10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

o 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 Company as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 36-1063330
(I.R.S. Employer
Identification No.)

1415 West 22nd Street
Oak Brook, IL 60523
(Address of principal executive offices) (Zip code)

(630) 954-2000
(Company’s telephone number including area code)

Not applicable
(Former name, former address, and former fiscal year, if changed since last report)

     Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the Company has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Company was required to submit and post such files). Yes o No o

     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. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the Company is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the Company’s classes of common stock, as of the latest practicable date.

Title
Common Stock, $1.00 par value	48,752,351 shares outstanding at October 13, 2009

FEDERAL SIGNAL CORPORATION
INDEX TO FORM 10-Q

	Page
Part I. Financial Information
Item 1. Financial Statements		3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)		4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)		5
Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (unaudited)		6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (unaudited)		7
Notes to Condensed Consolidated Financial Statements (unaudited)		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		25
Item 4. Controls and Procedures		25
Part II. Other Information
Item 1. Legal Proceedings		25
Item 1A. Risk Factors		25
Item 5. Other Information		25
Item 6. Exhibits		25
Signature		26

2

Part I. Financial Information

Item 1. Financial Statements

FORWARD-LOOKING STATEMENTS

This Form 10-Q, reports filed by Federal Signal Corporation and subsidiaries (“the Company”) with the Securities and Exchange Commission (“SEC”) and comments made by management may contain words such as “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “project,” “estimate” and “objective” or the negative thereof or similar terminology concerning the Company’s future financial performance, business strategy, plans, goals and objectives. These expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning the Company’s possible or assumed future performance or results of operations and are not guarantees. While these statements are based on assumptions and judgments that management has made in light of industry experience as well as perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances, they are subject to risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different.

These risks and uncertainties, some of which are beyond the Company’s control, include the cyclical nature of the Company’s industrial, municipal, government and commercial markets, availability of credit and third-party financing for customers, volatility in securities trading markets, economic downturns, risks associated with suppliers, dealer and other partner alliances, changes in cost competitiveness including those resulting from foreign currency movements, technological advances by competitors, increased warranty and product liability expenses, compliance with environmental and safety regulations, restrictive debt covenants, disruptions in the supply of parts or components from sole source suppliers and subcontractors, retention of key employees and general changes in the competitive environment. These risks and uncertainties include, but are not limited to, the risk factors described under “Risk Factors” in the Company’s Annual Report on Form 10-K, Form 10-Qs and other filings with the SEC. 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 financial position or results of operations. 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 makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other reports and information filed with the SEC and amendments to those reports available, free of charge, through its Internet website (http://www.federalsignal.com) as soon as reasonably practical after it electronically files or furnishes such materials to the SEC. All of the Company’s filings may be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-202-551-8090. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

3

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three months ended September 30,						Nine months ended September 30,
($ in millions, except per share data)	2009			2008*			2009			2008*
Net sales	$	166.6		$	212.0		$	560.9		$	665.9
Costs and expenses:
Cost of sales		(124.6	)		(155.7	)		(415.7	)		(488.3	)
Selling, general and administrative		(34.5	)		(44.0	)		(122.9	)		(136.1	)
Operating income		7.5			12.3			22.3			41.5
Interest expense		(2.6	)		(3.6	)		(8.8	)		(12.6	)
Other income (expense), net		0.7			(0.1	)		(0.3	)		(1.9	)
Income before income taxes		5.6			8.6			13.2			27.0
Income tax (expense) benefit		(1.0	)		5.9			(2.5	)		(0.3	)
Income from continuing operations		4.6			14.5			10.7			26.7
Loss from discontinued operations and disposal, net of income tax benefit of $0, $3.9, $0 and $21.8, respectively		(0.3	)		(0.3	)		(10.3	)		(110.6	)
Net income (loss)	$	4.3		$	14.2		$	0.4		$	(83.9	)
COMMON STOCK DATA:
Basic and diluted earnings per share:
Earnings from continuing operations	$	0.10		$	0.31		$	0.22		$	0.56
Loss from discontinued operations and disposal		(0.01	)		(0.01	)		(0.21	)		(2.32	)
Earnings (loss) per share	$	0.09		$	0.30		$	0.01		$	(1.76	)
Weighted average common shares outstanding:
Basic		48.0			47.6			48.5			47.7
Diluted		48.0			47.6			48.5			47.7
Cash dividends per share of common stock	$	0.06		$	0.06		$	0.18		$	0.18

See notes to condensed consolidated financial statements.

* - Prior periods have been adjusted to reflect the change in accounting method discussed in Notes 1 and 3.

4

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2009			2008*			2009			2008*
Net income (loss)	$	4.3		$	14.2		$	0.4		$	(83.9	)
Other comprehensive income (loss), net of tax -
Foreign currency translation		7.7			(6.9	)		19.4			(3.2	)
Net derivative gain, cash flow hedges		—			0.8			—			1.7
Net change in unrecognized pension and postretirement losses, net of tax		(0.5	)		0.7			(0.1	)		1.3
Comprehensive income (loss)	$	11.5		$	8.8		$	19.7		$	(84.1	)

See notes to condensed consolidated financial statements.

* Prior periods have been adjusted to reflect the change in accounting method discussed in Notes 1 and 3.

5

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE (unaudited)

	September 30,			December 31,
($ in millions)	2009			2008*
ASSETS
Current assets
Cash and cash equivalents	$	21.1		$	23.4
Short-term investments		—			10.0
Accounts receivable, net of allowances for doubtful accounts of $1.9 and $2.0, respectively		114.1			138.6
Inventories		129.2			133.5
Other current assets		27.1			21.5
Total current assets		291.5			327.0
Properties and equipment, net		67.7			63.5
Other assets
Goodwill		330.5			328.1
Intangible assets, net of accumulated amortization		48.0			47.8
Deferred tax assets		26.9			30.3
Deferred charges and other assets		1.8			4.4
Total assets of continuing operations		766.4			801.1
Assets of discontinued operations, net		10.2			37.0
Total assets	$	776.6		$	838.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	1.3		$	12.6
Current portion of long-term borrowings		40.4			25.1
Accounts payable		41.6			48.4
Accrued liabilities
Compensation and withholding taxes		20.6			23.9
Customer deposits		12.5			17.4
Other		53.0			48.6
Total current liabilities		169.4			176.0
Long-term borrowings		196.8			241.2
Long-term pension liabilities		54.1			58.0
Deferred gain		24.7			26.2
Other long-term liabilities		12.2			14.8
Total liabilities of continuing operations		457.2			516.2
Liabilities of discontinued operations		13.9			34.8
Total liabilities		471.1			551.0
Shareholders’ equity
Common stock, $1 par value per share, 90.0 million shares authorized, 49.6 million and 49.3 million shares issued, respectively		49.6			49.3
Capital in excess of par value		93.3			106.4
Retained earnings		220.6			229.0
Treasury stock, 0.8 million and 1.9 million shares at cost, respectively		(15.8	)		(36.1	)
Accumulated other comprehensive income (loss):
Foreign currency translation, net		15.3			(4.1	)
Net derivative loss, cash flow hedges, net		(0.9	)		(0.9	)
Unrecognized pension and postretirement losses, net		(56.6	)		(56.5	)
Total accumulated other comprehensive loss		(42.2	)		(61.5	)
Total shareholders’ equity		305.5			287.1
Total liabilities and shareholders’ equity	$	776.6		$	838.1

See notes to condensed consolidated financial statements.

* Prior periods have been adjusted to reflect the change in accounting method discussed in Notes 1 and 3.

6

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine months ended September 30,
($ in millions)	2009			2008*
Operating activities:
Net income (loss)	$	0.4		$	(83.9	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss on discontinued operations and disposal		10.3			110.6
Depreciation and amortization		11.7			11.9
Stock-based compensation expense		3.3			2.1
Pension contributions		(0.5	)		(8.2	)
Working capital (1)		21.4			(16.2	)
Other		(3.4	)		(6.5	)
Net cash provided by continuing operating activities		43.2			9.8
Net cash (used for) provided by discontinued operating activities		(3.2	)		119.5
Net cash provided by operating activities		40.0			129.3
Investing activities:
Purchases of properties and equipment		(11.9	)		(18.8	)
Proceeds from sales of properties, plant and equipment		1.2			35.8
Other, net		10.0			0.8
Net cash (used for) provided by continuing investing activities		(0.7	)		17.8
Net cash provided by discontinued investing activities		14.2			54.4
Net cash provided by investing activities		13.5			72.2
Financing activities:
Decrease in short-term borrowings, net		(11.3	)		(1.4	)
Payments on long-term borrowings, net		(29.8	)		(55.4	)
Purchases of treasury stock		—			(6.0	)
Cash dividends paid to shareholders		(8.7	)		(8.6	)
Other, net		0.2			(0.1	)
Net cash used for continuing financing activities		(49.6	)		(71.5	)
Net cash used for discontinued financing activities		(7.1	)		(126.7	)
Net cash used for financing activities		(56.7	)		(198.2	)
Effects of foreign exchange rate changes on cash		0.9			—
(Decrease) increase in cash and cash equivalents		(2.3	)		3.3
Cash and cash equivalents at beginning of period		23.4			12.5
Cash and cash equivalents at end of period	$	21.1		$	15.8

(1)	Working capital is defined as net accounts receivable, inventories, accounts payable and customer deposits.
See notes to condensed consolidated financial statements.
*	Prior periods have been adjusted to reflect the change in accounting method discussed in Notes 1 and 3.

7

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements of Federal Signal Corporation and subsidiaries (the “Company”) included herein have been prepared by the Company, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles 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 should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

In the opinion of the management of the Company, the information contained herein reflects all adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods. Such adjustments are of a normal recurring nature. The operating results for the three and nine month periods ended September 30, 2009 are not necessarily indicative of the results to be expected for the full year of 2009.

The Company reports its interim quarterly periods on a 13-week basis ending on a Saturday with the fiscal year ending on December 31. For presentation, the Company uses “September 30, 2009” to refer to its financial position as of September 26, 2009 and its results of operations for the 13-week and 39-week periods ended September 26, 2009, and “September 30, 2008” to refer to its financial position as of September 27, 2008 and its results of operations for the 13-week and 39-week periods ended September 27, 2008.

The Company has evaluated all subsequent events through November 3, 2009, the date the financial statements were issued.

Certain balances in 2008 have been reclassified to conform to the 2009 presentation. Included with reclassifications are restatements for discontinued operations and retrospective adoption of a change in accounting principle. The current year discontinued operations arise out of the Environmental Safety Group segment.

As of July 1, 2009, the Company changed its method for accounting for certain inventories from last-in, first-out (LIFO) to first-in, first-out (FIFO). The Company adopted this change in accounting principle retrospectively (See Note 3).

In December 2007, the FASB issued revised guidance related to accounting for business combinations which expands the definition of a business and a business combination, requires the fair value of the purchase price of an acquisition including the issuance of equity securities to be determined on the acquisition date, requires that all assets, liabilities, contingent consideration, contingencies and in-process research and development costs of an acquired business be recorded at fair value at the acquisition date, requires that acquisition costs generally be expensed as incurred, requires that restructuring costs generally be expensed in periods subsequent to the acquisition date, and requires changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. The Company adopted the guidance on January 1, 2009. The Company expects that the guidance may have a material impact on its results of operations or consolidated financial statements in periods subsequent to or concurrent with future acquisitions.

In October, the FASB amended guidance relating to multiple-deliverable revenue arrangements and certain arrangements that include software elements. The revised guidance requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. Tangible products are removed from the scope of software revenue guidance and guidance is provided on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. The amended guidance should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect the adoption of the revised guidance to have a material impact on the Company’s consolidated results of operations or financial condition.

8

No other new accounting pronouncements issued or effective during the first nine months of 2009 has had or is expected to have a material impact on the Consolidated Financial Statements.

2. EARNINGS (LOSS) PER SHARE

Earnings (Loss) per share – basic is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Earnings (loss) per share – diluted reflects the potential dilution that could occur if options issued under stock-based compensation awards were exercised and converted into common stock. For the three and nine month periods ended September 30, 2009, options to purchase 1.7 million shares of the Company’s common stock had exercise prices that were greater than the average market price of those shares during the respective reporting periods. For the three and nine months ended September 30, 2008, options to purchase 2.0 million shares of the Company’s common stock had exercise prices that were greater than the average market price of those shares during the respective reporting periods. As a result, these shares are excluded from the earnings per share calculation as they are anti-dilutive.

