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EnPro Industries Reports Results for the First Quarter of 2019

CHARLOTTE, N.C.–(BUSINESS WIRE)–EnPro Industries, Inc. (NYSE: NPO) today announced its financial results
for the three-month period ended March 31, 2019.

             

Financial Highlights

(Amounts in millions except per share data and percentages)       2019     2018 % ∆
Results for the Quarter Ended March 31              
Net Sales $ 360.3 $ 368.8 (2.3 %)
Segment Profit $ 33.7 $ 42.1 (20.0 %)
Segment Margin 9.4 % 11.4 %
Net Income $ 13.1 $ 12.6 4.0 %
Diluted Earnings Per Share $ 0.63 $ 0.58 8.6 %
Adjusted Net Income 1 $ 15.1 $ 18.0 (16.1 %)
Adjusted Diluted Earnings Per Share 1 $ 0.72 $ 0.83 (13.3 %)
Adjusted EBITDA 1 $ 43.1 $ 51.4 (16.1 %)
Adjusted EBITDA Margin 1         12.0 %       13.9 %      

1 See the attached schedules for adjustments and
reconciliations to GAAP numbers.

 

CEO Comment

“We had a very strong quarter in our Power Systems segment, with both
sales and earnings up significantly compared to the first quarter of the
prior year due to strong demand for military marine engines and
aftermarket parts and services. We also saw year-over-year strength in
food & pharma and petrochem in Sealing. These positive results were more
than offset by unexpected softness in Engineered Products’ auto and
general industrial businesses due to weakness in Europe and Asia, and by
the anticipated year-over-year declines in Sealing related to a softer
semiconductor market, last year’s exit from the industrial gas turbine
business, and timing-related differences in shipment patterns and
product mix,” said Steve Macadam, Chief Executive Officer. “Given the
weaker than expected demand in Engineered Products, we are implementing
a variety of countermeasures to adjust our cost structure and limit the
impact of the softness in this segment.”

2019 Outlook and Guidance

“We currently anticipate a relatively strong second quarter and are
adjusting full-year EBITDA guidance to $224 to $232 million to reflect
the impact of the first quarter, currency-related EDF loss provision.
This translates to an adjusted diluted earnings per share outlook of
$4.25 to $4.52 for the year,” said Mr. Macadam.

Full-year guidance excludes changes in the number of shares outstanding,
impacts from future acquisitions and acquisition-related costs,
restructuring costs, incremental impacts of tariffs and trade tensions
on market demand and costs subsequent to the end of the first quarter,
the impact of foreign exchange rate changes subsequent to the end of the
first quarter, and environmental and legacy litigation charges.

Sales and Segment Profit

During the first quarter, growth in Power Systems was more than offset
by a combination of: i) unexpected weakness in Asian and European
markets within Engineered Products, ii) anticipated market headwinds in
semiconductor, iii) negative translation impact due to the stronger
dollar, and iv) the 2018 exit from the industrial gas turbine business
in Sealing Products, resulting in first quarter sales decreasing 2.3%
compared to the same period of 2018. Excluding the impact of foreign
exchange translation, sales for the quarter declined by 0.3% compared to
the first quarter of 2018.

Segment profit in the first quarter was down 20.0% year-over-year
primarily as a result of the aforementioned factors. Excluding the
impact of costs related to acquisition expenses, foreign exchange
translation, the change in the loss reserve due to foreign exchange on
the EDF contract in the Power Systems segment, and restructuring
charges, total segment profit was 8.9% lower compared to total segment
profit in the first quarter of last year.

Capital Allocation

During the first quarter, the company invested $10.4 million in
facilities, equipment, and software compared to $15.2 million during the
same period of 2018. The company paid a $0.25 per share quarterly
dividend with a total value of $5.4 million. The company also
repurchased approximately 36,000 shares at a cost of $2.4 million.

Segment Highlights

Sealing Products

  • Sales decreased 3.2% in the first quarter versus the prior-year period
    due primarily to softness in the semiconductor market and the 2018
    exit from the industrial gas turbine business. This decline was
    partially offset by strength in the food & pharma and petrochemical
    markets. Excluding the impact of foreign exchange translation, sales
    decreased 1.8% compared to the prior-year period.
  • Segment profit decreased 12.2% in the first quarter versus the
    prior-year period, driven primarily by unfavorable volume and
    timing-related mix, partially offset by lower SG&A costs. Excluding
    the impact of restructuring costs, acquisition-related costs, and
    unfavorable foreign exchange translation, segment profit decreased
    6.7% compared to the prior-year period.

Engineered Products

  • Sales decreased 7.5% in the first quarter versus the prior-year
    period, primarily due to foreign exchange translation and weakness in
    Asia and Europe. Excluding the impact of foreign exchange translation,
    sales decreased 2.6% compared to the prior-year period due to the
    aforementioned weakness in Asia and Europe.
  • Segment profit decreased 56.9% in the first quarter versus the
    prior-year period, primarily due to lower sales volume and higher SG&A
    expenses. Excluding the impact of restructuring costs,
    acquisition-related expenses, and unfavorable foreign exchange
    translation, segment profit decreased 49.4% compared to the prior-year
    period.

