1 million , equal to $0.17 per diluted share, compared to $18.5 million , or $0.29 per diluted share, in the same quarter a year ago. The Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. A reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release. All results discussed herein are for continuing operations, and previously reported results have been recast to reflect the Fire Rescue Group as a discontinued operation following the sale of the Bronto Skylift business earlier in the year.
Municipal Markets Remain Solid; Orders and Backlog Improve with Completion of JJE Acquisition
“Our municipal markets remain solid and, in spite of continued softness in industrial demand, our total reported orders increased in comparison with both the first quarter of 2016 and the prior-year quarter, mostly as a result of the JJE acquisition. Excluding the effects of the acquisition, ESG reported a sequential order improvement of $28.6 million, or 36%,” noted Sherman.
In the Environmental Solutions Group, sales were down $27.2 million , or 19% , primarily due to lower sales of vacuum trucks. Sales in the Safety and Security Systems Group decreased by $5.9 million , or 10% , on reduced sales into industrial markets, offset by improved sales into public safety markets. Ongoing effects related to oil and gas end markets continue to adversely impact industrial sales in both groups.
Consolidated second quarter operating income was $14.3 million , down from $29.2 million in the prior-year quarter. Operating income in the current-year quarter includes $0.4 million of acquisition related expenses. Consolidated operating margin was 8.3%, compared to 14.2% last year. The margin decrease was primarily due to lower sales volume and changes in mix within the Environmental Solutions Group. Corporate expenses for the quarter were about the same as a year ago at $7.2 million . The

1


effective income tax rate for the quarter, at 33.8% , was slightly lower than the prior-year quarter and expectations for the full year. The cash tax rate for the year is expected to be approximately 15-20%.
Consolidated orders were $187.3 million for the quarter, up 7% compared to last year and up 38% compared to the first quarter of 2016. Consolidated backlog of $149.8 million was up 11% from the end of the first quarter. The increase in orders and backlog was primarily due to the acquisition of JJE.
Strong Financial Position Supports M&A and Cash Returns to Shareholders
In addition to completing the JJE acquisition, the Company funded share repurchases of $16.8 million and dividends of $4.3 million during the second quarter. At June 30, 2016 , we had approximately $36 million remaining under our authorized share repurchase programs. The Board of Directors also recently declared a $0.07 per share dividend that will be payable in the third quarter.
“Our debt remains low and our financial position continues to be very strong, allowing us to return $21.1 million of value to our shareholders in the quarter, the most in any quarter in nearly 15 years,” said Sherman.
Net cash of $10.6 million was provided by continuing operating activities in the second quarter of 2016, compared to $30.0 million in the prior-year quarter. For the first half of 2016, net cash of $3.9 million was provided by continuing operating activities, compared to $30.8 million in the same period of 2015. The operating cash flow in both current-year periods was lower by approximately $11 million as a result of the non-cash settlement, in connection with the acquisition, of accounts receivable due from JJE.
At June 30, 2016 , consolidated debt was $67 million , compared to $49 million a year ago, with $240 million of availability for borrowings. Cash and cash equivalents at June 30, 2016 were $39 million , compared to $36 million a year ago.
Outlook
“We remain confident in our businesses and our markets for the long term. With our strong balance sheet and ongoing actions to bring our cost structure in line with current demand, we are well-positioned to work through the headwinds raised by the ongoing weakness in our industrial markets,” commented Sherman. “We are committed to pursuing additional strategic acquisitions and maintaining appropriate levels of investment in our sales efforts and new products to build momentum for future growth.
“Continued softness in industrial demand has weighed on our orders and revenue outlook during the first half of the year, particularly in our businesses that serve oil and gas related end markets, and we do not believe these markets will recover meaningfully during the second half of the year. On a positive note, some of this decline has been offset by healthy municipal demand, our cost reduction initiatives and sales of new products. When we provided our outlook for 2016 earlier in the year, we mentioned that a likely accounting implication of the JJE acquisition would be a change in the timing of revenue and profit recognition, which should normalize over a period of about three years. We now expect that this temporary profit deferral could reduce our 2016 EPS outlook by up to $0.05. Considering these factors, we are adjusting our 2016 EPS outlook from a range of $0.70 to $0.80 to a range of $0.65 to $0.75.”
CONFERENCE CALL
Federal Signal will host its second quarter conference call on Thursday, July 28, 2016 at 10:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet through Federal Signal’s website at http://www.federalsignal.com or by dialing phone number 1-888-438-5519 and entering the pin number 7949735. A replay will be available on Federal Signal’s website shortly after the call.
About Federal Signal
Federal Signal Corporation (NYSE: FSS) provides products and services to protect people and our planet. Founded in 1901, Federal Signal is a leading global designer and manufacturer of products and total solutions that serve municipal, governmental, industrial and commercial customers. Headquartered in Oak Brook, Ill., with manufacturing facilities worldwide, the Company operates two groups: Environmental Solutions and Safety and Security Systems. For more information on Federal Signal, visit: http://www.federalsignal.com .



