EnPro Industries, Inc. (NPO)
Q3 2010 Earnings Call
November 4, 2010 10:00 AM ET
Don Washington – Director, Investor Relations and Corporate Communications
Steve Macadam – President and CEO
Bill Dries – Senior Vice President and CFO
Ned Borland – Hudson Securities
Todd Vencil – Davenport & Company
Joe Mondillo – Sidoti & Company
Steve Wortman – Lord Abbett
Gary Farber – C.L. King
Previous Statements by NPO
» EnPro Industries, Inc. Q2 2010 Earnings Call Transcript
» EnPro Industries, Inc. Q1 2010 Earnings Call Transcript
» EnPro Industries Inc., Q1 2009 Earnings Call Transcript
Thank you. Mr. Washington, you may begin your conference.
Good morning, everyone, and welcome to EnPro Industries quarterly earnings conference call. In a moment, Steve Macadam, our President and CEO, and Bill Dries, our Senior Vice President and CFO, will review the results for the third quarter.
But before we begin, I will remind you that our call is being webcast at EnProIndustries.com, where you will also find the slides accompanying the call. You can access the presentation through the webcast link on our homepage. A replay of the call will also be available on the website.
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 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 and Form 10-Q for the quarter ended June 30, 2010.
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 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.
Finally, I want to remind you that comparisons to our financial results for the third quarter and first nine months of 2010 to the comparable periods of 2009 reflect the deconsolidation of Garlock Sealing Technologies LLC and its subsidiaries, effective June 5, 2010. GST and its subsidiaries are deconsolidated from EnPro’s results during the pendency of the Chapter 11 legal proceedings to resolve asbestos claims against it. Accounting rules don’t permit the restatement of prior periods to reflect the deconsolidation.
We will conclude the call with a question-and-answer session after Steve and Bill make their remarks, and if your questions aren’t answered on the call or you have follow-up questions, please contact me at 704-731-1527.
And now I will turn the call over to Steve.
Thanks, Don. Good morning, everyone. Thanks for joining us. Our third quarter results continued the trend of improvement that we began to see late last year. We experienced strong year-over-year organic growth in nearly all areas. Our segment profits and profit margins improved, net income was higher, our cash flow was strong and we continued to make strategic acquisitions in the quarter.
As Bill will explain, the deconsolidation of GST had a negative impact on our reported consolidated sales growth, as well as our segment profits. However, GST had a strong performance in the quarter, and even though they are not included on our consolidated numbers for reasons Don explained, we continue to own a 100% of GST.
Before the selected items we outlined in our press release, we earned $9.6 million in the third quarter and GST earned another $5.7 million of income on the same basis. Last year, our entire company earned $9.5 million, before selected items, and I think it’s interesting to note that our consolidated earnings on this basis were about the same this year without GST as they were last year when they included GST. That provides some indication of the strength of the recovery that we’ve seen this year.
Looking briefly at the performance of our operations, all the Garlock companies reported strong year-over-year growth in the quarter, and benefited from improved demand across a number of markets. That includes both the consolidated Garlock companies and deconsolidated GST and its subsidiaries.
Stemco continued to see increased activity in the heavy-duty truck markets, where demand has increased significantly from the low levels of a year ago. At GGB, demand for bearing products grew, as both industrial and automotive markets remain stronger than a year ago.
Fairbanks Morse was unexpectedly stronger in the quarter, with good success in increasing aftermarket sales and made substantial contributions both to sales and profits.
At Compressor Products International, results were mixed, and as Bill will explain, growth has been more modest as gas prices remain depressed, causing continued postponements of projects and maintenance in CPI’s gas-gathering and related markets.