EnPro Industries Investor Presentation “Engineered Products for a Demanding and Safer World” Q3 2018 1 1
Forward-Looking Statements Statements in 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 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: 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; fluctuations in relevant foreign currency exchange rates; 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, 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, 2017, describe these and other risks and uncertainties in more detail. We do not undertake to update any forward-looking statement 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. We own a number of direct and indirect subsidiaries and, from time to time, we may refer collectively to EnPro and one or more of our subsidiaries as “we” or to the businesses, assets, debts or affairs of EnPro or a subsidiary as “ours.” These and similar references are for convenience only and should not be construed to change the fact that EnPro and each subsidiary is an independent entity with separate management, operations, obligations and affairs. This presentation also contains certain non-GAAP financial measures as defined by the Securities and Exchange Commission. A reconciliation of these measures to the most directly comparable GAAP equivalents is included as an appendix to this presentation. We will also be referencing certain pro forma unaudited condensed consolidated financials. Please refer to our earnings releases for important information regarding how pro forma and other financial information is derived, as well as related risks and uncertainties. 2 2
Who is EnPro? Leading provider of highly-engineered solutions for mission critical applications 3 3
Attractive portfolio of businesses Company Snapshot Trading Statistics (1) Company Overview • • Founded in 2002 (spin-off from Goodrich Corporation) NYSE Ticker: NPO • • Portfolio of niche businesses Market Cap: ~$1.5 billion • • Several brands over 100 years old Shares Outstanding: ~21.1 million • • Corporate HQ in Charlotte, NC Dividend: $0.96/share • • 6,000+ employees worldwide Dividend Yield: ~1.4% • LTM Q2 2018 Pro Forma (2) Sales: $1,480.0M • LTM Q2 2018 Pro Forma (2) EBITDA: $201.9M Sales Mix (3) Sales by Geography Sales by Market Sales by Channel Aerospace Other ROW HD/MD Aftermarket 4% 4% Truck Oil & Gas 12% 48% 8% Europe 26% Semiconductor 7% 21% 7% Automotive 9% 67% 15% Chemical & Material General Processing Industrial 10% 52% 11% North America OEM Navy & Marine Power Generation 4 4 (1) Trading metrics as of 8/2/18. (2) See appendix for pro forma financial reconciliations. (3) Based on pro forma sales.
EnPro’s three segments Sealing Products Engineered Products Power Systems Representative Markets: Representative Markets: Representative Markets: Aerospace Food & Pharma Semiconductor Automotive ConAg General Navy & Marine Processing Industrial Oil & Gas Heavy-Duty Metals & Mining Oil & Gas Chemical Natural Gas Power Generation Trucking Processing Transmission Segment LTM Q2 ’18 Pro Forma (1) : Segment LTM Q2 ’18 Pro Forma (1) : Segment LTM Q2 ’18 Pro Forma (1) : • • • Sales: $932M Sales: $322M Sales: $231M • • • Adjusted EBITDA Margin: 17% Adjusted EBITDA Margin: 17% Adjusted EBITDA Margin: 11% 5 5 (1) See appendix for pro forma financial reconciliations.
EnPro’s investment merits 1 Compelling business characteristics support market leading positions 2 Investments in innovation and new product development drive organic growth 3 Resources focused on markets with above average long-term growth EnPro Operating System drives margin expansion while embracing the nuances of 4 the niche markets we serve 5 Balanced capital allocation maximizes shareholder value 6 6
EnPro’s businesses share common characteristics Business Characteristics Benefits Leading brands (many 100+ years old) High switching costs Highly-engineered Competitive barriers Mission critical Ability to maintain & selectively raise prices Low-cost relative to applications served Premium pricing Highly diversified customer base Stable cash flows Balanced OEM and aftermarket presence Healthy margins Products specified / certified for applications Muted cyclicality EnPro’s characteristics produce an attractive financial profile 7 7
Investments in innovation and new product development drive organic growth Wide Portfolio of Innovation Opportunities in Highly Differentiated Products GYLON EPIX Hydrodynamic Seals Zip-Torq Axle Spindle Nuts Trident OP Common Rail Fuel Injection Evolution Gasket Proflo EOS Trifecta System Diverse innovation portfolio creates large growth opportunities, while speeding time to market and minimizing risk 8 8 Note: The above is a selection of representative examples from EnPro’s innovation portfolio.
Resources focused on markets with above average long-term growth Semiconductor Hygienic EnPro’s Key Growth Markets Aerospace Power Generation Investments in R&D, capital, and acquisitions will be disproportionately focused on markets with favorable characteristics and long-term trends 9 9
EnPro Operating System drives margin expansion while embracing the nuances of the niche markets we serve Organizational Construct Business Unit Corporate Management EnPro Strategy The EnPro Operating System Capital Allocation combines organization-wide capabilities that improve Talent Development efficiency, reduce cost, and Shared: Best practices facilitated by Corporate; Business Units ensure quality with Business Unit are accountable for results. Operational strategies that address the Excellence nuances of the niche markets we Commercial serve Excellence Innovation Business Unit Strategy 10 10
Balanced capital allocation 2017 Capital Allocation Summary Capital Allocation Strategy Key Objectives Share Repurchases Invest in new product development, new $12M applications, and new markets Long-Term R&D Growth Strategic Capex Acquisitions Pursue bolt-on and adjacency acquisitions to $17M $45M support growth strategies Fund disciplined growth and maintenance capital expenditures Shareholder Dividends $19M Return capital to shareholder base Sustaining & Maintenance Pro forma net leverage was 2.0x at the end of Q2 Capex $28M EnPro’s two pronged capital allocation approach has returned capital to shareholders anytime compelling investment opportunities were not available 11 11 Note: See appendix for pro forma net leverage calculation.
2018 Guidance Guidance Commentary • At the end of Q2, EnPro increased its expectation for full-year 2018 sales growth and decreased its expectation for full-year 2018 adjusted EBITDA • Expect full-year consolidated sales to be up between 8% and 9% over pro forma 2017 sales and full-year adjusted EBITDA to be between $214 and $220 million for the year • $10 million reduction to adjusted EBITDA is attributable to the stronger dollar and the second-quarter profitability challenges in heavy-duty trucking • New range reflects a slightly improved outlook for the balance of the year 2018 Guidance (1) $ in millions Low High Sales Growth 8.0% 9.0% Adjusted EBITDA $214M $220M Despite some challenges in Heavy Duty Trucking during the first-half of the year, we are confident that we will achieve strong year-over-year performance in the second-half of the year (1) Ranges include the impact from the previously announced acquisitions and excludes any impact of further M&A activity and acquisition-related costs, changes in foreign exchange rates from the end of the second quarter (June 30, 2018), and any litigation or environmental charges. 12 Note: 2018 pre-tax income will include a $12.8 million non-operating, non-cash charge resulting from the third quarter completion of an annuitization of a portion of the Company’s pension obligations.
Appendix 13 13
Sealing Products Snapshot Representative Products Sanitary Hoses Hydrodynamic Seals Bearing Isolators Metal Seals Wheel End Products Sales Mix (1) Sales by Geography Sales by Market Sales by Channel Aerospace Other ROW HD/MD Chemical & 5% 6% 12% Truck Material OEM 6% Europe Processing 13% Powergen 8% 40% 49% 51% 9% Oil & Gas 75% 11% Aftermarket 15% Semicon North General America Industrial 14 14 (1) Based on pro forma segment sales.
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