Thank you for standing by. This is the conference operator. Welcome to the Federal Signal Corporation fourth quarter earnings conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star and zero. I would now like to turn the conference over to Ian Hudson, Chief Financial Officer. Please go ahead.
Good morning, and welcome to Federal Signal's fourth quarter 2021 conference call. I'm Ian Hudson, the company's Chief Financial Officer. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer. We'll refer to some presentation slides today as well as to the earnings release which we issued this morning. The slides can be followed online by going to our website, federalsignal.com, clicking on the Investor Call icon, and signing in to the webcast. We have also posted the slide presentation and the earnings release under the Investor tab on our website. Before I turn the call over to Jennifer, 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 earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K later today. Jennifer is going to start today with a recap of the year, and then I will provide some more detail on our fourth quarter and full- year financial results. Jennifer will then provide her perspective on our performance and go over our outlook for 2022 before we open the line for any questions. With that, I would now like to turn the call over to Jennifer.
Thank you, Ian. I'd like to start by giving my profound thanks to each of our employees and our business partners for their ongoing commitment. I am immensely proud of how our teams have managed through another turbulent year, finding creative solutions when faced with widespread supply chain disruption and demonstrating tremendous resilience given the prolonged nature of the pandemic, including the impact of the resurgence of cases linked to the Omicron variant. Our strong performance is a testament to the efforts of our teams and the successful diversification of our revenue streams and end market exposures that has taken place over the last several years through a combination of organic growth initiatives and disciplined M&A.
Despite the ongoing challenges in the marketplace, our teams remained relentlessly focused on serving our customers, helping us to deliver the second highest adjusted EPS in the company's history, report record orders, and maintain an EBITDA margin of approximately 15% towards the high end of our target range. In addition to our strong financial performance, we also made good progress against several of our long-term objectives in 2021. We continued to invest in internal growth initiatives by making strategic investments for the future by purchasing new machinery and equipment aimed at gaining operating efficiencies and expanding capacity at several of our production facilities. We also recently completed the acquisition of two of our largest manufacturing plants, our Elgin sweeper facility in Illinois, as well as our facility in University Park, Illinois, which is home to our domestic SSG operations.
Both of these facilities were previously leased, and with the leases expiring towards the middle of next year, we are pleased to have secured the future of these operations, allowing us to better optimize the facility over the long run and leverage our 80/20 principle. We continued to invest in new product development with a particular emphasis on electrification projects, and are encouraged that these efforts will provide additional opportunities to further diversify our customer base, penetrate new end markets, or gain access to new geographic regions. We completed three acquisitions in 2021 with the additions of OSW, Ground Force, and Deist, providing us with opportunities to expand our geographic footprint and augment our specialty vehicle product offerings.
The integration of these businesses is going well, and we see meaningful opportunities for synergies and potential for additional investments to further strengthen and broaden our position in these attractive niche markets. We demonstrated our commitment to returning value to our stockholders, funding a combined $37 million of cash dividends and share purchases. Our 80/20 improvement initiatives remain a critical part of our culture, and we continue to focus on reducing product costs and improving manufacturing efficiencies across all of our businesses. To highlight our ongoing focus on operating in a socially responsible and sustainable manner, we also published our second annual sustainability report in the fourth quarter. I'm incredibly proud of the progress that we've made on our environmental, social, and governance initiatives and thrilled to share our many accomplishments highlighted in this report. I'll now turn the call back to Ian to go over the numbers.
Thank you, Jennifer. Our financial results for the fourth quarter and full- year of 2021 are provided in today's earnings release. Before I talk about the fourth quarter, let me highlight some of our full-year results. Consolidated net sales for the year were approximately $1.21 billion, up $82 million or 7% compared to last year. Operating income for the year was $130.7 million compared to $131.4 million last year. Consolidated adjusted EBITDA for the year was $180.5 million compared to $182.2 million last year. That translates to a margin of 14.9% this year, compared to 16.1% last year.
