Bill Barker - SVP and CFO Dennis Martin - President and CEO

Charlie Brady - BMO Capital Markets Walt Liptak - Barrington Research Deane Dray - Citi Ned Borland - Hudson Securities Robert Becker - Keeley Asset Management Steve Barger - KeyBanc Capital Markets Brad Evans - Heartland Advisors

Good morning and welcome to Federal Signal's third quarter 2010 conference call. I'm Bill Barker Federal Signal's Chief Financial Officer.

Joining me on the call today is Dennis Martin, Federal Signal's President and Chief Executive Officer and Jennifer Sherman, Federal Signal's General Council and Chief Administrative Officer. We'll be using some slides in the presentation.

The slides can be found by going to our website www.federalsignal.com. Clicking on the Q3 Investor Call Icon and selecting the webcast.

We'll also post a slide presentation to our website after the call. Before we get to the business review, I would like to remind you that some of our comments 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 website. We will file our Form 10-Q shortly.

I will give a brief review of our results for the quarter then, I'll turn the call over to Dennis Martin for his comments. After that we'll have some time for your questions.

As discussed in our earnings release this morning, the company's markets remain mixed. Our industrial focused businesses continue to see strong orders in the quarter; all our businesses that are more focused on municipal markets continue to be challenged.

Total company orders for Q3 increased 11% versus last year. Excluding the impact of recent acquisitions which were not in our portfolio last year orders increased 6%.

To illustrate the difference in our market several of our industrial businesses achieved double-digit order growth for the quarter and for the year-to-date. Our core industrial safety products, JetStream waterblasters and our Vactor Guzzler division that would sell sewer cleaners and vacuum trucks.

Combined that these businesses accounted for over 40% of the company's total Q3 orders. However, we saw double-digit declines in Q3 orders for several of our municipal focused businesses including lightbars and sirens in both the U.S.

and European markets and our Bronto Skylift business. Q3 orders for Elgin street sweepers were flat to last year but were down more than 20% versus the order rate we saw in the first half of the year.

Our FSTech businesses generated $27 million of revenue in the third quarter flat to what was achieved in the second quarter. While the timing has domestic projects are slipped, we expect these projects to come to fruition in the near future.

In addition, we have seen some good development in the international markets with revenue for the Thailand Electronic Vehicle Registration project accelerating. We've also received some initial orders from India.

We expect to see continued growth in our industrial focused businesses and in our FSTech division in Q4 and into 2011 but we also expect to see a continuation of challenging conditions in municipal focused businesses. I'll talk about our expectations for Q4 just later.

But now, I'll go through our Q3 financial results. Q3 financial headlines include our EPS from continuing operations for the quarter of $0.05 and we generated $20 million cash flow from continuing operations.

Looking at the P&L for the quarter, as I mentioned Q3 orders were $170 million up 11% versus last year. And sales of $182 million were up 12% versus last year.

Gross margin improved slightly in the quarter to 25.1%. Operating expenses or SG&A were $40 million up $7 million from last year.

The increase in SG&A versus last year is due to inclusion of SG&A costs from the acquired businesses and the newly formed FSTech group which were not in last year's P&L as well as higher costs associated with the company's and hearing loss litigation. The SG&A cost include $1.1 million increase in depreciation and amortization related to the acquisitions.

Operating income excluding restructuring charges in both years was down about $2 million versus last year due to higher SG&A costs. Reported EPS from continuing operations was $0.05 for the quarter.

The EPS comparison versus last year is impacted by the higher number of outstanding shares, as a result of the equity operating we completed in May. On Slide 4, we show the results by segment for the quarter.

For purposes of comparability we've excluded restructuring charges on the slide. The segment show reflect the new operating group structure we begin in Q2 and prior years have been restated for the transfer of our PIPS and Parking businesses from our safety and security group to the FSTech group.

Safety and security group or SSG generated $5.3 million of operating income in the quarter resulting in 10.4% operating margin, which was a slight improvement versus last year. Q3 orders and revenue for SSG were impacted by weakness in the domestic and European markets for lightbars and sirens, which more than offset growth in our core industrial safety products.

