NPO - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the EnPro Industries’ 2017 Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. Vice may Strategy, begin. Senior Investor Development Relations, you President O’Neal, Corporate of and Chris

Chris O’Neal

you outlook is call in our any statements such reflect in not or XX, this circumstances the XXXX. statements any based. filings undertake forward-looking expectations third Form point involve We express Thank Milt actual Harbor uncertainties, our course risks moment. are CEO other uncertainties to quarter change or where the are facts. more a may in of management’s in earnings statements. in review President well change remind statements to the call. our our EnPro Vice Kelly. will our you Childress, and Industries’ These a in call number and belief, our risks results you, are before release Good to and SEC, slides press and our CFO, year with I on our and hear quarterly their with on as are our from conference included forward-looking including morning, historical intentions, out These detail, made described can do as begin we find that materially Safe the and Steve call. risks Senior begin or of for that at forward-looking MacAdam, being this differ in XX-K and ended webcast also the and December the referenced But welcome that that events will along assumptions performance those enproindustries.com not you call and update such expectation of cause accompany which statement I’ll statements discussion, during that and uncertainties are any may President and that to

and our during or presentation Sealing effective GST, information; conference finally, as today’s throughout of and deconsolidation collective subsidiaries; and until OldCo, EnPro ended Garlock release and urge reporting call OldCo three call, presented nine-month XX, periods financial non-GAAP their we information and we financial third, September disclosures are on Technologies, July materials illustrative read carefully. OldCo And second, LLC following; references pro the the additional them XXXX. comments reconsolidations first, of the for XXXX. reconsolidated during and the to earnings XX, were important of contain periods purposes or Our disclosures regarding forma as will These to understanding you to financial make XXXX GST and

the segment based in are consummated call last was of Steve. pro quarters, few pro I XX, GST over segment the on of throughout now, did to which we joint will confirmation turn Oldco the periods plan EBITDA presented providing interim reorganization, as the reconsolidated forma July XXXX. as forma we for Just adjusted And and on with sales information and the

Stephen Macadam

We achieved Sealing Thank Products pro highlighting you, experienced within despite today. of growth of the our joining Chris. effect two positive Products forma segments. Good in by adverse we growth to sales in facilities that hurricanes segments. like our morning the positive on quarter for and I us several third and year-over-year start each the of would large Engineered the thanks

the food due basis higher mix points basis. modestly restructuring softness XXXX and compared occurred the from approximately of activities impact sales compensation strong, sales. last Systems and Demand positive experienced to product XX.X% and period higher exchange in X% In Power by the metals X% increased mining, that to Pro of down up foreign Excluding several the aerospace, year quarter in versus on turbines. and Pro forma up Power in heavy-duty slightly in strong gas and to favorable Engineered our automotive, sales up year-over-year sales in X.X% we pro while were increased continued a XXXX an in of nuclear industrial EBITDA year-over-year differences XX.X% early and pharma, segments primarily and same during offset demand was adjusted primarily expense aftermarket EBITDA trucking all XXXX. market and in in were due year-over-year forma in positive semiconductor, Systems. oil last adjusted continued quarter incentive by up increased product core general general conditions The total markets. with gas be industrial the forma translation, across versus growth driven acquisitions to and margins Products third year. X.X% unfavorable divestitures, continued Sealing, third experience momentum XX and and in

the hand see expect the right we of through to conditions the you can year. these of column generally balance X, Slide on As continue

the reorganization investments Before recent turning over discuss the to to commercial ACRP capabilities. this third reconsolidation subsequent I want developments discuss of We the the effective some the our more call detail, results joint of July consummation XX in the of ACRP previously quarter including to and Milt and financial in from plan announced our completion positive of year.

reflected of have The starting reconsolidation included of GST August this explain will company's company asbestos burden the our our you closed the asbestos a in era the of we and know, related the year. from of for long a new EnPro. EnPro consolidated consummation reconsolidated financial beginning entities to on joint seven-year our detail results our purposes more and implications been chapter. moment. reporting free marks Milt As and financial costly permanently ACRP results the effort for of in accounting with plan the in in are have most

we evidence mentioned our As caused our costs legal invest products in settlements XXXX to cash that nearly allegations scientific on insurance capacity This limited GST's the growth. before $XXX and related paid to illness flow net of million asbestos-related despite since contrary. we drag in to

of conclusion our product the organic expansion to portfolio a innovation, we're accelerated future through in the adjacencies. of With and ACRP forward new looking growth investments

going we've we develop to those the company investments products forward. quarters investment next several programs several throughout and continued made last and we generation innovation our the technological Over to have enhance that exciting detailed support anticipate

that continue exhibit Additionally, support business will acquisitions strategy. to financial characteristics our we and and pursue

we new value to quarter significant last gain discussed drive capabilities reach Fab's to invest segments. Garlock's as distribution region. two highlighted our last certain and Webstore These and support GGB's customer company. to for The in were to growth in across continued we've segments our a both quarter, we are As initiatives network way expansion the Rubber the the commercial Asia of in continue to traction creating growth new

on offers Products which our segment. Sealing to that in This elaborate tremendous for Stemco like quarter an initiative I'd growth is potential

