Enpro Inc. · NYSE:NPO
Enpro — EnPro Industries — Bank of America Merrill Lynch Leveraged Finance Conference 2019
37 slides from Enpro's conference presentation, Dec 3, 2019
Slide 1: EnPro Industries Investor Presentation
ENPRO INDUSTRIES INVESTOR PRESENTATION Bank of America Merrill Lynch Leveraged Finance Conference December 3, 2019
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: Who is EnPro?
WHO IS ENPRO? Leading provider of highly-engineered solutions for mission critical applications 3
Slide 4: EnPro Mission and Vision
ENPRO MISSION AND VISION CUSTOMIZED SOLUTIONS FOR THE MOST DEMANDING APPLICATIONS WE ARE A PURPOSE-DRIVEN COMPANY WITH STRONG VALUES, A FORWARD-THINKING OPERATING PHILOSOPHY, AND A WAY OF WORKING THAT DRIVES HUMAN DEVELOPMENT THROUGH THE WAY WE WORK BEST-IN-CLASS VALUE CREATION OVER THE LONG TERM. C
Slide 5: EnPro (NYSE: NPO) | Attractive Portfolio of Businesses
ENPRO (NYSE: NPO) | ATTRACTIVE PORTFOLIO OF BUSINESSES COMPANY OVERVIEW 2018 REVENUE CONTRIBUTION Headquarters Charlotte, NC SALES BY SEGMENT SALES BY MARKET Manufacturing Facilities 30 primary Global Employees ~6,000 Customers 50,000+ FINANCIAL OVERVIEW Market-Cap1 $1.4B SALES BY GEOGRAPHY Revenue2
Slide 6: EnPro's Three Segments
ENPRO’S THREE SEGMENTS SEALING PRODUCTS ENGINEERED PRODUCTS POWER SYSTEMS LTM 9/30/19 REVENUE $908M LTM 9/30/19 REVENUE $306M LTM 9/30/19 REVENUE $292M LTM 9/30/19 ADJ. EBITDA MARGIN 17% LTM 9/30/19 ADJ. EBITDA MARGIN 15% LTM 9/30/19 ADJ. EBITDA MARGIN 18% REVENUE COMPOSITION (2018) REVENUE COMPOSIT
Slide 7: Diversified Blue-Chip Customer Base
DIVERSIFIED BLUE-CHIP CUSTOMER BASE 7
Slide 8: Leveraging Our Strengths for Mission Critical Products
LEVERAGING OUR STRENGTHS FOR MISSION CRITICAL PRODUCTS STRENGTHS PRODUCTS • Nuclear reactor pressure vessel seals Leadership in high-value niche markets with established, • Aircraft engine seals & landing gear bearings premium brands SEALING • Petroleum/chemical refinery process sealing PRODUCTS • C
Slide 9: EnPro Strategy
ENPRO STRATEGY March 2019 Investor Day Leverage the EnPro Operating System for continuous improvement and ongoing 1 shareholder value; still early innings of opportunity 2019 priorities include increasing margins and cash flow Focus on growing in markets where we have competitive advantage 2 Allocat
Slide 10: 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 11: Underlying Trends Will Drive Long-Term Growth
UNDERLYING TRENDS WILL DRIVE LONG-TERM GROWTH SEMICONDUCTOR HYGIENIC AEROSPACE DIGITAL ECONOMY HEALTH NEEDS RISING STANDARDS OF LIVING Increased demand for semiconductor Increased pharmaceutical demand due to Increased demand for air travel logic and memory: greater life expectancy New aircraft deli
Slide 12: Driving Innovation to Unlock Further Value
DRIVING INNOVATION TO UNLOCK FURTHER VALUE SEALING PRODUCTS GYLON® EPIX TRIFECTA® HYDRODYNAMIC SEALS ENGINEERED PRODUCTS PROFLO® EOS EMISSIONS GUARD TRIBOLOGICAL COATINGS POWER SYSTEMS TRIDENT® OP COMMON RAIL FUEL INJECTION SYSTEM 12
Slide 13: Financial Strategy
FINANCIAL STRATEGY REINVEST IN • $63 million in FY18 capital expenditures; expected to moderate beginning in FY19 THE BUSINESS • Approximately 44% in FY18 maintenance-related and balance focused on growth • High technical know-how, IP-rich offering STRATEGIC • Experienced management with proven trac