GAAP earnings for the year equated to $1.63 per share, up $0.07 per share or 4% from last year. On an adjusted basis, we reported full-year earnings of $1.75 per share, up $0.08 per share or 5% from last year. For the rest of my comments, I will focus on comparisons of the fourth quarter of 2021 to the fourth quarter of 2020. Consolidated net sales for the quarter were $301 million, up $7 million or 2% compared to last year. Consolidated operating income in Q4 this year was $30.1 million compared to $33.8 million last year. Consolidated adjusted EBITDA for the quarter was $40 million compared to $47 million last year.
That translates to a margin of 13.3% in Q4 this year compared to 15.9% last year. In the current year quarter, we incurred a non-cash pre-tax pension settlement charge of $10.3 million in connection with a defined benefit pension annuitization project and realized approximately $3 million more in discrete tax benefits than in the prior quarter. Including both of those items and a benefit from M&A related activity, our income from continuing operations in Q4 this year was $19.5 million compared to $26 million last year. That equates to the GAAP EPS of $0.32 per share compared to $0.42 per share last year. On an adjusted basis, EPS for Q4 this year was $0.40 per share, which compares to $0.44 per share last year.
Orders in Q4 this year were $444 million, a new record for the company, and an increase of $168 million or 61% from last year. Our orders in the current year quarter included approximately $18 million of backlog acquired in the Ground Force and Deist acquisitions. The unprecedented order intake contributed to a record backlog at the end of the year of $629 million, more than double the amount at the end of last year. In terms of our fourth quarter group results, ESG's sales were $246 million, an increase of $8 million or 3% compared to last year. ESG's adjusted EBITDA for the quarter was $36.2 million compared to $44.2 million last year.
That translates to an adjusted EBITDA margin of 14.7% in Q4 this year compared to 18.6% last year. During the quarter, various commodity costs continued to increase and chassis delivery dates slipped. The pricing actions we had previously implemented assumed delivery of chassis on certain promise dates. As these deliveries were pushed out, we experienced an unfavorable price cost headwind of around $5 million during the quarter, which was about $2 million higher than we had previously anticipated. This impact was primarily felt within our dump truck businesses, where the customer provides the chassis and we have less control over delivery dates. We also saw a significant increase in coronavirus-related medical expenses during the quarter, incurring approximately $2 million of expense associated with a handful of hospitalizations and tragically, our first COVID-related employee death.
Within SSG, sales for the quarter were $56 million compared to $57 million last year. SSG's adjusted EBITDA for the quarter was $11 million compared to $11.2 million a year ago, and its adjusted EBITDA in Q4 this year was 19.7% compared to 19.6% last year. Corporate operating expenses in Q4 this year were $4.1 million compared to $9.8 million last year, with most of the reduction due to fair value adjustments of acquisition-related liabilities. Turning now to the consolidated income statement where despite the year-over-year sales increase, gross profit decreased by $8.5 million. Consolidated gross margin for the quarter was 22.4% compared to 25.7% last year.
As a percentage of sales, selling, engineering, general, and administrative expenses for the quarter were down 50 basis points from Q4 last year. During the fourth quarter, we recorded a $3 million benefit from acquisition-related activity compared to $1.3 million of expense last year, with the majority of the year-over-year change driven by the fair value adjustment I just referenced. Other items affecting the quarterly results include the pension settlement charge I mentioned earlier, a $300,000 increase in amortization expense, and a $400,000 reduction in other income. In Q4 this year, we also recognized several discrete tax benefits, which resulted in a lower-than-expected effective tax rate for the quarter.
Overall, we recognized a $300,000 tax benefit in Q4 this year compared to expense of $7.6 million last year, with the year-over-year change largely driven by lower pre-tax income levels and the incremental discrete tax benefits. Including discrete tax benefits, our effective rate for 2021 was low at approximately 15%. For 2022, we currently expect a tax rate of approximately 25%, excluding any discrete tax benefits. On an overall GAAP basis, we therefore earned $0.32 per share in Q4 this year, compared with $0.42 per share in Q4 last year. To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters.
