FEDERAL SIGNAL CORP /DE/FSS
FEDERAL SIGNAL CORP /DE/ Leases Disclosure
LEASES
The Company leases certain facilities within the U.S., Europe, and Canada from which the Company manufactures vehicles and equipment and provides sales, service, and/or equipment rentals. Some of the Company’s lease agreements contain options to renew. The Company also leases vehicles and various other equipment. The Company’s lease agreements may contain lease and non-lease components, which are accounted for separately. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets.
In connection with acquisitions completed in recent years, the Company has entered into certain lease agreements for facilities owned by affiliates of the sellers. All lease agreements contain an annual rent that is considered to be market-based. Total rent paid under these arrangements was $1.5 million in 2025, $2.0 million in 2024, and $2.3 million in 2023. The Company’s total lease liabilities under these agreements were $5.6 million as of December 31, 2025 and $16.2 million as of December 31, 2024. The decrease in these lease liabilities is primarily due to the exercise of a purchase option included in the lease agreement of one of our U.S. manufacturing facilities, as discussed in the Other Finance Lease Considerations section below.
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term.
The following table summarizes the Company’s total operating lease costs and supplemental cash flow information arising from operating lease transactions:
| (in millions of dollars) | For the Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Total operating lease costs (a) | $ | 13.3 | $ | 12.9 | $ | 12.7 | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Operating cash outflows from operating leases | 8.3 | 8.5 | 8.4 | ||||||||||||||
(a) Includes short-term leases and variable lease costs.
The following table summarizes the components of lease right-of-use assets and liabilities:
| (in millions of dollars) | 2025 | 2024 | Affected Line Item in Consolidated Balance Sheets | ||||||||||||||
| Assets | |||||||||||||||||
Operating lease right-of-use assets (a) | $ | 28.4 | $ | 27.8 | Operating lease right-of-use assets | ||||||||||||
Finance lease right-of-use assets (b) | 4.7 | 12.9 | |||||||||||||||
| Total lease right-of-use assets | $ | 33.1 | $ | 40.7 | |||||||||||||
| Liabilities | |||||||||||||||||
| Current: | |||||||||||||||||
| Operating leases | $ | 7.9 | $ | 6.8 | Current operating lease liabilities | ||||||||||||
| Finance leases | 0.5 | 12.4 | |||||||||||||||
| Noncurrent: | |||||||||||||||||
| Operating leases | 21.6 | 21.8 | Long-term operating lease liabilities | ||||||||||||||
| Finance leases | 2.1 | 0.5 | |||||||||||||||
| Total lease liabilities | $ | 32.1 | $ | 41.5 | |||||||||||||
(a) Right-of-use assets obtained in exchange for new operating lease liabilities was $7.9 million for the year ended December 31, 2025 and $16.9 million for the year ended December 31, 2024.
(b) Right-of-use assets obtained in exchange for new finance lease liabilities was $1.8 million for the year ended December 31, 2025 and $11.5 million for the year ended December 31, 2024.
The weighted-average remaining lease terms and discount rates of the Company’s operating leases were as follows:
| 2025 | 2024 | ||||||||||
| Weighted-average remaining lease term of operating leases | 4.4 years | 5.0 years | |||||||||
| Weighted-average discount rate of operating leases | 4.1 | % | 3.9 | % | |||||||
Maturities of lease liabilities as of December 31, 2025 were as follows:
| (in millions of dollars) | Operating Leases | Finance Leases | |||||||||
| 2026 | $ | 8.9 | $ | 0.6 | |||||||
| 2027 | 7.4 | 0.5 | |||||||||
| 2028 | 6.1 | 0.4 | |||||||||
| 2029 | 4.7 | 0.3 | |||||||||
| 2030 | 3.0 | 0.2 | |||||||||
| Thereafter | 2.1 | 1.0 | |||||||||
| Total lease payments | 32.2 | 3.0 | |||||||||
| Less: Imputed interest | 2.7 | 0.4 | |||||||||
| Present value of lease liabilities | $ | 29.5 | $ | 2.6 | |||||||
Other Finance Lease Considerations
In the fourth quarter of 2024, the Company provided notice to the lessor of one of its leased U.S. manufacturing facilities of its intent to exercise the $11.5 million purchase option included in the lease agreement. The Company remeasured the corresponding lease liability, adjusted the right-of-use asset, and reassessed the lease classification, resulting in a change in classification from an operating lease to a finance lease in the fourth quarter of 2024. As of December 31, 2024, the related finance lease right-of-use asset was $11.3 million and the finance lease liability was $11.5 million. The associated impact on the Company’s Consolidated Statement of Operations for the year ended December 31, 2024 was insignificant. The weighted average discount rate was 4.9%. The purchase was completed on February 10, 2025. As of the purchase date, the related finance lease right-of-use asset, net, was approximately $11.3 million and the finance lease liability was $11.5 million. The cash outflow of approximately $11.5 million related to the facility purchase is reflected as a component of Other, net within the financing activities on the Consolidated Statement of Cash Flows for the year ended December 31, 2025.
The following table summarizes the supplemental noncash investing and financing activities related to this facility purchase and certain other finance lease-related activities:
| For the Year Ended December 31, | |||||
| (in millions) | 2025 | ||||
| Purchase of properties and equipment through exchange of finance lease right-of-use asset | $ | 12.0 | |||
| Derecognition of right-of-use asset | (12.0) | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.