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What changed in FEDERAL SIGNAL CORP /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FEDERAL SIGNAL CORP /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+211 added−226 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in FEDERAL SIGNAL CORP /DE/'s 2023 10-K

211 paragraphs added · 226 removed · 190 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

36 edited+6 added−7 removed38 unchanged
Biggest changeJetstream is a market leader in the in-plant cleaning segment of the U.S. waterblast industry, competing on product performance, rapid delivery and solutions services. Joe Johnson Equipment, Inc. with Joe Johnson Equipment (USA), Inc., (collectively, “JJE”), is a leading Canadian-based distributor of maintenance equipment for municipal and industrial markets.
Biggest changeJoe Johnson Equipment, Inc. with Joe Johnson Equipment (USA), Inc., (collectively, “JJE”), is a leading Canadian-based distributor of maintenance equipment for municipal and industrial markets. Blasters is a leading U.S. manufacturer of truck-mounted waterblasting equipment. MRL is a U.S. manufacturer of truck-mounted and ride-on road-marking and line-removal equipment. Trackless is a leading Canadian manufacturer of off-road, multi-purpose tractors and attachments.
Many of the Company’s businesses also recruit summer interns from regional universities, providing hands-on experience in a manufacturing setting and building a pipeline for future engineers, information technology specialists and financial analysts.
Many of the Company’s businesses also recruit summer interns from regional universities, providing hands-on experience in a manufacturing setting and building a pipeline for future engineers, information technology (“IT”) specialists and financial analysts.
The Group manufactures vehicles and equipment in the U.S. and Canada that are sold under the Elgin ® , Vactor ® , Guzzler ® , TRUVAC ® , Westech TM , Jetstream ® , Mark Rite Lines, Ox Bodies ® , Crysteel ® , J-Craft ® , Duraclass ® , Rugby ® , Travis ® , OSW, NTE, WTB, Ground Force, TowHaul ® , Bucks ® and Switch-N-Go ® brand names.
The Group manufactures vehicles and equipment in the U.S. and Canada that are sold under the Elgin ® , Vactor ® , Guzzler ® , TRUVAC ® , Westech TM , Jetstream ® , Blasters, Mark Rite Lines, Trackless, Ox Bodies ® , Crysteel ® , J-Craft ® , Duraclass ® , Rugby ® , Travis ® , OSW, NTE, WTB, Ground Force, TowHaul ® , Bucks ® and Switch-N-Go ® brand names.
Westech is a manufacturer of high-quality, rugged vacuum-excavation trucks. Jetstream manufactures high-pressure waterblasting equipment and accessories for commercial and industrial cleaning and maintenance operations. Mark Rite Lines Equipment Company, Inc. (“MRL”), is a U.S. manufacturer of truck-mounted and ride-on road-marking and line-removal equipment.
Westech is a manufacturer of high-quality, rugged vacuum-excavation trucks. Jetstream manufactures high-pressure waterblasting equipment and accessories for commercial and industrial cleaning and maintenance operations. Blasters is a leading U.S. manufacturer of truck-mounted waterblasting equipment. Mark Rite Lines Equipment Company, Inc. (“MRL”), is a U.S. manufacturer of truck-mounted and ride-on road-marking and line-removal equipment.
With the application of these policies, the Company believes it complies with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Capital expenditures in 2022 attributable to compliance with such laws were not material.
With the application of these policies, the Company believes it complies with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Capital expenditures in 2023 attributable to compliance with such laws were not material.
Corporate contains those items that are not included in the Company’s reportable segments. Financial information concerning the Company’s two reportable segments for each of the three years in the period ended December 31, 2022, is included in Note 17 – Segment Information to the accompanying consolidated financial statements and is incorporated herein by reference.
Corporate contains those items that are not included in the Company’s reportable segments. Financial information concerning the Company’s two reportable segments for each of the three years in the period ended December 31, 2023, is included in Note 17 – Segment Information to the accompanying consolidated financial statements and is incorporated herein by reference.
In addition, the Company engages in the sale of parts, service and repair, equipment rentals and training as part of a comprehensive aftermarket offering to its customers. The Company operates 21 principal manufacturing facilities in five countries and provides products and integrated solutions to customers in all regions of the world.
In addition, the Company engages in the sale of parts, service and repair, equipment rentals and training as part of a comprehensive aftermarket offering to its customers. The Company operates 23 principal manufacturing facilities in five countries and provides products and integrated solutions to customers in all regions of the world.
While supply chain disruption and customer demand have contributed to longer lead times for certain businesses, production of the Company’s December 31, 2022 backlog is expected to be substantially completed during 2023.
While supply chain disruption and customer demand have contributed to longer lead times for certain businesses, production of the Company’s December 31, 2023 backlog is expected to be substantially completed during 2024.
Environmental Solutions Group The Company’s Environmental Solutions Group is a leading manufacturer and supplier of a full range of street sweepers, sewer cleaners, industrial vacuum loaders, safe-digging trucks, high-performance waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers and metal extraction support equipment.
Environmental Solutions Group The Company’s Environmental Solutions Group is a leading manufacturer and supplier of a full range of street sweepers, sewer cleaners, industrial vacuum loaders, safe-digging trucks, high-performance waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers, metal extraction support equipment and multi-purpose tractors.
Although certain materials are obtained from either a single-source supplier or a limited number of suppliers, the Company has generally identified alternative sources to minimize the interruption of its business in the event of supply disruptions. However, the Company may incur supply disruptions and unanticipated costs in transitioning to a new supplier.
Although certain materials are obtained from either a single-source supplier or a limited number of suppliers, the Company has generally identified alternative sources to minimize the interruption of its business in the event of supply disruptions. However, a transition to a new supplier may cause the Company to incur supply disruptions and unanticipated costs.
Executive Officers of the Registrant The following is a list of the Company’s executive officers, including their ages, business experience and positions as of February 1, 2023: Jennifer L. Sherman, age 58, was appointed President and CEO effective January 1, 2016. Ms. Sherman was also appointed to the Board of Directors effective January 1, 2016.
Executive Officers of the Registrant The following is a list of the Company’s executive officers, including their ages, business experience and positions as of February 1, 2024: Jennifer L. Sherman, age 59, was appointed President and CEO effective January 1, 2016. Ms. Sherman was also appointed to the Board of Directors effective January 1, 2016.
The Group’s product offerings also include certain products manufactured by other companies, such as refuse and recycling collection vehicles, camera systems, ice resurfacing equipment and snow-removal equipment. Products are sold to both municipal and industrial customers either through a dealer network or direct sales to service customers generally depending on the type and geographic location of the customer.
The Group’s product offerings also include certain products manufactured by other companies, such as refuse and recycling collection vehicles. Products are sold to both municipal and industrial customers either through a dealer network or direct sales to service customers generally depending on the type and geographic location of the customer.
Human Capital Management As of December 31, 2022, the Company employed approximately 4,100 people in its businesses located in five countries, with the Company’s U.S. hourly employees accounting for approximately 54% of its total workforce. As of December 31, 2022, approximately 10% of the Company’s U.S. hourly workers were represented by unions.
Human Capital Management As of December 31, 2023, the Company employed approximately 4,500 people in its businesses located in five countries, with the Company’s U.S. hourly employees accounting for approximately 54% of its total workforce. As of December 31, 2023, approximately 9% of the Company’s U.S. hourly workers were represented by unions.
The Company’s commitment to DE&I throughout the organization is further evidenced by its policies related to various aspects of employment, including, but not limited to, recruiting, selecting, hiring, employment placement, job assignment, compensation, access to benefits, selection for training, use of facilities, and participation in Company-sponsored employee activities.
The Company’s cultural philosophy is further evidenced by its policies related to various aspects of employment, including, but not limited to, recruiting, selecting, hiring, employment placement, job assignment, compensation, access to benefits, selection for training, use of facilities, and participation in Company-sponsored employee activities.
Customers and Backlog No single customer accounted for 10% or more of the Company’s net sales in any year within the three-year period ended December 31, 2022. The Company’s backlog totaled $879 million at December 31, 2022, compared to $629 million at December 31, 2021.
Customers and Backlog No single customer accounted for 10% or more of the Company’s net sales in any year within the three-year period ended December 31, 2023. The Company’s backlog totaled $1.03 billion at December 31, 2023, compared to $879 million at December 31, 2022.
The Company has designed and implemented plans to partially mitigate the impact of these challenges by using alternate 3 Table of Contents suppliers, re-engineering products, expanding its supply base globally, leveraging overall purchasing volumes to obtain favorable pricing and quantities and developing a closer working relationship with key suppliers.
The Company has designed and implemented plans to partially mitigate the impact of these challenges by using alternate suppliers, re-engineering products, expanding its supply base globally, leveraging overall purchasing volumes to obtain favorable pricing and quantities and developing a closer working relationship with key suppliers. However, the Company can provide no assurance that those efforts will be successful.
The Company applies a holistic total rewards strategy, designed to recruit, motivate, and retain talented employees at all levels of the organization and offer competitive, market-based compensation programs and attractive benefit packages.
The Company believes that its employees are key to its ability to deliver exceptional products and services to its customers. The Company applies a holistic total rewards strategy, designed to recruit, motivate, and retain talented employees at all levels of the organization and offer competitive, market-based compensation programs and attractive benefit packages.
Ground Force and TowHaul are leading manufacturers of specialty vehicles that support the extraction of metals. Within specific product categories and domestic markets, the businesses within the Safety and Security Systems Group are among the market leaders. This Group’s international market position varies from leader to ancillary participant depending on the geographic region and product line.
Within specific product categories and domestic markets, the businesses within the Safety and Security Systems Group are among the market leaders. This Group’s international market position varies from leader to ancillary participant depending on the geographic region and product line.
Elting also serves as the Company’s Corporate Controller, a position she has held since May 2018. Prior to joining the Company in January 2017, Ms. Elting worked at Ernst & Young, LLP from 2004 to 2016, most recently as Senior Audit Manager. Ian A. Hudson, age 46, was appointed Senior Vice President and Chief Financial Officer in October 2017. Mr.
Elting worked at Ernst & Young, LLP from 2004 to 2016, most recently as Senior Audit Manager. Ian A. Hudson, age 47, was appointed Senior Vice President and Chief Financial Officer in October 2017. Mr. Hudson joined the Company in August 2013 as Vice President and Corporate Controller. Prior to joining the Company, Mr.
Sherman also previously served as Senior Vice President, Chief Administrative Officer, General Counsel and Secretary from 2010 to April 2014, Senior Vice President, Human Resources, General Counsel and Secretary from 2008 to 2010, and Vice President, General Counsel and Secretary from 2004 to 2008. Diane I. Bonina, age 59, was appointed Vice President, General Counsel and Secretary in April 2022.
Sherman also previously served as Senior Vice President, Chief Administrative Officer, General Counsel and Secretary from 2010 to April 2014, Senior Vice President, Human Resources, General Counsel and Secretary from 2008 to 2010, and Vice President, General Counsel and Secretary from 2004 to 2008. Felix M.
TBEI includes a portfolio of regional dump truck body and trailer brands with market leadership positions in distinct geographies and product categories, differentiating itself with its broad regional distribution network, focus on customer responsiveness and operational expertise. MRL is a market-leading manufacturer of road-marking and line-removal equipment.
Ground Force and TowHaul are leading manufacturers of specialty vehicles that support the extraction of metals. TBEI includes a portfolio of regional dump truck body and trailer brands with market leadership positions in distinct geographies and product categories, differentiating itself with its broad regional distribution network, focus on customer responsiveness and operational expertise.
During 2021, the Company’s Executive Leadership Team, comprised of business leaders from across the organization, completed a comprehensive DE&I educational awareness training led by an industry expert. In 2022, this same group completed additional training on the importance of building inclusive workplaces. Additionally, the Company piloted DE&I training at a key manufacturing location in 2022.
In recent years, the Company’s Executive Leadership Team, comprised of business leaders from across the organization, completed a comprehensive educational awareness training led by an industry expert and completed supplemental training on the importance of building inclusive workplaces.
In addition, two of the Company’s directors are female, placing the Company in line with the average for companies in the Russell 3000 Index. Of the companies in the Russell 3000 Index, approximately 6% have a female Chief Executive Officer (“CEO”), and the Company is proud to be among that group.
Of the companies in the Russell 3000 Index, approximately 7% have a female Chief Executive Officer (“CEO”), and the Company is proud to be among that group. In addition, 50% of the Company’s current executive officers are female, including the Company’s President and CEO, Vice President and General Counsel, and Vice President, Chief Accounting Officer and Controller.
The Company’s portfolio of products that it manufactures includes sewer cleaners, industrial vacuum loaders, vacuum- and hydro-excavation trucks (collectively, “safe-digging” trucks), street sweepers, road-marking and line-removal equipment, waterblasting equipment, dump truck bodies, trailers, and safety and security systems, including technology-based products and solutions for the public safety market.
The Company’s portfolio of products that it manufactures includes (i) vehicles and equipment for maintenance and infrastructure end-markets, including sewer cleaners, industrial vacuum loaders, vacuum- and hydro-excavation trucks (collectively, “safe-digging trucks”), street sweepers, waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers, metal extraction support equipment and multi-purpose tractors, and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems and general alarm/public address systems.
Hudson joined the Company in August 2013 as Vice President and Corporate Controller. Prior to joining the Company, Mr. Hudson served as Director of Accounting – Latin America and Asia Pacific at Groupon, Inc. from June 2012 to August 2013. Prior to that role, Mr.
