Third Quarter 2023 Highlights (All results reflect
comparisons to prior-year period, from continuing operations,
unless otherwise noted) (*Non-GAAP measure. See the attached
schedules for adjustments and reconciliations of historical
measures to GAAP measures)
- Sales of $250.7 million down 10.5%; organic sales down
10.8%
- GAAP income from continuing operations attributable to EnPro
Industries, Inc. of $8.3 million compared to $26.2 million of
income last year
- Continued excellent performance in Sealing Technologies more
than offset by weakness in Advanced Surface Technologies
- Adjusted EBITDA* down 19.1% to $57.7 million; adjusted EBITDA
margin* down 250 bps to 23.0%
- GAAP diluted earnings per share from continuing operations
attributable to EnPro Industries, Inc. of $0.39, compared to
diluted earnings per share of $1.26 last year
- Adjusted diluted earnings per share* from continuing operations
attributable to EnPro Industries, Inc. down 16.4% to $1.58 versus
$1.89 last year
- Strong cash flow from operations and free cash flow,* along
with a well-capitalized balance sheet, provide ample flexibility
for continued growth investments
EnPro Industries, Inc. (NYSE: NPO) today announced its financial
results for the three and nine months ended September 30, 2023.
“Continued strong performance in the Sealing Technologies
segment in the third quarter was offset by declines experienced in
the Advanced Surface Technologies segment due to weakness in the
semiconductor industry," said Eric Vaillancourt, President and
Chief Executive Officer. "Despite these macro headwinds, Enpro
delivered adjusted EBITDA margins of 23.0% for the third quarter
and 23.6% year-to-date. Our ability to maintain healthy margins
during a semiconductor downturn reflects the benefits of our
balanced portfolio and resilient business model. We will continue
to invest in our semiconductor business through the cycle and are
well positioned to benefit from what is widely expected to be a
doubling of the industry in the decade ahead.”
Mr. Vaillancourt continued, “Our balance sheet is strong and we
continue to generate excellent free cash flow. We are investing in
organic growth opportunities and productivity enhancements across
the company, while prudently pursuing acquisitions that expand our
leading-edge capabilities and meet our strategic and financial
criteria.”
Financial Highlights
(Dollars in millions except per share
data)
Quarters Ended
September 30,
2023
2022
Change
Net Sales
$
250.7
$
280.1
(10.5
)%
Income from Continuing Operations
Attributable to EnPro Industries, Inc.
$
8.3
$
26.2
(68.3
)%
Diluted Earnings Per Share from Continuing
Operations Attributable to EnPro Industries, Inc.
$
0.39
$
1.26
(69.0
)%
Adjusted Net Income from Continuing
Operations Attributable to EnPro Industries, Inc.*
$
33.1
$
39.4
(16.0
)%
Adjusted Diluted Earnings Per Share from
Continuing Operations*
$
1.58
$
1.89
(16.4
)%
Adjusted EBITDA*
$
57.7
$
71.3
(19.1
)%
Adjusted EBITDA Margin*
23.0
%
25.5
%
*Non-GAAP measure. See the attached
schedules for adjustments and reconciliations to GAAP measures.
Third Quarter 2023 Consolidated Results
Sales of $250.7 million decreased 10.5% compared to the third
quarter of 2022. Excluding the impacts of divested businesses and
foreign exchange translation, sales declined 10.8% year-over-year.
Slow semiconductor markets, as well as softening demand in food
& pharmaceutical and commercial vehicle OEM, was offset in part
by the contribution from pricing actions and continued strong
demand in nuclear markets.
Corporate expenses of $9.4 million in the third quarter of 2023
increased slightly from $9.1 million in the third quarter of 2022,
as increased professional fees and personnel-related costs were
mostly offset by decreased incentive compensation costs.
Income from continuing operations attributable to EnPro
Industries, Inc. was $8.3 million, compared to $26.2 million in the
prior-year period. Diluted earnings per share attributable to EnPro
Industries, Inc. was $0.39, compared to $1.26 in the prior-year
period. The year-over-year change was driven primarily by weakness
in the Advanced Surface Technologies (or “AST”) segment and an
increase in the effective tax rate for 2023.
Adjusted net income from continuing operations attributable to
EnPro Industries, Inc. of $33.1 million decreased 16.0% compared to
the third quarter of 2022 and adjusted diluted earnings per share
from continuing operations decreased 16.4% to $1.58, compared to
$1.89 in the prior-year period.
Adjusted EBITDA* of $57.7 million, or 23.0% of total sales,
decreased 19.1% compared to the prior-year period driven primarily
by weakness in the AST segment.