The following is a reconciliation of net income (loss) to earnings per share – basic and diluted – for the three and nine months ended September 30, 2009 and 2008:

Computation of Earnings (Loss) per Common Share
(in millions, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Income from continuing operations	$	4.6		$	14.5		$	10.7		$	26.7
Loss from discontinued operations and disposal, net of tax		(0.3	)		(0.3	)		(10.3	)		(110.6	)
Net income(loss)	$	4.3		$	14.2		$	0.4		$	(83.9	)
Average shares outstanding – basic		48.0			47.6			48.5			47.7
Dilutive effect of stock options and other		—			—			—			—
Diluted shares outstanding		48.0			47.6			48.5			47.7
Earnings from continuing operations per share
Basic	$	0.10		$	0.31		$	0.22		$	0.56
Diluted	$	0.10		$	0.31		$	0.22		$	0.56
Loss from discontinued operations per share
Basic	$	(0.01	)	$	(0.01	)	$	(0.21	)	$	(2.32	)
Diluted	$	(0.01	)	$	(0.01	)	$	(0.21	)	$	(2.32	)
Earnings (loss) per share
Basic	$	0.09		$	0.30		$	0.01		$	(1.76	)
Diluted	$	0.09		$	0.30		$	0.01		$	(1.76	)

3. INVENTORIES

Inventories are summarized as follows:

	September 30,		December 31,
	2009		2008
Raw materials	$	52.5	$	66.3
Work in progress		38.6		34.7
Finished goods		38.1		32.5
Total inventories	$	129.2	$	133.5

9

Prior to July 1, 2009 the Company valued certain inventories under the LIFO cost method. As of July 1, 2009, the method of accounting for these inventories was changed from the LIFO method to the FIFO method. As of December 31, 2008, approximately 22% of total inventories were valued under the LIFO method of accounting. The Company believes that this change is to a preferable method which better reflects the current cost of inventory on its consolidated balance sheets. Additionally, this change conforms all of the Company’s inventories to a consistent costing method providing better comparability across businesses and peers. The Company has applied this change retrospectively to all prior periods presented herein in accordance with accounting principles relating to accounting changes. Accordingly, the previously reported cost of sales decreased by $0.3 million, income from continuing operations increased by $0.2 million and the net loss decreased by $0.2 million for the nine months ended September 30, 2008. There was no change to previously reported cost of sales or net income for the three month period ended September 30, 2008 as a result of the change in accounting method for inventories. Basic and diluted earnings (loss) per share for the three and nine month periods ended September 30, 2008 were not impacted by the change in method. The elimination of LIFO increased inventory $4.1 million, decreased deferred tax assets by $1.5 million and increased retained earnings by $2.6 million, the amount of the LIFO-based reserves, net of related tax liabilities as of December 31, 2008. The change in accounting principle had no significant impact on the results of operations for the first quarter ended March 31, 2009 or the second quarter ended June 30, 2009. Had the Company continued to value a portion of its inventories under the LIFO method during the third quarter ended September 30, 2009, actual results for the three and nine months then ended would not have been significantly different.

4. INCOME TAXES

The Company’s effective tax rate on earnings from continuing operations was 17.9% for the three month period ended September 30, 2009. In the comparable three month period ended September 30, 2008, the Company’s effective tax rate was (68.6%), primarily due to a tax benefit of $8.2 million for the utilization of capital loss carry forwards resulting from the sale-leaseback transactions for two U.S. based manufacturing facilities.

The Company’s effective tax rate was 18.9% and 0.9% for the nine month periods ended September 30, 2009 and 2008, respectively. The tax rate for the nine-month period ended September 30, 2009 reflects better foreign tax effects than the comparable 2008 period, due to reduced losses in China, and research and development tax credit benefits that are not reflected in the nine month period ended September 30, 2008, as Congress had not yet extended the credit. The effective tax rate for the nine-month period ending September 30, 2008 reflects an $8.2 million benefit for the utilization of capital loss carry forwards previously mentioned.

The Company’s unrecognized tax benefits were $5.0 million at January 1, 2009 of which $4.4 million are tax benefits that if recognized, would reduce the annual effective tax rate. As of September 30, 2009, the unrecognized tax benefits were increased to $5.6 million principally due to an unresolved tax issue in relation to unrepatriated foreign earnings. If recognized, $4.9 million of tax benefits would reduce the annual effective tax rate. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. Interest and penalties amounting to $0.5 million and $0.1 million, respectively, are included in the consolidated balance sheet at September 30, 2009. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. In the nine months ended September 30, 2009, the Company recognized $0.9 million of previously unrecognized tax benefits.

5. POSTRETIREMENT BENEFITS

The components of the Company’s net periodic pension expense for its defined benefit pension plans are summarized as follows:

10

	US Benefit Plans												Non-US Benefit Plan
	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30,						September 30,						September 30,						September 30,
	2009			2008			2009			2008			2009			2008			2009			2008
Service cost	$	—		$	0.1		$	—		$	0.7		$	—		$	0.1		$	0.1		$	0.2
Interest cost		2.0			2.1			6.0			6.6			0.7			0.8			1.9			2.6
Expected return on plan assets		(2.4	)		(2.6	)		(7.2	)		(8.2	)		(0.7	)		(1.0	)		(1.9	)		(3.2	)
Amortization of actuarial loss		0.5			0.1			1.5			0.5			0.3			0.1			0.8			0.4
Curtailment charge		—			—			—			0.4			—			—			—			—
Settlement charge		—			—			—			2.4			—			—			—			—
Net periodic pension expense (income)	$	0.1		$	(0.3	)	$	0.3		$	2.4		$	0.3		$	—		$	0.9		$	—

On April 21, 2008, the Company sold its Die & Mold Operations. The operations were included in discontinued operations for all periods presented through the sale date. As a result of an amendment related to the sale of the business, the Company was required to recognize a curtailment adjustment and a settlement charge under generally accepted accounting principles (“GAAP”) relating to accounting for settlements and curtailments of defined benefit plans and for termination benefits. Pension expense relating to the Tool segment employees, excluding the previously mentioned charges, was $0.3 million for the nine months ended September 30, 2008.

The remeasurement of these defined benefit plans as a result of the sale of the operations also included a change in the weighted average discount rate from 6.45% used at year-end 2007 to 6.8% at the July 1, 2008 remeasurement date, the impact of which was to decrease pension expense by $0.5 million and $0.8 million in the three and nine months ended September 30, 2008, respectively. The projected benefit obligation was reduced by $17.3 million and the accumulated benefit obligation by $8.7 million as a result of these changes.

During the nine month period ended September 30, 2009, the Company contributed 1.1 million shares of the Company’s common stock held in treasury to the U.S. pension plan. The stock was valued at $4.4 million based upon prices in the open market at the contribution date. The Company contributed $7.0 million in cash during the nine months ended September 30, 2008 to its U.S. defined benefit plan. In addition, the Company contributed $0.5 million and $1.2 million to its non-U.S. defined benefit plan during the nine months ended September 30, 2009 and 2008, respectively.

6. DISCONTINUED OPERATIONS

The following table presents the operating results of the Company’s discontinued operations for the three and nine month periods ended September 30, 2009 and 2008:

	Three months ended September 30,						Nine months ended September 30,
Ravo (Environmental Solutions Segment)	2009			2008			2009			2008
Net sales	$	1.5		$	13.6		$	28.2		$	38.9
Costs and expenses		(1.5	)		(13.6	)		(27.4	)		(39.0	)
Income (loss) before income taxes		—			—			0.8			(0.1	)
Income tax expense		—			—			—			—
Income (loss) on discontinued operations	$	—		$	—		$	0.8		$	(0.1	)

	Three months ended September 30,					Nine months ended September 30,
E-ONE (Fire Rescue Segment)	2009		2008			2009		2008
Net sales	$	—	$	26.1		$	—	$	157.1
Costs and expenses		0.1		(28.5	)		—		(168.4	)
Income (loss) before income taxes		0.1		(2.4	)		—		(11.3	)
Income tax (expense) benefit		—		(0.9	)		—		4.8
Income (loss) on discontinued operations	$	0.1	$	(3.3	)	$	—	$	(6.5	)

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Die/Mold and Refuse Operations (Tool and	Three months ended September 30,					Nine months ended September 30,
Environment Solutions Group Segments)	2009		2008			2009		2008
Net sales	$	—	$	—		$	—	$	39.6
Costs and expenses		—		(0.2	)		0.2		(38.5	)
(Loss) income before income taxes		—		(0.2	)		0.2		1.1
Income tax benefit		—		1.9			—		1.2
(Loss) income on discontinued operations	$	—	$	1.7		$	0.2	$	2.3

	Three months ended September 30,					Nine months ended September 30,
Financial Services	2009		2008			2009			2008
Net sales	$	—	$	0.9		$	0.1		$	4.0
Costs and expenses		—		(0.7	)		(0.1	)		(4.2	)
Income (loss) before income taxes		—		0.2			—			(0.2	)
Income tax benefit		—		0.4			—			1.5
Income on discontinued operations	$	—	$	0.6		$	—		$	1.3

On July 16, 2009, the Company sold 100% of the shares of its European sweeper business, Ravo Holdings B.V., (“Ravo”) located in the Netherlands for €8.5 million, or approximately $12.1 million. The Ravo businesses were classified as discontinued operations as of the second quarter of 2009. The results of Ravo’s operations were previously included within the Environmental Solutions Group. In association with this sale, the Company recognized a loss on disposal of discontinued operations of Ravo of $11.3 million at September 30, 2009. The loss includes a write-down of $4.9 million to reflect the fair value of the net assets sold, costs associated with the sale of $0.2 million, and the write-off of $6.2 million of goodwill of the Environmental Solutions Group attributable to Ravo. Proceeds from the sale were used to pay down debt and fund core operations.

In accordance with GAAP, the goodwill attributable to Ravo was determined based on its fair value in comparison to the fair value of the remaining businesses within the Environmental Solutions Group. The sale price of $12.1 million represented the fair value of Ravo, which was 5% of the fair value of the entire Group, as the remaining businesses are more profitable and have greater earnings potential than Ravo. This 5% was then applied to the Group’s goodwill balance of $126.4 million to derive the goodwill attributable to Ravo of $6.2 million.

All of the Company’s E-ONE businesses were discontinued in 2008 leaving just the Company’s Bronto businesses within its Fire Rescue segment. On August 5, 2008, the Company sold 100% of the shares of E-ONE, Inc. located in Ocala, Florida. The after-tax loss on disposal for the nine month period ended September 30, 2008 totaled $76.9 million, which related primarily to after-tax impairment charges that reflect the fair value of the net assets and the impairment of $6.2 million of goodwill attributable to the E-ONE businesses. The goodwill of E-ONE was based on its fair value in comparison to the fair value of the Bronto businesses. The sale price of E-ONE, which was representative of its fair value, was approximately 14% of the Fire Rescue Group’s fair value. Applying the 14% to the Group’s goodwill yielded goodwill attributable to E-ONE of $6.2 million. The Bronto businesses’ fair value was significantly greater than E-ONE’s fair value since Bronto was profitable and growing, while E-ONE was unprofitable and losing market share.

The Company provided its domestic municipal customers with the opportunity to finance purchases through leasing arrangements with the Company. Following the sale of the E-ONE businesses in 2008, the Company elected to discontinue its financial services activities through divestiture of this leasing portfolio. During the nine month period ended September 30, 2008, the Company sold its municipal leasing portfolio to Banc of America Public Capital Corp. in several tranches for $93.8 million which approximated book value. Proceeds from the sale of the portfolio were used to repay debt associated with these assets. In October 2008, the Company discontinued entirely lease financing to its customers and all other financial service activities, principally its dealer floor planning in its entirety.

On April 21, 2008, the Company completed the sale of Dayton Progress Corporation (excluding Dayton Hong Kong) and its subsidiary, PCS Company, referred to collectively as “Die and Mold Operations”. The after-tax loss on disposal for the nine month period ended September 30, 2008 was $28.8 million primarily due to asset impairments. Included in the loss on disposal was the remaining goodwill of the Tool Group of $55.8 million. The Company also closed the Dayton Hong Kong operation incurring a $4.9 million pre-tax impairment charge related to this business for the nine month period ended September 30, 2008.

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In December 2005, the Company determined that its investment in the Refuse business operating under the Leach brand name was no longer strategic. The majority of the assets of the business were sold and the operation was shut down. During the nine month period ended September 30, 2008 the Company recorded an after-tax gain of $3.5 million primarily related to a revision in the estimate of product liability reserves for the Refuse business.

The following table shows an analysis of assets and liabilities of discontinued operations as of September 30, 2009 and December 31, 2008:

	September 30,		December 31,
($ in millions)	2009		2008
Current assets	$	1.2	$	23.6
Properties and equipment		—		2.1
Long-term assets		6.2		5.7
Financial service assets, net		2.8		5.6
Total assets of discontinued operations	$	10.2	$	37.0
Current liabilities	$	0.7	$	16.5
Long-term liabilities		10.5		13.1
Financial service liabilities		2.7		5.2
Total liabilities of discontinued operations	$	13.9	$	34.8

Included in long-term liabilities is $7.4 million and $7.7 million relating to estimated product liability obligations of the Refuse business as of September 30, 2009 and December 31, 2008, respectively.

