Federal Signal Corporation
10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:40
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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, 2024. Information in MD&A is intended to provide an analysis of our financial condition and results of operations from management's perspective and 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, and to provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or future financial condition. The Company's results for interim periods should not be regarded as necessarily indicative of results that may be expected for the entire year, which may differ materially due to, among other things, 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, 2024, which was filed with the SEC on February 26, 2025.
Executive Summary
The Company is a leading global manufacturer and supplier of (i) vehicles and equipment for maintenance and infrastructure end-markets, including sewer cleaners, industrial vacuum loaders, vacuum- and hydro-excavation trucks (collectively, "safe-digging trucks"), street sweepers, waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers, metal extraction support equipment, and multi-purpose maintenance vehicles, and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems, and general alarm/public address systems. Product offerings also include certain products manufactured by other companies, such as refuse and recycling collection vehicles. In addition to vehicle and equipment sales, the Company engages in the sale of parts, service and repair, equipment rentals, and training as part of a comprehensive aftermarket offering to its customers. The Company operates 18 principal manufacturing facilities in the U.S., three in Canada, two in Europe, and one in South Africa and provides 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 in two reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group.
Economic Considerations
A substantial majority of the Company's manufacturing operations are located within the U.S., and the substantial majority of the raw materials and component parts used to support the Company's domestic production processes are sourced from within the U.S. Similarly, in the locations where the Company manufactures products outside of the U.S, the respective supply chains and end customers are predominantly localized. While the Company primarily sources its products within the respective countries in which it manufactures, certain raw materials and component parts that go into making its products are imported into the U.S. from various countries, including China, and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions. Additionally, the Company sells certain products to customers outside of the U.S., including in Canada, that are covered by international trade agreements and regulations, including tariffs. In 2025, the U.S. federal government has implemented or threatened broad new tariffs on imports, which has resulted in certain retaliatory tariffs being levied or threatened by a number of impacted countries. The U.S. federal government has also indicated that they may increase the existing tariffs, impose additional tariffs, and/or expand tariffs on goods imported from various countries. Although certain exemptions to the tariffs have been announced, their duration and scope remain unclear at this time, and such exemptions may be subject to change.
While the tariffs implemented did not have a significant impact on the Company's year-to-date results, the long-term effects of those implemented then, or those that may be implemented in the future, remain uncertain. Although the Company believes that many of its products are included in the current tariff exemptions, the Company continues to closely monitor the evolving tariff and trade policy environment, which could change or alter these exemptions. Further, the Company is monitoring the potential for supply disruptions as a result of these trade disputes and negotiations, including those related to restrictions around exporting certain rare earth minerals and magnets by China, some of which are used in the production of certain of the Company's products. While the collective impact of these trade issues is uncertain, the Company continues to monitor the potential for higher product and operating costs and to evaluate the need to counteract any adverse effects on the Company's financial position, results of operations, or cash flow.
Operating Results
Net sales for the three months ended September 30, 2025 increased by $80.8 million, or 17%, compared to the prior-year quarter, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. Our Environmental Solutions Group reported a net sales increase of $67.3 million, or 17%, primarily due to increases in sales of road-marking and line-removal equipment of $16.2 million, sewer cleaners of $7.0 million, street sweepers of $6.6 million, dump truck bodies of $5.2 million, industrial vacuum loaders of $4.6 million, safe-digging trucks of $4.2 million, and metal extraction support equipment of $2.9 million. In addition, aftermarket revenues improved by $15.4 million. Within our Safety and Security Systems Group, net sales increased by $13.5 million, or 18%, primarily due to improvements in sales of public safety equipment of $8.3 million and warning systems of $4.4 million, as well as a $0.8 million favorable foreign currency translation impact.
Net sales for the nine months ended September 30, 2025 increased by $193.9 million, or 14%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. Our Environmental Solutions Group reported a net sales increase of $172.4 million, or 15%, primarily due to increases in sales of road-marking and line-removal equipment of $41.8 million, sewer cleaners of $23.4 million, dump truck bodies of $21.9 million, streets sweepers of $16.9 million, industrial vacuum loaders of $11.4 million, metal extraction support equipment of $7.1 million, safe-digging trucks of $6.3 million, and refuse trucks of $6.1 million. In addition, aftermarket revenues improved by $40.6 million. Partially offsetting these improvement were reductions in sales of trailers of $7.9 million and multi-purpose maintenance vehicles of $3.0 million, as well as a $4.3 million unfavorable foreign currency translation impact. Within our Safety and Security Systems Group, net sales increased by $21.5 million, or 9%, primarily due to improvements in sales of public safety equipment of $13.5 million and warning systems of $7.3 million, as well as a $1.1 million favorable foreign currency translation impact.