Third Quarter 2023 Segment Highlights (All results
reflect comparisons to prior-year period unless otherwise
noted)
Sealing Technologies -
Safeguarding environments with critical applications in diverse end
markets Garlock, STEMCO, and Technetics Group
Quarters Ended
September 30,
(Dollars in millions)
2023
2022
Change
Sales
$
161.4
$
157.9
2.2
%
Adjusted Segment EBITDA
$
48.0
$
39.7
20.9
%
Adjusted Segment EBITDA Margin
29.7
%
25.1
%
- Sales increased 2.2% versus the prior-year period driven by the
positive impact of pricing initiatives along with strong demand in
the nuclear market, offset in part by volume declines in food and
pharmaceutical and commercial vehicle OEM markets. Excluding
results of the business divested in the fourth quarter of 2022 and
foreign exchange translation, sales increased 1.4% versus the
prior-year period.
- Adjusted segment EBITDA of $48.0 million was up 20.9%
year-over-year, with adjusted EBITDA margins expanding
approximately 460 basis points, as pricing actions, strong volume
in the nuclear market and improved aftermarket performance in the
commercial vehicle market more than offset volume declines in other
markets and rising labor costs. Excluding the impacts of the
divestiture and foreign exchange translation, adjusted segment
EBITDA increased 20.2% compared to the prior-year period.
Advanced Surface
Technologies - Leading edge precision manufacturing,
coatings, cleaning and refurbishment solutions and innovative
optical filter products — NxEdge, Technetics Semi, LeanTeq, and
Alluxa
Quarters Ended
September 30,
(Dollars in millions)
2023
2022
Change
Sales
$
89.4
$
122.5
(27.0
)%
Adjusted Segment EBITDA
$
19.0
$
39.9
(52.4
)%
Adjusted Segment EBITDA Margin
21.3
%
32.6
%
- Sales decreased 27.0% versus the prior-year period driven
primarily by the current slowdown in semiconductor capital
equipment spending and wafer starts. Excluding foreign exchange
translation, sales decreased 26.5% year-over-year.
- Adjusted segment EBITDA decreased 52.4% versus the prior-year
period and segment EBITDA margins declined by approximately eleven
percentage points, driven primarily by the decline in volume,
unfavorable mix, and investments supporting long-term growth
opportunities. Excluding the impact of foreign exchange
translation, adjusted segment EBITDA decreased 51.4% compared to
the prior-year period.
Balance Sheet, Cash Flow and Capital Allocation
The company generated $154.8 million of cash flow from operating
activities of continuing operations during the nine months ended
September 30, 2023 and $134.1 million of free cash flow, net of
$20.7 million in capital expenditures. This compares to $111.6
million of cash flow from operating activities of continuing
operations, or $101.4 million of free cash flow, net of $10.2
million in capital expenditures in the prior year. During the third
quarter, the company paid a regular quarterly dividend of $0.29 per
share, with dividend payments totaling $18.3 million for the nine
months ended September 30, 2023.
Enpro ended the third quarter with total debt of $648.6 million
and cash of $329.8 million. Outstanding letters of credit totaled
$10.0 million. Enpro repaid its $133.7 million Term Loan A-1,
including accrued interest, with available cash in July.
Quarterly Dividend
Enpro declared a regular quarterly dividend of $0.29 per share
on October 25, 2023. The dividend is payable on December 13, 2023
to shareholders of record as of the close of business on November
29, 2023.
2023 Guidance
Enpro continues to expect 2023 revenue to remain relatively flat
compared to 2022. Adjusted EBITDA and adjusted diluted earnings per
share for 2023 are now expected to be toward the lower end of our
previous guidance ranges of $248 million to $256 million, and
$6.70-$7.10, respectively.
Conference Call, Webcast Information, and
Presentations
Enpro will hold a conference call today, October 31, at 8:30
a.m. Eastern Time to discuss third quarter 2023 financial results.
Investors who wish to participate in the call should dial
1-877-407-0832 approximately 10 minutes before the call begins and
provide conference access code 13725739. A live audio webcast of
the call and accompanying slide presentation will be accessible
from the company’s website, https://www.enproindustries.com. To
access the earnings presentation, log on to the webcast by clicking
the link on the company’s home page.