7. RESTRUCTURING

In July 2009, the Company began an initiative to consolidate a number of manufacturing and distribution operations into the Company’s University Park, IL plant. The restructuring actions known collectively as the Footprint restructuring plan (“Footprint”) includes termination and benefit costs for employees that will be voluntarily or involuntarily terminated in the fourth quarter of 2009 and the first quarter of 2010, as well as costs associated with closing facilities and relocating operations and personnel. The Company expects all of these actions will be completed by July 31, 2010.

The following table summarizes the 2009 Footprint restructuring charges by segment and the total charges estimated to be incurred:

	Pre-Tax
	Restructuring		Estimate of
	Charges at		Total
Group	September 30, 2009		Charges
Safety and Security Systems	$	0.3	$	2.3
Environmental Solutions		0.1		0.6
	$	0.4	$	2.9

The following presents an analysis of the Footprint restructuring reserves included in other accrued liabilities as of September 30, 2009:

	Severance		Other		Total
Balance as of December 31, 2008	$	—	$	—	$	—
Charges to selling, general and administrative expenses		0.4		—		0.4
Cash payments		—		—		—
Balance as of September 30, 2009	$	0.4	$	—	$	0.4

In December 2008, the Company announced an objective to reduce salaried personnel costs by 13% in 2009 when compared to 2008 levels. This cost reduction was to affect not only salaries, benefits and equity compensation, but also contracted services and travel expenses. A process was created to review every organizational chart and employee reporting

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relationship within the Company with the purpose of increasing spans of control of each manager and to better improve management oversight. In addition, certain contracted services were reviewed for termination. A charge of $2.7 million was recorded in the fourth quarter of 2008 to reflect severance and other costs associated with a salaried employee reduction in force and contract terminations. There were no meaningful changes to the estimate of charges at September 30, 2009.

The following presents an analysis of the restructuring reserves as of December 31, 2008 and September 30, 2009:

	Severance			Other			Total
Balance as of December 31, 2008	$	2.0		$	0.6		$	2.6
Charges to selling, general and administrative expenses		—			—			—
Cash payments		(1.9	)		(0.3	)		(2.2	)
Balance as of September 30, 2009	$	0.1		$	0.3		$	0.4

8. LEGAL PROCEEDINGS

The Company is subject to various claims, other pending and possible legal actions for product liability and other damages and other matters arising out of the conduct of the Company’s business. The Company believes, based on current knowledge and after consultation with counsel, that the outcome of such claims and actions will not have an adverse effect on the Company’s consolidated financial position or results of operations. 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.

The Company has been sued by firefighters seeking damages claiming 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 1999-2004, involving a total of 2,443 plaintiffs pending in the Circuit Court of Cook County, Illinois. The trial of the first 27 of these plaintiffs’ claims began on March 18, 2008 and ended on April 25, 2008, when a Cook County jury returned a unanimous verdict in favor of the Company. Since the first trial concluded, another 63 cases were dismissed, all during 2008. An additional 40 firefighter plaintiffs were selected for trial to begin on January 5, 2009. Plaintiffs’ counsel later moved to reduce the number of plaintiffs from 40 to 9. Trial of these nine plaintiffs began on February 6, 2009 and concluded on February 20, 2009 with a verdict returned against the Company and for the plaintiffs in varying amounts totaling $0.4 million. The Company is appealing this verdict. All trials previously scheduled during 2009 and 2010 are stayed pending the result of this appeal. Since February 20, 2009, the Company is aware of six additional cases have been filed in Cook County, involving 299 plaintiffs.

The Company has also been sued on this issue outside of the Cook County venue. With the exception of matters on appeal, Federal Signal is currently a defendant in 48 hearing loss lawsuits in Pennsylvania, involving a total of 48 plaintiffs. Forty-two of these lawsuits have been filed since February 20, 2009. Two of these lawsuits have been set for trial during the fourth quarter of 2009. Four additional lawsuits are scheduled for trial during the first quarter of 2010 and another four trials, involving 10 plaintiffs each, are scheduled during the second and third quarters of 2010. Four cases in the Supreme Court of Kings County, New York were dismissed on January 25, 2008 after the court granted the Company’s motion to dismiss which eliminated all claims pending in New York. The court subsequently denied reconsideration of its ruling. On appeal, the Court affirmed the trial court’s dismissal of the cases. All plaintiffs who have filed hearing loss cases against the Company in other jurisdictions have dismissed their claims. Plaintiffs’ attorneys have threatened to file additional lawsuits. The Company intends to vigorously defend all of these lawsuits. The Company successfully defended approximately 41 similar cases in Philadelphia, Pennsylvania in 1999 resulting in a series of unanimous jury verdicts in favor of the Company.

Federal Signal’s ongoing negotiations with CNA over insurance coverage on these claims have resulted in reimbursements of a portion of the Company’s defense costs. In the three month period ended September 30, 2008, the Company recorded $0.3 million of reimbursements from CNA as a reduction of corporate operating expenses. No reimbursements were recorded in the three month period ended September 30, 2009. In the nine month period ended September 30, 2009 and 2008, reimbursement of $0.6 million and $1.7 million, respectively were recorded.

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9. SEGMENT INFORMATION

The following table summarizes the Company’s operations by segment for the three and nine month periods ended September 30, 2009 and 2008:

	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008
Net sales
Safety and Security Systems	$	73.8		$	90.3		$	228.8		$	275.9
Fire Rescue		27.4			28.1			101.4			92.5
Environmental Solutions		65.4			93.6			230.7			297.5
Total net sales	$	166.6		$	212.0		$	560.9		$	665.9
Operating income
Safety and Security Systems	$	6.7		$	8.3		$	21.8		$	27.5
Fire Rescue		2.2			0.7			9.5			4.6
Environmental Solutions		2.7			8.8			11.9			29.7
Corporate expense		(4.1	)		(5.5	)		(20.9	)		(20.3	)
Total operating income	$	7.5		$	12.3		$	22.3		$	41.5

There have been no material changes in total assets by segment from the amounts disclosed in the Company’s last annual report.

10. COMMITMENTS, CONTINGENCIES AND 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 conducts business, with warranty periods generally ranging from one to ten 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 the number of units under warranty from time to time, historical and anticipated rates of warranty claims and costs per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liabilities for the nine month periods ended September 30, 2009 and 2008 were as follows:

	Nine months ended September 30,
	2009			2008
Balance at January 1	$	5.8		$	5.2
Provisions to expense		6.8			5.7
Actual costs incurred		(6.2	)		(5.4	)
Balance at September 30	$	6.4		$	5.5

The Company has retained an environmental consultant to conduct an environmental risk assessment at its Pearland, Texas manufacturing facility. The facility manufactures marine, offshore and industrial lighting products operating within the Safety and Securities Systems Group. While the Company has not completed the risk assessment analysis, it appears probable the site will require remediation. A reasonable estimate of the range of costs to remediate the site is $0.7 million to $2.4 million, depending upon the remediation approach and other factors. As of September 30, 2009, $0.7 million has been recorded and is included in other accrued liabilities. 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 liquidity.

The Company guaranteed the debt of a joint venture in China for up to a maximum of $12.5 million. Upon the decision to dissolve the joint venture in December 2008, the guaranteed debt outstanding balance of $9.4 million was included in short term borrowings at that time. Subsequently, the balance increased to $10.1 million which was fully paid in March 2009.

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11. FAIR VALUE OF FINANCIAL INSTRUMENTS

In March 2008, the FASB amended and revised existing financial statement disclosure requirements related to derivative instruments and hedging activities. The requirements enhance disclosures for derivative instruments, including those used in hedging activities. The Company adopted the requirements on January 1, 2009 and the required disclosures are included herein.

At September 30, 2009, the Company was party to interest rate swap agreements with financial institutions in which the Company pays interest at a fixed rate and receives interest at variable LIBOR rates. These derivative instruments terminate in 2010. These interest rate swap agreements are designated as cash flow hedges.

The Company manages the volatility of cash flows caused by fluctuations in currency rates by entering into foreign exchange forward contracts and options. These derivative instruments may be designated as cash flow hedges that hedge portions of the Company’s anticipated third-party purchases and forecast sales denominated in foreign currencies. The Company also enters into foreign exchange contracts that are not intended to qualify for hedge accounting, but are intended to offset the effect on earnings of foreign currency movements on short and long term intercompany transactions. Gains and losses on these derivative instruments are recorded through earnings.

For assets and liabilities measured at fair value on a recurring basis, the Company uses an income approach to value the assets and liabilities for outstanding derivative contracts which include interest rate swap and foreign currency forward contracts. The income approach consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contracts using current market information as of the reporting date, such as prevailing interest rates and foreign currency spot and forward rates. The following table provides a summary of the fair values of assets and liabilities:

Assets

			Fair Value Measurements at September 30, 2009
			Quoted Prices in Active		Significant Other		Significant
			Markets for Identical		Observable Inputs		Unobservable Inputs
	Total		Assets (Level 1)		(Level 2)		(Level 3)
Derivatives	$	—	$	—	$	—	$	—
Liabilities
			Fair Value Measurements at September 30, 2009
			Quoted prices in Active		Significant Other		Significant
			Markets for Identical		Observable Inputs		Unobservable Inputs
	Total		Assets (Level 1)		(Level 2)		(Level 3)
Derivatives	$	2.7	$	—	$	2.7	$	—

At September 30, 2009 and December 31, 2008, the fair value of the Company’s derivative instruments was recorded as follows ($ in millions):

	Asset Derivatives		Liability Derivatives
	September 30, 2009		September 30, 2009
		Fair		Fair
	Balance Sheet Location	Value	Balance Sheet Location	Value
Derivatives designated as hedging instruments:
Interest rate contracts			Other current liabilities	$     0.8
Foreign exchange	Other current assets	—
Total derivatives designated as hedging instruments		—		0.8
Derivatives not designated as hedging instruments:
Foreign exchange	Accounts receivable, net	—	Other current liabilities	1.9
Total derivatives not designated as hedging instruments		—		1.9
Total derivatives		$     —		$     2.7

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	Asset Derivatives		Liability Derivatives
	December 31, 2008		December 31, 2008
		Fair		Fair
	Balance Sheet Location	Value	Balance Sheet Location	Value
Derivatives designated as hedging instruments:
Interest rate contracts	Deferred charges and other assets	$    1.1	Other long-term liabilities	$    1.4
Foreign exchange	Other current assets	1.6	Other current liabilities	0.5
Total derivatives designated as hedging instruments		2.7		1.9
Derivatives not designated as hedging instruments;
Interest rate contracts	Deferred charges and other assets	—	Other long-term liabilities	0.7
Foreign exchange	Accounts receivable, net	1.7	Other current liabilities	2.5
Total derivatives not designated as hedging instruments		1.7		3.2
Total derivatives		$    4.4		$    5.1

The effect of derivative instruments on the condensed consolidated statement of operations for the three months ended September 30, 2009, was as follows ($ in millions):

				Location of Gain/(Loss)	Amount of Gain/(Loss)
	Amount of Gain/(Loss)			Reclassified from	Reclassified from
Derivatives in Cash Flow	Recognized in OCI on			Accumulated OCI into	Accumulated OCI into
Hedging Relationships	Derivative (Effective Portion)			Income (Effective Portion)	Income (Effective Portion)
Interest rate contracts	$	(0.2	)	Interest expense	$	0.3
Foreign exchange		—		Net sales		0.2
Foreign exchange		(0.2	)	Other income (expense), net		(0.1	)
Total	$	(0.4	)		$	0.4

		Amount of Gain/(Loss)
Derivatives Not Designated as Hedging	Location of Gain/(Loss)Recognized in	Recognized in Income on
Instruments	Income on Derivative	Derivative
Foreign exchange	Other income (expense)	$	(2.8	)
Total		$	(2.8	)

The effect of derivative instruments on the condensed consolidated statement of operations for the nine months ended September 30, 2009, was as follows ($ in millions):

				Location of Gain/(Loss)	Amount of Gain/(Loss)
	Amount of Gain/(Loss)			Reclassified from	Reclassified from
Derivatives in Cash Flow	Recognized in OCI on			Accumulated OCI into	Accumulated OCI into
Hedging Relationships	Derivative (Effective Portion)			Income (Effective Portion)	Income (Effective Portion)
Interest rate contracts	$	(0.2	)	Interest expense	$	0.5
Foreign exchange		—		Net sales		0.5
Foreign exchange		(0.3	)	Other income (expense), net		(0.5	)
Total	$	(0.5	)		$	0.5

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		Amount of Gain/(Loss)
Derivatives Not Designated as Hedging	Location of Gain/(Loss) Recognized in	Recognized in Income on
Instruments	Income on Derivative	Derivative
Foreign exchange	Other income (expense)	$	(1.1	)
Total		$	(1.1	)

At September 30, 2009 and December 31, 2008, accumulated other comprehensive loss associated with interest rate swaps and foreign exchange contracts qualifying for hedge accounting treatment was $0.9 million, net of income tax effects. The Company expects $1.1 million of pre-tax net loss on cash flow hedges that are reported in accumulated other comprehensive loss as of September 30, 2009, to be reclassified into earnings within the next 12 months as the respective hedged transactions affect earnings.