Operating income for the three months ended September 30, 2025 increased by $18.1 million, or 24%, compared to the prior-year quarter, primarily driven by a $21.1 million improvement in gross profit, partially offset by a $1.3 million increase in Selling, Engineering, General and Administrative ("SEG&A") expenses, a $1.0 million increase in acquisition and integration-related expenses, net, and a $0.7 million increase in amortization expense. Consolidated operating margin for the three months ended September 30, 2025 was 16.9%, compared to 16.0% in the prior-year quarter.
Operating income for the nine months ended September 30, 2025 increased by $46.1 million, or 22%, compared to the prior-year period, primarily driven by a $61.5 million improvement in gross profit, partially offset by a $12.9 million increase in SEG&A expenses, a $2.1 million increase in amortization expense, and a $0.4 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the nine months ended September 30, 2025 was 16.3%, compared to 15.2% in the prior-year period.
Income before income taxes for the three months ended September 30, 2025 increased by $17.9 million, or 25%, compared to the prior-year quarter. The increase resulted from the higher operating income and a $0.2 million reduction in interest expense, net, partially offset by a $0.4 million increase in other expense, net.
Income before income taxes for the nine months ended September 30, 2025 increased by $44.9 million, or 22%, compared to the prior-year period. The increase resulted from the higher operating income, partially offset by a $1.3 million increase in other expense, net.
Net income for the three months ended September 30, 2025 increased by $14.2 million compared to the prior-year quarter, largely due to the aforementioned increase in income before taxes, partially offset by a $3.7 million increase in income tax expense.
Net income for the nine months ended September 30, 2025 increased by $19.5 million compared to the prior-year period, largely due to the aforementioned increase in income before taxes, partially offset by a $25.4 million increase in income tax expense.
Total orders for the three months ended September 30, 2025 were $467 million, an increase of $41 million, or 10%, compared to the prior-year quarter. The Environmental Solutions Group reported total orders of $371 million in the three months ended September 30, 2025, an increase of $18 million, or 5%, in comparison to the prior-year quarter. Orders in the three months ended September 30, 2025 within the Safety and Security Systems Group were $96 million, an increase of $23 million, or 31%, compared to the prior-year quarter.
Total orders for the nine months ended September 30, 2025 were $1.57 billion, an increase of $173 million, or 12%, compared to the prior-year period. The Environmental Solutions Group reported total orders of $1.29 billion in the nine months ended September 30, 2025, an increase of $116 million, or 10%, in comparison to the prior-year period. Orders in the nine months ended September 30, 2025 within the Safety and Security Systems Group were $282 million, an increase of $57 million, or 25%, compared to the prior-year period.
Our consolidated backlog at September 30, 2025 was $992 million, compared to $1.03 billion at September 30, 2024.
Results of Operations
The following table summarizes our Condensed Consolidated Statements of Operations and illustrates key financial indicators used to assess our consolidated financial results:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||
| Net sales | $ | 555.0 | $ | 474.2 | $ | 80.8 | $ | 1,583.4 | $ | 1,389.5 | $ | 193.9 | |||||||||||||||||||||||
| Cost of sales | 393.5 | 333.8 | 59.7 | 1,121.5 | 989.1 | 132.4 | |||||||||||||||||||||||||||||
| Gross profit | 161.5 | 140.4 | 21.1 | 461.9 | 400.4 | 61.5 | |||||||||||||||||||||||||||||
| Selling, engineering, general and administrative expenses | 61.4 | 60.1 | 1.3 | 188.5 | 175.6 | 12.9 | |||||||||||||||||||||||||||||
| Amortization expense | 4.5 | 3.8 | 0.7 | 13.3 | 11.2 | 2.1 | |||||||||||||||||||||||||||||
| Acquisition and integration-related expenses, net | 1.6 | 0.6 | 1.0 | 2.7 | 2.3 | 0.4 | |||||||||||||||||||||||||||||
| Operating income | 94.0 | 75.9 | 18.1 | 257.4 | 211.3 | 46.1 | |||||||||||||||||||||||||||||
| Interest expense, net | 2.8 | 3.0 | (0.2) | 9.3 | 9.4 | (0.1) | |||||||||||||||||||||||||||||
| Other expense, net | 0.7 | 0.3 | 0.4 | 2.2 | 0.9 | 1.3 | |||||||||||||||||||||||||||||
| Income before income taxes | 90.5 | 72.6 | 17.9 | 245.9 | 201.0 | 44.9 | |||||||||||||||||||||||||||||