Power Systems

  • Sales increased 10.0% in the first quarter versus the prior-year
    period due to strong military marine engine and aftermarket parts and
    services sales, partially offset by lower sales to the power
    generation market.
  • Segment profit increased 67.5% in the first quarter versus the
    prior-year period primarily due to the increase in higher-margin
    aftermarket parts and service sales and reduced SG&A costs. Excluding
    the impact of foreign exchange on the EDF contract, which had a
    negative impact of $0.9 million in the first quarter of 2019 and a
    positive impact of $1.7 million in the first quarter of 2018, segment
    profit increased 225.7%.

Conference Call and Webcast Information

EnPro will hold a conference call tomorrow, May 2, at 10:00 a.m. Eastern
Time to discuss first quarter 2019 results. Investors who wish to
participate in the call should dial 1-877-407-0832 approximately 10
minutes before the call begins and provide conference ID number
13686471. A live audio webcast of the call and accompanying slide
presentation will be accessible from the company’s website, https://www.enproindustries.com.
To access the presentation, log on to the webcast by clicking the link
on the company’s home page.

Non-GAAP Financial Information

This press release contains financial measures that have not been
prepared in conformity with GAAP. They include adjusted net income,
adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA
margin, as well as segment adjusted EBITDA and segment adjusted EBITDA
margin. Tables showing the effect of these historical non-GAAP financial
measures are attached to the release. Adjusted EBITDA and adjusted
diluted earnings per share anticipated for full year 2019 are calculated
in a manner consistent with the historical presentation of these
measures in the attached tables. Because of the forward-looking nature
of these estimates, it is impractical to present quantitative
reconciliations of such measures to comparable GAAP measures, and
accordingly no such GAAP measures are being presented. These estimates
exclude changes in the number of shares outstanding, impacts from future
acquisitions and acquisition-related costs, restructuring costs,
incremental impacts of tariffs and trade tensions on market demand and
costs subsequent to year-end, the impact of foreign exchange rate
changes subsequent to year-end, and any litigation or environmental
charges. Management believes these non-GAAP metrics are commonly used
financial measures for investors to evaluate the company’s operating
performance, and when read in conjunction with the company’s
consolidated financial statements, present a useful tool to evaluate the
company’s ongoing operations and performance from period to period. In
addition, these are some of the factors the company uses in internal
evaluations of the overall performance of its businesses. Management
acknowledges that there are many items that impact a company’s reported
results and the adjustments reflected in these non-GAAP measures are not
intended to present all items that may have impacted these results. In
addition, these non-GAAP measures are not necessarily comparable to
similarly titled measures used by other companies.

Forward-Looking Statements

Statements in this press release that express a belief, expectation or
intention, as well as those that are not historical fact, are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. They involve a number of risks and uncertainties
that may cause actual events and results to differ materially from such
forward-looking statements. These risks and uncertainties include, but
are not limited to: general economic conditions in the markets served by
our businesses, some of which are cyclical and experience periodic
downturns; prices and availability of raw materials; the impact of
fluctuations in relevant foreign currency exchange rates; unanticipated
delays or problems in introducing new products; the incurrence of
contractual penalties for the late delivery of long lead-time products;
announcements by competitors of new products, services or technological
innovations; changes in our pricing policies or the pricing policies of
our competitors; and the amount of any payments required to satisfy
contingent liabilities related to discontinued operations of our
predecessors, including liabilities for certain products, environmental
matters, employee benefit obligations and other matters. Our filings
with the Securities and Exchange Commission, including our most recent
Form 10-K, describe these and other risks and uncertainties in more
detail. We do not undertake to update any forward-looking statements
made in this press release to reflect any change in management’s
expectations or any change in the assumptions or circumstances on which
such statements are based.

About EnPro Industries

EnPro Industries, Inc. is a leader in sealing products, metal polymer
and filament wound bearings, components and service for reciprocating
compressors, diesel and dual-fuel engines, and other engineered products
for use in critical applications by industries worldwide. For more
information about EnPro, visit the company’s website at https://www.enproindustries.com.

APPENDICES

Consolidated Financial Information and Reconciliations

 
EnPro Industries, Inc.
 
Consolidated Statements of Operations (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars, Except Per Share Data)
 
        2019     2018
Net sales       $ 360.3     $ 368.8
Cost of sales         247.2         243.7  
 
Gross profit         113.1         125.1  
 
Operating expenses:
Selling, general and administrative 87.8 92.1
Other         1.4         1.0  
 
Total operating expenses         89.2         93.1  
 
Operating income 23.9 32.0
 
Interest expense (5.2 ) (8.2 )
Interest income 0.7 0.4
Other income (expense)         (1.5 )       0.6  
 
Income before income taxes 17.9 24.8
Income tax expense         (4.8 )       (12.2 )
 
Net income       $ 13.1       $ 12.6  
 
 
Basic earnings per share       $ 0.63       $ 0.59  
Average common shares outstanding (millions)         20.8         21.3  
 
Diluted earnings per share       $ 0.63       $ 0.58  
Average common shares outstanding (millions)         20.9         21.6  
 
 
EnPro Industries, Inc.
 
