Welcome to the first quarter 2008 Federal Signal earnings conference call. (Operator Instructions) I would now like to turn the call over to your host for today’s call, David Janek, Vice President and Treasurer.

Welcome to Federal Signal’s first quarter 2008 conference call. Joining me today are Jim Goodwin, our Interim President and Chief Executive Officer and Stephanie Kushner, our Senior vice President and Chief Financial Officer. On the call today Jim will discuss the progress made on several initiatives underway at the company. Stephanie will then comment on our financial results for the quarter and she will provide an outlook for the year. Following these prepared remarks we will open the call for your questions. Before we begin I must remind you that some of our comments may contain forward-looking statements that are subject to the Safe Harbor language found in today’s news release and in Federal Signal’s filings with the Securities and Exchange Commission. These documents are available on our website, www.FederalSignal.com. I will now turn the call over to Jim.

The first quarter was a productive one for Federal Signal as we made noteworthy progress on a number of important strategic initiatives. I’d like to take a moment to discuss these developments beginning with the changes to our portfolio of businesses. As you saw on our press release last week we completed the sale of our remaining Tool businesses to Connell Limited which included our Dayton Progress Corporation and its subsidiary PCS Corporation. We realized $64 million net of taxes on the divestiture and we expect to use the proceeds to pay down debt associated with the recent acquisitions in our Safety and Security Systems group. We also made progress on our initiative to explore strategic alternative for our E-ONE business which we announced last quarter. I am pleased to report that we are currently in advanced discussions with a potential buyer and may reach an agreement as early as the second quarter of this year. With our strategic transformation nearly complete we can begin to turn our attention to fully leveraging our strong asset base and unique position in the market to deliver better overall returns and consistent shareholder value creation over the long term. An important ingredient to our success in achieving and delivering value is leadership. Today I am pleased to report we are making progress identifying a world-class candidate to lead the company in the coming years. Given the interest of some highly qualified candidates to whom we have been speaking I would expect we will be able to announce the new CEO by the end of the second quarter. We have also taken steps to strengthen our leadership at the Board level with the appointments of Dennis Martin and Joseph Wright. Dennis Martin is the former Chairman and CEO of General Binding Corporation and has…

Before talking about the continuing operations results for the quarter I will make some comments about the large loss reported in discontinued operations. The $89 million loss includes two large charges, a $27 million loss on the sale of our Tool business stemming primarily of almost $56 million of goodwill in the segment. I would just point out the sale of the first part of the segment a year ago resulted in an almost equivalent $25 million gain so the total transaction was done at very close to book value. The other part of the charge was $58 million for E-ONE. The size of this charge reflects an impairment of the investment given our probable net realizable value in the market today. Although we have reduced our investment in this business considerably through a $32 million reduction in working capital over the past few quarters we believe that absent this write-down there would be a considerable gap between our carrying value and the value we will realize upon its sale. After the discontinuation of E-ONE and the sale of Tool, the profile of the company changes materially. We become a roughly $1 billion company with almost half of our sales and 30% of our employees outside the U.S. and a materially higher operating margin. We are in the process of re-stating our 2007 quarterly results on the new basis and will be releasing that information later in May. For the full year of 2007 EPS on a re-stated basis would be about $0.82. We are still finalizing the tax calculation on that. Turning to the first quarter I’ll start with a review of our orders. At $252 million our first quarter order intake was about 6% below a year ago but still about 11% higher than our shipments due in…

We would like to open the call to questions.

(Operator Instructions) The first question comes from Terry Darling - Goldman Sachs & Co. Terry Darling – Goldman Sachs & Co. : It was encouraging to hear about the timing expected on the potential divestiture of E-ONE. I think you had mentioned a strategic buyer. I’m just wondering if we can imply from that are we talking about a private equity firm or in fact if you did not mean to imply that. And can you tell us where the book value is today?

The buyer we are in discussions with right now is a financial buyer, not a strategic buyer, and I’ll let Stephanie respond to the book value today.

Because we are in discussions right now we’d really rather not disclose that. Terry Darling – Goldman Sachs & Co. : Stephanie can you tell us what the first quarter revenue profit performance was?

In the first quarter E-ONE had net sales of $53.2 million which was up slightly from $47.7 million a year ago. They recorded an operational loss of $6.2 million versus $3.9 million a year ago. It was actually worse by $2.3 million but there is an important distinction there. $4.3 million of that impact was really because they were reducing inventories rather than building inventories as they were a year ago. So that was $4.3 million negative. Then going the other way is the impact of the overhead and SEG&A reductions that they were working on. So although it doesn’t look like a better performance it is a better core performance. Terry Darling – Goldman Sachs & Co. : I appreciate you are in a sensitive situation here time wise in terms of indications of value. I think you can also appreciate on our side we are trying to get some clue in terms of what may come of this in terms of your ability to further reduce debt. Maybe I can just ask the question then in those terms. Should we expect a meaningful amount of debt reduction post the sale of this or is it potential for the sales price to be very, very low at this point?