| Income tax expense | 22.4 | 18.7 | 3.7 | 60.1 | 34.7 | 25.4 | |||||||||||||||||||||||||||||
| Net income | $ | 68.1 | $ | 53.9 | $ | 14.2 | $ | 185.8 | $ | 166.3 | $ | 19.5 | |||||||||||||||||||||||
| Operating data: | |||||||||||||||||||||||||||||||||||
| Operating margin | 16.9 | % | 16.0 | % | 0.9 | % | 16.3 | % | 15.2 | % | 1.1 | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 1.11 | $ | 0.87 | $ | 0.24 | $ | 3.02 | $ | 2.70 | $ | 0.32 | |||||||||||||||||||||||
| Total orders | 466.9 | 425.9 | 41.0 | 1,574.5 | 1,401.6 | 172.9 | |||||||||||||||||||||||||||||
| Backlog | 992.0 | 1,032.8 | (40.8) | 992.0 | 1,032.8 | (40.8) | |||||||||||||||||||||||||||||
| Depreciation and amortization | 20.3 | 16.5 | 3.8 | 58.9 | 47.7 | 11.2 | |||||||||||||||||||||||||||||
Net sales
Net sales for the three months ended September 30, 2025 increased by $80.8 million, or 17%, compared to the prior-year quarter, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. The Environmental Solutions Group reported a net sales increase of $67.3 million, or 17%, primarily due to increases in sales of road-marking and line-removal equipment of $16.2 million, sewer cleaners of $7.0 million, street sweepers of $6.6 million, dump truck bodies of $5.2 million, industrial vacuum loaders of $4.6 million, safe-digging trucks of $4.2 million, and metal extraction support equipment of $2.9 million. In addition, aftermarket revenues improved by $15.4 million. Within the Safety and Security Systems Group, net sales increased by $13.5 million, or 18%, primarily due to improvements in sales of public safety equipment of $8.3 million and warning systems of $4.4 million, as well as a $0.8 million favorable foreign currency translation impact.
Net sales for the nine months ended September 30, 2025 increased by $193.9 million, or 14%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. The Environmental Solutions Group reported a net sales increase of $172.4 million, or 15%, primarily due to increases in sales of road-marking and line-removal equipment of $41.8 million, sewer cleaners of $23.4 million, dump truck bodies of $21.9 million, streets sweepers of $16.9 million, industrial vacuum loaders of $11.4 million, metal extraction support equipment of $7.1 million, safe-digging trucks of $6.3 million, and refuse trucks of $6.1 million. In addition, aftermarket revenues improved by $40.6 million. Partially offsetting these improvement were reductions in sales of trailers of $7.9 million and multi-purpose maintenance vehicles of $3.0 million, as well as a $4.3 million unfavorable foreign currency translation impact. Within the Safety and Security Systems Group, net sales increased by $21.5 million, or 9%, primarily due to improvements in sales of public safety equipment of $13.5 million and warning systems of $7.3 million, as well as a $1.1 million favorable foreign currency translation impact.
Cost of sales
Cost of sales increased by $59.7 million, or 18%, for the three months ended September 30, 2025 compared to the prior-year quarter, largely due to an increase of $52.6 million, or 18%, within the Environmental Solutions Group, primarily related to
higher sales volumes and the addition of cost of sales from recent acquisitions. Within the Safety and Security Systems Group, cost of sales increased by $7.1 million, or 16%, primarily related to higher sales volumes.
Cost of sales increased by $132.4 million, or 13%, for the nine months ended September 30, 2025 compared to the prior-year period, largely due to an increase of $122.9 million, or 14%, within the Environmental Solutions Group, primarily related to higher sales volumes and the addition of cost of sales from recent acquisitions. Within the Safety and Security Systems Group, cost of sales increased by $9.5 million, or 7%, primarily related to higher sales volumes.
Gross profit
Gross profit increased by $21.1 million, or 15%, for the three months ended September 30, 2025 compared to the prior-year quarter, primarily due to a $14.7 million improvement within the Environmental Solutions Group and a $6.4 million improvement within the Safety and Security Systems Group. Gross profit as a percentage of revenues ("gross profit margin") for the three months ended September 30, 2025 was 29.1%, compared to 29.6% in the prior-year quarter, primarily due to an 80 basis point reduction within the Environmental Solutions Group, partially offset by a 70 basis point improvement within the Safety and Security Systems Group.