Stemco and to components markets and markets heavy-duty know, truck components. likely you and America. manufactures wheeling, brake medium-duty primarily most North high-quality supplies include suspension primary As in The the trailer and

During of waste in has formulations its its which brake the beginning hydraulic Shanghai, to air components. to is of Vehicle Commercial eliminating quarter enable brake Since third and the Stemco error we brake the performance opened second our enables disc, friction disc support or medium process. quality Stemco welcome manufacture we new exceed duty product And Georgia that publicly existing expanded in to the the pads. to Stemco specifications Stemco years last products proprietary This provide investment a include located two and and consistency manufactures portfolio our vehicle air On Components in drum, production yesterday, brake will line and Using a China. significant by the to like strategy. production for brake trucks. OE air will in CVC Stemco disc to acquisition had quarter disc call team state-of-the-art of and optimizing comprehensive acquisition this company This a medium portfolio commercial into EnPro. conference heavy-duty developments of announced expand premium a medium duty Stemco pads I'd to that friction provide designed of five announced markets. further Rome, announced offering product components facility of

Now I'll over turn to the Milt. call

Milton Childress

Thanks, Steve.

the financial Before Plan of a we pro and a Joint to had is financial a on I on reorganization comparative consolidated statements the on this would consummation of most believe impact meaningful, ACRP review to our the like basis, quarter. and forma review reconsolidation EnPro's take of moment results results which

XX, of liabilities months fair for September value of consolidated August XX, related periods income of as and the July quarter at entities date. for GST results the the the reconsolidated of statements balance reconsolidated the the of nine-month assets consolidated the sheet September and the and only. includes other at With entities EnPro's entities and on reconsolidation current EnPro's reconsolidation include

into fair and EnPro accounting would under specialist price the regarding negotiated negotiated transaction. the of accounted for be entity background further reconsolidation value with reconsolidated million July Absence evaluation third related as required of $XXX.X the being million excess non-cash a payables XX. purchase entities that of the a million date $XXX.X of support the a arm's-length recognized of of as plus is on of reconsolidated the reconsolidation purchase The EnPro's $XXX.X entities EnPro's million, was acquisition Based and July as GST as of fair for to was the in GAAP. determined known As of the entities the of cost investment elimination XX, of of reconsolidated quarter. basis the over value in gain $XXX.X was

in of in assets $XXX.X balance value other as reconsolidation and after the fair July assets. receivables $XX.X inventory, $XXX.X plant XX, of million property, million sheet goodwill accounting added consolidated intangible purchase rules These the acquisition. and the in to million at in million finalization $XXX.X million valuations at XX EnPro's $XX.X With and million accounting preliminary were $XXX.X permit equipment, months for liabilities are including of and an

any impacts it. other of forma amortizations not not will impact August However, the reconsolidation and of entities and to this we consolidated EBITDA purchase anticipate sales and $XX.X million The contributed for depreciation, do not pro increased year. did we revisions. defined adjusted have presently reconsolidated accounting September of as The sales

on calls, forma prepares GST I As discussed had OldCo the will discuss earnings release that the all earnings previous our of reconsolidated segment described our on throughout and been in results periods. basis pro

differences between is pro and stemming from in only Power operations forma most foreign those segment GST reminder, As Sealing Systems difference Engineered of of subsidiaries. segments consolidated Products a in and foreign with Products included information the small in

Our period pro forma $XXX same of from third up of million XXXX. sales the X.X% were quarter

gross Sealing, up of total margin to noted, impact and forma flat the X.X% effect exchange mostly The up offset was sales Systems. of X% foreign forma quarter mix. which third up sales was volume quarter Power additional XX.X% the were Engineered XXXX. pro in of up product X% for in and Steve and translations third profit in divestitures, XX.X% excluding As was acquisitions compared unfavorable Pro the by

temporary as million Products facilities were lost mentioned, Products incurred and quarter. in approximately the activity hurricane of due a by and We deferred negatively of Engineered previously impacted our result our As impacted to sales cost within by forma adversely over several $X.X plant prior earnings closings. forma third from incentive that Sealing were $X.X estimate higher the Total was or third the XXXX up adjusted due year. primarily quarter pro increased the million XXXX in third million quarter to segment Pro $XX.X income expense of prior versus slightly year. net compensation by of SG&A