Bronto, our fire rescue business had a significant decline in orders and sales versus last year due to weak market conditions across Europe. Bronto's order backlog at the end of Q3 stood at $64 million.

Q4 has traditionally been a strong shipment quarter for Bronto, as shipments picked up after the summer months in Europe. Our Environmental Solutions Group or ESG had another strong quarter.

Orders were up 31% due driven by continued strength in orders for our JetStream waterblaster business and our Vactor Guzzler division. Sales were also up strongly versus last year and operating income nearly doubled.

Operating margin improved almost 2 points driven by 1.5 point increase in gross margin. ESG's order backlog was $70 million at the end of the quarter.

Our newest operating group FSTech generated $27 million of revenue in the quarter which was flat to Q2. The comparison versus last year is not particularly meaningful as last year's numbers do not include results for the acquisition of Diamond, Sirit, and VESystems nor any group level cost for FSTech.

Due to the amortization associated with the acquisitions FSTech reported a slight operating loss for the quarter. However, we are focusing more on FSTech EBITDA results, which we believe better reflect near-term financial performance.

FSTech EBITDA margin was 4.4% for the quarter which was in line with our internal expectations for this year of mid-single-digit EBITDA margins. We expect to realize margin expansion in FSTech which will be driven by continued market growth in the intelligent transportation market as well as the revenue and cost benefits will realize as we continue to more fully integrate the FSTech businesses.

Corporate expenses in the third quarter were higher by $1 million versus last year but were nearly $5 million lower versus Q2. Both variances are largely driven by legal costs associated with the hearing loss litigation.

On Slide 5, we show our year-to-date cash flow. Cash flow from continuing operations was a positive $20 million for the quarter bringing the year-to-date total to $13 million.

We expect to generate continued positive cash flow in the fourth quarter. Year-to-date depreciation and amortization was $14.8 million up from $11.3 million last year due to the acquisitions completed in late 2009 and early 2010.

For the year, we expect depreciation and amortization to be roughly $20 million. Year-to-date CapEx is $10.4 million and we expect the full year number of about $14 million.

The biggest drivers of our net cash flow so this year was $97 million cash outlay associated with the acquisitions and the $71 million net proceeds from the equity operating we completed in May. Given the strong operating cash flow in Q3, an expectation for another good quarter in Q4, the Board recently approved another quarterly dividend of $0.06 per share to be paid in January.

Turning to the balance sheet, our goodwill and intangible assets increased significantly since year end due the to the acquisitions and our equity increased primarily due to the equity offering we completed in May. We had $16 million of cash on hand at the end of the quarter and had $57 million availability under our credit agreements giving us available of global liquidity of $73 million at the end of the quarter.

We redeemed $20 million of private placement note at par during the quarter, which reduced the outstanding balance of private placement notes from $67 million to $47 million. We have another $6 million of notes coming due in December this year and a total of $2 million coming due in 2011.

We intend to repay these maturities from operating cash flow. On Slide 7, as of the end of the third quarter, we are in compliance on each of our key debt covenants, net worth, debt-to-capital and EBIT to interest expense coverage ratio.

Given the challenging conditions I have discussed in some of our markets, we will closely monitor our Q4 performance versus our covenants as near year end, if necessary; we will proactively reach out to lenders to discuss our performance relative to our covenants and will determine the appropriate course of action. Our $250 million revolving credit facility matures in April 2012.

In terms of our current outlook for the fourth quarter, we expect to generate Q4 EPS from continuing operations between $0.08 and $0.10. This forecast includes costs associated with the recent CEO change.

We will not be providing guidance for 2011 at this point given that Dennis just moved into the CEO roll on Monday and he is just beginning his in-depth review of the businesses. We will provide our outlook for 2011 when we release our Q4 earnings.

That wraps up the financial summary. I'll now turn the call over to Dennis Martin.

Thanks Bill and good morning everyone. I am very excited to be talking to you today as President and CEO of Federal Signal.

Federal Signal is a company with many strengths and many opportunities and I'd like to take a few minutes to introduce myself and to discuss my approach to capitalizing on these opportunities. As you know, I've been a member of the Federal Signal Board of Directors since March 2008, and I served on the Audit and Finance Committees.