2


“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This release contains unaudited financial information and various forward-looking statements as of the date hereof and we undertake no obligation to update these forward-looking 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 and other risks and uncertainties described in filings with the Securities and Exchange Commission.
Contact: Brian Cooper, Chief Financial Officer, +1-630-954-2000, bcooper@federalsignal.com


3



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions, except per share data)
2016
 
2015
 
2016
 
2015
Net sales
$
172.3

 
$
205.4

 
$
345.1

 
$
401.9

Cost of sales
127.3

 
144.7

 
252.7

 
286.3

Gross profit
45.0

 
60.7

 
92.4

 
115.6

Selling, engineering, general and administrative expenses
30.3

 
31.1

 
59.9

 
61.5

Acquisition and integration related expenses
0.4

 
—

 
0.9

 
—

Restructuring
—

 
0.4

 
1.2

 
0.4

Operating income
14.3

 
29.2

 
30.4

 
53.7

Interest expense
0.4

 
0.6

 
0.8

 
1.2

Debt settlement charges
—

 
—

 
0.3

 
—

Other (income) expense, net
(0.3
)
 
—

 
(1.0
)
 
1.2

Income from continuing operations before income taxes
14.2

 
28.6

 
30.3

 
51.3

Income tax expense
(4.8
)
 
(10.4
)
 
(10.5
)
 
(18.7
)
Income from continuing operations
9.4

 
18.2

 
19.8

 
32.6

(Loss) gain from discontinued operations and disposal, net of income tax (benefit) expense of $(0.3), $(0.1), $4.1 and $0.0, respectively
(0.3
)
 
0.1

 
2.9

 
0.6

Net income
$
9.1

 
$
18.3

 
$
22.7

 
$
33.2

Basic earnings per share:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.16

 
$
0.29

 
$
0.32

 
$
0.52

(Loss) gain from discontinued operations and disposal, net of tax
(0.01
)
 
—

 
0.05

 
0.01

Net earnings per share
$
0.15

 
$
0.29

 
$
0.37

 
$
0.53

Diluted earnings per share:

 

 

 

Earnings from continuing operations
$
0.15

 
$
0.29

 
$
0.32

 
$
0.51

(Loss) gain from discontinued operations and disposal, net of tax
—

 
—

 
0.05

 
0.01

Net earnings per share
$
0.15

 
$
0.29

 
$
0.37

 
$
0.52

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
60.1

 
62.6

 
61.1

 
62.5

Diluted
60.9

 
63.6

 
61.9

 
63.5

Cash dividends declared per common share
$
0.07

 
$
0.06

 
$
0.14

 
$
0.12

 
 
 
 
 
 
 
 
Operating data:
 
 
 
 
 
 
 
Operating margin
8.3
%
 
14.2
%
 
8.8
%
 
13.4
%
Total orders
$
187.3

 
$
174.6

 
$
323.0

 
$
338.6

Backlog
149.8

 
190.9

 
149.8

 
190.9

Depreciation and amortization
4.2

 
3.2

 
7.2

 
6.2



4



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30,
2016
 
December 31,
2015
(in millions, except per share data)
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
38.7