Consolidated Statements of Cash Flows (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
         
2019     2018
Operating activities
Net income $ 13.1 $ 12.6

Adjustments to reconcile net income to net cash provided by (used
in) operating activities:

Depreciation 9.2 9.3
Amortization 8.2 9.0
Deferred income taxes (1.7 ) (0.9 )
Stock-based compensation 1.7 1.8
Other non-cash adjustments 1.5 1.1
Change in assets and liabilities:
Accounts receivable, net (5.6 ) (20.1 )
Inventories (16.1 ) (9.8 )
Accounts payable (13.4 ) (6.8 )
Other current assets and liabilities 14.6 (11.5 )
Other non-current assets and liabilities         (1.6 )       (4.7 )
Net cash provided by (used in) operating activities         9.9         (20.0 )
 
Investing activities
Purchases of property, plant and equipment (10.3 ) (14.9 )
Payments for capitalized internal-use software (0.4 ) (0.7 )
Proceeds from sale of property, plant and equipment         0.3         0.4  
Net cash used in investing activities         (10.4 )       (15.2 )
 
Financing activities
Proceeds from debt 120.8 256.1
Repayments of debt, including premiums to par value (111.6 ) (268.1 )
Repurchase of common stock (2.0 ) (15.4 )
Dividends paid (5.4 ) (5.3 )
Other         (3.4 )       (4.2 )
Net cash used in financing activities         (1.6 )       (36.9 )
 
Effect of exchange rate changes on cash and cash equivalents         3.4         0.9  
 
Net increase (decrease) in cash and cash equivalents 1.3 (71.2 )
Cash and cash equivalents at beginning of period         129.6         189.3  
Cash and cash equivalents at end of period       $ 130.9       $ 118.1  
 
 
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ (1.6 ) $ 14.5
Income taxes $ (12.3 ) $ (1.4 )
 
 
EnPro Industries, Inc.
 
Consolidated Balance Sheets (Unaudited)
 
As of March 31, 2019 and December 31, 2018
(Stated in Millions of Dollars)
 
      2019     2018
Current assets    
Cash and cash equivalents $ 130.9 $ 129.6
Accounts receivable 292.1 286.6
Inventories 249.3 233.1
Income tax receivable 32.7 49.5
Other current assets         33.9         33.2  
Total current assets 738.9 732.0
 
Property, plant and equipment 294.0 301.2
Goodwill 334.6 333.7
Other intangible assets 291.6 297.3
Other assets         88.0         54.9  
Total assets       $ 1,747.1       $ 1,719.1  
 
Current liabilities
Current maturities of long-term debt $ 0.4 $ 2.4
Accounts payable 119.3 139.2
Accrued expenses         158.8         145.5  
Total current liabilities 278.5 287.1
 
Long-term debt 472.8 462.5
Other liabilities         119.7         106.8  
Total liabilities         871.0         856.4  
 
 
Shareholders’ equity
Common stock 0.2 0.2
Additional paid-in capital 299.8 301.0
Retained earnings 627.6 608.3
Accumulated other comprehensive loss (50.2 ) (45.5 )
Common stock held in treasury, at cost         (1.3 )       (1.3 )
Total shareholders’ equity         876.1         862.7  
Total liabilities and equity       $ 1,747.1       $ 1,719.1  
 

In January 2019, we adopted a new accounting standard that requires us
to recognize an asset and liability for operating leases that were
previously not recorded on the balance sheet. We had approximately $30.0
million of assets recorded in other assets, and liabilities of $10.1
million reflected in accrued expenses and $20.1 million in other
liabilities at March 31, 2019 that were not required to be recorded at
December 31, 2018.

Additionally, in January 2019 we adopted a new accounting standard that
allowed for the reclassification of disproportionate income tax effects
(“stranded tax effects”) resulting from the Tax Cuts and Jobs Act from
accumulated other comprehensive loss to retained earnings. We made an
adjustment reclassifying a net tax benefit of $11.5 million from
accumulated other comprehensive loss to retained earnings.

 
EnPro Industries, Inc.
 
Segment Information (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
 
 
Sales
      2019     2018
   
Sealing Products $ 224.5 $ 231.9
Engineered Products 79.5 85.9
Power Systems         57.3         52.1  
361.3 369.9
Less intersegment sales         (1.0 )       (1.1 )
        $ 360.3       $ 368.8  
 
 
Segment Profit
2019     2018
 
Sealing Products $ 20.8 $ 23.7
Engineered Products 6.2 14.4
Power Systems         6.7         4.0  
        $ 33.7       $ 42.1  
 
 
Segment Margin
2019     2018
Sealing Products 9.3 % 10.2 %
Engineered Products 7.8 % 16.8 %
Power Systems         11.7 %       7.7 %
          9.4 %       11.4 %
 
 
Reconciliation of Segment Profit to Net Income
2019     2018
 
Segment profit $ 33.7 $ 42.1
Corporate expenses (9.0 ) (8.7 )
Interest expense, net (4.5 ) (7.8 )
Other expense, net         (2.3 )       (0.8 )
 
Income before income taxes 17.9 24.8
Income tax expense         (4.8 )       (12.2 )
Net income       $ 13.1       $ 12.6  
 

Segment profit is total segment revenue reduced by operating expenses
and restructuring and other costs identifiable with the segment.
Corporate expenses include general corporate administrative costs.
Expenses not directly attributable to the segments, corporate expenses,
net interest expense, asset impairments, gains/losses related to the
sale of assets and income taxes are not included in the computation of
segment profit. The accounting policies of the reportable segments are
the same as those for the Company.