Before joining Federal Signal's Board, I had a variety of experience as working with publicly traded complex diversified global industrial manufacturing companies that are very much like Federal Signal. I served as Chairman, President and CEO of General Binding Company, where we more than tripled shareholder value in four years.

Prior to that I spent 10 years at ITW, Illinois Tool Works and the three other very important engineered products operating companies and before that I spent 15 years in sales and sales leadership positions at Ingrsoll-Rand Company. Somehow, I have spoken to this week know that like Bill Osbon I am an operational and lean expert, where people don't know as that I have extensive turnaround experience supported by extremely strong commercial background.

I was Chairman and CEO of a public company that I was recruited to and led out of significant operating loss position and addressed capital structure issues. I have merged divested and acquired numerous businesses across the globe.

At General Binding I led successful integration of 10 businesses that had struggled since they were added to that portfolio before I got there. I've successfully dealt with all aspects of capital structure and balance sheets.

I have successfully led business turnaround activities by focusing ITW style 80/20 lean operating processes and coupling that with my commercial experience to drive profitable growth. This has been successful because those processes are transferable and I work with and teach the leadership how to apply them year-after-year.

I spent more than 25 years directly involved in engineered sales of products that range in price from a few dollars to $1.5 million per item, and I've operated in every manufacturing environment and the products that I've dealt with have range from peer commodity for a few pennies to highly engineered equipment that incorporate the latest technology. As an example, at Miller Electric ITW, we were on the leading edge as converting transformer, welders and plasma cutters to invert technology.

That advancement allowed precise and advanced welding procedures to be created and those products are used on such things as the Space Shuttle and advanced items like that. I have successfully operated every sales and distribution model; I have a logistics experience background.

I've repeatedly led sales and product development turnarounds, which have led to profitable growth in each company. And in every position, I've taken in the past 25 years it is either be a pure turnaround or has been transformational and I've enjoyed that and been successful.

Now turning to my observations of Federal Signal, as a Board member for the last two and a half years, I have gained important insight into Federal Signal and each of its businesses, each strength, each opportunity as well as significant challenges that we have. I'm aware that we've not been executing in the way we need to be and of course I'm keenly aware of our stock price performance and no one is more disappointed in that than me in this Board.

During the past few years, I do feel the company has made some important progress. The company has transitioned away from a number of non-core businesses.

We've taken significant costs out of the organization and I believe there's more we can do. We have launched an important growth initiative with our newly formed FSTech division.

Let me make it perfectly clear, I'm not deviating from the FSTech commitment. Let me also make it clear, I am recommitting to increased focus on all of our businesses to accelerate the company's strategic and financial goals.

While much has been made of the new opportunity with FSTech that we are proud of, ESG SSG and our Bronto businesses are great businesses and they are all capable of generating better returns. We have some tough markets right now but we can overcome those.

We need to refocus on growing the top-line sales and I have ideas how we can do that. We are going to take a hard look at all of our businesses.

There is more we can do on the cost side. We will apply 80/20 processes and determine the right things to do to drive growth in each business and we need to accelerate the integration and better understand the various components of the FSTech to ensure that we have a fully integrated compelling offering of solutions to meet the needs of our customers.

Let me stress that this Board and I are fully committed to the FSTech platform and we continue to see that potential and the value it has. We simply need to better integrate and understand the opportunity before us.

Starting today and over this week so far I have visited many of our facilities and I am meeting our folks and will sit down and have discussions with the managers and the sales force. I'll also be visiting and speaking with many of our key customers across each of the businesses.

I will and have spoken with a number of our shareholders and analysts, who know this company well and I hope to visit those I haven't seen as soon as my schedule permits. I am looking forward to hearing your perspectives on the company and will take that in a consideration.

What I am committing to is the following, I leverage my broad experience and understanding of process improvement and commercial aspects to evaluate each of Federal Signal's businesses in order to drive profitability and create shareholder value. I'm open to the opinions and perspective of all of our key stakeholders, our employees, our customer and our stock holders.

I am also committed to coaching, motivating and getting the most of our hardworking and dedicated global workforce. I will take the tough action in order to ensure the company can achieve what we all know it can.

