Sales improved 42% over the fourth quarter of 2010, benefiting from acquisitions and continued organic growth

Before selected items, fourth quarter EPS was $0.37 compared to $0.30 a year ago

GAAP EPS was $0.12 in the fourth quarter compared to $0.30 in the fourth quarter of 2010

Full-year sales increased 28% to $1.11 billion, reflecting acquisitions and increases in demand

Before selected items, EPS was $2.81 in 2011 compared to $2.37 in 2010, which included EPS of $0.42 from GST; 2011 GAAP EPS from continuing operations of $2.06 compares to $2.96 in 2010

2011 EBITDA increased to $153.3 million from $121.8 million in 2010, which included $16.4 million from GST in 2010

CHARLOTTE, N.C.--(BUSINESS WIRE)--Feb. 9, 2012-- EnPro Industries (NYSE: NPO) today reported consolidated net income of $2.6 million, or $0.12 a share, for the fourth quarter of 2011, compared to consolidated net income of $6.3 million or $0.30 a share in the fourth quarter of 2010.

Before selected items, including interest due to Garlock Sealing Technologies LLC (GST), a deconsolidated subsidiary, income in the fourth quarter of 2011 was $7.7 million, or $0.37 a share, compared with $6.4 million or $0.30 a share, in the fourth quarter of 2010. The results of GST and its subsidiaries were deconsolidated effective June 5, 2010, when GST entered a process to reach a permanent resolution of all current and future asbestos claims. A table on page 10 of this press release shows the effect of selected items, including interest due to GST, in both periods.

All per share amounts are stated on a diluted basis.

Sales in the fourth quarter of 2011 were $271.4 million, a 42% increase over the fourth quarter of 2010, when sales were $191.5 million. Improving conditions in the company’s markets, market share gains, selected price increases and new products contributed to a 16% increase in sales while businesses acquired in 2011 contributed growth of 26%, or $49.7 million.

Consolidated earnings before interest, income taxes, depreciation and amortization (EBITDA) were $28.4 million in the fourth quarter of 2011, a 63% improvement over the fourth quarter of 2010, when EBITDA was $17.4 million.

“The fourth quarter capped a successful year for EnPro,” said Steve Macadam, president and chief executive officer. “We saw steady growth in our markets throughout the year, we completed acquisitions that position us in new markets with new opportunities, and we continued to achieve our objectives for enterprise excellence. Our accomplishments position us well as we begin 2012, and we look forward to another year of improving sales and earnings.”

Full Year Results

For the full year of 2011, EnPro reported income from continuing operations of $44.2 million, or $2.06 a share, compared to income from continuing operations of $61.3 million, or $2.96 a share, for the full year of 2010. Before selected items, including interest due to GST and a gain on the deconsolidation of GST, EnPro’s consolidated net income in 2011 was $60.4 million, or $2.81 a share. In 2010, consolidated net income before selected items was $49.0 million, or $2.37 a share, and included a contribution of $8.7 million, or $0.42 a share, from GST and its subsidiaries prior to deconsolidation.

Sales in 2011 were $1.1 billion, an increase over 2010 of 28%, or $240.5 million, including a contribution from acquisitions of $170.1 million. In addition, GST recorded sales of $214.4 million in 2011. In 2010, consolidated sales were $865.0 million and included sales of $77.7 million from GST and its subsidiaries prior to June 5.

In 2011, earnings before interest, income taxes, depreciation, amortization and asbestos-related expenses (EBITDA-A) were $153.3 million, or 13.9% of sales. GST recorded an additional $50.1 million of EBITDA-A in 2011. In 2010, EBITDA-A was $121.8 million, or 14.1% of sales, and included a contribution of $16.4 million from GST prior to deconsolidation.

Sealing Products Segment



Sales in the Sealing Products segment were 58% higher than in the fourth quarter of 2010. Acquisitions contributed an increase of 45%, or $40.0 million, while higher activity levels in the segment’s markets contributed an increase of 13%. The segment reported increased demand from a wide range of markets and in all regions of the world, but especially in the North American heavy-duty truck markets served by Stemco.