In April 2009, the FASB amended disclosure requirements related to the fair value of financial instruments in financial statements for interim reporting periods and in annual financial statements of publicly-traded companies. The disclosures are required to include the method(s) and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to highlight any changes from prior periods.

The following table summarizes the carrying amounts and fair values of the Company’s financial instruments as of September 30, 2009 and December 31, 2008:

	September 30, 2009					December 31, 2008
	Notional		Fair			Notional		Fair
	Amount		Value			Amount		Value
Short-term debt	$	1.3	$	1.3		$	12.6	$	12.6
Long-term debt*		240.0		241.3			270.4		273.7
Fair value swaps		—		—			50.0		1.7
Cash flow swaps		70.0		(0.8	)		60.0		(2.7	)
Foreign exchange contracts		24.6		(1.9	)		59.2		0.3

* Long term debt includes financial service borrowings for all periods presented, which is included in discontinued operations.

The carrying value of short-term debt approximates fair value due to its short maturity. The fair value of long-term debt is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.

12. SALE LEASEBACK TRANSACTION

In July 2008, the Company entered into sale-leaseback transactions for its Elgin and University Park, Illinois plant locations. Net proceeds received were $35.8 million resulting in a deferred gain of $29.0 million. The deferred gain is being amortized over the 15-year life of the respective leases.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Federal Signal Corporation (the “Company”) manufactures safety, signaling and communication equipment and systems; articulated aerial devices and a broad range of municipal and industrial cleaning vehicles. To achieve technology, marketing, distribution and product application synergies, the Company’s business units are organized and managed in three operating segments: Safety and Security Systems, Fire Rescue and Environmental Solutions.

Consolidated Results of Operations

The following table presents the Company’s results of operations for the three and nine month periods ended September 30, 2009 and 2008, respectively ($ in millions, except per share data):

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Net sales	$	166.6		$	212.0		$	560.9		$	665.9
Cost of sales		(124.6	)		(155.7	)		(415.7	)		(488.3	)
Gross profit		42.0			56.3			145.2			177.6
Operating expenses		(34.5	)		(44.0	)		(122.9	)		(136.1	)
Operating income		7.5			12.3			22.3			41.5
Interest expense		(2.6	)		(3.6	)		(8.8	)		(12.6	)
Other income (expense), net		0.7			(0.1	)		(0.3	)		(1.9	)
Income tax (expense) benefit		(1.0	)		5.9			(2.5	)		(0.3	)
Income from continuing operations		4.6			14.5			10.7			26.7
Loss from discontinued operations and disposal, net of tax		(0.3	)		(0.3	)		(10.3	)		(110.6	)
Net income (loss)	$	4.3		$	14.2		$	0.4		$	(83.9	)
Other data:
Operating margin		4.5	%		5.8	%		4.0	%		6.2	%
Earnings per share — continuing operations	$	0.10		$	0.31		$	0.22		$	0.56
Orders	$	157.5		$	204.9		$	478.8		$	686.9

Net sales decreased 21% or $45.4 million in the third quarter of 2009 compared to the same quarter of 2008 as a direct result of a decrease in volume; principally comprised of a reduction of $28.2 million in the Environmental Solutions Group and $16.5 million the Safety and Security Systems Group. Net sales for the nine month period ended September 30, 2009 as compared to 2008, decreased 16% due to a reduction of $66.8 million at Environmental Solutions and $47.1 million at Safety and Security Systems, offset by an increase in net sales of $8.9 million at Fire Rescue where a large backlog afforded higher shipments. Unfavorable foreign currency movement, most notably a stronger U.S. dollar versus European currencies in the comparable prior year periods, reduced sales in the three and nine month periods by 1% and 2.6%, respectively.

Operating income declined $4.8 million in the third quarter and $19.2 million in the first nine months of 2009 versus the comparable periods of 2008. Lower sales volumes drove the reductions in operating income in each of these periods offset in part by lower spending both in fixed manufacturing and SG&A of $12.2 million and $19.9 million in the third quarter and year to date periods, respectively. Operating expenses in the third quarter of 2009 were $9.5 million lower than the comparable period in 2008. Included in operating expense in 2009 is a $0.4 million charge related to the Footprint restructuring plan (“Footprint”) initiated during the quarter and a $0.7 million charge related to an environmental remediation issue at the Company’s Pearland, Texas manufacturing site. Footprint broadly represents a consolidation of manufacturing and distribution operations into the Company’s University Park, IL plant. Operating expenses in 2008 include a $3.6 million charge to settle a dispute and write off assets associated with a contract to install revenue control equipment at the Dallas Fort Worth (DFW) airport. Excluding these items, operating expenses were reduced $6.3 million in the third quarter: $1.1 million associated with lower hearing loss litigation expense than in the comparable prior year period and the remainder associated with lower sales commissions and a lower cost structure from restructuring actions taken in previous quarters.

Operating income in the first nine months of 2009 declined 46% on sales volume decline, despite the benefit of $19.9 million in lower fixed overhead and operating expenses. Year to date operating income benefitted from the absence of $6.9 million of increased costs in 2008 to settle and resolve the DFW parking system contract dispute and lower costs associated

19

with the firefighter hearing loss litigation of $4.5 million. Offsetting some of the benefit were $2.6 million in increased costs in 2009 associated with a proxy contest initiated by an activist shareholder.

Interest expense decreased $1.0 million in the third quarter of 2009 and $3.8 million in the first nine months of 2009 when compared to the same periods in 2008 due to lower interest rates and lower average borrowings.

Other income (expense) in the third quarter of 2009 includes $0.2 million of income associated with the shutdown of China joint venture that occurred in 2008. The prior year comparative period included losses associated with the operations of the joint venture of $0.6 million. Also included in other income (expense) are both realized and unrealized foreign exchange transaction gains/losses.

The Company’s effective tax rate on earnings from continuing operations was 17.9% for the three month period ended September 30, 2009. In the comparable three month period ended September 30, 2008, the Company’s effective tax rate was (68.6%), which included the recording of a tax benefit of $8.2 million for the utilization of capital loss carry forwards resulting from the sale-leaseback transactions for two U.S. based manufacturing facilities.

The tax rate for the nine-month period ended September 30, 2009 reflects better foreign tax effects than the comparable 2008 period, due to reduced losses in China, and research and development tax credit benefits that are not reflected in the nine month period ended September 30, 2008, as Congress had not yet extended the credit. The effective tax rate for the nine-month period ending September 30, 2008 includes an $8.2 million benefit for the utilization of capital loss carry forwards previously mentioned.

Income from continuing operations fell 68% for the third quarter of 2009 and 60% for the nine months of 2009 versus the comparable periods in 2008, due to lower operating income as described above and a higher effective tax rate, offset by the benefits of lower interest expense and other income (expense).

Loss from discontinued operations and disposal for the three month period ended September 30, 2009 reflects $0.4 million of additional loss from the sale of the Company’s European sweeper business (Ravo) less $0.1 million of income from the Company’s former E-ONE business disposed in 2008. For the nine month period ended September 30, 2009, a net loss from discontinued operations of $10.3 million was recorded, primarily related to the sale and discontinuation of Ravo. Included in the loss is a charge of $6.2 million related to the goodwill of the Environmental Solutions Group. In accordance with GAAP, the goodwill attributable to Ravo was determined based on its fair value in comparison to the fair value of the remaining businesses within the Environmental Solutions Group. The sale price of $12.1 million represented the fair value of Ravo, which was 5% of the fair value of the entire Group, as the remaining businesses are more profitable and have greater earnings potential than Ravo. This 5% was then applied to the Group’s goodwill balance of $126.4 million to derive the goodwill attributable to Ravo of $6.2 million.

Diluted earnings per share from continuing operations decreased 68% to $0.10 for the quarter ended September 30, 2009. For the nine months ended September 30, 2009, diluted earnings per share from continuing operations decreased 61%.

Orders and Backlog

Orders in the third quarter of 2009 fell 23%, and on a year to date basis by 30%, from the comparable periods of 2008 reflecting weakness across all segments and most markets due to the global economic recession. Non-U.S. orders in the third quarter, which were affected by unfavorable foreign currency translation, declined 21% while U.S. orders declined 24%. For the first nine months, non-U.S. orders declined 36% and U.S. orders declined 26%.

U.S. municipal and government orders in the third quarter of 2009 decreased 11% from the prior year’s quarter primarily as a result of lower demand for street sweepers of $5.2 million, and first responder products of $2.5 million. Year to date U.S. municipal and government orders decreased 16% compared to the prior year led by declines in sewer cleaners of $10.2 million, street sweepers of $9.9 million, first responder police and fire products of $8.7 million and outdoor warning systems of $3.8 million.

A 42% decline in U.S. industrial and commercial orders in the third quarter was caused primarily by a $13.4 million reduction in orders for vacuum trucks and a $5.7 million reduction in orders for Safety and Security Systems products. Year to date U.S. industrial and commercial orders decreased 38% from 2008 driven by declines in Environmental Solutions of $45.4 million and Safety and Security Systems of $19.5 million.

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A reduction in non-U.S. orders of 21% in the third quarter of 2009 stems from the Safety and Security Systems Group with a decline of $11.8 million, the Fire Rescue Group with a decline of $6.8 million, and is offset by an increase in the Environmental Solutions Group of $0.4 million. The 36% reduction in year to date non-U.S. orders came from declines of $65.6 million, $35.5 million and $8.5 million in Fire Rescue, Safety and Security Systems and Environmental Solutions, respectively.

Backlog of $209.0 million at September 30, 2009 decreased 38% from the same date in 2008 as a result of the lower order intake in the quarter.

Safety and Security Systems

The following table summarizes the Safety and Security Systems Group operating results for the three and nine month periods ended September 30, 2009 and 2008, respectively ($ in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Orders	$	70.5		$	86.6		$	218.7		$	281.2
Net sales		73.8			90.3			228.8			275.9
Operating income		6.7			8.3			21.8			27.5
Operating margin		9.1	%		9.2	%		9.5	%		10.0	%

Orders declined 19% from the third quarter of 2008 primarily as a result of the global economic recession. Public Safety Systems orders were down $7.7 million due to weakness in domestic and foreign first responder markets, and in part due to the effects of unfavorable foreign currency translation. The decrease was moderately offset by a $4.2 million increase in orders for alerting and notification systems and ALPR cameras. Industrial Systems were down $8.6 million, driven by softness in oil and gas markets. Year to date orders decreased 22% as compared to the prior year period with most market segments performing below 2008 levels with the exception of ALPR cameras in the U.S. and international warning systems.

Net sales decreased 18% or $16.5 million in the third quarter of 2009, and 17% on a year to date basis from the comparable periods of 2008 due to lower volume across most market segments and an unfavorable foreign currency variance of 1.9% in the quarter and 3.2% on the year.

Operating income decreased $1.6 million in the third quarter of 2009 from the comparable period in 2008 as a result of lower sales volumes. Operating expenses, lower than the prior year by $5.6 million, were not sufficiently reduced to overcome the decline in volume during the quarter. Included in operating income in the quarter is a charge of $0.3 million associated with the “Footprint” restructuring plan initiated in September, 2009 and a charge of $0.7 million related to an environmental remediation issue at the Company’s Pearland, Texas manufacturing site. The 2008 comparable quarter included costs associated with a contract dispute settlement of $6.1 million. The operating margin was up marginally, as headcount reductions made in previous quarters and cost containment efforts partially offset the revenue shortfall. Year to date, the operating income and margin fell from the prior year due to the reduction in sales volume offset partly by savings related to headcount reductions and other spending of approximately $8.4 million.

Fire Rescue

The following table summarizes the Fire Rescue Group’s operating results for the three and nine month periods ended September 30, 2009 and 2008, respectively ($ in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Orders	$	26.2		$	34.1		$	68.2		$	135.5
Net sales		27.4			28.1			101.4			92.5
Operating income		2.2			0.7			9.5			4.6
Operating margin		8.0	%		2.5	%		9.4	%		5.0	%

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The Bronto plant expansion project in Pori, Finland was completed during the third quarter of 2008, adding approximately 40% to production capacity, providing the business with the opportunity to more cost-effectively meet demand and reduce backlog from $174.8 million to $106.6 million during the first nine months of 2009.

