Enpro Inc. · NYSE:NPO
Enpro — Enpro Industries — BB&T Commercial & Industrial Conference 2011
48 slides from Enpro's conference presentation, Apr 4, 2011
Slide 1: BB&T Commercial & Industrial Conference
BB&T Commercial & Industrial Conference April 6, 2011 Exhibit 99.1
Slide 2: Forward Looking Statements
2 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 tha
Slide 3: The EnPro Story is About...
3 Accelerating sustainable growth The EnPro Story is About... A company with a solid performance record... Leveraging a successful business model... 1 2 3
Slide 4: EnPro at a Glance
4 EnPro at a Glance Consolidated Sales (2010) Aftermarket mix Markets served Acquisitions since 2003 Market cap $865M 55% 40+ 28 $860M
Slide 5: Three Solid Business Segments
5 Three Solid Business Segments Diverse market reach Broad, proprietary product offering ENGINEERED PRODUCTS ENGINE PRODUCTS & SERVICES 45% of consolidated sales Industrial gaskets, seals Truck wheel-end, brake and suspension components Primarily aftermarket sales 35% of consolidated sales Non-rolli
Slide 6: 2002 to 2008: Built a Stronger Business
6 2002 to 2008: Built a Stronger Business Strengthened the base Focused on operational efficiency Total Customer Value (TCV) Invested in new facilities and modernizations Strengthened the business mix improved or disposed of underperforming businesses made complementary acquisitions Developed new pr
Slide 7: Established EnPro as a Global Player with Significant Aftermarket Presence
7 Established EnPro as a Global Player with Significant Aftermarket Presence United States 52% Europe 29% Canada Asia/ Pacific Cent. & S. Amer. Other 19% Aftermarket 55% OEM 45% 48 manufacturing locations in 10 countries in North and South America, Europe and Asia 2010 Consolidated Sales
Slide 8: Delivered Consistent Growth...
8 Delivered Consistent Growth... Sales Adjusted EPS $627M $994M 10% CAGR $1.43 $3.31 18% CAGR Note: Adjusted EPS is a non-GAAP measure - see appendix for reconciliation ....until downturn in 2009
Slide 9: Aggressive Response to Economic Challenges
9 Aggressive Response to Economic Challenges Operating initiatives Pricing and sourcing optimization Working capital efficiency Carefully paced acquisition and capital spending Operational improvement teams Improved sales and marketing programs Workforce initiatives 17% reduction from peak employmen
Slide 10: Result: Response Provided Basis for Improvement in 2010
10 Result: Response Provided Basis for Improvement in 2010 Consolidated Sales Consolidated Adjusted Net Income (non-GAAP) $70M $994M $803M $35M Excludes GST LLC sales of $105M after June 4. $865M* $49M* Excludes GST LLC adjusted net income of $12M after June 4.
Slide 11: Strong Financial Position - EnPro has the Resources Needed to Grow
11 Strong Financial Position - EnPro has the Resources Needed to Grow $125M ABL credit facility up to 2016 History of strong free cash flow Debt to Capital* (December 31, 2010) 26% $172M convertible debenture 3.9% interest matures 2015 * Does not include intercompany debt to GST.
Slide 12: The EnPro Story is About...
12 Accelerating sustainable growth 1 2 3 A company with a solid performance record... The EnPro Story is About... Leveraging a successful business model...