 
$
76.0

Accounts receivable, net of allowances for doubtful accounts of $1.1 and $0.8, respectively
82.5

 
73.0

Inventories
119.5

 
87.2

Prepaid expenses and other current assets
13.0

 
15.1

Current assets of discontinued operations
—

 
63.8

Total current assets
253.7

 
315.1

Properties and equipment, net of accumulated depreciation of $102.6 and $100.2, respectively
46.2

 
45.0

Rental equipment, net of accumulated depreciation of $4.2 and $2.6, respectively
90.1

 
7.9

Goodwill
236.2

 
231.6

Intangible assets, net of accumulated amortization of $0.4 and $0.4, respectively
12.2

 
0.2

Deferred tax assets
6.4

 
20.1

Deferred charges and other assets
4.1

 
3.3

Long-term assets of discontinued operations
2.4

 
43.3

Total assets
$
651.3

 
$
666.5

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term borrowings and capital lease obligations
$
0.6

 
$
0.4

Accounts payable
40.9

 
38.0

Customer deposits
5.9

 
3.7

Accrued liabilities:
 
 
 
Compensation and withholding taxes
12.9

 
18.6

Other current liabilities
30.9

 
27.9

Current liabilities of discontinued operations
3.9

 
28.6

Total current liabilities
95.1

 
117.2

Long-term borrowings and capital lease obligations
66.3

 
43.7

Long-term pension and other postretirement benefit liabilities
50.7

 
55.2

Deferred gain
11.7

 
12.6

Other long-term liabilities
28.0

 
16.9

Long-term liabilities of discontinued operations
3.5

 
15.3

Total liabilities
255.3

 
260.9

Stockholders’ equity:
 
 
 
Common stock, $1 par value per share, 90.0 shares authorized, 65.3 and 64.8 shares issued, respectively
65.3

 
64.8

Capital in excess of par value
197.4

 
195.6

Retained earnings
289.0

 
274.9

Treasury stock, at cost, 5.4 and 2.6 shares, respectively
(76.6
)
 
(40.9
)
Accumulated other comprehensive loss
(79.1
)
 
(88.8
)
Total stockholders’ equity
396.0

 
405.6

Total liabilities and stockholders’ equity
$
651.3

 
$
666.5



5



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
Operating activities:
 
 
 
Net income
$
22.7

 
$
33.2

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain from discontinued operations and disposal
(2.9
)
 
(0.6
)
Depreciation and amortization
7.2

 
6.2

Deferred financing costs
0.5

 
0.2

Deferred gain
(0.9
)
 
(1.0
)
Stock-based compensation expense
2.2

 
3.1

Excess tax benefit from stock-based compensation
—

 
(0.3
)
Pension expense, net of funding
(2.2
)
 
(2.2
)
Deferred income taxes
7.0

 
14.6

Changes in operating assets and liabilities, net of effects of acquisitions and discontinued operations
(29.7
)
 
(22.4
)
Net cash provided by continuing operating activities
3.9

 
30.8

Net cash provided by (used for) discontinued operating activities
1.3

 
(3.4
)
Net cash provided by operating activities
5.2

 
27.4

Investing activities:
 
 
 
Purchases of properties and equipment
(3.6
)
 
(5.1
)
Payments for acquisitions, net of cash acquired
(102.6
)
 
—

Other, net
(0.5
)
 
0.1

Net cash used for continuing investing activities
(106.7
)
 
(5.0
)
Net cash provided by (used for) discontinued investing activities
88.0

 
(0.5
)
Net cash used for investing activities
(18.7
)
 
(5.5
)
Financing activities:
 
 
 
Increase in revolving lines of credit, net
64.8

 
—

Payments on long-term borrowings
(43.4
)
 
(1.4
)
Payments of debt financing fees
(1.1
)
 
—

Purchases of treasury stock
(33.1
)
 
