FSS US Equity☆

Item 1A. Risk Factors.

We may occasionally make forward-looking statements and estimates such as forecasts and projections of our future performance or statements of our plans and objectives. These forward-looking statements may be contained in, but are not limited to, filings with the SEC, including this Form 10-K, press releases made by us and oral statements made by our officers. 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.

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. Many of our customers are municipal government agencies, and as a result, we are dependent on municipal government spending. Spending by our municipal customers can be affected by federal, state and local political circumstances, budgetary constraints, changing priorities, actual or potential government shutdowns and other factors. The U.S. government and municipalities depend heavily on tax revenues as a source of spending and accordingly, there is a historical correlation that suggests a lag of one to two years between the condition of the U.S. economy and our sales to the U.S. government and municipalities. 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. 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.

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. 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. 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.

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.

Our business is subject to fluctuations in demand and changing international economic, legal and political conditions that are beyond 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. Operating in the international marketplace exposes us to a number of risks, including the need to comply with U.S. and foreign laws and regulations applicable to our foreign operations, such as the Foreign Corrupt Practices Act, the United Kingdom (“U.K.”) Bribery Act and their counterparts in other foreign jurisdictions in which we operate, restrictive domestic and international trade regulations, and changes in these laws, regulations and policies by the U.S. and foreign governments. In addition, we may be exposed to risks and adverse economic effects associated with changes in tax laws, geopolitical conflicts, actual or threatened imposition of tariffs or trade barriers on our products or materials incorporated into our products, actual or threatened trade disputes, including so-called “trade wars,” political and economic instability in the jurisdictions in which we operate, foreign receivables collection risk and local labor market conditions. 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. 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.

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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 mitigate the risk of foreign receivables collection, we may obtain letters of credit from international customers to satisfy concerns regarding the collectability of amounts billed to customers.

Some of our contracts are denominated in foreign currencies, which may expose us to risks of fluctuating currency values and exchange rates, hard currency shortages and controls on currency exchange. 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.

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. 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 execution of our growth strategy is dependent upon the continued availability of credit and third-party financing arrangements for our customers.

Economic downturns result in tighter credit markets, which could adversely affect our customers’ ability to secure financing or to secure financing at favorable terms or interest rates necessary to proceed or continue with purchases of our products and services. 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. Our customers’ or potential customers’ inability to secure financing for projects could result in the delay, cancellation or downsizing of new purchases or the suspension of purchases already under contract, which could cause a decline in the demand for our products and services and negatively impact our financial position, results of operations or cash flow.

We operate in highly competitive markets.

The markets in which we operate are highly competitive. Many of our competitors have significantly greater financial resources than we do. The intensity of this competition, which is expected to continue, can result in price discounting and margin pressures throughout the industry and may adversely affect our ability to increase or maintain prices for our products. In addition, certain of our competitors may have lower overall labor or material costs. In some cases, our contracts with municipal and other governmental customers are awarded and renewed through competitive bidding. We may not be successful in obtaining or renewing these contracts, which could have an adverse effect on our financial condition, results of operations or cash flow.

Strategic and Operational Risks

The inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner would adversely affect our ability to manufacture and market our products.

We purchase from suppliers raw materials, component parts and finished goods to be used in the manufacturing and sale of our products. In addition, we may incorporate vehicle chassis provided directly by our customers in our production process. Although the vast majority of our raw materials and component parts are sourced domestically, certain of our suppliers are based overseas, and certain of our domestic suppliers may source subcomponents from overseas. 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. 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. In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers.

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. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain. Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations.

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During 2022, our manufacturing operations continued to be adversely affected by supply chain disruptions. 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. 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.

Challenges within global logistics networks, including trucking and chassis shortages and shortages in labor availability, have also contributed to delays in receiving key manufacturing components, increased order backlogs and higher transportation costs. Such logistical disruption may cause us to incur higher freight costs to expedite the receipt of components from our suppliers or the delivery of products to our customers, and may also result in longer lead times for our customers.

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. 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. 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. 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. We may experience difficulties that could delay or prevent the successful development, introduction and marketing of product or process enhancements or new products, applications or processes. Our products, applications or processes may not adequately meet the requirements of the marketplace and achieve market acceptance. Our financial condition, results of operations or cash flow could be materially and adversely affected if we or our suppliers were to incur delays in developing new products, applications or processes or product or process enhancements, or if our products do not gain market acceptance.

Our efforts to develop new products and services or enhance existing products and services involve substantial research, development and marketing expenses, and the resulting new or enhanced products or services may not generate sufficient revenues to justify the expense.

We place a high priority on developing new products and services, as well as enhancing our existing products and services. As a result of these efforts, we may be required to expend substantial research, development and marketing resources, and the time and expense required to develop a new product or service or enhance an existing product or service are difficult to predict. We may not succeed in developing, introducing or marketing new products or services or product or service enhancements. In addition, we cannot be certain that any new or enhanced product or service will generate sufficient revenue to justify the expense and resources devoted to the related product diversification effort.

Disruptions within our dealer network or the inability of our dealers to secure adequate access to capital could adversely affect our business.

We rely on national and global dealer networks to market certain of our products and services. As a result, our business with respect to these products and services is influenced by our ability to manage new and existing relationships with dealers. While we have relatively low turnover of dealers, from time to time, we or a dealer may choose to terminate the relationship as a result of difficulties that our dealers experience in operating their businesses due to economic conditions or other factors. While we do not believe our business is dependent on any single dealer, a disruption in our dealer network, or with a significant dealer, or within a specific market, could have an adverse impact on our business within the affected market. In addition, our dealers require adequate liquidity to finance their operations, including purchases of our products. Dealers are subject to numerous risks and uncertainties that could unfavorably affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis on reasonable terms. These sources of financing are vital to our ability to sell products through our dealer network. Recent significant increases in interest rates and any future deterioration in the liquidity or credit worthiness of our dealers could have a significant adverse effect on our business. From time to time, we may provide financing assistance to dealers or consider taking ownership positions. The loss or termination of a significant dealer, or a

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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.

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. 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. 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. 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.

Acquisitions involve risks, including those associated with the following:

•integrating the operations, financial reporting, disparate systems and processes and personnel of acquired companies;

•managing geographically dispersed operations;

•diverting management’s attention from other business concerns;

•changing the competitive landscape, including disrupting existing sales channels or markets;

•entering markets or lines of business in which we have either limited or no direct experience; and

•losing key employees, customers and strategic partners of acquired companies.