with the up $XXX.X was such third pro As segments as reconciliation the to the acquired of non-cash in reserve the AT restructuring, quarter tax income environmental and non-cash shown million items. were X.X% the sales items tables, XXXX. for intangible February net million adjusted of effects with recognized Pro quarter, associated related a million third $XXX.X Products quarter in in forma forma the associated in $XX.X Dynamics, Sealing which reconsolidation charges gain over including XXXX, impairment the assets these changes,

gas general X.X% of industrial of translation. the quarter Excluding were year. and $XX.X up forma and adjusted from pharma, Plastik headwinds. experienced X.X% the continued acquisition, the of quarter. Franken impact and third Pro million, closed nuclear last EBITDA This turbines December in Qualiseal sales to in impact and the year semiconductor, increase trucking, food forma mining and which and acquisition over up due the excludes was sales third restructuring strength Pro the heavy-duty exchange aerospace, metals segment industrial, last foreign [indiscernible] of year-over-year was while expenses

acquisition divestitures of $X.X exchange contingent Fabrico acquisitions adjusted increased last the a and foreign X.X% adjustment price forma year and of including positive EBITDA the the year-over-year. pro purchase related in third translations impact quarter Excluding million to

in facilities forma in Texas in flat the segment approximately segment EBITDA SG&A were higher we forma in reflecting and to the excluding in Pro third hurricanes quarter and million unfavorable basis Florida is items million margin prior Several mix the same by pro estimate $XX.X costs the activity third segment adversely quarter profits the million. relatively that $XX.X impacted $X.X was year by the year. compared affected offset Sealing segment's Products hurricane which On adjusted were XX.X% to prior by the volume. these

Excluding the the in and price adjustment compared quarter to divestitures of the forma $XX.X reconsolidation. were impact to In the the million acquisition, the segment by million purchase Engineered of Fabrico costs quarter third XXXX. contingent restructuring costs SG&A XX.X% sales of related previously acquisitions million and mentioned $XX.X $XX.X pro Segment year. Products related to the third the third from prior quarter increased in charges

the the European million Excluding due Pro Systems continued segment year segment the and profit $XX.X the million primarily American $XX.X Power the We throughout were $XX.X in margins forma quarter third Engineered to hurricane exchange adversely positive $X.X X.X% by the from estimate SG&A in primarily quarter quarter gas to segment XXXX translations adjusted markets. the and up million that and in XXXX. and activities compared third segment foreign up that forma cost-reduction were early sales Products third aerospace volumes last prior year-over-year $XX.X increase and affected and Harvey the XX.X%. of in the in quarter quarter were XXXX. impact $XXX,XXX. efforts XX.X% general, the in impact pro year. increased adjusted automotive increased were sales third North approximately the forma XX.X% sales year. costs in In industrial, modest of from and pro was million to of restructuring compared segment in Pro due markets to improvements occurred forma versus EBITDA million of prior third strength oil This Pro forma EBITDA

Steve by the revenue. engines. was of engine of parts Morse decrease two due As percentage flat first increase shipment noted, the higher were to primarily offset sales aftermarket relatively and completion was Engine sales Power in in the the of revenue

contract. the engines reminder, a parts offset million driven increase quarter. million forma The positive the segment a lower partially the was adjusted are up warranty ago. $X.X a adjustments, favorable on LIFO estimates programs contract engine As for the costs, cost basis. aftermarket to for higher EDF The $XXX,XXX adjustment increased for Pro $X.X on due by partially margins and a net from negative EBITDA by inventory third EDF foreign lower year accounted Morse completed contract was offset and by production quarter in was adjustment a exchange revenue,

gross prior in in a loss to As on third be GAAP position of a that in the in are $X.X current the the forma EDF any reminder, recognized SG&A contract, were quarter since year. million require the we quarter. rules profit change $X.X the segment Pro in program million compared the costs

In in third satisfy balance and committed As asbestos to we company. remaining of are obligation obligation. asbestos in allocation to we obligation have million discussed the our strong July and trust due the million long-term trust conjunction with in payment to settlement a satisfy we fully reorganization capital of the U.S. XXXX. disciplined Plan balanced Canadian maintaining a sheet past, and as $XX.X XX, Joint additional value growth of drive portion satisfy million to of $XXX funded $XX we the asbestos a by the U.S. And quarter, the is the

approximately $X.XX equipment, $X.X totaling per the a a on program basis paid were third million $XX.X repurchase that in share of our three-year program for Directors million our $XX shares yesterday repurchased new common pro aggregate as $XX.X capital for open under million. We've XX,XXX and quarter software $X.X of and shares expired Board a the of market privately share part expenditures facilities repurchase for repurchased the million Additionally and forma authorized both that transactions. for shares in a we program In XXX,XXX $XX negotiated the dividend of We million. repurchase week. approximately last million announced total share