Primary Segment Operating Performance Measure
The primary metric used by management to allocate resources and
assess segment performance is adjusted segment EBITDA, which is
segment revenue reduced by operating expenses and other costs
identifiable with the segment, excluding acquisition and
divestiture expenses, restructuring costs, impairment charges,
non-controlling interest compensation, amortization of the fair
value adjustment to acquisition date inventory, and depreciation
and amortization. Expenses not directly attributable to the
segments, corporate expenses, net interest expense, gains/losses
related to the sale of assets, and income taxes are not included in
the computation of adjusted segment EBITDA. Under U.S. generally
accepted accounting principles (“GAAP”), the primary metric used by
management to allocate resources and assess segment performance is
required to be disclosed in financial statement footnotes, and
accordingly such metric as presented for each segment is not deemed
to be a non-GAAP measure under applicable regulations of the
Securities and Exchange Commission.
Non-GAAP Financial Information
This press release contains financial measures that have not
been prepared in conformity with GAAP. They include adjusted net
income attributable to EnPro Industries, Inc., adjusted diluted
earnings per share attributable to EnPro Industries, Inc., adjusted
EBITDA, adjusted EBITDA margin, total adjusted segment EBITDA and
free cash flow. Tables showing the reconciliation of these
historical non-GAAP financial measures to the comparable GAAP
measures are attached to the release. Adjusted EBITDA and adjusted
diluted earnings per share anticipated for full year 2023 are
calculated in a manner consistent with the historical presentation
of these measures in the attached tables. Because of the
forward-looking nature of these estimates, it is impractical to
present quantitative reconciliations of such measures to comparable
GAAP measures, and accordingly no such GAAP measures are being
presented.
Management believes these non-GAAP metrics are commonly used
financial measures for investors to evaluate the company’s
operating performance and, when read in conjunction with the
company’s consolidated financial statements, present a useful tool
to evaluate the company’s ongoing operations and performance from
period to period. In addition, these are some of the factors the
company uses in internal evaluations of the overall performance of
its businesses. Management acknowledges that there are many items
that impact a company’s reported results and the adjustments
reflected in these non-GAAP measures are not intended to present
all items that may have impacted these results. In addition, these
non-GAAP measures are not necessarily comparable to similarly
titled measures used by other companies.
Forward-Looking Statements and Guidance
Statements in this press release that express a belief,
expectation or intention, including the 2023 guidance and other
statements 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 may
cause actual events and results to differ materially from such
forward-looking statements. These risks and uncertainties include,
but are not limited to: economic conditions in the markets served
by the company’s businesses and the businesses of its customers,
some of which are cyclical and experience periodic downturns; the
impact of geopolitical activity on those markets, including
instabilities associated with the armed conflicts in Ukraine and
between Israel and Hamas and any conflict or threat of conflict
that may affect Taiwan; uncertainties with respect to the
imposition of government embargoes, tariffs and trade protection
measures, such as “anti-dumping” duties applicable to classes of
products, and import or export licensing requirements, as well as
the imposition of trade sanctions against a class of products
imported from or sold and exported to, or the loss of “normal trade
relations” status with, countries in which the company conducts
business, could significantly increase the company’s cost of
products or otherwise reduce its sales and harm its business;
uncertainties with respect to prices and availability of raw
materials, including as a result of instabilities from geopolitical
conflicts; uncertainties with respect to the company’s ability to
achieve anticipated growth within the semiconductor, life sciences,
and other technology-enabled markets, including uncertainties with
respect to receipt of CHIPS Act support and the timing of
completion of the new Arizona facility; the impact of fluctuations
in relevant foreign currency exchange rates or unanticipated
increases in applicable interest rates; unanticipated delays or
problems in introducing new products; the impact of any labor
disputes; announcements by competitors of new products, services or
technological innovations; changes in the company’s pricing
policies or the pricing policies of its competitors; risks related
to the reliance of the AST segment on a small number of significant
customers; uncertainties with respect to the company’s ability to
identify and complete business acquisitions consistent with its
strategy and to successfully integrate any businesses that it
acquires; and uncertainties with respect to the amount of any
payments required to satisfy contingent liabilities, including
those related to discontinued operations, other divested businesses
and discontinued operations of the company’s predecessors,
including liabilities for certain products, environmental matters,
employee benefit and statutory severance obligations and other
matters. Enpro’s filings with the Securities and Exchange
Commission, including its most recent Form 10-K and Form 10-Q
reports, describe these and other risks and uncertainties in more
detail. Enpro does not undertake to update any forward-looking
statements made in this press release to reflect any change in
management's expectations or any change in the assumptions or
circumstances on which such statements are based.
Full-year guidance is subject to the risks and uncertainties
discussed above and specifically excludes changes in the number of
shares outstanding, impacts from future and pending acquisitions,
dispositions and related transaction costs, restructuring costs,
incremental impacts of tariffs and trade tensions on market demand
and costs subsequent to September 30, 2023, and the impact of
foreign exchange rate changes subsequent to that date.
