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EnPro Industries, Inc. (NPO)
Corporate Conference Call
January 13, 2014 9:00 AM ET
Donald Washington – Director-Communications & Investor Relations
Stephen E. Macadam – President and Chief Executive Officer
Richard L. Magee – Senior Vice President
Jeffrey D. Hammond – KeyBanc Capital Markets, Inc.
Ian A. Zaffino – Oppenheimer & Co., Inc.
Todd Vencil – Sterne, Agee & Leach, Inc.
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Mr. Don Washington from EnPro Industries, you may begin your conference.
Thank you, Jake, and good morning, everyone. Welcome to today’s conference call to discuss last Friday’s court ruling in Garlock Sealing Technologies’ asbestos claims resolution process. I remind you that our call is also being webcast on enproindustries.com and you’ll be able to find a replay there. On the call this morning are Steve Macadam, our President and CEO; and Rick Magee, EnPro’s former Senior Vice President and General Counsel. Rick officially retired from the company earlier this month. He continues to coordinate and assist our efforts on the ACRP as a consultant to the company and will continue in that role through the completion of this process.
Before I begin, I want to point out to 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 risk 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 risk 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 September 30, 2013. 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 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 that EnPro and each subsidiary is an independent entity with separate management, operations, obligations and affairs.
And now I’ll give the line to Steve.
Stephen E. Macadam
Thanks, Don. Thanks to everyone for joining us this morning. On Friday, we reached a very gratifying point in a process that we began 3.5 years ago when GST filed for Chapter 11 protection in order to resolve asbestos claims against it. Our goal was to free GST from an unfair system. In our opinion, the deck was unjustly stacked against GST and toward the claimants and their lawyers. GST’s products were safe and did not contribute to asbestos-related diseases. Yet the system allowed claimants’ attorneys to present questionable, scientific evidence that made it appear GST’s products were dangerous and leveraged this evidence and the high cost of litigation to extract settlement payments from GST.
We also set out to show that GST’s settlement costs were in fact greatly inflated by abuses in the tort system that flourished after the bankruptcy wave began in the early 2000s. Claimants’ attorneys were successful in concealing and suppressing evidence of their clients’ exposures to asbestos containing products made by defendants, who left the tort system when they entered bankruptcy. With those defendants absent from the courtroom and the evidence of exposures to their products no longer acknowledged, GST settlement cost increased dramatically.
We said at the time of the filing that we had embarked on a difficult journey. Much of what we set out to prove took us into unchartered territory. GST’s case required difficult decisions about challenging and complicated issues. Quite often the outcome of those decisions was difficult to predict. However, we’d attempted during this process to be responsible and forthright with you at each step and to fulfill all responsibilities as a public company. This has sometimes been a challenge, because of the inherent uncertainty in this process. With the judge’s opinion on Friday, we’ve passed an important milestone, but we want to make it clear that the process is not over yet. Much work remains and important issues are yet to be clarified.
Over the next few minutes, we hope to help you understand some of those issues and we will take your questions about where we are in the process. As I said, we’re extremely gratified by the court’s ruling on last Friday and very appreciative of the time and energy Judge Hodges put into the estimation trial and his decision. His opinion estimating GST’s liability on a $125 million is exceptionally well-reasoned, well-written and will, no doubt, become an important, and in our opinion, a historic landmark in asbestos litigation.
We’re also very grateful to GST’s team of lawyers and experts, who we believe prepared and conducted the most comprehensive and effective defense ever presented in asbestos litigation. We are deeply indebted to this wonderful team, who communicated complicated legal and medical and economic issues in a manner that was both understandable and compelling. The judge’s ruling concludes that $125 million is a reasonable and reliable estimate of GST’s liability for present and future mesothelioma claims and is sufficient to satisfy GST’s obligations.