quarters debt previous the outlined leverage third our net of in consolidated XX at As quarter. Slide we on and the ratio end

we end ACRP million XX-month be does the over X.X adjusted times approximately Including ratio ratio XX-month table expect of calculation leverage our tax planned forma EBITDA. the see estimate approximately can leverage current not to our tax leverage you approximately realize include would time. trailing pro in refund EBITDA. $XXX the our The the As quarter was that of funding at trailing benefits times of X.X this

estimated note that year. this in we of to we will an benefit million, tax updated You benefits quarters part that used if but estimate tax and former of tax the the past $XXX reflect recent realized the analysis

to continuing our refining necessary. team work as we Our on tax estimates provide tax is will updates and

forma are earnings. pro during we As to the relative our quarters, three of provided we an valuations have update including last

As to ACRP approximately adjusted compared estimated the quarter tax pro times times EBITDA Slide of including our value enterprise a to third of the forma at results. of the XX-month by refund shown end benefit on XX was X.X multiple our trailing XX.X the related indicated consolidated

turn call Now to the I'll Steve. back

Stephen Macadam

Thanks Milt.

discussion the then and quarter close will for We XXXX conditions a current of our questions. outlook fourth the with take and market of

explained cycles always have of visibility most shipment we've limit businesses short of our demand. future naturally quarterly As relatively which

of Power With Systems a engine couple production backlogs exception days to order in handful range typical from of new of the a months.

remain that correlate the and such our modestly. market our demand gas not performance in through that the turbine as in we demand nuclear Notwithstanding optimistic performance maintain continue our we visibility, indicators of challenges products. industrial trucking gas of businesses most will year-over-year improved ongoing due the macro heavy-duty this component improved Accordingly, quarter. markets we and and fourth notwithstanding oil has other markets, in to necessarily strong limited Additionally, and of nature did to serve in our with remained markets

previous Qualiseal macro [ph] of order excludes pro revised and includes foreign in $XXX to of exchange we any of quarter, further associated million to impact and adjusted range the and Given M&A million. or patterns, for acquisitions OldCo with accounting adjustments sustained forma our million $XXX announced GST forecasts, environmental rates increasing from fourth a impact are range previously changes guidance of full-year the range to from of the markets, in XXXX customer litigation charges. a and EBITDA reconsolidation This third CBC the activity, our $XXX from any strength revised $XXX quarter million full-year number end current economic of

our questions, position open I company. your for the to the my lien want reiterate of Before to excitement I current

great we heavily reliable to We have our day and our manage invested more we're them growth and improvements become of facilities make able well-positioned our initiatives are get with every in to our of made in execution company post the company. We've to and continue and operating in in number on modernized our world. ACRP value progress a to precision drive which we growth

Now we'll questions. for your line open the

Operator

[Operator Zaffino the from comes Your of first Oppenheimer. line Instructions] Ian question from

Your line open. is

Ian Zaffino

Hi great, quarter. thank you very much, good

think I you You know, guess how front about on missed Where the you cash to are allocation now you the look and question be and that you process, that go ultimately are by Thanks. unencumbered now could thinking what want where the be after flow? does previously do there would the capital bankruptcy now? outlook and I opportunities like your leverage

Milton Childress

be through with trust year. planned the in lot, expect sheet we refund different that the you we but we of you've we strong balance Ian, coming year this have year. When company the consider funding position flow so will associated acknowledged have cash of we as move carryback cash our tax de-levering, now from a kind and in will much at are some the the balance look rightly a we'll as loss the be when the do Yes a next in from you of

for really opportunities, the to going company as with bolt-ons on growth accelerate a well opportunities open our our you it and innovation doing our moves initiatives, to we're shape be front. as noted us our in as we're up out what does both So as great and M&A edging adjacency

that net maintain debt plan to average time do we to over X.X EBITDA So X in to on times our range. our

and is if quickly. above it opportunity, So strong investment back right it can flowing in bring pretty we're that with okay that knowing spiking line cash we but up the have strategic

that's like to we we're feel thinking have So about opportunities it. We of how growth pursue. lots

Ian Zaffino

Okay.