About Enpro
Enpro is a leading industrial technology company focused on
critical applications across many end-markets, including
semiconductor, photonics, industrial process, aerospace, food and
pharma and life sciences. Enpro is listed on the New York Stock
Exchange under the symbol “NPO”. For more information about Enpro,
visit the company’s website at http://www.enproindustries.com.
APPENDICES
Consolidated Financial Information and
Reconciliations
EnPro Industries, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Quarters and Nine Months Ended
September 30, 2023 and 2022
(In Millions, Except Per Share Data)
Quarters Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2023
2022
2023
2022
Net sales
$
250.7
$
280.1
$
810.2
$
827.3
Cost of sales
151.1
169.3
479.7
509.5
Gross profit
99.6
110.8
330.5
317.8
Operating expenses:
Selling, general and administrative
65.6
65.8
210.3
205.1
Goodwill impairment
—
—
60.8
—
Other
2.1
0.1
3.1
2.3
Total operating expenses
67.7
65.9
274.2
207.4
Operating income
31.9
44.9
56.3
110.4
Interest expense
(10.8
)
(9.4
)
(34.9
)
(24.2
)
Interest income
3.7
0.1
11.3
0.3
Other income (expense)
(1.9
)
0.3
(4.3
)
(1.7
)
Income from continuing operations before
income taxes
22.9
35.9
28.4
84.8
Income tax expense
(14.7
)
(9.1
)
(17.0
)
(19.8
)
Income from continuing operations
8.2
26.8
11.4
65.0
Income from discontinued operations,
including gain on sale, net of tax
—
0.7
11.4
13.9
Net income
8.2
27.5
22.8
78.9
Less: net income (loss) attributable to
redeemable non-controlling interest
(0.1
)
0.6
(4.3
)
0.8
Net income attributable to EnPro
Industries, Inc.
$
8.3
$
26.9
$
27.1
$
78.1
Income attributable to EnPro Industries,
Inc. common shareholders:
Income from continuing operations, net of
tax
$
8.3
$
26.2
$
15.7
$
64.2
Income from discontinued operations,
including gain on sale, net of tax
—
0.7
11.4
13.9
Net income attributable to EnPro
Industries, Inc.
$
8.3
$
26.9
$
27.1
$
78.1
Basic earnings per share attributable to
EnPro Industries, Inc.:
Continuing operations
$
0.40
$
1.26
$
0.75
$
3.09
Discontinued operations
—
0.03
0.55
0.67
Basic earnings per share
$
0.40
$
1.29
$
1.30
$
3.76
Average common shares outstanding
20.9
20.8
20.9
20.8
Diluted earnings per share attributable to
EnPro Industries, Inc.:
Continuing Operations
$
0.39
$
1.26
$
0.75
$
3.08
Discontinued operations
—
0.03
0.54
0.66
Diluted earnings per share
$
0.39
$
1.29
$
1.29
$
3.74
Average common shares outstanding
21.0
20.9
21.0
20.9
EnPro Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30,
2023 and 2022
(In Millions)
2023
2022
Operating activities of continuing
operations
Net income
$
22.8
$
78.9
Adjustments to reconcile net income to net
cash provided by operating activities of continuing operations:
Income from discontinued operations, net
of taxes
(11.4
)
(13.9
)
Taxes related to sale of discontinued
operations
(3.3
)
—
Depreciation
18.4
19.4
Amortization
52.7
58.5
Goodwill impairment
60.8
—
Deferred income taxes
(1.6
)
(1.9
)
Stock-based compensation
7.9
4.6
Other non-cash adjustments
3.9
4.9
Change in assets and liabilities, net of
effects of divestitures of businesses:
Accounts receivable, net
16.9
(17.0
)
Inventories
5.4
(19.2
)
Accounts payable
(9.6
)
2.7
Other current assets and liabilities
2.7
(13.2
)
Other non-current assets and
liabilities
(10.8
)
7.8
Net cash provided by operating activities
of continuing operations
154.8
111.6
Investing activities of continuing
operations
Purchases of property, plant and
equipment
(20.7
)
(10.2
)
Proceeds from sale of businesses
25.7
0.6
Receipts from settlements of derivative
contracts
—
27.4
Purchase of short-term investments
(35.8
)
—
Redemption of short-term investments
35.0
—
Other
0.5
2.9
Net cash provided by investing activities
of continuing operations
4.7
20.7
Financing activities of continuing
operations
Proceeds from debt
—
60.5
Repayments of debt
(143.1
)
(304.2
)
Dividends paid
(18.3
)
(17.6
)
Other
(1.4
)
(7.8
)
Net cash used in financing activities of
continuing operations
(162.8
)
(269.1
)
Cash flows of discontinued operations
Operating cash flows
(0.6
)
8.8
Investing cash flows
—
(4.3
)
Net cash provided by (used in)
discontinued operations
(0.6
)
4.5
Effect of exchange rate changes on cash
and cash equivalents
(0.7
)
(39.6
)
Net decrease in cash and cash
equivalents
(4.6
)
(171.9
)
Cash and cash equivalents at beginning of
period
334.4
338.1
Cash and cash equivalents at end of
period
$
329.8
$
166.2
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest
$
29.2
$
15.8
Income taxes, net of refunds
$
10.8
$
35.8
EnPro Industries, Inc.