Hudson served as Director of Accounting – Latin America and Asia Pacific at Groupon, Inc. from June 2012 to August 2013. Prior to that role, Mr. Hudson worked at Ernst & Young, LLP from 1998 to 2012, most recently as Senior Audit Manager. Mark D.
Competition Within the Environmental Solutions Group, Elgin is recognized as a market leader among domestic sweeper competitors and differentiates itself primarily on product performance. The Vactor, TRUVAC and Guzzler brands each maintain a leading domestic position in their respective marketplaces by enhancing product performance with leading technology and application flexibility.
The Vactor, TRUVAC and Guzzler brands each maintain a leading domestic position in their respective marketplaces by enhancing product performance with leading technology and application flexibility. Jetstream is a market leader in the in-plant cleaning segment of the U.S. waterblast industry, competing on product performance, rapid delivery and solutions services.
Prior to joining the Company in March 2022, Ms. Bonina worked at AT&T Inc. (“AT&T”), where she served as Assistant Vice President – Senior Legal Counsel. At AT&T, Ms. Bonina held a broad range of roles of increasing legal and management responsibilities since 1996, both for AT&T and its predecessor companies. Prior to that role, Ms.
Bonina, age 60, was appointed Vice President, General Counsel and Secretary in April 2022. Prior to joining the Company in March 2022, Ms. Bonina worked at AT&T Inc. (“AT&T”), where she served as Assistant Vice President – Senior Legal Counsel. At AT&T, Ms.
Ground Force Manufacturing LLC (“Ground Force”) and TowHaul are leading manufacturers of specialty vehicles that support the extraction of metals.
Trackless is a leading Canadian manufacturer of off-road, multi-purpose tractors and attachments. Ground Force and TowHaul are leading manufacturers of specialty vehicles that support the extraction of metals.
Weber joined Supreme in May 2013 as President and Chief Executive Officer, serving in that capacity up to the sale of Supreme to Wabash National Corporation, which was completed in September 2017. Prior to joining Supreme, Mr. Weber worked for 17 years as an executive within the Company’s Environmental Solutions Group, including a decade as Group President.
Weber, age 66, was appointed Senior Vice President and Chief Operating Officer in January 2018, upon rejoining the Company after four years at Supreme Industries, Inc. (“Supreme”). Mr. Weber joined Supreme in May 2013 as President and Chief Executive Officer, serving in that capacity up to the sale of Supreme to Wabash National Corporation, which was completed in September 2017.
Governmental Regulation of the Environment As part of its ongoing commitment to environmental, social and governance initiatives, the Company endeavors to establish environmentally-friendly policies and objectives, and believes that these actions are also consistent with cost-effective operating practices.
The Safety Council meets regularly to collaborate and implement safety improvement measures, including workplace hazard reduction programs and awards focusing on continuous improvement initiatives and the reduction of incident frequency. 5 Table of Contents Governmental Regulation of the Environment The Company endeavors to establish environmentally-friendly policies and objectives, and believes that these actions are also consistent with cost-effective operating practices.
Bonina worked as an attorney with Jenner & Block in its litigation department from 1990 to 1996, and also served as a law clerk for the Honorable Cornelia G. Kennedy of the U.S. Court of Appeals for the Sixth Circuit in Detroit, Michigan. Lauren B. Elting, age 41, was appointed Vice President and Chief Accounting Officer in April 2022. Ms.
Bonina held a broad range of roles of increasing legal and management responsibilities since 1996, both for AT&T and its predecessor companies. Prior to that role, Ms. Bonina worked as an attorney with Jenner & Block in its litigation department from 1990 to 1996, and also served as a law clerk for the Honorable Cornelia G. Kennedy of the U.S.
These officers hold office until the next annual meeting of the Board of Directors following their election and until their successors have been elected and qualified. There are no family relationships among any of the foregoing executive officers. 6 Table of Contents
There are no family relationships among any of the foregoing executive officers. 6 Table of Contents
The Company has established an enterprise-wide Safety Council, which includes representatives from several of our manufacturing facilities. The Safety Council meets regularly to collaborate and implement safety improvement measures, including workplace 5 Table of Contents hazard reduction programs and awards focusing on continuous improvement initiatives and the reduction of incident frequency.
The Company has established an enterprise-wide Safety Council, which includes representatives from several of our manufacturing facilities.
Diversity, Equity and Inclusion The Company is committed to promoting and supporting diversity, equity and inclusion (“DE&I”). The Company believes that behaving inclusively is the right thing to do. The Company also believes that hearing different voices, and seeking different perspectives and ideas, leads to better results.
Cultural Philosophy The Company is committed to promoting and supporting an inclusive culture throughout the organization, and believes that hearing different voices, and seeking different perspectives and ideas, leads to better results. The Company is proud of the diversity on its Board of Directors, senior management and in leadership roles throughout the Company.
The Company strives to promote diversity on its Board of Directors, senior 4 Table of Contents management and in leadership roles throughout the Company. Currently, two of the Company’s seven directors self-identify as members of a minority group.
Currently, two of the 4 Table of Contents Company’s eight directors self-identify as members of a minority group. In addition, three of the Company’s directors are female, placing the Company ahead of the 29% average for companies in the Russell 3000 Index.
During the year ended December 31, 2022, the Company completed the acquisition of substantially all of the assets and operations of TowHaul Corporation (“TowHaul”).
During the year ended December 31, 2023, the Company completed the acquisitions of substantially all of the assets and operations of Trackless Vehicles Limited and Trackless Vehicles Asset Corp, and the wholly-owned subsidiary Work Equipment Ltd. (collectively, “Trackless”) and substantially all of the assets and operations of Blasters, Inc. and Blasters Technologies, LLC (collectively, “Blasters”).
Removed
During 2022, the Company’s manufacturing operations continued to be adversely affected by supply chain disruptions, which impacted the supply of raw materials and purchased components, and inflationary pressure.
Added
Throughout 2023, supply chain conditions continued to gradually improve. However, the 3 Table of Contents Company continues to experience sporadic supply shortages and extended lead times for some components and raw materials, including certain classes of chassis and electronic components that are important to its manufacturing processes.
Removed
However, the Company can provide no assurance that those efforts will be successful. Although global supply chain disruptions and inflationary pressure have recently shown some signs of easing, the Company anticipates that component shortages, production delays and elevated material costs may persist into 2023.
Added
Although global supply chain conditions have improved in 2023, component shortages may persist into 2024, which could limit the Company’s ability to maximize production. Competition Within the Environmental Solutions Group, Elgin is recognized as a market leader among domestic sweeper competitors and differentiates itself primarily on product performance.
Removed
During the year ended December 31, 2022, the International Association of Machinists (“IAM”) union was decertified at the Company’s Rugby, North Dakota manufacturing facility. The decertification process was initiated and completed by the employees represented by the IAM union, which included approximately 73% of the employees at that facility.
Added
Additionally, the Company piloted training at a key manufacturing location in 2022 and provided facilitated training at another key manufacturing location in 2023.
Removed
The Company believes that its labor relations with its employees are good, as evidenced by the decertification in 2022. The Company believes that its employees are key to its ability to deliver exceptional products and services to its customers.
Added
Boeschen, age 29, was appointed Vice President, Corporate Strategy and Investor Relations in September 2023. Prior to joining the Company, Mr. Boeschen served as a Vice President, Equity Research at Raymond James, where he covered companies in the machinery space, with a primary focus on the truck equipment and specialty vehicle industries. Diane I.
Removed
In addition, 60% of the Company’s current executive officers are female, including the Company’s President and CEO, Vice President and General Counsel, and Vice President, Chief Accounting Officer and Controller.
Added
Court of Appeals for the Sixth Circuit in Detroit, Michigan. Lauren B. Elting, age 42, was appointed Vice President and Chief Accounting Officer in April 2022. Ms. Elting also serves as the Company’s Corporate Controller, a position she has held since May 2018. Prior to joining the Company in January 2017, Ms.
Removed
The Company continues to monitor the impact of the pandemic on its business and employees, while ensuring the ongoing support of customer sites to remain operational, and will implement or modify its policies to adapt to changing circumstances arising from the coronavirus pandemic.
Added
Prior to joining Supreme, Mr. Weber worked for 17 years as an executive within the Company’s Environmental Solutions Group, including a decade as Group President. These officers hold office until the next annual meeting of the Board of Directors following their election and until their successors have been elected and qualified.
Removed
Hudson worked at Ernst & Young, LLP from 1998 to 2012, most recently as Senior Audit Manager. Mark D. Weber, age 65, was appointed Senior Vice President and Chief Operating Officer in January 2018, upon rejoining the Company after four years at Supreme Industries, Inc. (“Supreme”). Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+4 added−8 removed57 unchanged
Biggest changeWe have international operations that are subject to compliance with domestic and foreign laws and regulations, economic and political uncertainties and conflicts and foreign currency rate fluctuations. Our business is subject to fluctuations in demand and changing international economic, legal and political conditions that are beyond our control.
Biggest changeThe costs of compliance with the various laws, regulations and policies applicable to us could be significant and penalties for non-compliance could significantly impact our business. We have international operations that are subject to compliance with domestic and foreign laws and regulations, economic and political uncertainties and conflicts and foreign currency rate fluctuations.
If the supply of skilled labor is constrained or our costs of attracting and maintaining a workforce increase and such costs, our profit margins could decrease as well our ability to maximize production and meet customer demand. Our business may be adversely impacted by work stoppages and other labor relations matters.
If the supply of skilled labor is constrained or our costs of attracting and maintaining a workforce increase, our profit margins could decrease as well as our ability to maximize production and meet customer demand. Our business may be adversely impacted by work stoppages and other labor relations matters.
Any product liability or warranty issues may adversely impact our reputation as a manufacturer of high-quality, safe products and may have a material adverse effect on our business. The costs associated with complying with environmental, safety and other ESG regulations could lower our margins.
Any product liability or warranty issues may adversely impact our reputation as a manufacturer of high-quality, safe products and may have a material adverse effect on our business. The costs associated with complying with environmental, safety and other regulations could lower our margins.
Our success will depend upon our ability to source, develop and introduce on a timely and cost-effective basis new products, applications and processes that keep pace with technological developments, ESG regulations and address increasingly sophisticated customer requirements. We may not be successful in identifying, sourcing, developing and marketing new products, applications and processes and product or process enhancements.
Our success will depend upon our ability to source, develop and introduce on a timely and cost-effective basis new products, applications and processes that keep pace with technological developments, applicable regulations and address increasingly sophisticated customer requirements. We may not be successful in identifying, sourcing, developing and marketing new products, applications and processes and product or process enhancements.
The secure operation of these information technology systems and networks and processing and maintenance of this information is critical to the Company’s business operations and strategy. These information technology systems and networks may be susceptible to damage, disruptions or shutdowns due to hardware failures, computer viruses, cybersecurity attacks, telecommunication failures, user errors, catastrophic events or other factors.
The secure operation of these IT systems and networks and processing and maintenance of this information is critical to the Company’s business operations and strategy. These IT systems and networks may be susceptible to damage, disruptions or shutdowns due to hardware failures, computer viruses, cybersecurity attacks, telecommunication failures, user errors, catastrophic events or other factors.
Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our ability to timely manufacture and deliver products to our customers.
Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, labor stoppages or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our ability to timely manufacture and deliver products to our customers.
Increased public awareness and concern regarding climate change and other ESG matters at numerous levels of government in various jurisdictions may lead to additional international, national, regional and local legislative and regulatory responses, and compliance with any new rules could be difficult and costly.
Increased public awareness and concern regarding climate change and other related matters at numerous levels of government in various jurisdictions may lead to additional international, national, regional and local legislative and regulatory responses, and compliance with any new rules could be difficult and costly.
We rely on a combination of patents, trademarks, copyrights, nondisclosure agreements, information technology security systems, physical security and other measures to protect our proprietary intellectual property and the intellectual property of certain customers and suppliers. However, we cannot be certain that our efforts to protect these intellectual property rights will be sufficient.
We rely on a combination of patents, trademarks, copyrights, nondisclosure agreements, IT security systems, physical security and other measures to protect our proprietary intellectual property and the intellectual property of certain customers and suppliers. However, we cannot be certain that our efforts to protect these intellectual property rights will be sufficient.
Data Security and Intellectual Property Risks Increased information technology security threats and more sophisticated cybersecurity attacks pose a risk to our systems, networks, products and operations. We rely upon information technology systems and networks, some of which are managed by third parties, to support a variety of business processes and activities, and to comply with regulatory, legal and tax requirements.
Data Security and Intellectual Property Risks Increased IT security threats, including more sophisticated cybersecurity attacks, pose a risk to our systems, networks, products and operations. We rely upon IT systems and networks, some of which are managed by third parties, to support a variety of business processes and activities, and to comply with regulatory, legal and tax requirements.
In addition, our acquisition activities could be disrupted by overtures from competitors for the targeted companies, governmental regulation and rapid developments in our industry that decrease the value of a potential target’s products or services.
In addition, our 9 Table of Contents acquisition activities could be disrupted by overtures from competitors for the targeted companies, governmental regulation and rapid developments in our industry that decrease the value of a potential target’s products or services.
In 2022, we generated approximately 80% of our net sales in the U.S. Our ability to be profitable depends heavily on varying conditions in the U.S. governmental and municipal markets, as well as the overall U.S. economy. The industrial markets in which we compete are subject to considerable cyclicality, and move in response to cycles in the overall business environment.
In 2023, we generated approximately 78% of our net sales in the U.S. Our ability to be profitable depends heavily on varying conditions in the U.S. governmental and municipal markets, as well as the overall U.S. economy. The industrial markets in which we compete are subject to considerable cyclicality, and move in response to cycles in the overall business environment.
