Enpro Inc. · NYSE:NPO
Enpro — EnPro Industries — Investor Presentation (2020)
40 slides from Enpro's investor presentation, 2020
Slide 1: Investor Presentation Q2 2020
INVESTOR PRESENTATION Q2 2020
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Statements made in the course of this presentation 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
Slide 3: Business Overview
BUSINESS OVERVIEW
Slide 4: Who Is EnPro?
WHO IS ENPRO? A leading provider of advanced materials technologies used in critical and demanding applications 4
Slide 5: Attractive Portfolio of Businesses
ATTRACTIVE PORTFOLIO OF BUSINESSES Company Overview (NYSE: NPO) Revenue Contribution Headquarters Charlotte, NC Sales by Sales by Segment 4 Sales by Channel5 Sales by Market 4 Manufacturing Facilities 25 primary Geography5 Global Employees ~5,000 3% 10% 3% 6% 3% Customers 50,000+ 24% 6% 22% 43% 6% 2
Slide 6: EnPro's Segments
ENPRO’S SEGMENTS Sealing Products Engineered Products LTM 6/30/20 REVENUE $832M LTM 6/30/20 REVENUE $290M LTM 6/30/20 ADJ. EBITDA MARGIN* 19.5% LTM 6/30/20 ADJ. EBITDA MARGIN* 13.7% REVENUE COMPOSITION (2019) REVENUE COMPOSITION (2019) 39% STEMCO 59% GGB 31% TECHNETICS 41% CPI 30% GARLOCK KEY PRODUC
Slide 7: EnPro Mission and Vision
ENPRO MISSION AND VISION HIGHLY ENGINEERED PRODUCTS AND SERVICES THAT PROVIDE DIFFERENTIATED PERFORMANCE DERIVED FROM MATERIALS SCIENCE EXPERTISE, MANUFACTURING KNOW- HOW, AND TRADE SECRETS WE ARE A PURPOSE-DRIVEN COMPANY WITH STRONG VALUES, A FORWARD-THINKING OPERATING DUAL-BOTTOM LINE CULTURE ENAB
Slide 8: EnPro Strategic Priorities
ENPRO STRATEGIC PRIORITIES 1 Reshape our portfolio towards businesses with compelling margins, leading technology, and high cash flow return on investment in markets with favorable secular tailwinds 2 M aintain a balanced approach to capital allocation 3 Increase aftermarket exposure and recurring r
Slide 9: Value Creation at EnPro
VALUE CREATION AT ENPRO • Increasing stability and predictability of our cash flows by increasing our aftermarket and recurring revenue mix Increasing Profits • Increasing exposure to markets that are growing more than 5% annually through organic and inorganic investments • Acquiring companies that
Slide 10: Update on Current Business Environment
UPDATE ON CURRENT BUSINESS ENVIRONMENT
Slide 11: Early Actions Taken to Protect Our People, Business, and Community
EARLY ACTIONS TAKEN TO PROTECT OUR PEOPLE, BUSINESS, AND COMMUNITY Protecting Our People Protecting our Business Protecting our Community • Suspended all non-essential travel • Aggressive cost management • Distributed thousands medical grade • Implemented flexible work options, initiatives (N95) ma
Slide 12: Four-Phase Response to Navigate the COVID-19 Pandemic
FOUR-PHASE RESPONSE TO NAVIGATE THE COVID-19 PANDEMIC Our cross-functional COVID-19 Response & Support Team, made up of our global executive leadership team, is working around the clock to manage our business continuity plans and coordinated response THE HEALTH AND SAFETY OF OUR EMPLOYEES, COMMUNITI
Slide 13: Balance Sheet Strength
BALANCE SHEET STRENGTH Net Leverage Debt Maturity Schedule Reported June 30, 2020 ($M) Credit Facility $0 Undrawn3 $400M $350M Rev olv er Senior Senior Notes 1 $346 Unsecured $150M Notes Term Loan2 $148 Term Loan A2 2020 2021 2022 2023 2024 2025 2026 Capital Lease Obligations $0 Commentary • Strong
Slide 14: COVID-19 Scenario Analysis
COVID-19 SCENARIO ANALYSIS Q2 Market Exposure Total EnPro Sealing Products Engineered Products General Industrial MD/HD Truck General Industrial 3%3% MD/HD Truck 3%3% 1% 2% Oil & Gas Semiconductor 1% 6% 4% 8% Petrochemical 22% Semiconductor 6% General Industrial 6% 29% 32% Oil & Gas 7% 12% Auto 6% F