Consolidated Balance Sheets
(Unaudited)
As of September 30, 2023 and December 31,
2022
(In Millions)
September 30,
December 31,
2023
2022
Current assets
Cash and cash equivalents
$
329.8
$
334.4
Accounts receivable, net
119.5
137.1
Inventories
145.9
151.9
Prepaid expenses and other current
assets
41.3
44.9
Current assets of discontinued
operation
—
15.9
Total current assets
636.5
684.2
Property, plant and equipment, net
186.0
185.2
Goodwill
805.2
863.8
Other intangible assets
749.6
799.8
Other assets
124.0
114.8
Total assets
$
2,501.3
$
2,647.8
Current liabilities
Current maturities of long-term debt
$
8.1
$
15.6
Accounts payable
63.6
73.4
Accrued expenses
123.4
120.2
Current liabilities of discontinued
operation
—
2.3
Total current liabilities
195.1
211.5
Long-term debt
640.5
775.1
Deferred taxes and non-current income
taxes payable
133.7
136.5
Other liabilities
106.2
111.7
Total liabilities
1,075.5
1,234.8
Redeemable non-controlling interests
17.9
17.9
Shareholders’ equity
Common stock
0.2
0.2
Additional paid-in capital
302.5
299.2
Retained earnings
1,139.0
1,130.2
Accumulated other comprehensive loss
(32.6
)
(33.3
)
Common stock held in treasury, at cost
(1.2
)
(1.2
)
Total shareholders’ equity
1,407.9
1,395.1
Total liabilities and equity
$
2,501.3
$
2,647.8
EnPro Industries, Inc.
Segment Information (Unaudited)
For the Quarters and Nine Months Ended
September 30, 2023 and 2022
(Dollars In Millions)
Sales
Quarters Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Sealing Technologies
$
161.4
$
157.9
$
511.4
$
467.4
Advanced Surface Technologies
89.4
122.5
299.1
360.7
250.8
280.4
810.5
828.1
Less: intersegment sales
(0.1
)
(0.3
)
(0.3
)
(0.8
)
$
250.7
$
280.1
$
810.2
$
827.3
Income from continuing operations
attributable to EnPro Industries, Inc.
$
8.3
$
26.2
$
15.7
$
64.2
Earnings before interest, income taxes,
depreciation,
amortization and other selected items
(Adjusted Segment EBITDA)
Quarters Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Sealing Technologies
$
48.0
$
39.7
$
153.9
$
118.1
Advanced Surface Technologies
19.0
39.9
72.6
112.6
$
67.0
$
79.6
$
226.5
$
230.7
Adjusted Segment EBITDA Margin
Quarters Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Sealing Technologies
29.7
%
25.1
%
30.1
%
25.3
%
Advanced Surface Technologies
21.3
%
32.6
%
24.3
%
31.2
%
26.7
%
28.4
%
28.0
%
27.9
%
Reconciliation of Adjusted Segment
EBITDA to Income from Continuing Operations Attributable to EnPro
Industries, Inc.
Quarters Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Income from continuing operations
attributable to EnPro Industries, Inc.