 
EnPro Industries, Inc.
 
Reconciliation of Net Income to Adjusted Net Income and Adjusted
Diluted Earnings Per Share (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars, Except Per Share Data)
 
 
 
      2019     2018
$    

Average common
shares outstanding,
diluted (millions)

    Per share $    

Average common
shares outstanding,
diluted (millions)

    Per share
               
Net income $ 13.1 20.9 $ 0.63 $ 12.6 21.6 $ 0.58
 
Income tax expense         4.8                     12.2              
 
Income before income taxes 17.9 24.8
 
Adjustments:
 
Restructuring costs 1.3 0.3
 

Environmental reserve adjustments and other costs associated with
previously disposed businesses

0.9
 
Pension expense (income) (non-service cost) 0.6 (0.6 )
 
Other         0.5                     0.8              
 
Adjusted income before income taxes 21.2 25.3
 
Adjusted income tax expense         (6.1 )                   (7.3 )            
 
Adjusted net income       $ 15.1       20.9     $

0.72**

    $ 18.0       21.6     $

0.83**

 

Management of the Company believes that it would be helpful to the
readers of the financial statements to understand the impact of certain
selected items on the Company’s reported net income and earnings per
share, including items that may recur from time to time. The items
adjusted for in this schedule are those that are excluded by management
in budgeting or projecting for performance in future periods, as they
typically relate to events specific to the period in which they occur.
This presentation enables readers to better compare EnPro Industries,
Inc. to other diversified industrial manufacturing companies that do not
incur the sporadic impact of restructuring activities, costs associated
with previously disposed of businesses, or other selected items.
Management acknowledges that there are many items that impact a
company’s reported results and this list is not intended to present all
items that may have impacted these results.

The restructuring costs, environmental reserve adjustment and other
costs associated with previously disposed businesses, and pension
(non-service cost) are included as part of other operating expense and
other expense.

The adjusted income tax expense presented above is calculated using a
normalized company-wide effective tax rate excluding discrete items of
29.0%. Per share amounts were calculated by dividing by the
weighted-average shares of diluted common stock outstanding during the
periods.

** Adjusted diluted earnings per share.

 
EnPro Industries, Inc.
 
Reconciliation of Segment Profit to Adjusted Segment EBITDA
(Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
 
      Three Months Ended March 31, 2019
Sealing     Engineered     Power     Total
Products     Products     Systems     Segments
 
 
Segment profit $ 20.8 $ 6.2 $ 6.7 $ 33.7
 
Acquisition expenses 0.2 0.3 0.5
Restructuring costs 0.7 0.3 1.0
Depreciation and amortization expense   12.0         3.6         1.8         17.4  
Adjusted segment EBITDA $ 33.7       $ 10.4       $ 8.5       $ 52.6  
Adjusted segment EBITDA margin   15.0 %       13.1 %       14.8 %       14.6 %
 
Three Months Ended March 31, 2018
Sealing Engineered Power Total
Products     Products     Systems     Segments
 
 
Segment profit $ 23.7 $ 14.4 $ 4.0 $ 42.1
 
Restructuring costs 0.3 0.3
Depreciation and amortization expense   13.0         4.0         1.3         18.3  
Adjusted segment EBITDA $ 36.7       $ 18.7       $ 5.3       $ 60.7  
Adjusted segment EBITDA margin   15.8 %       21.8 %       10.2 %       16.5 %
 

For a reconciliation of segment profit to net income, please refer to
the Segment Information (Unaudited) schedule.

 
EnPro Industries, Inc.
 
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
         
2019     2018
 
 
Net income $ 13.1 $ 12.6
 

Adjustments to arrive at earnings before interest, income taxes,
depreciation and amortization (EBITDA):

 
Interest expense, net 4.5 7.8
 
Income tax expense 4.8 12.2
 
Depreciation and amortization expense   17.4       18.3  
 
EBITDA 39.8 50.9
 

Adjustments to arrive at earnings before interest, income taxes,
depreciation, amortization and other selected items (Adjusted
EBITDA):

 
Restructuring costs 1.3 0.3
 
Environmental reserve adjustments and other costs associated with
previously disposed businesses
0.9
 
Pension expense (income) (non-service cost) 0.6 (0.6 )
 
Other   0.5       0.8  
 
Adjusted EBITDA $ 43.1     $ 51.4  
 

* Adjusted EBITDA as presented also represents the amount defined as
“EBITDA” under the indenture governing the Company’s 5.75% senior notes
due 2026.

Supplemental disclosure: For the three months ended March 31, 2019,
approximately 47% of the adjusted EBITDA as presented above was
attributable to EnPro’s subsidiaries that do not guarantee the Company’s
5.75% Senior Notes due 2026

Contacts

Investor Contact:
Chris O’Neal
Senior Vice
President – Strategy, Corporate

Development and Investor
Relations

704-731-1527
[email protected]

CHARLOTTE, N.C.–(BUSINESS WIRE)–EnPro Industries, Inc. (NYSE: NPO) today announced its financial results
for the three-month period ended March 31, 2019.