We also may not achieve anticipated revenue and cost benefits associated with our acquisitions. Acquisitions may not be accretive to our earnings and may negatively impact our results of operations as a result of, among other things, the incurrence of debt, acquisition costs, impairment of goodwill and amortization of other intangible assets. In addition, future acquisitions could result in dilutive issuances of equity securities.

Businesses acquired by us may have liabilities that are not known to us.

We may assume liabilities in connection with the acquisition of businesses. There may be liabilities that we fail or are unable to discover in the course of performing due diligence investigations on the acquired businesses, or that may be more material than we expected. In these circumstances, we cannot assure that our rights to indemnification will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the businesses or property acquired. Further, these liabilities could result in unexpected legal or regulatory exposure, unexpected increases in taxes or other adverse effects on our business. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial condition, results of operations or cash flow.

We could incur restructuring and impairment charges as we continue to evaluate opportunities to restructure our business and rationalize our manufacturing operations in an effort to optimize our cost structure.

We continue to evaluate opportunities to restructure our business and rationalize our manufacturing operations in an effort to optimize our cost structure. These actions could result in significant charges that could adversely affect our financial condition and results of operations. Future actions could result in restructuring and related charges, including but not limited to impairments, employee termination costs and charges for pension and other postretirement contractual benefits and pension curtailments that could be significant and could have an adverse effect on our financial condition, results of operations or cash flow.

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, including increased indebtedness and/or lower earnings as a result of the coronavirus pandemic. Failure to comply with one or more of these restrictive covenants may result in an event of default which, if not cured by us or waived by our lenders, allows our lenders to declare all amounts outstanding as due and payable. 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.

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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. In addition, our future success will depend on, among other factors, our ability to attract and retain qualified personnel. 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.

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. In the event prevailing wage rates continue to increase in the markets in which we operate, we may be required to concurrently increase the wages paid to our employees to maintain the quality of our work force and customer service. 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.

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. Any strikes, threats of strikes or other organized disruptions in connection with the negotiation of new labor agreements or other negotiations could materially adversely affect our business as well as impair our ability to implement further measures to reduce costs and improve production efficiencies. In addition, the stoppage of work for a prolonged period of time at one, or several, of our principal manufacturing facilities, due to public health concerns, or any other reason, could materially adversely affect our business.

Our pension funding requirements and expenses are affected by certain factors outside of our control, including the performance of plan assets, the discount rate used to value liabilities, actuarial assumptions and experience and legal and regulatory changes.

Our funding obligations and pension expense for our defined benefit pension plans are driven by the performance of assets set aside in trusts for these plans, the discount rate used to value the plans’ liabilities, actuarial assumptions and experience and legal and regulatory funding requirements. Changes in these factors could have an adverse impact on our financial condition, results of operations or cash flow. In addition, a portion of our pension plan assets are invested in equity securities, which can experience significant declines if financial markets weaken. 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. Our future pension expenses and funding requirements could increase significantly due to the effect of adverse changes in the discount rate, asset values or the estimated expected return on plan assets. In addition, we could become legally required to make increased cash contributions to the pension plans, and these contributions could be material and negatively affect our cash flow.

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. Additionally, in the ordinary course of business, we collect and store sensitive information relating to our businesses, customers, suppliers and employees. Sensitive information may also be stored by our vendors and on the platforms and networks of third-party providers. 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. 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. 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. 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

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production stoppages and supply shortages, which in turn could adversely affect our reputation, financial condition, results of operations or cash flow.

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. 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. 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.

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. Intellectual property protection is subject to applicable laws in various jurisdictions where interpretations and protections differ or can be unpredictable and costly to enforce. Further, our ability to protect our intellectual property rights may be limited in certain foreign jurisdictions that do not have, or do not enforce, strong intellectual property rights. Any failure to protect or enforce our intellectual property rights could have a material adverse effect on our competitive position, financial condition, results of operations or cash flow.

Legal and Financial Risks

We may incur material losses and costs as a result of lawsuits or claims that may be brought against us which are related to product liability, warranty, product recalls, intellectual property, client service interruptions or other matters.

We are exposed to product liability and warranty claims in the normal course of business in the event that our products actually or allegedly fail to perform as expected, or the use of our products results, or is alleged to result, in bodily injury and/or property damage. For example, we have been sued by firefighters seeking damages claiming that exposure to our sirens has impaired their hearing and that the sirens are, therefore, defective. In addition, we are subject to other claims and litigation from time to time, as further described in the accompanying notes to our consolidated financial statements. We could experience material product liability or warranty costs in the future and incur significant costs to defend ourselves against these claims. While we carry insurance and maintain reserves for product liability claims, our insurance coverage may be inadequate if such claims do arise, and any defense costs and liability not covered by insurance could have a material adverse impact on our financial condition, results of operations or cash flow. A future claim could involve the imposition of punitive damages, the award of which, pursuant to state laws, may not be covered by insurance. In addition, warranty and certain other claims are not typically covered by insurance. 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.

We, like other manufacturers, continue to face heavy governmental regulation of our products, especially in the areas of the environment and employee health and safety. 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. These regulations could include environmental requirements applicable to manufacturing and vehicle emissions and regulations impacting our supply chain both nationally and internationally. 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. While we believe that we are in compliance in all material respects with these laws and regulations, we may be adversely impacted by costs, liabilities or claims with respect to our operations under existing laws or those that may be adopted. These requirements are complex, change frequently and have tended to become more stringent over time. Therefore, we could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions as a result of violation of, or liabilities under, environmental laws and safety regulations. Further, climate change regulations at the federal, state or local level or in international jurisdictions could require us to limit emissions, change our manufacturing processes or product offerings, or undertake other activities which may require us to incur additional expense. These requirements may increase the cost of our products, which may diminish demand for those products.

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. 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.

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An impairment in the carrying value of goodwill, intangible assets or long-lived assets could negatively affect our financial position and results of operations.

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. Definite-lived intangible assets and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In evaluating the potential for impairment of goodwill, intangible assets and long-lived assets, we make assumptions regarding future operating performance, business trends, competition and market and general economic conditions. 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. 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. Unresolved Staff Comments.

None.

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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. 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. Approximately 65% of the total square footage is owned by the Company with the remaining 35% being 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”).