Orders decreased 23% from the third quarter of 2008 and 50% for the nine month period in 2009 versus 2008, as early 2008 orders were at record levels across all market segments. Market demand for the Company’s products in both fire-lift and industrial markets was weak in all regions in 2009. A stronger U.S. dollar contributed 5% to the decline in the nine month period.

Net sales were essentially flat in the third quarter. Year to date net sales increased 9.6% over the same period in 2008 as the business worked down its backlog during 2009. Excluding the effects of a stronger U.S. dollar, the nine month period would have increased 22%.

Operating income increased $1.5 million from the third quarter of 2008, and the operating margin increased 5.5 percentage points due to reduced outsourcing and more efficient overhead usage. Year to date operating income increased 107% and operating margins rose 4.4 percentage points compared to the prior year period as a result of lower costs associated with improved plant utilization. Year to date operating income increased 230% excluding the unfavorable foreign currency effects.

Environmental Solutions

The following table summarizes the Environmental Solutions Group’s operating results for the three and nine month periods ended September 30, 2009 and 2008, respectively ($ in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Total orders	$	60.8		$	84.2		$	191.9			$	270.2
Net sales		65.4			93.6			230.7				297.5
Operating income		2.7			8.8			11.9				29.7
Operating margin		4.1	%		9.4	%		5.2	%			10.0	%

Segment results have been restated to exclude the results of Ravo, which have been presented as discontinued operations.

Orders of $60.8 million in the third quarter of 2009 were 28% below the prior year quarter with decreases across all product lines with the exception of export orders for sweepers. Year to date orders decreased 29% as compared to the prior year period. Orders in municipal markets, export, and non-U.S. and industrial markets declined due to the global economic recession and reduced municipal and industrial spending.

Net sales decreased 30% compared to the third quarter of 2008 on lower sales volume. The flow through of the decline in sales volume in the quarter resulted in a $6.1 million reduction in operating income and a lower operating margin. The volume loss in the quarter was partially offset by a favorable purchase variance of $2.1 million, and lower manufacturing and operating costs of $1.8 million, however the lower costs were insufficient to overcome the significant loss of volume in the quarter over quarter comparison. Year to date net sales decreased 22% over the prior year period as a result of the order weakness. Operating income and margins fell in the nine month period ended September 30, 2009 as the decline in sales volume was only partially offset by headcount reductions and other cost-cutting measures taken throughout the year.

Corporate Expenses

Corporate expenses decreased to $4.1 million for the third quarter of 2009 compared to $5.5 million in the third quarter of 2008. The decrease is due predominantly to $1.1 million in lower legal expenses associated with the ongoing firefighter hearing loss litigation.

Corporate expenses for the nine months ended September 30, 2009 were $20.9 million and $20.3 million for the comparable period in 2008. The increase is due to $2.6 million associated with the costs for a proxy contest initiated by an activist shareholder, offset by a decrease of $4.5 million of lower legal and trial costs associated with the Company’s ongoing

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firefighter hearing loss litigation. Other offsetting amounts include higher bonus and stock-based compensation costs of approximately $1.9 million as a result of lower executive turnover in 2009, and the absence of a $1.1 million credit related to workers compensation and casualty expenses in 2008.

Seasonality of Company’s Business

Certain of the Company’s businesses are susceptible to the influences of seasonal buying or delivery patterns. The Company’s businesses which tend to have lower sales in the first calendar quarter compared to other quarters as a result of these influences are street sweeping, fire rescue products, outdoor warning, emergency signaling products and parking systems.

Financial Position, Liquidity and Capital Resources

The Company utilizes its operating cash flow and available borrowings under its revolving credit facility for working capital needs of its operations, capital expenditures, strategic acquisitions of companies operating in markets related to those already served, pension contributions, debt repayments, share repurchases and dividends.

The following table summarizes the Company’s cash flows for the nine month periods ended September 30, 2009 and 2008, respectively ($ in millions):

	Nine months ended
	September 30,
	2009			2008
Operating cash flow	$	40.0		$	129.3
Investing, net		13.5			72.2
Debt repayments, net		(41.1	)		(56.8	)
Dividends		(8.7	)		(8.6	)
Purchases of treasury stock		—			(6.0	)
Payments for discontinued financing activities		(7.1	)		(126.7	)
Other, net		1.1			(0.1	)
(Decrease) increase in cash and cash equivalents	$	(2.3	)	$	3.3

Operating cash flow decreased $89.3 million from the comparable period in 2008 due to a reduction in cash from discontinued operating activities in comparison to 2008. The prior year’s discontinued operating activities accounted for cash collection of the Company’s leasing receivables of $41.9 million and $93.8 million from the sale of 93% of the Company’s municipal lease portfolio. Cash flows provided by continuing operations increased $33.4 million from $9.8 million in the comparable period last year primarily as a result of lower accounts receivable attributable to lower sales volume.

The Company’s investing activities in 2009 include cash proceeds of $10.0 million from the redemption of a fully matured six-month Certificate of Deposit classified as a short-term investment and net proceeds of $11.3 million received from the sale of the Ravo businesses in July, 2009 and $2.9 million received from the sale of the E-One business, offset by $11.9 million used for capital expenditures. In 2008, cash derived from investing activities included net proceeds received from the sale-leaseback transactions of two U.S. based plants and gross cash proceeds of $66 million received to date from the divestitures of the Die and Mold Operations and E-One businesses, less $18.8 million of cash used primarily for capital expenditures in part related to a plant expansion in Pori, Finland. Proceeds from the sale of the Die and Mold Operations in 2008 were used primarily to pay down debt, as were proceeds from the sale of discontinued lease financing operations included as payments for discontinued financing activities.

Debt, net of cash, as a percentage of capitalization was 41.6% at September 30, 2009, versus 46.1% at the end of 2008.

At September 30, 2009, $129.0 million was drawn against the Company’s revolving credit facility which provides for borrowings up to $250.0 million and matures April 25, 2012. Borrowings under the facility bear interest, at the Company’s option, at the Base Rate or LIBOR, plus an applicable margin. The applicable margin ranges from 0.00% to 0.75% for Base Rate borrowings and 1.00% to 2.00% for LIBOR borrowings depending on the Company’s total indebtedness to capital ratio. At September 30, 2009, the Company’s applicable margins over LIBOR and Base Rate borrowings were 1.50% and 0.25%, respectively.

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At September 30, 2009, $1.2 million was drawn against the Company’s foreign lines of credit which provide for borrowings up to $20.2 million.

The Company’s revolving credit facility and private placement notes contain certain financial covenants for each fiscal quarter end. At September 30, 2009, the Company was in compliance with its covenants and expects to be in compliance with its covenants for the balance of the year.

During the current downturn in global financial markets, some companies have experienced difficulties accessing their cash equivalents, trading investment securities, drawing on revolvers, issuing debt and raising capital generally, which have had a material adverse impact on their liquidity. Given the Company’s cash position and debt structure, the diversity and strength of the ten banks in its revolving credit facility, and its anticipated cash usage over the next twelve months, the Company has not experienced any material liquidity issues and it continues to expect its liquidity, notwithstanding these adverse market conditions, will be sufficient to meet all its anticipated needs during the next twelve months and for the foreseeable future.

The Company is required to assess on an on-going basis, events or circumstances that may trigger an evaluation of goodwill for impairment, and test for impairment annually should no triggering event indicate the need for analysis in the interim. The Company’s practice is to group goodwill by operating segment. There have been no events identified as a triggering event since the Company’s annual impairment testing was performed at December 31, 2008.

Contractual Obligations and Commercial Commitments

Short-term borrowings decreased to $1.3 million at September 30, 2009 from $12.6 million at December 31, 2008 primarily due to the payment in full in the first quarter of 2009 of the $9.4 million obligation at December 31, 2008 to guaranty the debt of a joint venture in China. Total long-term borrowings decreased to $196.8 million at September 30, 2009 from $241.2 million at December 31, 2008. See the Financial Condition, Liquidity and Cash Flow section of this report for more information. There have been no other significant changes in the first nine months of 2009 to the Company’s contractual obligations and commercial commitments as summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent Form 10-Q’s for the quarters ended March 31, 2009 and June 30, 2009.

Changes to the Company’s accrual for product warranty claims in the first nine months of 2009 is discussed in Note 10.

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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 utilizes interest rate swaps and foreign currency forward and option contracts. The Company does not hold or issue derivative financial instruments for trading or speculative purposes and is not party to leveraged derivatives.

The Company manages its exposure to interest rate movements by maintaining a proportionate relationship between fixed-rate debt to total debt within established percentages. The Company uses funded fixed and floating-rate borrowings as well as interest rate swap agreements to balance its overall fixed-to-floating interest rate mix.

The Company also has foreign exchange exposures related to buying and selling in currencies other than the local currency in which it operates. The Company utilizes foreign currency forward contracts to manage risks associated with sales and purchase commitments as well as forecasted transactions denominated in foreign currencies.

The information contained in Note 12, “Fair Value of Financial Instruments” to the Condensed Consolidated Financial Statements of this Form 10-Q discusses the changes in the Company’s exposure to market risk during the three and nine month periods ended September 30, 2009. For additional information, refer to the discussion contained under the caption “Market Risk Management” included in Item 7 of the Company’s Form 10-K for the year ended December 31, 2008.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, 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 of September 30, 2009. 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 September 30, 2009. As a matter of practice, the Company’s management continues to review and document disclosure controls and procedures, including internal controls and procedures for financial reporting. From time to time, the Company may make changes aimed at enhancing the effectiveness of the controls and to ensure that the systems evolve with the business. During the quarter ended September 30, 2009, 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.

Part II. Other Information

Item 1. Legal Proceedings

The information is set forth in Footnote 8 of the condensed consolidated financial statements included in Part I of this Form 10-Q are incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes in the risk factors described in Item 1A (“Risk Factors”) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Item 5. Other Information.

On November 3, 2009, the Company issued a press release announcing its financial results for the three months ended September 30, 2009. The full text of the press release is included as Exhibit 99.1 to this Form 10-Q.

Item 6. Exhibits

Exhibit 31.1 — CEO Certification under Section 302 of the Sarbanes-Oxley Act

Exhibit 31.2 — CFO Certification under Section 302 of the Sarbanes-Oxley Act

Exhibit 32.1 — CEO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act

Exhibit 32.2 — CFO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act

Exhibit 10.1 — Change in Control Agreement

Exhibit 18.1 — Preferability Letter from Independent Registered Public Accounting Firm

Exhibit 99.1 — Press Release dated November 3, 2009

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Federal Signal Corporation
Date: November 3, 2009	By:	/s/ William G. Barker
		William G. Barker
		Senior Vice President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

Federal Signal Corporation
Executive Change-in-Control Severance Agreement

     THIS EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made, entered into, and is effective this ______ day of ______ (hereinafter referred to as the “Effective Date”), by and between Federal Signal Corporation (the “Company”), a Delaware corporation, and _________ (the “Executive”).

     WHEREAS, the Executive is employed by the Company and will develop considerable experience and knowledge of the business and affairs of the Company concerning its policies, methods, personnel, and operations; and

     WHEREAS, the Company is desirous of assuring insofar as possible, that it will continue to have the benefit of the Executive’s services, and the Executive is desirous of having such assurances; and

     WHEREAS, the Company recognizes that circumstances may arise in which a Change in Control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment without regard to the Executive’s competence or past contributions. Such uncertainty may result in the loss of the valuable services of the Executive to the detriment of the Company and its shareholders; and

     WHEREAS, both the Company and the Executive are desirous that any proposal for a Change in Control or acquisition will be considered by the Executive objectively and with reference only to the business interests of the Company and its shareholders; and

     WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such Change in Control or acquisition.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

     Article 1. Definitions

     Wherever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:

(a)	“Agreement” means this Executive Change-in-Control Severance Agreement.
(b)	“Base Salary” means, at any time, the then regular annual rate of pay which the Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses.
(c)	“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(d)	“Board” means the Board of Directors of the Company.
(e)	“Cause” shall be determined solely by the Committee in the exercise of good faith and reasonable judgment, and shall mean the occurrence of any one or more of the following:

(i) The Executive’s willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s Disability), after a written demand for substantial performance is delivered to the Executive that

	specifically identifies the manner in which the Committee believes that the Executive has not substantially performed his duties, and the Executive has failed to remedy the situation within fifteen (15) business days of such written notice from the Company; or
(ii)	The Executive’s conviction of a felony; or
(iii)	The Executive’s willful engaging in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise. However, no act or failure to act on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company.