Complying with environmental, safety and other ESG requirements has added and will continue to add to the cost of our products, could increase the capital required to support our business and could affect the products and services that we offer.
Complying with environmental, safety and other regulations has added and will continue to add to the cost of our products, could increase the capital required to support our business and could affect the products and services that we offer.
Actual results could differ materially from those contained in such forward-looking statements. Important factors that could cause our actual results to differ from those contained in such forward-looking statements include, but are not limited to, the risks described below. Macroeconomic and Industry Risks Our financial results are subject to U.S. economic uncertainty.
Actual results could differ materially from those contained in such forward-looking statements. Important factors that could cause our actual results to differ from those contained in such forward-looking statements include, but are not limited to, the risks described below. Macroeconomic and Industry Risks Our financial results are subject to U.S. economic uncertainty and compliance with laws and regulations.
As a portion of our workforce is unionized, we are subject to risk of work stoppages and other labor relations matters. As of December 31, 2022, approximately 10% of our U.S. hourly workers were represented by labor unions and were covered by collective bargaining agreements with various unions.
As a portion of our workforce is unionized, we are subject to risk of work stoppages and other labor relations matters. As of December 31, 2023, approximately 9% of our U.S. hourly workers were represented by labor unions and were covered by collective bargaining agreements with various unions.
Despite the information security measures we have taken, our systems and networks remain potentially vulnerable to attacks, as do those of our vendors and third-party providers.
Despite the information security measures we have taken, our systems and networks remain potentially vulnerable to cybersecurity incidents, as do those of our vendors and third-party providers.
The level of the funding of our defined benefit pension plan liabilities was approximately 86% as of December 31, 2022. Funding of the Company’s U.S. defined benefit pension plan is determined in accordance with guidelines set forth in the Employee Retirement Income Security Act.
The level of the funding of our defined benefit pension plan liabilities was approximately 88% as of December 31, 2023. Funding of the Company’s U.S. defined benefit pension plan is determined in accordance with guidelines set forth in the Employee Retirement Income Security Act.
While we actively monitor and take steps in an effort to mitigate supply chain risk, there can be no assurance that our ongoing mitigation plans will prevent disruptions that may arise from shortages of materials that we use in the production of our products.
While we actively monitor and take steps in an effort to mitigate supply chain risk, there can be no assurance that our ongoing mitigation plans will prevent disruptions that may arise from shortages of materials that we use in the production of our products. Global supply chain disruptions may continue to adversely affect our business and our outlook.
Further, information technology security threats are growing in frequency and sophistication. Accordingly, we have implemented and continue to implement measures to address cybersecurity attacks and mitigate potential risks to our systems from these information technology-related disruptions.
Further, IT security threats are growing in frequency and sophistication. Accordingly, we have implemented and continue to implement measures to address cybersecurity incidents and mitigate potential risks to our systems from these IT-related disruptions.
Cybersecurity attacks on the Company, our vendors or our third-party providers could potentially result in the compromising of confidential information, misuse of our systems and networks, manipulation and destruction of data, misappropriation of assets or 11 Table of Contents production stoppages and supply shortages, which in turn could adversely affect our reputation, financial condition, results of operations or cash flow.
Cybersecurity incidents with respect to the Company, our vendors or our third-party providers could potentially result in the compromising of confidential information, misuse of our systems and networks, manipulation and destruction of data, misappropriation of assets or production stoppages and supply shortages, which in turn could adversely affect our reputation, financial condition, results of operations or cash flow.
Further, certain government agencies, including the U.S. Treasury, have implemented or signaled the implementation of policies that have resulted and may continue to result in significantly increased interest rates and borrowing costs.
Further, certain government agencies, including the U.S. Treasury, have previously implemented and may continue to implement policies that have resulted and may continue to result in significantly increased interest rates and borrowing costs.
The introduction of products or processes utilizing new technologies, including those resulting from any new ESG regulations, could require us and our suppliers to make significant changes to existing products or processes in order for them to remain marketable and competitive.
The introduction of products or processes utilizing new technologies, including those resulting from any new environmental, safety and other regulations, artificial intelligence and machine learning, could require us and our suppliers to make significant changes to existing products or processes in order for them to remain marketable and competitive.
As of December 31, 2022, goodwill and intangible assets represented 30% and 14% of total consolidated assets, respectively. Rental equipment and properties and equipment are long-lived assets, which also collectively represented 19% of our total consolidated assets as of December 31, 2022. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if indicators of impairment exist.
As of December 31, 2023, goodwill and intangible assets represented 29% and 13% of total consolidated assets, respectively. Rental equipment and properties and equipment are long-lived assets, which also collectively represented 20% of our total consolidated assets as of December 31, 2023. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if indicators of impairment exist.
Although we have not suffered any significant cyber incidents that have had a material business impact, we and our vendors have, from time to time, been the target of malicious cyber threats.
Although we have not suffered any significant cybersecurity incidents that have had a material business impact, we and our vendors have been the target of malicious cybersecurity threats and attacks.
Global markets for various products and goods have suffered, and are continuing to suffer, material disruptions to certain supply chains, in part due to the coronavirus pandemic and geopolitical conflicts.
Global markets for various products and goods have suffered, and are continuing to suffer, material disruptions to certain supply chains, in part due to the coronavirus pandemic and geopolitical conflicts, including the war between Russia and Ukraine and the war between Israel and Hamas.
If the inflation rate increases, it will likely affect our expenses, including, but not limited to, employee compensation and labor expenses and increased costs for supplies, and we may not be successful in offsetting such cost increases through pricing actions.
The United States and other jurisdictions have experienced high levels of inflation in recent years. If the inflation rate increases, it will likely affect our expenses, including, but not limited to, employee compensation and labor expenses and increased costs for supplies, and we may not be successful in offsetting such cost increases through pricing actions.
Therefore, downturns in the U.S. economy are likely to result in decreases in demand for our products. Certain market factors indicate the U.S. economy may experience a significant downturn in the near future. During previous economic downturns, we experienced decreases in sales and profitability, and we expect our business to remain subject to similar economic fluctuations in the future.
Therefore, downturns in the U.S. economy are likely to result in decreases in demand for our products. During previous economic downturns, we experienced decreases in sales and profitability, and we expect our business to remain subject to similar economic fluctuations in the future.
We are currently experiencing supply shortages and inflationary pressure for certain components and raw materials, including chassis, hydraulic pumps and electronic components that are important to our manufacturing processes. When facing supply-related challenges, we may increase our inventory levels and purchase commitments to shorten lead times and to help maintain adequate inventory levels to meet customer expectations.
However, we continue to experience supply shortages and extended lead times for some components and raw materials, including certain classes of chassis and electronic components that are important to our manufacturing processes. When facing supply-related challenges, we may increase our inventory levels and purchase commitments to shorten lead times and to help maintain adequate inventory levels to meet customer expectations.
As economies around the world have recovered since the initial onset of the pandemic, sharp increases in demand have created significant disruption to the global supply chain, which has adversely affected our ability to receive goods on a timely basis and increased our material costs.
As economies around the world recovered following the most significant effects of the pandemic, sharp increases in demand created significant disruption to the global supply chain, which adversely affected our ability to receive goods on a timely basis and increased our material costs. Throughout 2023, supply chain conditions have continued to gradually improve.
The loss or termination of a significant dealer, or a 9 Table of Contents significant number of dealers, could cause difficulties in marketing and distributing our products and have an adverse effect on our business, financial condition, results of operations or cash flow.
The loss or termination of a significant dealer, or a significant number of dealers, could cause difficulties in marketing and distributing our products and have an adverse effect on our business, financial condition, results of operations or cash flow. We may be unsuccessful in our future acquisitions, if any, which may have an adverse effect on our business.
Further, government administrations and agencies, the investment community, employees and other stakeholders have had an increased focus on certain climate change and other environmental, social and governance (“ESG”) factors, issues and initiatives. Regulatory and other legal changes in laws in response to such ESG matters could require material efforts and costs by us to comply with such changes.
Government administrations and agencies, political figures, the investment community, employees and other stakeholders have had an increased focus on sustainability issues and initiatives. Regulatory and other legal changes in laws in response to such matters could require material efforts and costs by us, and our suppliers, to comply with such changes.
While various procedures and controls have been and are being utilized to mitigate information technology risks, there can be no guarantee that the actions and controls that we and our third-party providers have implemented will be sufficient to protect our systems, information or other property.
While various procedures and controls have been and are being utilized to mitigate IT risks, there can be no guarantee that the actions and controls that we and our third-party providers have implemented will be sufficient to protect our systems, information or other property. 11 Table of Contents Infringement of, or an inability to protect, our intellectual property rights could adversely affect our business.
Changes in the value of foreign currencies over the long term could increase our U.S. dollar costs for, or reduce our U.S. dollar revenues from, our foreign operations. Any increased costs or reduced revenues as a result of foreign currency fluctuations could adversely affect our results of operations.
Changes in the value of foreign currencies over the long term could increase our U.S. dollar costs for, or reduce our U.S. dollar revenues from, our foreign operations.
We may also experience an increase in order cancellations if any such pricing actions are not accepted by our customers. Failure to keep pace with technological developments may adversely affect our operations. We are engaged in an industry that will be affected by future technological developments.
Failure to keep pace with technological developments may adversely affect our operations. We are engaged in an industry that will be affected by future technological developments.
The costs of compliance with the various laws, regulations and policies applicable to us could be significant and penalties for non-compliance could significantly impact our business. 7 Table of Contents To the extent that our international operations are affected by adverse foreign economic or political conditions, we may experience disruptions and losses that could have a material impact on our financial position, results of operations or cash flow.
To the extent that our international operations are affected by adverse foreign economic or political conditions, we may experience disruptions and losses that could have a material impact on our financial position, results of operations or cash flow.
Such an acceleration of the maturity of our indebtedness may cause us to incur substantial costs and may prevent or limit us from engaging in transactions that benefit us, including responding to changing business and economic conditions and taking advantage of attractive business opportunities. 10 Table of Contents Human Capital and Labor Risks Our ability to operate effectively could be impaired if we fail to attract and retain key personnel.
Such an acceleration of the maturity of our indebtedness may cause us to incur substantial costs and may prevent or limit us from engaging in transactions that benefit us, including responding to changing business and economic conditions and taking advantage of attractive business opportunities.
Our ability to comply with these restrictive covenants may be affected by the other factors described in this “ Risk Factors ” section, as well as other factors outside of our control, including increased indebtedness and/or lower earnings as a result of the coronavirus pandemic.
Indebtedness Risk We are subject to a number of restrictive debt covenants. Our credit facility contains certain restrictive debt covenants and customary events of default. Our ability to comply with these restrictive covenants may be affected by the other factors described in this “ Risk Factors ” section, as well as other factors outside of our control.
In 2022, approximately 20% of our net sales were to customers outside the U.S. and we expect a significant portion of our revenues to come from international sales in the foreseeable future.
Our business is subject to fluctuations in demand and changing international economic, legal and political conditions that are beyond our control. In 2023, approximately 22% of our net sales were to customers outside the U.S. and we expect a significant portion of our revenues to come from international sales in the foreseeable future.
We also may be unable to identify suitable targets for acquisition or to make acquisitions at favorable prices. If we identify a suitable acquisition candidate, our ability to successfully implement the acquisition would depend on a variety of factors, including our ability to obtain financing on acceptable terms.
If we identify a suitable acquisition candidate, our ability to successfully implement the acquisition would depend on a variety of factors, including our ability to obtain financing on acceptable terms, especially with interest rates at comparatively high levels.
Our ability to operate our businesses and implement our strategies depends in part on the efforts of our executive officers and other key employees. In addition, our future success will depend on, among other factors, our ability to attract and retain qualified personnel.
In addition, our future success will depend on, among other factors, our ability to attract and retain qualified personnel.
Additionally, uneven application of environmental, safety and other ESG regulations could place our products at a cost or features disadvantage, which could reduce our revenues and profitability.
Additionally, uneven application of environmental, safety and other regulations could place our products at a cost or features disadvantage, which could reduce our revenues and profitability. An impairment in the carrying value of goodwill, intangible assets or long-lived assets could negatively affect our financial position and results of operations.
Uncertainties related to the magnitude and duration of global supply chain disruptions may continue to adversely affect our business and our outlook. If we are unable to recover a substantial portion of the increase in material and transportation costs from our customers through price adjustments and/or surcharges, our business or results of operations could be adversely affected.
If we are unable to recover a substantial portion of the increase in material and transportation costs from our customers through price adjustments and/or 8 Table of Contents surcharges, our business or results of operations could be adversely affected. We may also experience an increase in order cancellations if any such pricing actions are not accepted by our customers.
The loss of the services of any key employee or the failure to attract or retain other qualified personnel could have a material adverse effect on our business or business prospects.
The loss of the services of any key employee or the failure to attract or retain other qualified personnel could have a material adverse effect on our business or business prospects. 10 Table of Contents Additionally, availability of labor in the markets in which we operate has declined in recent years and competition for such labor has increased.
Additionally, availability of labor in the markets in which we operate has declined in recent years and competition for such labor has increased, especially under the economic crises experienced through the coronavirus pandemic. A significant increase in wages paid by competitors for employees similar to our work force could result in insufficient availability of workers and/or increase our labor costs.
A significant increase in wages paid by competitors for employees similar to our work force could result in insufficient availability of workers and/or increase our labor costs.
Such analyses further require us to make certain assumptions about our sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these factors. An impairment charge may result from, among other things, a significant decline in operating results, adverse market conditions, unfavorable changes in applicable laws or regulations, or a variety of other factors.
Such analyses further require us to make certain assumptions about our sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these factors.
