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EnPro Industries, Inc. (NPO)
Q3 2013 Earnings Conference Call
November 01, 2013 10:00 a.m. ET
Don Washington – Director, IR
Stephen E. Macadam – President & CEO
Alexander W. Pease – SVP & Chief Financial Officer
Ian Zaffino – Oppenheimer
Todd Vencil – Stern Agee
Joe Mondale – Sidoti & Company
Gary Farber – C.L. King
James – KeyBanc Capital Market
Previous Statements by NPO
» EnPro Industries, Inc. Discusses Q3 2013 Results (Webcast)
» EnPro Industries Management Discusses Q2 2013 Results - Earnings Call Transcript
» EnPro' CEO Discusses Q1 2013 Results - Earnings Call Transcript
Mr. Don Washington, Director of Investor Relations for EnPro, you may begin your conference.
Thank you, Rob and good morning everyone. Welcome to our quarterly earnings conference call. I’ll remind you that the call is being webcasted in enproindustries.com, where you can also find the slides that accompany our call. Steve Macadam, our President and CEO and Alex Pease, Senior Vice President and CFO will begin their review of our third quarter performance and our outlook for the remainder of the year in just a moment.
But before we begin, I will need to point out that you may hear statements during the course of this 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, 2012 and the Form 10-Q for the quarter ended June 30, 2013. We don’t 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 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, 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 of EnPro and each subsidiary is an independent entity, with separate management, operations, obligations and affairs.
I want to remind you that 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 this as the Asbestos Claims Resolution Process or ACRP and issues during the call today. GST’s summary results are presented separately in our earnings release and we’ll discuss those as well.
And now I’ll turn the call over to Steve.
Stephen E. Macadam
Thanks Don. Good morning everyone. I’m going to start the discussion about the third quarter with a few comments about the ACRP since I suspect that’s a topic of high interest to many of you. As you may remember I missed this call last quarter because I was actually attending GST’s Estimation Trial which was held in order for the judge to make an informed decision about the appropriate number and value of pending and future measure on the claims against GST.
The courtroom portion of the trial concluded on August 22, after 17 days of live testimony. Both GST’s legal team and I were generally pleased with the way GST’s case was presented. Significant evidence was presented on both sides of the science issue, but the GST team presented what I believe was compelling evidence that GST’s products could not have been a substantial contributing cause of claimants’ mesotheliomas.
More over GST’s representatives presented what I believe a very, very convincing case on estimation of the liability. The estimation case demonstrates the GST’s settlements had little to do with actual legal liability, but instead were influenced by the necessity of avoiding high cost of litigation which were further inflated by the unfair and abusive practices of the plaintiffs' bar. In cases against GST these practices included the suppression of evidence of their clients’ exposures to many sources of highly friable, extremely dangerous asbestos products mainly factored by large companies mostly insulation that had filed for bankruptcy relief.
Despite the substantial limitations placed on GST’s ability to discover evidence of these abuses, the pervasiveness and impact on GST were well chronicled in the evidence presented at the trial. The case is now in the post-trial briefing stage with final briefs due in late November. We are uncertain as to when the judge will render his decision, but we do not expect the decision from the court before the first quarter of 2014. Even then our court decision will be very important but not to terminate it. There are many potential impediments to the adoption of the plan of reorganization including the Pos which may make confirmation difficult in absence of the consensual resolution.
In the meantime both we and GST have indicated repeatedly that we’re willing to find an accepted reasonable compromise that would bring finality and certainty to that situation. However, we’ve also demonstrated that we’re patient and that we’re not going to accept a settlement that’s not in the best interest of our company and our shareholders. Even though settlement remains a possibility for the ultimate outcome with ACRP and is our strong preference. We can’t be sure that the case will be resolved in that fashion.