In the current year quarter, we made adjustments to GAAP earnings per share to exclude acquisition-related benefits, pension-related charges, and purchase accounting expense effects. On this basis, our adjusted earnings in Q4 this year were $0.40 per share, compared with $0.44 per share in Q4 last year. Looking now at cash flow, where we generated $47 million of cash from operations during the quarter, bringing the total amount of year-to-date operating cash generation to $102 million. Our borrowings increased during the quarter with the acquisitions of Ground Force and Deist and the purchase of our Elgin manufacturing facility. We ended the quarter with $242 million of net debt and availability under our credit facility of $209 million.
Our current net debt leverage ratio remains low even after factoring in these acquisitions, as well as our more recent purchase of our University Park manufacturing facility. With our financial position remaining strong, we have significant flexibility to pursue strategic acquisitions, invest in additional organic growth initiatives, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid a dividend of $0.09 per share during the fourth quarter, amounting to $5.5 million, and we recently announced a similar dividend for the first quarter. We also funded $12 million of share repurchases during the quarter. That concludes my comments, and I would now like to turn the call back to Jennifer.
Thank you, Ian. Demand for our products remains at unprecedented levels, with our fourth quarter order intake setting a new company record, contributing to an all-time high backlog at the end of the year. In fact, our orders for the year exceeded $1.5 billion for the first time in the company's history, and we're up $492 million or 47% from last year. We have seen improvement across the board, with orders from both municipal and industrial customers up around 50% year-over-year. With lead times for certain products extended as a result of this increased demand, and with the need for certain customers to secure a chassis, we saw some dealers place advanced orders during the fourth quarter.
This acceleration of orders, which has continued so far this year, could cause some distortion in the comparability of our orders as we move through the year. As we had anticipated, our fourth quarter results were impacted by shortages and delays in delivery of various components we require to manufacture our products. In particular, a limited supply of chassis associated with reduced allocations from chassis OEMs and delivery delays forced us to constantly modify our production schedules and sporadically shut down operations at certain facilities. Such disruptions impacted sales at almost all of our vehicle-based businesses within our Environmental Solutions Group. Shortages of hydraulics, pumps, and certain electrical components also became more prominent this quarter. Our teams have been creative and nimble in adapting and identifying solutions to these supply chain challenges.
As an example, our SSG team has brought production of a number of components in-house, including hand stuffing, soldering, and testing PC boards that our suppliers were able to only partially complete. With our diversified product and service offerings, we have been able to provide our customers with rental and used equipment to partially mitigate the current tightness in the supply chain, which has led to longer lead times for new equipment deliveries. Overall, our aftermarket revenues in Q4 this year were up $12 million or 19% compared to last year, growing to represent a higher share of ESG's revenues for the quarter at around 30%. Turning to labor, towards the end of the year, we started to see an escalation of cases linked to the Omicron variant, which caused a dramatic increase in employee-related absences within our manufacturing facilities.
Many of our key suppliers also experienced the same. Those trends have continued into the new year. In January, we were hit particularly hard, essentially all of our facilities recording almost 300 positive cases, which was about eight or nine times higher than the run rate in prior months. In fact, at one of our dump truck facilities, we had more than 40% of the workforce out at one point, either with confirmed COVID or through required quarantines. Overall, we estimate that we lost approximately 20,000 direct labor hours across our facilities in January alone. As a result, we have not been able to operate as efficiently as we had planned. Thankfully, we have seen some recent improvement in case counts. Input costs related to purchased materials, logistics, and labor continued to rise in the quarter.
Although we've seen some relief recently with the decline in steel prices, aluminum has increased dramatically. We have also experienced delays in the receipt of customer supply chassis at our dump truck businesses. At one of our dump truck facilities, for example, we are currently receiving about half of the chassis we need to satisfy our current production demands. With chassis deliveries being pushed out and with inflation at 40-year highs, we are experiencing margin pressure in our dump truck businesses during the first quarter. As we have throughout 2021, we have responded accordingly with pricing actions. With the various actions we have taken, including repricing of our backlog in a number of our businesses, we are expecting to see improvements as we progress throughout the year with more price realization expected as our backlog turns.