(f) “Change in Control” of the Company shall mean the occurrence of any one (1) or more of the following events:

(i)	Any Person (other than the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing forty percent (40%) or more of the combined voting power of the Company’s then outstanding securities;
(ii)	During any period of not more than twenty-four (24) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company, and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;
(iii)	The consummation of a merger or consolidation of the Company with any other corporation, other than: (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than forty percent (40%) of the combined voting power of the Company’s then outstanding securities;
(iv)	The Company’s stockholders approve a plan or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction or series of transactions having a similar effect); or
(v)	Any other transaction that the Board designates as being a Change in Control.

(g)	“Code” means the Internal Revenue Code of 1986, as amended.
(h)	“Committee” means the Compensation Committee of the Board of Directors of the Company, or, if no Compensation Committee exists, then the full Board of Directors of the Company, or a committee of Board members, as appointed by the full Board to administer this Agreement.

(i)	“Company” means Federal Signal Corporation, a Delaware corporation (including any and all subsidiaries), or any successor thereto as provided in Article 9 herein.
(j)	“Disability” or “Disabled” shall have the meaning ascribed to such term in the Executive’s governing long-term disability plan, or if no such plan exists, means entitled to receive Social Security disability benefits.
(k)	“Effective Date” means the date this Agreement is approved by the Board, or such other date as the Board shall designate in its resolution approving this Agreement, and as specified in the opening sentence of this Agreement.
(l)	“Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder.
(m)	“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(n)	“Good Reason” means, without the Executive’s express written consent, the occurrence after a Change in Control of the Company of any one (1) or more of the following, which results in a material negative change in the Executive’s employment relationship with the Company:

(i)	The assignment of the Executive to duties materially inconsistent with the Executive’s authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an executive and/or officer of the Company, or a material reduction or alteration in the nature or status of the Executive’s authorities, duties, or responsibilities from those in effect as of ninety (90) calendar days prior to the Change in Control, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii)	The Company’s requiring the Executive to be based at a location in excess of fifty (50) miles from the location of the Executive’s principal job location or office immediately prior to the Change in Control; except for required travel on the Company’s business to an extent substantially consistent with the Executive’s then present business travel obligations;
(iii)	A reduction by the Company of the Executive’s Base Salary in effect on the Effective Date hereof, or as the same shall be increased from time to time;
(iv)	The failure of the Company to continue in effect any of the Company’s short- and long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or other compensation arrangements in which the Executive participates unless such failure to continue the plan, policy, practice, or arrangement pertains to all plan participants generally; or the failure by the Company to continue the Executive’s participation therein on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control of the Company;
(v)	The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform the Company’s obligations under this Agreement, as contemplated in Article 9 herein; and
(vi)	A material breach of this Agreement by the Company which is not remedied by the Company within thirty (30) business days of receipt of written notice of such breach delivered by the Executive to the Company.

	Unless the Executive becomes Disabled, the Executive’s right to terminate employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. Executive must notify the Company within ninety (90) days of the existence of the Good Reason condition, and the Company shall have thirty (30) days to remedy the conditions.
(o)	“Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
(p)	“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d).
(q)	“Qualifying Termination” means the Executive’s separation from service (as defined in Section 409A of the Code and the applicable regulations) due to any of the events described in Section 2.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder.
(r)	“Severance Benefits” mean the payment of severance compensation as provided in Section 2.3 herein.

     Article 2. Severance Benefits

     2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits as described in Section 2.3 herein, if there has been a Change in Control of the Company and, if within twenty-four (24) calendar months thereafter the Executive’s employment with the Company shall end for any reason specified in Section 2.2 herein as being a Qualifying Termination.

     The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or a voluntary termination of employment for reasons other than as specified in Section 2.2(b) herein.

     No Executive shall be entitled to receive duplicative severance benefits under any other Company-related plans or programs if benefits are triggered hereunder.

     2.2 Qualifying Termination. The Executive’s separation from service (as defined in Section 409A of the Code and applicable regulations) within twenty-four (24) calendar months after a Change in Control of the Company shall constitute a Qualifying Termination and shall trigger the payment of Severance Benefits to the Executive under this Agreement under the following circumstances:

(a)	The Company’s involuntary termination of the Executive’s employment without Cause; and
(b)	The Executive’s voluntary employment termination for Good Reason.

     For purposes of this Agreement, a Qualifying Termination shall not include a termination of employment by reason of death, Disability, or the Executive’s voluntary termination for reasons other than as specified in Section 2.2(b) herein, or the Company’s involuntary termination for Cause.

     2.3 Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 2.1 and 2.2 herein, the Company shall pay to the Executive and provide him with the following Severance Benefits, subject to the limitations set forth in Section 5.1 herein:

(a) Upon a Qualifying Termination, a lump-sum amount equal to the Executive’s accrued but unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and

	all other items earned by and owed to the Executive through and including the Effective Date of Termination.
(b)	Upon a Qualifying Termination, a lump-sum amount equal to the Executive’s then current annual target bonus opportunity, established under the annual bonus plan in which the Executive is then participating, for the bonus plan year in which the Executive’s Effective Date of Termination occurs, multiplied by a fraction the numerator of which is the number of full completed months in the year from January 1 through the Effective Date of Termination, and the denominator of which is twelve (12). This payment will be in lieu of any other payment to be made to the Executive under the annual bonus plan in which the Executive is then participating for the plan year.
(c)	Upon a Qualifying Termination, a lump-sum amount equal to 1.99 multiplied by the sum of the following: (i) the higher of: (A) the Executive’s annual rate of Base Salary in effect upon the Effective Date of Termination, or (B) the Executive’s annual rate of Base Salary in effect on the date of the Change in Control; and (ii) the Executive’s annual target bonus opportunity established under the annual bonus plan in which the Executive is then participating for the bonus plan year in which the Executive’s Effective Date of Termination occurs.
(d)	Upon a Qualifying Termination, a lump-sum amount equal to one (1) multiplied by the sum of the following: (i) the higher of: (A) the Executive’s annual rate of Base Salary in effect upon the Effective Date of Termination, or (B) the Executive’s annual rate of Base Salary in effect on the date of the Change in Control; and (ii) the Executive’s annual target bonus opportunity established under the annual bonus plan in which the Executive is then participating for the bonus plan year in which the Executive’s Effective Date of Termination occurs. Such amount shall be in consideration for the Executive entering into a noncompete agreement as described in Article 4 herein.
(e)	Upon a Qualifying Termination, vesting and cash-out of any and all outstanding cash-based long-term incentive awards held by the Executive, as granted to the Executive by the Company as a component of the Executive’s compensation. The cash-out shall be in a lump-sum amount equal to the target award level established for each award, multiplied by a fraction the numerator of which is the full number of completed days in the preestablished performance period as of the Effective Date of termination, and the denominator of which is the full number of days in the entire performance period (i.e., typically thirty-six (36) months). This payment will be in lieu of any other payment to be made to the Executive under these long-term performance-based award plans.
(f)	Upon the occurrence of a Change in Control, an immediate full vesting and lapse of all restrictions on any and all outstanding equity-based long-term incentives, including but not limited to stock options and restricted stock awards held by the Executive. This provision shall override any conflicting language contained in the Executive’s respective award agreements.
(g)	Upon the occurrence of a Change in Control, the Company shall, as soon as possible, but in no event longer than thirty (30) calendar days following the occurrence of a Change in Control, make an irrevocable contribution to the then current trust in effect for purposes of holding assets to assist the Company in satisfying its liabilities under the Federal Signal Corporation Supplemental Savings and Investment Plan (the “Deferred Compensation Plan”) or successor thereto in an amount that is sufficient (taking into account the trust assets, if any, resulting from prior contributions) to fund the trust in an amount equal to but no less than one hundred percent (100%) of the

	amount necessary to pay the Executive the benefits to which such Executive would be entitled pursuant to the terms of the aforementioned Deferred Compensation Plan.
(h)	Upon a Qualifying Termination, continuation for thirty-six (36) months of the Executive’s medical insurance coverage. The benefit shall be provided by the Company to the Executive beginning immediately upon the Effective Date of Termination. Such benefit shall be provided to the Executive at the same coverage level and cost to the Executive as in effect immediately prior to the Executive’s Effective Date of Termination. Any COBRA health benefit continuation coverage provided to Executive shall run concurrently with the aforementioned thirty-six (36) month period.
	The value of such medical insurance coverage shall be treated as taxable income to Executive to the extent necessary to comply with Sections 105(h) and 409A of the Code. For purposes of 409A of the Code, any payments of continued health benefits that are made during the applicable COBRA continuation period (even if the Executive does not actually receive COBRA coverage for the entire applicable period), are exempt from the requirements of Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(B). The right to continue coverage beyond the applicable COBRA continuation period is not subject to liquidation or exchange for another benefit. Notwithstanding the above, this medical insurance benefit shall be discontinued prior to the end of the stated continuation period in the event the Executive receives a substantially similar benefit from a subsequent employer, as determined solely by the Committee in good faith. For purposes of enforcing this offset provision, the Executive shall be deemed to have a duty to keep the Company informed as to the terms and conditions of any subsequent employment and any corresponding benefit earned from such employment, and shall provide, or cause to provide, to the Company in writing correct, complete, and timely information concerning the same.

     2.4 Termination for Total and Permanent Disability. Following a Change in Control, if the Executive’s employment is terminated with the Company due to Disability, the Executive’s benefits shall be determined in accordance with the Company’s retirement, insurance, and other applicable plans and programs then in effect.

     2.5 Termination for Death. Following a Change in Control, if the Executive’s employment with the Company is terminated by reason of his death, the Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s benefits, insurance, and other applicable programs then in effect.

     2.6 Termination for Cause or by the Executive Other Than for Good Reason. Following a Change in Control, if the Executive has a separation from service (as defined in Section 409A of the Code and the applicable regulations) either due to: (i) termination by the Company for Cause; or (ii) voluntary termination by the Executive for reasons other than as specified in Section 2.2(b) herein, the Company shall pay the Executive his accrued but unpaid Base Salary at the rate then in effect, accrued vacation, and other items earned by and owed to the Executive through the Executive’s separation from service, plus all other amounts to which the Executive is entitled under any compensation plans of the Company at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.

     2.7 Notice of Termination. Any termination of the Executive’s employment by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party.

     Article 3. Form and Timing of Severance Benefits

     3.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 2.3(a), 2.3(b), 2.3(c), 2.3(d), and 2.3(e) herein shall be paid in cash to the Executive in a single lump sum as

soon as practicable following the Effective Date of Termination, but in no event beyond ten (10) calendar days from such date.

     3.2. Internal Revenue Code Section 409A. The Plan is intended to comply with the American Jobs Creation Act of 2004, Code Section 409A, and related guidance.

     (a) Notwithstanding anything to the contrary set forth in this Agreement, any Severance Benefits paid (i) within 2-¹/2 months of the end of the Company’s taxable year containing the Executive’s severance from employment, or (ii) within 2-¹/2 months of the Executive’s taxable year containing the severance from employment shall be exempt from the requirements of Section 409A of the Code, and shall be paid in accordance with this Article 3. Severance Benefits subject to this Section 3.2(a) shall be treated and shall be deemed to be an entitlement to a separate payment within the meaning of Section 409A of the Code and the regulations thereunder.

     (b) To the extent Severance Benefits are not exempt from Section 409A under Section 3.2(a) above, any Benefits paid in the first 6 months following the Executive’s severance from employment that are equal to or less than the lesser of the amounts described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and (2) shall be exempt from Section 409A and shall be paid in accordance with this Article 3. Severance Benefits subject to this Section 3.2(b) shall be treated and shall be deemed to be an entitlement to a separate payment within the meaning of Section 409A of the Code and the regulations thereunder.

     (c) To the extent Severance Benefits are not exempt from Section 409A under Sections 3.2(a) or (b) above, any Benefits paid equal to or less than the applicable dollar amount under Section 402(g)(1)(B) of the Code for the year of severance from employment shall be exempt from Section 409A in accordance with Treasury Regulation Section 1.409A-1(b)(9)(v)(D) and shall be paid in accordance with this Article 3. Severance Benefits subject to this Section 3.2(c) shall be treated and shall be deemed to be an entitlement to a separate payment within the meaning of Section 409A of the Code and the regulations thereunder.