$
8.3
$
26.2
$
15.7
$
64.2
Plus: net income (loss) attributable to
redeemable non-controlling interests
(0.1
)
0.6
(4.3
)
0.8
Income from continuing operations
8.2
26.8
11.4
65.0
Income tax expense
(14.7
)
(9.1
)
(17.0
)
(19.8
)
Income from continuing operations before
income taxes
22.9
35.9
28.4
84.8
Acquisition and divestiture expenses
—
—
—
0.4
Non-controlling interest compensation
allocation1
—
(0.6
)
(0.3
)
(0.1
)
Amortization of the fair value adjustment
to acquisition date inventory
—
1.0
—
12.3
Restructuring and impairment expense
2.0
0.1
2.6
1.2
Depreciation and amortization expense
23.5
25.7
70.9
77.7
Corporate expenses
9.4
9.1
35.1
31.4
Interest expense, net
7.1
9.3
23.6
23.9
Goodwill impairment
—
—
60.8
—
Other expense (income), net
2.1
(0.9
)
5.4
(0.9
)
Adjusted Segment EBITDA
$
67.0
$
79.6
$
226.5
$
230.7
Adjusted Segment EBITDA is total segment revenue reduced by
operating expenses and other costs identifiable with the segment,
excluding acquisition and divestiture expenses, restructuring and
impairment expense, non-controlling interest compensation,
amortization of the fair value adjustment to acquisition date
inventory, goodwill impairment, and depreciation and
amortization.
Corporate expenses include general corporate administrative
costs. Expenses not directly attributable to the segments,
corporate expenses, net interest expense, gains/losses related to
the sale of assets, and income taxes are not included in the
computation of Adjusted Segment EBITDA. The accounting policies of
the reportable segments are the same as those for the Company.
1Non-controlling interest compensation allocation represents
compensation expense adjustment associated with a portion of the
rollover equity from the acquisitions of LeanTeq and Alluxa that is
subject to reduction for certain types of employment terminations
of the LeanTeq and Alluxa sellers and is directly related to the
terms of the respective acquisitions. This expense will continue to
be recognized as compensation expense over the term of the put and
call options associated with the acquisitions unless certain
employment terminations have occurred. The LeanTeq non-controlling
interests were acquired by Enpro in December 2022.
EnPro Industries, Inc.
Adjusted Segment EBITDA Reconciling
Items by Segment (Unaudited)
For the Quarters and Nine Months Ended
September 30, 2023 and 2022
(In Millions)
Quarter Ended September 30,
2023
Sealing Technologies
Advanced Surface Technologies
Total Segments
Restructuring and impairment expense
$
1.6
$
0.4
$
2.0
Depreciation and amortization expense
$
6.2
$
17.3
$
23.5
Quarter Ended September 30,
2022
Sealing Technologies
Advanced Surface Technologies
Total Segments
Non-controlling interest compensation
allocation1
$
—
$
(0.6
)
$
(0.6
)
Amortization of the fair value adjustment
to acquisition date inventory
$
—
$
1.0
$
1.0
Restructuring and impairment expense
$
0.1
$
—
$
0.1
Depreciation and amortization expense
$
6.3
$
19.4
$
25.7
Nine Months Ended September 30,
2023
Sealing Technologies
Advanced Surface Technologies
Total Segments
Non-controlling interest compensation
allocation1
$
—
$
(0.3
)
$
(0.3
)
Restructuring and impairment expense
$
1.7
$
0.9
$
2.6
Depreciation and amortization expense
$
18.9
$
52.0
$
70.9
Nine Months Ended September 30,
2022
Sealing Technologies
Advanced Surface Technologies
Total Segments
Acquisition and divestiture expenses
$
—
$
0.4
$
0.4
Non-controlling interest compensation
allocation1
$
—
$
(0.1
)
$
(0.1
)
Amortization of the fair value adjustment
to acquisition date inventory
$
—
$
12.3
$
12.3
Restructuring and impairment expense
$
0.6
$
0.6
$
1.2
Depreciation and amortization expense
$
19.9
$
57.8
$
77.7
1Non-controlling interest compensation allocation represents
compensation expense associated with a portion of the rollover
equity from the acquisitions of LeanTeq and Alluxa that is subject
to reduction for certain types of employment terminations of the
LeanTeq and Alluxa sellers and is directly related to the terms of
the respective acquisitions. This expense will continue to be
recognized as compensation expense over the term of the put and
call options associated with the acquisitions unless certain
employment terminations have occurred. The LeanTeq non-controlling
interests were acquired by Enpro in December 2022.
EnPro Industries, Inc.
Reconciliation of Income from
Continuing Operations Before Income Taxes to Adjusted Income from
Continuing Operations Attributable to EnPro Industries, Inc. and
Adjusted Diluted Earnings Per Share (Unaudited)
For the Quarters and Nine Months Ended
September 30, 2023 and 2022
(In Millions, Except Per Share Data)
Quarters Ended September 30,
2023
2022
$
Average common shares
outstanding, diluted
Per Share
$
Average common shares
outstanding, diluted
Per Share
Income from continuing operations
attributable to EnPro Industries, Inc.