Looking forward, we remain focused on delivering strong results while continuing to execute on our long-term strategy. Our strong balance sheet provides opportunities for us to drive both our organic growth initiatives and pursue additional strategic acquisitions. Over the last several years, we've transformed our end market exposure and implemented the revenue diversification strategy that has enabled us to adjust as needed to market conditions. Our aftermarket business has grown to represent about 30% of ESG's revenues, and we see additional opportunities to grow that business by expanding into new geographies we believe to be underserved. We are also making progress with our electrification efforts, and were recently joined by the Mayor of Los Angeles and other state and local representatives for the delivery of the first two plug-in hybrid electric Broom Bear street sweepers to be placed into service.
We have also begun demonstrations of our hybrid three-wheel Pelican sweeper and solidified an agreement with a development partner for the hybrid system used in the hybrid Broom Bear sweeper. Demand for demonstrations from our dealer network is high. We are exploring other ways to further integrate electrification into our suite of products with around 20% of our overall R&D budget allocated to these efforts. As our orders suggest, we are already seeing some of the impact from the federal stimulus funding that was introduced in 2021, providing much needed funding to state or local municipalities whose budgets were impacted by the pandemic. We are also continuing to monitor developments with respect to a long-term infrastructure legislation, which we believe will provide visibility for project planning and could see capital equipment demand increase in areas such as roads, bridges, broadband, clean energy, and public transportation build-out.
We anticipate this would provide significant benefits for the majority of our product offerings, including sales and rentals, safe digging trucks, road marking equipment, sewer cleaners, street sweepers, dump trucks, and trailers. Within our industrial markets, we continue to be bullish about our prospects with respect to our safe digging initiative and are monitoring further developments on the regulatory front. With the recent increase in oil prices, we expect to see an uptick in demand for our safe digging products. I recently attended two of our largest trade shows. At these shows, we showcased our road striping, sewer cleaning, and safe digging products, including the newest product in our expanding safe digging portfolio. The TRUVAC TRXX vacuum excavator is a compact trailer with the power and features required at a variety of job sites to perform a wide range of tasks.
This new product, which was developed by our TRUVAC innovation team in less than a year, opens up a new end market for our valuable TRUVAC lines. Reaction from our customer and dealer at the show was overwhelmingly positive. We have positioned Federal Signal in a manner in which we will fully participate in the post-pandemic recovery through our investments in capacity within our facilities, reduce lead times to where we can better respond to customer needs, investing in new product development, and gaining market share. On the M&A pipeline front, it remains active, and we continue to believe that M&A will be an important part of our growth. On the flip side, like many companies, we expect the current supply chain environment and inflationary pressure to linger into 2022. Turning now to our outlook.
We remain encouraged by conditions in our end markets, the ongoing execution against our strategic initiatives, and the order trends that we have seen over the last few quarters, which have contributed to a record backlog entering 2022. As a reminder, seasonal effects typically result in our first quarter earnings being lower than subsequent quarters. Similar to most parts of the country, we have recently seen a dramatic increase in coronavirus cases and quarantines at all of our domestic facilities. Adverse weather conditions also caused us to temporarily close operations at several facilities in January. Combined with a highly unpredictable supply chain environment, these factors have caused significant disruption in our operations so far this year, and we believe this uncertainty will continue at least during the first half of 2022.
In particular, delays in receiving customer supplied chassis have been more prevalent than we anticipated within our dump truck businesses. On the other hand, we are encouraged that delivery of chassis that we procure from our suppliers for our Vactor, Elgin, and MRL businesses have to date been generally in line with our expectations. We are also continuing to navigate our way through unprecedented inflationary pressure, and although we have taken actions in response, supply chain constraints have delayed the realization of some of those actions. Because of these factors, we are not currently operating at our expected level of efficiency. Nevertheless, and despite the softer than normal first quarter, we anticipate recovery over the remainder of the year and currently expect our earnings in the second half of the year will represent approximately 60% of our full- year earnings.
For the full- year, we currently expect to report net sales of between $1.35 billion-$1.45 billion, and adjusted EPS of between $1.76 and $2 per share, despite a headwind of approximately $0.20 per share resulting from the normalization of our tax rate in 2022. With backlog as an indicator that market demand remains robust for most of our products, an active M&A pipeline, ongoing investments in new product development, capacity expansions in our people, and with anticipated multi-year tailwinds from the infrastructure legislation passed in November, our businesses are well positioned for long-term sustainable growth. With that, we are ready to open the line for questions. Operator?