Slide 15: Capital Allocation and Portfolio Management Overview
CAPITAL ALLOCATION AND PORTFOLIO MANAGEMENT OVERVIEW
Slide 16: Disciplined Capital Allocation Strategy
DISCIPLINED CAPITAL ALLOCATION STRATEGY • $22 million in FY19 capital expenditures; $8.9 million in REINVEST IN Q1 and Q2 2020 THE BUSINESS 2019 CAPITAL ALLOCATION ($M) • Approximately 57% in FY19 maintenance-related and balance focused on growth $13M $9M $15M $21M • High technical know-how, IP-rich
Slide 17: Inorganic Value Creation Through Deliberate M&A Approach
INORGANIC VALUE CREATION DELIVERED THROUGH DELIBERATE M&A APPROACH ENPRO’S M&A CRITERIA ILLUSTRATIVE AREAS OF INTEREST MARKET FIT ✔Addressable market growth >5% per annum, driven by key technology growth trends ✔High barriers to entry (e.g., intellectual property, switching costs, trade secrets, etc
Slide 18: Shifting Characteristics Through Thoughtful Portfolio Shaping
SHIFTING CHARACTERISTICS THROUGH THOUGHTFUL PORTFOLIO SHAPING ACTIVITIES SHIFTING FROM… …TO Invested in high-value niche markets with addressable market growth of >5% p.a., driven by technology tailwinds Leadership in high-value niche markets with established, premium brands Portfolio of businesses
Slide 19: Successful Integration of Recent Acquisitions
SUCCESSFUL INTEGRATION OF RECENT ACQUISITIONS The Aseptic Group (joined Garlock) LeanTeq Co., Ltd. (joined Technetics Group) Acquisition increases aftermarket presence in the growing Acquisition increases aftermarket presence in the growing pharmaceutical and biopharmaceutical markets semiconductor
Slide 20: Successful Execution of Portfolio Shaping Actions
SUCCESSFUL EXECUTION OF PORTFOLIO SHAPING ACTIONS TrailerTail Fairbanks Morse Bushing Block Brake Products Air Springs Exit Divestiture Business Exit Exits (Several) Divestiture (Completed Q4 2019) (Closed Q1 2020) (Announced Q2 2020) (Announced/Completed (Announced Q3 2020) • TrailerTail manufactur
Slide 21: EnPro Operating System
ENPRO OPERATING SYSTEM Committed to shareholder value creation Combines capabilities that improve productivity, efficiency and innovation in all business units World class standard is always maintained Learning mentality and ownership-based leadership Everyone must play for EnPro Learn from others,
Slide 22: Financial Performance
FINANCIAL PERFORMANCE ($ IN MILLIONS) REVENUE GROSS PROFIT MARGIN ADJUSTED EBITDA MARGIN* $1,274 $1,206 14.7% $1,115 33.5% 33.5% 14.0% 14.0% 32.8% 2018 2019 LTM 6/30/20 2018 2019 LTM 6/30/20 2018 2019 LTM 6/30/20 Portfolio Reshaping and Operational Improvements Have Driven Increased Margins * Non-GA
Slide 23: Financial Performance
FINANCIAL PERFORMANCE ($ IN MILLIONS) FREE CASH FLOW*,(1) NET DEBT TO ADJUSTED EBITDA* MULTIPLE $1 50 .00 240 % $1 40 .00 216% 3.0x 220 % $1 30 .00 196% 200 % $1 20 .00 174% $1 10 .00 180 % 1.9x $1 00 .00 160 % $9 0.0 0 140 % $8 0.0 0 $109 $110 $99 120 % 0.4x $7 0.0 0 100 % $6 0.0 0 $5 0.0 0 80% (2)
Slide 24: Investment Thesis
INVESTMENT THESIS
Slide 25: EnPro Investment Thesis
ENPRO INVESTMENT THESIS Portfolio that is being reshaped towards businesses with compelling margins, 1 leading technology, and high cash flow return on investment in markets with favorable secular tailwinds 2 EnPro Operating System continues to drive margin expansion 3 Shareholder value maximized th
Slide 26: Investor Presentation
INVESTOR PRESENTATION Q3 2020
Slide 27: Appendix
APPENDIX
Slide 28: Sealing Products Snapshot
SEALING PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE $881 $832 • #1 - #3 in principal markets served; Garlock 125 year operating history • High degree of technical and application expertise; extensive trade secrets SAL ES • Deep customer engagement to create innovative solutions complemented
