Enpro Inc. · NYSE:NPO
Enpro — EnPro Industries — Non-Deal Roadshow (December 2020)
48 slides from Enpro's roadshow presentation, Dec 15, 2020
Slide 1: Investor Presentation Q3 2020
INVESTOR PRESENTATION Q3 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 technology company using materials science to push the boundaries of the semiconductor, life sciences, and other technology-enabled sectors 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 5% Customers 50,000+ 10% 3% 5% 3% 25% 5% 25% 43% 6% 2
Slide 6: EnPro's Segments
ENPRO’S SEGMENTS Sealing Products Engineered Products LTM 9/30/20 REVENUE $814M LTM 9/30/20 REVENUE $277M LTM 9/30/20 ADJ. EBITDA MARGIN* 21.0% LTM 9/30/20 ADJ. EBITDA MARGIN* 11.8% 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's Strategy
ENPRO’S STRATEGY Focusing on niche, high-margin materials science-related businesses with 1 strong cash flow in markets with favorable tailwinds 2 Increasing exposure to aftermarket and faster growth technology businesses Leveraging the EnPro Operating System to increase margins and cash flow 3 retu
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 7% annually through organic and inorganic investments Leveraging Inorganic • Seed
Slide 10: Update on Current Business Environment
UPDATE ON CURRENT BUSINESS ENVIRONMENT
Slide 11: Focused on Protecting Our People, Business, and Community
FOCUSED ON PROTECTING OUR PEOPLE, BUSINESS, AND COMMUNITY Protecting Our People Protecting our Business Protecting our Community • Expanded IT infrastructure to enable • Enacted cost reductions resulting in • Distributed thousands medical grade working remotely and virtual meetings full year 2020 sa
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 & Cash Flow
BALANCE SHEET & CASH FLOW Net Leverage Debt Maturity Schedule Reported September 30, 2020 ($M) Undrawn3 Credit Facility $0 $400M $350M Rev olv er Senior Senior Notes 1 $346 $150M Unsecured Term Loan A2 Notes Term Loan2 $147 2020 2021 2022 2023 2024 2025 2026 Capital Lease Obligations $0 Commentary •
Slide 14: COVID-19 Scenario Analysis
COVID-19 SCENARIO ANALYSIS ● For the fourth quarter, anticipate year-over-year demand to be solid for both semiconductor and food and pharma, with continued softness in heavy duty truck, general industrial, oil and gas, petrochemical, and aerospace ● For the full year, revised scenario planning rang
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; $11.8 million REINVEST IN YTD Q3 2020 THE BUSINESS 2019 CAPITAL ALLOCATION ($M) • Approximately 57% in FY19 maintenance-related and balance focused on growth $13M $9M $15M $21M • High technical know-how, IP-rich offe
Slide 17: Inorganic Value Creation Delivered 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 >7% 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 Activities
SHIFTING CHARACTERISTICS THROUGH THOUGHTFUL PORTFOLIO SHAPING ACTIVITIES SHIFTING FROM… …TO Invested in high-value niche markets with addressable market growth of >7% p.a., driven by technology tailwinds Leadership in high-value niche markets with established, premium brands Portfolio of businesses
Slide 19: EnPro's Portfolio Transformation
ENPRO’S PORTFOLIO TRANSFORMATION 1 Focusing on niche, high- Successful Execution of Portfolio Shaping Actions margin materials science- Resulting in a More Durable Business Model related businesses with strong cash flow in Transaction Strategic Rationale markets with favorable tailwinds Alluxa Close