Recent increases in inflation in the United States and elsewhere could adversely affect our business. We are exposed to inflation effects, which could negatively affect our business, financial condition and results of operation. The United States and other jurisdictions have recently experienced high levels of inflation.
Any increased costs or reduced revenues as a result of foreign currency fluctuations could adversely affect our results of operations. 7 Table of Contents Inflation in the United States and elsewhere could adversely affect our business. We are exposed to inflation effects, which could negatively affect our business, financial condition and results of operation.
In addition, the extent of any potential changes to policies and regulations under the current U.S. administration, and how any such changes may impact the Company’s operations, is currently uncertain. The extent to which the coronavirus pandemic will continue to adversely impact our business, financial condition and operating results is highly uncertain and cannot be predicted but could be material.
In addition, the extent of any potential changes to policies, tax laws and regulations and how any such changes may impact the Company’s financial results and operations, is currently uncertain.
Such acquisitions may help us expand into adjacent markets, add complementary products and services or allow us to leverage our distribution channels. In connection with this strategy, we could face certain risks and uncertainties in addition to those we face in the day-to-day operations of our business.
In connection with this strategy, we could face certain risks and uncertainties in addition to those we face in the day-to-day operations of our business. We also may be unable to identify suitable targets for acquisition or to make acquisitions at favorable prices.
Our total consolidated assets and results of operations for the applicable period could be materially adversely affected if any such charge is recorded.
An impairment charge may result from, among other things, a 12 Table of Contents significant decline in operating results, adverse market conditions, unfavorable changes in applicable laws or regulations, or a variety of other factors. Our total consolidated assets and results of operations for the applicable period could be materially adversely affected if any such charge is recorded. Item 1B.
We may be unsuccessful in our future acquisitions, if any, which may have an adverse effect on our business. Our long-term strategy includes exploring acquisitions of companies or businesses to facilitate our growth, enhance our global market position and broaden our product offerings.
Our long-term strategy includes exploring acquisitions of companies or businesses to facilitate our growth, enhance our global market position and broaden our product offerings. Such acquisitions may help us expand into adjacent markets, add complementary products and services or allow us to leverage our distribution channels.
Removed
The coronavirus pandemic has created, and may continue to create, significant worldwide volatility, uncertainty and disruption, including substantial curtailment of business activities, slowdowns, suspensions or delays of production and commercial activity, and weakened economic conditions, both in the United States and in many foreign countries.
Added
For example, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various non-U.S. governments are enacting legislation. As currently designed, Pillar Two would apply to our worldwide operations.
Removed
The actual and potential impacts of the pandemic that could adversely impact the Company’s business, financial condition and operating results, which could be material, will depend on numerous evolving factors, including the emergence of new variants, decreased labor availability, production delays and continued supply chain disruptions, and changes in safety protocols.
Added
We currently do not expect these rules to materially increase our global tax costs because we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum. We continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.
Removed
Additionally, a possible recession or market correction resulting from the spread of coronavirus, or otherwise, could materially affect our business and the value of our stock. To the extent coronavirus adversely affects our business, it may heighten other risks described in this “ Risk Factors ” section.
Added
Further, if we implement emerging technologies such as artificial intelligence and machine learning into our products and services, we may not be able to anticipate vulnerabilities, flaws or security threats resulting from the use of such technology and develop adequate protection measures.
Removed
Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.
Added
Human Capital and Labor Risks Our ability to operate effectively could be impaired if we fail to attract and retain key personnel. Our ability to operate our businesses and implement our strategies depends in part on the efforts of our executive officers and other key employees.
Removed
Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. 8 Table of Contents During 2022, our manufacturing operations continued to be adversely affected by supply chain disruptions.
Removed
Indebtedness Risk We are subject to a number of restrictive debt covenants. Our credit facility contains certain restrictive debt covenants and customary events of default.
Removed
Further, the amount of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack. Infringement of, or an inability to protect, our intellectual property rights could adversely affect our business.
Removed
A failure, or perceived failure, to respond to investor or customer expectations related to ESG concerns in areas such as climate change and supply chain management could materially adversely affect our business and reputation. 12 Table of Contents An impairment in the carrying value of goodwill, intangible assets or long-lived assets could negatively affect our financial position and results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeApproximately 65% of the total square footage is owned by the Company with the remaining 35% be ing leased. Owned facilities are subject to liens under the Company’s Third Amended and Restated Credit Agreement dated October 21, 2022 (the “2022 Credit Agreement”).
Biggest changeOwned facilities are subject to liens under the Company’s Third Amended and Restated Credit Agreement dated October 21, 2022 (the “2022 Credit Agreement”). 13 Table of Contents The Company believes its properties, and related machinery and equipment, are well-maintained, suitable and adequate for their intended purposes.
Item 2. Properties. As of December 31, 2022, the Company utilized 16 principal manufacturing plants located throughout the U.S., as well as two in Europe, two in Canada and one in South Africa. The Company also leases facilities within the U.S., Europe and Canada from which we provide sales, service and/or equipment rentals.
Item 2. Properties. As of December 31, 2023, the Company utilized 17 principal manufacturing plants located throughout the U.S., as well as two in Europe, three in Canada and one in South Africa. The Company also leases facilities within the U.S., Europe and Canada from which we provide sales, service and/or equipment rentals.
As of December 31, 2022, the Company devoted approximately 2.4 million square feet to manufacturing and 1.0 million square feet to sales, service, warehousing and office space. Of the total square footage, approximately 82% is devoted to the Environmental Solutions Group and 18% to the Safety and Security Systems Group.
As of December 31, 2023, the Company devoted approximately 2.5 million square feet to manufacturing and 1.2 million square feet to sales, service, warehousing and office space. Of the total square footage, approximately 84% is devoted to the Environmental Solutions Group and 16% to the Safety and Security Systems Group.
The Company believes its properties, and related machinery and equipment, are well-maintained, suitable and adequate for their intended purposes. In the aggregate, these facilities are of sufficient capacity for the Company’s current business needs. However, the Company may make additional investments in certain facilities in the future in response to increased demand for the Company’s products.
In the aggregate, these facilities are of sufficient capacity for the Company’s current business needs. However, the Company may make additional investments in certain facilities in the future in response to increased demand for the Company’s products.
Added
Approximately 63% of the total square footage is owned by the Company with the remaining 37% being leased.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 14 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14 Item 6. Reserved 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 29 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 14 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14 Item 6. Reserved 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 28 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2017 2018 2019 2020 2021 2022 Federal Signal Corporation $ 100.00 $ 100.38 $ 164.53 $ 171.08 $ 225.50 $ 244.04 Russell 2000 100.00 88.99 111.70 134.00 153.85 122.41 S&P Midcap 400 100.00 88.92 112.21 127.54 159.12 138.34 S&P Industrials 100.00 86.71 112.17 124.59 150.89 142.63 S&P 600 Capital Goods 100.00 85.79 111.20 128.64 161.27 154.30 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Biggest changeAs of December 31, 2018 2019 2020 2021 2022 2023 Federal Signal Corporation $ 100.00 $ 163.90 $ 170.42 $ 224.64 $ 243.10 $ 404.16 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 S&P Midcap 400 100.00 126.20 143.44 178.95 155.58 181.15 S&P Industrials 100.00 129.37 143.68 174.02 164.49 194.31 S&P 600 Capital Goods 100.00 129.62 149.95 187.99 179.86 248.67 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Securities Authorized for Issuance under Equity Compensation Information concerning the Company’s equity compensation plans is included under Item 12 of Part III of this Form 10-K. Recent Sales of Unregistered Securities There were no sales of unregistered securities by the Company during the year ended December 31, 2022.
Securities Authorized for Issuance under Equity Compensation Information concerning the Company’s equity compensation plans is included under Item 12 of Part III of this Form 10-K. Recent Sales of Unregistered Securities There were no sales of unregistered securities by the Company during the year ended December 31, 2023.
The graph assumes that the value of the investment in the Company’s common stock, and in each index, was $100 on December 31, 2017 and assumes reinvestment of all dividends through December 31, 2022. Copyright© 2023 Russell Investment Group. All rights reserved. Copyright© 2023 Standard & Poor’s, a division of S&P Global. All rights reserved.
The graph assumes that the value of the investment in the Company’s common stock, and in each index, was $100 on December 31, 2018 and assumes reinvestment of all dividends through December 31, 2023. Copyright© 2024 Russell Investment Group. All rights reserved. Copyright© 2024 Standard & Poor’s, a division of S&P Global. All rights reserved.
Purchases of Equity Securities The following table provides a summary of the Company’s repurchase activity for its common stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a) October 2022 (10/2/22 - 11/5/22) — $ — — $ 59,052,829 November 2022 (11/6/22 - 12/3/22) — — — 59,052,829 December 2022 (12/4/22 - 12/31/22) — — — 59,052,829 (a) In March 2020, the Board authorized a stock repurchase program of up to $75.0 million of the Company’s common stock, with the remaining authorization under our previously described repurchase program adopted in 2014 being subject to the March 2020 program. 14 Table of Contents Performance Graph The following graph compares the cumulative five-year total return to stockholders of the Company’s common stock relative to the cumulative total returns of the Russell 2000 index, the S&P Midcap 400 index, the S&P Industrials index, and the S&P 600 Capital Goods index.
Purchases of Equity Securities The following table provides a summary of the Company’s repurchase activity for its common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a) October 2023 (10/1/23 - 11/4/23) 21,083 $ 59.5008 21,083 $ 53,544,951 November 2023 (11/5/23 - 12/2/23) — — — 53,544,951 December 2023 (12/3/23 - 12/31/23) — — — 53,544,951 (a) In March 2020, the Board authorized a stock repurchase program of up to $75.0 million of the Company’s common stock, with the remaining authorization under our previously described repurchase program adopted in 2014 being subject to the March 2020 program. 14 Table of Contents Performance Graph The following graph compares the cumulative five-year total return to stockholders of the Company’s common stock relative to the cumulative total returns of the Russell 2000 index, the S&P Midcap 400 index, the S&P Industrials index, and the S&P 600 Capital Goods index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Market Information The Company’s common stock is listed and traded on the New York Stock Exchange under the symbol “FSS”. Holders As of February 28, 2023, there were 1,492 holders of record of the Company’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Market Information The Company’s common stock is listed and traded on the New York Stock Exchange under the symbol “FSS”. Holders As of January 31, 2024, there were 1,463 holders of record of the Company’s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeConsolidated operating margin for the year ended December 31, 2022 was 11.2%, compared to 10.8% in the prior year. 16 Table of Contents • For the year ended December 31, 2022, we reported income from continuing operations of $120.4 million, an increase of $19.8 million, or 20%, from last year. • On a consolidated basis, we reported adjusted EBITDA* of $215.0 million for the year ended December 31, 2022, an increase of $34.5 million, or 19%, from last year. • Adjusted EBITDA margin* for the year ended December 31, 2022 was 15.0%, up from 14.9% last year and towards the high-end of our current target range. • Cash flow from continuing operating activities for the year ended December 31, 2022 was $71.8 million. • In October 2022, we refinanced our credit agreement, increasing our facility from $500 million to $800 million, with the potential to increase the facility further by up to the greater of (i) $400 million and (ii) 100% of Consolidated EBITDA for the applicable four-quarter period preceding any such request to increase. • With our strong balance sheet, positive operating cash flow, and increased capacity under our new credit facility, we are well positioned to continue to invest in internal growth initiatives, pursue strategic acquisitions and consider ways to return value to stockholders, as we did during 2022: ◦ Our capital expenditures in 2022 were approximately $53 million, most of which related to the acquisition of our University Park, Illinois manufacturing facility, which we had previously leased.
Biggest changeIncluded among the Company’s highlights in 2023 were the following: • Orders for the year were at a record level of $1.87 billion, an increase of $178 million, or 11%, from last year. • Backlog at December 31, 2023 was $1.03 billion, another Company record, and an increase of $146 million, or 17%, compared to the end of last year. • Net sales for the year ended December 31, 2023 were $1.72 billion, the highest level in our history, and an increase of $288 million, or 20% from last year. • For the year ended December 31, 2023, we reported operating income of $224.5 million, an increase of $63.7 million, or 40%, from last year. • Consolidated operating margin for the year ended December 31, 2023 was 13.0%, compared to 11.2% in the prior year. • For the year ended December 31, 2023, we reported net income of $157.4 million, an increase of $37.0 million, or 31%, from last year. • On a consolidated basis, we reported adjusted EBITDA* of $286.0 million for the year ended December 31, 2023, an increase of $71.0 million, or 33%, from last year. • Adjusted EBITDA margin* for the year ended December 31, 2023 was 16.6%, up from 15.0% last year. • Cash flow from continuing operating activities for the year ended December 31, 2023 was $194 million, an increase of $123 million, or 171%, from last year. • With our strong balance sheet, positive operating cash flow, and increased capacity under our credit facility, we are well positioned to continue to invest in internal growth initiatives, pursue strategic acquisitions and consider ways to return value to stockholders, as we did during 2023: 16 Table of Contents ◦ Our capital expenditures in 2023 were approximately $30 million, and included a number of strategic investments in new machinery and equipment aimed at gaining operating efficiencies and expanding capacity at certain production facilities. ◦ We continue to invest in new product development and are encouraged that these efforts will provide additional opportunities to further diversify our customer base, penetrate new end-markets and/or gain access to new geographic regions. ◦ We continued to execute on our disciplined M&A strategy with the acquisitions of Blasters and Trackless.
For further discussion, see Note 12 – Commitments and Contingencies to the accompanying consolidated financial statements. 26 Table of Contents Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period.
For further discussion, see Note 12 – Commitments and Contingencies to the accompanying consolidated financial statements. 25 Table of Contents Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period.