The segment’s profits decreased slightly and profit margins declined. The decrease in profits and profit margins reflect $3.5 million of acquisition-related expenses, including amortization expense of $2.5 million, and increases in selling, general and administrative expenses to support increased activity in the segment’s markets and the execution of the segment’s growth strategies.

For the full year of 2011, the segment’s sales improved to $534.9 million, a 35% improvement over 2010, when sales were $397.6 million and included net sales of $67.1 million from GST. Excluding GST from 2010, the segment’s sales increased by 62%, or $204.4 million and included a contribution of $131.7 million from acquisitions.

Segment profits were $81.2 million in 2011, or 15.2% of sales, and included a contribution of $6.6 million from acquisitions. Acquisition related expenses in 2011 were $12.4 million, including amortization of $6.9 million. In 2010, segment profits were $70.3 million, or 17.7% of sales, and included a contribution of about $14.0 million from GST prior to its deconsolidation.

Engineered Products Segment



Sales in the Engineered Products segment were $92.1 million in the fourth quarter of 2011, an increase of $15.0 million, or 19%, over the fourth quarter of 2010. Acquisitions completed in 2011 were the primary source of the increase, contributing sales of $9.7 million. Both GGB and CPI reported stronger demand, and the segment’s organic growth reached 8%. GGB benefited primarily from the acquisition of PI Bearings as well as from increased demand in North America. At CPI, sales improved due to the acquisition of the Mid Western Companies and modestly higher activity levels in some European markets.

Profits increased in the segment compared to the fourth quarter of 2010, and segment profits improved to $3.1 million. Acquisition-related expenses in the fourth quarter were $0.7 million, including $0.5 million of amortization. As sales and profits increased, the segment’s margins increased to 3.4%.

For the full year of 2011, sales in the Engineered Products segment were $386.7 million, a 28% increase over 2010. The segment benefited from an organic growth rate of 11% as demand increased at both GGB and CPI. Acquisitions accounted for a 13% increase in the segment’s sales as they contributed $38.4 million to the total. Favorable foreign exchange contributed growth of 4% to the segment’s sales.

Segment profits increased substantially in 2011 to $29.2 million, or 7.6% of sales, from $16.3 million or 5.4% of sales in 2010. Acquisition-related expenses in 2011 were $3.5 million, including $1.9 million in amortization expense. Profits benefited from a small contribution from acquisitions as well as higher volumes across all products and geographies as GGB’s and CPI’s markets strengthened in 2011.

Engine Products and Services Segment



Increased parts and services sales and the transition to percentage of completion accounting on new engine sales resulted in a $13.7 million, or 52%, increase in sales in the Engine Products and Services segment during the fourth quarter of 2011. Segment profits improved to $7.3 million in the fourth quarter and segment profit margins improved to 18.1%, reflecting the increase in aftermarket sales, which typically are more profitable than engine sales.

For the full year of 2011, sales in the Engine Products and Services segment improved to $185.8 million, an increase of 12% over 2010. Sales benefited about equally from increased engine shipments and the use of percentage of completion accounting for new engine sales, which began in the third quarter of 2011. Aftermarket sales were slightly lower in 2011 than in 2010.

The segment’s profits decreased $4.9 million to $30.6 million or 16.5% of sales in 2011, reflecting a less profitable product mix as aftermarket sales declined and the effect of several items which combined to create a net reduction of $2.1 million in segment profits. These items included a warranty provision, a loss provision on a contract related to the segment’s nuclear power strategy, and a reimbursement for costs associated with the cancellation of a contract by the customer. Segment profits in 2010 were $35.5 million or 21.4% of sales.

Garlock Sealing Technologies



GST and its subsidiaries reported a 20% increase in third-party sales over the fourth quarter of 2011, primarily reflecting increased demand from North American industrial markets and favorable pricing. Operating profit increased as volumes grew and pricing improved, and operating profit margins expanded to 20.9% from 13.1% in the fourth quarter of 2010.

