• Sales grew 14% over the second quarter of 2011 to $301.7 million; excluding the effects of acquisitions and foreign exchange, sales increased 6%
• GAAP EPS of $0.47 compares to $0.56 in the second quarter of 2011
• Before selected items, EPS was $0.76, the same as in the second quarter of 2011
• Consolidated EBITDA increased 7% over the second quarter of 2011 to $43.0 million; for the first half of 2012, EBITDA increased 6% over the first half of 2011 to $89.5 million
• Deconsolidated operations of GST reported third-party sales of $56.9 million and adjusted net income of $9.1 million in the second quarter compared to $55.3 million and $9.0 million a year ago

CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug. 2, 2012-- EnPro Industries (NYSE: NPO) today reported consolidated sales of $301.7 million, a 14% increase over the second quarter of 2011. Businesses acquired since the second quarter of 2011 contributed an increase of 13% while the combination of diesel engine revenue and modestly higher activity in the Sealing Products segment produced growth of 6%. These increases were partially offset by the effect of foreign currency translation into U.S. dollars, which reduced consolidated sales by 5%, and lower demand in the company’s Engineered Products segment.

Net income in the second quarter of 2012 was $10.2 million, or $0.47 a share, compared to $12.2 million, or $0.56 a share, in the second quarter of 2011. Before selected items, including interest due to Garlock Sealing Technologies LLC (GST), a deconsolidated subsidiary, restructuring costs and an inventory step-up related to an acquisition, net income was $16.7 million, or $0.76 a share. In the second quarter of 2011, income before selected items was also $16.7 million, or $0.76 a share. The results of GST and its subsidiaries were deconsolidated effective June 5, 2010, when GST entered a process to reach a permanent resolution of all current and future asbestos claims. A table attached to this press release shows the effect of selected items in the second quarter and first six months of 2012 and 2011. All per share amounts in this release are stated on a diluted basis.

Consolidated earnings before interest, income taxes, depreciation and amortization and other selected items (EBITDA) were $43.0 million in the second quarter of 2012, a 7% improvement over the second quarter of 2011, when EBITDA was $40.1 million.

“Our second quarter results reflect changing conditions in our markets, especially in the last weeks of the quarter,” said Steve Macadam, president and chief executive officer. “In our European operations, demand grew weaker as the end of the quarter neared and economic uncertainty increased. Throughout the quarter, conditions in our North American heavy-duty truck market were relatively unchanged from a year ago and softness continued in our natural gas markets. Although near-term economic conditions remain uncertain, we are confident our enterprise excellence programs will enable us to operate successfully in this environment as we complete the integration of our recent acquisitions and pursue other measures to improve profitability.”

Six Months Results

Sales for the first six months of 2012 were $613.2 million, a 15% increase over the first half of 2011. Acquisitions contributed growth of 12% in the first half of the year while increased sales in the Engine Products and Services and Sealing Products segments contributed growth of 6%. Sales in the Engineered Products segment were about the same as in the first half a year ago. The increases were partially offset by the effect of foreign currency translation into U.S. dollars, which reduced consolidated sales by 3% from the first half of 2011.

EBITDA for the first half of 2012 was $89.5 million, a 6% increase over the first half of 2011 when EBITDA was $84.2 million.

Net income for the first six months of the year was $24.0 million, or $1.11 a share, compared to $27.4 million, or $1.26 a share, in the first six months of 2011. Before selected items, net income in the first half of 2012 was $36.2 million, or $1.67 a share, compared to $37.4 million, or $1.73 a share, in the first six months of 2011.

In the second quarter of 2012, sales in the Sealing Products segment increased 22% over the second quarter of 2011, reflecting growth of 23% from the Motorwheel and Tara Technologies acquisitions and 2% from organic factors, including favorable pricing. These improvements were partially offset by the effect of foreign currency translation, which reduced the segment’s sales by 3%. The segment’s sales benefited from increased demand in North American industrial markets and higher activity levels in semiconductor and nuclear power markets. Compared to the second quarter a year ago, demand in the segment’s European markets was lower, and demand for aftermarket products in North American heavy-duty truck markets and in global oil and gas markets decreased.

The segment’s profits declined by 6% and segment profit margins were reduced to 13.8% in the second quarter of 2012. The change in margins reflects a shift in sales mix from higher margin aftermarket products to lower margin original equipment components as a result of the Tara Technologies acquisition. Segment profits and margins also were affected by acquisition-related expenses of $2.4 million, including a $1.4 million inventory step-up related to the Motorwheel acquisition.

Engineered Products segment sales declined by 7% over the second quarter of 2011, reflecting the effect of foreign currency translation, which reduced sales by 6%, and lower volumes in the segment’s operations. These factors were partially offset by sales from PI Bearings, which was acquired in the third quarter of 2011, and better pricing for the segment’s products. Although activity declined in European industrial and automotive markets and remained at low levels in North American natural gas markets, the segment’s sales benefited from increased activity in its North American industrial and petrochemical markets, compared to the second quarter a year ago.

Segment profits also decreased and segment margins were lower as volumes declined in the segment’s European and Canadian markets and as restructuring costs and investments in sales and marketing activities increased.

