Welcome to the Federal Signal Second Quarter Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Ian Hudson, Vice President and Corporate Controller. Please go ahead.

Good morning and welcome to Federal Signal's second quarter 2016 conference call. I'm Ian Hudson, the Company's Corporate Controller. Brian Cooper, our Chief Financial Officer is unable to participate in today's call as he is recovering from a sports related injury. Brian has had a successful surgery and is expected to make a full recovery. While recovering he is still performing his duties as our CFO and he is currently expected to return to the office in August. In Brian's absence I will be presenting on today's call alongside Jennifer Sherman, our President and Chief Executive Officer. We’re also joined today by Svetlana Vinokur, Vice President, Treasurer and Corporate Development We'll refer to some presentation slides today, as well this to the earnings news release which we issued this morning. The slides can be followed online by going through our website federalsignal.com, clicking on the investor call icon and signing into the webcast. We've also posted the slide presentation and the news releases under the Investor tab on our website. Before we begin, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the Safe Harbor language found in today's news release and in Federal Signal's filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with U.S. Generally Accepted Accounting Principles. In our news release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-Q later today. I'm going to start today by addressing our financial results. Jennifer will then provide her perspective on our performance, current market conditions and our outlook for the remainder of 2016. After our prepared comments, Jennifer, Svetlana and I will…

Thank you, Ian. I'd like to start by providing some color on the second quarter. Our results for the quarter and this year continued to reflect a tale of two markets. Our municipal markets which constitute about 60% of our revenues remained solid. It was pleasing to see us reported increase in total orders which was largely driven by the JJE acquisition. But even after excluding the effects of the JJE acquisition ESG orders were up about 36% on a sequential quarter basis and up almost 6% versus the prior quarter, much of that was due to steady performance in municipal market and we are optimistic about a couple of near term opportunities for larger fleet orders. While there is some caution in municipal market in any election year we continue to see steady demand in the U.S. as well as in Canada. The growth and improving profitability of our U.S. and European public safety system businesses which are part of our safety and security systems group were also encouraging. These businesses make life bars [ph], sirens and related products for municipal customers in the police, fire and heavy duty markets. They continue to gain share and benefit from a number of new products introductions in recent year. While municipal markets remain solid our industrial markets continue to be impacted by the lingering effects associated with the downturn in the oil and gas market. Within our Environmental Solutions Group, an overhang of used equipment at reduced prices continues to impact demand for the new equipment we sell from customer service saying oil and gas and other adjacent industrial markets. As you’ve seen this has impacted ESG's revenues and margins. As a result income in industrial order activity has remained low with the biggest effects occurring in our vacuum truck line.…

[Operator Instructions]. We will go first to Steve Barger with KeyBanc Capital Markets.

Hey, good morning. It's actually Ken Newman on for Steve. Thanks for taking my call. I had a question on operating cash flow, it was lower in the first half of the year just due to the reasons that you mentioned in the slides, in the press release. Curious if you could talk about what you expect for free cash flow generation for the rest of the year or at least for the full year in total?

Ken, this is Ian, I will take this one. Obviously the cash flow in the first six months of the year especially as we just presented it is impacted by the transaction as we described and the associate non-cash settlement of the receivables from JJE. The working capital that we have is it -- if you look at it as a percentage of sales it is distorted this quarter largely because of the acquisition as well as the inventory and rental fleet step up in value. So that is impacting for the quarter, I mean we've only had one month of results of JJE and so we expect that to normalize over time certainly later this year and we expect that our cash flow is obviously going to pick up in the second half of the year.

Understood. Looking at ESG margin decline, can you break out for us how much of that was mix, how much was volume and what pricing did in the quarter?

I think pricing range remained pretty stable. It's a combination of both mix and volume, so hydro excavation trucks that we sell into the oil and gas market, have higher margins. So we're feeling the impact of that going forward but the encouraging news is that we talked about the improvement in the ESG orders particularly on the municipal side and they tend to have not as good margins as the hydro excavation trucks but healthy margins.