Slide 13: Successful Business Model
13 Leading brands 1 Diversified markets 2 Competitive advantages 3 Innovation 4 Acquisitions 5 Successful Business Model E X C E L L E N C E
Slide 14: 1. Leading Brands and Market Share
14 1. Leading Brands and Market Share Brand Product Market Share Industrial seals and gaskets Heavy-duty truck wheel-end seals High performance plain bearings Reciprocating compressor sealing components US Navy engines #1 #1 #1 #1 #1 EnPro brands hold strong market positions
Slide 15: 2. Diversified Across End Markets
15 2. Diversified Across End Markets Other Industries 19% General Industry 8% Defense 16% Basic Materials 6% Medium/Heavy Duty Truck 14% Oil & Gas 10% Auto 9% Power Generation 7% Chemical Processing 4% Mobile & Agri. Equip. 2% 2010 Consolidated Sales Aerospace 3% Electronics & Semiconductors 2%
Slide 16: 3. Attractive Characteristics - Competitive Advantage
16 3. Attractive Characteristics ? Competitive Advantage Competitive advantage high customer retention + + Critical applications Broad product offering Proprietary high-quality products +
Slide 17: 4. Continual Innovation - A Key to Our Success
17 4. Continual Innovation - A Key to Our Success New product sales as % of total sales 20% Examples of new products Stemco Duroline products brake pads for heavy-duty trucks industry leading technology Pikotek VCS Fire Safe gasket upstream oil and gas applications maintains integrity to 1500^ F, me
Slide 18: 5. Successful Acquisitions Accelerate Growth
18 Acquisitions 2003-2011 Disciplined Approach 5. Successful Acquisitions Accelerate Growth Complement core strengths in sealing, engineered products Pay a reasonable price Add value to EnPro and acquired company Implement a proven and disciplined integration process 29 transactions Total investment
Slide 19: 5. A Successful Acquisition Case Study: CPI
19 5. A Successful Acquisition Case Study: CPI A 4x Increase in Sales Base business Organic FX 2006-2011 16 acquisitions geographic expansion core products broadened lubrication market entered 15+ service centers opened global market, local presence 2005 2011 est. 4x
Slide 20: Our Priorities to Drive Sustained Growth in Earnings
20 Our Priorities to Drive Sustained Growth in Earnings Enterprise excellence Growth from new products, markets and acquisitions Effective capital deployment 1 2 3
Slide 21: Priority #1: Excellence
21 P r i o r i t y #1: E x c e l l e n c e Continuous Improvement ? Measurable Results Total Customer Value Enterprise-wide lean program Commercial Excellence Consistent and effective sales and marketing Pricing Leadership Optimal prices set for all products Sourcing Leadership Supply chain managed
Slide 22: Enterprise Excellence: Case Study
22 P r i o r i t y #1: E x c e l l e n c e Enterprise Excellence: Case Study Fairbanks Morse Engine Strategic sales and marketing analyzed market segments established tiered pricing structure Operational efficiency increased productivity reduced lead times, improved on time delivery Supply chain imp
Slide 23: Priority #2: Growth
23 Acquisitions Proven track record successful integration timely accretion Attractive opportunities higher margin businesses aftermarket focus Sufficient resources $125M credit facility strong operating cash flows P r i o r i t y #2: G r o w t h Focus on Organic Growth and Complementary Acquisition
Slide 24: Priority #3: Capital Deployment
24 P r i o r i t y #3: Capital Deployment Invest Cash to Build Shareholder Value - 2003 to 2010 $794M cumulative after-tax operating cash flow 24 Capital expenditures Acquisitions Share repurchase 80% Shareholder Value Creation 20% Net Asbestos Related Payments
Slide 25: 2010 In Review: A Year of Significant Change
25 2010 In Review: A Year of Significant Change A Stronger Company Emerged A Sound Business Model Provided a Solid Foundation MARKET GROWTH STRATEGIC INITIATIVES ASBESTOS CLAIMS RESOLUTION PROCESS Organic growth returned Sales volumes improved industrial markets up 20%+ engine business stable Profit
Slide 26: A Favorable Outlook for 2011
26 A Favorable Outlook for 2011 Expect broad-based improvement in industrial markets demand for sealing, engineered products should increase normal seasonal patterns likely Expect engine sales similar to 2010 mix, R&D spending likely to produce slightly lower profits engine shipments scheduled in Q1
Slide 27: Looking to the Future
27 L o o k i n g t o t h e F u t u r e Significant Growth Opportunities in Large Global Markets Growth in the $40-$50B global sealing markets multiple acquisition opportunities for Garlock family of companies, Stemco and CPI target faster growing industries such as aerospace, pharma, biotech, medica
Slide 28: In Summary: Why Invest in EnPro
28 I n S u m m a r y Why Invest in EnPro Solid performance record 18% CAGR in EPS 2003-2008 Sustained organic growth Acquisitions accelerate growth Successful business model Leading market shares Broad customer base, diverse markets Strong aftermarket mix Sustainable future growth Excellence in oper
Slide 29: Appendix
Er? Industries Engineered for Performance Appendix
Slide 30: Garlock Family of Companies