As we close our year and move into 2011, I'll be happy to back to you with more specifics of my plan to aggressively execute against the company's strategic goals and to enhance shareholder value. I took this job because I do believe that the potential of Federal Signal businesses and the employees, and I'm confident that I can unlock that potential.

The process won't be easy. We clearly have some challenges in our municipal markets but I'm confident that we'll be successful.

And now, I'll be very happy to take questions. Thank you.

Hi, thanks, good morning. With respect to the fourth quarter guidance of $0.08 to $0.10 a share, what is the embedded CEO change costs in the assumptions?

That will be going out later today Charlie in an 8-K. Right now, we figure roughly about $0.02 a share impact.

Okay. Can you give us what the hearing loss litigation costs were in Q3?

Hang on a second before that number. About $1.4 million in the quarter.

Okay. And the FSTech business, can you give us some idea on an operating basis when that business gets above breakeven?

What is the timeframe in your mind? You can bridge the EBITDA operating income in Q3 that would be helpful?

Take the first question first, first. In terms of when it gets above breakeven on the operating income line we certainly expect to get there next year.

Assuming some pretty good revenue growth for FSTech and so we would expect to see hopefully in the fourth quarter but certainly in 2011, operating income to be positive as well or EBITDA margin. I'm sorry, second question on the EBITDA point?

Yes, they had positive EBITDA margin in the quarter and negative operating income and I just want to bridge the two. Amortization in there correct?

Yes, depreciation amortization about $2.5 million a quarter.

Okay. And that is pretty much, nothing else in there?

No.

Okay. And you mentioned some project slippage with regard to the FSTech business.

What exactly does that mean, slipping into Q4 or is it beyond Q4 and can you quantify it?

Charlie, what's happening is the municipalities and some of the agencies really don't have clear revenue picture in their mind so they really are just holding out some of these projects and some of them could slip more than a quarter. Some certainly have already slipped a quarter.

So, they are just not coming to market with them. We don't really have good expectations.

Thanks. I'll hop back into queue.

Hi, thanks, good morning guys and congratulations on the change, Dennis. I just wanted to ask first and maybe sort of answer this.

Why did we get the sudden CEO change? The numbers for the quarter were lower than expected but they weren't that much worse.

Hired away, Osborne hired away? What exactly happened?

No, Walt. There was no one unusual event.

He was not hired away. But Bill and the Board came into conclusion that to advance our strategies in the next period ahead of us, a change was necessary and they came to that mutual agreement.

Okay. Can you tell us a little bit about your intentions?

Do you sign an employment contract? How many, how much time are you willing to dedicate to Federal Signal?

The terms of my agreement with the company will be in the 8-K filed later today. But I've come here as a full time executive to lead a turnaround of sales activities and help integrate the rest of the businesses.

It is a long-term perspective. We're going to do the strategy implementations you're familiar with, get the team together.

Work on 80/20, really focus. We are confident we can get more costs out and we are also confident that we can grow the top line.

So this is a permanent long-term assignment that I am proud to take on and lead the teams here.

Okay. So, there's no end period to your employment contract?

Absolutely not.

Okay. And you been there long enough and my understanding was you were working with the management at Federal Signal to do some of the 80/20 things to the business.

How far along did you get with them?

We have had a good experience here in terms of the work that spent. But let me just kind of twist it a different way, for you.

When you look H&I and you look at ITW or we have done this and they do this, every year they have significant opportunities and significant improvement in the results from applying 80/20. The company has begun the process.

I will take it a lot further. So I think, in terms of stages of 80/20 implementation, it will take us maybe another three or four months to get the initial real look at it.

But a lot of good things have been done and I know there is a lot more that can be done. So, it will be just implemented step by step as we always have.

Let me just switch to a segment, in FST, was there organic growth in the quarter or was that acquisition related growth?

Versus last year?

I don't know. However, you want to look at it.

Quarter-over-quarter or year-over-year.

Quarter-to-quarter revenue was flat Q2 to Q3, some ups and downs in different segment but pretty much flat. And then versus last year, the existing businesses were pretty flat in the quarter.

So, the growth versus last year in the second quarter was due to the acquisitions.

Okay. So, are you guys disappointed that it's not growing?

There's this slippage that's going on?