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.

Item 3. Legal Proceedings.

The information concerning the Company’s legal proceedings included in Note 13 – Legal Proceedings to the accompanying consolidated financial statements is incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

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.

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.

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:

(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.

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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. 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.

As of December 31,

The stock price performance included in this graph is not necessarily indicative of future stock price performance. Notwithstanding anything set forth in any of our previous filings under the Securities Act or the Exchange Act, which might be incorporated into future filings in whole or part, including this Form 10-K, the preceding performance graph shall not be deemed incorporated by reference into any such filings.

Item 6.[Reserved]

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide information that is supplemental to, and shall be read together with, the consolidated financial statements and the accompanying notes contained in this Form 10-K. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) the consolidated financial statements, (ii) the Company’s business segments and how the results of those segments impact the Company’s results of operations and financial condition as a whole and (iii) how certain accounting principles affect the Company’s consolidated financial statements.

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. 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.

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.

Coronavirus, Supply Chain and Market Update

Customer demand for our product and service offerings during the year ended December 31, 2022 has been at unprecedented levels, with the ongoing strength in orders contributing to a record backlog of $879 million as of December 31, 2022.

However, the direct and indirect effects of the ongoing coronavirus pandemic continued to impact our ability to maximize production levels during the year ended December 31, 2022. Specifically, the increased demand for our products combined with ongoing global supply chain disruptions have affected our ability to obtain a sufficient quantity of raw materials and purchased components, including chassis, hydraulics and other parts, that are necessary to our production processes and to deliver products to our customers. With these supply chain challenges, we have also experienced increases in the cost of raw materials and have taken measures to mitigate the associated impacts, such as implementing price increases and surcharges. From a labor perspective, the Company experienced an escalated level of coronavirus-related absences at several locations early in the year, which improved as the year progressed. While we continue to work to mitigate these challenges as they arise, we cannot provide assurance that such efforts would continue to be successful in addressing a further significant deterioration in the global supply chain, if applicable, which could impact our ability to service our customers, effectively roll out and realize price increases to offset the effects of commodity inflation and sustain our profit margins.

We continue to closely monitor the impact of the coronavirus pandemic, including emerging variants, on our business, including how it is affecting our employees, customers, supply chain and distribution network. The overall magnitude of the direct and indirect impact of the pandemic on our operating and financial results remains uncertain and will largely depend on the duration of the pandemic and the measures implemented in response, as well as the effect on our customers and suppliers.

Operating and Financial Performance in 2022

Despite the challenges created by a volatile supply chain and the coronavirus pandemic, the Company was able to sustain a high level of financial performance and make progress against several long-term objectives in 2022. Included among the Company’s highlights in 2022 were the following:

•Orders for the year were at a record level of $1.7 billion, an increase of $153 million, or 10%, from last year.

•Backlog at December 31, 2022 was $879 million, another new Company record, and an increase of $250 million, or 40%, compared to the end of last year.

•Net sales for the year ended December 31, 2022 were $1.4 billion, an increase of $222 million, or 18% from last year.

•For the year ended December 31, 2022, we reported operating income of $160.8 million, an increase of $30.1 million, or 23%, from last year. Consolidated operating margin for the year ended December 31, 2022 was 11.2%, compared to 10.8% in the prior year.

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•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. 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. 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.

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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

Restructuring — — 1.3 — (1.3)

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)

Gain from discontinued operations and disposal, net of tax — — 0.1 — (0.1)

Other data:

(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. We believe that investors use versions of these metrics in a similar manner. For these reasons, the Company believes that adjusted EBITDA and adjusted EBITDA margin are meaningful metrics to investors in evaluating the Company’s underlying financial performance. 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 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). 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, 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. 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.

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. The Environmental Solutions Group reported a net sales increase of $186.6

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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. 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. 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.

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. 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.

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 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.

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. As a percentage of net sales, SEG&A expenses decreased from 12.3% in the prior year, to 12.0% in the current 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. 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.

Pension settlement charges

During the year ended December 31, 2021, the Company recognized a pension settlement charge of $10.3 million in connection with the purchase of a group annuity contract from an insurance company, under which approximately $25 million of the projected benefit obligation of the Company’s U.S. defined benefit plan was transferred to the insurance company. For further discussion, see Note 11 – Pension and Other Post-Employment Plans to the accompanying consolidated financial statements.

Other (income) expense, net

For the year ended December 31, 2022, Other (income) expense, net, totaled $0.5 million of income, largely due to the recognition of $0.6 million of net periodic pension benefit. For the year ended December 31, 2021, Other (income) expense, net, totaled $1.7 million of income, largely due to the recognition of $1.1 million of net periodic pension benefit and $0.3 million of foreign currency transaction gains.

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Income tax expense

The Company recognized income tax expense of $30.5 million for the year ended December 31, 2022, compared to $17.0 million for the year ended December 31, 2021. 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. 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. 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. In the year ended December 31, 2021, the Company recognized a $3.4 million tax benefit associated with the release of state valuation allowances and a $3.3 million tax benefit associated with the remeasurement of deferred taxes for changes in state tax apportionment, both of which primarily resulted from a change in tax status and other tax planning activities executed during the year. 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.

Income from continuing operations

Income from continuing operations for the year ended December 31, 2022 increased by $19.8 million, or 20%, compared to the prior year, largely due to the increased operating income and the non-recurrence of the pension settlement charge recognized in the prior year, partially offset by a $13.5 million increase in income tax expense, the $5.8 million increase in interest expense, a $1.2 million reduction in other income and a $0.1 million debt settlement charge.

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.

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,

Income from continuing operations $ 120.4 $ 100.6 $ 96.1

Add (less):

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

(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. 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.

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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

Other data:

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. 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. 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. Non-U.S. orders increased by $24.6 million, or 11%, primarily due to improvements in orders for metal extraction support equipment, street sweepers, snow removal equipment, refuse trucks, and aftermarket demand of $31.4 million, $4.0 million, $3.0 million, $2.8 million and $2.1 million, respectively. 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.

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. 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. Non-U.S. sales decreased by $7.7 million, or 4%, primarily due to a $14.1 million reduction in shipments of refuse trucks, a $5.7 million unfavorable foreign currency translation impact and a $3.2 million reduction in shipments of camera systems, primarily associated with the timing of a large fleet shipment in the prior year. Partially offsetting these reductions were improvements in shipments of metal extraction support equipment and dump truck bodies of $13.6 million and $4.3 million, respectively.