Slide 20: Pro Forma Bridge (LTM)
PRO FORMA BRIDGE (LTM) $ in millions RESHAPING ACTIONS HAVE SIGNIFICANTLY ENHANCED PROFITABILITY OF T HE PORTFOLIO Sales Adjusted EBITDA* Adjusted EBITDA Margin* -8.8% +1.9% +175b ps $95 $3 1.7% $1,085 $167 16.8% $989 $164 15.1% Reported Net Imp act of Pro Forma Reported Net Imp act of Pro Forma Rep
Slide 21: Alluxa at a Glance
ALLUXA AT A GLANCE Key Statistics Revenue ($M) 2019 Sales 2019 Sales By Application By Geography A&D, 4% Founded 2007 As i a, Semi , 10% 12% Facilities 2 Industrial Europe, Technology, 22% Li fe 50% Ameri cas,1 Location Santa Rosa, CA Sci ences, 33% 68% 2017 2018 2019 2020E 1 Announced 9/28/20 32% o
Slide 22: Alluxa Adds Significant Value to Our Portfolio
ALLUXA ADDS SIGNIFICANT VALUE TO OUR PORTFOLIO Strengthens and expands Adds proprietary technology Aligns with EnPro’s growth strategy EnPro’s materials science exposure platform, processes, and and acquisition criteria with in specialty optical filters and thin- capabilities with a highly attractiv
Slide 23: Alluxa Has Compelling Strategic and Financial Benefits
ALLUXA HAS COMPELLING STRATEGIC AND FINANCIAL BENEFITS PROPRIETARY Alluxa’s design expertise and proprietary SIRRUS™ plasma deposition software allow the company to provide 1 TECHNOLOGY & specialized filters and coatings specific to customer requirements and support the company’s ability to service
Slide 24: 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 25: Successful Execution of Portfolio Shaping Actions
SUCCESSFUL EXECUTION OF PORTFOLIO SHAPING ACTIONS Fairbanks Morse Bushing Block Heavy Duty Truck Product Air Springs Divestiture Divestiture Lines Divestitures Divestiture (Closed Q1 2020) (Announced Q2 2020) (Announced/Completed (Announced Q3 2020) • Produces large medium-speed • Announced plans to
Slide 26: 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 27: Financial Performance
FINANCIAL PERFORMANCE ($ IN MILLIONS) REVENUE GROSS PROFIT MARGIN ADJUSTED EBITDA MARGIN* $1,274 $1,206 34.1% 15.1% $1,085 33.5% 14.0% 14.0% 32.8% 2018 2019 LTM 9/30/20 2018 2019 LTM 9/30/20 2018 2019 LTM 9/30/20 Portfolio Reshaping and Operational Improvements Have Driven Increased Margins * Non-GA
Slide 28: Financial Performance
FINANCIAL PERFORMANCE ($ IN MILLIONS) FREE CASH FLOW*,(1) NET DEBT TO ADJUSTED EBITDA* MULTIPLE $1 70 .00 250 % 3.0x $1 50 .00 196% 174% 200 % $1 30 .00 $1 10 .00 141% 1.9x 150 % $9 0.0 0 100 % $7 0.0 0 $99 $109 $5 0.0 0 $70 50% 0.3x $3 0.0 0 $1 0.0 0 0% (2) 2018 2019 LTM 9/30/20 2018 2019 LTM 9/30/
Slide 29: Investment Merits
INVESTMENT MERITS
Slide 30: EnPro's Investment Merits
ENPRO’S INVESTMENT MERITS Focusing on niche, high-margin materials science-related businesses with strong cash flow in markets with favorable tailwinds Increasing exposure to aftermarket and faster growth technology businesses Leveraging the EnPro Operating System to increase margins and cash flow r
Slide 31: Investor Presentation
INVESTOR PRESENTATION Q3 2020
Slide 32: Appendix
APPENDIX
Slide 33: Sealing Products Snapshot
SEALING PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE $881 $814 • #1 - #3 in principal markets served; Garlock 125 year operating history • High degree of technical and application expertise; extensive trade secrets SAL ES • Deep customer engagement to create innovative solutions complemented