We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We'll pause for a moment as callers join the queue. The first question comes from Steve Barger from KeyBanc Capital Markets. Please go ahead.
Hi, good morning.
Good morning.
I'll just start on ESG operating margin. It's been in a pretty tight range around the low 13% area for about 4 years now. Modeling this out, it seems like 2022 margin could be similar to last year. Can you talk about how you see a path to higher margin in ESG? Or is the plan more just maintaining this kind of range while growing the top line?
Yeah, I think obviously, Steve, the recent acquisitions we've had have been included within the ESG segment. I think when we think about the potential to grow the margins in that segment, we do when we look at acquisitions, one of the questions we ask ourselves is whether they are operating within that target range currently, or whether they have the ability to get within that range after a period of two to three years once we, you know, we can start applying our 80/20 principles. I think that would be one area. The two acquisitions that we completed in Q4, you know, of those, Deist had a double-digit EBITDA margin at the time of acquisition, and Ground Force was within our range towards the lower end of our target range for the group.
We think there is room to grow those businesses. We also think there's room to grow the aftermarket businesses. Jennifer mentioned we're looking to expand into some new geographies that we think are underserved. We think that margin profile would allow for some margin improvement on the ESG side.
Am I correct in thinking that the guidance kind of contemplates a similar margin range in ESG in 2022 as we saw in 2021?
Yeah, I think that's probably fair, Steve, because as we talked about, there is some pressure in the first quarter as we described, because the dump truck business is a component of ESG. So there will be some pressure in Q1, but as we move through the year, we're expecting that to improve as we start to realize more price. So I think overall, and we typically look at EBITDA margins, Steve, for that business. Our target ranges are EBITDA margins as opposed to the operating margin because of the amortization impact of the recent acquisition. So, from an EBITDA margin standpoint, I still think we're expecting ESG would be operating in the upper half of its target range for 2022.
Yeah. The pandemic and some of the supply chain challenges have delayed some of our expectations regarding margin improvement of the recent acquisitions. You know, we've got plans in place. We've been able to successfully improve margin profile of previous acquisitions, and that has been delayed in part because of the pandemic and supply chain challenges.
Yeah, understood. I guess to that point, when I think about the 40/60 front half/back half weighting, it seems like you're thinking Q1 EPS comes in well below Q1 2021. Do you expect Q2 is below as well, or is that pressure primarily in Q1, manifesting in a much weaker quarter and then more normalizing in Q2?
It is a much weaker quarter for Q1 and more normalizing in Q2.
Got it. I'll just ask one more and then jump back in line. Just as you think about your mix of organic growth and the likely pace of acquisitions, you know, if we assume that you continue at the rate you have done, what is the right incremental margin on a consolidated basis going forward? And I know it's a tough question to answer because of mix and acquisition integration costs and everything else. Just, you know, your guidance this year kind of implies a mid-teen or slightly below at the midpoint. Is that where we kind of live if you continue to do deals at this rate?
You know, I guess I'll go back to what Ian said, is we're very focused when we evaluate acquisitions about whether they can operate within that target range. It's not just for acquisitions. It's also as we look at new organic growth initiatives or new projects, we look again at whether they can operate within that target range through the cycle. You know, given our backlogs, as we move through the supply chain challenges, I'm very confident with the capacity expansions that we've done, that we'll be able to move to the higher end of those ranges as we move through the year, particularly for our Vactor and TRUVAC businesses.
Got it. Thanks.
The next question comes from Michael Shlisky from D.A. Davidson. Please go ahead.
Good morning, Mike.
Morning. This is David Johnson for Mike, actually.
Thanks, David.
It's been over a year now, the new presidential administration. Can you share any information on any changes made by OSHA or other government agencies that might be supportive of the safety and security business in the near term?
With respect to OSHA, one of the things that we monitor very closely is on the safe digging side of things. We continue to see more states adopt safe digging as a best practice, similar to what OSHA has done. We believe that will be a very important tailwind for that particular business. We haven't seen any specific action that would benefit the ESG side. Obviously, as we talked about, the federal stimulus package that was passed, we're starting to see the benefit of that with respect to our orders. There are certain municipalities that, frankly, couldn't afford our products. With access to these funds, they've been able to afford our products.