             

Financial Highlights

(Amounts in millions except per share data and percentages)       2019     2018 % ∆
Results for the Quarter Ended March 31              
Net Sales $ 360.3 $ 368.8 (2.3 %)
Segment Profit $ 33.7 $ 42.1 (20.0 %)
Segment Margin 9.4 % 11.4 %
Net Income $ 13.1 $ 12.6 4.0 %
Diluted Earnings Per Share $ 0.63 $ 0.58 8.6 %
Adjusted Net Income 1 $ 15.1 $ 18.0 (16.1 %)
Adjusted Diluted Earnings Per Share 1 $ 0.72 $ 0.83 (13.3 %)
Adjusted EBITDA 1 $ 43.1 $ 51.4 (16.1 %)
Adjusted EBITDA Margin 1         12.0 %       13.9 %      

1 See the attached schedules for adjustments and
reconciliations to GAAP numbers.

 

CEO Comment

“We had a very strong quarter in our Power Systems segment, with both
sales and earnings up significantly compared to the first quarter of the
prior year due to strong demand for military marine engines and
aftermarket parts and services. We also saw year-over-year strength in
food & pharma and petrochem in Sealing. These positive results were more
than offset by unexpected softness in Engineered Products’ auto and
general industrial businesses due to weakness in Europe and Asia, and by
the anticipated year-over-year declines in Sealing related to a softer
semiconductor market, last year’s exit from the industrial gas turbine
business, and timing-related differences in shipment patterns and
product mix,” said Steve Macadam, Chief Executive Officer. “Given the
weaker than expected demand in Engineered Products, we are implementing
a variety of countermeasures to adjust our cost structure and limit the
impact of the softness in this segment.”

2019 Outlook and Guidance

“We currently anticipate a relatively strong second quarter and are
adjusting full-year EBITDA guidance to $224 to $232 million to reflect
the impact of the first quarter, currency-related EDF loss provision.
This translates to an adjusted diluted earnings per share outlook of
$4.25 to $4.52 for the year,” said Mr. Macadam.

Full-year guidance excludes changes in the number of shares outstanding,
impacts from future acquisitions and acquisition-related costs,
restructuring costs, incremental impacts of tariffs and trade tensions
on market demand and costs subsequent to the end of the first quarter,
the impact of foreign exchange rate changes subsequent to the end of the
first quarter, and environmental and legacy litigation charges.

Sales and Segment Profit

During the first quarter, growth in Power Systems was more than offset
by a combination of: i) unexpected weakness in Asian and European
markets within Engineered Products, ii) anticipated market headwinds in
semiconductor, iii) negative translation impact due to the stronger
dollar, and iv) the 2018 exit from the industrial gas turbine business
in Sealing Products, resulting in first quarter sales decreasing 2.3%
compared to the same period of 2018. Excluding the impact of foreign
exchange translation, sales for the quarter declined by 0.3% compared to
the first quarter of 2018.

Segment profit in the first quarter was down 20.0% year-over-year
primarily as a result of the aforementioned factors. Excluding the
impact of costs related to acquisition expenses, foreign exchange
translation, the change in the loss reserve due to foreign exchange on
the EDF contract in the Power Systems segment, and restructuring
charges, total segment profit was 8.9% lower compared to total segment
profit in the first quarter of last year.

Capital Allocation

During the first quarter, the company invested $10.4 million in
facilities, equipment, and software compared to $15.2 million during the
same period of 2018. The company paid a $0.25 per share quarterly
dividend with a total value of $5.4 million. The company also
repurchased approximately 36,000 shares at a cost of $2.4 million.

Segment Highlights

Sealing Products

  • Sales decreased 3.2% in the first quarter versus the prior-year period
    due primarily to softness in the semiconductor market and the 2018
    exit from the industrial gas turbine business. This decline was
    partially offset by strength in the food & pharma and petrochemical
    markets. Excluding the impact of foreign exchange translation, sales
    decreased 1.8% compared to the prior-year period.
  • Segment profit decreased 12.2% in the first quarter versus the
    prior-year period, driven primarily by unfavorable volume and
    timing-related mix, partially offset by lower SG&A costs. Excluding
    the impact of restructuring costs, acquisition-related costs, and
    unfavorable foreign exchange translation, segment profit decreased
    6.7% compared to the prior-year period.

Engineered Products

  • Sales decreased 7.5% in the first quarter versus the prior-year
    period, primarily due to foreign exchange translation and weakness in
    Asia and Europe. Excluding the impact of foreign exchange translation,
    sales decreased 2.6% compared to the prior-year period due to the
    aforementioned weakness in Asia and Europe.
  • Segment profit decreased 56.9% in the first quarter versus the
    prior-year period, primarily due to lower sales volume and higher SG&A
    expenses. Excluding the impact of restructuring costs,
    acquisition-related expenses, and unfavorable foreign exchange
    translation, segment profit decreased 49.4% compared to the prior-year
    period.

