CHARLOTTE, N.C., Aug. 5 NC-EnPro-Ind-earnings
CHARLOTTE, N.C., Aug. 5 /PRNewswire-FirstCall/ --
-- Sales increase 25% compared to the second quarter of 2007, reaching
$316.8 million including contributions from acquisitions
-- Segment profits improve by 31% to $57.6 million as all segments report
double-digit growth over the second quarter of 2007
-- Segment profit margins reach 18.2% compared to 17.3% in the second
quarter of 2007
-- GAAP earnings grow to $0.99 a share, an improvement of 62% over the
second quarter of 2007 when they were $0.61 a share
-- Before asbestos-related expenses and other selected items, earnings per
share increase 37% to a record $1.38 a share from $1.01 a share in the second
quarter of 2007
EnPro Industries (NYSE: NPO) today reported continued strength in its
financial results as its performance during the second quarter of 2008 set new
quarterly records for sales, segment profits, segment profit margins and
income.
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Earnings in the quarter were $0.99 a share, a 62% improvement over the
second quarter of 2007, when they were $0.61 a share. Net income grew to $21.1
million in the quarter, an increase of 53% over the $13.8 million reported a
year ago. Before asbestos-related expenses and other selected items, income
was $1.38 a share compared to $1.01 a share in the second quarter of 2007, an
improvement of 37%. Earnings on this basis were $29.4 million, an improvement
of 29% over the second quarter of 2007, when they were $22.8 million. A table
showing the effect of asbestos-related expenses and other selected items for
the second quarter and first six months of 2008 and 2007 is included in this
release. Per share amounts are expressed on a diluted basis throughout this
release.
The company's diluted earnings benefited by about $0.05 a share as a
result of the Accelerated Share Repurchase (ASR) program announced in March
2008. Before asbestos-related expenses and other selected items, earnings
benefited by about $0.07 a share as a result of the ASR.
Sales in the quarter grew to $316.8 million, a 25% improvement over the
$254.4 million reported in the second quarter of 2007, while segment profits
increased 31% to $57.6 million, or 18.2% of sales, compared to $43.9 million,
or 17.3% of sales, a year ago. The increase in sales reflects strong organic
growth in each of the company's segments. Favorable markets in Sealing
Products and Engineered Products and increased shipments of engines and
associated equipment in Engine Products and Services were responsible for
about 11 percentage points of the improvement. Foreign exchange and
acquisitions each added about 7 points.
"Our operations performed very well in the second quarter," said Steve
Macadam, president and chief executive officer. "A number of factors
contributed to these results, including the strength of our oil and gas, power
generation and mining markets, our growing international presence and
acquisitions we completed in the past year. Our earnings per share also
reflect the impact of the share repurchase program we implemented earlier in
the year. Our performance in the first half of 2008 puts us on very sound
footing as we enter the second half of the year, which is especially important
in light of seasonal decreases in activity that are typical of the second half
and current concerns about the economic outlook."
Sealing Products
Second quarter sales in the Sealing Products segment reached $136.9
million, 16% better than the second quarter a year ago. Strong growth in a
number of industrial sealing markets and contributions from acquisitions
combined to provide about 11 percentage points of the growth, while favorable
foreign exchange accounted for about 5 percentage points. At Garlock Sealing
Technologies, increased demand from power generation, hydrocarbon production
and processing, and metals and mining markets, both in the United States and
the rest of the world, benefited sales. The original equipment segment of the
heavy-duty truck markets served by Stemco remained soft during the quarter,
but Stemco's sales to the heavy-duty truck aftermarket improved as a result of
the acquisition of V.W. Kaiser in the first quarter of 2008.
Profits in the segment grew by 41%, to $31.2 million and margins increased
to 22.8% from 18.7% a year ago as the segment benefited from better
performances at Garlock and Stemco and from the receipt of $2.5 million
related to the settlement of a 2002 warranty claim against a supplier.
($ Millions)
Quarter Ended6/30/08 6/30/07
Sales $136.9$118.3
Profit $31.2 $22.1
Margin 22.8% 18.7%
Engineered Products
In the Engineered Products segment, second quarter sales grew to $144.8
million, a 34% improvement over the second quarter of 2007. Stronger markets
for the segment's products were responsible for 12 percentage points of the
growth in sales. Acquisitions contributed 13 percentage points of the growth
and favorable foreign exchange rates contributed 9 percentage points. GGB
Bearing Technology reported the largest sales growth in the segment resulting
from increases in European industrial demand, stronger power generation and
automotive markets in Brazil and favorable foreign exchange rates. At
Compressor Products International (CPI), acquisitions completed in the second
half of 2007 helped to double sales over the second quarter of 2007. The
business also saw strength in its European and Canadian markets. Sales at
Quincy Compressor also increased as that business benefited from strong demand
from its U.S. oil and gas customers and the acquisition of Air Perfection.