Again, one of the things that I'm very encouraged about is the infrastructure legislation that was passed in November of last year. I know there's gonna be some commentary this evening about how it's gonna be dispersed, and we believe that's a very important catalyst for growth for most of our businesses.
Got you. That's very helpful. Thank you. Also, do you see any customers switching brands or even trying to find used trucks for upfitting?
I think right now, given the chassis constraints, that customers are trying to find new chassis, used chassis, any chassis that they can. As I talked about on the call, one of the things we are encouraged about is, although we're on allocation for our non-dump truck businesses, the chassis supply has been more predictable, which has helped us with efficiency in those businesses. We believe, based on what the chassis suppliers are saying, that we should see some improvement in the second half of this year.
Awesome. Thank you very much.
The next question comes from Walt Liptak from Seaport Global Securities. Please go ahead.
Morning, Walt.
Hi. Morning. Hey, I wanted to ask about the revenue guidance. You know, at the low end of the 2022 sales guidance of $1.35 billion, that seems a little bit low considering you know, the order entry and the backlog and things like that. You know, I wonder if you could talk about you know, what would have to go wrong to you know, for you to come in at the low end.
We've assumed that there are gonna be improvements in supply chain in the second half of the year, based on what we've seen so far this year. I said we are encouraged about kind of the chassis predictability, particularly for our Vactor, Elgin, and MRL businesses. If those assumptions were wrong, that we didn't see that improvement in the second half of the year, that could move us to the lower end of the range.
Okay, great.
The other thing I would add is if we saw some type of resurgence of the coronavirus, similar to what we saw in January, which I do believe is unprecedented.
Okay, great. Yeah, it sounds like things are getting better though. So that's good, right?
Absolutely.
Yeah. Okay. The order entry looked great. I wonder if you could just go into a little bit more detail. You made a comment in the prepared remarks about some dealers placing orders in advance of something. I wonder if you could just flesh that out a little bit.
Sure. I guess the first comment I wanna make is we've done analysis, and the strong orders were really across the board. That was one of the things we were encouraged about. You know, we saw a really nice improvement in both the municipal and the industrial side of the business. However, with longer lead times, we've seen some of our dealers place orders. The other important factor is chassis availability for them. In order to secure the chassis that they need, it is easier to secure those chassis if they've placed orders. Again, I wanna emphasize that we saw those strong order trends continue in January, and we're encouraged by what we're seeing.
Okay, that sounds great. Maybe a last one for me is just on aftermarket in ESG at 30% is good. What was the growth rate of aftermarket, and is that something that's sustainable?
Yes. Walt, if you look at kind of Q4, the aftermarket revenues in the aggregate were up about $12 million, so that's a growth rate of about 19%. For the full- year, it would've been up about $56 million, and that's a 24% growth rate. I think what we described in our prepared remarks with the tightness in the supply chain, having this tool in our toolbox to be able to offer, you know, re-rentals or used equipment to our customers, we're certainly seeing the benefits of that strategy in 2021, and we expect that to continue in 2022. We think, you know, the aftermarket business continues to be an area of focus for us.
30% of ESG's revenue, that's kind of close to what we were aiming for when we started on this journey. I think we are, you know, certainly encouraged with the prospects. As we described, we're looking to potentially expand into some new geographies that we think are underserved.
Absolutely.
Okay, great.
I just want to echo, the aftermarkets team just had a fantastic 2021. It's really off to a strong start, and we're continuing to be encouraged by the growth opportunities for that business unit.
Okay, great. Thanks.
The next question comes from Chris Moore with CJS Securities. Please go ahead.
Hey, good morning, guys. Thanks for taking a few.
Good morning, Chris.
Yes, good morning. Maybe just trying to get the sense for the rough mix between volume and price at the midpoint of revenue guidance and, you know, how would that change if you were able to approach the higher end? Would the higher end be more volume-focused?