I would say we have taken quite a lot of working capital out of this business so we have already benefited $30+ million since we frankly started talking about this toward the end of last year. There will be more debt reduction but it is fair to say I wouldn’t look for a huge number. Terry Darling – Goldman Sachs & Co. : Lastly can you update us on the expenses expected related to the cost savings effort? I think you mentioned $20 million is still your target for the rest of the year. Can you update the spend related to that? Can you update us on timing of realization of savings? It didn’t look like the first quarter saw a lot of that so maybe we’ll have a nice benefit in the back half.

In the first quarter we spent $1.4 million. We expect to spend about $4 million in total over the course of the year. We should more than cover that in terms of savings. Terry Darling – Goldman Sachs & Co. : So $4 million realized this year and the balance of the $20 million as you move into 2009?

No. We are on target for getting the $20 million out. The $4 million is the severance costs that will go against getting that $20 million. Terry Darling – Goldman Sachs & Co. : Did we see any of the $20 million this quarter? Will we see any in the second quarter? Can you just help us with timing and realization of those savings?

There wasn’t a lot. If you recall we instituted these reductions the first part of March so there was minimal impact in Q1 so the balance of these savings are going to play out over the next several quarters.

The next question comes from Ned Borland - Generation Equity Research. Ned Borland – Next Generation Equity Research: The severance and the $1.3 million to support the Public Safety business, I’m coming up with about 11% operating margin below the traditional 12% to 15% range. I know you had the light bar sales down in the quarter. Was there anything else with regard to mix that contributed to that?

The biggest issue was the light bar sales. That is a relatively strong marginal profit business for us and we were impacted primarily by that in the quarter. Ned Borland – Next Generation Equity Research: You said that you expect to see a sequential improvement in the margins because there are just more orders coming in the second quarter for those products?

Our second quarter tends to be a strong quarter in this business in part because of municipal budgets…the budget year of a lot of our municipalities close out at the end of the second quarter. So last year, for example, I think our second quarter margin was 14.9%. So we are expecting a nice boost in the second quarter of this year as well. Ned Borland – Next Generation Equity Research: Full-year legal expenses, are we still looking at if we take the $3 million from this quarter and what you projected for the second quarter, is that it for legal expense? I imagine you have some expenses in the back half of the year.

We are still looking at a full-year $9 to $10 million. That has not changed from what I talked about last quarter. Ned Borland – Next Generation Equity Research: With regard to the Bronto expansion were there any costs related to that in the quarter?

The only thing I would say is we are still operating somewhat inefficiently because of all the outsourcing we are doing but the actual project and costs associated with that are almost entirely being capitalized.

The ongoing cost of the outsourcing because of the capacity constraints is clearly having an impact on the margin.

The next question comes from Walt Liptak - Barrington Research. Walt Liptak – Barrington Research: On the Safety and Security Group, with the order entry and the backlog, the decline in the backlog was $57 million versus last quarter of $88 and a year ago down. Can you talk about the different products that are not in backlog that you had previously? What is in the backlog? The mix in business in the backlog. Your visibility right now going into the second quarter?

All of this is relatively shorter cycle business so there is a piece of our larger parking installations that would typically be in backlog. One of the things you’re seeing now is we are getting to the completion of the New York/New Jersey Port Authority so that has just about run through our backlog. We have some of the larger offshore oil platform orders in our Electrical business that are in backlog. Again I know we are getting close to shipping something pretty significant for Shell [Perl]. Some of the large PIPS installations, for example something right now for the City of London will be in backlog. But the other things, light bars and sirens, unless it is for a big tender, for one of these large export orders or something really sizeable that business tends to be what I call a day-in day-out business. Walt Liptak – Barrington Research: Then the commentary at the beginning, Jim you mentioned the economic issues and decline in municipal spending. You were talking primarily about the light bars or was there other products you were concerned about?

Principally two areas, the light bars is clearly one. As Stephanie indicated police car shipments are down and that definitely is having an impact on light bars. The other area of significant decline has been in the street sweeper marketplace. That is being impacted principally by municipalities but also to some degree by the housing industry slow down. A lot of the contractors and builders use street sweepers to keep their construction areas cleaned up and cut traffic and particularly on the west coast we are seeing a softness in the California market on street sweeper orders. Walt Liptak – Barrington Research: Lastly, I wonder if you could break out the charge of $1.4 million. I think you said $500,000 in environmental. How much is broken out into Fire and Safety?