The segment's operating profit improved by 19% to $21.9 million as all
units in the segment reported increases compared to the second quarter of
2007. However, the segment's margins declined to 15.1% from 17.0% as increases
in material costs at all units outpaced increases in selling prices. Margins
also reflect a less profitable product mix and the impact of lower margins in
businesses acquired by CPI in the past 12 months.
($ Millions)
Quarter Ended6/30/08 6/30/07
Sales $144.8$108.3
Profit $21.9 $18.4
Margin 15.1% 17.0%
Engine Products and Services
Sales in the Engine Products and Services segment grew by 27% to $35.8
million as Fairbanks Morse shipped more engines and associated equipment than
it did in the second quarter of 2007. Compared to last year, profits in the
segment improved by 32% to $4.5 million and profit margins increased to 12.6%
as the engine business benefited from increased parts sales.
($ Millions)
Quarter Ended6/30/08 6/30/07
Sales $35.8 $28.2
Profit $4.5 $3.4
Margin 12.6% 12.1%
Cash Flows
At June 30, 2008, the company's cash balance stood at $77.1 million
compared to $129.2 million at December 31, 2007.
Operating activity contributed net cash of $55.2 million in the first half
of the year, compared to $44.1 million in the first half of 2007. Operating
cash flows improved as a result of higher earnings, which more than offset
increased working capital levels. Working capital increases are typical in the
first half of the year as seasonal activity increases. Payments of asbestos
claims and expenses, net of insurance receipts, were $1.8 million in the first
half of 2008 compared to $3.2 million a year ago.
Capital expenditures were $26.1 million in the first half of 2008 compared
to $19.2 million in the first six months of 2007. The company continues to
invest in its operations, including the modernization of Garlock's Palmyra,
New York manufacturing facility and other projects supporting continuous
improvement in the company's operations.
The company spent $36.9 million on acquisitions in the first half of the
year as it completed transactions to acquire Sinflex Sealing Technologies,
V.W. Kaiser Engineering and Air Perfection. The company also spent $50.2
million in the first half of 2008 in connection with a share repurchase
program which resulted in the retirement of about 1.7 million shares of common
stock.
Outlook
While the company expects economic conditions to soften in some markets in
the second half of the year, results should continue to benefit from EnPro's
access to a broad range of markets, its growing international presence and
acquisitions completed over the past 12 months.
The company expects its cash balances for the remainder of the year to be
affected by significant increases in net outflows for asbestos claims and
expenses, as well as any acquisitions completed before the end of the year.
Cash balances are also likely to be affected by a final settlement payment
in connection with the company's ASR and by any other shares repurchased under
the company's $100 million share repurchase authorization. The company expects
the ASR to be completed by the end of August, at which time it will owe a
settlement of about $11 million, based on recent share prices. While the
company has the option to make the payment by delivering common shares, it
currently expects to make the settlement in cash. After a cash payment, the
company will have completed $61 million of the authorization, leaving the
remainder to be used for additional share repurchases over the next several
months, subject to market conditions, the company's financial results and
other factors.
"Many of our U.S. and European markets face uncertain economic conditions
brought on by high energy prices and other well-publicized factors," said
Macadam. "We expect these developments, combined with normal seasonal
reductions in activity, to slow our rate of growth in the second half of the
year in comparison to the first half. However, we expect our operating
performance to continue to improve and our operating results to exceed those
we reported in the second half of 2007."
Conference Call Information
EnPro will hold a conference call today, August 5, 2008, at 9:00 a.m.
Eastern Time to discuss second quarter earnings. To participate in the call,
dial 1-800-628-5949 approximately 10 minutes before the call begins and
provide access code number 4524467. The call will also be webcast at
http://www.enproindustries.com.
Forward-Looking Statements
Statements in this release 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 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: the resolution of current
and potential future asbestos claims against certain of our subsidiaries which
depends on such factors as the possibility of asbestos reform legislation, the
financial viability of insurance carriers, the timing of payments of claims
and related expenses, the timing of insurance collections, limitations on the
amount that may be recovered from insurance carriers, the bankruptcies of
other defendants and the results of litigation; general economic conditions in
the markets served by our businesses, some of which are cyclical and
experience periodic downturns; prices and availability of raw materials; and
the amount of any payments required to satisfy contingent liabilities related
to discontinued operations of our predecessors, including liabilities for
certain products, environmental matters, guaranteed debt and lease payments,
employee benefit obligations and other matters. Our filings with the
Securities and Exchange Commission, including the Form 10-K for the year ended
December 31, 2007, and the Form 10-Q for the quarter ended June 30, 2008,
describe these and other risks and uncertainties in more detail. We do not
undertake to update any forward-looking statement made in this release to
reflect any change in management's expectations or any change in the
assumptions or circumstances on which such statements are based.
