Enpro Industries (NPO)

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EnPro Industries, Inc. (NYSE:NPO)

Q2 2014 Earnings Conference Call

July 31, 2014 10:00 AM ET


Dan Grgurich – Director, Investor Relations and Corporate Communications

Stephen Macadam – President and Chief Executive Officer

Alexander Pease – Senior Vice President and Chief Financial Officer


Jeffrey Hammond – KeyBanc Capital Markets, Inc.

Joe Mondillo – Sidoti & Co. LLC

Todd Vencil – Sterne, Agee & Leach, Inc.



Good morning. My name is Leanne, and I will be your conference operator today. At this time, I would like to welcome everyone to the EnPro Industries Second Quarter 2014 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. (Operator Instructions)

Dan Grgurich, Director, Investor Relations and Corporate Communications, you may begin your conference.

Dan Grgurich

Thank you, Leanne. Good morning and welcome to EnPro Industries quarterly earnings conference call. I'll remind you that our call is being webcast at enproindustries.com, where you can find the slides accompanying the call.

Steve Macadam, our President and CEO and Alex Pease, Senior Vice President and CFO will begin their review of our second quarter performance and our outlook in a moment.

But before we begin, I will point out that you may hear statements during the course of this call that expresses 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 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, 2013.

We do not undertake to update any forward-looking statements on this conference call to reflect any change in management’s expectations or any change in assumptions or circumstances on which 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.

I want to remind you that our financial results reflect the deconsolidation beginning on June 5, 2010 of Garlock Sealing Technologies LLC, Garrison Litigation Management and their subsidiaries, which we refer to as GST. 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 you will hear us use that acronym during the call today. GST’s summary results are presented separately in our earnings release.

In addition to our usual discussion of EnPro's financial results for the quarter and six months ending June 30, 2014 and 2013 we will be discussing pro-forma unaudited consolidated financial information. On May 29, 2014, GST filed its amended proposed plan of reorganization which is briefly described in our earnings release and is available on our website. Under this plan of reorganization we would retain 100% of the equity interests of GST.

Under accounting rules GST's financial results cannot be reconsolidated with our results until GST exits the Chapter 11 process upon the confirmation and completion of a plan of reorganization. In our earnings release however, we included pro-forma financial information that illustrates the effect of reconsolidation of GST based on the terms specified in GSTs amended plan of reorganization.

You should refer to our earnings release for important information regarding how this pro-forma financial information is derived as well as the risks and uncertainties related to confirmation and completion of the amended plan of reorganization. Any pro-forma financial information discussed on the call today is derived from the condensed pro-forma financial statements included in the earnings release.

These consolidated pro-forma financial statements are based on estimates and assumptions which has been made solely for the purposes of developing such pro-forma information. They also include certain adjustments such as increased depreciation and amortization expense on tangible and intangible asset, increased interest expense on the debt incurred to complete the reconsolidation, as well as the tax impacts related to these adjustments. The pro-forma adjustments are based upon available information and certain assumptions that EnPro believes are reasonable.

The unaudited pro-forma financial information is presented for information purposes only and is not necessarily indicative of what the consolidated company’s financial position or results of operations actually would have been had the reconsolidation been completed as of the dates indicated, nor is it necessarily indicative of the future operating results or financial position of the consolidated company. Therefore, the actual amounts recorded at the date the reconsolidation occurs may differ from the information presented in the earnings release or discussed on this call.

And now, I'll turn the call over to Steve.

Stephen Macadam

Thank you, Dan, and good morning, everyone. As you can see in our earnings release we reported a slight increase in consolidated sales compared to the second quarter of 2013. Sales grew from the benefit of foreign exchange and the impact of two small acquisitions completed in March of this year. Excluding those items organic sales were about flat with the second quarter of 2013.

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