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. 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.

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.

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.

Backlog was $824 million at December 31, 2022, compared to $576 million at December 31, 2021.

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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

Other data:

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. 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. Non-U.S. orders decreased by $12.2 million, or 12%, largely due to a $13.8 million reduction in orders for public safety equipment, primarily associated with the timing of a large fleet order in the prior year, as well as a $5.8 million unfavorable foreign currency translation impact, partially offset by a $7.5 million improvement in orders for industrial signaling equipment.

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 $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.

Cost of sales increased by $21.5 million, or 16%, for the year ended December 31, 2022, primarily related to higher sales volumes and increased material costs, partially offset by a $4.8 million favorable foreign currency translation impact. 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.

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.

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.

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.

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. 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. These acquisition-related benefits have been included as a component of Acquisition and integration-related (benefits) expenses on the Consolidated Statements of Operations.

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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. In accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting, which provides that segment reporting should follow the management of the item and that certain expenses may be corporate expenses, these legal expenses (which are not part of the normal operating activities of any of our reportable segments) are reported and managed as corporate expenses.

Financial Condition, Liquidity and Capital Resources

The Company uses its cash flow from operations to fund growth and to make capital investments that sustain its operations, reduce costs, or both. Beyond these uses, remaining cash is used to pay down debt, repurchase shares, fund dividend payments and make pension contributions. The Company may also choose to invest in the acquisition of businesses. In the absence of significant unanticipated cash demands, we believe that the Company’s existing cash balances, cash flow from operations and borrowings available under the 2022 Credit Agreement will provide funds sufficient for these purposes. 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. Cash and cash equivalents held by subsidiaries outside the U.S. typically are held in the currency of the country in which it is located. The Company uses this cash to fund the operating activities of its foreign subsidiaries and for further investment in foreign operations. Generally, the Company has considered such cash to be indefinitely reinvested in its foreign operations and the Company’s current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. However, in the event that these funds were needed to fund U.S. operations or to satisfy U.S. obligations, they generally could be repatriated. The repatriation of these funds may cause the Company to incur additional 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 reduction in cash generated by operating activities in 2022 compared to the prior year was primarily due to increases in working capital, including higher accounts receivable, largely due to increases in net sales, and strategic stocking of critical inventory components, such as chassis, to support demand levels and partially mitigate ongoing supply chain constraints. In addition, the Company had increased rental fleet investment in response to strong customer demand for rental and used equipment. Partially offsetting these increases was an $8.6 million reduction in income tax payments, primarily as a result of prior-year tax planning initiatives which resulted in the Company beginning 2022 with higher prepaid income taxes.

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. 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. As discussed further in Note 2 – Acquisitions to the accompanying consolidated financial statements, 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. In 2021, the Company completed three acquisitions for aggregate initial consideration of $131.8 million, excluding cash acquired. In 2020, the Company paid $6.2 million to acquire certain assets and operations of Public Works Equipment and Supply, Inc. (“PWE”) and received $0.8 million as part of the finalization of certain post-closing adjustments in connection with the acquisition of MRL.

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 funded cash dividends and share repurchases of $21.8 million and $16.1 million, respectively, and redeemed $6.2 million of stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation and the exercise of stock options. In 2021, the Company borrowed $70.5 million under its revolving credit facility, primarily to fund acquisitions, and received $4.2 million from stock option exercises. The Company also funded cash dividends and share repurchases of $22.0 million and $15.4 million, respectively, and redeemed $10.7 million of stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation and the exercise of stock options. In 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.

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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.

The 2022 Credit Agreement is a senior secured credit facility which provides the Borrowers access to an aggregate principal amount of $800 million, consisting of (i) a revolving credit facility in an amount up to $675 million (the “Revolver”) and (ii) a term loan facility in an amount up to $125 million. The Revolver provides for borrowings in the form of loans or letters of credit up to the aggregate availability under the facility, with a sub-limit of $100 million for letters of credit. Borrowings can be made in denominations of U.S. Dollars, Canadian Dollars, Euros or British Pounds (with borrowings in non-U.S. currencies subject to a sublimit of $300 million). In addition, the Company may expand its borrowing capacity under the 2022 Credit Agreement by up to the greater of (i) $400 million and (ii) 100% of Consolidated EBITDA for the applicable four-quarter period preceding such expansion notice, subject to the approval of the applicable lenders providing such additional borrowings in the form of increases to their revolving facility commitment, or funding of incremental term loans. Borrowings under the 2022 Credit Agreement may be used for working capital and general corporate purposes, including acquisitions. The 2022 Credit Agreement matures on October 21, 2027.

The Company’s material domestic subsidiaries provide guarantees for all obligations of the Borrowers under the 2022 Credit Agreement, which is secured by a first priority security interest in (i) all existing or hereafter acquired domestic property and assets of the Company and material domestic subsidiaries, (ii) the stock or other equity interests in each of the material domestic subsidiaries and (iii) 65% of outstanding voting capital stock of certain first-tier foreign subsidiaries, subject to certain exclusions.

Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a base rate or an Adjusted Term Secured Overnight Financing Rate (“SOFR”), Adjusted Eurocurrency Rate or Adjusted Daily Simple SONIA Rate (as each is defined in the 2022 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from zero to 0.75% for base rate borrowings and 1.00% to 1.75% for Adjusted Term SOFR, Adjusted Eurocurrency Rate or Adjusted Daily Simple SONIA Rate borrowings. 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 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. The 2022 Credit Agreement also includes certain “covenant holiday” periods, which allow for the temporary increase of the minimum net leverage ratio following the completion of a permitted acquisition, or a series of acquisitions, when the aggregate consideration over a period of twelve months exceeds $75 million. In addition, the 2022 Credit Agreement includes customary negative covenants, subject to certain exceptions, restricting or limiting the Company’s and its subsidiaries’ ability to, among other things: (i) make non-ordinary course dispositions of assets; (ii) make certain fundamental business changes, such as mergers, consolidations or any similar combination; (iii) make restricted payments, including dividends and stock repurchases; (iv) incur indebtedness; (v) make certain loans and investments; (vi) create liens; (vii) transact with affiliates; (viii) enter into certain sale/leaseback transactions; (ix) make negative pledges; and (x) modify subordinated debt documents.