I think, Chris, if you look at the overall kind of implied growth rate in our revenue outlook, it's 11%-20%. I think, you know, there is obviously the full- year contributions from the acquisitions, so that's between probably 6%-7% of the growth is coming from the acquisitions. That implies kind of organic growth of between 4%-12%. I think the pricing is probably more in the kind of 3%-5% range based on the actions that we've taken. Obviously the volume is the variable in that equation as we talked about the supply chain. I think it's more to get to the upper end of the range. It's more of a volume driver.
You know, if we get more supplies and if it eases beyond what we expect, then I think we would be, you know, likely towards the upper end of the range or the upper half of the range.
As I think about it, you know, we did a number of capacity expansions. We have the backlog. We have, you know, generally good access to labor. You know, as we move through these issues, which I'm confident we will, we're in an excellent position for the second half of this year and as we move into 2023.
Got it. No, it makes sense. We were talking about the aftermarket. So just in terms of used equipment sales in Q4, I'm assuming that was up meaningfully. Does that have any impact in your kind of rental revenue in 2022 given the difficulty, you know, to build things and have that rental fleet where you need it to be?
Yeah. I mean, obviously, with the strength of the used equipment sales, and you're right, it was up about 50% year-over-year in Q4, Chris. It was strong used equipment sales that we saw. We had factored into our plans for 2022 in our planning processes, you know, a significant replenishment of our own fleet and in fact growing the size of the fleet. That's all baked into our plans that we have at the factories. We've gone out and we've made sure we've procured the chassis to fulfill that demand. We are still expecting rental income to grow year-over-year. As I say, we had factored all of that into our plans for 2022. That's baked into the outlook.
Yeah. To reiterate, we are still on track, with respect to the investments that we're making in our rental fleet, for 2022 to support that year-over-year growth.
Got it. I appreciate it. I'll leave it there. Thanks, guys.
Thank you.
The next question comes from Greg Burns with Sidoti & Company. Please go ahead.
Morning, Greg.
Good morning. Can you just talk about the complexion of the backlog, the split between municipal and industrial and what is tied to fixed contracts and the timing of kind of how you see the pricing realization occurring over the next year?
I think when we look at our orders, we've seen, as I think Jennifer mentioned, it's been across the board. Both municipal and industrial orders in 2021 were both up in excess of 50%. It's a nice balance of muni and industrial. There are obviously some on the municipal side, it is a little more difficult to have price adjustments of the backlog. There is a little bit more pressure on the municipal side of the business, and I think that's what some of the impacts that we're expecting in Q1 on the dump truck side is reflective of that municipal business that is not including the price adjustments that we've made.
Okay. In terms of the dump truck business, is there anything you can do to help your customers get supply of chassis? Like, can you use your procurement to get them chassis? Like, is there any remediation that you could do for them going forward?
Rest assured, we're exploring every option.
On the electrification front, when you look at the competitive landscape, where do you think you are in terms of your electrification projects? Are there other competitors out there with demoing trucks? Do you have a sense of, like, kind of where you sit in terms of your market position in terms of electrification?
We believe with respect to the U.S. manufacturers and the markets we operate, we're in a leading market position on electrification. On the street sweeper side of things, there are some smaller European players that have electric offerings. Although, you know, generally, U.S. municipalities tend to buy from U.S. manufacturers.
When we think about electrification, is that like, will that expand your total addressable market, or is it gonna be more of, like, a replacement cycle accelerator?
I think it's really both. Because, you know, given our focus on electrification and the products that we've introduced, there are certain municipalities that have objectives in terms of buying electric vehicles. You know, we believe that we'll be in a leading position to provide those. Also, as replacement cycles occur, they will consider our product vis-à-vis competitors given where we are on that development journey.
Okay, thank you.
Once again, if you have a question, please press star then one. The next question comes from Marco Rodriguez from Stonegate Capital Markets. Please go ahead.
Good morning, Marco.
Good morning, everybody. Morning. Hey, thank you for taking my questions. I was wondering if maybe you could talk a little bit more about the chassis lead times. Obviously, supply chain issues are all over the place. Can you help us kind of understand what do those lead times look like in weeks or months, and if you can kinda contrast that to what is a normal lead time and how you kinda see. If I remember correctly in your prepared remarks, you said you're expecting that to improve in the second half. Can you just kinda give us a sense of that improvement?