EnPro Industries, Inc. is a leader in sealing products, metal polymer and
filament wound bearings, compressor systems and components, diesel and
dual-fuel engines and other engineered products for use in critical
applications by industries worldwide. For more information about EnPro, visit
the company's website at http://www.enproindustries.com .
EnPro Industries, Inc.
Consolidated Statements of Operations (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
(Stated in Millions of Dollars, Except Per Share Data)
Quarters Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
Net sales $316.8 $254.4 $599.9 $501.7
Cost of sales 201.8163.0381.4321.8
Gross profit 115.0 91.4218.5179.9
Operating expenses:
Selling, general and
administrative expenses 72.4 55.2137.9110.2
Asbestos-related expenses 12.2 13.1 24.3 26.0
Other operating expense (income) (3.9) 1.3 (2.7) 2.3
Total operating expenses 80.7 69.6159.5138.5
Operating income 34.3 21.8 59.0 41.4
Interest expense (2.0)(2.0)(4.0)(4.0)
Interest income 0.8 2.2 1.9 4.1
Other expense(1.0) - (3.8) -
Income before income taxes 32.1 22.0 53.1 41.5
Income tax expense (11.0)(8.2) (18.8) (15.4)
Net income $21.1$13.8$34.3$26.1
Basic earnings per share$1.05$0.65$1.67$1.23
Average common shares
outstanding (millions) 20.0 21.3 20.5 21.2
Diluted earnings per share $0.99$0.61$1.60$1.17
Average common shares
outstanding (millions) 21.3 22.6 21.4 22.3
EnPro Industries, Inc.
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2008 and 2007
(Stated in Millions of Dollars)
2008 2007
Operating activities
Net income$34.3 $26.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 15.214.1
Amortization7.0 5.1
Deferred income taxes 3.7 0.1
Stock-based compensation3.1 1.0
Excess tax benefits from stock-based
compensation (0.5) (3.0)
Gain on sale of assets (2.2) -
Change in assets and liabilities, net of
effects of acquisitions of businesses:
Asbestos liabilities, net of
insurance receivables 22.522.8
Accounts and notes receivable (32.7) (17.3)
Inventories(7.2)7.0
Accounts payable6.2 2.9
Other current assets and liabilities4.7(4.7)
Other non-current assets and liabilities1.1 (10.0)
Net cash provided by operating activities55.244.1
Investing activities
Purchases of property, plant and equipment(26.1) (19.2)
Proceeds from sales of assets 3.1 -
Proceeds from liquidation of investments2.6 -
Acquisitions, net of cash acquired(36.9) (12.5)
Other 3.1(0.8)
Net cash used in investing activities (54.2) (32.5)
Financing activities
Repayments of debt (4.0) -
Common stock repurchase (50.2) -
Proceeds from issuance of common stock 0.1 0.5
Excess tax benefits from stock-based
compensation 0.5 3.0
Net cash provided by (used in)
financing activities (53.6)3.5
Effect of exchange rate changes on
cash and cash equivalents0.5 1.7
Net increase (decrease) in cash and
cash equivalents (52.1) 16.8
Cash and cash equivalents at beginning of year 129.2 161.0
Cash and cash equivalents at period $77.1 $177.8
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $4.1$4.0
Income taxes$15.1 $15.3
Asbestos-related claims and expenses, net of
insurance recoveries$1.8$3.2
EnPro Industries, Inc.
Consolidated Balance Sheets (Unaudited)
As of June 30, 2008 and December 31, 2007
(Stated in Millions of Dollars)
June 30, December 31,
2008 2007
Current assets
Cash and cash equivalents $77.1$129.2
Accounts and notes receivable 206.9 167.6
Asbestos insurance receivable 65.1 70.0
Inventories 83.1 70.3
Other current assets45.3 55.3
Total current assets477.5 492.4
Property, plant and equipment 210.8 193.5
Goodwill 235.9 213.8
Other intangible assets 117.0 103.5
Asbestos insurance receivable 272.4 311.5
Deferred income taxes 92.3 90.3
Other assets 71.4 65.3
Total assets $1,477.3 $1,470.3
Current liabilities
Current maturities of long-term debt$9.7 $3.6
Accounts payable90.3 80.1
Asbestos liability 91.8 86.9
Other accrued expenses 108.2 89.8
Total current liabilities 300.0 260.4
Long-term debt172.6 182.1
Retained liabilities of previously
owned businesses 31.4 31.0
Environmental liabilities 18.0 20.4
Asbestos liability411.1 437.5
Other liabilities 61.7 63.8
Total liabilities 994.8 995.2
Shareholders' equity
Common stock 0.2 0.2
Additional paid-in capital 380.7 427.2
Retained earnings (accumulated deficit) 33.6 (0.7)
Accumulated other comprehensive income 69.5 49.9
Common stock held in treasury, at cost (1.5) (1.5)
Total shareholders' equity 482.5 475.1
Total liabilities and
shareholders' equity$1,477.3 $1,470.3
EnPro Industries, Inc.