Power Systems

  • Sales increased 10.0% in the first quarter versus the prior-year
    period due to strong military marine engine and aftermarket parts and
    services sales, partially offset by lower sales to the power
    generation market.
  • Segment profit increased 67.5% in the first quarter versus the
    prior-year period primarily due to the increase in higher-margin
    aftermarket parts and service sales and reduced SG&A costs. Excluding
    the impact of foreign exchange on the EDF contract, which had a
    negative impact of $0.9 million in the first quarter of 2019 and a
    positive impact of $1.7 million in the first quarter of 2018, segment
    profit increased 225.7%.

Conference Call and Webcast Information

EnPro will hold a conference call tomorrow, May 2, at 10:00 a.m. Eastern
Time to discuss first quarter 2019 results. Investors who wish to
participate in the call should dial 1-877-407-0832 approximately 10
minutes before the call begins and provide conference ID number
13686471. A live audio webcast of the call and accompanying slide
presentation will be accessible from the company’s website, https://www.enproindustries.com.
To access the presentation, log on to the webcast by clicking the link
on the company’s home page.

Non-GAAP Financial Information

This press release contains financial measures that have not been
prepared in conformity with GAAP. They include adjusted net income,
adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA
margin, as well as segment adjusted EBITDA and segment adjusted EBITDA
margin. Tables showing the effect of these historical non-GAAP financial
measures are attached to the release. Adjusted EBITDA and adjusted
diluted earnings per share anticipated for full year 2019 are calculated
in a manner consistent with the historical presentation of these
measures in the attached tables. Because of the forward-looking nature
of these estimates, it is impractical to present quantitative
reconciliations of such measures to comparable GAAP measures, and
accordingly no such GAAP measures are being presented. These estimates
exclude changes in the number of shares outstanding, impacts from future
acquisitions and acquisition-related costs, restructuring costs,
incremental impacts of tariffs and trade tensions on market demand and
costs subsequent to year-end, the impact of foreign exchange rate
changes subsequent to year-end, and any litigation or environmental
charges. Management believes these non-GAAP metrics are commonly used
financial measures for investors to evaluate the company’s operating
performance, and when read in conjunction with the company’s
consolidated financial statements, present a useful tool to evaluate the
company’s ongoing operations and performance from period to period. In
addition, these are some of the factors the company uses in internal
evaluations of the overall performance of its businesses. Management
acknowledges that there are many items that impact a company’s reported
results and the adjustments reflected in these non-GAAP measures are not
intended to present all items that may have impacted these results. In
addition, these non-GAAP measures are not necessarily comparable to
similarly titled measures used by other companies.

Forward-Looking Statements

Statements in this press release that express a belief, expectation or
intention, as well as those that are not historical fact, are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. They involve a number of risks and uncertainties
that may cause actual events and results to differ materially from such
forward-looking statements. These risks and uncertainties include, but
are not limited to: general economic conditions in the markets served by
our businesses, some of which are cyclical and experience periodic
downturns; prices and availability of raw materials; the impact of
fluctuations in relevant foreign currency exchange rates; unanticipated
delays or problems in introducing new products; the incurrence of
contractual penalties for the late delivery of long lead-time products;
announcements by competitors of new products, services or technological
innovations; changes in our pricing policies or the pricing policies of
our competitors; and the amount of any payments required to satisfy
contingent liabilities related to discontinued operations of our
predecessors, including liabilities for certain products, environmental
matters, employee benefit obligations and other matters. Our filings
with the Securities and Exchange Commission, including our most recent
Form 10-K, describe these and other risks and uncertainties in more
detail. We do not undertake to update any forward-looking statements
made in this press release to reflect any change in management’s
expectations or any change in the assumptions or circumstances on which
such statements are based.

About EnPro Industries

EnPro Industries, Inc. is a leader in sealing products, metal polymer
and filament wound bearings, components and service for reciprocating
compressors, diesel and dual-fuel engines, and other engineered products
for use in critical applications by industries worldwide. For more
information about EnPro, visit the company’s website at https://www.enproindustries.com.

APPENDICES

Consolidated Financial Information and Reconciliations

 
EnPro Industries, Inc.
 
Consolidated Statements of Operations (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars, Except Per Share Data)
 
        2019     2018
Net sales       $ 360.3     $ 368.8
Cost of sales         247.2         243.7  
 
Gross profit         113.1         125.1  
 
Operating expenses:
Selling, general and administrative 87.8 92.1
Other         1.4         1.0  
 
Total operating expenses         89.2         93.1  
 
Operating income 23.9 32.0
 
Interest expense (5.2 ) (8.2 )
Interest income 0.7 0.4
Other income (expense)         (1.5 )       0.6  
 
Income before income taxes 17.9 24.8
Income tax expense         (4.8 )       (12.2 )
 
Net income       $ 13.1       $ 12.6  
 
 
Basic earnings per share       $ 0.63       $ 0.59  
Average common shares outstanding (millions)         20.8         21.3  
 
Diluted earnings per share       $ 0.63       $ 0.58  
Average common shares outstanding (millions)         20.9         21.6  
 
 
EnPro Industries, Inc.
 
