ENPRO INDUSTRIES FIRST QUARTER 2020 EARNINGS REVIEW MAY 5, 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 customers and vendors will continue to be treated as “essential” operations under government orders restricting business activities or, even if so treated, whether site-specific health and safety concerns might otherwise require certain of the company’s operations to be halted for some period of time; uncertainty 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 of 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; the impact of the acquisition of LeanTeq on its existing customer relationships; 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 Commission, including its most recent Form 10-K, 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 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 non-GAAP measures to the most directly comparable GAAP equivalents is included as an appendix to this presentation. 2
Q1 2020 UPDATE Marvin Riley – President & Chief Executive Officer
Q1 2020 HIGHLIGHTS • Sales decreased ~7% to $282.7M • Adjusted EBITDA* increased ~19% to $40.6M; adjusted EBITDA margin* expanded ~320 bps to 14.4% • Closed divestiture of Fairbanks Morse on January 21, 2020 • Net debt to adjusted EBITDA at March 31, 2020 of 0.6x Q1 2020 • Withdrawing 2020 guidance due to macroeconomic uncertainty surrounding the COVID-19 pandemic Financial Highlights • Sales decreased ~4% to $216.1M due to decreased demand in the heavy-duty truck and petrochemical markets, offset by food and pharma, general industrial, and semiconductor markets • Adjusted EBITDA* increased ~23% to $41.3M; adjusted EBITDA margin* expanded 410 bps to 19.1%; primarily driven by acquisitions, improvements in the heavy-duty truck business, and cost control measures Sealing Products Development • Sales decreased ~15% to $67.9M due to weakness in the automotive, general industrial, and petrochemical markets • Adjusted EBITDA* decreased ~25% to $7.8M; adjusted EBITDA margin* contracted 160 bps to 11.5%; primarily driven by lower sales volume, partially offset by cost-reduction initiatives • Continue to optimize the cost structure in response to volume declines and are taking actions to right Engineered Products size workforce, improve plant overhead, and decrease SG&A spending 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 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 • Developed ‘global safe work − • Planning for running business in Procedures playbook’, a standardized approach adverse conditions, resetting • Digital transformation of workplace for COVID-19 pandemic − New ways of working business to new demand levels, and work routines preparedness and response managing liquidity, and being • Finding solutions to allow employees • Enacted preventative measures in responsive to customers to thrive in new environment • Supply chain reconfiguration line with recommendations from global and local authorities • Enhanced customer experience • Taking decisive, informed actions to • Implemented flexible and remote prevent the spread of COVID-19 work options • Enacted safe operating procedures, • Developed playbooks to respond to including temperature screenings, changing demand levels additional PPE, physical plexiglass workspace barriers, and enhanced • Supply chain focused on stability, visual management to support social progression, and risk mitigation distancing Taking the Necessary Actions to Protect our People and Organization 5
ENPRO’S STRATEGIC OUTLOOK Reshaping our portfolio towards businesses with compelling margins, leading technology, and high cash flow 1 return on investment in markets with favorable secular tailwinds 2 Increasing aftermarket exposure and recurring revenue opportunities 3 Maintaining a balanced approach to capital allocation Leverage the EnPro Operating System for continuous improvement to increase margins and cash flow return 4 on investment Successful Execution of Portfolio Shaping Actions Resulting in a More Durable Business Model Fairbanks Morse TrailerTail, Aeris, and Brake Shoe Business The Aseptic Group LeanTeq Co., Ltd. Divestiture AirBatRF Exits Divestiture Acquisition Acquisition (Closed Q1 2020) (Q1 2020/Q4 2019) (Closed Q3 2019) (Closed Q3 2019) (Closed Q3 2019) 6
OVERVIEW OF FINANCIAL RESULTS Milt Childress – Executive Vice President & CFO
Q1 2020 FINANCIAL PERFORMANCE $ in millions, except per share data Sales Gross Profit & Margin Adj. EBITDA* & Margin Adj. Diluted EPS* 38% 38% 37% 33% $40.6 -6.7% +90bps +19.4% +37.8% $99.5 $303.0 $282.7 36% 28% $0.62 $95.3 $34.0 35% 23% $0.45 34% 18% 33.7% 33% 13% 14.4% 32.8% 11.2% 32% 8% 31% 3% 30% -2% Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 • Growth in semiconductor and food • Benefit from LeanTeq and The • Increase driven by: • Improved profitability in Sealing and pharma, including contributions Aseptic Group acquisitions Products segment − LeanTeq and Aseptic Group from acquired businesses, were more • Improvements in the heavy-duty truck acquisitions than offset by weakness in the heavy- business duty truck, general industrial, − Improved results in heavy-duty automotive, and petrochemical truck resulting from cost markets reductions • Excluding impact of foreign exchange − Exit from brake shoe business translation and sales from acquired and divested businesses, organic sales declined 7.1% 8 * Non-GAAP measure; refer to appendix for reconciliation to GAAP
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