Slide 34: Sealing Products: Products, Services, and End Market Overview
SEALING PRODUCTS: PRODUCTS, SERVICES, AND END MARKET OVERVIEW SELECT PRODUCTS & SERVICES SELECT MARKETS SOFT GASKETS BEARING ISOLATORS HYDRODYNAMIC FOOD & PHARMA SEMICONDUCTOR SEALS METAL SEALS ELECTROSTATIC CLEANING AND NUCLEAR AEROSPACE PEDESTALS REFURBISHMENT SERVICES SANITARY GASKETS SANITARY HO
Slide 35: Engineered Products Snapshot
ENGINEERED PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE $331 • Leading brands $277 • Technology and market leadership in plain bearings SAL ES • High degree of tribological and applications expertise in bearings GROSS MARGIN 37% EBITDA MARGIN* • Strong aftermarket presence in oil & gas and p
Slide 36: Engineered Products: Products and End Market Overview
ENGINEERED PRODUCTS: PRODUCTS AND END MARKET OVERVIEW SELECT PRODUCTS SELECT MARKETS METAL POLYMER BEARING TRIBOLOGICAL SOLUTIONS SOLID POLYMER AUTOMOTIVE GENERAL INDUSTRIAL BEARING ISOLATION GASKETS FILAMENT WOUND HIGH-FLOW VALVES PETROCHEM AEROSPACE BEARING MONITORING DEVICES PACKING CASES PISTON
Slide 37: Reconciliation of LTM Results
RECONCILIATION OF LTM RESULTS Net income (loss) EnPro Revenue Adjusted EBITDA attributable to EnPro Adjusted EBITDA ($) ($ in millions) ($) Margin % Industries, Inc. Plus: Nine Months Ended September 30, 2020 798 193 120 15.1% Y ear Ended December 31, 2019 1,206 38 169 14.0% Less: Nine Months Ended
Slide 38: 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 39: Consolidated Adjusted EBITDA
CONSOLIDATED ADJUSTED EBITDA 39
Slide 40: Segment Adjusted EBITDA
SEGMENT ADJUSTED EBITDA Segment AEBITDA Quarter Ended Year Ended Quarter Ended March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 December 31, 2019 March 31, 2020 June 30, 2020 Sealing Products $ 32.6 $ 42.4 $ 37.0 $ 42.9 $ 154.9 $ 40.8 $ 41.5 Engineered Products 11.5 15.7 14.8 11.7 5
Slide 41: Consolidated Adjusted Net Income
CONSOLIDATED ADJUSTED NET INCOME (Stated in Millions of Dollars, Except Per Share Data) 41
Slide 42: Consolidated Adjusted Net Income
CONSOLIDATED ADJUSTED NET INCOME (Stated in Millions of Dollars, Except Per Share Data) 42
Slide 43: 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 44: Free Cash Flow
FREE CASH FLOW LTM YTD2020 YTD2019 FY2019 ($ in Millions) 9/30/20 FY2018 (A) (B) (C) (=A-B+C) Net Cash Provided by (Used in) Operating Activities of 88.1 48.4 91.1 130.8 212.8 Continuing Operations Purchases of Property, Plant and Equipment (18.3) (11.8) (15.1) (21.6) (36.1) Free Cash Flow 69.8 36.6
Slide 45: Free Cash Flow
FREE CASH FLOW (Stated in Millions of Dollars) 45
Slide 46: Pro Forma Calculation
PRO FORMA CALCULATION (Stated in Millions of Dollars) LTM September 30, 2020 Pro forma EnPro Adjustments Pro Forma Net sales $ 1,085 $ (95) $ 989 Net income (loss) attributable to EnPro Industries, Inc. $ 195 $ 27 $ 222 Adjustments to arrive at earnings before interest, income taxes, depreciation an
Slide 47: 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* $178 E = (C / D) Leverage Ratio 1.9x * Non-GAAP measu
Slide 48: 2019 Net Debt to Adjusted EBITDA
2019 NET DEBT TO ADJUSTED EBITDA Reported December 31, 2019 ($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.