     (d) To the extent Severance Benefits are not exempt from Section 409A pursuant to Sections 3.2(a), (b) or (c) above, and to the extent the Executive is a “specified employee” (as defined below), payments due to the Executive under Section 6 shall begin no sooner than six months after the Executive’s severance from employment (other than for Death) ; provided, however, that any payments not made during the six (6) month period described in this Section 3.2(d) due to the 6-month delay period required under Treasury Regulation Section 1.409A-3(i)(2) shall be made in a single lump sum as soon as administratively practicable after the expiration of such six (6) month period, with interest thereon , and the balance of all other payments required under this Agreement shall be made as otherwise scheduled in this Agreement. Notwithstanding anything herein to the contrary, and subject to Code Section 409A, to the extent the following rules should apply to the Executive in connection with payments made hereunder, payment shall not be made or commence as a result of the Executive’s Effective Date of Termination to any Executive who is a key employee (defined below) before the date that is not less than six months after the Executive’s Effective Date of Termination. For this purpose, a key employee includes a “specified employee” (as defined in Code Section 409A(a)(2)(B)) during the entire 12-month period determined by the Company ending with the annual date upon which key employees are identified by the Company, and also including any Executive identified by the Company in good faith with respect to any distribution as belonging to the group of identified key employees, to a maximum of 200 such key employees, regardless of whether such Executive is subsequently determined by the Company, any governmental agency, or a court not to be a key employee. The identification date for determining key employees shall be each December 31 (and the new key employee list shall be updated and effective each subsequent April 1).

     (e) For purposes of this Section 3.2, any reference to severance of employment or termination of employment shall mean a “separation from service” as defined in Treasury Reg. Section 1.409A-1(h). For purposes of this Agreement, the term “specified employee” shall have the meaning set forth in Treasury Reg. Section 1.409A-1(i). The determination of whether the Executive is a “specified employee” shall be made by the Company in good faith applying the applicable Treasury regulations.

     3.3 Withholding of Taxes. The Company shall withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as legally shall be required.

     Article 4. Noncompetition and Confidentiality

     In the event of a Change in Control, as provided in Article 1 paragraph (f) herein, the following shall apply:

(a)	Noncompetition. During the term of this Agreement and, if longer, for a period of eighteen (18) months after the Effective Date of Termination, the Executive shall not: (i) directly or indirectly act in concert or conspire with any person employed by the Company in order to engage in or prepare to engage in or to have a financial or other interest in any business or any activity which he knows (or reasonably should have known) to be directly competitive with the business of the Company as then being carried on; or (ii) serve as an employee, agent, partner, shareholder, director or consultant for, or in any other capacity participate, engage, or have a financial or other interest in any business or any activity which he knows (or reasonably should have known) to be directly competitive with the business of the Company as then being carried on (provided, however, that notwithstanding anything to the contrary contained in this Agreement, the Executive may own up to two percent (2%) of the outstanding shares of the capital stock of a company whose securities are registered under Section 12 of the Securities Exchange Act of 1934).
(b)	Confidentiality. The Company has advised the Executive and the Executive acknowledges that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. All Protected Information shall remain confidential permanently and no Executive shall at any time, directly or indirectly, divulge, furnish, or make accessible to any person, firm, corporation, association, or other entity (otherwise than as may be required in the regular course of the Executive’s employment with the Company), nor use in any manner, either during the term of employment or after termination, at any time, for any reason, any Protected Information, or cause any such information of the Company to enter the public domain.
	For purposes of this Agreement, “Protected Information” means trade secrets, confidential and proprietary business information of the Company, and any other information of the Company, including, but not limited to, customer lists (including potential customers), sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees, including the Executive; provided, however, that information that is in the public domain (other than as a result of a breach of this Agreement), approved for release by the Company or lawfully obtained from third parties who are not bound by a confidentiality agreement with the Company, is not Protected Information.
(c)	Nonsolicitation. During the term of this Agreement and, if longer, for a period of eighteen (18) months after the Effective Date of Termination, the Executive shall not employ or retain or solicit for employment or arrange to have any other person, firm, or other entity employ or retain or solicit for employment or otherwise participate in the employment or retention of any person who is an employee or consultant of the Company.
(d)	Cooperation. Executive agrees to cooperate with the Company and its attorneys in connection with any and all lawsuits, claims, investigations, or similar proceedings that have been or could be asserted at any time arising out of or related in any way to Executive’s employment by the Company or any of its subsidiaries.
(e)	Nondisparagement. At all times, the Executive agrees not to disparage the Company or otherwise make comments harmful to the Company’s reputation.

(f)

Judicial Interpretation. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that any restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply to the maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

(g)

Injunctive Relief and Additional Remedy. The Executive acknowledges that the injury that would be suffered by the Company as a result of a breach of the provisions of this Agreement would be irreparable and that an award of monetary damages to the Company for such a breach would be an inadequate remedy. Consequently, the Company will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Company will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s rights under this Article or any other remedies of the Company, if the Executive breaches any of the provisions of this Article, the Company will have the right to recover any amounts paid to the Executive under subsection 2.3(d) of this Agreement.

     Article 5. Reduction of Severance Benefits in the Event of an Excise Tax Due

     5.1 Events Triggering Reduction of Severance Benefits. If any portion of the Severance Benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company (in the aggregate, “Total Payments”) would constitute an “excess parachute payment,” such that a golden parachute excise tax is due, the Company will make no additional payments to the Executive to cover the cost of such excise tax (a “Gross-Up Payment”) and the aggregate amount of Severance Payments payable to the Executive under this Agreement, or any other agreement with or plan of the Company, shall be reduced to the largest amount which would both (i) not cause any excise tax to be payable by the Executive, and (ii) not cause any of the Severance Payments to become nondeductible by the Company by reason of Section 280G of the Code (or any successor provision thereto).

     For purposes of this Agreement, the term “excess parachute payment” shall have the meaning assigned to such term in Section 280G of the Code, and the term “excise tax” shall mean the tax imposed on such excess parachute payment pursuant to Sections 280G and 4999 of the Code.

     5.2 Procedures in the Event of a Reduction in Severance Benefits. If there is a determination that the Severance Benefits payable to the Executive must be reduced pursuant to Section 5.1, the Company shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof and of the amount that must be reduced. The Executive may then elect, at the Executive’s sole discretion, which and how much of the various Severance Benefits shall be eliminated or reduced as long as after the Execuitive’s election the aggregate present value of the Severance Benefits equals the largest amount that would both (i) not cause any excise tax to be payable by the Executive, and (ii) not cause any Severance Payment to become nondeductible by the Company by reason of Section 280G of the Code (or any successor provision thereto). The Executive will advise the Company in writing of the Executive’s election under this Section 5.2 within ten (10) days of the Executive’s receipt of the notice under this Section 5.2 from the Company. If no election is made by the Executive within the ten-day period, the Company may election which and how much of the Severance Benefits shall be eliminated or reduced as long as after the Company’s election the aggregate present value of the Severance Payments equals the largest amount that would both (i) not cause any excise tax to be paid by the Executive, and (ii) not cause and Severance Payments to become nondeductible by the Company by reason of Section 289G of the Code (or any successor provision thereof). For purposes of this Section 5.2, present value shall be determined in accordance with Section 280G(d)(4) of the Code.

     Article 6. The Company’s Payment Obligation

     6.1 Payment Obligations Absolute. The Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever.

     The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 2.3(h) herein.

     6.2 Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder, except to the extent provided in Section 2.3(g) herein.

     Article 7. Term of Agreement

     This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless either party delivers written notice six (6) months prior to the end of such term, or extended term, stating that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress.

     However, in the event of a Change in Control of the Company, the term of this Agreement shall automatically be extended for two (2) years from the date of the Change in Control.

     Article 8. Dispute Resolution

     Any dispute or controversy between the parties arising under or in connection with this Agreement shall be settled by arbitration.

     The arbitration proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of the Executive’s principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction.

     All expenses of such litigation or arbitration, including the reasonable fees and expenses of the legal representative for the Executive, and necessary costs and disbursements incurred as a result of such dispute or legal proceeding, and any prejudgment interest, shall be borne by the Company.

     Article 9. Successors

     9.1 Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) of all or a significant portion of the assets of the Company by agreement, in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the “Company” for purposes of this Agreement.

     9.2 Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s beneficiary designated under the Company’s life insurance plan, or, if there is no such beneficiary, to the Executive’s devisee, legatee, or other designee, or if there is no such designee, to the Executive’s estate.

     Article 10. Miscellaneous

     10.1 Employment Status. This Agreement is not, and nothing herein shall be deemed to create, an employment contract between the Executive and the Company or any of its subsidiaries. The Executive acknowledges that the rights of the Company remain wholly intact to change or reduce at any time and from time to time his compensation, title, responsibilities, location, and all other aspects of the employment relationship, or to discharge him prior to a Change in Control (subject to such discharge possibly being considered a Qualifying Termination pursuant to Section 2.2).

     10.2 Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. In addition, the payments provided for under this Agreement in the event of the Executive’s termination of employment shall be in lieu of any severance benefits payable under any severance plan, program, or policy of the Company to which he might otherwise be entitled.

     10.3 Notices. All notices, requests, demands, and other communications hereunder shall be sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.

     10.4 Execution in Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

     10.5 Conflicting Agreements. This Agreement completely supersedes any and all prior change-in-control agreements or understandings, oral or written, entered into by and between the Company and the Executive, with respect to the subject matter hereof, and all amendments thereto, in their entirety. Further, the Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of, any other employment or other agreement to which he is a party, except to the extent any such conflict, breach, or violation under any such agreement has been disclosed to the Board in writing in advance of the signing of this Agreement.

     Notwithstanding any other provisions of this Agreement to the contrary, if there is any inconsistency between the terms and provisions of this Agreement and the terms and provisions of Company-sponsored compensation and welfare plans and programs, the Agreement’s terms and provisions shall completely supersede and replace the conflicting terms of the Company-sponsored compensation and welfare plans and programs, where applicable.

     10.6 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect.

     Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a federal or state court or regulatory agency of

competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order.

     10.7 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by a member of the Board, as applicable, or by the respective parties’ legal representatives or successors.

     10.8 Applicable Law. To the extent not preempted by the laws of the United States, the laws of Delaware shall be the controlling law in all matters relating to this Agreement without giving effect to principles of conflicts of laws.

          IN WITNESS WHEREOF, the parties have executed this Agreement on this ______ day of ____________, _______________.

ATTEST Federal Signal Corporation
By:		,
	Compensation Committee of the
	Board of Directors
Executive

EX-18.1

Exhibit 18.1

Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606

Tel: +1-312-879-2000
www.ey.com

November 3, 2009

Mr. William G. Barker III
Senior Vice President and Chief Financial Officer
Federal Signal Corporation
1415 West 22^nd Street
Oakbrook, Illinois 60523

Dear Mr. Barker:

Note 3 of Notes to the Condensed Consolidated Financial Statements of Federal Signal Corporation (the Company), included in its Form 10-Q for the quarter ended September 30, 2009, describes a change in the method of accounting for valuing inventory from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method for that portion of the Company’s inventory which had been valued using the LIFO method. There are no authoritative criteria for determining a ‘preferable’ inventory valuation method based on the particular circumstances; however, we conclude that such change in the method of accounting is to an acceptable alternate method which, based on your business judgment to make this change and for the stated reasons, is preferable in your circumstances. We have not conducted an audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) of any financial statements of the Company as of any date or for any period subsequent to December 31, 2008, and therefore we do not express any opinion on any financial statements of Federal Signal Corporation subsequent to that date.

Very truly yours,

EX-31.1

Exhibit 31.1

CEO Certification Under Section 302 of the Sarbanes-Oxley Act

I, William Osborne, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Federal Signal Corporation;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;
4.	The Company’s other certifying officer 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 Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly 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 Company’s disclosure controls and procedures and presented in this quarterly 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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

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 Company’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 Company’s internal control over financial reporting.

Date: November 3, 2009

/s/ William Osborne  

William Osborne  

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

CFO Certification under Section 302 of the Sarbanes-Oxley Act

I, William G. Barker, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Federal Signal Corporation;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;
4.	The Company’s other certifying officer 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 Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly 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 Company’s disclosure controls and procedures and presented in this quarterly 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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

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 Company’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 Company’s internal control over financial reporting.