Stephen Macadam

in to years we've me let at do our year And well. add build and that of been to the just growth Investor capacity thing Day this one is really Obviously Ian. last you number in to focused the what trying on the earlier organizational were

really sort we've you to pipeline. manage we in how much, the ideas, as a out in Chris invested divisions well together been invested The we number acquisition teams been starting productivity and had with guys is stuff team now our that a have to pursue invested in New vulnerable and traction how to and how have our place in there. years We've our leadership gotten in when how in them reports through as for explained place we company Milt stuck and we've innovation now much lot talent teams we improvements. that lot the how about really integrate created process them. get York a we've in We've in So to and at commercially think an project acquisitions what of and better it

execute facilities, lifting, work cetera. root execution of and fixing, we solve we on lot and cause gotten looking, unprofitable a really why hard last of et describe now our the period us years the the what behind on So the that to our we company point exiting of upgrading to lot focused are I’m outside much company energy that's is it's more time did organizational is growth. balance than would excited consolidating next the and over facilities, the so And now backward the number so better years availability a and together. several company the problems affectively coming and out how of capacity to solving We've at today because facilities, company gotten organizational are functions of capital sheet entering really more them I try of the about heavy a where processes is our like down it shutting the to when to because

position than been in different down So these mired we're a all issues really we obviously were working through also bankruptcy. the we've as and much in

Ian Zaffino

those initiatives. comments, of getting and seems your particular a you. know cost area better been and just I of of we higher, so to it for little get in dovetailing efficiency bit do you lot off Do your is previously, it we a very market big discuss Europe an if were that that's How cuts, to me maybe as lot is incremental about think Okay, that Thanks. may a margins where or Europe market a be could we that back recovers? is about the incrementals?

Milton Childress

I of do indication that we at is Well, that Engineered is in two the exposure Europe this really best progress Ian making think past, the over in higher Engineered Products we results year in than the other to we're Products our have segments. looking

the at in reflects restructuring, our the line so you some it obviously top look that's QX the Products And we in of year a seeing also Europe. then growth that some but some of And shows of serve. activity markets we're Engineered over it improved the last positive impact reflection in in

both as So, market significant that we're actions benefit taken in our somewhat. margins as the improving result well we've seeing some a as of our

or this close earlier to out year. will outlook targets that targets, about together a can year. to time our in three-year at exceeding our we the see margin margin level more Products as already position put at next next for we're Engineered after we the Going you QX where that be forward results we're But we're talk

significant that America year-over-year we've business that North in also North got pass had So, our segment. strong well. we the with seen some that European improvements America is we in Once again - we've some as a driven by because in but marketplace, CPI really performance had improvements in

Ian Zaffino

All quarter right, good and much really you great. very Thank again.

Milton Childress

Thanks.

Operator

Your KeyBanc next Hammond line from of question Capital. the comes Jeff of

line open. is Your

James Picariello

James Picariello.

XXX% there? expansion including what acquisition, just Is like space. medium-duty just gets Thanks. a from I the mean now, your the that size rationale? into you right it it sounds are cost can CVC the either or us the cover out So leading it and maybe help international you deeper China guidance opportunities mentality just

Stephen Macadam

a James, strategically. exclusively let shipped is and Steve, operation few an those with into It's fit a that question America play this your for started in ago part and the get of me, it's factory growth a air I'll Stemco. pads disc does which years North start is makes China it almost that brake today. second It's how up

over they these the is call past the brake in disc brakes will the foundation we The and brakes or had going as control U.S. it's over and for capacity foundation truck is, we've years same it an it air did the market business essential couple power grown do fair a supplier brake are market of the that OEMs are So brake medium-duty That in have direction to is outsourced pads both, foundation pad in European to business bit. so the quickly and be drum brakes products will in of the in overtake marketplace. brakes trucks. which time in really as we relative obviously there's a that them market disc well as as happen big to capacity. as and Europe as have as and the because heavy-duty not heavy-duty probably not OEM, in already But Europe the country brake markets the base the much don't have it's - our installed fleets

that is buying this is of essentially volume trying we a Greenfield so bought of continue that this us, displace startup has. that us a facility lot the third a shift we're one and that other with volume party, going but to And a although from them relationship to rather do already to volume a we'll plant, we'll some specialty pick we'll for do up for have skews they than that the

speed in So us more way building get to up the think is about bigger business quicker it a than the efficient factory. for really way way a to to a in and

Milton Childress

is small investment a relatively It James.

So this to as made add technology to Steve mentioned, offering. we've be our move able to the

an over good yield making we're time. investment think we will results So that

James Picariello

how America, key air competitors Okay you in and the North do that? disc within the specifically guys define space

Stephen Macadam

rapidly. all Well, first growing the of is market

I think for the foundation happening plenty be what’s is of for the probably because would growing growth in us But so company. there's would the brakes, room business. European is biggest be it's displacing market Bendix competitors to be that considerably

James Picariello

leverage Okay, sealing, just looks you like just the the it the of And if quarter good, impact scrub for it. in even appreciate here I it storm. like was on

the about does the gas, was strong, mix like that fourth there, and is getting sounds the weak thinking that factor it weaker there. right like sound doesn't in mix points early quarter remained XXXX? It So semiconductor any change leading dynamic nuclear