Slide 14: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION CAPITAL DEPLOYED DETAIL CAPITAL DEPLOYED as % TOTAL • Long term growth and R&D projects represented 56% of FY 2018 Cap ex vs. 44% dedicated to sustaining and maintenance projects 14
Slide 15: Capitalization
CAPITALIZATION ($M) 9/30/19 Net Debt Analysis BALANCED MATURITY SCHEDULE ($M) Cash $112 Credit Facility – Revolver 170 Senior Term Loan 150 Unsecured $350M Senior Notes (2026 Maturity) (1) 345 Notes Revolver $400 Capital Lease Obligations 1 Net Debt $554 $350 Term Loan A $150 Capitalization Analysis
Slide 16: Financial Performance
FINANCIAL PERFORMANCE FREE CASH FLOW ($M) (1) NET DEBT TO ADJUSTED EBITDA MULTIPLE (2) (3) 2.6x 198% 206% 2.3x 1.9x $178 $164 1.5x 2018 LTM 9/30/19 2016 2017 2018 LTM 9/30/19 FREE CASH FLOW AS A % OF ADJUSTED NET INCOME • EnPro’s cash generation capacity is expected to provide sufficient funds for r
Slide 17: M&A Filters and Growth Objectives
M&A FILTERS AND GROWTH OBJECTIVES March 2019 Investor Day ENPRO’S M&A CRITERIA ENPRO GROWTH OBJECTIVES STRATEGIC FIT ✔ Highly engineered products often with mission-critical applications; “high-value niches” ✔ IP-rich/proprietary technology or know-how ✔ Attractive and growing end markets; cycle res
Slide 18: Recent Acquisitions
RECENT ACQUISITIONS The Aseptic Group LeanTeq Co., Ltd. ● Announced and closed on July 2, 2019 ● Announced on July 22, 2019; anticipated closing Q4 2019 ● Distributes, designs and manufactures sterile fluid transfer products ● Primarily provides cleaning, testing and verification services for for th
Slide 19: Appendix
APPENDIX
Slide 20: Sealing Products Snapshot
SEALING PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE • #1 - #3 in principal markets served; Garlock 125 year operating history • High degree of technical and application expertise; extensive trade secrets • Deep customer engagement to create innovative solutions complemented by value-added s
Slide 21: Sealing Products: Products and End Market Overview
SEALING PRODUCTS: PRODUCTS AND END MARKET OVERVIEW SELECT PRODUCTS SELECT MARKETS SOFT GASKETS BEARING ISOLATORS ISOLATION GASKETS FOOD & PHARMA SEMICONDUCTOR METAL SEALS ELECTROSTATIC BRUSH SEALS NUCLEAR AEROSPACE PEDESTALS SANITARY GASKETS SANITARY HOSES WHEEL-END PRODUCTS HEAVY DUTY TRUCKING OIL,
Slide 22: Engineered Products Snapshot
ENGINEERED PRODUCTS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE • Leading brands • Technology and market leadership in plain bearings • High degree of tribological and applications expertise in bearings • Strong aftermarket presence in oil & gas and petrochemical REVENUE COMPOSITION (2018) SALES BY
Slide 23: Engineered Products: Products and End Market Overview
ENGINEERED PRODUCTS: PRODUCTS AND END MARKET OVERVIEW SELECT PRODUCTS SELECT MARKETS METAL POLYMER BEARING TRIBOLOGICAL SOLUTIONS SOLID POLYMER AUTOMOTIVE GENERAL INDUSTRIAL BEARING DRY BEARING FILAMENT WOUND HIGH-FLOW VALVES PETROCHEM AEROSPACE BEARING MONITORING DEVICES PACKING CASES PISTON & RIDE
Slide 24: Power Systems Snapshot
POWER SYSTEMS SNAPSHOT HISTORICAL FINANCIALS ($M) PROFILE • Well-established and respected brand; >1GW of power installed in the last 10 years • 140+ year operating history; significant barriers to entry • Engine of choice for U.S. Navy & Coast Guard • Reliability advantage o Opposed Piston® (OP) te
Slide 25: Power Systems: Products and End Markets Overview
POWER SYSTEMS: PRODUCTS AND END MARKETS OVERVIEW SELECT PRODUCTS SELECT MARKETS AND APPLICATIONS MARINE POWERGEN DEFENSE NUCLEAR COMMERCIAL INDUSTRIAL MUNICIPAL SOLUTIONS SERVICE ANALYTICS ALTERNATIVE FUELS 25