$
8.3
21.0
$
0.39
$
26.2
20.9
$
1.26
Net income (loss) attributable to
redeemable non-controlling interests
(0.1
)
0.6
Income tax expense
14.7
9.1
Income from continuing operations before
income taxes
22.9
35.9
Adjustments from selling, general, and
administrative:
Non-controlling interest compensation
allocations1
—
(0.6
)
Amortization of acquisition-related
intangible assets
17.1
18.7
Adjustments from other operating expense
and cost of sales:
Restructuring and impairment expense
2.2
0.1
Amortization of the fair value adjustment
to acquisition date inventory
—
0.9
Adjustments from other non-operating
expense:
Environmental reserve adjustments
0.4
0.1
Costs associated with previously disposed
businesses
0.4
0.2
Pension expense (income) (non-service
cost)
0.4
(0.7
)
Foreign exchange losses related to the
divestiture of a discontinued operation2
0.5
—
Other adjustments:
Other
0.2
0.2
Adjusted income from continuing operations
before income taxes
44.1
54.8
Adjusted income tax expense
(11.1
)
(14.8
)
Net loss (income) attributable to
redeemable non-controlling interests
0.1
(0.6
)
Adjusted income from continuing operations
attributable to EnPro Industries, Inc.
$
33.1
21.0
$
1.58
3
$
39.4
20.9
$
1.89
3
Nine Months Ended September
30,
2023
2022
$
Average common shares
outstanding, diluted
Per Share
$
Average common shares
outstanding, diluted
Per Share
Income from continuing operations
attributable to EnPro Industries, Inc.
$
15.7
21.0
$
0.75
$
64.2
20.9
$
3.08
Net income (loss) attributable to
redeemable non-controlling interests
(4.3
)
0.8
Income tax expense
17.0
19.8
Income from continuing operations before
income taxes
28.4
84.8
Adjustments from selling, general, and
administrative:
Acquisition and divestiture expenses
0.1
1.0
Non-controlling interest compensation
allocations1
(0.3
)
(0.2
)
Amortization of acquisition-related
intangible assets
51.5
56.3
Adjustments from other operating expense
and cost of sales:
Restructuring and impairment expense
3.2
2.2
Amortization of the fair value adjustment
to acquisition date inventory
—
12.1
Adjustments from other non-operating
expense:
Asbestos receivable adjustment
—
2.8
Environmental reserve adjustments
0.5
(0.2
)
Costs associated with previously disposed
businesses
0.8
0.8
Pension expense (income) (non-service
cost)
1.1
(2.1
)
Goodwill impairment
56.6
—
Foreign exchange losses related to the
divestiture of a discontinued operation2
1.5
—
Other adjustments:
Other
0.3
0.6
Adjusted income from continuing operations
before income taxes
143.7
158.1
Adjusted income tax expense
(35.9
)
(42.7
)
Net loss (income) attributable to
redeemable non-controlling interests
4.3
(0.8
)
Adjusted income from continuing operations
attributable to EnPro Industries, Inc.
$
112.1
21.0
$
5.35
3
$
114.6
20.9
$
5.49
3
Management of the Company believes that it would be helpful to
the readers of the financial statements to understand the impact of
certain selected items on the Company's reported net income
attributable to EnPro Industries, Inc. and diluted earnings per
share attributable to EnPro Industries, Inc., including items that
may recur from time to time. The items adjusted for in this
schedule are those that are excluded by management in budgeting or
projecting for performance in future periods, as they typically
relate to events specific to the period in which they occur. This
presentation enables readers to better compare EnPro Industries,
Inc. to other diversified industrial manufacturing companies that
do not incur the sporadic impact of restructuring activities, costs
associated with previously disposed of businesses, acquisitions and
divestitures, or other selected items. The adjustments in the table
above relate solely to expenses attributable to EnPro Industries,
Inc. and have been adjusted to remove any amounts attributable to
non-controlling interests.
Management acknowledges that there are many items that impact a
company's reported results and this list is not intended to present
all items that may have impacted these results.
Other adjustments are included in selling, general, and
administrative, cost of sales, and other operating expenses on the
consolidated statements of operations.
The adjusted income tax expense presented above is calculated
using a normalized company-wide effective tax rate excluding
discrete items of 25.0% and 27.0% for the 2023 and 2022 periods,
respectively. Per share amounts were calculated by dividing by the
weighted-average shares of diluted common stock outstanding during
the periods.