2 Garlock Family of Companies 75% Aftermarket 25% OEM Sales Product Examples Manufacturing Locations Palmyra, NY* Columbia, SC Houston, TX* Wheat Ridge, CO Sherbrooke, QC* Mexico City* Montbrison, France Saint-Etienne, France Neuss, Germany Elland, UK Stockport, UK Sydney, Australia* Shanghai, China
Slide 31: Stemco
3 Stemco 85% Aftermarket 15% OEM Sales Manufacturing Locations Longview, TX Millington, MI Caxias do Sul, Brazil (Duroline alliance) Buffalo, NY (Stemco-Crewson joint venture) Stemco TCV Truck Sales Channels: Distribution 80% Direct 20%
Slide 32: GGB Bearing Technology
4 GGB Bearing Technology 10% Aftermarket 90% OEM Sales Product Examples Manufacturing Locations Thorofare, NJ Annecy, France Dieuze, France Heilbronn, Germany Dry bearing Lubricated metal-polymer bearing Solid polymer bearing Sealed cartridge bearing Flanged bushing Su^any, Slovakia Barueri, Brazil
Slide 33: Compressor Products International
5 Compressor Products International 20% OEM 80% Aftermarket Sales Product Examples Manufacturing Locations Houston, TX Arvada, CO New Smyrna, FL Medicine Hat, AB Edmonton, AB Hungerford, UK Bavay, France Gross-Gerau, Germany Campinas, Brazil 25+ service centers worldwide Packing cases Packing rings
Slide 34: Fairbanks Morse Engine
6 Fairbanks Morse Engine 60% Aftermarket 40% OEM Sales Product Examples Manufacturing Location Beloit, WI Service Centers Houston, TX Norfolk, VA San Diego, CA Seattle, WA Calgary, AB Medium speed diesel engines Parts & service Sales Channels: Direct 100%
Slide 35: Growth Strategies
Acquire reciprocating compressor component manufacturers and service companies Opportunities in CNG, PET compressor markets, global service center expansion Growth Strategies Brand Growth Strategy Acquire to expand markets and product reach Opportunities in aerospace, nuclear, wind, green products a
Slide 36: Acquisition Profile: Rome Tool & Die
Acquisition Profile: Rome Tool & Die Manufactures brake shoes for heavy-duty trucks #1 in the North American aftermarket Growing presence in OEM segment Accelerates growth of Stemco Brake Products Group complementary product to Stemco- Duroline brake pads lined shoe now available through Stemco cata
Slide 37: Acquisition Profile: PSI
Acquisition Profile: PSI Flange sealing and related products, and signage systems oil & gas water and wastewater markets Locations manufacturing in U.S., U.K. and Germany sales locations in Middle East and Asia Rationale adds pipeline accessory products increases penetration into water/wastewater br
Slide 38: Acquisition Profile: Mid Western Companies
Acquisition Profile: Mid Western Companies Reciprocating compressor and engine services and components rebuilds reciprocating natural gas engines and compressors designs, installs and services compressor lubrication systems reconditions components specialized machining of components Rationale broade
Slide 39: Reporting unit Deconsolidated subsidiary of filed entity Filed entity Reflects full year 2010 results
11 Reporting unit Deconsolidated subsidiary of filed entity Filed entity Reflects full year 2010 results as if deconsolidation had occurred on January 1, 2010. Sales are third party; income is before asbestos related expenses and other selected items. Garlock Companies
Slide 40: GST Pro Forma 2010 Results
GST Pro Forma 2010 Results 12 23% Third Party Sales 40% Adjusted Net Income Reflects impact of deconsolidation of GST as if it occurred January 1, 2009
Slide 41: Reporting unit Deconsolidated subsidiary of filed entity Filed entity Reflects full year 2010 results
13 Reporting unit Deconsolidated subsidiary of filed entity Filed entity Reflects full year 2010 results as if deconsolidation had occurred on January 1, 2010. Sales are third party; income is before asbestos related expenses and other selected items. Garlock Family of Companies
Slide 42: Asbestos Expenses Were On Course to Consume Increasing Amounts of Cash
Asbestos Expenses Were On Course to Consume Increasing Amounts of Cash 14 Annual insurance recoveries Annual net outflows: Mgmt. estimate Insurance moving to exhaustion receipts scheduled to drop significantly in 2011 no insurance available after 2018 Total costs not likely to decline in line with i
Slide 43: Targeting of Garlock Was Increasing as Disease Incidence Declined
Targeting of Garlock Was Increasing as Disease Incidence Declined 15 15
Slide 44: Billions of Dollars are Available in Trusts
Billions of Dollars are Available in Trusts 16
Slide 45: Garlock's Costs Escalated in Bankruptcy Wave
17 Garlock's Costs Escalated in Bankruptcy Wave; Trust Payments Were Providing no Relief Bankruptcy wave Trust funds begin to pay
Slide 46: Expect Limited Near-Term Impact from Earthquake and Tsunami in Japan
Expect Limited Near-Term Impact from Earthquake and Tsunami in Japan Nuclear power market accounts for less than 4% of EnPro sales entirely Garlock and FME aftermarket anticipate $3M reduction of sealing product segment sales, resulting from plant shutdowns in Europe and Japan expect no adverse effe
Slide 47: Non-GAAP Reconciliations
Er? Industries Engineered for Performance Non-GAAP Reconciliations
Slide 48: Reconciliation of Earnings Per Share
20 Reconciliation of Earnings Per Share
Enpro Industries — BB&T Commercial & Industrial Conference 2011 on 6ix