In the Engine Products and Services segment, sales improved by 59% over the second quarter of 2011. The increase reflects engine revenue recorded in the second quarter of 2012 as a result of percentage of completion accounting, which the segment began using for new engine production in the third quarter of 2011. In the second quarter of 2011, no engines were shipped by the segment and as a result, no engine revenue was recorded. Aftermarket parts and services sales were lower in the second quarter of 2012 than a year ago, when the segment benefited from major engine repairs and overhauls.

Although segment profits benefited from the increase in engine revenue, segment margins contracted as engine revenue, which is generally less profitable than aftermarket sales, increased.

Third party sales at the deconsolidated operations of GST and its subsidiaries increased by 3% over the second quarter of 2011, reflecting modest increases in activity in North American markets and better pricing. Higher selling, general and administrative expenses reduced operating profits and operating profit margins in the second quarter of 2012 compared to a year ago.

Cash Flows

EnPro’s cash balance stood at $31.2 million at June 30, 2012. Operating activities provided cash of $4.8 million in the first six months of 2012 compared to $12.6 million in the first six months of 2011. The change reflects increased working capital of about $16 million, partially offset by a decrease of about $7 million in cash taxes paid.

The company’s long term debt rose to $248.4 million at the end of June from $150.2 million at the end of 2011. The increase primarily reflects borrowings of approximately $85 million from the company’s revolving credit facility to complete the Motorwheel acquisition in the second quarter. For the remainder of the year, the company believes operating cash flows will be sufficient to fund working capital and anticipated capital expenditures.

GST finished the first half of 2012 with a cash balance of $137.8 million dollars, compared with $126.3 million at the end of 2011.

Outlook

“Although economic conditions in Europe and growing caution in many of our North American markets impacted our second quarter results, we continued to execute against our strategies and we remain confident in the direction of our operations,” Macadam said. “While our outlook reflects current global economic conditions, the environment does not change our commitment to our long-term goals or our confidence in our ability to achieve them.”

Macadam said the company now expects 2012 sales to increase by more than 10% over 2011, assuming no further deterioration in the global economic environment. This is a reduction in the company’s earlier outlook for growth in excess of 12%. The change reflects the effect of declining exchange rates for foreign currencies, primarily the euro, on the translation of the company’s sales into U.S. dollars. Sales will benefit from acquisitions, which should contribute sales growth of about 8% compared to 2011. Acquisitions completed after the second quarter of 2011 contributed sales of about $65 million in the first half of 2012 and are expected to contribute another $25 to $30 million in the second half of the year for a total of $90-$95 million in 2012. Growth will be limited by declining volumes in many of the company’s European operations and the effect of foreign exchange rates. At current rates, the company anticipates foreign exchange will reduce 2012 consolidated sales by 3% compared to 2011. Macadam also said segment profit margins will reflect acquisition related expenses and restructuring costs, primarily at Compressor Products International. Under those circumstances, segment margins are not likely to improve in comparison to segment margins reported in 2011.

Conference Call and Webcast Information

EnPro will hold a conference call today, August 2, at 10:00 a.m. Eastern Time to discuss second quarter 2012 results. Investors who wish to participate in the call should dial 1-800-851-4704 approximately 10 minutes before the call begins and provide conference id number 12399828. A live audio webcast of the call and accompanying slide presentation will be accessible from the company’s website, http://www.enproindustries.com. To access the presentation, log on to the webcast by clicking the link on the company’s home page.

Deconsolidation of Garlock Sealing Technologies LLC

Results for the second quarter and first six months of 2012 reflect the deconsolidation of Garlock Sealing Technologies LLC (GST) and its subsidiaries, effective June 5, 2010, when GST filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code to begin a process in pursuit of an efficient and permanent resolution to all current and future asbestos claims against it. Deconsolidation is required by generally accepted accounting principles. To aid in comparisons of year-over-year data, the company has attached a schedule to this press release showing key operating measures for both EnPro and GST on a pro forma basis.

Non-GAAP Financial Information

This press release contains financial measures that have not been prepared in accordance with GAAP. They include income before asbestos-related expenses and other selected items, EBITDAA, EBITDA and related per share amounts. Tables showing the effect of these non-GAAP financial measures for second quarter and first six months of 2012 and 2011 are attached to the release.

Forward-Looking Statements

Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They 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 include, but are not limited to: general economic conditions in the markets served by our businesses, some of which are cyclical and experience periodic downturns; prices and availability of raw materials; and the amount of any payments required to satisfy contingent liabilities related to discontinued operations of our predecessors, including liabilities for certain products, environmental matters, guaranteed debt payments, employee benefit obligations and other matters. In addition, adverse developments could arise in regard to voluntary petitions filed by certain of our subsidiaries in U.S. Bankruptcy Court to establish a trust that would resolve all current and future asbestos claims. Our filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2011 and Form 10-Q for the quarter ended March 31, 2012, describe these and other risks and uncertainties in more detail. We do not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based.

About EnPro Industries

EnPro Industries, Inc. is a leader in sealing products, metal polymer and filament wound bearings, components and service for reciprocating compressors, diesel and dual-fuel engines and other engineered products for use in critical applications by industries worldwide. For more information about EnPro, visit the company’s website at http://www.enproindustries.com.

Source: EnPro Industries

EnPro Industries
Don Washington, 704-731-1527
Director, Investor Relations and Corporate Communications
don.washington@enproindustries.com