Sure. You know, it really varies business to business. With respect to our dump truck businesses, we do not procure the chassis. It can vary depending on the type of customer. With respect to our Vactor, Elgin, MRL businesses, it's a combination. In some cases, we procure the chassis. In some cases, our customers procure the chassis. We have worked very closely with our customers on a number of aggressive chassis procurement initiatives. Lead times are extended right now. All the chassis manufacturers, the vast majority are sold out for 2022, so we're into 2023. We have our allocations, as do our dealers for 2022. Where there's upside is if we can procure additional chassis.
Our teams and our dealers are very focused on opportunities to procure additional chassis. Because what I said earlier is, you know, we're in a position where we've done a number of capacity expansions. We have relatively good access to labor. We're ready to go because we want to reduce our own lead times given our unprecedented backlogs.
All right. Thank you. And then in terms of the margin pressures, you guys saw quite a bit of commentary, and I appreciate some of the figures. I believe I got a $5 million headwind price cost. I'm assuming most of that is in the gross margin pressure line. Can you maybe just kind of unpack that area? It seems like it came up a bit short versus at least for our estimate. Where were the big numbers that you saw, and if you can help kind of rank the pressures you saw there. I'm assuming based on guidance that the expectations is that pressure should remain in Q1 and maybe alleviate a bit in Q2.
On the gross margin front for Q4, we had the $5 million unfavorable price cost impact in the fourth quarter. We also had a $2 million increase in coronavirus medical expenses that we described in our prepared remarks. Combined, that's about $7 million of pressure that would have really been impacting the gross margins within ESG. When you look at that comparison, Q4, we went from about 23 and a little over 23% down to a little under 20% on the gross margin front in Q4.
If you adjust for those two things, it would have been more in line, I would say, although it would have still been down slightly with just some of the general inefficiencies we had in the supply chain disruption. I think those are the two largest variables that we mentioned in our prepared remarks that impacted gross margin in the quarter.
Got it. Just the manufacturing efficiency that you had with all the absences, I don't remember if you mentioned this in the call, but that has started to improve or has improved or is gone. Obviously you're not operating at complete capacity because you don't have the chassis availability, can you comment a little bit.
Sure. Absolutely. We've seen dramatic improvement in the second half of February, where we're really back to kind of a more normal state in this coronavirus world. It started similar to the rest of the country, and in our Canadian operations also, it started in the you know towards the holidays in December. It peaked pretty dramatically in January, and then as we exited January, we saw a dramatic decline.
Got it. In terms of the M&A pipeline that you had mentioned, you're obviously very focused on that. It's an important part of your overall strategy. I'm just kinda wondering here, with all the volatility that's out there from a macro standpoint, also given the fact that you guys did three acquisitions last year, which I believe is the most acquisitions you've done in about a 12-month period for at least the last seven years. Can you maybe talk a little bit about your ability to take on more acquisitions?
We think we're very well-positioned to take on more acquisitions. We're in active dialogue right now. It's a critical part of our growth story. You know, we believe that our aftermarkets business, as we referenced earlier, there are opportunities there. There are opportunities really across the board. We think we're getting the playbook down pretty well. The other thing that's important to note is two of the three acquisitions that we did in 2021 were acquisitions that we sourced. They were exclusive to us, and we have that ongoing dialogue going on. We believe we've got a good playbook, and we're committed to executing against that.
Got it. Thank you, guys. I appreciate the time.
Thank you.
This concludes the question answer session. I would like to turn the conference back over to Jennifer Sherman for any closing remarks.
Thank you. In closing, I would like to reiterate that we are confident in the long-term prospects for our business and our markets. Our teams are performing at a high level and remain focused on delivering high-quality results. We continue to aggressively address supply chain challenges, and we believe we are winning in the marketplace with our customers. We remain committed to investing in our businesses and our people to generate sustained long-term success for our shareholders. Our foundation is strong, and we are focused on delivering profitable long-term growth through the execution of our strategic initiatives. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.