(5.0
)
Redemptions of common stock to satisfy withholding taxes related to stock-based compensation
(2.6
)
 
(2.9
)
Cash dividends paid to stockholders
(8.6
)
 
(7.5
)
Proceeds from stock-based compensation activity
0.2

 
0.4

Excess tax benefit from stock-based compensation
—

 
0.3

Other, net
(0.4
)
 
(0.3
)
Net cash used for continuing financing activities
(24.2
)
 
(16.4
)
Net cash provided by discontinued financing activities
0.7

 
—

Net cash used for financing activities
(23.5
)
 
(16.4
)
Effects of foreign exchange rate changes on cash and cash equivalents
(0.3
)
 
—

(Decrease) increase in cash and cash equivalents
(37.3
)
 
5.5

Cash and cash equivalents at beginning of year
76.0

 
30.4

Cash and cash equivalents at end of period
38.7

 
35.9

Less: Cash and cash equivalents of discontinued operations at end of period
—

 
(2.5
)
Cash and cash equivalents of continuing operations at end of period
$
38.7

 
$
33.4


6



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
GROUP RESULTS (Unaudited)
The following tables summarize group operating results as of and for the three and six months ended June 30, 2016 and 2015 :  
Environmental Solutions Group
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net sales
$
119.4

 
$
146.6

 
$
(27.2
)
 
$
234.8

 
$
286.8

 
$
(52.0
)
Operating income
14.9

 
29.2

 
(14.3
)
 
31.4

 
53.1

 
(21.7
)
Operating data:
 
 
 
 
 
 
 
 
 
 
 
Operating margin
12.5
%
 
19.9
%
 
(7.4
)%
 
13.4
%
 
18.5
%
 
(5.1
)%
Total orders
$
135.3

 
$
114.2

 
$
21.1

 
$
218.5

 
$
220.5

 
$
(2.0
)
Backlog
117.0

 
152.0

 
(35.0
)
 
117.0

 
152.0

 
(35.0
)
Depreciation and amortization
3.1

 
2.0

 
1.1

 
4.9

 
3.8

 
1.1

Safety and Security Systems Group
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net sales
$
52.9

 
$
58.8

 
$
(5.9
)
 
$
110.3

 
$
115.1

 
$
(4.8
)
Operating income
6.6

 
7.3

 
(0.7
)
 
11.5

 
13.9

 
(2.4
)
Operating data:
 
 
 
 
 
 
 
 
 
 
 
Operating margin
12.5
%
 
12.4
%
 
0.1
%
 
10.4
%
 
12.1
%
 
(1.7
)%
Total orders
$
52.0

 
$
60.4

 
$
(8.4
)
 
$
104.5

 
$
118.1

 
$
(13.6
)
Backlog
32.8

 
38.9

 
(6.1
)
 
32.8

 
38.9

 
(6.1
)
Depreciation and amortization
1.1

 
1.2

 
(0.1
)
 
2.2

 
2.3

 
(0.1
)
Corporate Expenses
Corporate operating expenses were $7.2 million and $7.3 million for the three months ended June 30, 2016 and 2015 , respectively. For the six months ended June 30, 2016 and 2015 , corporate operating expenses were $12.5 million and $13.3 million , respectively.

7



SEC REGULATION G NON-GAAP RECONCILIATION
The financial measures presented below 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 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 below, and to provide an additional measure of performance which management considers in operating the business.
Adjusted net income and earnings per share from continuing operations (“EPS”):
The Company believes that modifying its 2016 and 2015 net income and diluted EPS provides additional measures which are representative of the Company’s underlying performance and improve the comparability of results across reporting periods. During the three and six months ended June 30, 2016 and 2015 adjustments were made to reported GAAP net income and diluted EPS to exclude the impact of restructuring activity, acquisition and integration related expenses, purchase accounting effects and debt settlement charges, where applicable.
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in millions)
2016
 
2015
 
2016
 
2015
Income from continuing operations
$
9.4

 
$
18.2

 
$
19.8

 
$
32.6

Add:
 