Milton Childress

we noted just the this a falls, about fall having and segment in haven't, talked we've we're and that past. year the in James, Sealing banner you've as in does semiconductor

legacy segment of our overall the knowhow this and the are changing new products than currently margins as lower semiconductor gradually products over the we in than products Some lower rest this But and new in that's add for of average time semiconductor for our margins our in segment. semiconductor products other and business average on carries content.

fairly does being business in nuclear significantly where industrial that were really in a high leverage the command picture what of hurting sales the things two in and though margins we're the seeing which So quarter significantly combined volume facility, for is it's from volumes give flat volume nicely. that very you're down down margin with being really turbine and combined those even that loss up gas to

James Picariello

dynamics for those remaining about think intact should quarter? next we And

Stephen Macadam

industrial by that is but for the the competitive we're as changing. that engine it in other going road I which market. bodes as end-use for a the platform, that’s trying X.X large there different because we're into into are market to industrial been. tough for offerings see way a that sure year That hurts recent that's by business to that think gas answers has Yes, said, well POWER-GEN much industrial OP to the well gas That’s don't so we turbines to are exposure struggling the components our technologies going sell reposition turbine our that get introduce. nuclear gas are where think has that in I segments. be turbines struggling to technology the driven next QX for shifts dynamic In James, business not

outlook shift to ebb gas flow and platform So of demand has I in that a turbines. and say more long would a industrial of large do with kind lots of for term

nuclear to different. so continue. business of something will trying nuclear we have address lines some you most our is that in company. So, high The business piece, know for and facility. that the The to It's product we're as that address is that margin

have applications large refueling just and it around facilities for and the dominant cycles many our nuclear share flows We and with of a world. ebbs of kind maintenance in simply

and but we're this Western predominant will in will that come the - I But as So be and us these again the a but in there's have to light forth. Communist in part be that detail, term by not it a Western studying we that well Bloc been so that as from year nuclear both Eastern have outlook long for reactors and - block. it may the the a designed EMEA right, built to share probably know just the some as nuclear. China just doesn’t has relatively Europe, the to first dominant and ones for think It design as next basically have for year this about companies you care specifically that the it reactors and we're Russia the strong currently past. so have Russian of offering U.S. doing were you some, year, in the work kind old We will and may into happened Russian for don't try companies back doing actually expand exciting continue was change of the

all countries is reactors, have technology them out, in and technology and a our that different seals and sealing their in turns use the there they like So countries ours much over they ex-Communist Ukraine don’t better.

XX, because next value those XX converted, actually doesn't number, And which much chance you have so our probably technology so good be progress. unlikely Ukraine conversion Russia first of stronger. get and essentially a but year what a and reactor reactors working exact I got reactors old to We're with applied can these we've to been to operators of of our our think a is to remember include there's pretty hopefully XX, to countries happen Poland and our seals we’ve reactors to that reactors and suited convert their seals don't is some lot be made in is our but other Czechoslovakia and the the these proposition these some other in and of converting so of we and if we've include that portion going

a quickly, being in and you some it It nuclear working reactors So to the challenges offset won’t should of kind of that if will happen is way of markets. kind Japanese term team out but the the and German aging decommissioned. kind of that that’s long mitigate

that have view what more still exciting longer That's wanted of illustration I but it's but last the So now of balanced for you we've industry that, it's know work than term, in kind few quarters our pretty teams I few doing of nuclear good are seen we're the a we detail another quarters. so. seeing, the a we'll think what see

James Picariello

I appreciate Thanks. it.

Operator

line Capital. question Liam next the comes Your Instructions] of [Operator FBR from Burke from

open. Your line is

Liam Burke

Thank Steve, you. morning Milt. morning Good good

Stephen Macadam

Liam. Hi,

Milton Childress

Liam. Hi,

Liam Burke

freed Steve, that Milt into more you this give cash XXXX? gets us also the Could for sense capital going flow as acquisitions, and up resources new R&D on innovation. are you year freeze up mentioned obviously where product investment just product a but

Stephen Macadam

very very, doing we're well. mean I Liam, Yes,

teams, in afford number Coltec for in we years very the one I've it I really it we group divisions - We or we the first a technical of reasons essentially innovation innovation just and our none a have our to really times guys had know was time because before the to explained and all had going embed and lot did couldn't five business for on. hadn’t with before across implementation you could about Goodrich that so this legacy did to team not certainly retrace work ago the of or very, if and lot install XX four of of years we that you activity there's in approach process a work started little an right,

the we started investment in just of could as we being began and as we OPX, then I��ve but we focused I about had think and to Obviously that I've applications as as pharma last to in the into I've and more learning the talked segments. in didn't want things ACRP We're afford funding [ph] that we've the and aerospace. applications go. doing more talked in the calls level our building crank about while sealing pharma. which of which - that to on and our food So at goes up that pipeline exciting industrial we process we the the in want hydro kind talked for both dynamic applications. biggest some ideas, and and process made start well so chemical in world new throwing number single seal different is into about food money pipeline, first work we a at Coatings our it, goes

new couple have been only very, But these products certainly to because to commercialization these the of more stronger appetite marketplace much at in muffle and company to spend our time the funded fund products ideas of over money selecting get spend period last how don't frankly to and the the gotten to introduce is new happen really years get have very it beginning going good which where we quite we've So to into year. it. anticipating robust teams our trying ideas of this gotten just of has new so recently we've ones and will we're been what very introduction and want technical don’t stronger, our this