Consolidated Statements of Cash Flows (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
         
2019     2018
Operating activities
Net income $ 13.1 $ 12.6

Adjustments to reconcile net income to net cash provided by (used
in) operating activities:

Depreciation 9.2 9.3
Amortization 8.2 9.0
Deferred income taxes (1.7 ) (0.9 )
Stock-based compensation 1.7 1.8
Other non-cash adjustments 1.5 1.1
Change in assets and liabilities:
Accounts receivable, net (5.6 ) (20.1 )
Inventories (16.1 ) (9.8 )
Accounts payable (13.4 ) (6.8 )
Other current assets and liabilities 14.6 (11.5 )
Other non-current assets and liabilities         (1.6 )       (4.7 )
Net cash provided by (used in) operating activities         9.9         (20.0 )
 
Investing activities
Purchases of property, plant and equipment (10.3 ) (14.9 )
Payments for capitalized internal-use software (0.4 ) (0.7 )
Proceeds from sale of property, plant and equipment         0.3         0.4  
Net cash used in investing activities         (10.4 )       (15.2 )
 
Financing activities
Proceeds from debt 120.8 256.1
Repayments of debt, including premiums to par value (111.6 ) (268.1 )
Repurchase of common stock (2.0 ) (15.4 )
Dividends paid (5.4 ) (5.3 )
Other         (3.4 )       (4.2 )
Net cash used in financing activities         (1.6 )       (36.9 )
 
Effect of exchange rate changes on cash and cash equivalents         3.4         0.9  
 
Net increase (decrease) in cash and cash equivalents 1.3 (71.2 )
Cash and cash equivalents at beginning of period         129.6         189.3  
Cash and cash equivalents at end of period       $ 130.9       $ 118.1  
 
 
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ (1.6 ) $ 14.5
Income taxes $ (12.3 ) $ (1.4 )
 
 
EnPro Industries, Inc.
 
Consolidated Balance Sheets (Unaudited)
 
As of March 31, 2019 and December 31, 2018
(Stated in Millions of Dollars)
 
      2019     2018
Current assets    
Cash and cash equivalents $ 130.9 $ 129.6
Accounts receivable 292.1 286.6
Inventories 249.3 233.1
Income tax receivable 32.7 49.5
Other current assets         33.9         33.2  
Total current assets 738.9 732.0
 
Property, plant and equipment 294.0 301.2
Goodwill 334.6 333.7
Other intangible assets 291.6 297.3
Other assets         88.0         54.9  
Total assets       $ 1,747.1       $ 1,719.1  
 
Current liabilities
Current maturities of long-term debt $ 0.4 $ 2.4
Accounts payable 119.3 139.2
Accrued expenses         158.8         145.5  
Total current liabilities 278.5 287.1
 
Long-term debt 472.8 462.5
Other liabilities         119.7         106.8  
Total liabilities         871.0         856.4  
 
 
Shareholders’ equity
Common stock 0.2 0.2
Additional paid-in capital 299.8 301.0
Retained earnings 627.6 608.3
Accumulated other comprehensive loss (50.2 ) (45.5 )
Common stock held in treasury, at cost         (1.3 )       (1.3 )
Total shareholders’ equity         876.1         862.7  
Total liabilities and equity       $ 1,747.1       $ 1,719.1  
 

In January 2019, we adopted a new accounting standard that requires us
to recognize an asset and liability for operating leases that were
previously not recorded on the balance sheet. We had approximately $30.0
million of assets recorded in other assets, and liabilities of $10.1
million reflected in accrued expenses and $20.1 million in other
liabilities at March 31, 2019 that were not required to be recorded at
December 31, 2018.

Additionally, in January 2019 we adopted a new accounting standard that
allowed for the reclassification of disproportionate income tax effects
(“stranded tax effects”) resulting from the Tax Cuts and Jobs Act from
accumulated other comprehensive loss to retained earnings. We made an
adjustment reclassifying a net tax benefit of $11.5 million from
accumulated other comprehensive loss to retained earnings.

 
EnPro Industries, Inc.
 
Segment Information (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
 
 
Sales
      2019     2018
   
Sealing Products $ 224.5 $ 231.9
Engineered Products 79.5 85.9
Power Systems         57.3         52.1  
361.3 369.9
Less intersegment sales         (1.0 )       (1.1 )
        $ 360.3       $ 368.8  
 
 
Segment Profit
2019     2018
 
Sealing Products $ 20.8 $ 23.7
Engineered Products 6.2 14.4
Power Systems         6.7         4.0  
        $ 33.7       $ 42.1  
 
 
Segment Margin
2019     2018
Sealing Products 9.3 % 10.2 %
Engineered Products 7.8 % 16.8 %
Power Systems         11.7 %       7.7 %
          9.4 %       11.4 %
 
 
Reconciliation of Segment Profit to Net Income
2019     2018
 
Segment profit $ 33.7 $ 42.1
Corporate expenses (9.0 ) (8.7 )
Interest expense, net (4.5 ) (7.8 )
Other expense, net         (2.3 )       (0.8 )
 
Income before income taxes 17.9 24.8
Income tax expense         (4.8 )       (12.2 )
Net income       $ 13.1       $ 12.6  
 

Segment profit is total segment revenue reduced by operating expenses
and restructuring and other costs identifiable with the segment.
Corporate expenses include general corporate administrative costs.
Expenses not directly attributable to the segments, corporate expenses,
net interest expense, asset impairments, gains/losses related to the
sale of assets and income taxes are not included in the computation of
segment profit. The accounting policies of the reportable segments are
the same as those for the Company.

