EnPro Industries, Inc. (NPO)
Q1 2009 Earnings Call
April 30, 2009 10:00 am ET
Stephen E. MacAdam - President and Chief Executive Officer
William Dries - Senior Vice President and Chief Financial Officer
Don Washington - Director, Investor Relations and Corporate Communications
Joseph Mondillo - Sidoti & Co.
Gary Farber - C.L. King & Associates
Todd Vencil - Davenport & Co.
Gregory Macosko - Lord Abbett
Rob Young - William Smith & Co.
Previous Statements by NPO
» EnPro Industries Inc. Q4 2008 Earnings Call Transcript
» EnPro Industries Inc. Q3 2008 Earnings Call Transcript
» EnPro Industries Inc. Q1 2008 Earnings Call Transcript
Good morning everyone and welcome to EnPro Industry’s quarterly earnings conference call. Steve MacAdam, our President and CEO, and Bill Dries, our Senior Vice President and CFO, are here to review the events of the first quarter of 2009 and our financial results for the quarter. They will also discuss current conditions in our markets and how those affect our expectations for the remainder of this year. Following their comments, as usual, we’ll open the line for a question-and-answer session. In addition to Steve and Bill, Rick Magee, our General Counsel, is also here if there are any questions directed for him.
Before Steve and Bill make their prepared remarks I’d like to remind you that you may hear statements during the course of this call that express the belief, expectation, or intention, as well as those that are not historical facts. These statements are forward looking and involve a number of risk and uncertainties that may cause actual results and events to differ materially from such forward-looking statements. These risks and uncertainties are referenced in the Safe Harbor statement included in our press release and are described in more detail along with other risks and uncertainties in our filings with the SEC including the Form 10-K for the year ended December 31st, 2008.
We do not undertake to update any forward-looking statements made on this conference call to reflect any changes in management’s expectations or any change in assumptions or circumstances on which such statements are based. This call is also being webcast on enproindustries.com and a replay of the call will be available on the website later today. If your questions are not answered on the call or if you have any followup questions, you can contact me later at (704) 731-1527, and now, I will turn the call over to Steve.
Stephen E. MacAdam
Good morning everyone. Thanks for joining us today. I hope you have all had a chance to review our first quarter results; clearly they were disappointing. Many of our end markets deteriorated very quickly through the quarter, which resulted in sharply falling volumes, which in turn put pressure on profits and margins. The deterioration was not only because of reduced primary demand, but also because of substantial de-stocking of inventories by our customers. We are operating in a difficult environment, but we are comfortable on our direction and we are enthusiastic about our future.
Our near-term objective is to deal with this environment in a realistic and decisive manner that strikes a balance between the need to control cost and the opportunity to invest for the future. Controlling cost is critical and we are addressing the issue head-on. We’ve reduced employment levels by approximately 8% from the end of last year and by nearly 10% from the peak in the middle of 2008. We’ve shortened work weeks, frozen salaries, and reduced discretionary spending. We continue to monitor conditions closely and we are prepared to take additional steps should we determinate if they are necessary.
We are fortunate to have a group of very experienced and capable managers who are driving our efforts to control and reduce our cost and we are fortunate to already have the benefit of the productivity and efficiency programs that we’ve implemented over the past several years and that are continuing.
Although we are aggressively reducing and controlling cost, we are also prepared to invest where appropriate to assure we can take advantage of opportunities to grow. In the current economy, we expect to encounter many opportunities to use our leading market positions and healthy balance sheet to create an even stronger company. In this vein we continue to support product development and marketing programs that allow us to gain share and to seek acquisitions that provide us entry into new markets and new technologies.
Bill will provide a full review of our first quarter results, but in summary, they reflect the same kinds of conditions that we’ve seen across the board among industrial companies. With few exceptions our industrial markets are weak and overall our sales were down 24% compared to the first quarter of last year.
The engineered products segment, which was mostly impacted by the downturn particularly at GGB which dealt with very weak demand for both automotive and industrial bearings from OEM markets, recorded a loss in the quarter. Our sealing products segment was better, but was also impacted by significant decline in volume. This segment benefited from the high proportion of its sales that go into the aftermarket applications, which tend to be more profitable and less dependent on general economic conditions. This segment’s nuclear power generation markets and certain products of its upstream oil and gas market were stable in the quarter.
The engine products and services segment continues to be a bright spot. Fairbanks Morse Engine is executing very well and is turning in strong profits. The predictable backlog of Navy work, consistent aftermarket demand, and the business’s operating performance make it a strong and stable contributor to our results.