Under the 2022 Credit Agreement, restricted payments, including dividends and stock repurchases, shall be permitted if (i) the Company’s leverage ratio is less than or equal to 3.25x; (ii) the Company is in compliance with all other financial covenants; and (iii) there are no existing defaults under the 2022 Credit Agreement. If its leverage ratio is more than 3.25x, the Company is still permitted to fund (1) up to $35 million of dividend payments and stock repurchases annually; and (2) additional incremental other cash payments up to the greater of $65 million or 5% of consolidated total assets for the term of the 2022 Credit Agreement.

The 2022 Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2022 Credit Agreement and the commitments from the lenders may be terminated.

The 2022 Credit Agreement amended and restated the Second Amended and Restated Credit Agreement (as amended, the “2019 Credit Agreement”), which provided the Company with a $500 million revolving credit facility.

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In connection with entering into the 2022 Credit Agreement during the year ended December 31, 2022, the Company wrote off $0.1 million of unamortized deferred financing fees associated with the 2019 Credit Agreement, and incurred $1.9 million of new debt issuance costs. The new fees have been deferred and are being amortized over the five-year term as a component of Interest expense on the Consolidated Statements of Operations.

As of December 31, 2022, there was $361.0 million of cash drawn and $11.2 million of undrawn letters of credit under the 2022 Credit Agreement, with $427.8 million of net availability for borrowings.

The following table summarizes the gross borrowings and gross payments under the Company’s revolving credit facilities:

For the Years Ended December 31,

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 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.

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. The Company believes that its financial resources and major sources of liquidity, including cash flow from operations and borrowing capacity, will be adequate to meet its operating needs, capital needs and financial commitments.

Contractual Obligations and Off-Balance Sheet Arrangements

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 than1 Year 2-3 Years 4-5 Years More than5 Years

Interest payments on long-term debt (a) 94.8 19.9 39.3 35.6 —

Finance lease obligations 2.0 0.7 1.3 — —

Pension contributions (d) 2.3 2.3 — — —

Contingent earn-out payments (e) 2.7 0.7 2.0 — —

(a) Amounts represent estimated contractual interest payments on outstanding long-term debt.

(b) Amounts include contractual obligations associated with lease arrangements with an initial term of twelve months or less, which are not recorded on the Consolidated Balance Sheets. For further discussion, see Note 4 – Leases to the accompanying consolidated financial statements.

(c) Purchase obligations primarily relate to commercial chassis and other contracts in the ordinary course of business.

(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. Future contributions to the plans will be based on such factors as (i) annual service cost, (ii) the financial return on plan assets, (iii) interest rate movements that affect discount rates applied to plan liabilities and (iv) the value of benefit payments made. 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. 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. Due to the uncertainties related to these tax matters, the Company generally cannot make a reasonably reliable estimate of the period of cash settlement for this liability. As such, the potential future cash outflows are not included in the table above. 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.

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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 than1 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.

(b) Performance and bid bonds primarily relate to guarantees of performance of certain subsidiaries that engage in transactions with domestic and foreign customers.

(c) Relates to certain transactions that the Company has entered into involving the sale of equipment to certain of its customers which included (i) guarantees to repurchase the equipment for a fixed price at a future date and (ii) guarantees to repurchase the equipment from the third-party lender in the event of default by the customer. For further discussion, see Note 12 – Commitments and Contingencies to the accompanying consolidated financial statements.

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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. Actual results could differ from those estimates. The Company considers the following policies to be the most critical in understanding the judgments that are involved in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s financial condition, results of operations or cash flow.

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.

In testing the goodwill of its reporting units for potential impairment, the Company applies either a qualitative or quantitative test, in accordance with ASC 350, Intangibles – Goodwill and Other.

A qualitative approach may be applied when the Company concludes that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying value. In conducting a qualitative assessment, the Company analyzes a variety of events or factors that may influence the fair value of the reporting unit, including, but not limited to: the results of prior quantitative assessments performed; changes in the carrying amount; actual and projected financial performance; relevant market data for both the Company and its guideline comparable companies; industry outlook; and macroeconomic conditions. Significant judgment is used to evaluate the totality of these events and factors to make the determination of whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. In this situation, the Company would not be required to perform the quantitative impairment test described below.

A quantitative approach is performed by comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and no impairment charge is required. If the carrying amount of a reporting unit exceeds its fair value, this difference is recorded as an impairment charge not to exceed the carrying amount of goodwill. The Company generally determines the fair value of its reporting units using both the income and market approaches.

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. An additional key assumption under this approach is the discount rate, which is determined by reviewing current risk-free rates of capital and current market interest rates and by evaluating the risk premium relevant to the reporting unit. If the Company’s assumptions relative to growth rates were to change, the fair value calculation may change, which could result in impairment.

Under the market approach, the Company estimates fair value using marketplace fair value data from within a comparable industry grouping of publicly traded companies and from pricing multiples implied from sales of companies similar to the Company’s reporting units. The Company’s selection of comparable guideline companies is a key assumption underlying the market approach. Similar to the income approach discussed above, sales, cost of sales, operating expenses, EBITDA and their respective growth rates are also key assumptions utilized. The market prices of the Company’s common stock and other guideline companies are additional key inputs. If these market prices increase, the estimated market value would increase. Conversely, if market prices decrease, the estimated market value would decrease.

The results of these two methods are weighted based upon management’s evaluation of the relevance of the two approaches.

Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from estimated financial results due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of any goodwill impairment charge, or both. The Company also compares the sum of the estimated fair values of its reporting units to the overall fair value of the Company implied by its market capitalization. This comparison provides an indication that, in total, assumptions and estimates are reasonable. 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 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. One measure of the sensitivity of assumptions used in the impairment

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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.

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. 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. See Note 8 – Goodwill and Other Intangible Assets to the accompanying consolidated financial statements for a summary of the Company’s goodwill by segment.

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. 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. A qualitative approach may be applied when the Company concludes that it is not “more likely than not” that the fair value of the indefinite-lived intangible assets are less than their carrying value. A quantitative impairment test consists of comparing the fair value of the indefinite-lived intangible asset with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.