1Non-controlling interest compensation allocation represents
compensation expense adjustment associated with a portion of the
rollover equity from the acquisitions of LeanTeq and Alluxa that is
subject to reduction for certain types of employment terminations
of the LeanTeq and Alluxa sellers and is directly related to the
terms of the respective acquisitions. This expense will continue to
be recognized as compensation expense over the term of the put and
call options associated with the acquisitions unless certain
employment terminations have occurred. The LeanTeq non-controlling
interests were acquired by Enpro in December 2022.
2In connection with the sale of GGB, accounted for as a
discontinued operation, in the fourth quarter of 2022, we issued an
intercompany note between a domestic and foreign entity that was
denominated in a foreign currency. As a result of this note, we
recorded a loss due to the change in exchange rate in 2023. In
January 2023, we hedged the outstanding note in order to mitigate
related gains or losses.
3Adjusted diluted earnings per share.
EnPro Industries, Inc.
Reconciliation of Income from
Continuing Operations Attributable to EnPro Industries, Inc. to
Adjusted EBITDA (Unaudited)
For the Quarters and Nine Months Ended
September 30, 2023 and 2022
(In Millions)
Quarters Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Income from continuing operations
attributable to EnPro Industries, Inc.
$
8.3
$
26.2
$
15.7
$
64.2
Net income (loss) attributable to
redeemable non-controlling interests
(0.1
)
0.6
(4.3
)
0.8
Income from continuing operations
8.2
26.8
11.4
65.0
Adjustments to arrive at earnings before
interest, income taxes, depreciation, amortization, and other
selected items (Adjusted EBITDA):
Interest expense, net
7.1
9.3
23.6
23.9
Income tax expense
14.7
9.1
17.0
19.8
Depreciation and amortization expense
23.6
25.7
71.1
77.9
Restructuring and impairment expense
2.2
0.1
3.2
2.2
Environmental reserve adjustments
0.4
0.1
0.5
(0.2
)
Costs associated with previously disposed
businesses
0.4
0.2
0.8
0.8
Acquisition and divestiture expenses
—
—
0.1
1.0
Pension expense (income) (non-service
cost)
0.4
(0.7
)
1.1
(2.1
)
Non-controlling interest compensation
allocation1
—
(0.6
)
(0.3
)
(0.1
)
Asbestos receivable adjustment
—
—
—
2.8
Amortization of the fair value adjustment
to acquisition date inventory
—
1.0
—
12.3
Foreign exchange losses related to the
divestiture of a discontinued operation2
0.5
—
1.5
—
Goodwill impairment
—
—
60.8
—
Other
0.2
0.3
0.3
0.6
Adjusted EBITDA
$
57.7
$
71.3
$
191.1
$
203.9
1Non-controlling interest compensation allocation represents
compensation expense associated with a portion of the rollover
equity from the acquisitions of LeanTeq and Alluxa that is subject
to reduction for certain types of employment terminations of the
LeanTeq and Alluxa sellers and is directly related to the terms of
the respective acquisitions. This expense will continue to be
recognized as compensation expense over the term of the put and
call options associated with the acquisitions unless certain
employment terminations have occurred. The LeanTeq non-controlling
interests were acquired by Enpro in December 2022.
2In connection with the sale of GGB, accounted for as a
discontinued operation, in the fourth quarter of 2022, we issued an
intercompany note between a domestic and foreign entity that was
denominated in a foreign currency. As a result of this note, we
recorded a loss due to the change in exchange rate in 2023. In
January 2023, we hedged the outstanding note in order to mitigate
related gains or losses.
Supplemental disclosure: Adjusted EBITDA as presented also
represents the amount defined as "EBITDA" under the indenture
governing the Company's 5.75% Senior Notes due 2026. For the nine
months ended September 30, 2023, approximately 46% of the adjusted
EBITDA as presented above was attributable to Enpro's subsidiaries
that do not guarantee the Company's 5.75% Senior Notes due
2026.
EnPro Industries, Inc.
Reconciliation of Free Cash Flow
(Unaudited)
(In Millions)
Free Cash Flow - Nine Months Ended
September 30, 2023
Net cash provided by operating activities
of continuing operations
$
154.8
Purchases of property, plant, and
equipment
(20.7
)
Free cash flow
$
134.1
Free Cash Flow - Nine Months Ended
September 30, 2022
Net cash provided by operating activities
of continuing operations
$
111.6
Purchases of property, plant, and
equipment
(10.2
)
Free cash flow
$
101.4
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031311885/en/
Investor Contacts: Milt Childress Executive Vice
President and Chief Financial Officer James Gentile Vice President,
Investor Relations 704-731-1527
investor.relations@enproindustries.com
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