Enpro Inc. · NYSE:NPO
Enpro — Enpro Industries — Davenport Building Materials and Basic Industries Conference 2008
34 slides from Enpro's conference presentation, Mar 6, 2008
Slide 1: Davenport Building Materials and Basic Industries Conference
DAVENPORT BUILDING MATERIALS AND BASIC INDUSTRIES CONFERENCE March 6, 2008 ENGINEERED FOR PERFORMANCE
Slide 2: Forward Looking Statements
Forward Looking Statements Statements in 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 uncertainties that
Slide 3: Additional Information Concerning Proxy Materials
Additional Information Concerning Proxy Materials EnPro will file a proxy statement in connection with its 2008 annual meeting of shareholders. EnPro shareholders are strongly advised to read the proxy statement and the accompanying proxy card when they become available, as they will contain importa
Slide 4: The EnPro Value Proposition
The EnPro Value Proposition Proprietary products for critical applications Attractive mix of stable, higher margin aftermarket sales Clear and effective management strategies Consistent, profitable growth producing strong cash flows
Slide 5: Growing Sales and Profits
Growing Sales and Profits 2002 2003 2004 2005 2006 2007 Sales $690 $710 $815 $839 $928 $1030 2002 2003 2004 2005 2006 2007 Segment EBITDA $102 $117 $123 $148 $177 $202 Segment EBITDA Margin $14.8% $16.5% $15.1% $17.6% $19.1% $19.6% 8% CAGR 15% CAGR $M $M
Slide 6: Strong Brands, Leading Market Shares
Strong Brands, Leading Market Shares Leading Brands Account for More Than 90% of EnPro's Sales #1 Industrial Gaskets #1 Plain Bearings #1 Wheel-end Seals Top US Custom Supplier #1 US Navy Engines #1 Compressor Sealing Components
Slide 7: Diverse Markets Provide Stable Growth
Light Truck Marine Trans. Heavy Duty Truck Hydrocarb. & Chem. Prod. & Proc. General Industry Other Industry Pulp & Paper Primary Metals Rubber & Plastics Pumps & Compressors Utility 7.78 10.26 10.56 13.34 14.95 22.84 1.52 3.08 4.56 5.42 5.69 Diverse Markets Provide Stable Growth No single customer a
Slide 8: Geographic Reach, Aftermarket Balance
Geographic Reach, Aftermarket Balance United States Europe Other regions 55 27 18 EnPro has primary manufacturing locations in North and South America, Europe and Asia. Europe 27% Other Areas 18% United States 55% OEM Aftermarket 50 50 Aftermarket 50% OEM 50% 2007 Sales
Slide 9: Product Segment Sales and Profit Contributions
Product Segment Sales and Profit Contributions Sealing Products Egineered Products Engine Products & Services 44 44 12 Sealing Products 45% Engine Products & Services 12% Engineered Products 43% Sealing Products Egineered Products Engine Products & Services 46 45 8 Sealing Products 46% Engineered Pr
Slide 10: Sealing Products Segment
Sealing Products Segment Markets Hydrocarbon production, refining and processing Chemical processing Power generation Primary metals Pulp and paper Heavy-duty trucking Primary Products Fluid seals and gaskets Mechanical seals Oil seals Fleet information systems Unitized hub systems Wheel seals and b
Slide 11: Sealing Products Performance
Sealing Products Performance 2006 2007 90 93 Growth Drivers Customer replacement cycles Oil and gas markets Industrial activity Pricing leadership Productivity and facility improvements Business Characteristics High aftermarket content Leading market shares Respected brands Responsiveness Worldwide
Slide 12: Engineered Products Segment
Engineered Products Segment Markets Automotive Heavy equipment Hydraulic equipment Machine tools Manufacturing plants Pneumatic temperature and instrument control Medical devices and facilities Refineries and chemical plants Gas gathering and transmission Primary Products Metal-backed and solid poly
Slide 13: Engineered Products Performance
Engineered Products Performance 2006 2007 79 90 Growth Drivers Industrial capacity utilization Pricing leadership Productivity and facility improvements Acquisition Business Characteristics Attractive mix of aftermarket and OE Leading market shares Customer responsiveness Respected brands Global pre
Slide 14: Engine Products and Services Segment
Engine Products and Services Segment Markets U.S. Navy shipbuilding programs Aftermarket parts and service Commercial power Products Medium-speed engines Diesel and natural gas Licensee of European companies Engine parts and service Sealing Products Egineered Products Engine Products & Services 46 4
Slide 15: Engine Products and Services Performance
Engine Products and Services Performance 2006 2007 8.6 19.3 Growth Drivers U.S. Navy shipbuilding programs Aftermarket parts demand Commercial power opportunities Productivity improvements Business Characteristics Backlog visibility Long-lead time items Mix of OE and aftermarket 2006 2007 105 128 Sa
Slide 16: Management Strategies Produce Results
Management Strategies Produce Results Operational Efficiency New Products, New Markets Strengthen Business Mix Manage Asbestos Settlements Increasing Cash Flows Growing Profits Shareholder Value
Slide 17: Efficiency Improvements, Facilities Investments
Efficiency Improvements, Facilities Investments Total Customer Value Comprehensive lean enterprise Achieving results Sales per employee up Days sales in inventory down Leveraged purchasing Facilities investments New facilities China: compressors ('04), bearings and seals('07) Slovakia: bearings ('04
Slide 18: New Products and New Markets