I think all the numbers are actually in the release. We have $400,000 in [inaudible]. Safety and Security had $500,000. Actually nothing in the operational Fire Rescue, environmental was $500,000. Walt Liptak – Barrington Research: How do you think that will break out for the second quarter?

I’m not sure. I am not sure I know with enough specificity.

The next question comes from Charlie Brady - BMO Capital Markets.

The Safety Security margin you are talking about a sequential increase in Q2 but given the downdraft particularly on that light bar business is it fair to say you are not expecting a year-over-year increase in that margin?

Yes I think that is right. We were at almost 15% last year.

Can you just speak to the potential for order cancellations as to what is in your backlog on some of these projects? You talked about orders being pushed out but I’m wondering if you can give us some specificity on orders being cancelled. Are deposits put down on much of this? Obviously with the light bars it is not in backlog but some of the sweepers and vacuum trucks and things like that.

I think experience would suggest we see hardly any order cancellation. The long-lead products are in high demand and deliveries get accepted. The light bar market, for example, is a book and ship type of process. So I don’t think we have any concerns about order cancellation.

Going back into the backlog again, what protection do you have on what products are in the backlog, the orders in the backlog now for raw material price increases or surcharges coming through? Are you hearing from the suppliers that you are going to get hit with a surcharge that is going to hit some of the margin that is already backlogged? Or do you have the ability to reprice that?

We have not received any surcharges yet on our steel. That clearly doesn’t mean we won’t face something in the future but at this point in time we have not had any surcharges placed. As I mentioned in the last conference call we are contracted through the balance of this year for our steel. We are beginning to see some flow through cost increases on some of our manufactured components that we buy from other suppliers. As I indicated in my opening comments we are taking advantage of those cost increases on raw materials to put new price increases out into the marketplace.

With respect to Bronto you had an 8% margin in the quarter. Once that additional capacity comes online and you are not doing as much outsourcing and you are running more efficiently, what is a target operating margin goal for that business?

That should be operating at double-digit margins. I think low double-digits.

The next question comes from Steve Barger - KeyBanc. Steve Barger – KeyBanc: I’d like to talk about some of the newer products that you have. Can you talk about the size of the market opportunities for the newer higher margin stuff that came out of the acquisitions? Maybe talk about the outlook for federal funding in some of those markets?

Here is the issue, when we are defining and building a market it is very difficult to talk about the market size. So, for example when we initially acquired PIPS we believed we had a market size on the order of $150 million but as adoption occurs that could grow fairly dramatically for things like congestion tolling or increased usage of the product for recovery of stolen cars and so on. So we view it as a gestating market. Steve Barger – KeyBanc: When you say fairly dramatically does that mean in doubles? Or five times? Or you just can’t define it because it is much bigger than that?

I think we would be speculating all over the map if we tried to put a number on it. I think what is beginning to happen in this country is municipalities and states are beginning to look at the opportunities that this technology has for them to increase revenues outside the normal taxing window. We’ve got three major cities right now that are currently exploring tolling systems. New York state unfortunately was unsuccessful at passing legislation to permit New York City to begin tolling. Even though federal funds were available, a grant in excess of $300 million was available for New York to do that from the Federal Government. The next opportunity for that to proceed is probably going to be this fall when the legislature reconvenes. The City of Chicago was just given a grant of $150 million to begin exploring tolling opportunities and congestion pricing here for the City of Chicago. Los Angeles is currently actively exploring the opportunity. So I think as cities and states start to look at the revenue generating capabilities of this technology with the help of the Federal Government who is making money available for this type of technology I think we have got some very solid opportunities out there. All of these cities we have been involved with we have been the prime supplier being bid into these projects. So, once the decisions are made to move forward I think we are excited about the upside. Steve Barger – KeyBanc: Thinking about England where we know there are a lot of cameras installed and PIPS had other competitors, do you know the dollar amount of cameras installed in that market?

We do and I don’t know off the top of my head. But there are incredibly more densely situated than anyone has ever even dreamt of having in the U.S. So we clearly think that the U.S. is the opportunity. Steve Barger – KeyBanc: So that is PIPS. Any idea of market opportunity for the Codespear? How are you thinking about that?

