EnPro Industries Announces Fourth Quarter and Full Year 2010 Results

CHARLOTTE, N.C., Feb. 16, 2011 /PRNewswire/ --

• Strengthening markets and improving volumes benefit full year and fourth quarter results in Sealing Products and Engineered Products
• Engine Products and Services sales remained strong and segment profits improved 16% for the full year; as expected, the segment's fourth quarter results declined from a year ago primarily because of the timing of engine shipments in 2010
• Full year consolidated net income in 2010 was $155.4 million while consolidated net income in the fourth quarter of 2010 was $6.3 million; this compares to a net loss of $139.3 million for the full year of 2009 and a net loss of $38.6 million in the fourth quarter of 2009
• Full year consolidated net income before selected items was $49.0 million in 2010; GST earned an additional $11.8 million before selected items in the period after deconsolidation; in 2009, consolidated net income before selected items was $34.8 million
• Consolidated operations generated earnings before interest, taxes, depreciation, amortization and asbestos-related expenses (EBITDAA) of  $121.8 million in 2010; GST's EBITDAA was $19.4 million in the period following deconsolidation
• A significant portion of EnPro's 2010 year-end cash balance of $219 million has been used to complete acquisitions in 2011
• Improving markets and the contributions of strategic initiatives and recent acquisitions should benefit results throughout 2011

EnPro Industries (NYSE: NPO) today reported net income of $6.3 million, or $0.30 a share, for the fourth quarter of 2010. This compares to a net loss of $38.6 million, or $1.93 a share, in the fourth quarter of 2009.

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Results for the fourth quarter and full year of 2010 reflect the deconsolidation of Garlock Sealing Technologies LLC (GST) and its subsidiaries, effective June 5, 2010, when GST filed a voluntary petition to establish a trust to resolve all current and future asbestos claims against it under Section 524(g) of the U.S. Bankruptcy Code. Deconsolidation is required by accounting regulations, which do not permit the restatement of results of prior periods to reflect the deconsolidation. However, 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. The schedule presents results for the fourth quarters and full years of 2010 and 2009 as if the deconsolidation of GST had occurred on January 1, 2009.

Before selected items, EnPro's consolidated net income in the fourth quarter of 2010 was $6.4 million. At GST, income before selected items was $4.6 million in the fourth quarter. In the fourth quarter of 2009, when GST was consolidated in EnPro's results, income before selected items was $12.3 million. A table listing these items and their effect on EnPro's consolidated net income in both periods is included in this release.

Consolidated sales were $191.5 million in the fourth quarter of 2010, while GST reported third party sales of $45.1 million in the quarter. In the fourth quarter of 2009, when GST was included in EnPro's consolidated results, sales were $223.2 million.

Consolidated earnings before interest, income taxes, depreciation, amortization, asbestos-related expenses and other selected items (EBITDAA) were $17.4 million in the fourth quarter of 2010; GST reported EBITDAA of $7.2 million. In the fourth quarter of 2009, consolidated EBITDAA, including GST, was $30.3 million.

"Overall, our operations performed well in the fourth quarter of 2010," said Steve Macadam, president and chief executive officer. "With the exception of Fairbanks Morse Engine, where the timing of engine shipments affected results, our operations reported improved sales and earnings as markets strengthened and volumes increased. The quarter continued the positive trends we saw throughout 2010 as we benefited from growing strength in many of our markets, our strategic initiatives for continuous improvement and acquisitions that broadened the reach of our operations. In addition, GST took a step during 2010 that we anticipate will lead to a fair and permanent resolution of asbestos claims against it. We are confident that our accomplishments over the past year and the current state of our markets put us on the correct course for continued growth during 2011."

Full Year Results

For the full year of 2010, EnPro reported net income of $155.4 million, or $7.51 a share, compared to a net loss of $139.3 million, or $6.97 a share, in 2009.

Before selected items, consolidated net income in 2010 was $49.0 million; in addition, GST recorded net income of $11.8 million on that basis in the period following its deconsolidation on June 5. In 2009, consolidated net income before selected items was $34.8 million, including earnings from GST.  A table listing these items and their affect on EnPro's consolidated net income in both years is included in this release.

Consolidated sales in 2010 were $865.0 million, while GST recorded additional third-party sales of $105.0 million during the period following its deconsolidation. In 2009, when GST was included in consolidated results, EnPro reported sales of $803.0 million. The increase in consolidated sales compared to 2009 was primarily the result of organic growth with a smaller portion attributable to acquisitions.

Consolidated EBITDAA was $121.8 million in 2010; GST generated additional EBITDAA of $19.4 million following its deconsolidation on June 5. In 2009, when GST was included in consolidated results for the full year, EBITDAA was $97.1 million. As a percent of consolidated sales, EBITDAA improved to 14.1% in 2010 from 12.1% in 2009.

Garlock Sealing Technologies

Third party sales at GST and its subsidiaries were $45.1 million in the fourth quarter of 2010, an improvement of 14% from the levels of a year ago, when those businesses were included in EnPro's consolidated results. GST and its subsidiaries benefited from increased demand from the steel industry, process industries and other markets in North America as general economic conditions grew stronger. Higher volumes, improved pricing and the absence of restructuring costs in 2010 benefited GST's operating profits, which improved by 18% to $5.9 million, while operating profit margins grew to 13.1% in 2010 from 12.6% in the fourth quarter of 2009. GST's operating profit and operating profit margins do not reflect expenses of $5.4 million incurred in connection with the asbestos claims resolution process.  