No, I don't think we disappointed. The thing, Walt, and I appreciate it more this way than before, as when you look at that business, we've been talking about it is tolling business, which is very definitely, it is tolling business.

But a lot of the internal growth opportunities in that business are really not related to that. You have the RFID opportunities, we have had some things happen there, the synergy between the technologies and the new businesses with our parking business offer some great opportunity.

So, no, we're not disappointed, just toll roads aren't spending money right now. We have a lot of projects on the docket.

We have some of the parking things, there is a lot of opportunity but until you deliver those opportunities, it's not going to show on top line or earnings. But, no disappointment at all.

Okay, alright. So, the most vocal person with the U.S.

highways was Senator Oberstar and he lost his place in the house yesterday and he was Chairman of the Transportation Committee and now there is a Republican in place. Do you have a view?

How much of your prospects in that highway business in the U.S. are tied to what happens with the next highway bill?

Yes, the highway bill will have an impact on it but the important part about tolling is that most of it is privately funded. So I think as the economy increases and as more people are back to work you will see more cash flowing into the economy, the value of these roads will become more important.

Parking and tolling will be an important opportunity for municipalities that are struggling with lack of funding because they can raise funding. Like here in Chicago, the Skyway and the parking was sold off to private entities and those opportunities really offer our kind of opportunity.

So, we are concerned about the transportation change but we are obviously trying to influence any way we can. But I think the opportunity is bigger than that.

Okay. Thanks, guys.

Thank you. Good morning, everyone.

Dennis, there is no question you've landed in the hot seat literally because you're the third CEO in three years and I know it's just a couple of days into your tenure. Your initial comments about cost focus, revenue focus, 80/20 all make sense but that's basically sounds like you're just hitting the reset button on what has been going on previously.

So, the first question is, are you considering strategic alternatives for the company? What's on our not on the table?

If we say things like LBO, breakup, sales of company are those potential alternatives and what might the timeframe be for when you start consider those?

Yes, let me start with on the table, the answer is they are not on the table today. Not on the table today in terms of immediate option but I can tell you that the Board of Directors understands the options available for this company and those are actively considered and also that we know that we can run the company better than it has, so we'll consider all those as we move made.

And is there a time frame that Board has as to how long or how patient for these internal initiatives to let them run?

We have not established a timeline. I need to get a better look at the business and the growth opportunities.

It's not business as usual in that regard because I have a different approach to it then, as generally done and hopefully we have a better handle on it.

And then, with regard to the businesses, your opening comment I think is interesting where you point out that growth opportunities for Federal Signal expand broadly to the portfolio and perhaps there's been too much focus on FSTech. Is that one of your messages?

I think there's been too much press focus on FSTech. I know that the good folks at SSG, Bronto, and ESG have done a lot of good work but I'm a believer that there's a lot more we can do together there and I'm really pointing out that before we consider the other options you asked about, we need to really understand the value in this business.

If we reset these cost structures, as we have started and we get any lift at all on the municipal, it will be important improvement in our operations. So that's all, I'm saying.

I'm a believer in those businesses. I've worked with companies that had 40 different businesses and just I don't want to just create the focus that we are only doing one thing because we're not.

That's fair. And then, one of the businesses specifically on Bronto, it is correctly said that there is usually a seasonal lift into the fourth quarter and expectations that we might see that same lift based upon municipal budgets, still a question mark.

How does that look today?

I would say, after the flash crash, the municipal markets in Europe and even also even in China today which is a big part of the market have all been stressed.

Deane, this is Bill. What I would say is, we expect to see fourth quarter revenue higher than third quarter, as we've seen traditionally.

We'll have to certainly hold our fire in 2011 a little bit until we see how it comes in for the quarter. But given the backlog, given the production schedule, we expect to see Q4 revenues higher than Q3.

Good. And then just over back to FSTech for a moment.

It is interesting that this is a could probably competed market, but you had some real successes outside the U.S., London, Stockholm, Thailand. Is that because the focus has been more outside the U.S.

for you guys? As you have less competition there and just kind of expand on I like the idea of going beyond toll roads tools, because RF applications look very interesting.

Just give us a sense on the international opportunities.