Got it. That's helpful. One more and then I will jump back in line. You know we're seeing a lot of companies having a hard time finding organic growth, curious -- as you look at your competitors are they remaining rational and is there anything that you can do to stimulate growth outside of price actions. You mentioned a couple of new products coming into market anything else that you're looking at?

On the new product development side, we're very focused on our innovation initiative particularly on the ESG side we have -- we introduced new product to the utility market and we plan on introducing additional products into that market and we also introduced our recycling products in our trailer jetter product earlier this year. On the SSG side we’re undergoing some redesign of our industrial core products and we continue to benefit from the new products that were introduced on our public safety system side. So as we move forward we're very focused on you know how do we utilize our existing technologies to open up new market opportunities for us or is there opportunity for some of our existing products to new geography.

Okay. And just a follow up I mean as you look at your competitors, would you say that the remaining rational in terms of price actions?

Not always.

Understand.

But we think that we’re able to differentiate our product and we've been -- we remained aiming pricing.

We will go next to Marco Rodriguez with Stonegate Capital Markets.

Good morning. Thank you for taking my questions. I was wondering if you could talk a little bit more about the Joe Johnson integration, just kind of providing this sort of color you might be able to in terms of just the timing how long you expect it to kind of move through and what sort of perhaps cross training you might be doing with the salespeople.

Sure you know we have Joe Johnson and one of our Jetstream General Manager are leading that project and we have a team focused on the strategic objectives that we set forth behind the acquisition which is also tied to the earns out that we previously discussed and as we mentioned on the call we have a new product offering, the rental equipment, the initial demand has been encouraging there as we discussed. With respect to used equipment, we've done cross training because we've introduced our Jetstream, our guzzler and Westech products to Joe Johnson's Canadian sales force so they've been trained on those products and we plan on leveraging their service centers and their sales team to increase sales of those products and then on the parts and service side we now have a aggregated 25 locations across North America that should allow us to better service our products in those strategic areas where our customers reside and then we also believe this used equipment offering is we've sold some used equipment but we'll have more of that available to sell and that will -- it's something that thus far has been received very positively. So we're encouraged, we're in the early days, we just closed the transaction in about six weeks ago. We're encouraged by the progress we've made today.

Got you. And I think if I heard you correctly in your prepared remarks you were looking to basically kind of accelerate some of the rental business after this acquisition here with Joe Johnson, what sort of investments do you need to make to kind of make that happen if you will?

We announced the acquisition, we talked about an incremental $15 million to $20 million in their rental fleet. We have obviously certain internal metrics that guide when we make those investments and the market reaction to the rental offering both by our dealers that we're going to re-rent to and by our industrial salesforce in certain areas has been encouraging. So we anticipate that the amount likely won't change but we could be making those investments earlier than we originally thought.

Got you. Okay and then other quick question I had here was just kind of all from a modeling perspective. Have you guys gotten a handle on how your DNA is going to change once you bring Joe Johnson in here?

Marco, this is Ian. Yes we have obviously we have the rental fleet that is going to be an asset that we're going to depreciate overtime, you will see when we file our Q later today you'll see how we're trying to depreciate that, the policy that we're going to apply. So we thought about it. It's obvious that -- our D&A is obviously going to increase overtime because of the addition of the fleet. So, yes you'll get a feel of how we're thinking about modeling it when we file the Q later today.

Our next question comes from Walter Liptak with Seaport Global.

I got into the call a little bit late so just wanted to ask about JJE and can you provide what you expected the back half revenue and profit contribution would be and I realize this is going to be a long term story and with the accounting changes, really a [indiscernible] company but I wondered about you know revenue and profits.

We typically don't break out the results of the JJE is now part of our ESG Group and we don't break out those results. Beyond that to state that it's thus far and in the very beginning period it's performing at or better than we had modeled, it's part of the acquisition analysis.