Not in total, but I think as I commented Codespear has really opened up some new market opportunities for us. Particularly municipalities look at the flexibility Codespear is giving them to deploy other products from Federal Signal. We are the only ones now in the position to offer to municipalities outdoor warning systems that are Codespear enabled and that has generated a significant amount of interest in replacing older outdated warning systems with the new digital sirens that we are now deploying with Codespear. So we had expected with the Codespear acquisition we would be able to do traditional deployment for mass notification, etc. but I think we are finding that bigger opportunities are starting to evolve now and using that product to help sell other products we have manufactured for quite some time. Steve Barger – KeyBanc: So when you bought Codespear you must have had some estimate for this will be like $100 million market or $300 million? I know it is hard to define the upper limit but if you think about the dollar value of installed warning systems in the U.S. you must have some idea of what that is; basically your own market share. Maybe you could define in a numeric way what you think is possible.

I’m just not prepared to do that on this call. I take your point and again the opportunities are shifting and growing at such a pace that is a tough thing to be able to comment on. Steve Barger – KeyBanc: What do you think the organic growth rate might be for some of the newer products in the Safety and Security segment versus the organic growth rate for some of your legacy products?

The PIPS growth rate we were seeing when we acquired them was north of 20% to 25% per annum. So I do think within that Safety and Security group we will have products that are growing at that rate of 20% to 30% per annum. Some of the traditional products are still in the single digits. Steve Barger – KeyBanc: Any idea or can you tell us the operating margin spread between newer products and some of the legacy stuff?

The gross margin spread can be 20% to 30%. Steve Barger – KeyBanc: Difference between a light bar and an installed [inaudible] system, 20% to 30%.

Yes, but then the intensity of the selling and the R&D is greater so you lose some of those margin points and it all depends on the rate at which we can grow the volume. Some of those, the SEG&A and the R&D type expenses are fixed. Steve Barger – KeyBanc: Even factoring that in, is it safe to say these are higher margin products than the legacy stuff?

Yes. They should not be dilutive, that is for sure. Steve Barger – KeyBanc: In terms of looking for the new CEO, is the candidate likely to come from a diversified industrial company or are you searching for someone more experienced with a proprietary engineering product background? What would the candidate look like in terms of resume?

At the moment we have candidates from both of those camps. We have been extremely pleased with the quality of candidates we have seen. We have already talked to twelve candidates in the first round. We have narrowed that down to ten which we are currently putting through a second round of interviews with the search committee. It is our intent after this second round that we will cull that list down to probably three which we will then present to the full Board for consideration. Right now we have candidates out of both camps.

The next question is a follow-up from Terry Darling - Goldman Sachs & Co. Terry Darling – Goldman Sachs & Co. : Stephanie can you give us the 2007 Bronto revenues and operating income?

Net sales $118 million. Orders were about $174 million. Operating income for Bronto was $7.9 million. Terry Darling – Goldman Sachs & Co. : That margin then implies below that 10$ to 13% range and so you were still struggling with the same outsourcing impact at that point?

They were just operating generally at a lower volume. That is when we were convinced the investment in the expansion was appropriate. Terry Darling – Goldman Sachs & Co. : You had 18% growth in the first quarter layering in 40% additional capacity post July. So the overall growth rate here for the year should be what in the 25% to 30% range. Or is that 18% above where the run rate is?

Probably 20% on the top line. Terry Darling – Goldman Sachs & Co. : On the litigation expense issue should we be making assumptions that some continue into 2009 or is it just too early to call at this point?

I would say it is too early to call. Terry Darling – Goldman Sachs & Co. : Jim, in your opening comments, something about exiting the first phase or strategic reorganization phase or something like that, I’m just trying to get a sense as to how you and the Board are thinking about the potential for additional acquisitions or conversely divestitures of other parts of the company and it seems to be that comment suggested you really were not thinking about any potential additional divestitures? Maybe you can just set the record straight there for us?

You read that right. We have been focused on getting the Tool business transaction closed which we accomplished, we are now working on finalizing the E-ONE transaction, and we have no other activity underway on the acquisition side or the divestiture side. Terry Darling – Goldman Sachs & Co. : Stephanie can you give us the debt position today, i.e. post proceeds from the Tool group sale coming in? I think you had mentioned in your comments there was $64 million?

You can subtract $64 million from the number on the balance sheet.

This concludes the question-and-answer session of the call.

We’d like to thank you all for being with us this morning. Hopefully we have been able to communicate that we are in fact taking actions we committed to in the last conference call we had in February. Obviously we have been quite busy and we remain focused on continuing to drive shareholder value higher. We will continue to monitor the municipal market place. We will continue to work on our cost reduction and we look forward to sharing with you at the end of the second quarter the results of those efforts. Thanks again for your support.