The fun part about this business is that there's equal opportunity business both domestically and international. As you have emerging markets in Thailand as an example, they have a different control need, RFID makes more sense.

A lot of the products make more sense. So, what we are seeing is really an acceptance in those markets of that kind of product.

Countries are emerging, they are looking to implement this technology. I will say, no, we don't have less competition.

We have excellent global competitors. But I think the economies just different place in development than we are.

A lot of the applications may be vehicle identification instead of tolling. The RFID is an expansive array of security opportunities both domestically and international.

So the fun part of that business is while today it's only 14% or 15% of our revenue and as you see not a lot of our dollar earnings, the potential is very broad and it goes well beyond tolling but it also includes tolling.

Deane, I also want to add at that point, what you see in some of the international markets like Thailand and Latin America, as they are putting in infrastructure, they are going with the newest technology. There is no existing infrastructure to replace.

So there is no switching costs, so they want the latest technology that can do multiple things. Tolling as well as vehicle registration and I think that's why we're seeing some of the successes we've had.

And at Federal Signal we have the experience obviously with our cameras and some of our other software technologies, parking, all the Sirit, and all the VESystems and things so really this new package, that's why I said we're not shying away from it. And you'll see a lot of global expansion there.

Great, that's very helpful. And just last, it is more of a request, we are big believers in the 80/20 approach.

That is really the signature productivity tools of ITW. And as you go through this process, you said you were early in the stage.

If you can share with us the initiatives taken about how many SKUs are eliminated and how you thought through, how these businesses might be structured from the 80/20 standpoint. Just milestones, updates would be very helpful.

My intention is, I'm going to have a training process with the top 100 leaders of the business next week and we will at that time have the opportunity to look back at the great things that have been done but also set the bench markets what we're talking about. What I've traditionally done and what I will do here is, I won't relate earnings per share discussions about the 80/20, as we move ahead in the near-term but I will help to find for you the kinds of structural things that we've learned about the business and there we go to act on as you say like customer profitability, SKUs and processes, there is a lot of process things that we can do.

So, I will give you some way to really measure at least to have a great understanding of it.

Very Helpful. Thank you.

Good morning. Just following up on one of Dean's questions there on FSTech.

Last quarter I think there was a pipeline quantified project about $120 million to $180 million. Just wondering, if you can give us color on the pipeline as it exists now.

You know, I guess, there was some slippage but just sort of the timing of some of those projects and color you can provide.

Ned, its Bill. Let me take a shot at that.

We don't see there is any real significant change in the pipeline. The number of opportunities we are pursuing and the magnitude of those opportunities haven't really changed.

What has changed is some of the timing, we've been bidding on projects that were originally expected to be reward early this year. Now, reflect them either Q4 or early next year and that ranges in size and location.

So, there isn't any feeling that the pipeline or the opportunity is smaller. If anything we think it could be broader, if that as referenced.

It is just a question of sometimes you are dealing with government agencies and getting the projects to completion takes little bit longer.

There are a few things in there, Ned, we decided to take a pass on and we will as we go through this part of the 80/20. It has been sure that we work on things that are profitable and things that make sense for technology.

So, as it comes and goes we'll give you our best insight on that.

Okay. But in terms of projects, are these mostly of tolling variety or some of the other stuff that you were highlighting?

A big mix.

Okay. And then, on ESG margin in the quarter, obviously a good improvement over last year.

But was there may be some mix that hampered the margin a little bit? Because you had revenue that was pretty comparable to the second quarter, yet the margin was quite a bit lower than it was in the second quarter.

So, was there anything going on there?

We had a little bit of mix. JetStream Board had a good quarter, was not as big part of the portfolio as it was in Q2 and JetStream is highest marginal product in that business lineup.

Okay. And then, I guess, on Bronto, I think you were actively looking for a U.S.

distribution partner for Bronto. Where does that stand now?

We still have work going on that and it's continuing.

Okay. Any thoughts when you were actually going to have one lined up with you?

Probably before the end of the year.

Okay, alright. Thank you.

Thanks. Most of my questions have been answered but in your slide presentation you talked about the covenants for your debt and you certainly seem to well within your covenants and you are projecting decent cash flows.

