Please stand by, we are about to begin. Good day, and welcome to the Federal Signal Corporation Fourth Quarter Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brian Cooper, Senior Vice President and Chief Financial Officer. You may begin.

Thank you. Good morning, and welcome to Federal Signal's fourth quarter 2014 conference call. I'm Brian Cooper, the company's Chief Financial Officer. Also with me on this call are Dennis Martin, President and Chief Executive Officer; and Jennifer Sherman, our Chief Operating Officer. We'll refer to some presentation slides today, as well as to the news release, which we issued this morning. The slides can be followed online by going to our Web site, federalsignal.com, clicking on the Investor Call icon and signing into the webcast. We've also posted the slide presentation and the news release under the Investor tab on our Web site. Before we begin, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the Safe Harbor language found in today's news release and in Federal Signal's filings with the Securities and Exchange Commission. These documents are available on our Web site. Our presentation also contains some measures that are not in accordance with U.S. Generally Accepted Accounting Principles. In our news release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K today. I'm going to start by addressing our financial results, I'll then hand the call over to Jennifer, who will provide an overview of our operations, and Dennis will wrap up our prepared comments with an update on our goals and our outlook for 2015. Our consolidated fourth quarter and full year financial results are provided in today's new release. For the full year, I would like to briefly highlight some of our consolidated results. Net sales totaled $919 million, which is up 8% over 2014. Operating income was $93 million, up 31%, and operating margin was 10.1%, exceeding the 10% target we set for ourselves…

You want me to go?

Yes.

Corporate operating expenses for the quarter were $7.2 million, down from $7.7 million in the prior year. We have continued to benefit from the low level of trial activity and associated costs related to our defense of hearing loss litigation. Reflecting all these factors, Q4 consolidated operating income was $31 million, up 44% against the prior year quarter. We also recorded a 4% increase in consolidated orders, which was driven by an 18% improvement at Fire Rescue Group, and a 9% increase at the Safety and Security Systems Group. Looking at the income statement, our 20% increase in sales to over 24% increase in gross profit, and consolidated gross margin of 26.2 for the quarter, which compares to 25.5 in the prior year. Selling, engineering and general administrative expenses were 15% higher than last year, primarily as a result of sales expenses related to higher revenue levels. In the prior year quarter, we also recorded $1.3 million of restructuring charges. All of these factors roll into the company's $31 million of operating income. Interest expense also remains low, reflecting low interest rates, and our declining debt balances. Income tax expenses for the quarter were $5.9 million, compared with the benefit of $6.5 million a year ago. Two factors lowered our tax expense in the prior year quarter as we captured benefits associated with the release of valuation allowances on domestic deferred taxes, assets, and also recognized the $6.7 million benefit from a tax planning strategy, which help preserve some expiring tax credits. The effective tax rate for Q4 of 2014 also was low at 20.3%, and included the impact of a $3.5 million released valuation allowance on certain foreign deferred tax assets, as well as $0.4 million benefit from change in the enacted tax rate in Spain. I would also…

Turning to the balance sheet and cash flow, cash provided by continuing operations were strong at $28 million for the quarter. For the full year, cash provided by continuing operations were $72 million, down from $80 million in the prior year. The change in cash provided by continuing operations relative to the prior years was largely due to an increase in working capital at the end of 2014. This was driven by higher inventory levels associated with a higher backlog. It also included higher accounts receivable as a result of the high volume fourth quarter shipments primarily in the Fire Rescue Group. Cash flow from continuing operations also was reduced by income tax payments and pension contributions that were higher than in 2013.

With this strong cash flow, we were able to reduce our borrowings by more than $18 million during the quarter. This included making a voluntary term loan prepayment of $15 million. Total debt of $50 million at the end of Q4 was down $42 million since the beginning of the year, and our leverage ratio dropped to 0.5 times adjusted EBITDA. Our strong operating performance and this low level of debt obviously give us good liquidity and flexibility to consider funding growth initiatives and returning value to shareholders. During the quarter, we paid dividends of $1.8 million, and also funded $3.6 million worth of share repurchases. We have about $80 million remaining under our share repurchase authorization. As we have discussed in the other calls, our priorities for cash in descending order are to fund organic growth, acquisitions, dividends, and finally, share repurchases; and we would typically target a capital structure with a debt at about 1.5 to two EBITDA. That concludes my comments, and I'd like to turn the call over to Jennifer.