Gross profit increased by $61.5 million, or 15%, for the nine months ended September 30, 2025 compared to the prior-year period, primarily due to a $49.5 million improvement within the Environmental Solutions Group and a $12.0 million improvement within the Safety and Security Systems Group. Gross profit margin for the nine months ended September 30, 2025 was 29.2%, compared to 28.8% in the prior-year period, primarily due to improvements within the Environmental Solutions Group of 30 basis points and the Safety and Security Systems Group of 120 basis points.
SEG&A expenses
SEG&A expenses for the three months ended September 30, 2025 increased by $1.3 million, or 2%, compared to the prior-year quarter, primarily due to a $1.3 million increase within the Safety and Security Systems Group and a $0.3 million increase within the Environmental Solutions Group, partially offset by a $0.3 million decrease in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were 11.1% in the current-year quarter, compared to 12.7% in the prior-year quarter.
SEG&A expenses for the nine months ended September 30, 2025 increased by $12.9 million, or 7%, compared to the prior-year period, primarily due to a $7.6 million increase within the Environmental Solutions Group, a $3.6 million increase in Corporate SEG&A expenses, and a $1.7 million increase within the Safety and Security Systems Group. As a percentage of net sales, SEG&A expenses were 11.9% in the current year, compared to 12.6% in the prior-year period.
Operating income
Operating income for the three months ended September 30, 2025 increased by $18.1 million, or 24%, compared to the prior-year quarter, primarily driven by a $21.1 million improvement in gross profit, partially offset by a $1.3 million increase in SEG&A expenses, a $1.0 million increase in acquisition and integration-related expenses, net, and a $0.7 million increase in amortization expense. Consolidated operating margin for the three months ended September 30, 2025 was 16.9%, compared to 16.0% in the prior-year quarter.
Operating income for the nine months ended September 30, 2025 increased by $46.1 million, or 22%, compared to the prior-year period, primarily driven by a $61.5 million improvement in gross profit, partially offset by a $12.9 million increase in SEG&A expenses, a $2.1 million increase in amortization expense, and a $0.4 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the nine months ended September 30, 2025 was 16.3%, compared to 15.2% in the prior-year period.
Interest expense, net
Interest expense, net, for the three months ended September 30, 2025 decreased by $0.2 million compared to the prior-year quarter, largely due to reductions in average debt levels.
Interest expense, net, for the nine months ended September 30, 2025 decreased by $0.1 million compared to the prior-year period, largely due to reductions in average debt levels.
Other expense, net
Other expense, net, for the three months ended September 30, 2025 increased by $0.4 million compared to the prior-year quarter, primarily due to higher non-operating pension costs.
Other expense, net, for the nine months ended September 30, 2025 increased by $1.3 million compared to the prior-year period, primarily due to higher non-operating pension costs.
Income tax expense
The Company recognized income tax expense of $22.4 million for the three months ended September 30, 2025, compared to $18.7 million in the three months ended September 30, 2024, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by a $0.9 million increase in excess tax benefits associated with stock-based compensation activity. The Company's effective tax rate for the three months ended September 30, 2025 was 24.8%, compared to 25.8% in the prior-year quarter.
The Company recognized income tax expense of $60.1 million for the nine months ended September 30, 2025, compared to $34.7 million in the nine months ended September 30, 2024, with the increase primarily due to the effects of higher pre-tax income levels and the non-recurrence of a $15.6 million discrete tax benefit, which was recognized in the prior-year period in connection with the amendment of certain U.S. federal and state tax returns to claim a worthless stock deduction, partially offset by a $0.7 million increase in excess tax benefits associated with stock-based compensation activity. The Company's effective tax rate for the nine months ended September 30, 2025 was 24.4%, compared to 17.3% in the prior-year period.
Net income
Net income for the three months ended September 30, 2025 increased by $14.2 million compared to the prior-year quarter, largely due to the aforementioned increase in income before taxes, partially offset by a $3.7 million increase in income tax expense.
Net income for the nine months ended September 30, 2025 increased by $19.5 million compared to the prior-year period, largely due to the aforementioned increase in income before taxes, partially offset by a $25.4 million increase in income tax expense.