Well I think when we think about it we obviously -- there is a chain now because of the interplay between ESG and JJE now, it's a different dynamic to what we previously had before the acquisition and so that's really what is reflected in the deferral impact of up to $0.05 that we referenced.

Okay. Just switching gears over to the oil and gas commentary that you made, you know a lot of our companies saw bottoming in the first half of the year and you know I realize that you may not have visibility into 2017 but if you can comment on you know any trends or comments from customers you think were at least bottomed and the market will be stable for your oil and gas exposure especially the hydro excavators?

Yes we’re assuming for the second half of the year that it is going to remain the same with respect to the first half of the year and we are -- our internal plans have the overhang that we've talked about leading into 2017. Over the last couple months we haven't seen it deteriorate further. So that's encouraging but we're not expecting any meaningful coverage for the second half of the year and we believe it's overhang of excess inventory will bleed into 2017.

Okay, makes sense. And then lastly any update on the [indiscernible] loss litigation, were any of the trials started? Are things moving forward the way that you thought they were for the year?

We have not had any trials in the first half of the year. We had put out a press release that we’re successful in getting one of the cases dismissed. We have two trials scheduled perhaps three depending on the timing in the second half of the and we're moving forward aggressively defending those cases.

We will go to Ken Newman for a follow-up question.

So ESG revenue was $235 million in the first half, curious, do you expect second half revenue to be flat or up versus the first half?

I think it would be up in the second half of the mainly because of I mean we're going to have the effects of the Joe Johnson acquisition for the year that wasn’t in there in the first half of the year.

And we also talked about the increased orders. We tried to break it out for you with Joe Johnson Equipment without Joe Johnson Equipment and we are encouraged by the sequential improvement.

Got it. So those orders -- another way of saying that is the orders could be monetized before the year is out?

Some of them, yes.

Okay And then I guess moving to ESG margin, I mean if we look at the margin in this quarter is that a good proxy for the back half for ESG?

I mean we're not expecting the mix to change significantly, so we're not expecting to see an increase in for example hydro excavators which are higher margins. So I think there are going to be some impact with the JJE acquisition which you'll need to factor in but it should be a stable margin basis, yes.

Okay. And then moving over to ESG, I mean given the view on mix in the 2017 how do you think about the margin for that segment? I mean is that sustainable in the 13% range?

A lot of it depends on mix. We also have the impact of the JJE acquisition moving forward, you know but we do remain confident in our long term margin targets for JJE [ph].

And then I guess lastly I mean you did talk about focusing on strategic acquisition, can you talk a little bit about what's in the pipeline currently? Any active projects and how should we think about deal size as we progress over the call it, the next 6 to 12 months.

Sure we have a number of active projects in the pipeline and we look at our management bandwidth, we completed the JJE acquisition. So right now we are focusing more on the SSG side but if something were to pop on the ESG side and we thought it made sense to me at the bandwidth we would move forward. You know the areas we're focusing on are you know either they are adjacent, we're staying pretty close to the core. Does this acquisition give a factor to new geographies? Can we leverage channels and market, are there adjacent markets with new products. Those are all some of the acquisition criteria that we're looking at very closely and obviously acceptable return. So I would say the pipeline is healthy right now and we’re pursuing a number of options. We’re looking at more bolt-on, less than $100 million type opportunities.

Great. I do have one more, it's going back to JJE. Could you talk a little bit about the organic growth rate for that business in the quarter understanding that you know the results are a little mixed just given the accounting here but you know just the organic growth rate where you're finding cost savings and did JJE generate cash in a standalone basis?

So from a standalone kind of contribution, JJE except for the month of June contributed about $10 million of revenue and just a little shy of the $1 million of operating income.

[Operator Instructions].

Okay. There are no more questions. In closing I'd like to reiterate that we are confident in the long term prospects for our businesses and our markets. We'd like to express our thanks to our stockholders, employees, distributors, dealers and customers for their continued support. Thank you for joining us today and we'll talk to you at the end of the third quarter.

Ladies and gentlemen that does conclude today's conference. Thank you all for joining.