OPX we're coming some with the sharing new up quietly trade going We've market very and industry one biggest big this for the we been engine first part and in industry. with the the to recently excited it we've the we really the In December the in introduce yet really OpX a been got of to but showcase rolled performance out be in POWER-GEN is where the to show. ready show splash And trying about haven't until fact because we're in customers test engine, characteristics good performance very made have and specs data. for waiting

emissions industry. think is and I So in and it room performs a which group to were Las customers introduced to little deal characteristics trying going actually second the I session fuel of curtain is excited make three And fuel the other we four and OPX how actually we performance of when a very a kind was Systems December I big to and and just they in and real in Power week engine been bit we're because the kind on had was wow performance the mentioned performance is a team alike, it's the about the in or opened that big is I'm performance, think and how the I the Vegas with this splash and of say. the the to that we've show in it efficiency

asked, going that's So happen it. to often I'm about here I'm excited and pretty so

Liam Burke

just is perform both step in how step perform give nice split Terrific well? the EBITDA could us did a have equally up a on and in Engineered they revenue the that up you give between and this EBITDA sense and or sense Products margin, front, CPI you GGB

Stephen Macadam

years wise a absolutely a been she spots. the difficult market business as is GGB. is GGB a bit, doing by is industrial It's couple to I comeback quarter ago performance. a as GGB, last doing commercial substantial they had oil and been they've place done she's had. has say the and the lot you business the are technologically of job of with little a in very a We're in that took Well as smaller CPI. in And the mean as every than weakened been European lot because would in our than know two-thirds had really years GGB few the the in is and on has automotive Europe, team is years. that better doing based. and and improvement a of president, division a better tank performance. they've the that outstanding over way bit gas because at a been GGB organically year so GGB true And solidified. years “turnaround performance the heck I couple the people even the better has has the that's ventures little - predominantly this dollar an few leadership - we've new she very, well. commercial joint for mend, And A GGB has - in just got team was its CPI and manufacturing a performing we've mostly and not a globally had volume relative a edge strong help. and doing now and not story” gotten the growing still while We've it's we've of got most right job was team market and is some has although out business for to

of - forth would So GGB is been doing over the kind had years. from CPI quite major activity the driven well. patch fighting say team and a doing I through by in also of restructuring came the really is we so well that has - had issues but we've past number very gas

or think other, sold now so total centers that So you or have their know XX as consolidated into is count we - service small world either our year. closed of activity of I of last Most in QX last we excited the around couple happened the facilities, that throughout year, but in Australia in year. locations finished this quarter that first the this activity of XX

come The So is market like better. that operating, much the situation. way back are - but plants and back sales stabilized, a in is focused. more great. It's - in has doing by team not has not place. performing much same The team much, the little That come it's it's is

business has nice that profitable that's growing leverage as pace as and and enough at at a forward. level we well should that see So say go stabilized I’d fast we there the now

Liam Burke

thank you, Steve. Great,

Stephen Macadam

Yep.

Operator

Bergner next of Justin Your line from of Gabelli Company. and question the comes

Your line is open.

Justin Bergner

Milt. Good morning morning Good Steve.

Stephen Macadam

Hey, Justin.

Milton Childress

Justin. Hey,

Justin Bergner

midpoint take up about obviously the First relates it's just guidance, revised question million. I like come guidance quarter. looks $X to the it and If nice

that flowing I like factors. products add How terms sort in back going Sealing Systems $XX of EDF If lumpy? Systems would Power be about increase temporary the excluding increase effects is to Power amount think you it about looks EBITDA hurricane the your should those and in that be of through that your and particularly it that's and guide million Products,

Milton Childress

get may Yes, Justin a we bit.

the I think going relatively effect the to of hurricanes flat. QX be is

how about understand so would increase it. were at in $X it's at looking I Effectively million for you're So, that be we guidance. the not it

So I'm that. with you on

Power that If than a QX at look significantly year-over-year year-over-year basis segments. basis, stronger in two on at you you other performance look we Systems do on if expect the a do we in

our think Systems. expect Power little related. year a quarter currency of expectations last fourth quarter And I Systems strong that in just the to a but - are aftermarket have weak quarter we we another bit So of currently, some relatively had of in in Power that was relatively

know you that As of drives a lot the profitability.