Slide 29: Sealing Products: Products, Services, and End Market Overview
SEALING PRODUCTS: PRODUCTS, SERVICES, AND END MARKET OVERVIEW SELECT PRODUCTS & SERVICES SELECT MARKETS SOFT GASKETS BEARING ISOLATORS HYDRODYNAMIC FOOD & PHARMA SEMICONDUCTOR SEALS METAL SEALS ELECTROSTATIC CLEANING AND NUCLEAR AEROSPACE PEDESTALS REFURBISHMENT SERVICES SANITARY GASKETS SANITARY HO
Slide 30: Engineered Products Snapshot
ENGINEERED PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE $331 • Leading brands $290 • Technology and market leadership in plain bearings SAL ES • High degree of tribological and applications expertise in bearings GROSS MARGIN 37% EBITDA MARGIN* • Strong aftermarket presence in oil & gas and p
Slide 31: Engineered Products: Products and End Market Overview
ENGINEERED PRODUCTS: PRODUCTS AND END MARKET OVERVIEW SELECT PRODUCTS SELECT MARKETS METAL POLYMER BEARING TRIBOLOGICAL SOLUTIONS SOLID POLYMER AUTOMOTIVE GENERAL INDUSTRIAL BEARING ISOLATION GASKETS FILAMENT WOUND HIGH-FLOW VALVES PETROCHEM AEROSPACE BEARING MONITORING DEVICES PACKING CASES PISTON
Slide 32: Reconciliation of LTM Results
RECONCILIATION OF LTM RESULTS EnPro Revenue Adjusted EBITDA Adjusted EBITDA ($ in millions) ($) ($) Margin % Plus: Six Months Ended June 30, 2020 530 78 14.7% Y ear Ended December 31, 2019 1,206 169 14.0% Less: Six Months Ended June 30, 2019 620 83 13.4% LTM Ended June 30, 2020 1,115 164 14.7% Seali
Slide 33: Consolidated Adjusted EBITDA
CONSOLIDATED ADJUSTED EBITDA Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited) For the Years Ended December 31, 2019 and 2018 (Stated in Millions of Dollars) Years Ended December 31, 2019 2018 Net income (loss) $ 38.3 $ 19.6 Adjustments to arrive at earnings before interest, income
Slide 34: Consolidated Adjusted EBITDA
CONSOLIDATED ADJUSTED EBITDA 34
Slide 35: Segment Adjusted EBITDA
SEGMENT ADJUSTED EBITDA Er”ro ‘Quarter Ended June 30, 2020 ‘Segment proft (loss) s 10 $ 03) $ 107 ‘Segment profit ‘Acquisition and divestiture expenses 05 - 05 Acquisition and aivestiture expenses Non-controliing interest compensation allocation” os - Os Non-controlling interest compensation allocat
Slide 36: Consolidated Adjusted Net Income
CONSOLIDATED ADJUSTED NET INCOME (Stated in Millions of Dollars) 36
Slide 37: Consolidated Adjusted Net Income
CONSOLIDATED ADJUSTED NET INCOME Reconciliation of Net Income (Loss) to Adjusted Net Income from Continuing Operations and Adjusted Diluted Earnings Per Share (Unaudited) (Stated in Millions of Dollars, Except Per Share Data) Years Ended December 31, 2019 2018 Average common Average common shares ou
Slide 38: Free Cash Flow
FREE CASH FLOW LTM H12020 H12019 FY2019 ($ in Millions) 3/31/20 FY2018 (A) (B) (C) (=A-B+C) Net Cash Provided by (Used in) Operating Activities of 130.6 33.4 33.6 130.8 212.8 Continuing Operations Purchases of Property, Plant and Equipment (20.5) (8.9) (10.0) (21.6) (36.1) Free Cash Flow 110.1 24.5
Slide 39: 2018 Net Debt to Adjusted EBITDA
2018 NET DEBT TO ADJUSTED EBITDA $ millions December 31, 2018 Credit Facility $117 Senior Notes $345 Capital Lease Obligations $1 A Debt Components $463 B Cash and Equivalents $130 C = (A – B) Net Debt $333 D FY December 31, 2018 Adjusted EBITDA* $178 E = (C / D) Leverage Ratio 1.9x * Non-GAAP measu
Slide 40: 2019 Net Debt to Adjusted EBITDA
2019 NET DEBT TO ADJUSTED EBITDA Reported December 31, 2019 ($M) Credit Facility $134 Senior Notes (1) $345 Term Loan $149 Capital Lease Obligations $1 A Debt Components $629 B Cash and Equivalents $121 C = (A – B) Net Debt $508 D December 31, 2019 Adjusted EBITDA* $169 E = (C / D) Leverage Ratio 3.