Cites Disappointing Second Quarter Results, Flawed Sale of E-One and Tainted CEO Search
STAMFORD, Conn., Aug. 5 /PRNewswire/ -- Warren B. Kanders, in a letter to James C. Janning, Chairman of the Board of Federal Signal Corporation (NYSE: FSS) called for his resignation as Chairman and as a director following FSS's disappointing second quarter results, the flawed sale of E-One for a price significantly below expectations, and a tainted CEO search process which has yet to result in the selection of a new Chief Executive Officer.
Responding to Mr. Janning's allegations that Mr. Kanders' letter of July 23, 2008, which questioned the process and price for FSS's sale of E-One to a group that included E-One management, contained "inaccuracies, innuendos, and misrepresentations", Mr. Kanders stated:
"You claim that despite the active involvement of E-One management in the sale - the process was nonetheless 'robust' and 'fully negotiated at arms length.' Yet we know that bona fide, highly qualified and well financed bidders were deliberately excluded from the process - which resulted in a purchase price significantly below my and most analysts' expectations. Did our Board not consider the payment of a success fee to Mr. Guile of $400,000, plus 1% of the sale proceeds in excess of liquidation value of E-One, a conflict of interest? The Board apparently did not see fit to obtain an independent fairness opinion, yet FSS wrote off an additional $21M as a result of this material transaction."
Mr. Kanders called the Second Quarter results "unacceptable", noting that:
-- "Sales were up marginally - missing consensus expectations.
-- Margins of the Safety and Security Group, FSS's most profitable
division, declined for the fourth consecutive quarter, year over year.
-- Earnings per share from continuing operations were down
precipitously -- falling 32 % year over year.
-- Overhead remains far too high after the sale of E-One; FSS's cost
cutting program is lagging."
"Even the analysts at BMO Capital Markets, the investment bank that advised the Board on the sale of E-One, in their July 28, 2008 report, concluded that 'given the performance over the past few quarters, our confidence level in the Company's ability to meet its own targets and our estimate is less than it has been in the past.' You have apparently lost all credibility."
Observing that FSS's July 25 earnings call was "carefully orchestrated to prevent shareholders from asking tough questions challenging management's and the Board's performance", Mr. Kanders continued:
"FSS could have declined to have any Q&A period. Instead, after announcing he would open the call to questions, Mr. Goodwin manipulated the call and misled the audience by taking only powder-puff questions from friendly analysts -- most of whom had or have investment banking relationships with FSS. Not one question was taken from a single shareholder -- although I know that several sought to be heard -- unsuccessfully."
Mr. Kanders, noting further that three days before the earnings call, the Board had adopted Amended and Restated By-Laws, but made no mention of them on the earnings call, accused the Board and management of shamefully trying to "quietly slip them by shareholders" by burying them as an exhibit to FSS's Second Quarter Form 10-Q.
Mr. Kanders charged that:
"Clearly, the Restated By-Laws are designed to insulate the current Board to the maximum extent possible and limit even further the rights of unhappy shareholders fed up with nine years of unfulfilled expectations, dismal financial performance and a depressed stock price, by, among other things:
-- Moving the date of the annual meeting of stockholders to the Friday of
Memorial Day weekend;
-- Replacing the inspectors of election responsible for determining
contested elections from two persons 'who are not affiliated with the
Corporation' to persons who may be employees of the Corporation;
-- Lengthening the advance notice requirement for shareholders nominating
directors to the Board from 30 days prior to the Annual Meeting to a
narrow window between 90 and 120 days prior to the anniversary of the
last Annual Meeting;
-- Requiring any person nominated by a shareholder for election as a
director to furnish, in addition to the information required by the
Federal proxy rules, any information the Corporation may require,
including 'submission of a questionnaire, representation and agreement
in the form requested by the Corporation.'"
Mr. Kanders nonetheless offered to meet with a "select group of independent directors to discuss where we go from here."
DATASOURCE: Warren B. Kanders
CONTACT: Warren B. Kanders, +1-203-552-9600, ,
Forest Sup. (LSE:FSS)
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