Thank you, and thanks to all of you for joining our call. I am proud of our teams for turning in an excellent year and fourth quarter, and I'd like to provide some color on the outstanding performance across our group. Let me focus first on the Environment Solutions Group, which grew both sales and operating income extremely well. As most of you know, ESG has strong channels for municipal and government business, primarily through a dealer network that captures about 60% of the group sales. Our municipal products are primarily street sweepers and sewer cleaners. We have also been working to grow our industrial base, which covers sales on a direct basis. Industrial products include vacuum loaders, hydro excavators, and water blasting tools. A good portion of our recent growth on the industrial side has been related to oil and gas markets. All of these municipal industrial markets remain strong throughout 2014, and the ESG capitalized by leveraging and expanding its existing capacity, which was able to do with minimal investment. Our greatly improved ESG operating margins reflect this. We also exited the year with a healthy backlog. Looking forward, we continue to experience sold demand, and positive signals in our municipal markets. In our industrial markets low oil prices have led to caution and hesitancy among our customers, with orders slowing in some areas. As a result of the delay, and or shutdown of many North American oil related projects, we have seen a significant decrease in the demand for environmental and security products that support the oil and gas industries, which represent less than 10% of our consolidated sales. As we previously mentioned, we have strong backlogs, and have decent visibility for the first-half of the year. Like many other companies, it is difficult to predict what…

Thank you, Jennifer. As we enter 2015, we are continuing to work with our strategies and initiatives that should help us to sustain our profitable growth. I want to briefly revisit them. Our first initiative is disciplined growth. I talked at length on our last call about a variety of initiatives and investments that we are driving to stimulate organic growth in our businesses. We want to complement that growth with acquisitions that leverage our core competencies, or give us access to adjacent or new markets. We continue to be committed to the disciplined approach in evaluating opportunities in the marketplace. We also continue to focus on leveraging our invested capital, and improving our manufacturing efficiencies, and costs with 80-20 now an important part of our Federal Signal culture. Our strong 2014 performance depended heavily on these two areas of focus. The final initiative is to diversity our customer base. We continue to focus a lot of our growth efforts on the industrial side of our business, because we feel opportunity for long range growth, and profitability in that area tends to be higher. Oil and gas markets, upstream and downstream have been part of that focus, along with utilities and industrial contractors. Our municipal and government business, which grew well in 2014, remains an important part of our portfolio. Our long range goals remain unchanged as well. On the top line we want to grow faster than GDP, while increasing the share that comes from industrial. We aim to continue to improve our return on invested capital. During 2014, we also raised our long-term consolidated operating margin target to 12%, and we have targeted an average growth of earnings per share at a rate in the low to mid teens. Before we look forward into 2015, I'd like to…

Thank you. [Operator Instructions] We will take our first question from Steve Barger with KeyBanc Capital Markets.

Hi, good morning, it's Ken Newman on for Steve.

Hi, Ken. Good morning.

Good morning, Ken.

Good morning. I wanted to talk about the dividend, just curious why increase the dividend at this point versus further debt reduction, I'm curious if you -- are there no worries about cyclicality in the next few year affecting revenue, and if not, why not put out some revenue guidance to help investors think about growth potential?

Yes, we cherish both the dividend and other strategies on our capital structure. And while we think that the next few years will have some cyclicality in it, the reduction in our overall debt and our confidence in the businesses we feel that the dividend was something that should be reenacted before we do some of the other strategies.

Okay. And back to your guidance, I'm just curious. What is the operating margin expectation embedded in the $0.95 to $1.02 EPS range; do you expect margins to grown in '15? I guess the same question for operating cash flow.

We expect most of our margins will remain solid and may grow. Although, as Dennis said in his comments, 2014 was an exceptional year. So we expect to remain very solid. Some of the businesses will continue improving, and we are driving that improvement all the time. Operating cash flow will probably be similar to what it was last year. We have a lot of the same factors. We will pay a little bit more in taxes in the coming year. Pension contributions are similar, and if we generate more operating income, we'll generate more cash flow from that. So, one of the answers to your questions on dividend is, our cash flow is so strong that we can fund that, and fund our other opportunities.

Got it. And then just one more, if I could; You talked a little bit in the press release about some stronger European public safety markets. Could you provide a little bit more color, has order inquiries in that market suggested that there's some more large orders out there for backlog? And where in particular are you seeing the most impact, from an inquiry standpoint?

We've seen solid demand in Spain, Italy, and France, and that continues. The team has made an effort to diversify into Eastern Europe. We're starting to see the positive benefits from that effort, it's [ph] the fourth quarter last year, although the markets continue to remain tough, we're cautiously optimistic about 2015 for that group.

Got it, thanks. I'll get back in queue.

Thank you. We'll take our next question from Robert Kosowsky with Sidoti.

Hi, good morning everyone, how are you doing?

Good morning, Rob.

Good morning.

I was wondering on ESG, it was another strong quarter, and the backlog obviously looks pretty good as well. Can you tell us was there any pull-forward or positive lumpiness on the municipal side, and do you see growth from the municipal market into 2015?

We don't think there's a pull-forward, Rob, into the market. We think there is returning strength in broad municipal markets around the whole U.S. The activity though that added to a fair amount of the growth in 2014, was also driven by international orders, which they do tend to be spiky. And in 2014, we experienced very good Middle East orders, and that on top of the strong U.S. and North American municipal markets really drove the performance that we see. So the backlog is not just advanced order placement, its real demand to the market.

Okay, that's helpful. And then secondly, on the Fire Rescue, how close is the segment to operating the way you wanted it to be? I know you hit a lot of supplier issues, and also material flow issues, throughout the plant?