Significant judgment is applied when evaluating whether an intangible asset has an indefinite useful life and in testing for impairment. The Company primarily uses the relief from royalty model to estimate the fair value of the 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 2022, the Company performed a combination of qualitative and quantitative impairment tests over its indefinite-lived intangible assets. 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. 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. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from estimated financial results due to the inherent uncertainty involved in making such estimates. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and potentially result in different impacts to the Company’s results of operations. 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.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Company is subject to market risk associated with changes in interest rates and foreign exchange rates. To mitigate this risk, the Company may utilize derivative financial instruments, including interest rate swaps and foreign currency forward contracts. The Company does not hold or issue derivative financial instruments for trading or speculative purposes and is not party to leveraged derivatives contracts.

Interest Rate Risk

The Company has certain debt instruments which subject it to market risk associated with movements in interest rates. 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. 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. 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.

Foreign 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. 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. 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%.

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. 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.

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Item 8. Financial Statements and Supplementary Data.

FEDERAL SIGNAL CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 31

Consolidated Balance Sheets as of December 31, 2022 and 2021 36

Notes to Consolidated Financial Statements 39

Note 1 – Summary of Significant Accounting Policies 39

Note 2 – Acquisitions 43

Note 3 – Revenue Recognition 49

Note 4 – Leases 50

Note 5 – Inventories 51

Note 6 – Properties and Equipment, Net 52

Note 7 – Rental Equipment, Net 52

Note 8 – Goodwill and Other Intangible Assets 52

Note 9 – Debt 53

Note 10 – Income Taxes 56

Note 11 – Pension and Other Post-Employment Plans 59

Note 12 – Commitments and Contingencies 63

Note 13 – Legal Proceedings 64

Note 14 – Earnings Per Share 68

Note 15 – Stock-based Compensation 69

Note 16 – Stockholders’ Equity 72

Note 17 – Segment Information 74

Note 18 – Fair Value Measurements 77

Note 19 – Subsequent Events 78

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Federal Signal Corporation

Oak Brook, Illinois

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Federal Signal Corporation and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill - Refer to Notes 1 and 8 to the financial statements

Critical Audit Matter Description

In testing the goodwill of its reporting units for potential impairment, the Company applies either a qualitative or quantitative test, in accordance with ASC 350, Intangibles – Goodwill and Other. A qualitative approach may be applied when the Company concludes that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying value.

A quantitative approach is performed by comparing the fair value of a reporting unit with its carrying amount (“quantitative assessment”).

For reporting units tested for impairment using the quantitative assessment, the Company determines the fair value of each reporting unit using both the income and market approaches. The income approach requires management to make a number of business and valuation assumptions for each reporting unit including annual assumptions of projected sales, cost of sales, operating expenses, earnings before interest, income taxes, depreciation, and amortization (“EBITDA”), and discount rates. The market approach requires management to estimate fair value using marketplace fair value data derived from a comparable industry grouping of publicly traded companies and from pricing multiples implied from sales of companies similar to the Company’s reporting units (“market multiples”). The Company’s goodwill balance was $453.4 million as of December 31, 2022. No impairment was recognized in 2022.

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We identified the valuation of goodwill for one of the Company’s reporting units as a critical audit matter due to the reporting unit’s historical performance as compared to projections and because the determination of reporting unit fair value was based on significant assumptions that are sensitive to changes and are affected by expected future market and economic conditions. Auditing management’s judgments used in the quantitative assessment regarding significant assumptions related to projected sales, cost of sales, operating expenses, and EBITDA (“forecasts”) as well as the selection of market multiples applied to management’s projected sales and EBITDA estimates for this reporting unit required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s forecasts and the selection of market multiples for this reporting unit included the following, among others:

•We tested the design and operating effectiveness of controls over the annual goodwill impairment assessment, including those over the forecasts and the market multiples.

•We evaluated management’s ability to accurately forecast projected sales, cost of sales, operating expenses, and EBITDA by comparing actual results to management’s historical forecasts.

•We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:

◦Internal communications to management and the Board of Directors.

◦Historical results, third-party economic research, industry performance, and peer company performance.

◦Actual results from the October 31, 2022 annual measurement date to December 31, 2022.

•We performed sensitivity analyses to evaluate the risk of impairment if key assumptions are changed.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) market multiples by performing certain procedures, that included:

◦Evaluating whether the fair value models being used are appropriate considering the Company’s circumstances and valuation premise identified.

◦Evaluating the market multiples by considering (1) the selected comparable industry grouping of publicly traded companies, (2) the selected sales of companies similar to the Company’s reporting units, and (3) the adjustments made for differences in growth prospects and risk profiles between the reporting unit and the comparable industry grouping of publicly traded companies.

◦Testing the underlying source information and mathematical accuracy of the calculations.

/s/ Deloitte & Touche LLP

Chicago, Illinois

March 1, 2023

We have served as the Company’s auditor since 2013.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Federal Signal Corporation

Oak Brook, Illinois

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Federal Signal Corporation and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 1, 2023, expressed an unqualified opinion on those financial statements.

As described in Management's Annual Report on Internal Control over Financial Reporting, management excluded from its assessment, the internal control over financial reporting at TowHaul Corporation (“TowHaul”), which was acquired on October 3, 2022, and whose financial statements constitute approximately 1% of total assets and 1% of net sales of the consolidated financial statement amounts (excluding goodwill and intangible assets, which were integrated into the Company’s control environment) as of and for the year ended December 31, 2022. Accordingly, our audit did not include the internal control over financial reporting at TowHaul.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Chicago, Illinois

March 1, 2023

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31,

Selling, engineering, general and administrative expenses 171.7 149.2 149.2

Acquisition and integration-related (benefits) expenses (0.5) (2.1) 2.1

Restructuring — — 1.3

Debt settlement charges 0.1 — —

Pension settlement charges — 10.3 —

Other (income) expense, net (0.5) (1.7) 1.1

Gain from discontinued operations and disposal, net of tax — — 0.1

Basic earnings per share:

Earnings from continuing operations $ 1.99 $ 1.65 $ 1.59

Earnings from discontinued operations and disposal, net of tax — — 0.00

Diluted earnings per share:

Earnings from continuing operations $ 1.97 $ 1.63 $ 1.56

Earnings from discontinued operations and disposal, net of tax — — 0.00

Weighted average shares outstanding:

See notes to consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31,

Other comprehensive income (loss):

Change in foreign currency translation adjustment (12.6) (4.7) 8.4

Total other comprehensive (loss) income (9.8) 17.5 (2.6)

