SECOND QUARTER 2020 EARNINGS REVIEW AUGUST 4, 2020
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 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: impacts from the COVID-19 pandemic and governmental responses to limit the further spread of COVID- 19, including impacts on the company’ s operations, and the operations and businesses of its customers and vendors, including whether the company’s operations and those of its custo mers and vendors will continue to be treated as “essential” operations under government orders restricting business activities or, even if so treat ed, whether site-specific health and safety concerns might otherwise require certain of the company’s operations to be halted for some period of time; uncerta inty with respect to the duration and severity of these impacts from the COVID-19 pandemic, including impacts on the general economy; other economic conditions in the markets served by EnPro’s businesses, some of which are cyclical and experience periodic downturns; prices and availability o f its raw materials; the impact of fluctuations in relevant foreign currency exchange rates; unanticipated delays or problems in introducing new products; announcements by competitors of new products, services or technological innovations; changes in pricing policies or the pricing policies of competitors; and the amount of any payments required to satisfy contingent liabilities related to discontinued operations of its predecessors, including liabilities for certain products, environmental matters, employee benefit obligations and other matters. EnPro’s filings with the Securities and Exchange Commi ssion, including its most recent Form 10-K and 10-Q, describe these and other risks and uncertainties in more detail. EnPro does not undertake to update any forward-looking statements made in the course of this presentation to reflect any change in management's expectations or any change in the as sumptions 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 non-GAAP measures to the most directly comparable GAAP equivalents is included as an appendix to this presentation. 2
Q2 2020 UPDATE Marvin Riley – President & CEO
Q2 2020 HIGHLIGHTS • Sales decreased 22.1% to $247.0M • Adjusted EBITDA margin* remained relatively stable, contracting ~30 bps to 15.2%, with adjusted EBITDA* of $37.5M • Announced final steps toward completion of reshaping the heavy-duty truck business to focus on products that are highly differentiated with market leading positions and compelling margins • Announced plans to exit GGB’s bushing block business, a non - core product line that does not fit with EnPro’s portfolio strategy • Strong balance sheet with net debt to adjusted EBITDA* of 0.4x and ample liquidity consisting of $424M cash and $387M Q2 2020 Financial Highlights available under revolver • Sales decreased 17.9% to $189.9M due to lower demand in heavy-duty truck, general industrial, aerospace, and oil & gas, offset by growth in food and pharma and semiconductor markets • Adjusted EBITDA* decreased 2.1% to $41.5M; adjusted EBITDA margin* expanded 360 bps to 21.9%; primarily driven by acquisitions, improvements in the heavy-duty truck business, and cost control measures Sealing Products Development • Sales decreased 32.9% to $58.6M due to weakness in the automotive, general industrial, oil & gas, and petrochemical markets • Adjusted EBITDA* decreased 68.8% to $4.9M; adjusted EBITDA margin* contracted 960 bps to 8.4%; driven by lower sales, partially offset by cost-reduction initiatives in response to market challenges • Moved oil and gas portion of Garlock Pipeline Technologies (GPT) business from Sealing Products to the Engineered Engineered Products Products segment, grouping our two oil and gas businesses, GPT and CPI, to be managed as one business unit Development 4 * Non-GAAP measure; refer to appendix for reconciliation to GAAP.
FOUR-PHASE RESPONSE TO NAVIGATE THE COVID-19 PANDEMIC Our cross-functional COVID-19 Response & Support Team, made up of our global executive leadership team, is working around the clock to manage our business continuity plans and coordinated response THE HEALTH AND SAFETY OF OUR EMPLOYEES, COMMUNITIES, CUSTOMERS, AND SUPPLIERS IS OUR NUMBER ONE PRIORITY PHASE 1 PHASE 2 PHASE 3 PHASE 4 Health and Safety Business Stability and Progression Process and Cost Improvement Post-pandemic Period • • • • Mobilized COVID-19 Response & Planning for several contingency Monitoring and improving: Adapting to the new normal − Support Team scenarios Processes • Refocusing on our core strategy − Procedures • Developed ‘global safe work • Planning for running business in • Digital transformation of workplace − New ways of working playbook’, a standardized approach adverse conditions, resetting and work routines • for COVID-19 pandemic business to new demand levels, Finding solutions to allow employees • Supply chain reconfiguration preparedness and response managing liquidity, and being to thrive in new environment responsive to customers • • Enacted preventative measures in Enhanced customer experience • line with recommendations from Taking decisive, informed actions to global and local authorities prevent the spread of COVID-19 • • Implemented flexible and remote Developed playbooks to respond to work options changing demand levels • • Enacted safe operating procedures, Focused on supply chain stability, including temperature screenings, progression, and risk mitigation additional PPE, physical plexiglass • Enacted cost reductions resulting in workspace barriers, and enhanced full year 2020 savings of ~$30M , visual management to support social estimate half will be sustainable distancing annual savings moving forward T aking the Necessary Actions to Protect our People and Organization 5
ENPRO’S STRATEGY Reshaping portfolio to include businesses focused on materials science with compelling margins, leading 1 technologies, and strong cash flow in markets with favorable secular trends 2 Increasing aftermarket exposure and driving greater recurring revenues Maintaining a balanced, disciplined approach to capital allocation while leveraging the EnPro Operating 3 System to increase margins and cash flow return on investment SUCCESSFUL EXECUTION OF PORTFOLIO SHAPING ACTIONS RESULTING IN A MORE DURABLE BUSINESS MODEL Acquisitions Divestitures and Exits The Aseptic Group LeanTeq Co., Ltd. TrailerTail Fairbanks Morse Bushing Block Brakes Products Air Springs Acquisition Acquisition Exit Divestiture Business Exit Exits (Several) Divestiture (Closed Q3 2019) (Closed Q3 2019) (Completed Q4 2019) (Closed Q1 2020) (Announced Q2 2020) (Announced/Completed (Announced Q3 2020) Q3 2019 – Q3 2020) 6
OVERVIEW OF FINANCIAL RESULTS Milt Childress – Executive Vice President & CFO
Q2 2020 FINANCIAL PERFORMANCE $ in m illions, except per share data Sales Gross Profit & Margin Adj. EBITDA* & Margin* Adj. Diluted EPS* $0.93 -22.1% -80bps $49.3 -23.9% -41.9% $317.2 $108.5 38 % 43 % $247.0 $37.5 33 % $82.5 % 41 28 % $0.54 % 39 23 % % 37 % 35 18 % % 33 13 % 34.2% 15.5% 15.2% 33.4% % 31 8% 29 % 3% 27 % 25 % 2% - Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 • • • • Grow th in semiconductor and food and Decrease driven by sales volume Decline w as primarily driven by Repurchased 117k shares, totaling $5.3M in Q1’20 pharma, including contributions from declines across our businesses and decreased demand in certain of our acquired businesses, w as more than $5M in inventory w rite-dow ns related to core markets, partially offset by: • $30M remaining in $50M share offset by w eakness in heavy-duty truck, heavy-duty truck exits, partially offset − LeanTeq and Aseptic Group repurchase plan; have suspended general industrial, automotive, by contributions from acquisitions and acquisitions program in response to COVID-19 aerospace, oil and gas, and company-w ide cost reduction programs − Company-w ide cost reductions petrochemical markets • Excluding impact of foreign currency and sales from acquired and divested businesses, organic sales for the quarter declined 23.6% 8 * Non-GAAP measure; refer to appendix for reconciliation to GAAP.
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