Environmental Solutions
The following table summarizes the Environmental Solutions Group's operating results as of and for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||
| Net sales | $ | 465.5 | $ | 398.2 | $ | 67.3 | $ | 1,333.4 | $ | 1,161.0 | $ | 172.4 | |||||||||||||||||||||||
| Operating income | 85.3 | 71.5 | 13.8 | 236.9 | 196.1 | 40.8 | |||||||||||||||||||||||||||||
| Operating data: | |||||||||||||||||||||||||||||||||||
| Operating margin | 18.3 | % | 18.0 | % | 0.3 | % | 17.8 | % | 16.9 | % | 0.9 | % | |||||||||||||||||||||||
| Total orders | $ | 371.1 | $ | 352.7 | $ | 18.4 | $ | 1,292.3 | $ | 1,176.6 | $ | 115.7 | |||||||||||||||||||||||
| Backlog | 903.8 | 979.7 | (75.9) | 903.8 | 979.7 | (75.9) | |||||||||||||||||||||||||||||
| Depreciation and amortization | 19.1 | 15.4 | 3.7 | 55.4 | 44.4 | 11.0 | |||||||||||||||||||||||||||||
Three months ended September 30, 2025 vs. three months ended September 30, 2024
Total orders for the three months ended September 30, 2025 increased by $18.4 million, or 5%, compared to the prior-year quarter. U.S. orders increased by $13.4 million, primarily due to improvements in orders for road-marking and line-removal equipment of $9.8 million, safe-digging trucks of $7.8 million, aftermarket offerings of $6.2 million, industrial vacuum loaders of $3.7 million, metal extraction support equipment of $3.4 million, and trailers of $3.0 million. Partially offsetting these improvements were reductions in orders for sewer cleaners of $12.7 million and street sweepers of $8.9 million. Non-U.S. orders increased by $5.0 million, largely due to improvements in orders for road-marking and line-removal equipment of $3.4 million, aftermarket offerings of $2.0 million, industrial vacuum loaders of $1.2 million, and refuse trucks of $1.0 million. Partially offsetting these improvements were reductions in orders for sewer cleaners of $2.6 million and dump truck bodies of $1.5 million.
Net sales for the three months ended September 30, 2025 increased by $67.3 million, or 17%, compared to the prior-year quarter, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. For the three months ended September 30, 2025, U.S. sales increased by $52.1 million, largely due to increases in sales of road-marking and line-removal equipment of $15.1 million, sewer cleaners of $9.1 million, dump truck bodies of $7.1 million, industrial vacuum loaders of $4.6 million, street sweepers of $3.6 million, and safe-digging trucks of $3.0 million. Additionally, aftermarket revenues increased by $13.4 million. Partially offsetting these improvements was a $4.1 million reduction in shipments of refuse trucks. Non-U.S. sales increased by $15.2 million, primarily due to increases in shipments of refuse trucks of $6.0 million, metal extraction support equipment of $3.8 million, street sweepers of $3.0 million, aftermarket offerings of $2.0
million, safe-digging trucks of $1.2 million, and road-marking and line-removal equipment of $1.1 million. Partially offsetting these improvements were reductions in shipments of sewer cleaners of $2.1 million and dump truck bodies of $1.9 million.
Cost of sales for the three months ended September 30, 2025 increased by $52.6 million, or 18%, compared to the prior-year quarter, primarily related to higher sales volumes, the addition of cost of sales from recent acquisitions, and a $0.5 million increase in purchase accounting expense effects. Gross profit margin for the three months ended September 30, 2025 was 26.3%, compared to 27.1% in the prior-year quarter.
SEG&A expenses for the three months ended September 30, 2025 increased by $0.3 million, or 1%, compared to the prior-year quarter, primarily due to the addition of SEG&A expenses from recent acquisitions and higher employee-related costs. As a percentage of net sales, SEG&A expenses were 7.0% in the current-year quarter, compared to 8.1% in the prior-year quarter.
Operating income for the three months ended September 30, 2025 increased by $13.8 million, or 19%, compared to the prior-year quarter, largely due to a $14.7 million improvement in gross profit and a $0.1 million reduction in acquisition and integration-related expenses, net, partially offset by a $0.7 million increase in amortization expense and the $0.3 million increase in SEG&A expenses.