Goodwill Goodwill represents the excess of the cost of an acquired business over the amounts assigned to its net assets. Goodwill is not amortized but is tested for impairment at a reporting unit level on an annual basis or more frequently if indicators of impairment exist. The Company performed its annual goodwill impairment test as of October 31, 2022.
Goodwill Goodwill represents the excess of the cost of an acquired business over the amounts assigned to its net assets. Goodwill is not amortized but is tested for impairment at a reporting unit level on an annual basis or more frequently if indicators of impairment exist. The Company performed its annual goodwill impairment test as of October 31, 2023.
Further, the Company concluded that it was not “more likely than not” that the fair value of indefinite-lived intangible assets that were qualitatively tested for impairment were less than the carrying amounts. Accordingly, further quantitative testing was not required to be performed. The Company had no indefinite-lived intangible asset impairments in 2022, 2021 or 2020.
Further, the Company concluded that it was not “more likely than not” that the fair value of indefinite-lived intangible assets that were qualitatively tested for impairment were less than the carrying amounts. Accordingly, further quantitative testing was not required to be performed. The Company had no indefinite-lived intangible asset impairments in 2023, 2022 or 2021.
In addition, we engage in the sale of parts, service and repair, equipment rentals and training as part of a comprehensive aftermarket offering to our customer base. We operate 21 manufacturing facilities in five countries and provide products and integrated solutions to municipal, governmental, industrial and commercial customers in all regions of the world.
In addition, we engage in the sale of parts, service and repair, equipment rentals and training as part of a comprehensive aftermarket offering to our customer base. We operate 23 manufacturing facilities in five countries and provide products and integrated solutions to municipal, governmental, industrial and commercial customers in all regions of the world.
Executive Summary The Company is a leading global manufacturer and supplier of (i) vehicles and equipment for maintenance and infrastructure end-markets, including sewer cleaners, industrial vacuum loaders, safe-digging trucks, street sweepers, waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers and metal extraction support equipment, and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems and general alarm/public address systems.
Executive Summary The Company is a leading global manufacturer and supplier of (i) vehicles and equipment for maintenance and infrastructure end-markets, including sewer cleaners, industrial vacuum loaders, safe-digging trucks, street sweepers, waterblasting equipment, road-marking and line-removal equipment, dump truck bodies, trailers, metal extraction support equipment and multi-purpose tractors, and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems and general alarm/public address systems.
The relief from royalty model requires management to make a number of business and valuation assumptions including future revenue growth and royalty rates. In 2022, the Company performed a combination of qualitative and quantitative impairment tests over its indefinite-lived intangible assets.
The relief from royalty model requires management to make a number of business and valuation assumptions including future revenue growth and royalty rates. In 2023, the Company performed a combination of qualitative and quantitative impairment tests over its indefinite-lived intangible assets.
Due to the high degree of uncertainty regarding the potential future cash outflows associated with these plans, the Company is unable to provide a reasonably reliable estimate of the amounts and periods in which any additional liabilities might be paid. (e) Represents the fair value of the contingent earn-out payments associated with the MRL and Deist acquisitions.
Due to the high degree of uncertainty regarding the potential future cash outflows associated with these plans, the Company is unable to provide a reasonably reliable estimate of the amounts and periods in which any additional liabilities might be paid. (e) Represents the fair value of the contingent earn-out payments associated with the Deist, Blasters and Trackless acquisitions.
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, 2021, filed with the SEC on March 1, 2022.
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, 2022, filed with the SEC on March 1, 2023.
Actual results may differ from the Company’s estimates. See Note 8 – Goodwill and Other Intangible Assets to the accompanying consolidated financial statements for a summary of the Company’s indefinite-lived intangible assets. 28 Table of Contents
Actual results may differ from the Company’s estimates. See Note 8 – Goodwill and Other Intangible Assets to the accompanying consolidated financial statements for a summary of the Company’s indefinite-lived intangible assets. 27 Table of Contents
Under the income approach, the key assumptions include projected sales, cost of sales, operating expenses and earnings before interest, income taxes, depreciation and amortization (“EBITDA”). These assumptions are determined by management utilizing our internal operating plan, including growth rates for revenues and operating expenses and margin assumptions.
Under the income approach, the key assumptions include projected sales and earnings before interest, income taxes, depreciation and amortization (“EBITDA”). These assumptions are determined by management utilizing our internal operating plan, including growth rates for revenues and margin assumptions.
These acquisition-related benefits have been included as a component of Acquisition and integration-related (benefits) expenses on the Consolidated Statements of Operations. 22 Table of Contents The Company’s hearing loss litigation has historically been managed by the Company’s legal staff resident at the corporate office and not by management at either segment.
These acquisition-related benefits have been included as a component of Acquisition and integration-related expenses (benefits), net on the Consolidated Statements of Operations. The Company’s hearing loss litigation has historically been managed by the Company’s legal staff resident at the corporate office and not by management at either segment.
Adjusted EBITDA margin is a non-GAAP measure that represents the total of income from continuing operations, interest expense, pension settlement charges, acquisition and integration-related (benefits) expenses, restructuring activity, coronavirus-related expenses, debt settlement charges, purchase accounting effects, other income/expense, income tax expense, and depreciation and amortization expense, where applicable, divided by net sales for the applicable period(s).
Adjusted EBITDA margin is a non-GAAP measure that represents the total of net income, interest expense, pension settlement charges, acquisition and integration-related expenses (benefits), coronavirus-related expenses, purchase accounting effects, other income/expense, income tax expense, and depreciation and amortization expense, where applicable, divided by net sales for the applicable period(s).
The weighted average interest rate on long-term borrowings was 5.5% at December 31, 2022. The Company paid interest of $9.4 million in 2022, $3.9 million in 2021 and $5.4 million in 2020. The Company paid income taxes of $26.9 million in 2022, $35.5 million in 2021 and $22.3 million in 2020.
The weighted average interest rate on long-term borrowings was 5.9% at December 31, 2023. The Company paid interest of $22.8 million in 2023, $9.4 million in 2022 and $3.9 million in 2021. The Company paid income taxes of $46.2 million in 2023, $26.9 million in 2022 and $35.5 million in 2021.
The fair value of the indefinite-lived intangible asset that was quantitatively tested for impairment exceeded its carrying value by more than 50%, and, therefore, no impairment was recognized. This valuation was prepared by a third-party valuation specialist.
The fair value of the indefinite-lived intangible asset that was quantitatively tested for impairment exceeded its carrying value by approximately 40%, and, therefore, no impairment was recognized. This valuation was prepared by a third-party valuation specialist.
For further discussion, see Note 2 – Acquisitions to the accompanying consolidated financial statements. (f) As of December 31, 2022, the Company had a liability of approximately $1.2 million for unrecognized tax benefits. For further discussion, see Note 10 – Income Taxes to the accompanying consolidated financial statements.
For further discussion, see Note 2 – Acquisitions to the accompanying consolidated financial statements. (f) As of December 31, 2023, the Company had a liability of approximately $1.1 million for unrecognized tax benefits, including penalties and interest. For further discussion, see Note 10 – Income Taxes to the accompanying consolidated financial statements.
During the year ended December 31, 2022, the Company received a favorable settlement of $1.9 million in a post-closing adjustment dispute associated with the 2021 acquisition of OSW Equipment & Repair, LLC (“OSW”). During the year ended December 31, 2021, the Company recorded a $3.5 million benefit associated with a reduction in the estimated fair value of contingent consideration.
During the year ended December 31, 2023, the Company recognized a $2.1 million benefit associated with a reduction in the estimated fair value of contingent consideration. During the year ended December 31, 2022, the Company received a favorable settlement of $1.9 million in a post-closing adjustment dispute associated with the 2021 acquisition of OSW Equipment & Repair, LLC.
The following table summarizes the Company’s adjusted EBITDA and adjusted EBITDA margin and reconciles income from continuing operations to adjusted EBITDA for each of the three years in the period ended December 31, 2022: For the Years Ended December 31, ($ in millions) 2022 2021 2020 Income from continuing operations $ 120.4 $ 100.6 $ 96.1 Add (less): Interest expense 10.3 4.5 5.7 Pension settlement charges — 10.3 — Acquisition and integration-related (benefits) expenses (0.5) (2.1) 2.1 Restructuring — — 1.3 Coronavirus-related expenses (a) — 1.2 2.3 Debt settlement charges 0.1 — — Purchase accounting effects (b) — 0.3 0.3 Other (income) expense, net (0.5) (1.7) 1.1 Income tax expense 30.5 17.0 28.5 Depreciation and amortization 54.7 50.4 44.8 Adjusted EBITDA $ 215.0 $ 180.5 $ 182.2 Net sales $ 1,434.8 $ 1,213.2 $ 1,130.8 Adjusted EBITDA margin 15.0 % 14.9 % 16.1 % (a) Coronavirus-related expenses relate to direct expenses incurred in connection with the Company's response to the coronavirus pandemic, that are incremental to, and separable from, normal operations.
The following table summarizes the Company’s adjusted EBITDA and adjusted EBITDA margin and reconciles net income to adjusted EBITDA for each of the three years in the period ended December 31, 2023: For the Years Ended December 31, (in millions of dollars) 2023 2022 2021 Net income $ 157.4 $ 120.4 $ 100.6 Add (less): Interest expense, net 19.7 10.3 4.5 Pension settlement charges — — 10.3 Acquisition and integration-related expenses (benefits), net 0.4 (0.5) (2.1) Coronavirus-related expenses (a) — — 1.2 Purchase accounting effects (b) 0.7 — 0.3 Other expense (income), net 1.8 (0.4) (1.7) Income tax expense 45.6 30.5 17.0 Depreciation and amortization 60.4 54.7 50.4 Adjusted EBITDA $ 286.0 $ 215.0 $ 180.5 Net sales $ 1,722.7 $ 1,434.8 $ 1,213.2 Adjusted EBITDA margin 16.6 % 15.0 % 14.9 % (a) Coronavirus-related expenses relate to direct expenses incurred in connection with the Company's response to the coronavirus pandemic, that are incremental to, and separable from, normal operations.
Adjusted EBITDA is a non-GAAP measure that represents the total of income from continuing operations, interest expense, pension settlement charges, acquisition and integration-related (benefits) expenses, restructuring activity, coronavirus-related expenses, debt settlement charges, purchase accounting effects, other income/expense, income tax expense, and depreciation and amortization expense, where applicable.
Adjusted EBITDA is a non-GAAP measure that represents the total of net income, interest expense, pension settlement charges, acquisition and integration-related expenses (benefits), coronavirus-related expenses, purchase accounting effects, other income/expense, income tax expense, and depreciation and amortization expense, where applicable.
Net cash used for investing activities totaled $99.7 million, $168.7 million and $34.4 million in 2022, 2021 and 2020, respectively. In each of the years presented, cash was used to fund the purchase of properties and equipment, with $53.0 million, $37.4 million and $29.7 million of capital expenditures in 2022, 2021 and 2020, respectively.
Net cash used for investing activities totaled $83.7 million, $99.7 million and $168.7 million in 2023, 2022 and 2021, respectively. In each of the years presented, cash was used to fund the purchase of properties and equipment, with $30.3 million, $53.0 million and $37.4 million of capital expenditures in 2023, 2022 and 2021, respectively.
The Company also recognized a $1.1 million tax benefit during the current year associated with the release of a valuation allowance in the U.K., as the associated deferred tax assets are now considered more-likely-than-not to be realized primarily due to increased projections of future taxable income.
The Company also recognized a $1.1 million tax benefit during the year ended December 31, 2022 associated with the release of a valuation allowance in the U.K., as the associated deferred tax assets were considered more-likely-than-not to be realized primarily due to increased projections of future taxable income.
The repatriation of these funds may cause the Company to incur additional U.S. income tax expense, dependent on income tax laws and other circumstances at the time any such amounts were repatriated. Net cash provided by operating activities totaled $71.8 million, $101.8 million and $136.2 million in 2022, 2021 and 2020, respectively.
The repatriation of these funds may cause the Company to incur additional U.S. income tax expense and withholding taxes, as applicable, dependent on income tax laws and other circumstances at the time any such amounts were repatriated. Net cash provided by operating activities totaled $194.4 million, $71.8 million and $101.8 million in 2023, 2022 and 2021, respectively.
U.S. orders increased by $18.7 million, or 13%, compared to the prior year, driven by improvements in orders for public safety equipment, warning systems and industrial signaling equipment of $8.4 million, $8.1 million and $2.2 million, respectively.
U.S. orders increased by $16.9 million, or 11%, compared to the prior year, driven by improvements in orders for public safety equipment, warning systems and industrial signaling equipment of $10.8 million, $4.9 million and $1.2 million, respectively.
As a percentage of net sales, SEG&A expenses decreased from 12.3% in the prior year, to 12.0% in the current year.
As a percentage of net sales, SEG&A expenses increased from 12.0% in the prior year, to 12.2% in the current year.
Selling, engineering, general and administrative (“SEG&A”) expenses For the year ended December 31, 2022, SEG&A expenses increased by $22.5 million, or 15%, compared to the prior year, primarily due to increases of $16.9 million, $5.4 million and $0.2 million within the Environmental Solutions Group, the Safety and Security Systems Group and Corporate, respectively.
Selling, engineering, general and administrative (“SEG&A”) expenses For the year ended December 31, 2023, SEG&A expenses increased by $38.4 million, or 22%, compared to the prior year, primarily due to increases of $16.8 million, $6.3 million and $15.3 million within the Environmental Solutions Group, the Safety and Security Systems Group and Corporate, respectively.
