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EnPro Industries (NPO)
Q1 2013 Earnings Call
May 2, 201310:00 am ET
Don Washington – Director, IR
Steve Macadam - President & CEO
Alex Pease - SVP & CFO
Jeff Hammond - KeyBanc Capital Markets
Todd Vencil - Sterne, Agee
Joan Mondale - Sidoti & Company
Previous Statements by NPO
» EnPro Industries CEO Discusses Q3 2010 Results - Earnings Call Transcript
» EnPro Industries, Inc. Q2 2010 Earnings Call Transcript
» EnPro Industries, Inc. Q1 2010 Earnings Call Transcript
» EnPro Industries Inc., Q1 2009 Earnings Call Transcript
Mr. Don Washington, Director of Investor Relations, you may begin your conference sir.
Thanks Shirley. And good morning everyone. Welcome to our quarterly earnings conference call. I remind you that our calls is being webcasted in enproindustries.com, where you can also find the slides accompanying the call.
In a moment Steve Macadam, our President and CEO; and Alex Pease, our Senior Vice President and CFO will review the results for the first quarter of 2013.
But before we begin, I will point out to you that you may hear statements during the course of the call that express the belief, expectation or intension as well as those that are not historical fact.
These statements are forward-looking and 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 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 31, 2009.
We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management’s expectations or any change in assumptions or circumstances on of which such statements are based.
You should also note that EnPro owns a number of direct and indirect subsidiaries. From time to time, we may refer collectively to EnPro and one or more of its subsidiaries as we, or to the businesses, assets and debts or affairs of EnPro or a subsidiary as ours. These and similar references are for convenience only, and should not be construed to change the fact that EnPro and each subsidiary is an independent entity, with separate management, operations, obligations and affairs.
I want to remind you that to our financial results reflect the deconsolidation of Garlock Sealing Technologies LLC and Garrison Litigation Management and their subsidiaries, effective June 5, 2010. The results of these entities will remain deconsolidated during the pendency of the Chapter 11 legal proceedings to resolve asbestos claims against GST.
We refer to these as the asbestos claims resolution process or ACRP and you will hear us use that actively during the call today. GST results are included separately in our earnings release.
And with that I will turn the call over to Steve.
Thanks Don. Good morning everyone. Thanks for joining today. Alex will provide more detail on the first quarter shortly when he discusses our financial performance as you can tell from our earnings release we continue to deal with soft market conditions. Especially in comparison to the levels of demand that we saw in the first quarter of 2012.
Seasonal improvements provided a modest uptick in activity levels from the fourth quarter of 2012. That compared to the first quarter of last year. Our earnings reflect decreased volumes, a less profitable mix as aftermarket demand softened. Some accounting adjustments at (inaudible) and cost at GGB in France associated with implementing an ERP system and qualifying a new raw material formulation.
The events at FME and GGB combined to create a net reduction in our first quarter pre-tax earnings are about $3 million. Of course future volumes will depend a lot on market demand but we do believe that the mix and cost issues are largely temporary and they don’t indicate a shift in our longer term expectations for performance of GGB or FME.
Overall sales were down 8% from the first quarter of last year excluding the Motorwheel acquisition which was not in last year’s first quarter. Sales were down 12% or $37 million. About half of this organic decrease came in our Sealing Products and Engineered Products segments where demand was much lower than the first quarter of last year.
The other half came at Fairbanks Morse Engine which last year shipped four engines and recognized about $18 million and completed contract revenue on those engines. This year no engines were shipped in the first quarter and all engine revenues were accounted for 100% of completion accounting.
We currently plan to ship 22 new engines in 2013 or 8 more than last year and account for all the engine revenues this year 100 percentage of complete.
In our Sealing Products segment sales were down 10% from the first quarter of last year excluding the contribution of the Motorwheel acquisition. Sales of the Engineered Products segment were down about 9%, conditions were softer and almost all market served by these segments. Profits in margin in all three segments reflected the effect of lower volumes as well as reduced demands for some of our higher margin aftermarket products.
In the Engineered Products segment, however, a portion of the decline was offset by the benefit of cost reductions at CPI implemented last year. In the deconsolidated operation to GST demand in the U.S. markets were stable compared to last year but sales were down 2% as a result of lower demand and in a couple of foreign markets.