If you look at how you evaluate a business like that you look at the operating pieces within the business, so what are our core competencies and how are they performing, and within this last year we implemented automatic welding, rearranged the factory, a new paint system, and an automated machining center; and all of those pieces are functioning as we would expect. So coming into 2015, really for the first time in a couple of years, we are hitting on all the cylinders and the main boom factory in Peoria, and the assembly business at Tampere also seems to be flowing well. So we think they're operating the way they should be. They're still operating in very competitive end markets, and there is a mix of orders and margin levels in the backlog, but we think we are heading off to a pretty good start to the year.

All right. And then, finally, Brian, did you say what CapEx might be for this year?

I didn't Rob, but it's a fair question; it will probably be pretty similar to what it was last year in the $15 million to $20 million.

All right. Thank you very much and good luck.

Thanks, Rob.

Thank you.

Thank you.

We will take our next question from Walter Liptak. [Operator Instructions] We will go now to Walter Liptak with Global Hunter.

Okay, great. Thanks, good morning guys.

Good morning.

Good morning.

I wanted to ask about the currency headwind; what's in your forecast, what kind of a revenue hit or EPS hit?

So, our plan includes a forecast on foreign exchange with rates about where they are today. Obviously that's maybe 10% less than what they were last year. But that headwind is included in all of the plans that our units have made and how it rolls up into what we look at. I would say it's probably maybe a 3% headwind on the top line. A little of a gas, but that's just based on our first look at it.

Okay. And I think Dennis commented that there might be some markets -- or maybe it was Jennifer -- that might be less competitive. You're exporting from the U.S. to other parts of the world because of the strong U.S. dollar. Is that factored into the guidance as well?

Yes, but again, we talked about our visibility in the second half of the year, and that still remains uncertain.

Okay. And then on the energy market, Jennifer, I think you mentioned 10% of sales. And it wasn't clear to me -- is it 10% of ESG sales are energy-related, or 10% of the company overall?

10% of the company overall.

Okay. Are you seeing any order cancellations now?

We haven't seen order cancellations as much yet. We have seen projects being put off, and a fair amount of our dealers rent equipment to that oil patch and there has been some reduction in rental units in that market. So we've actually seen it come down.

Okay. And wonder if you could just help refresh my memory on your energy exposure. What's the mix of streams? Is it all upstream, or is there some also that's midstream and downstream?

It is a mix. Our systems businesses serve a lot of downstream uses, so does Jetstream, but it's probably about two thirds to the upstream or midstream, and one third of that 9%, 10% or so is the other piece.

Okay. So maybe it's a third, a third, and a third?

Yes, I don't know. It's harder for me to break the midstream apart, so we sort of lump those together as two thirds and probably mostly upstream.

Okay. And then you mentioned the outlook for Bronto. Your orders look up pretty nicely year over year. What's the timing on shipments and the seasonality? Is this one where it's more back-half loaded?

I mean typically our fourth quarter has been a strong quarter for Bronto, and our first quarter has been softer, although it can vary from year-over-year. We're starting to see, as Dennis mentioned, some progress on our turnaround initiative, although Bronto's results vary from quarter-to-quarter depending on the timing of the shipments and customer inspections, although we expect improvement in 2015, it will vary quarter-to-quarter.

Okay. Are you suggesting that the first quarter, it's going to be seasonally weaker than normal or is it just normal seasonality?

At this point, it's probably normal. Bronto's backlog -- they will be working at steadily through the year.

Okay. Okay, great. And one last one; I think you mentioned acquisitions, that you're stepping things up there. I wondered if you could provide us some color on what you're looking for. Would you look at a transformational acquisition? Are you looking at bolt-ons, the kind of multiples or geographic regions that you're looking at?

Yes, I think when we do our evaluation of acquisitions, we think about shareholder value, and if we could create a transformational acquisition that created shareholder value, that would be something we would consider and our Board will consider. We're looking at some international activities as well as the best like the U.S. activities. So it's a pretty broad range, Walt. We do want them to be near our core manufacturing or marketed distribution channels. And so we are not trying to get way outside the line.

Okay. And then, multiples are up, I think, for a lot of private companies. What kind of range are you willing to pay?

That question really can't be answered until we look at what the business is. If there is -- the multiple maybe strong, but if there is a huge synergy, or it breaks us into a different channel or market or an adjacent channel market that we really care about, we would pay a little more, but you're right, the ratios are high, but we really would look at each one on a one-off basis.

Okay. Okay, fair enough. Thanks, guys.

Thank you.

[Operator Instructions]

Okay. We have no further questions, so I would like to emphasize that we remain committed to growing our businesses and leveraging their profitability. Our outstanding fourth quarter and 2014 results are really, as I've always said, a product of the hard work of all of our employees, the dedication of our distributors and dealers and the depth of our relationship with our customers. I want to thank all of them, and we remain optimistic about our businesses, and I look forward to talking with you again after the first quarter. Thank you, and good-bye.

And that concludes today's conference call. Thank you for your participation.