In addition, during 2022 the Company paid $4.3 million to acquire certain distribution rights from dealers and funded a $1.6 million post-closing adjustment related to the 2021 acquisition of substantially all of the assets and operations of Deist Industries, Inc. In 2021, the Company completed three acquisitions for aggregate initial consideration of $131.8 million, excluding cash acquired.
During 2022 the Company completed the acquisition of TowHaul for initial consideration of $43.3 million. In addition, during 2022 the Company paid $4.3 million to acquire certain distribution rights from dealers and funded a $1.6 million post-closing adjustment related to the 2021 acquisition of substantially all of the assets and operations of Deist Industries, Inc.
Gross profit as a percentage of net sales (“gross profit margin”) for the year ended December 31, 2022 was 24.0%, compared to 23.8% in the prior year, primarily driven by improvements within the Environmental Solutions Group and Safety and Security Systems Group of 30 basis points and 20 basis points, respectively.
Gross profit as a percentage of net sales (“gross profit margin”) for the year ended December 31, 2023 was 26.1%, compared to 24.0% in the prior year, primarily driven by improvements within the Environmental Solutions Group and Safety and Security Systems Group of 220 basis points and 180 basis points, respectively.
In the year ended December 31, 2022, the Company recognized a $2.6 million tax benefit from the release of a valuation allowance that had previously been recorded against deferred tax assets associated with foreign tax credits in the U.S., which are now considered more-likely-than-not to be realized, primarily due to tax planning.
In the year ended December 31, 2022, the Company recognized a $2.6 million tax benefit from the release of a valuation allowance that had previously been recorded against deferred tax assets associated with foreign tax credits in the U.S., primarily due to tax planning.
Corporate Expense Corporate operating expenses were $24.5 million, $22.5 million and $28.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Corporate Expense Corporate operating expenses were $39.5 million, $24.5 million and $22.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The net cash flows associated with the Company’s rental equipment transactions are included in cash flow from operating activities. The Company’s cash and cash equivalents totaled $47.5 million, $40.5 million and $81.7 million as of December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, $19.4 million of cash and cash equivalents was held by foreign subsidiaries.
The net cash flows associated with the Company’s rental equipment transactions are included in cash flow from operating activities. The Company’s cash and cash equivalents totaled $61.0 million, $47.5 million and $40.5 million as of December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, $27.8 million of cash and cash equivalents was held by foreign subsidiaries.
The Company’s indefinite-lived intangible assets include trade names associated with acquisitions. In testing the indefinite-lived intangibles assets for potential impairment, the Company applies either a qualitative test, or a quantitative test, in accordance with ASC 350, Intangibles — Goodwill and Other .
In testing the indefinite-lived intangibles assets for potential impairment, the Company applies either a qualitative test, or a quantitative test, in accordance with ASC 350, Intangibles — Goodwill and Other .
Refer to the Results of Operations section for further discussion regarding these non-GAAP metrics and a reconciliation of each to the most comparable GAAP measure for each of the periods presented. 17 Table of Contents Results of Operations The following table summarizes our Consolidated Statements of Operations as of, and for the years ended, December 31, 2022, 2021 and 2020, and illustrates the key financial indicators used to assess our consolidated financial results: For the Years Ended December 31, Change ($ in millions, except per share data) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 1,434.8 $ 1,213.2 $ 1,130.8 $ 221.6 $ 82.4 Cost of sales 1,089.9 924.5 837.2 165.4 87.3 Gross profit 344.9 288.7 293.6 56.2 (4.9) Selling, engineering, general and administrative expenses 171.7 149.2 149.2 22.5 — Amortization expense 12.9 10.9 9.6 2.0 1.3 Acquisition and integration-related (benefits) expenses (0.5) (2.1) 2.1 1.6 (4.2) Restructuring — — 1.3 — (1.3) Operating income 160.8 130.7 131.4 30.1 (0.7) Interest expense 10.3 4.5 5.7 5.8 (1.2) Debt settlement charges 0.1 — — 0.1 — Pension settlement charges — 10.3 — (10.3) 10.3 Other (income) expense, net (0.5) (1.7) 1.1 1.2 (2.8) Income before income taxes 150.9 117.6 124.6 33.3 (7.0) Income tax expense 30.5 17.0 28.5 13.5 (11.5) Income from continuing operations 120.4 100.6 96.1 19.8 4.5 Gain from discontinued operations and disposal, net of tax — — 0.1 — (0.1) Net income $ 120.4 $ 100.6 $ 96.2 $ 19.8 $ 4.4 Other data: Operating margin 11.2 % 10.8 % 11.6 % 0.4 % (0.8) % Adjusted EBITDA (a) $ 215.0 $ 180.5 $ 182.2 $ 34.5 $ (1.7) Adjusted EBITDA margin (a) 15.0 % 14.9 % 16.1 % 0.1 % (1.2) % Diluted earnings per share — Continuing operations $ 1.97 $ 1.63 $ 1.56 $ 0.34 $ 0.07 Total orders 1,692.2 1,538.8 1,047.1 153.4 491.7 Backlog 879.2 628.9 303.9 250.3 325.0 Depreciation and amortization 54.7 50.4 44.8 4.3 5.6 (a) The Company uses adjusted EBITDA and adjusted EBITDA margin as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods.
Refer to the Results of Operations section for further discussion regarding these non-GAAP metrics and a reconciliation of each to the most comparable GAAP measure for each of the periods presented. 17 Table of Contents Results of Operations The following table summarizes our Consolidated Statements of Operations as of, and for the years ended, December 31, 2023, 2022 and 2021, and illustrates the key financial indicators used to assess our consolidated financial results: For the Years Ended December 31, Change (in millions of dollars, except per share data) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 1,722.7 $ 1,434.8 $ 1,213.2 $ 287.9 $ 221.6 Cost of sales 1,272.5 1,089.9 924.5 182.6 165.4 Gross profit 450.2 344.9 288.7 105.3 56.2 Selling, engineering, general and administrative expenses 210.1 171.7 149.2 38.4 22.5 Amortization expense 15.2 12.9 10.9 2.3 2.0 Acquisition and integration-related expenses (benefits), net 0.4 (0.5) (2.1) 0.9 1.6 Operating income 224.5 160.8 130.7 63.7 30.1 Interest expense, net 19.7 10.3 4.5 9.4 5.8 Pension settlement charges — — 10.3 — (10.3) Other expense (income), net 1.8 (0.4) (1.7) 2.2 1.3 Income before income taxes 203.0 150.9 117.6 52.1 33.3 Income tax expense 45.6 30.5 17.0 15.1 13.5 Net income $ 157.4 $ 120.4 $ 100.6 $ 37.0 $ 19.8 Other data: Operating margin 13.0 % 11.2 % 10.8 % 1.8 % 0.4 % Adjusted EBITDA (a) $ 286.0 $ 215.0 $ 180.5 $ 71.0 $ 34.5 Adjusted EBITDA margin (a) 16.6 % 15.0 % 14.9 % 1.6 % 0.1 % Diluted earnings per share $ 2.56 $ 1.97 $ 1.63 $ 0.59 $ 0.34 Total orders 1,870.1 1,692.2 1,538.8 177.9 153.4 Backlog 1,025.1 879.2 628.9 145.9 250.3 Depreciation and amortization 60.4 54.7 50.4 5.7 4.3 (a) The Company uses adjusted EBITDA and adjusted EBITDA margin as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods.
Gross profit margin for the year ended December 31, 2022 was 37.1%, compared to 36.9% in the prior year, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions, partially offset by higher material costs.
Gross profit margin for the year ended December 31, 2023 was 38.9%, compared to 37.1% in the prior year, with the improvement primarily attributable to improved operating leverage from higher sales volumes, benefits from pricing actions and lower freight costs.
Cash dividends of $21.8 million, $22.0 million and $19.4 million were declared and paid to stockholders in 2022, 2021 and 2020, respectively. The Company anticipates that capital expenditures for 2023 will be in the range of $25 million to $30 million.
Cash dividends of $23.8 million, $21.8 million and $22.0 million were declared and paid to stockholders in 2023, 2022 and 2021, respectively. The Company anticipates that capital expenditures for 2024 will be in the range of $35 million to $40 million.
(d) The Company expects to contribute up to $1.4 million to the U.S. benefit plan and up to $0.9 million to the non-U.S. benefit plan in 2023, which represent the minimum required contributions.
(d) The Company expects to contribute up to $5.0 million to the U.S. benefit plan and up to $0.2 million to the non-U.S. benefit plan in 2024, which represent the minimum required contributions.
Net sales increased by $186.6 million, or 19%, for the year ended December 31, 2022, primarily due to increased sales volumes, inclusive of the effects of acquisitions, pricing actions and higher chassis revenues.
Net sales increased by $247.3 million, or 21%, for the year ended December 31, 2023, primarily due to higher sales volumes, inclusive of the effects of acquisitions, pricing actions and increased chassis sales.
Backlog was $824 million at December 31, 2022, compared to $576 million at December 31, 2021. 21 Table of Contents Safety and Security Systems The following table summarizes the Safety and Security Systems Group’s operating results as of, and for the years ended, December 31, 2022, 2021 and 2020: For the Years Ended December 31, Change ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 244.2 $ 209.2 $ 215.0 $ 35.0 $ (5.8) Operating income 40.8 32.7 35.5 8.1 (2.8) Other data: Operating margin 16.7 % 15.6 % 16.5 % 1.1 % (0.9) % Total orders $ 248.0 $ 241.5 $ 207.1 $ 6.5 $ 34.4 Backlog 54.8 52.5 21.4 2.3 31.1 Depreciation and amortization 4.2 3.6 3.4 0.6 0.2 Year ended December 31, 2022 vs. year ended December 31, 2021 Total orders increased by $6.5 million, or 3%, for the year ended December 31, 2022.
Safety and Security Systems The following table summarizes the Safety and Security Systems Group’s operating results as of, and for the years ended, December 31, 2023, 2022 and 2021: For the Years Ended December 31, Change (in millions of dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 284.8 $ 244.2 $ 209.2 $ 40.6 $ 35.0 Operating income 54.8 40.8 32.7 14.0 8.1 Other data: Operating margin 19.2 % 16.7 % 15.6 % 2.5 % 1.1 % Total orders $ 292.1 $ 248.0 $ 241.5 $ 44.1 $ 6.5 Backlog 58.6 54.8 52.5 3.8 2.3 Depreciation and amortization 4.2 4.2 3.6 — 0.6 Year ended December 31, 2023 vs. year ended December 31, 2022 Total orders increased by $44.1 million, or 18%, for the year ended December 31, 2023.
Year ended December 31, 2022 vs. year ended December 31, 2021 Net sales Net sales for the year ended December 31, 2022 increased by $221.6 million, or 18%, compared to the prior year, inclusive of the effects of acquisitions and pricing actions.
Year ended December 31, 2023 vs. year ended December 31, 2022 Net sales Net sales for the year ended December 31, 2023 increased by $287.9 million, or 20%, compared to the prior year, inclusive of the effects of acquisitions, pricing actions and increased chassis sales.
The Company must also pay a commitment fee to the lenders ranging between 0.10% to 0.25% per annum on the unused portion of the $675 million Revolver along with other standard fees. Applicable margin, issuance fees and other customary expenses are payable on outstanding letters of credit.
The Company must also pay a commitment fee to the lenders ranging between 0.10% to 0.25% per annum on the unused portion of the $675 million Revolver along with other standard fees.
Operating income increased by $24.0 million, or 20%, for the year ended December 31, 2022, largely due to a $42.7 million increase in gross profit and a $0.2 million decrease in acquisition-related costs, partially offset by the $16.9 million increase in SEG&A expenses and a $2.0 million increase in amortization expense.
Operating income increased by $64.7 million, or 45%, for the year ended December 31, 2023, largely due to a $85.0 million increase in gross profit, partially offset by the $16.8 million increase in SEG&A expenses, a $2.3 million increase in amortization expense and a $1.2 million increase in acquisition-related costs.
A discussion of changes in the Company’s financial condition and results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K, but may be found under the heading “Item 7.
Other companies may use different methods to calculate adjusted EBITDA and adjusted EBITDA margin. A discussion of changes in the Company’s financial condition and results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Form 10-K, but may be found under the heading “Item 7.
Indefinite-lived Intangible Assets An intangible asset determined to have an indefinite useful life is not amortized. Indefinite-lived intangible assets are tested for impairment on an annual basis at year-end, or more frequently if an event occurs or circumstances change that indicate the fair value of an indefinite-lived intangible asset could be below its carrying amount.
Indefinite-lived intangible assets are tested for impairment on an annual basis at year-end, or more frequently if an event occurs or circumstances change that indicate the fair value of an indefinite-lived intangible asset could be below its carrying amount. The Company’s indefinite-lived intangible assets include trade names associated with acquisitions.
One measure of the sensitivity of assumptions used in the impairment 27 Table of Contents analyses is the amount by which each reporting unit “passed” (fair value exceeds the carrying value). The fair values of the Company’s reporting units exceeded their carrying values by more than 20%, and, therefore, no impairment was recognized.
One measure of the sensitivity of assumptions used in the impairment analysis is the amount by which the reporting unit “passed” (fair value exceeds the carrying value). The fair value of the reporting unit exceeded its carrying value by more than 20%. Therefore, no impairment was recognized.
SEG&A expenses increased by $16.9 million, or 21%, for the year ended December 31, 2022, primarily due to additional costs from prior-year acquisitions, as well as higher selling expenses, including increases in sales commissions and marketing costs. As a percentage of net sales, SEG&A expenses were 8.1% in the current year, compared to 8.0% in the prior year.
