Enpro Industries (NPO)

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EnPro Industries Inc. (NPO)

Q3 2008 Earnings Call

October 30, 2008 9:00 am ET

Executives

William Dries - Chief Financial Officer and Sr. VP

Stephen Macadam - Chief Operating Officer

Richard L. Magee - Sr. VP, Sec. and Gen. Counsel

Donald G. Pomeroy II - Principal Accounting Officer, VP and Controller

John R. Smith - Sr. VP of HR and Admin.

Analysts

Todd Vencil - Davenport and Co.

Randy Laufman - Imperial Capital

Joe Mandelo - Fidelity and Company

Presentation

Operator

(Operator Instructions)

Welcome to EnPro third quarter earnings conference call. Today’s conference is being recorded. At this time the conference is being recorded. At this time I would like to turn the conference over to Mr. Don Washington.

Mr. Washington, please go ahead.

Don Washington

Thank you Leslie and good morning everyone. Again we welcome you to EnPro Industries Quarterly Earning Conference Call.

Stephen Macadam, our President and CEO, and Bill Dries, our Senior Vice President and CFO will review the events of the 3rd quarter on the call, our financial results and our outlook. In addition Rick Magee, our general counsel, is present and prepared to participate in the Q & A.

Before Steve and Bill make their prepared remarks and we open the lines for questions I’d like to remind you that you may hear statements during the course of this call that express a belief, expectation or intention as well as those that are not historical fact. These statements are forward looking and involve a number of risks and un uncertainties that may cause actual events and results to differ materially from such forward looking statements.

These risks and uncertainties are referenced in the safe harbor statement and are included in our press release and are described in more detail along with other risk and uncertainties in our filing with the FCC including the 4M10k December 31 2007 and the 4TQ for the 2nd quarter of 2008.

We do not undertake to update any forward looking statements made on this conference call to reflect any change in management expectations or any change in assumptions or circumstances on which such statements are made.

I’d like to remind you that the call is also being webcast on EnProIndustries.com and a replay will be available on the website shortly following the call.

If your questions aren’t answered or you have any follow up questions, please contact me after the call at 704 2731 1527 and with that I’ll turn the call over to Steve.

Thank you Don, and good morning everyone. Thanks for joining us today. As our earnings release reports our performance in the 3rd quarter reflects continued benefits from acquisitions and from organic growth in certain of our industrial markets.

However, as I’m sure you realize many of our in use and geographic markets are growing increasingly soft. We will provide the details of the 3rd quarter shortly. But here are a few highlights Sales were up about 10% compared to the 3rd quarter of last year, with more than half the increase from acquisitions and organic growth.

At the bottom line we reported improved earrings both on a GAAP and adjusted basis. Under GAAP we earned $0.62 a share in the 3rd quarter, an improvement of about 15% over last year.

Adjusting our earnings for asbestos related expenses, and other selective items, we produced income of $1.02 a share or about 19% better than last year.

Our cash flows have been extremely healthy this year giving us sufficient liquidity to spend about $62 million on share repurchases through the end of the 3rd quarter, plus another $74 million on capital projects and acquisitions.

I’ll have more to say about our outlook at the end of the call. But it’s clear that we have entered challenging times in many of out markets. We are fortunate to have sound operating practices, strong brands, a stable base of activity generated in the aftermarket, participation in a diverse set of markets, and a healthy balance sheet.

Each of these factors should continue to benefit us in current conditions. We will remain disciplined in the execution of our strategies and look for opportunities to grow and strengthen our company though acquisitions, new products, and market expansion.

Looking briefly and recent developments, we completed one deal since our last earnings call. We bought a small compressor service company for our CPI business in a transaction that closed after the end of the 3rd quarter. We are currently in discussions with several prospects which we believe will lead to completed transactions later this year and early next year.

Earlier this week we announced that Fairbanks Morris Engine has signed a letter of intent to supply emergency diesel generators for nuclear power plants that are designed for the US market by Arriba. Construction of these plants is still in the planning stages. But this is an important win for Fairbanks Morris. .

After they supplied diesel generator sets to nuclear power plants 40 years ago, and although as we all know, there’s been no new construction in this market for many years, with this letter of intent and a growing interest in the construction of nuclear power plants in North America [EFFINY] is well positioned to participate in a market that appears to be heading for growth.

Our largest capital project, the modernization of the Carlox Palmyra, New York facility continues to move along nicely.

We completed the relocation of the Guyline product line to a new building in the 3rd quarter, and the demolition of the buildings that previously house the product line is complete.

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