But you did give a cautionary note that you might have to go and renegotiate those agreements. Would that have to do with restructuring due to the 80/20 rule?

Often we are involved in companies where there is a non-cash charge on restructuring and many of our company's had to run a gauntlet on changing their covenants. Are your lenders aware that you might be making some restructuring changes and that was a result of your comment?

No, Bob, it's Bill. It is a 12-month rolling test.

As Q4 rolls off last year, which was a pretty strong quarter for us and we go into Q4 this year and given some of the challenges we have particularly not so much in our longer cycle businesses. ESG and Bronto, you get a good sense to backlog coming into the quarter.

Some of the SSG businesses and FSTech, which are very quick turn businesses, we will see how those go. So, it could be the agreement and primarily interest coverage ratio that we are looking at, we are allowed to carve out restructuring charges up to a certain bucket, up to certain limit.

So, any GAAP restructuring charges that we take should not be an issue for us. It is more we just want to let people know that it's going to be a little tighter in the fourth quarter than it has been in the recent quarters because of the drop-off of last Q4, pickup this Q4.

And as we have talked about we have been a little surprised in some of the market softness from the municipal side, some orders slipping out. So, we just want to be as transparent of that as we can.

Okay, thanks. That's all I have.

Hi, good morning. I know it's early in the process, but you have been on Board for couple of years, what do you currently see is the biggest issue you are facing or what can you get the most traction on coming out of the gate in terms effecting a positive change?

I think it's too early to answer that. I do think, there's more costs we can do in the product area in terms of product line simplification and those things.

I haven't had a deep enough dive into the operating practices in some of the backroom stuff, so I just go to look at it. No better than a couple months.

Okay. In that context no way to frame up for investors what the potential range of cost savings could be that you're looking at?

Not until I take a look at it. But I'll do that as soon as practical.

Takes time to do that.

Sure. One of the issues that came out last quarter was the European spending environment.

Is that still a bigger concern for you than the U.S. mini outlook or it has the domestic situation moved higher on the list in terms of revenue concerns?

No, it's Bill again. I think the European markets obviously continue to be a concern for us.

I think in U.S., we have more balance on industrial versus Muni projects and some of the stuff on the Muni side is largely vehicle based, street sweepers and sewer cleaners get run pretty hard and eventually they have plan that have to be replaced or if they're not. Our parts and services business picked up pretty well.

Bronto unit it is something that lasts a lot longer, it is a much bigger ticket item obviously and given some of security programs being rolled out in the countries over there, I think that's a bigger challenge for us. So I think U.S., we're still concerned.

On the Muni side obviously, police light bar and sirens are going to be challenged. But on more sort of traditional vehicle base businesses, we think, we continue to be a little bit soft but not nearly the concern we have over in Europe.

Okay. Thanks.

And Dennis in the prepared comments you said that you had various ideas to draw the top line on the segments. Any more color you can provide on that in terms of how you plan to position in the market?

There is some very good product development things going on right now in the business. So, part of the 80/20 process will be to define which one of those will get to market the fastest and have the biggest impact on.

So, each of the businesses have opportunities. Bronto has opportunities in some of the new designs on the products Elgin, same with the safety business.

They all have different opportunities. The key will be to put the money and the opportunities and the effort behind those things that are going to drive the fastest return and then once we do get a kick in, I think the two will blend together well.

Okay. And just to bring it back to FSTech, I know you spent a lot of time on that.

But the original focus back when Bob Welding was still around was really to pursue safety and security end markets. And then that kind of more after doing some of the other acquisitions into intelligence transportation systems, now I hear you are saying there hasn't been enough focus on unlocking value in the other segments.

I guess just broadly speaking how substantial is this strategic change that we face here? Is this tweaking at the margins or we are doing a 180 in a broader sense?

I think I've said it before. We're not doing a 180 but I am a big believer that we can drive a lot of improvement and growth in all the businesses at one time and may be that's a different message.

It will not diminish the effort we put in FSTech but I think the FSTech business is not just the tolling business. I think it is not just the transportation.

There is a lot of opportunities there and the team is defining actual engineering projects and products that can be expanded in some of these areas. It's really a need to do all things or a lot of things extremely well.