Nine months ended September 30, 2025 vs. nine months ended September 30, 2024
Total orders for the nine months ended September 30, 2025 increased by $115.7 million, or 10%, compared to the prior-year period. U.S. orders increased by $135.2 million, primarily due to increases in orders for safe-digging trucks of $44.9 million, road-marking and line-removal equipment of $42.5 million, inclusive of the acquisition of a $16.1 million U.S. order backlog attributable to the Hog transaction, as well as increases in orders for aftermarket offerings of $36.8 million, industrial vacuum loaders of $12.2 million, street sweepers of $8.5 million, dump truck bodies of $8.4 million, trailers of $6.1 million, and metal extraction support equipment of $3.0 million. Partially offsetting these improvements were reductions in orders for sewer cleaners of $19.5 million and refuse trucks of $9.9 million. Non-U.S. orders decreased by $19.5 million, largely due to reductions in orders for refuse trucks of $61.3 million, dump truck bodies of $7.6 million, and a $4.4 million unfavorable foreign currency translation impact. Partially offsetting these reductions were improvements in orders for sewer cleaners of $16.0 million, metal extraction support equipment of $13.5 million, road-marking and line-removal equipment of $10.4 million, inclusive of the acquisition of a $3.4 million non-U.S. order backlog attributable to the Hog transaction, aftermarket offerings of $2.9 million, safe-digging trucks of $2.3 million, waterblasting equipment of $2.2 million, street sweepers of $2.0 million, and industrial vacuum loaders of $1.7 million.
Net sales for the nine months ended September 30, 2025 increased by $172.4 million, or 15%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. For the nine months ended September 30, 2025, U.S. sales increased by $138.0 million, largely due to increases in sales of road-marking and line-removal equipment of $36.3 million, dump truck bodies of $27.9 million, sewer cleaners of $24.1 million, industrial vacuum loaders of $11.4 million, and street sweepers of $8.5 million. Additionally, aftermarket revenues increased by $39.4 million. Partially offsetting these improvements were reductions in shipments of trailers of $7.9 million, refuse trucks of $5.0 million, and multi-purpose maintenance vehicles of $2.6 million. Non-U.S. sales increased by $34.4 million, primarily due to increases in shipments of refuse trucks of $11.1 million, street sweepers of $8.4 million, metal extraction support equipment of $6.8 million, safe-digging trucks of $5.6 million, road-marking and line-removal equipment of $5.5 million, and waterblasting equipment of $2.3 million. Partially offsetting these improvements was a $6.0 million reduction in shipments of dump truck bodies, and a $4.3 million unfavorable foreign currency translation impact.
Cost of sales for the nine months ended September 30, 2025 increased by $122.9 million, or 14%, compared to the prior-year period, primarily related to higher sales volumes, the addition of cost of sales from recent acquisitions, and a $1.2 million increase in purchase accounting expense effects. Gross profit margin for the nine months ended September 30, 2025 was 26.5%, compared to 26.2% in the prior-year period.
SEG&A expenses for the nine months ended September 30, 2025 increased by $7.6 million, or 8%, compared to the prior-year period, primarily due to the addition of SEG&A expenses from recent acquisitions and higher employee-related costs. As a percentage of net sales, SEG&A expenses were 7.7% in the current year, compared to 8.2% in the prior-year period.
Operating income for the nine months ended September 30, 2025 increased by $40.8 million, or 21%, compared to the prior-year period, largely due to a $49.5 million improvement in gross profit and a $1.0 million reduction in acquisition and integration-related expenses, net, partially offset by the $7.6 million increase in SEG&A expenses and a $2.1 million increase in amortization expense.
Backlog was $904 million at September 30, 2025, compared to $980 million at September 30, 2024.
Safety and Security Systems
The following table summarizes the Safety and Security Systems Group's operating results as of and for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||
| Net sales | $ | 89.5 | $ | 76.0 | $ | 13.5 | $ | 250.0 | $ | 228.5 | $ | 21.5 | |||||||||||||||||||||||
| Operating income | 21.9 | 16.8 | 5.1 | 59.2 | 48.9 | 10.3 | |||||||||||||||||||||||||||||
| Operating data: | |||||||||||||||||||||||||||||||||||
| Operating margin | 24.5 | % | 22.1 | % | 2.4 | % | 23.7 | % | 21.4 | % | 2.3 | % | |||||||||||||||||||||||
| Total orders | $ | 95.8 | $ | 73.2 | $ | 22.6 | $ | 282.2 | $ | 225.0 | $ | 57.2 | |||||||||||||||||||||||
| Backlog | 88.2 | 53.1 | 35.1 | 88.2 | 53.1 | 35.1 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 1.0 | 1.0 | - | 3.1 | 3.0 | 0.1 | |||||||||||||||||||||||||||||
Three months ended September 30, 2025 vs. three months ended September 30, 2024
Total orders for the three months ended September 30, 2025 increased by $22.6 million, or 31%, compared to the prior-year quarter. U.S. orders increased by $6.8 million, primarily due to improvements in orders for public safety equipment of $7.7 million and industrial signaling equipment of $0.4 million, partially offset by a $1.3 million reduction in orders for warning systems. Non-U.S. orders increased by $15.8 million, primarily due to a $15.5 million improvement in orders for public safety equipment and a $1.3 million favorable foreign currency translation impact, partially offset by a $1.0 million reduction in orders for industrial signaling equipment.