 
EnPro Industries, Inc.
 
Reconciliation of Net Income to Adjusted Net Income and Adjusted
Diluted Earnings Per Share (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars, Except Per Share Data)
 
 
 
      2019     2018
$    

Average common
shares outstanding,
diluted (millions)

    Per share $    

Average common
shares outstanding,
diluted (millions)

    Per share
               
Net income $ 13.1 20.9 $ 0.63 $ 12.6 21.6 $ 0.58
 
Income tax expense         4.8                     12.2              
 
Income before income taxes 17.9 24.8
 
Adjustments:
 
Restructuring costs 1.3 0.3
 

Environmental reserve adjustments and other costs associated with
previously disposed businesses

0.9
 
Pension expense (income) (non-service cost) 0.6 (0.6 )
 
Other         0.5                     0.8              
 
Adjusted income before income taxes 21.2 25.3
 
Adjusted income tax expense         (6.1 )                   (7.3 )            
 
Adjusted net income       $ 15.1       20.9     $

0.72**

    $ 18.0       21.6     $

0.83**

 

Management of the Company believes that it would be helpful to the
readers of the financial statements to understand the impact of certain
selected items on the Company’s reported net income and earnings per
share, including items that may recur from time to time. The items
adjusted for in this schedule are those that are excluded by management
in budgeting or projecting for performance in future periods, as they
typically relate to events specific to the period in which they occur.
This presentation enables readers to better compare EnPro Industries,
Inc. to other diversified industrial manufacturing companies that do not
incur the sporadic impact of restructuring activities, costs associated
with previously disposed of businesses, or other selected items.
Management acknowledges that there are many items that impact a
company’s reported results and this list is not intended to present all
items that may have impacted these results.

The restructuring costs, environmental reserve adjustment and other
costs associated with previously disposed businesses, and pension
(non-service cost) are included as part of other operating expense and
other expense.

The adjusted income tax expense presented above is calculated using a
normalized company-wide effective tax rate excluding discrete items of
29.0%. Per share amounts were calculated by dividing by the
weighted-average shares of diluted common stock outstanding during the
periods.

** Adjusted diluted earnings per share.

 
EnPro Industries, Inc.
 
Reconciliation of Segment Profit to Adjusted Segment EBITDA
(Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
 
      Three Months Ended March 31, 2019
Sealing     Engineered     Power     Total
Products     Products     Systems     Segments
 
 
Segment profit $ 20.8 $ 6.2 $ 6.7 $ 33.7
 
Acquisition expenses 0.2 0.3 0.5
Restructuring costs 0.7 0.3 1.0
Depreciation and amortization expense   12.0         3.6         1.8         17.4  
Adjusted segment EBITDA $ 33.7       $ 10.4       $ 8.5       $ 52.6  
Adjusted segment EBITDA margin   15.0 %       13.1 %       14.8 %       14.6 %
 
Three Months Ended March 31, 2018
Sealing Engineered Power Total
Products     Products     Systems     Segments
 
 
Segment profit $ 23.7 $ 14.4 $ 4.0 $ 42.1
 
Restructuring costs 0.3 0.3
Depreciation and amortization expense   13.0         4.0         1.3         18.3  
Adjusted segment EBITDA $ 36.7       $ 18.7       $ 5.3       $ 60.7  
Adjusted segment EBITDA margin   15.8 %       21.8 %       10.2 %       16.5 %
 

For a reconciliation of segment profit to net income, please refer to
the Segment Information (Unaudited) schedule.

 
EnPro Industries, Inc.
 
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
 
For the Three Months Ended March 31, 2019 and 2018
(Stated in Millions of Dollars)
         
2019     2018
 
 
Net income $ 13.1 $ 12.6
 

Adjustments to arrive at earnings before interest, income taxes,
depreciation and amortization (EBITDA):

 
Interest expense, net 4.5 7.8
 
Income tax expense 4.8 12.2
 
Depreciation and amortization expense   17.4       18.3  
 
EBITDA 39.8 50.9
 

Adjustments to arrive at earnings before interest, income taxes,
depreciation, amortization and other selected items (Adjusted
EBITDA):

 
Restructuring costs 1.3 0.3
 
Environmental reserve adjustments and other costs associated with
previously disposed businesses
0.9
 
Pension expense (income) (non-service cost) 0.6 (0.6 )
 
Other   0.5       0.8  
 
Adjusted EBITDA $ 43.1     $ 51.4  
 

* Adjusted EBITDA as presented also represents the amount defined as
“EBITDA” under the indenture governing the Company’s 5.75% senior notes
due 2026.

Supplemental disclosure: For the three months ended March 31, 2019,
approximately 47% of the adjusted EBITDA as presented above was
attributable to EnPro’s subsidiaries that do not guarantee the Company’s
5.75% Senior Notes due 2026

Contacts

Investor Contact:
Chris O’Neal
Senior Vice
President – Strategy, Corporate

Development and Investor
Relations

704-731-1527
[email protected]

leverton

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