For the full year, GST’s third party sales were $214.4 million, an increase of 17% over 2010. Sales grew as demand increased across most of GST’s markets. GST’s operating profit improved to $44.8 million, a 46% increase over 2010, and EBITDA-A grew to $50.1 million, a 40% increase over 2010. Adjusted net income at GST was $28.8 million in 2011 compared to $20.5 million in 2010.

Measures of GST’s profitability, including adjusted net income, do not reflect expenses incurred in connection with the asbestos claims resolution process. Those expenses were about $6.1 million in the fourth quarter of 2011 compared to $5.4 million in the fourth quarter of 2010 and $17.0 million for the full year of 2011 compared to $9.0 million in 2010.

Cash Flows

EnPro’s cash balance stood at $30.7 million at the end of 2011, compared to $219.2 million at the end of 2010. The decrease in the cash balance came after investments of $228.2 million to complete acquisitions during 2011 and capital expenditures of $31.5 million, an increase of nearly $10 million over 2010, when capital spending was $21.9 million. Operating activities generated cash of $78.6 million during the year. In 2010, operating activities generated cash of $33.5 million after net outflows of $3.8 million for asbestos-related expenses prior to the initiation of GST’s asbestos claims resolution process on June 5, 2010.

GST’s cash balance stood at $126.3 million at the end of 2011, compared with $87.1 million at the end of 2010.

Outlook

In 2012, EnPro currently anticipates strong sales growth as the company’s operations benefit from improved market conditions, higher volumes, market share gains and a full year of sales from companies acquired in 2011. The company also expects the margin on total segment profit to improve over 2011 although the margin will continue to reflect increased sales of lower margin products as the company expands in original equipment markets and costs associated with the integration of acquisitions, especially in the first half of the year.

“We are well-positioned as we enter 2012,” said Macadam. “Our markets appear stable and we anticipate they will continue to improve during the year. Our operations are poised to take advantage of these improvements as they benefit from our enterprise excellence programs. We also expect to see increasing contributions from our recent acquisitions as they become fully integrated and present opportunities for us to expand the products we offer and the markets we serve.

“The past 24 months have been a time of transformation for EnPro, with the initiation of a process to permanently resolve asbestos claims against GST, the sale of Quincy Compressor and the reinvestment of those proceeds into acquisitions that give us new, attractive opportunities for growth. We look forward to continuing our transformation in 2012,” Macadam concluded.

Conference Call and Webcast Information

EnPro will hold a conference call today, February 9, at 10:00 a.m. Eastern Time to discuss fourth quarter and full year 2011 results. Investors who wish to participate in the call should dial 1-800-851-4704 approximately 10 minutes before the call begins and provide conference id number 46282655. A live audio webcast of the call and accompanying slide presentation will be accessible from the company’s website, http://www.enproindustries.com. To access the presentation, log on to the webcast by clicking the link on the company’s home page.

Deconsolidation of Garlock Sealing Technologies

Results for the fourth quarter and full year of 2011 reflect the deconsolidation of Garlock Sealing Technologies LLC (GST) and its subsidiaries, effective June 5, 2010, when GST filed a voluntary petition to begin an asbestos claims resolution process intended to permanently resolve all current and future asbestos claims against it under Section 524(g) of the U.S. Bankruptcy Code. Deconsolidation is required by generally accepted accounting standards, which do not permit the restatement of results of prior periods to reflect the deconsolidation. However, to aid in comparisons of year-over-year data, the company has attached a schedule to this press release showing key operating measures for both EnPro and GST on a pro forma basis. The schedule presents results for the fourth quarter and full year of 2011 and 2010 as if the deconsolidation of GST had occurred on January 1, 2010.

Non-GAAP Financial Information

This press release contains financial measures that have not been prepared in accordance with GAAP. They include income before asbestos-related expenses and other selected items, EBITDAA, EBITDA and related per share amounts. Tables showing the effect of these non-GAAP financial measures for the fourth quarter and full year of 2011 and 2010 are attached to the release.

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