Net sales for the three months ended September 30, 2025 increased by $13.5 million, or 18%, compared to the prior-year quarter, inclusive of the effects of higher sales volumes. U.S. sales increased by $9.3 million, driven by increases in sales of public safety equipment of $6.9 million and warning systems of $2.4 million. Non-U.S. sales increased by $4.2 million, primarily due to increases in sales of warning systems of $2.0 million and public safety equipment of $1.4 million, as well as a $0.8 million favorable foreign currency translation impact.
Cost of sales for the three months ended September 30, 2025 increased by $7.1 million, or 16%, compared to the prior-year quarter, primarily related to higher sales volumes. Gross profit margin for the three months ended September 30, 2025 was 43.6%, compared to 42.9% in the prior-year quarter, with the improvement primarily attributable to improved operating leverage from higher sales volumes.
SEG&A expenses for the three months ended September 30, 2025 increased by $1.3 million, or 8%, compared to the prior-year quarter, primarily due to higher employee-related costs and sales commissions as well as increased investments in new product development initiatives. As a percentage of net sales, SEG&A expenses were 19.1% in the current-year quarter, compared to 20.8% in the prior-year quarter.
Operating income for the three months ended September 30, 2025 increased by $5.1 million, or 30%, compared to the prior-year quarter, primarily due to a $6.4 million improvement in gross profit, partially offset by the $1.3 million increase in SEG&A expenses.
Nine months ended September 30, 2025 vs. nine months ended September 30, 2024
Total orders for the nine months ended September 30, 2025 increased by $57.2 million, or 25%, compared to the prior-year period. U.S. orders increased by $32.9 million, primarily due to improvements in orders for public safety equipment of $27.4 million, warnings systems of $4.7 million, and industrial signaling equipment of $0.8 million. Non-U.S. orders increased by $24.3 million, primarily due to improvements in orders for public safety equipment of $24.1 million and warning systems of $0.5 million, as well as a $1.7 million favorable foreign currency translation impact, partially offset by a $2.0 million reduction in orders for industrial signaling equipment.
Net sales for the nine months ended September 30, 2025 increased by $21.5 million, or 9%, compared to the prior-year period, inclusive of the effects of higher sales volumes. U.S. sales increased by $14.4 million, driven by increases in sales of public safety equipment of $9.9 million, warning systems of $3.3 million, and industrial signaling equipment of $1.2 million. Non-U.S. sales increased by $7.1 million, primarily due to increases in sales of warning systems of $4.0 million and public safety equipment of $3.6 million, as well as a $1.1 million favorable foreign currency translation impact, partially offset by a $1.6 million reduction in sales of industrial signaling equipment.
Cost of sales for the nine months ended September 30, 2025 increased by $9.5 million, or 7%, compared to the prior-year period, primarily related to higher sales volumes. Gross profit margin for the nine months ended September 30, 2025 was 43.4%, compared to 42.2% in the prior-year period, with the improvement primarily attributable to improved operating leverage from higher sales volumes.
SEG&A expenses for the nine months ended September 30, 2025 increased by $1.7 million, or 4%, compared to the prior-year period, primarily due to higher employee-related costs and increased investment in new product development initiatives. As a percentage of net sales, SEG&A expenses were 19.7% in the current year, compared to 20.8% in the prior-year period.
Operating income for the nine months ended September 30, 2025 increased by $10.3 million, or 21%, compared to the prior-year period, primarily due to a $12.0 million improvement in gross profit, partially offset by the $1.7 million increase in SEG&A expenses.
Backlog was $88 million at September 30, 2025, compared to $53 million at September 30, 2024.
Corporate Expenses
Corporate operating expenses for the three months ended September 30, 2025 were $13.2 million, compared to $12.4 million in the prior-year quarter, with the increase primarily due to a $1.1 million increase in acquisition and integration-related expenses, net.
Corporate operating expenses for the nine months ended September 30, 2025 were $38.7 million, compared to $33.7 million in the prior-year quarter, with the increase primarily due to a $1.4 million increase in acquisition and integration-related expenses, net, the non-recurrence of a $1.8 million gain associated with an insurance recovery in the prior-year period, as well as increases in information technology costs, and higher post-retirement and incentive compensation expenses.
