The Company’s stock compensation plan, approved by the Company’s stockholders and administered by the Compensation and Benefits Committee of the Board of Directors of the Company (the “CBC”), provides for the grant of incentive stock options, restricted stock and other stock-based awards or units to key employees and directors. The plan, as amended, authorizes the grant of up to 11.0 million shares or units through April 2030. At December 31, 2022, approximately 5.2 million shares were available for future issuance under the plan.

The total compensation expense related to all grants awarded under the plan was $10.2 million, $7.6 million and $8.4 million, for the years ended December 31, 2022, 2021 and 2020, respectively. The related income tax benefits recognized in earnings were $1.9 million, $1.5 million and $1.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Stock options vest ratably (i.e. one-third annually) over the three years from the date of the grant. The cost of stock options, based on their fair value at the date of grant, is charged to expense over the respective vesting periods. Stock options normally become exercisable at a rate of one-third annually and in full on the third anniversary date. Under the plan, all options and rights must be exercised within ten years from date of grant. At the Company’s discretion, vested stock option holders are permitted to elect an alternative settlement method in lieu of purchasing common stock at the option price. The alternative settlement method permits the employee to receive, without payment to the Company, cash, shares of common stock or a combination thereof equal to the excess of market value of common stock over the option purchase price. The Company has historically settled all such options in common stock and intends to continue to do so. Stock options do not have voting or dividend rights until such time that the options are exercised and shares have been issued.

Dividend yields are based on historical dividend payments. Expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of the options. The expected life of options represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns.


	Option Shares			Weighted Average Exercise Price
(in millions, except per share data)	2022	2021	2020	2022		2021		2020
Outstanding, at beginning of year	1.4	2.0	2.3	$	23.58	$	17.52	$	13.87
Granted	0.2	0.2	0.3	35.80		42.84		27.82
Exercised	(0.4)	(0.8)	(0.6)	16.09		12.12		7.85
Canceled or expired	—	—	—	33.89		30.76		26.44
Outstanding, at end of year	1.2	1.4	2.0	$	27.40	$	23.58	$	17.52
Exercisable, at end of year	0.8	1.0	1.5	$	23.60	$	19.15	$	14.37

At December 31, 2022, options that have vested and are expected to vest totaled 1.2 million shares, with a weighted average exercise price of $27.24, and represent the sum of 0.8 million vested (or exercisable) options and 0.4 million options that are expected to vest. Options that are expected to vest are derived by applying the pre-vesting forfeiture rate assumption against outstanding, unvested options as of December 31, 2022.


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Life	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
	(in millions)	(in years)			(in millions)
$5.01 — 10.00	0.0	0.4	$	8.40	0.0	$	8.40
10.01 — 15.00	0.1	3.0	12.88		0.1	12.88
15.01 — 20.00	0.1	3.9	16.82		0.1	16.82
20.01 — 25.00	0.2	5.3	23.14		0.2	23.14
25.01 — 30.00	0.4	6.8	27.58		0.3	27.53
30.01 — 35.00	—	0.0	—		—	—
35.01 — 40.00	0.2	9.3	35.80		—	—
40.01 — 45.00	0.2	8.2	42.86		0.1	42.86
	1.2	6.4	$	27.40	0.8	$	23.60

The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2022 was $22.8 million and $19.0 million, respectively. The total intrinsic value of stock options exercised was $9.7 million, $22.7 million and $13.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. The related tax benefits were $2.5 million, $5.7 million and $3.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. Cash received from the exercise of stock options was $0.2 million, $4.2 million and $0.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The total compensation expense related to all stock option compensation plans was $2.1 million, $2.0 million and $1.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, there was $2.8 million of total unrecognized compensation cost related to stock options that is expected to be recognized over the weighted-average period of approximately 1.9 years.

Restricted stock awards and restricted stock units primarily cliff vest at the third anniversary from the date of grant, provided the recipient is still employed by the Company on the vesting date. The cost of restricted stock, based on the fair market value of the underlying shares determined using the closing market price on the date of grant, is charged to expense over the respective vesting periods. Shares associated with non-vested restricted stock awards have the same voting rights as the Company’s common stock and have non-forfeitable rights to dividends. Shares associated with non-vested restricted stock units do not have voting or dividend rights.