See notes to consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

(in millions, except per share data) 2022 2021

ASSETS

Current assets:

Cash and cash equivalents $ 47.5 $ 40.5

Prepaid expenses and other current assets 17.4 25.4

Properties and equipment, net 179.3 141.9

Operating lease right-of-use assets 24.7 29.8

Deferred tax assets 8.8 8.4

Deferred charges and other long-term assets 9.4 8.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued liabilities:

Compensation and withholding taxes 31.1 29.9

Current operating lease liabilities 6.9 8.8

Other current liabilities 43.2 44.4

Long-term borrowings and finance lease obligations 361.5 282.2

Long-term operating lease liabilities 18.5 22.1

Long-term pension and other post-retirement benefit liabilities 38.9 40.4

Deferred tax liabilities 51.0 53.2

Other long-term liabilities 13.0 13.8

Stockholders’ equity:

Capital in excess of par value 271.8 256.7

Treasury stock, at cost, 8.8 and 8.0 shares, respectively (178.6) (151.0)

Accumulated other comprehensive loss (84.0) (74.2)

Total liabilities and stockholders’ equity $ 1,524.3 $ 1,366.1

See notes to consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

Operating activities:

Net gain on discontinued operations and disposal — — (0.1)

Deferred financing costs 0.4 0.3 0.3

Stock-based compensation expense 10.2 7.6 8.4

Pension settlement charges — 10.3 —

Pension-related expense, net of funding (1.4) (3.8) (6.6)

Changes in fair value of contingent consideration — (3.5) (0.1)

Deferred income taxes, including change in valuation allowance (4.2) (6.5) 5.8

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (0.5) (2.6) (0.6)

Accrued liabilities 1.1 (5.5) (1.2)

Net cash provided by continuing operating activities 71.8 101.8 136.3

Net cash used for discontinued operating activities — — (0.1)

Net cash provided by operating activities 71.8 101.8 136.2

Investing activities:

Purchases of properties and equipment (53.0) (37.4) (29.7)

Payments for acquisition-related activity (49.8) (131.8) (5.4)

Net cash used for investing activities (99.7) (168.7) (34.4)

Financing activities:

Increase (decrease) in revolving lines of credit, net 81.2 70.5 (11.8)

Payments of debt financing fees (1.9) — —

Purchases of treasury stock (16.1) (15.4) (13.7)

Cash dividends paid to stockholders (21.8) (22.0) (19.4)

Proceeds from stock compensation activity 0.2 4.2 0.6

Other, net 0.1 (0.2) —

Net cash provided by (used for) financing activities 35.5 26.4 (53.4)

Increase (decrease) in cash and cash equivalents 7.0 (41.2) 50.1

Cash and cash equivalents at beginning of year 40.5 81.7 31.6

Cash and cash equivalents at end of year $ 47.5 $ 40.5 $ 81.7

See notes to consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Total other comprehensive loss (2.6) (2.6)

Cash dividends declared ($0.32 per share) (19.4) (19.4)

Stock-based payments:

Stock-based compensation 7.8 7.8

Stock option exercises and other 0.7 4.6 (10.2) (4.9)

Performance share unit transactions 0.2 (0.2) (2.9) (2.9)

Stock repurchase program (13.7) (13.7)

Total other comprehensive income 17.5 17.5

Cash dividends declared ($0.36 per share) (22.0) (22.0)

Stock-based payments:

Stock-based compensation 7.0 7.0

Stock option exercises and other 0.9 9.1 (12.0) (2.0)

Performance share unit transactions 0.2 (0.2) (3.8) (3.8)

Stock repurchase program (15.4) (15.4)

Total other comprehensive loss (9.8) (9.8)

Cash dividends declared ($0.36 per share) (21.8) (21.8)

Stock-based payments:

Stock-based compensation 9.5 9.5

Stock option exercises and other 0.5 5.7 (10.2) (4.0)

Performance share unit transactions 0.1 (0.1) (1.3) (1.3)

Stock repurchase program (16.1) (16.1)

See notes to consolidated financial statements.

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FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of the Business

Federal Signal Corporation was founded in 1901 and was reincorporated as a Delaware corporation in 1969. References herein to the “Company,” “we,” “our” or “us” refer collectively to Federal Signal Corporation and its subsidiaries.

Products manufactured and services rendered by the Company are divided into two reportable segments: Environmental Solutions Group and Safety and Security Systems Group. The individual operating businesses are organized as such because they share certain characteristics, including technology, marketing, distribution and product application, which create long-term synergies.

The Company’s fiscal year ends on December 31. All references to 2022, 2021 and 2020 relate to the fiscal year unless otherwise indicated.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements represent the consolidation of Federal Signal Corporation and its subsidiaries and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”).

Intercompany balances and transactions have been eliminated in consolidation.

New Accounting Standards Adopted in 2022

In October 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date. This ASU, which is applied on a prospective basis, is effective for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company adopted this ASU effective January 1, 2022, and the application of the amended guidance to the acquisition completed in 2022 did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

New accounting pronouncements issued, but not yet adopted, are either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements.

Non-U.S. Operations

Assets and liabilities of non-U.S. subsidiaries, other than those whose functional currency is the U.S. dollar, are translated at current exchange rates with the related translation adjustments reported in stockholders’ equity as a component of Accumulated other comprehensive loss. Accounts within the Consolidated Statements of Operations are translated at the average exchange rate during the period. Non-monetary assets and liabilities are translated at historical exchange rates.

The Company incurs foreign currency transaction gains or losses, related to transactions that are denominated in a currency other than the functional currency, which are recognized in the Consolidated Statements of Operations as a component of Other (income) expense, net. For the year ended December 31, 2022, the Company realized foreign currency transaction losses of $0.2 million. For the years ended December 31, 2021 and 2020, the Company realized foreign currency transaction gains of $0.3 million and $0.4 million, respectively.

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Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the 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. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity and highly liquid nature of these instruments.

Accounts Receivable

The Company carries accounts receivable at the face amount less an allowance for doubtful accounts for estimated losses as a result of a customer’s inability to make required payments. Management evaluates the aging of the accounts receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of accounts receivables that may not be collected in the future and records the appropriate provision.

Inventories

The Company’s inventories are valued at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Included in the cost of inventories are raw materials, direct wages and associated production costs.