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. In general, the Company tends to have lower equipment sales in the first calendar quarter of each year compared to other quarters as a result of these factors. In addition, rental income and parts sales are generally higher in the second and third quarters of the year, because many of the Company's products are used for maintenance activities in North America, where usage is typically lower during periods of harsher weather conditions.
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, like the acquisition of substantially all the assets and operations of Hog that was completed on February 12, 2025. 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 Company's new credit facility will provide funds sufficient for these purposes.
As of September 30, 2025, there was $94.4 million of cash drawn under the revolving credit facility, $117.2 million outstanding under the term loan facility, and $10.9 million of undrawn letters of credit under the 2022 Credit Agreement, with $569.7 million of availability for borrowings. The net cash flows associated with the Company's rental equipment transactions are included in cash flow from operating activities.
The Company's cash and cash equivalents totaled $54.4 million as of September 30, 2025 and $91.1 million as of December 31, 2024. As of September 30, 2025, $18.6 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. The Company uses this cash to fund the operating activities of its foreign subsidiaries and for further investment in foreign operations. Generally, the Company has considered such cash to be permanently reinvested in its foreign operations and the Company's current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. However, in the event that these funds are needed to fund U.S. operations or to satisfy U.S. obligations, they generally could be repatriated. The repatriation of these funds may cause the Company to incur additional tax expense, dependent on income tax laws and other circumstances at the time any such amounts are repatriated.
Net cash of $157.5 million was provided by operating activities in the nine months ended September 30, 2025, compared to $140.7 million in the prior-year period, with the year-over-year increase primarily due to higher net income partially offset by the non-recurrence of a U.S. federal worthless stock deduction refund of approximately $14 million received in the prior-year period.
Net cash of $101.3 million was used for investing activities in the nine months ended September 30, 2025, compared to $30.8 million in the prior-year period. During the nine months ended September 30, 2025, the Company funded $19.9 million of capital expenditures and made an initial payment of $82.1 million to acquire Hog. During the nine months ended September 30, 2024, the Company funded $32.1 million of capital expenditures.
Net cash of $94.4 million was used for financing activities in the nine months ended September 30, 2025, compared to $97.2 million in the prior-year period. In the nine months ended September 30, 2025, the Company increased net borrowings under its revolving credit facility by $1.1 million, paid down $3.1 million under its term loan facility, funded payments of $4.3 million relating to the 2023 acquisition of Trackless, paid $11.5 million to acquire a previously-leased manufacturing facility, funded cash dividends of $25.6 million and share repurchases of $39.7 million, and redeemed $12.2 million of stock in order to remit funds to tax authorities to satisfy employees' tax withholdings following the vesting of stock-based compensation and the exercise of stock options. In the nine months ended September 30, 2024, the Company paid down $64.4 million of net borrowings under its revolving credit facility and $1.6 million under its term loan facility, funded cash dividends of $22.0 million and share repurchases of $4.5 million, and redeemed $6.0 million of stock in order to remit funds to tax authorities to satisfy employees' tax withholdings following the vesting of stock-based compensation and the exercise of stock options.
On October 29, 2025, the Company entered into the 2025 Credit Agreement, which amends and restates the 2022 Credit Agreement. The 2025 Credit Agreement increases the Company's revolving credit facility from up to $675 million to up to $1.1 billion, and includes a delayed draw term loan facility in an amount of up to $400 million. In addition, the Company may expand its borrowing capacity under the 2025 Credit Agreement by an aggregate amount of up to the sum of (x) the greater of (i) $500 million and (ii) 100% of Consolidated EBITDA for the applicable four-quarter period preceding such expansion, and (y) the amount of additional indebtedness (if any) that could be incurred without causing the Consolidated Total Net Leverage Ratio for the applicable four-quarter period preceding such expansion, on a pro forma basis, to exceed 2.75 to 1.00, subject to the approval of the applicable lenders providing such additional borrowings.
The Company was subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2022 Credit Agreement that are measured at each fiscal quarter-end. The Company was in compliance with all such covenants as of September 30, 2025. The Company will be subject to similar financial covenants under the 2025 Credit Agreement.
The Company anticipates that capital expenditures for 2025 will be in the range of $40 million to $50 million.
The Company believes that its financial resources and major sources of liquidity, including cash flow from operations and borrowing capacity, will be adequate to meet its operating needs, capital needs, and financial commitments.
Contractual Obligations and Off-Balance Sheet Arrangements
During the nine months ended September 30, 2025, 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, 2024.
Federal Signal Corporation published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 20:41 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]