Slide 26: Reconciliation of Free Cash Flow
RECONCILIATION OF FREE CASH FLOW Full Year LTM 9 months ($ in millions) 2018 9/30/2019 9/30/2018 9/30/2019 Cash Provided by (Used in) Operations 226.4 218.7 158.4 150.7 Purchases of property, plant and equipment (62.6) (40.7) (45.7) (23.8) Operating Free Cash Flow "OFCF" 163.8 178.0 112.7 126.9 Adju
Slide 27: Reconciliation of Net Income to Adjusted Net Income
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME For the Year Ended December 31, 2018 (Stated in Millions of Dollars, Except Per Share Data) Years Ended December 31, 2018 Average common shares outstanding, $ diluted (millions) Per share Net income $ 19.6 21.1 $ 0.93 Income tax expense 27.0 Income
Slide 28: Reconciliation of Net Income to Adjusted Net Income
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME 28
Slide 29: Reconciliation of Net Debt to Pro Forma Adjusted EBITDA Multiple
RECONCILIATION OF NET DEBT TO PRO FORMA ADJUSTED EBITDA MULTIPLE December 31, 2016 $ millions Pro Forma Third-Party Debt 547.6 Intercompany Debt - Asbestos Liability 80.0 A Debt Components 627.6 Asbestos Insurance Receivable 62.0 Cash and Investments 126.9 B Cash and Equivalents 188.9 C = (A – B) Ne
Slide 30: Reconciliation of Net Debt to Pro Forma Adjusted EBITDA Multiple
RECONCILIATION OF NET DEBT TO PRO FORMA ADJUSTED EBITDA MULTIPLE $ millions December 31, 2017 Credit Facility $174 Senior Notes(1) 444 A Debt Components $618 Cash and Equivalents 189 Asbestos Insurance Receivable 17 B Cash and Equivalents $206 C = (A – B) Net Debt $412 D FY December 31, 2017 Pro For
Slide 31: Reconciliation of Net Debt to Adjusted EBITDA Multiple
RECONCILIATION OF NET DEBT TO ADJUSTED EBITDA MULTIPLE $ millions December 31, 2018 Credit Facility $117 Senior Notes(1) $345 Capital Lease Obligations $3 A Debt Components $465 B Cash and Equivalents $130 C = (A – Net Debt $335 B) D FY December 31, 2018 Adjusted EBITDA $217 E = (C / Leverage Ratio
Slide 32: Reconciliation of Net Debt to Adjusted EBITDA Multiple
RECONCILIATION OF NET DEBT TO ADJUSTED EBITDA MULTIPLE $ millions September 30, 2019 Credit Facility $170 Senior Notes(1) $345 Term Loan $150 Capital Lease Obligations $1 A Debt Components $666 B Cash and Equivalents $112 C = (A – B) Net Debt $554 D LTM September 30, 2019 Adjusted EBITDA $213 E = (C
Slide 33: Reconciliation of Pro Forma Adjusted EBITDA
RECONCILIATION OF PRO FORMA ADJUSTED EBITDA (Stated in Millions of Dollars) Years Ended December 31, 2017 2016 Pro forma net income $ 53.7 $ 40.2 Adjustments to arrive at pro forma earnings before interest, taxes, depreciation, and amortization (pro forma EBITDA) Interest expense, net 29.9 23.5 Inco
Slide 34: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA 34
Slide 35: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA 35
Slide 36: Reconciliation of Adjusted Segment EBITDA
RECONCILIATION OF ADJUSTED SEGMENT EBITDA (Stated in Millions of Dollars) 36
Slide 37: Reconciliation of LTM Results
RECONCILIATION OF LTM RESULTS EnPro Revenue Adjusted EBITDA Adjusted EBITDA Sealing Products Revenue Adjusted EBITDA Adjusted EBITDA ($ in millions) ($) ($) Margin % ($ in millions) ($) ($) Margin % Plus: Plus: Nine Months Ended Sept. 30, 2019 1,120 159 14.2% Nine Months Ended Sept. 30, 2019 691 117
EnPro Industries — Bank of America Merrill Lynch Leveraged Finance Conference 2019 on 6ix