SEG&A expenses increased by $16.8 million, or 17%, for the year ended December 31, 2023, primarily due to additional costs from acquired businesses, as well as increases in sales commissions and incentive-based compensation expense. As a percentage of net sales, SEG&A expenses were 7.9% in the current year, compared to 8.1% in the prior year.
Cost of sales increased by $143.9 million, or 18%, for the year ended December 31, 2022, primarily related to increased sales volumes, inclusive of the effects of acquisitions, higher material costs, and a $1.4 million increase in depreciation expense, partially offset by a $5.4 million favorable foreign currency translation impact.
Cost of sales increased by $162.3 million, or 17%, for the year ended December 31, 2023, primarily related to increased sales volumes, inclusive of the effects of acquisitions, increased chassis costs and a $3.2 million increase in depreciation expense, partially offset by a $6.2 million favorable foreign currency translation impact.
Partially offsetting these improvements was a $9.1 million reduction in shipments of refuse trucks and a $5.7 million unfavorable foreign currency translation impact.
Partially offsetting these improvements was a $5.9 million reduction in sales of safe-digging trucks and a $6.4 million unfavorable foreign currency translation impact.
We do not expect any significant change to our unrecognized tax benefits as a result of potential expiration of statute of limitations and settlements with tax authorities. 25 Table of Contents The following table summarizes the Company’s off-balance sheet arrangements and the notional amount by expiration period as of December 31, 2022: Notional Amount by Expiration Period (in millions) Total Less than 1 Year 2-3 Years 4-5 Years Financial standby letters of credit (a) $ 11.2 $ 11.2 $ — $ — Performance and bid bonds (b) 23.8 23.7 0.1 — Repurchase obligations (c) 2.0 0.6 1.2 0.2 Total off-balance sheet arrangements $ 37.0 $ 35.5 $ 1.3 $ 0.2 (a) Financial standby letters of credit largely relate to casualty insurance policies for the Company’s workers’ compensation, automobile, general liability and product liability policies.
The following table summarizes the Company’s off-balance sheet arrangements and the notional amount by expiration period as of December 31, 2023: Notional Amount by Expiration Period (in millions of dollars) Total Less than 1 Year 2-3 Years 4-5 Years Financial standby letters of credit (a) $ 9.1 $ 9.1 $ — $ — Performance and bid bonds (b) 12.1 11.9 0.2 — Repurchase obligations (c) 1.5 0.7 0.6 0.2 Total off-balance sheet arrangements $ 22.7 $ 21.7 $ 0.8 $ 0.2 (a) Financial standby letters of credit largely relate to casualty insurance policies for the Company’s workers’ compensation, automobile, general liability and product liability policies.
Gross profit For the year ended December 31, 2022, gross profit increased by $56.2 million, or 19%, compared to the prior year, primarily due to a $42.7 million improvement within the Environmental Solutions Group and a $13.5 million increase within the Safety and Security Systems Group.
Gross profit For the year ended December 31, 2023, gross profit increased by $105.3 million, or 31%, compared to the prior year, primarily due to a $85.0 million improvement within the Environmental Solutions Group and a $20.3 million increase within the Safety and Security Systems Group.
Adjusted EBITDA Adjusted EBITDA for the year ended December 31, 2022 was $215.0 million, compared to $180.5 million in the prior year. Adjusted EBITDA margin for the year ended December 31, 2022 was 15.0%, compared to 14.9% in the prior year.
Adjusted EBITDA Adjusted EBITDA for the year ended December 31, 2023 was $286.0 million, compared to $215.0 million in the prior year. Adjusted EBITDA margin for the year ended December 31, 2023 was 16.6%, compared to 15.0% in the prior year.
Future declines in the overall market value of the Company may also result in a conclusion that the fair value of one or more reporting units has declined below its carrying value.
Future declines in the overall market value of the Company may also result in a conclusion that the fair value of one or more reporting units has declined below its carrying value. In 2023, the Company performed a combination of qualitative and quantitative impairment tests to assess the goodwill of its reporting units for potential impairment.
The following table summarizes the gross borrowings and gross payments under the Company’s revolving credit facilities: For the Years Ended December 31, (in millions) 2022 2021 2020 Gross borrowings $ 137.0 $ 214.0 $ 82.6 Gross payments 55.8 143.5 94.4 Aggregate maturities of total borrowings due amount to approximately $1.5 million in 2023, $4.6 million in 2024, $7.6 million in 2025, $10.2 million in 2026 and $339.1 million in 2027.
The following table summarizes the gross borrowings and gross payments under the Company’s revolving credit facilities: For the Years Ended December 31, (in millions of dollars) 2023 2022 2021 Gross borrowings $ 134.3 $ 137.0 $ 214.0 Gross payments 198.4 55.8 143.5 Aggregate maturities of long-term borrowings and finance lease obligations are $4.7 million in 2024, $7.8 million in 2025, $10.2 million in 2026 and $276.3 million in 2027.
Operating income increased by $8.1 million, or 25%, for the year ended December 31, 2022, primarily due to a $13.5 million increase in gross profit, partially offset by the $5.4 million increase in SEG&A expenses. Backlog was $55 million at December 31, 2022, compared to $53 million at December 31, 2021.
Operating income increased by $14.0 million, or 34%, for the year ended December 31, 2023, primarily due to a $20.3 million increase in gross profit, partially offset by the $6.3 million increase in SEG&A expenses. Backlog was $59 million at December 31, 2023, compared to $55 million at December 31, 2022.
Cost of sales For the year ended December 31, 2022, cost of sales increased by $165.4 million, or 18%, compared to the prior year, largely due to an increase of $143.9 million, or 18%, within the Environmental Solutions Group, primarily related to increased sales volumes, additional costs from prior-year acquisitions, higher material costs, and a $0.9 million increase in depreciation expense, partially offset by a $5.4 million favorable foreign currency translation impact.
Cost of sales For the year ended December 31, 2023, cost of sales increased by $182.6 million, or 17%, compared to the prior year, largely due to an increase of $162.3 million, or 17%, within the Environmental Solutions Group, primarily related to increased sales volumes, inclusive of the effects of acquisitions, increased chassis costs and a $3.2 million increase in depreciation expense, partially offset by a $6.2 million favorable foreign currency translation impact.
The Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2022 Credit Agreement that are to be measured at each fiscal quarter-end.
Applicable margin, issuance fees and other customary expenses are payable on outstanding letters of credit. 23 Table of Contents The Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2022 Credit Agreement that are to be measured at each fiscal quarter-end.
SEG&A expenses increased by $5.4 million for the year ended December 31, 2022, primarily due to higher selling expenses, including increases in sales commissions and marketing costs. As a percentage of net sales, SEG&A expenses were 20.4% in the current year, compared with 21.2% in the prior year.
SEG&A expenses increased by $6.3 million for the year ended December 31, 2023, primarily due to higher sales commissions and incentive-based compensation expense. As a percentage of net sales, SEG&A expenses were 19.7% in the current year, compared with 20.4% in the prior year.
Operating income Operating income for the year ended December 31, 2022 increased by $30.1 million, or 23%, compared to the prior year, largely due to the $56.2 million improvement in gross profit, partially offset by the $22.5 million increase in SEG&A expenses, a $2.0 million increase in amortization expense and a $1.6 million reduction in acquisition-related benefits.
Operating income Operating income for the year ended December 31, 2023 increased by $63.7 million, or 40%, compared to the prior year, largely due to the $105.3 million improvement in gross profit, partially offset by the $38.4 million increase in SEG&A expenses, a $2.3 million increase in amortization expense and a $0.9 million increase in acquisition-related costs.
Capital expenditures in 2022 included the acquisition of the Company’s University Park, Illinois manufacturing facility for $28 million, and capital expenditures in 2021 included the purchase of the Company’s Elgin, Illinois manufacturing facility for $19.8 million.
Capital expenditures in 2022 included the acquisition of the Company’s University Park, Illinois manufacturing facility for $28 million, and capital expenditures in 2021 included the purchase of the Company’s Elgin, Illinois manufacturing facility for $19.8 million. During 2023, the Company made initial payments of $41.9 million and $13.0 million to acquire Trackless and Blasters.
U.S. sales increased by $194.3 million, or 24%, largely due to a $31.9 million increase in aftermarket revenues and increases in sales of dump truck bodies, sewer cleaners, metal extraction support equipment, safe-digging trucks, trailers, road-marking and line-removal equipment, street sweepers, hoists, industrial vacuum loaders and refuse trucks of $36.6 million, $32.6 million, $19.5 million, $17.7 million, $12.2 million, $12.0 million, $10.9 million, $8.7 million, $6.1 million and $5.0 million, respectively.
U.S. sales increased by $165.8 million, or 17%, largely due to a $45.1 million increase in aftermarket revenues and increases in sales of street sweepers, sewer cleaners, safe-digging trucks, industrial vacuum loaders, trailers, multi-purpose tractors, road-marking and line-removal equipment and refuse trucks of $35.5 million, $28.1 million, $21.4 million, $16.3 million, $10.5 million, $7.8 million, $7.5 million and $6.3 million, respectively.
(b) Purchase accounting effects represent the step-up in the valuation of equipment acquired in recent business combinations that was sold during the periods presented. 20 Table of Contents Environmental Solutions The following table summarizes the Environmental Solutions Group’s operating results as of, and for the years ended, December 31, 2022, 2021 and 2020: For the Years Ended December 31, Change ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 1,190.6 $ 1,004.0 $ 915.8 $ 186.6 $ 88.2 Operating income 144.5 120.5 124.3 24.0 (3.8) Other data: Operating margin 12.1 % 12.0 % 13.6 % 0.1 % (1.6) % Total orders $ 1,444.2 $ 1,297.3 $ 840.0 $ 146.9 $ 457.3 Backlog 824.4 576.4 282.5 248.0 293.9 Depreciation and amortization 50.3 46.7 41.3 3.6 5.4 Year ended December 31, 2022 vs. year ended December 31, 2021 Total orders increased by $146.9 million, or 11%, for the year ended December 31, 2022, inclusive of the effects of acquisitions and pricing actions.
Environmental Solutions The following table summarizes the Environmental Solutions Group’s operating results as of, and for the years ended, December 31, 2023, 2022 and 2021: For the Years Ended December 31, Change (in millions of dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 1,437.9 $ 1,190.6 $ 1,004.0 $ 247.3 $ 186.6 Operating income 209.2 144.5 120.5 64.7 24.0 Other data: Operating margin 14.5 % 12.1 % 12.0 % 2.4 % 0.1 % Total orders $ 1,578.0 $ 1,444.2 $ 1,297.3 $ 133.8 $ 146.9 Backlog 966.5 824.4 576.4 142.1 248.0 Depreciation and amortization 56.0 50.3 46.7 5.7 3.6 Year ended December 31, 2023 vs. year ended December 31, 2022 Total orders increased by $133.8 million, or 9%, for the year ended December 31, 2023, inclusive of the effects of acquisitions and pricing actions.
Consolidated operating margin for the year ended December 31, 2022 was 11.2%, compared to 10.8% in the prior year. Interest expense Interest expense for the year ended December 31, 2022 increased by $5.8 million, or 129%, compared to the prior year, largely due to an increase in average debt levels and higher interest rates.
Consolidated operating margin for the year ended December 31, 2023 was 13.0%, compared to 11.2% in the prior year. Interest expense, net Interest expense for the year ended December 31, 2023 increased by $9.4 million, or 91%, compared to the prior year, largely due to an increase in interest rates.
As described in Note 17 – Segment Information to the accompanying consolidated financial statements, the Company’s business units are organized in two reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group.
As described in Note 17 – Segment Information to the accompanying consolidated financial statements, the Company’s business units are organized in two reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group. Operating and Financial Performance in 2023 Conditions in our end markets remained strong throughout 2023, with demand for our products and services at unprecedented levels.
The increase in income tax expense in the current year was primarily due to higher earnings, a $3.2 million reduction in the amount of excess tax benefits from stock compensation activity compared to the prior year, and fewer discrete tax benefits than in the prior year.
The increase in income tax expense in the current year was primarily due to higher earnings and the non-recurrence of certain discrete tax benefits recognized in the prior year associated with the release of valuation allowances, partially offset by a $1.5 million increase in the amount of excess tax benefits from stock compensation activity compared to the prior year.
The Environmental Solutions Group reported a net sales increase of $186.6 18 Table of Contents million, or 19%, primarily due to a $30.6 million improvement in aftermarket revenues and increases in sales of dump truck bodies, metal extraction support equipment, sewer cleaners, safe-digging trucks, trailers, street sweepers, road-marking and line-removal equipment, hoists and industrial vacuum loaders of $40.9 million, $33.1 million, $32.6 million, $18.3 million, $12.2 million, $11.5 million, $11.3 million, $8.7 million and $6.1 million, respectively.
The Environmental Solutions Group reported a net sales increase of $247.3 million, or 21%, primarily due to a $66.2 million improvement in aftermarket revenues and increases in sales of street sweepers, sewer cleaners, refuse trucks, multi-purpose tractors, metal extraction support equipment, industrial vacuum loaders, safe-digging trucks, trailers and road-marking and line-removal equipment of $38.6 million, $35.0 million, $31.1 million, $21.4 million, $17.2 million, $16.3 million, $15.5 million, $10.5 million and $7.4 million, respectively.
Including these items, the Company’s effective tax rate for the year ended December 31, 2022 was 20.2%, compared to 14.5% in 2021. For further discussion, see Note 10 – Income Taxes to the accompanying consolidated financial statements.
Including these items, the Company’s effective tax rate for the year ended December 31, 2023 was 22.5%, compared to 20.2% in 2022.