 
 
 
 
 
 
Income tax expense
4.8

 
10.4

 
10.5

 
18.7

Income before income taxes
14.2

 
28.6

 
30.3

 
51.3

Add (less):
 
 
 
 
 
 
 
Restructuring
—

 
0.4

 
1.2

 
0.4

Acquisition and integration related expenses
0.4

 
—

 
0.9

 
—

Purchase accounting effects (a)
0.5

 
—

 
0.5

 
—

Debt settlement charges
—

 
—

 
0.3

 
—

Adjusted income before income taxes
15.1

 
29.0

 
33.2

 
51.7

Adjusted income tax expense (b)
(5.0
)
 
(10.5
)
 
(11.5
)
 
(18.8
)
Adjusted net income from continuing operations
$
10.1

 
$
18.5

 
$
21.7

 
$
32.9

 
 
 
 
 
 
 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(dollars per diluted share)
2016
 
2015
 
2016
 
2015
EPS, as reported
$
0.15

 
$
0.29

 
$
0.32

 
$
0.51

Add:
 
 
 
 
 
 
 
Income tax expense
0.08

 
0.16

 
0.17

 
0.29

Income before income taxes
0.23

 
0.45

 
0.49

 
0.80

Add (less):
 
 
 
 
 
 
 
Restructuring
—

 
0.01

 
0.02

 
0.01

Acquisition and integration related expenses
0.01

 
—

 
0.01

 
—

Purchase accounting effects (a)
0.01

 
—

 
0.01

 
—

Debt settlement charges
—

 
—

 
0.01

 
—

Adjusted income before income taxes
0.25

 
0.46

 
0.54

 
0.81

Adjusted income tax expense (b)
(0.08
)
 
(0.17
)
 
(0.19
)
 
(0.29
)
Adjusted EPS
$
0.17

 
$
0.29

 
$
0.35

 
$
0.52

(a)
Purchase accounting effects relate to adjustments to exclude the step-up in the valuation of JJE inventory that was sold subsequent to the acquisition in the three and six months ended June 30, 2016 , as well as to exclude the depreciation of the step-up in the valuation of the rental fleet acquired.
(b)
Adjusted income tax expense for the three and six months ended June 30, 2016 and 2015 was recomputed after excluding the impact of restructuring activity, acquisition and integration related expenses, purchase accounting effects and debt settlement charges, where applicable.

8



Total debt to adjusted EBITDA ratio:
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 continuing operations before interest expense, debt settlement charges, acquisition and integration related expenses, restructuring charges, other (income) expense, income tax expense, and depreciation and amortization expense. The Company uses the ratio to calibrate the magnitude of its debt and its debt capacity against adjusted EBITDA, which is used as an operating performance measure. We believe that investors use a version of this ratio in a similar manner. In addition, financial institutions (including the Company’s lenders) use the ratio in connection with debt agreements to set pricing and covenant limitations. For these reasons, the Company believes that the ratio is a meaningful metric to investors in evaluating the Company’s long-term financial performance and stability. Other companies may use different methods to calculate total debt to EBITDA. The following table summarizes the Company’s ratio of total debt to adjusted EBITDA and reconciles income from continuing operations to adjusted EBITDA as of and for the trailing 12-month periods ended June 30, 2016 and 2015 :
 
Trailing Twelve 
 Months Ending 
 June 30,
($ in millions)
2016
 
2015
Total debt
$
66.9

 
$
48.6

 
 
 
 
Income from continuing operations
53.0

 
67.5

Add:
 
 
 
Interest expense
1.9

 
2.9

Debt settlement charges
0.3

 
—

Acquisition and integration related expenses
0.9

 
—

Restructuring
1.2

 
0.5

Other (income) expense, net
(1.2
)
 
2.7

Income tax expense
25.9

 
31.6

Depreciation and amortization
13.3

 
12.1

Adjusted EBITDA
$
95.3

 
$
117.3

 
 
 
 
Total debt to adjusted EBITDA ratio
0.7

 
0.4



9