	Number of Restricted Shares	Weighted Average Price per Share
	(in millions)
Outstanding and non-vested, at December 31, 2021	0.2	$	32.15
Granted	0.2	35.60
Vested	(0.1)	28.35
Forfeited	—	34.99
Outstanding and non-vested, at December 31, 2022	0.3	$	34.93

The total compensation expense related to all restricted stock compensation plans was $3.8 million, $2.6 million and $2.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, there was $4.2 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over the weighted-average period of approximately 1.7 years.

In each of the three years in the period ended December 31, 2022, the Company granted performance-based restricted stock unit awards (“PSUs”) to certain executives and other non-executive officers. Performance targets associated with PSUs are set annually and approved by the CBC. At the Company’s discretion, actual payment of the awards earned shall be in cash or in common stock of the Company, or in a combination of both. The Company intends to settle all such awards by issuing shares of its common stock. Shares associated with non-vested PSUs do not have voting or dividend rights until issuance. The Company assesses the probability of vesting, based on expected achievement against these performance targets, on a quarterly basis.

The PSUs granted in 2022 have a three-year performance period ending December 31, 2024, in which the Company must achieve a certain cumulative EPS from continuing operations and a certain average return on invested capital (“ROIC”), which are performance conditions per ASC 718, Compensation — Stock Compensation (“ASC 718”). The percentage of shares earned under these two performance conditions may be subject to a further 20% modifier, for a maximum potential payout of 240% of target, determined by comparing the Company’s total stockholder return (“TSR”) over a multi-year performance period, relative to that of the S&P 600 Capital Goods Index. The TSR modifier, which is a market condition under ASC 718, will only apply if the Company’s TSR performance over the performance period is in the top or bottom quartile of the S&P 600 Capital Goods Index. If earned, these shares would vest on December 31, 2024.

The PSUs granted in 2021 have a three-year performance period ending December 31, 2023, in which the Company must achieve a certain cumulative EPS from continuing operations and a certain average ROIC, which are performance conditions per ASC 718. The number of shares of common stock that the Company may issue in connection with the PSUs granted in 2021 can range from 0% to 200% of target. If earned, these shares would vest on December 31, 2023.

The PSUs granted in 2020 had a three-year performance period ending December 31, 2022, in which a certain cumulative EPS from continuing operations and a certain average ROIC was targeted. The number of shares of common stock that the Company may issue in connection with the PSUs granted in 2020 can range from 0% to 200% of target. The PSUs granted in 2020

became fully vested on December 31, 2022. Based on the achievement against targets over the three-year performance period, 125% of the target shares were earned. The underlying shares will be issued to participants in the first quarter of 2023.

The cost of PSUs, based on their fair value, is charged to expense over the respective vesting periods, which is the three-year period ended December 31, 2022 for the 2020 grants, the three-year period ended December 31, 2023 for the 2021 grants and the three-year period ended December 31, 2024 for the 2022 grants. The fair value of the PSUs granted in 2021 and 2020 was determined using the closing market price on the date of grant. As the PSUs granted in 2022 contain a market condition, the Company utilized a Monte Carlo simulation model to determine the grant date fair value, using the following assumptions:


	Expected Volatility		Expected Dividend Yield		Risk-Free Interest Rate		Correlation Between TSR for the Company and the S&P 600 Capital Goods Index
Federal Signal Corporation	34.4	%	1.0	%	2.8	%	52.3	%
S&P 600 Capital Goods Index	50.5	%	n/a		2.8	%	n/a

Compensation expense included in the Consolidated Statements of Operations for the PSUs in the years ended December 31, 2022, 2021 and 2020 was $4.3 million, $3.0 million and $4.1 million, respectively. As of December 31, 2022, there was $4.7 million of total unrecognized compensation cost related to PSUs that is expected to be recognized over the weighted-average period of approximately 1.8 years.


	Number of PSUs	Weighted Average Price per Share
	(in millions)
Outstanding and non-vested, at December 31, 2021	0.2	$	34.87
Granted (a)	0.1	35.82
Vested	(0.1)	28.04
Forfeited	—	37.97
Outstanding and non-vested, at December 31, 2022	0.2	$	39.83