Steve, let me jump in row quickly. I think what has happened over the last couple of quarters and with the equity road show and investor conferences and so forth is we did spend a lot of time explaining the FSTech business because it was new.

We want to explain the rationale behind the acquisition how they fit together, as an integrated tolling solution and because of that time spent on FSTech we probably didn't talk enough about the other businesses that didn't necessarily relay our lack of focus but may have come across that way in the communication. Internally, we continue to focus ESG's margin improvements.

So I think it was more of a communication issue than what's actually being going on internally.

Got it, okay. Thanks for the time.

Good morning. Thanks for taking the question.

Dennis just to be clear here in terms of the review of the businesses, the timeframe which you'll have a better understanding of the direction, the strategic merits of all businesses being within the Federal Signal portfolio, is that a multi-quarter event or do you think you'll be able to report back to us by the end of the fourth quarter in terms of your assessment of the merits of all the pieces of the portfolio today?

Brad, I think, if not by the end of the fourth quarter, just past that. When we do [JVC] it is about the same size business with little more complexity and we were able to get a pretty good picture worked out about that period of time.

So, 60 to 90 days, a pretty good look at it. Including the actual things we need to do step-by-step.

Do you think the leaders of your respective businesses are incented the right way to drive profitability at this point from a compensation perspective?

I think they are and I know that I have that we have do this process together that they will be and I know they are excited about driving the right kind of performance changes we need. So, I think so and if not we'll definitely work on that.

Brad, its Bill, let me jump on that. The incentive for managers is tied to both income performance as well as cash flow performance.

So, we believe we won't have to drive both those measures and that is how the incentive is set up.

We try to keep them on earning, operating income and things that they can be influenced on and certainly, we guess that operating income targets on all the different aspects of the business. They have been there but I think it will just be done differently than they are expect or maybe they are used to.

For housekeeping item, Bill, if you did give the year-over-year change in orders for municipal, industrial and international markets, could you give those on a consolidated basis, please?

I'll have to get back to you on that. I broke it up by business and not by segment, so let me follow-up with you on that one.

Okay. I'm just looking for the consolidated rate of change year-over-year for those three respective markets.

I'll get that to you.

And just a follow-up question on the SSG side and just for U.S. spending in general, do you feel like you're bouncing along the bottom in that respective market or how would you characterize the rate of change there at this point?

I think it balancing on the bottom. I think the elections are past us here and I think we can start to see at least level off and that's why it's important to do the 80/20 business things as soon as we wrap it so we can take advantage of that.

But I think we are pretty close.

Okay. And just one last question, again just discussion on the balance sheet.

Unless, I've got a bad number here, it looks in the fourth quarter of '09 you did around $17 million of adjusted EBITDA and it looks like your guidance for the current quarter would have you very close to that number. It looks like as you think about trailing 12-month number it's not going to change a whole lot.

Just confused as to why there would be, why you feel like you might be approaching the covenant this quarter?

Some of that is that we had some restructuring charges last year that we were able to carve out of the calculation. More of certain things that get added back in and deducted back out.

It is not pure continuing up comparison.

Do you have a debt target for the end of the year in terms where you might help to be on the revolver?

Right now we have got about $225 million of debt out there, I believe. We expect that will come down a little bit with our cash flow, we have got $6 million of private placement notes coming due, we expect to fund that out of operating cash flow.

So I would imagine probably about a $5 million reduction in the quarter.

Okay. We'll be very interested to hear what you have to say on the next conference call.

Thank you.

Thanks. We look at the backlog, Bronto backlog, how much of that extends beyond 2010?

Beyond 2010, I don't have an exact breakout of that. I would say probably about 50/50.

And what's your assumption on tax rate in Q4? It was a little bit lower than we got modeled in Q3.

Q3 was about 22%. We had one or two discreet items that we're able to reverse back and because we have, unfortunately, relatively low rate of income in Q3, as the sweet items change the tax rate it makes a big difference in the rate.

We are assuming somewhere around 30% for the fourth quarter.

Great. Thank you.

I'd like to thank all that were on the call today and thank you for your good questions. We're going to do our best and we are going to get after it so thank you.

Have a good day.