Segment Information (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
(Stated in Millions of Dollars)
Sales
Quarters Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sealing Products $136.9 $118.3 $260.5 $233.9
Engineered Products144.8108.3277.9214.6
Engine Products and Services35.8 28.2 62.3 53.8
317.5254.8600.7502.3
Less intersegment sales (0.7)(0.4)(0.8)(0.6)
$316.8 $254.4 $599.9 $501.7
Segment Profit
Quarters Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sealing Products $31.2$22.1$52.7$43.5
Engineered Products 21.9 18.4 43.7 37.2
Engine Products and Services 4.5 3.4 8.0 5.4
$57.6$43.9 $104.4$86.1
Segment Profit Margin
Quarters Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sealing Products22.8%18.7%20.2%18.6%
Engineered Products 15.1%17.0%15.7%17.3%
Engine Products and Services12.6%12.1%12.8%10.0%
18.2%17.3%17.4%17.2%
Reconciliation of Segment Profit to Net Income
Quarters Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Segment profit $57.6$43.9 $104.4$86.1
Corporate expenses (12.4)(8.2) (21.8) (17.0)
Asbestos-related expenses (12.2) (13.1) (24.3) (26.0)
Gain on sale of assets 2.2- 2.2-
Interest income (expense), net (1.2) 0.2 (2.1) 0.1
Other expense, net (1.9)(0.8)(5.3)(1.7)
Income before income taxes 32.1 22.0 53.1 41.5
Income tax expense (11.0)(8.2) (18.8) (15.4)
Net income $21.1$13.8$34.3$26.1
Segment profit is total segment revenue reduced by operating expenses and
restructuring and other costs identifiable with the segment. Corporate
expenses include general corporate administrative costs. Expenses not
directly attributable to the segments, corporate expenses, net interest
expense, asbestos-related expenses, gains/losses or impairments related to the
sale of assets and income taxes are not included in the computation of segment
profit. The accounting policies of the reportable segments are the same as
those for the Company.
EnPro Industries, Inc.
Reconciliation of Income Before Asbestos-Related Expenses and
Other Selected Items to Net Income (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
(Stated in Millions of Dollars, Except Per Share Data)
Quarters Ended June 30,
2008 2007
$Per share$Per share
Income before asbestos-related expenses
and other selected items $29.4$1.38$22.8$1.01
Adjustments (net of tax):
Asbestos-related expenses(7.7) (0.36)(8.2) (0.36)
Restructuring costs (0.5) (0.02)(0.8) (0.04)
Warranty claim settlement 1.6 0.07 --
Gain on sale of assets1.4 0.07 --
Proxy related expenses (0.6) (0.03) --
CEO transition costs (2.5) (0.12) --
Impact (8.3) (0.39)(9.0) (0.40)
Net income $21.1$0.99$13.8$0.61
Six Months Ended June 30,
2008 2007
$Per share$Per share
Income before asbestos-related expenses
and other selected items $52.4$2.45$43.8$1.97
Adjustments (net of tax):
Asbestos-related expenses (15.2) (0.71) (16.2) (0.73)
Restructuring costs (1.3) (0.06)(1.5) (0.07)
Warranty claim settlement 1.6 0.07 --
Gain on sale of assets1.4 0.07 --
Proxy related expenses (2.1) (0.10) --
CEO transition costs (2.5) (0.12) --
Impact (18.1) (0.85) (17.7) (0.80)
Net income $34.3$1.60$26.1$1.17
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 and earnings per share, including items
that may recur from time to time. This presentation enables readers to better
compare EnPro Industries, Inc. to other diversified industrial manufacturing
companies that do not incur significant asbestos-related expenses, the
sporadic impact of restructuring activities or discontinued operations.
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.
The amounts above, which may be considered non-GAAP financial measures,
are shown on an after-tax basis and have been calculated by applying a 37.5%
assumed effective tax rate to the pre-tax amount. The pre-tax amounts for the
asbestos-related expenses are separately presented in the accompanying
consolidated statements. The restructuring costs, warranty claim settlement
and gain on sale of assets are included as part of other operating expense
(income), the proxy related expenses are included in other (non-operating)
expense and the CEO transition costs are included in selling, general and
administrative expenses. Per share amounts were calculated by dividing by the
weighted-average shares of common stock outstanding during the periods.
SOURCE EnPro Industries, Inc.