Date: November 3, 2009

/s/ William G. Barker  

William G. Barker  

Senior Vice President and
Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Federal Signal Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Osborne, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: November 3, 2009

/s/ William Osborne  

William Osborne  

President and Chief Executive Officer 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Federal Signal Corporation and will be retained by Federal Signal Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Federal Signal Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William G. Barker, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: November 3, 2009

/s/ William G. Barker  

William G. Barker 

Senior Vice President and Chief Financial Officer 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Federal Signal Corporation and will be retained by Federal Signal Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

News From

REGENCY TOWERS, 1415 W. 22ND ST., OAK BROOK, ILLINOIS 60523

FOR IMMEDIATE RELEASE

Federal Signal Corporation Announces Third Quarter Earnings

Company Generates Q3 Profit From Continuing Operations Through Cost Reductions and Improved
Performance from its Fire Rescue Group

—Highlights—

• Q3 EPS of $0.10 from Continuing Operations

• Overhead Costs Reduced $12.2 Million versus Q3 2008, Including $3.6 Million Related to a Q3 2008 Contract Dispute

• Improved Q3 Operating Margin in the Fire Rescue Group

• Q3 Order Backlog = $209 Million vs $218 Million at End of Q2

• Net Debt Reduced Over $26 Million in the Quarter

• $130 Million of Global Liquidity at end of Q3

Oak Brook, Ill., November 3, 2009 — Federal Signal Corporation (NYSE: FSS) reported income from continuing operations of $4.6 million, or $0.10 per share, for the third quarter of 2009 on revenue of $167 million. For the same period of 2008, the Company earned $14.5 million from continuing operations, or $0.31 per share, on revenue of $212 million. The year-over-year third quarter income reduction is primarily the result of lower sales volumes, offset somewhat by margin improvement in the Fire Rescue Group, lower overhead costs and lower interest and other expense.

The Company recorded net income including discontinued operations of $4.3 million in the third quarter of 2009 compared to net income of $14.2 million in the prior year period. Operating cash flow from continuing operations for the first nine months of 2009 totaled $43.2 million, a $33.4 million improvement versus the prior year, primarily due to improved working capital management, offsetting lower profits. The Company had $130 million of global liquidity at the end of the quarter.

William H. Osborne, president and chief executive officer, stated, “I am pleased with the progress the company made in the quarter, as we had success on several fronts. Our team has focused intensely on cost reduction this year, and the results are impressive. Overhead costs — which we define as fixed manufacturing costs and SG&A — were reduced $12.2 million in the quarter versus last year, including a $3.6 million one-time cost related to a contract dispute in Q3 2008. Overhead costs are down $20 million year-to-date, including $5 million in cumulative costs relating to the contract dispute. We improved the operating margin in our Fire Rescue (Bronto) group in the quarter. We generated strong cash flow in the quarter and reduced our net debt by over $26 million.”

Mr. Osborne continued, “Orders stabilized in the quarter, with third quarter orders equal to those in the second quarter. While we have not yet seen a consistent pattern of growth across our entire business portfolio, we did see sequential order growth in our Bronto aerial lift and PIPS automated license plate recognition (ALPR) businesses. We are continuing to take steps and

devote resources to develop and grow our public safety businesses. I believe that our actions in 2009 have the company well positioned to profit from an economic recovery.”

Q3 GROUP RESULTS

Safety and Security Systems

• Q3 orders of $70.5 million were down slightly from the $72.2 million in Q2.

• Orders declined 19% from 2008 to $70.5 million as a result of the global economic recession and unfavorable currency effects.

• Net sales were down 18% to $73.8 million due to lower volumes across most market segments and unfavorable foreign currency effects of 1.9%.

• Operating income decreased $1.6 million to $6.7 million as a result of lower sales volumes. Operating expenses were lower than the prior year by $5.6 million primarily as a result of headcount reductions and cost containment efforts, and the absence of one-time costs in 2008 related to a contract dispute. However, this was not sufficient to overcome the volume decline in the quarter. 2009 operating expenses include an initial charge of $0.3 million for a restructuring initiave to consolidate plant operations. As a comparison, Q3 2008 income included a total of $6.1 million in charges associated with a contract dispute.

Fire Rescue (Bronto)

• Orders for Q3 were up 24%, or $5.0 million, from Q2 to $26.2 million.

• Orders declined 23%, or $7.9 million, to $26.2 million from Q3 2008 with a decrease across all product lines. Early 2008 orders were at record levels across all segments.

• Net sales were essentially flat at $27.4 million as the group continues to work off a strong backlog.

• Q3 operating income was up $1.5 million, to $2.2 million. Operating margin increased from 2.5% in 2008 to 8.0% in 2009 as a result of reduced outsourcing and efficiencies associated with the plant expansion.

Environmental Solutions

• Orders were down 5%, or $2.9 million, from the second quarter

• Q3 Orders declined 28%, to $60.8 million from Q3 2008 with a decrease across all product lines except sweeper exports.

• Net sales were down 30% to $65.4 million primarily due to order weakness and lower sales volume.

• Q3 operating income was down $6.1 million to $2.7 million. The impact of lower sales volumes was partially offset by favorable purchase price variances of $2.1 million and lower manufacturing and operating expenses of $1.8 million.

Other

• Q3 Corporate expense was down $1.4 million to $4.1 million primarily as a result of lower legal expenses associated with the hearing loss litigation.

• Interest expense for Q3 was down $1.0 million in 2009 due to lower interest rates and lower average borrowings.

• The Q3 effective tax rate on income from continuing operations was 17.9%, or $1.0 million.

CONFERENCE CALL

Federal Signal will host its third quarter conference call on Tuesday, November 3, 2009 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. A replay will be available on Federal Signal’s website shortly after the call.

About Federal Signal

Federal Signal Corporation (NYSE: FSS) enhances the safety, security and well-being of communities and workplaces around the world. Founded in 1901, Federal Signal is a leading global designer and manufacturer of products and total solutions that serve municipal, governmental, industrial and institutional customers. Headquartered in Oak Brook, Ill., with manufacturing facilities worldwide, the Company operates three groups: Safety and Security Systems, Environmental Solutions and Fire Rescue. For more information on Federal Signal, visit: http://www.federalsignal.com.

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.

INVESTOR CONTACT: William Barker, +1.630.954.2000, wbarker@federalsignal.com or Leo Mahon, +1.630.954.2000, lmahon@federalsignal.com

# # # # #

FEDERAL SIGNAL CORPORATION (NYSE)
Consolidated Financial Data
For the Third Quarter 2009 and 2008 (Unaudited)
(in millions except per share data)

	QTR			QTR			YTD			YTD
	September 30			September 30			September 30			September 30
	2009			2008			2009			2008
Quarter September 30:
Net Sales	$	166.6		$	212.0		$	560.9		$	665.9
Cost of sales		(124.6	)		(155.7	)		(415.7	)		(488.3	)
Operating expenses		(34.5	)		(44.0	)		(122.9	)		(136.1	)
Operating income		7.5			12.3			22.3			41.5
Interest expense		(2.6	)		(3.6	)		(8.8	)		(12.6	)
Other income (expense)		0.7			(0.1	)		(0.3	)		(1.9	)
Income before income taxes		5.6			8.6			13.2			27.0
Income tax (expense) benefit		(1.0	)		5.9			(2.5	)		(0.3	)
Income from continuing operations		4.6			14.5			10.7			26.7
Loss from discontinued operations and disposal, net of tax		(0.3	)		(0.3	)		(10.3	)		(110.6	)
Net income (loss)	$	4.3		$	14.2		$	0.4		$	(83.9	)
Gross margin		25.2	%		26.6	%		25.9	%		26.7	%
Operating margin		4.5	%		5.8	%		4.0	%		6.2	%
Effective tax rate		17.9	%		(68.6	%)		18.9	%		0.9	%
Diluted earnings per share:
Earnings from continuing operations	$	0.10		$	0.31		$	0.22		$	0.56
Loss from discontinued operations and disposal, net of tax		(0.01	)		(0.01	)		(0.21	)		(2.32	)
Income (loss) per share	$	0.09		$	0.30		$	0.01		$	(1.76	)
Average common shares outstanding		48.0			47.6			48.5			47.7

	QTR			QTR			YTD			YTD
	September 30			September 30			September 30			September 30
	2009			2008			2009			2008
Group results:
Safety and Security Systems Group:
Orders	$	70.5		$	86.6		$	218.7		$	281.2
Net Sales		73.8			90.3			228.8			275.9
Operating Income		6.7			8.3			21.8			27.5
Operating Margin		9.1	%		9.2	%		9.5	%		10.0	%
Backlog							$	43.3		$	61.8
Fire Rescue Group:
Orders	$	26.2		$	34.1		$	68.2		$	135.5
Net Sales		27.4			28.1			101.4			92.5
Operating Income		2.2			0.7			9.5			4.6
Operating Margin		8.0	%		2.5	%		9.4	%		5.0	%
Backlog							$	106.6		$	174.8
Environmental Solutions Group:
Orders	$	60.8		$	84.2		$	191.9		$	270.2
Net Sales		65.4			93.6			230.7			297.5
Operating Income		2.7			8.8			11.9			29.7
Operating Margin		4.1	%		9.4	%		5.2	%		10.0	%
Backlog							$	59.1		$	101.4
Corporate operating expenses	$	(4.1	)	$	(5.5	)	$	(20.9	)	$	(20.3	)
Total Operating Income	$	7.5		$	12.3		$	22.3		$	41.5

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	September 30			December 31
($ in millions)	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	21.1		$	23.4
Short-term investments		—			10.0
Accounts receivable, net of allowances for doubtful accounts of $1.9 million and $2.0 million, respectively		114.1			138.6
Inventories		129.2			133.5
Other current assets		27.1			21.5
Total current assets		291.5			327.0
Properties and equipment, net		67.7			63.5
Other assets
Goodwill		330.5			328.1
Intangible assets, net of accumulated amortization		48.0			47.8
Deferred tax assets		26.9			30.3
Deferred charges and other assets		1.8			4.4
Total assets		766.4			801.1
Assets of discontinued operations		10.2			37.0
Total assets	$	776.6		$	838.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	1.3		$	12.6
Current portion of long-term borrowings		40.4			25.1
Accounts payable		41.6			48.4
Accrued liabilities
Compensation and withholding taxes		20.6			23.9
Customer deposits		12.5			17.4
Other		53.0			48.6
Total current liabilities		169.4			176.0
Long-term borrowings		196.8			241.2
Long-term pension liabilities		54.1			58.0
Deferred gain		24.7			26.2
Other long-term liabilities		12.2			14.8
Total liabilities		457.2			516.2
Liabilities of discontinued operations		13.9			34.8
Total liabilities		471.1			551.0
Shareholders’ equity
Common stock, $1 par value per share, 90.0 million shares authorized, 49.6 million and 49.3 million shares issued, respectively		49.6			49.3
Capital in excess of par value		93.3			106.4
Retained earnings		220.6			229.0
Treasury stock, 0.8 million and 1.9 million shares at cost, respectively		(15.8	)		(36.1	)
Accumulated other comprehensive loss
Foreign currency translation, net		15.3			(4.1	)
Net derivative loss, cash flow hedges, net		(0.9	)		(0.9	)
Unrecognized pension and postretirement losses, net		(56.6	)		(56.5	)
Total		(42.2	)		(61.5	)
Total shareholders’ equity		305.5			287.1
Total liabilities and shareholders’ equity	$	776.6		$	838.1
Supplemental data:
Debt	$	238.5		$	278.9
Debt-to-capitalization ratio:		43.8	%		49.3	%
Net Debt/Cap Ratio		41.6	%		46.1	%
Net Debt/Cap Ratio = debt-to-capitalization ratio, net of cash

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Year-to-Date
	September 30,
	2009			2008
	($ in millions)
Operating activities
Net income (loss)	$	0.4		$	(83.9	)
Adjustments to reconcile net income (loss) to net cash provided by (Used for) operating activities:
Loss on discontinued operations and disposal		10.3			110.6
Depreciation and amortization		11.7			11.9
Stock based compensation expense		3.3			2.1
Pension contributions		(0.5	)		(8.2	)
Working capital (1)		21.4			(16.2	)
Other		(3.4	)		(6.5	)
Net cash provided by continuing operating activities		43.2			9.8
Net cash (used for) provided by discontinued operating activities		(3.2	)		119.5
Net cash provided by operating activities		40.0			129.3
Investing activities
Purchases of properties and equipment		(11.9	)		(18.8	)
Proceeds from sales of properties, plant and equipment		1.2			35.8
Other, net		10.0			0.8
Net cash (used for) provided by continuing investing activities		(0.7	)		17.8
Net cash provided by discontinued investing activities		14.2			54.4
Net cash provided by investing activities		13.5			72.2
Financing activities
Decrease in short-term borrowings, net		(11.3	)		(1.4	)
Payments on long-term borrowings, net		(29.8	)		(55.4	)
Purchases of treasury stock		—			(6.0	)
Cash dividends paid to shareholders		(8.7	)		(8.6	)
Other, net		0.2			(0.1	)
Net cash used for continuing financing activities		(49.6	)		(71.5	)
Net cash used for discontinued financing activities		(7.1	)		(126.7	)
Net cash used for financing activities		(56.7	)		(198.2	)
Effects of foreign exchange rate changes on cash		0.9			—
(Decrease) increase in cash and cash equivalents		(2.3	)		3.3
Cash and cash equivalents at beginning of period		23.4			12.5
Cash and cash equivalents at end of period	$	21.1		$	15.8

(1) Working capital is composed of net accounts receivable, inventories, accounts payable and customer deposits.