Properties and Equipment

Properties and equipment are stated at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Useful lives generally range from eight to 40 years for buildings and three to 15 years for machinery and equipment. Leasehold improvements are depreciated over the shorter of the remaining life of the lease or the useful life of the improvement. Depreciation expense is primarily included as a component of Cost of sales on the Consolidated Statements of Operations, with depreciation expense associated with certain assets used for administrative purposes being presented within SEG&A expenses. Depreciation expense, which includes depreciation on rental equipment, was $41.8 million, $39.5 million and $35.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Properties and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Rental Equipment

The Company enters into lease agreements with customers related to the rental of certain equipment. All of these leasing agreements are classified as operating leases and are for periods generally not to exceed five years. In accounting for these leases, the cost of the equipment purchased or manufactured by the Company is recorded as an asset and is depreciated over its estimated useful life. Rental income is recognized ratably over the term of the underlying leases.

Rental equipment is depreciated to an estimated residual value on a straight-line basis over the estimated useful lives of the assets and is reviewed for potential impairment whenever an event occurs or circumstances change that indicate the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares non-discounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on a non-discounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Rental equipment includes certain equipment that is manufactured by the Company and subsequently transferred to the rental fleet, as well as equipment purchased from third-party manufacturers, for the purpose of renting to end-customers. The related cash flow activity associated with these transactions is reflected within operating activities on the Consolidated Statements of Cash Flows.

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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.

In testing the goodwill of its reporting units for potential impairment, the Company applies either a qualitative or quantitative test, in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other.

A qualitative approach may be applied when the Company concludes that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying value. In this situation, the Company would not be required to perform the quantitative impairment test described below.

A quantitative approach is performed by comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and no impairment charge is required. If the carrying amount of a reporting unit exceeds its fair value, this difference is recorded as an impairment charge not to exceed the carrying amount of goodwill. The Company generally determines the fair value of its reporting units using both the income and market approaches.

Under the income approach, the key assumptions include projected sales, cost of sales, operating expenses and the discount rate. Under the market approach, the Company estimates fair value using marketplace fair value data from within a comparable industry grouping. The results of these two methods are weighted based upon management’s evaluation of the relevance of the two approaches.

In 2022, the Company applied the quantitative approach to assess the goodwill of its reporting units for potential impairment, using a combination of the income and market approaches to determine the fair values of its reporting units. The fair values of the Company’s reporting units exceeded their carrying values by more than 20% and, therefore, no impairment was recognized.

The Company had no goodwill impairments in 2022, 2021 or 2020. See Note 8 – Goodwill and Other Intangible Assets for a summary of the Company’s goodwill by segment.

Intangible Assets

Definite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives and are tested for impairment if indicators exist in a manner similar to that described above for Rental Equipment.

Indefinite-lived intangible assets are tested for impairment on an annual basis at October 31, 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. 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. A qualitative approach may be applied when the Company concludes that it is not “more likely than not” that the fair value of the indefinite-lived intangible assets are less than their carrying value. A quantitative impairment test consists of comparing the fair value of the indefinite-lived intangible asset with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.

In 2022, the Company performed a combination of qualitative and quantitative impairment tests over its indefinite-lived intangible assets. 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. 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. See Note 8 – Goodwill and Other Intangible Assets for a summary of the Company’s intangible assets.

Warranties

Warranties are classified as either assurance-type or service-type warranties. A warranty is considered an assurance-type warranty if it provides the customer with assurance that the product will function as intended. A warranty that goes above and beyond ensuring basic functionality is considered a service-type warranty. The Company offers certain limited warranties that are assurance-type warranties and extended service arrangements that are service-type warranties. Assurance-type warranties

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are not accounted for as separate performance obligations under the revenue model. If a service-type warranty is sold with a product or separately, revenue is recognized over the life of the warranty.

Sales of many of the Company’s products include assurance-type warranties based on terms that are generally accepted in the Company’s marketplaces. The Company records provisions for estimated warranty costs, which are included within Cost of sales, at the time of sale based on historical experience. The Company periodically adjusts these provisions to reflect actual experience. Infrequently, a material warranty issue can arise which is beyond the scope of the Company’s historical experience. The Company records costs related to these issues as they become probable and estimable.

The Company also sells optional service-type warranty contracts that extend coverage beyond the initial term of the express warranty period. At the time of sale, revenue related to the service-type warranty contract is deferred and typically recognized as revenue on a straight-line basis over the life of the contract. As of December 31, 2022 and 2021, deferred revenue associated with service-type warranty contracts was $4.1 million and $4.0 million, respectively, and was included within Other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets. Costs under service-type warranty contracts are expensed as incurred.

Workers’ Compensation and Product Liability Reserves

Due to the nature of the Company’s manufacturing and products, the Company is subject to claims for workers’ compensation and product liability in the normal course of business. The Company is self-funded for a portion of these claims. The Company establishes a reserve using a third-party actuary for any known outstanding matters, including a reserve for claims incurred but not yet reported. The amount and timing of cash payments relating to these claims are considered to be reliably determinable given the nature of the claims and historical claim volumes to support the actuarial assumptions and judgments used to derive the expected loss payment patterns. As such, the reserves recorded are discounted using a risk-free rate that matches the average duration of the claims.

The Company has not established a reserve for potential losses resulting from the firefighter hearing loss litigation, with the exception of certain estimated losses that have been recognized related to settlement discussions (see Note 13 – Legal Proceedings). If the Company is not successful in its defense after exhausting all appellate options, it would record a charge for such claims, to the extent they exceed insurance recoveries, when the related losses become probable and estimable.

Pensions

The Company sponsors domestic and foreign defined benefit pension plans. Key assumptions used in the accounting for these employee benefit plans include the discount rate, expected long-term rate of return on plan assets and estimates of future mortality of plan participants.

The weighted-average discount rate used to measure pension liabilities and costs is selected using a hypothetical portfolio of high-quality bonds that would provide the necessary cash flow to match the projected benefit payments of the plans. The discount rate represents the rate at which our benefit obligations could effectively be settled as of the year-end measurement date. The weighted-average discount rate used to measure pension liabilities increased from 2021 to 2022. See Note 11 – Pension and Other Post-Employment Plans for further discussion.

The expected long-term rate of return on plan assets is based on historical and expected returns for the asset classes in which the plans are invested. The Company references published mortality tables and scales in determining its estimate of future mortality.

Revenue Recognition