Within the Safety and Security Systems Group, net sales increased by $35.0 million, or 17%, primarily due to improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $28.1 million, $9.4 million and $3.8 million, respectively, partially offset by a $6.3 million unfavorable foreign currency translation impact.
Within the Safety and Security Systems 18 Table of Contents Group, net sales increased by $40.6 million, or 17%, primarily due to improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $22.7 million, $11.0 million and $6.8 million, respectively.
For the year ended December 31, 2022, corporate operating expenses increased by $2.0 million, primarily due to a $1.8 million reduction in acquisition and integration-related benefits and increased stock- and incentive-based compensation expense, partially offset by lower post-retirement expenses.
For the year ended December 31, 2023, corporate operating expenses increased by $15.0 million compared to the prior year, with the increase primarily due to higher post-retirement expenses and increases in incentive-based compensation, stock compensation, medical and IT costs, partially offset by a $0.3 million decrease in acquisition-related expenses.
We also continued to make strategic investments for the future by purchasing new machinery and equipment aimed at gaining operating efficiencies and expanding capacity at several of our production facilities. ◦ We continue to invest in new product development and are encouraged that these efforts will provide additional opportunities to further diversify our customer base, penetrate new end-markets and/or gain access to new geographic regions. ◦ We completed our ninth acquisition since 2016 with the acquisition of TowHaul. ◦ We demonstrated our commitment to returning value to our stockholders by paying cash dividends of $21.8 million, and spending $16.1 million repurchasing shares under our authorized repurchase program. • To highlight our ongoing focus on operating in a socially responsible and sustainable manner, we published our third annual Sustainability Report in May 2022. * The Company uses adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”) and the ratio of adjusted EBITDA to net sales (“adjusted EBITDA margin”) as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods.
We have now completed 11 acquisitions since 2016. ◦ We demonstrated our commitment to returning value to our stockholders by paying cash dividends of $23.8 million, and spending $5.5 million to repurchase shares under our authorized repurchase program. • To highlight our ongoing focus on operating in a socially responsible and sustainable manner, we published our fourth annual Sustainability Report in June 2023. * The Company uses adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”) and the ratio of adjusted EBITDA to net sales (“adjusted EBITDA margin”) as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods.
Contractual Obligations and Off-Balance Sheet Arrangements The following table summarizes the Company’s contractual obligations and payments due by period as of December 31, 2022: Payments Due by Period (in millions) Total Less than 1 Year 2-3 Years 4-5 Years More than 5 Years Long-term debt $ 361.0 $ 0.8 $ 10.9 $ 349.3 $ — Interest payments on long-term debt (a) 94.8 19.9 39.3 35.6 — Operating lease obligations (b) 27.3 7.9 10.4 5.0 4.0 Finance lease obligations 2.0 0.7 1.3 — — Purchase obligations (c) 273.3 271.6 1.4 0.3 — Pension contributions (d) 2.3 2.3 — — — Contingent earn-out payments (e) 2.7 0.7 2.0 — — Total contractual obligations (f) $ 763.4 $ 303.9 $ 65.3 $ 390.2 $ 4.0 (a) Amounts represent estimated contractual interest payments on outstanding long-term debt.
The Company believes that its financial resources and major sources of liquidity, including cash flow from operations and borrowing capacity, will be adequate to meet its operating needs, capital needs and financial commitments. 24 Table of Contents Contractual Obligations and Off-Balance Sheet Arrangements The following table summarizes the Company’s contractual obligations and payments due by period as of December 31, 2023: Payments Due by Period (in millions of dollars) Total Less than 1 Year 2-3 Years 4-5 Years More than 5 Years Long-term debt $ 297.4 $ 3.9 $ 17.2 $ 276.3 $ — Interest payments on long-term debt (a) 64.4 17.4 33.7 13.3 — Operating lease obligations (b) 23.3 7.7 9.5 3.6 2.5 Finance lease obligations 1.6 0.8 0.8 — — Purchase obligations (c) 277.6 254.1 23.4 0.1 — Pension contributions (d) 5.2 5.2 — — — Contingent earn-out payments (e) 4.9 — 4.9 — — Total contractual obligations (f) $ 674.4 $ 289.1 $ 89.5 $ 293.3 $ 2.5 (a) Amounts represent estimated contractual interest payments on outstanding long-term debt.
Net sales increased by $35.0 million, or 17%, for the year ended December 31, 2022, inclusive of the effects of higher sales volumes and pricing actions. U.S. sales increased by $28.8 million, or 23%, driven by improvements in sales of public safety equipment, warning systems and industrial signaling equipment of $19.2 million, $6.7 million and $2.9 million, respectively.
Non-U.S. sales increased by $18.8 million, or 21%, largely due to improvements in sales of public safety equipment, industrial signaling equipment and warning systems of $10.1 million and $6.3 million and $2.3 million, respectively. Cost of sales increased by $20.3 million, or 13%, for the year ended December 31, 2023, primarily related to higher sales volumes.
Non-U.S. sales increased by $6.2 million, or 7%, largely due to improvements in sales of public safety equipment and industrial signaling equipment of $8.9 million and $6.5 million, respectively, partially offset by a $6.3 million unfavorable foreign currency translation impact and a $2.9 million reduction in sales of warning systems.
U.S. sales increased by $21.8 million, or 14%, driven by improvements in sales of public safety 21 Table of Contents equipment, industrial signaling equipment and warning systems of $12.6 million, $4.7 million and $4.5 million, respectively.
Net cash of $35.5 million and $26.4 million was provided by financing activities in 2022 and 2021, respectively, compared to a net cash usage of $53.4 million in 2020. In 2022, the Company borrowed $81.2 million under its revolving credit facility, primarily to fund current-year acquisitions, and received $0.2 million from stock option exercises.
The Company also received $3.9 million from stock option exercises. In 2022, the Company borrowed $81.2 million under its revolving credit facility, primarily to fund acquisitions, and received $0.2 million from stock option exercises.
In 2020, the Company paid down $11.8 million of net borrowings, funded cash dividends and share repurchases of $19.4 million and $13.7 million, respectively, and redeemed $9.1 million of stock in order to remit funds to tax authorities to satisfy employees’ minimum tax withholdings. 23 Table of Contents On October 21, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the “2022 Credit Agreement”), by and among the Company and certain of its foreign subsidiaries (collectively, the “Borrowers”), Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, PNC Bank, National Association and Truist Bank as syndication agents, and the other lenders and parties signatory thereto.
On October 21, 2022, the Company entered into the 2022 Credit Agreement, by and among the Company and certain of its foreign subsidiaries (collectively, the “Borrowers”), Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, PNC Bank, National Association and Truist Bank as syndication agents, and the other lenders and parties signatory thereto.
In 2022, the Company applied the quantitative approach to assess the goodwill of its reporting units for potential impairment and used a combination of the income and market approaches to determine the fair values of its reporting units. The valuations were prepared by a third-party valuation specialist.
For one reporting unit, a quantitative impairment test was performed, using a combination of the income and market approaches to determine the fair value of its reporting unit. The valuation was prepared 26 Table of Contents by a third-party valuation specialist.
U.S. orders increased by $122.3 million, or 11%, primarily due to improvements in orders for safe-digging trucks, street sweepers, sewer cleaners, industrial vacuum loaders and refuse trucks of $53.3 million, $33.2 million, $22.3 million, $12.2 million and $8.6 million, respectively. Additionally, aftermarket demand increased by $32.7 million.
U.S. orders increased by $73.1 million, or 6%, primarily due to improvements in orders for street sweepers, road-marking and line-removal equipment, dump truck bodies, multi-purpose tractors, industrial vacuum loaders and refuse trucks of $26.9 million, $22.9 million, $19.5 million, $12.0 million, $9.5 million and $6.4 million, respectively. Additionally, aftermarket demand increased by $43.2 million.
Partially offsetting these improvements were reductions in orders for safe-digging trucks and industrial vacuum loaders of $10.1 million and $4.8 million, respectively, as well as a $6.2 million unfavorable foreign currency translation impact.
Partially offsetting these improvements was a reduction in sales of hoists and waterblasting equipment of $7.9 million and $5.1 million, respectively, as well as a $6.4 million unfavorable foreign currency translation impact.
The Company had no goodwill impairments in 2022, 2021 or 2020. For all reporting units, a 10% decrease in the estimated fair value would have had no effect on the carrying value of goodwill at the annual measurement date in 2022.
For all reporting units, a 10% decrease in the estimated fair value would have had no effect on the carrying value of goodwill at the annual measurement date in 2023. However, adverse changes to the Company’s business environment and future cash flow could cause us to record impairment charges in future periods, which could be material.
Within the Safety and Security Systems Group, cost of sales increased by $21.5 million, or 16%, primarily related to higher sales volumes and increased material costs, partially offset by a $4.8 million favorable foreign currency translation impact.
Within the Safety and Security Systems Group, cost of sales increased by $20.3 million, or 13%, primarily related to higher sales volumes, benefits from pricing actions and lower freight costs.
Partially offsetting these improvements were reductions in orders for dump truck bodies and metal extraction support equipment of $27.1 million and $5.1 million, respectively.
Partially offsetting these improvements were reductions in shipments of hoists and waterblasting equipment of $7.9 million and $5.5 million, respectively.
Such expenses primarily relate to incremental paid time off provided to employees and costs incurred to implement enhanced workplace safety protocols.
Such expenses primarily relate to incremental paid time off provided to employees and costs incurred to implement enhanced workplace safety protocols. (b) Purchase accounting effects represent the step-up in the valuation of equipment acquired in recent business combinations that was sold during the periods presented.
Including these factors, gross profit margin for the year ended December 31, 2022 was 21.4%, compared to 21.1% in the prior year, with the impact of pricing actions and a more favorable sales mix, associated with the increase in aftermarket demand, being partially offset by higher material costs and production inefficiencies associated with supply chain disruptions.
Including these factors, gross profit margin for the year ended December 31, 2023 was 23.6%, compared to 21.4% in the prior year, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions, partially offset by an increase in lower margin chassis sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−1 removed2 unchanged
Biggest changeForeign Exchange Rate Risk Although the majority of the Company’s sales, expenses and cash flow are transacted in U.S. dollars, the Company has exposure to changes in foreign exchange rates, primarily the Canadian Dollar, Euro and British pound. The impact of currency movements on the Company’s financial results is largely mitigated by natural hedges in its operations.
Biggest changeDollars, the Company has exposure to changes in foreign exchange rates, primarily the Canadian Dollar, Euro and British Pound. The impact of currency movements on the Company’s financial results is largely mitigated by natural hedges in its operations. The Canadian operations of JJE and Trackless primarily conduct business in Canadian dollars.
If such transactional or balance sheet exposures are material, the Company may enter into matching foreign currency forward contracts from time to time to protect against variability in exchange rates. 29 Table of Contents
If such transactional or balance sheet exposures are material, the Company may enter into matching foreign currency forward contracts from time to time to protect against variability in exchange rates. 28 Table of Contents
The fair value of the Company’s total debt obligations held at December 31, 2022 was $363.0 million. From time to time, the Company may enter into interest rate swaps as a means of fixing the floating interest rate component on its variable-rate debt. At December 31, 2022, the Company had one interest rate swap outstanding.
The fair value of the Company’s total debt obligations held at December 31, 2023 was $299.0 million. From time to time, the Company may enter into interest rate swaps as a means of fixing the floating interest rate component on its variable-rate debt. At December 31, 2023, the Company had two interest rate swaps outstanding.
That swap had a notional amount of $75.0 million, and fixed the floating interest rate component on $75.0 million of the Company’s variable-rate debt. See Note 9 – Debt to the accompanying consolidated financial statements for a description of the Company’s debt agreements and interest rate swaps that were in place during 2022.
The swaps had an aggregate notional amount of $150.0 million, and fixed the floating interest rate component on $150.0 million of the Company’s variable-rate debt. See Note 9 – Debt to the accompanying consolidated financial statements for a description of the Company’s debt agreements and interest rate swaps that were in place during 2023.
The Canadian operations of JJE primarily conduct business in Canadian dollars. Almost all other sales of product from the U.S. to other parts of the world are denominated in U.S. dollars. Sales from and within other currency zones are predominantly transacted in the currency of the country sourcing the product or service.
Almost all other sales of product from the U.S. to other parts of the world are denominated in U.S. dollars. Sales from and within other currency zones are predominantly transacted in the currency of the country sourcing the product or service. Approximately 78% of the Company’s net sales are conducted within the U.S. and are transacted in U.S. dollars.
A hypothetical 1% increase or decrease in variable interest rates on the Company’s total debt obligations as of December 31, 2022 would increase or decrease annual interest expense by approximately $2.9 million.
A hypothetical 1% increase or decrease in variable interest rates on the Company’s total debt obligations as of December 31, 2023 would increase or decrease annual interest expense by approximately $1.5 million. Foreign Exchange Rate Risk Although the majority of the Company’s sales, expenses and cash flow are transacted in U.S.
The Company may also have foreign currency exposures related to buying and selling in currencies other than the local currency in which it operates and to certain balance sheet positions.
The Company estimates that a 10% appreciation of the U.S. dollar against other currencies would reduce full-year net sales by approximately 2% and operating income by approximately 1%. The Company may also have foreign currency exposures related to buying and selling in currencies other than the local currency in which it operates and to certain balance sheet positions.
Removed
Approximately 80% of the Company’s net sales are conducted within the U.S. and are transacted in U.S. dollars. The Company estimates that a 10% appreciation of the U.S. dollar against other currencies would reduce full-year net sales by approximately 1% and operating income by approximately 1%.

Other FSS 10-K year-over-year comparisons