Sealing Products Segment

Despite the deconsolidation of GST, Sealing Products segment profits improved by 15% to $15.8 million in the fourth quarter of 2010, and segment profit margins increased by almost five percentage points to 17.9% as volumes grew and prices increased for selected products. Sales in the Sealing Products segment declined to $88.1 million as the result of the deconsolidation.

The Garlock companies included in EnPro's consolidated results reported higher demand from upstream oil and gas, power generation and semiconductor markets, and the benefits of the acquisition of companies involved in aerospace markets. Sales in these operations were up 19% over the fourth quarter of 2009 and profits improved by almost 50%. In Stemco's heavy-duty truck markets, both original equipment and aftermarket demand was very strong and sales of wheel-end products, braking products and suspension system components increased. These conditions led Stemco's sales to increase by 30% and profits to more than double.

Engineered Products Segment

Increased demand for GGB Bearing Technology's products was the primary factor behind an 18% improvement in sales in the Engineered Products segment.  GGB reported a modest profit in the fourth quarter after reporting a loss in the fourth quarter of 2009, but costs associated with growth and other initiatives at Compressor Products International (CPI) limited the improvement in the segment's profits.

All of GGB's major product segments in Europe and the Americas reported increased demand, and sales improved by 26% before the negative effect of currency translation. Even though volumes remain well below peak levels, the combination of volume increases and cost reduction programs helped GGB record a small profit in the fourth quarter of 2010. At CPI, sales grew primarily from acquisitions, but the business also reported favorable conditions in refining markets in the United States, Europe and South America. In CPI's North American natural gas markets, activity remained low due to high storage levels and weak demand. Costs associated with establishing new service centers, the implementation of a new ERP system and various other growth-related initiatives reduced CPI's segment profits below the level recorded in the fourth quarter of 2009.

Engine Products and Services Segment

Fairbanks Morse Engine (FME) completed the full year of 2010 with sales equaling the record levels of 2009 and segment profits improving by 16%. As anticipated, however, schedules established by customers required FME to ship only one engine in the fourth quarter of 2010 compared to six in the fourth quarter of 2009, and sales declined by 50% compared to the fourth quarter of 2009. Lower engine sales and reduced aftermarket activity led to decreased segment profits in the fourth quarter while the segment's profit margins returned to the mid-teens.

Cash Flows

At December 31, 2010, the company's consolidated cash balance stood at $219.2 million, while in addition GST held a cash balance of $87.1 million. At December 31, 2009, EnPro's consolidated cash balance was $76.8 million.

EnPro's 2010 cash balance benefited from $138.2 million, net of taxes, received from the sale of Quincy Compressor; however, it was reduced by the reclassification of $29.5 million as a result of the deconsolidation of GST, capital expenditures of $21.9 million and $25.9 million spent to complete four acquisitions. Acquisitions which have closed or are expected to close in the first quarter of 2011 will reduce the company's year-end cash balance by approximately $155 million.

In 2009, the company spent $51.1 million to complete five acquisitions and had capital expenditures of $22.1 million.

EnPro's consolidated operating activities generated cash of $84.4 million in 2010, excluding taxes paid on the sale of Quincy Compressor, compared to $59.0 million in 2009.

Outlook

"The condition of our markets and the programs that improved our results in 2010 should continue to benefit us in 2011," said Macadam. "In our Engine Products and Services segment we expect sales and engine shipments will be similar to 2010, but profits are likely to be slightly lower because of a less attractive mix and higher research and development spending." Macadam noted that the current 2011 schedule places half of the year's new engine sales in the first quarter and half in the third quarter. Consequently, sales in those quarters should be substantially higher than in the second and fourth quarters.

"In our Sealing Products and Engineered Products segments as well as at GST, sales and profits should benefit from higher demand and stronger volumes from a number of markets, including heavy-duty trucking, and oil and gas processing and refining," Macadam continued. "Even though the deconsolidation of GST will be reflected in year over year comparisons, growth in our markets and the contributions of acquisitions should offset a significant portion of the effect of GST's deconsolidation." As previously noted, the deconsolidation resulted from the commencement of the asbestos claims resolution process GST entered into in June 2010.

"The acquisitions of Rome Tool and Die, PSI, and the Mid Western companies should contribute sales of about $100 million in 2011. We expect they will be modestly accretive to 2011 earnings, and we're confident their value will increase as we integrate them fully into our continuous improvement programs," Macadam said.

Since the announcement of the sale of Quincy Compressor in December 2009, EnPro has announced seven acquisitions and a strategic alliance for a total investment of approximately $180 million. Macadam concluded: "We have continued to redeploy the proceeds from the sale of Quincy to strengthen our position in businesses where we have strong market shares and attractive prospects for growth. Those are the keys to our acquisition strategy, and we expect to identify opportunities to make additional acquisitions in the future."

Conference Call and Webcast Information

EnPro will hold a conference call today, February 16, at 10:00 a.m. Eastern Time to discuss fourth quarter and full year 2010 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 40100857.  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.

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 the fourth quarter and full year of 2010 and 2009 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, 2009 and Form 10-Q for the quarter ended September 30, 2010, 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, Inc.