New Products and New Markets Increased emphasis on engineering and marketing Senior level staff improvements Technical fellow program Focused product development spending Coordinate engineering and marketing Listen to the 'Voice of the Customer' New product sales are growing 2002 Sales: 7% 2007 Sale
Slide 19: Acquisitions Support Growth, Add Value
Acquisitions Support Growth, Add Value Support Corporate Strategies Add new products Open faster growing technical and geographic markets Complement sealing and engineered products Explore opportunities in adjacent industries Financial Considerations Financial performance in line with current operat
Slide 20: Acquisitions Add Products, Open Markets, Build Strength
Acquisitions Add Products, Open Markets, Build Strength Pikotek (October 2003) New product for GST, presence in the upstream oil and gas market Strong growth-85% sales increase in four years Compressor Products International (June 2006- July 2007) Doubled size, elevated to core EnPro division Geogra
Slide 21: Acquisition Strategy Achieving Momentum
Acquisition Strategy Achieving Momentum Acquisition activity is increasing 2002-2005 2 acquisitions, $22 million spent 2006-2008 YTD 10 acquisitions, $134 million spent Added $90 million of sales at attractive margins Growing acquisition pipeline Driven by strategic planning Complements organic grow
Slide 22: Asbestos Claims and Cash Flow Trends are Favorable
2001 2002 2003 2004 2005 2006 2007 Insurance Recoveries 88 94 99 83 107 88 90 Net Outflow 78 52 36 40 22 38 25 Asbestos Claims and Cash Flow Trends are Favorable 2002 2003 2004 2005 2006 2007 41700 44700 17400 15300 7700 5200 $M Asbestos claims arise from products formerly made by Garlock Sealing Te
Slide 23: Managing Asbestos Settlements
Managing Asbestos Settlements Significant insurance remains $382 million of solvent coverage Total to be collected over next several years No coverage disputes Liability reflects management's best estimate $524 million over 10 years Updated quarterly Excludes future legal and administrative fees and
Slide 24: Segment Results Reach Record Levels
Segment Results Reach Record Levels 2006 2007 Sales 928 1060 Segment EBITDA 177 202 Sales up 11% 5% organic growth U.S. markets mixed Europe improved FX, acquisitions contributed Segment EBITDA up 14%; margins at new highs Volume increased Productivity improved Pricing and acquisitions contributed S
Slide 25: Consistent Improvement in Cash Flows and Earnings
Consistent Improvement in Cash Flows and Earnings 2002 2003 2004 2005 2006 2007 Cash Flows $63 $65 $50 $61 $79 $98 2002 2003 2004 2005 2006 2007 EPS $1.43 $1.67 $1.86 $2.43 $3.09 $3.75 Non-GAAP measures; see appendix for reconciliation $M
Slide 26: Capital Management Policy
Capital Management Policy Designed for flexibility Supports corporate strategies Invest in existing businesses Pursue bolt-on acquisitions to add value Demonstrated ability to identify, acquire and integrate Completed acquisitions generate IRR's well above cost of capital Attractive acquisition pipe
Slide 27: Share Repurchase Program
Share Repurchase Program $100 million authorization $50 million ASR $50 million open market 1.7 million shares purchased immediately Open market purchases completed over next year Program allows EnPro to Return cash to shareholders Continue to execute profitable growth strategy
Slide 28: Commitment to Good Corporate Governance
Commitment to Good Corporate Governance High governance scores from ISS Consistently in top 20% of peers Non-executive chairman Independent majority (7 of 8 directors) Fully independent nominating committee Highly qualified Board Significant public company experience 5 former public company CEOs CEO
Slide 29: Outlook for 2008
Outlook for 2008 Market conditions Seasonal activity typical in first half General conditions could improve in second half Sales and earnings should grow Modest market improvements for the year Benefits of acquisitions, new markets and geographic expansion Continued execution of strategies Cash flow
Slide 30: EnPro is Positioned for Continued Success
EnPro is Positioned for Continued Success Strong business characteristics Broad base of customers in critical industries Highly respected brand names and leading market shares Strong aftermarket presence Sound financial performance Good earnings in competitive market conditions Strong operating cash
Slide 31: Appendix: Reconciliation of Non-GAAP to GAAP Financial Measures
Appendix Reconciliation of Non-GAAP to GAAP Financial Measures
Slide 32: Reconciliation of Non-GAAP Operating Cash Flows to GAAP Cash Flows
Reconciliation of Non-GAAP Operating Cash Flows to GAAP Cash Flows 2002 2003 2004 2005 2006 2007 Net cash provided by operating activities of continuing operations per published statements of cash flows 20 $ 44 $ 41 $ 76 $ 76 $ 105 $ Add back: Asbestos payments Increase in receivable (liability) 34
Slide 33: Reconciliation of non-GAAP EPS to GAAP EPS
Reconciliation of non-GAAP EPS to GAAP EPS In 2002, this adjustment removes the impact of discontinued operations, the cumulative effect of a change in accounting principle and management's estimate of the additional corporate costs and reduced interest expense that would have been incurred had we o
Slide 34: Reconciliation of Non-GAAP EBITDA to Reported Segment Profit
Reconciliation of Non-GAAP EBITDA to Reported Segment Profit Reconciliation of Non-GAAP EBITDA to Reported Segment Profit 2002 2003 2004 2005 2006 2007 Sealing Products segment profit 39.3 $ 48.7 $ 58.6 $ 66.1 $ 76.5 $ 78.0 $ Engineered Products segment profit 31.8 30.9 32.6 45.4 61.5 69.4 Engine Pr
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