to fourth think you're the segment performance stronger that So, likely see, I going year-over-year two. to looking than with that think other just the in at we in impact to quarter we're terms of see

Justin Bergner

on Okay, I but $X and the appreciate relates the to to second I'll increase to shift specific to just hesitancy million, a reconsolidation. that get relative question which the that realize I

has XXX been XXX. was on the think mean to we On so the much from that tax benefit you total can mentioned already to asset the XXX? the be does how of I and re-upsized that top of it potential have realized, benefit that of tax downsized value

Milton Childress

$XX been so and benefit fact we the so or at million in this virtue part, small not we'll associated year less payments you taxes funding. in estimated to if a paid expense the is of with of by for expect trust paying we our XXXX. this Yes, the getting total it XXXX compared the just far that cash in of look not would what XXXX be in roughly Had have

we XXXX. have in our it roughly So let's that in seen balance have sheet million will roughly call $XX benefit will seen year-end

so in credits we and the decline benefit still we the income So, permanently, will with years those those which then don’t that's as no foreign taken is those caring taken tax for credits a now but prior back we've and the we'll big take will those part on of and We have we've in at earnings. team that lose our years this, lose against working the credits, to forward. on there's to loss look them prior carry carry we use have but back -

the may run present So, value a there's that that into. useful basis then life impact of and sometimes we on

return. a reason other and them out down another what our but the still as the we're These number characterize that's would is to why do coming modestly are just for than We're before directional, go finalize I we year. continuing lot factors with of work So this using work.

Justin Bergner

you in XX Okay, if benefit mentioned so of million million NPV been $XXX XXXX, million? year that how $XX number XX $XXX much has so top as September any full realized of on of the September as a benefit

Stephen Macadam

answer your Yes, you some but year-to-date, question at give if not so exactly, just you I'll look it to going direction. I'm

look you $XX so. million it cash taxes through nine paid $XX year-to-date at we're about million If year-over-year months, the so down it, call or bracket

Justin Bergner

that's XXXX? some Okay, if just on that helpful curious major finally of any anything there OPX.X, been early is update in directional share the know in you past on events of ahead guidance. an And there's and was then calls want update quarters I I to

Milton Childress

of shared a customers potential to I that's rolling we going Justin it be are. number what so out that industry very already it to got we've Just at seriously, the looking where we're

Justin Bergner

call? by hope stretch of I that if customer still you end just was a Okay, a have sort year do launch to recall

Milton Childress

Yep.

Justin Bergner

for thanks right, taking my All Okay. questions.

Stephen Macadam

Yes, thank Justin. you

Operator

comes line Sidoti Joe of from Mondillo And your question next the Company. of &

is open. line Your

Stephen Macadam

can’t you. Joe, we hear

Joe Mondillo

now? Can you hear me

Stephen Macadam

yes. Yes,

Joe Mondillo

the for is the at look going asked. it amortization ask that. few that get quarter? reconsolidation the to what just wanted going in GST already apologize to number to sorry to related about I the right, calls quarterly quarterly I All X.X but same third on expense got if ask time forward going conference been number of I think a the like I've of anything that’s I here,

Milton Childress

$X.X it's full year a On million. amount about

that's do on and it rough the $XXX so math would on of what assets be intangible accounting about out figure So fair the you can quarterly. And million, value average.

Joe Mondillo

at it's for going years there least? the to be next That X.X several

Stephen Macadam

in There's equipment. of step depreciation smaller because to number up years. is That smaller about Yes, there and was some in average increase a property, which XX a the is per about million correct plant a year. XX

Joe Mondillo

Okay, EDF to great. Also related contracts wanted the to currency the in of adjustment number the the quarter? get

Stephen Macadam

quarter. EDF for we that net we mentioned Yes, the in had adjustment $XXX,XXX

it - the you I Joe as If we're you you know think the look accounting position. a in FX we loss at because understand had of since

quarter an do P&L the to program, changes for we estimated changes complete the reflect that s we and entire any So every in happened our quarter. what not current in cost just in

accounting. So because in typical of our a position typical loss is percentage the or this not completion

we quarter had offsetting you benefit the so that $X that's to the additional in we the how an net $XXX,XXX quarter. in roughly recognized to loss part that recognized of and down $X.X cost FX about million of complete additional So million, we

Joe Mondillo

for to the Systems, guess or to questions, yes the referring company, difference you the about Power outlook talking the entire guidance Systems, biggest ago? and how regarding outlook actually where Systems the comparison related and is income one going the guess I just Power prior, Systems the fourth I operating quarter benefit at the you Power Okay whole regarding year-over-year the, year of to or adjusted were when be prior Power for

Stephen Macadam

EBITDA. The adjusted

Joe Mondillo

year so aftermarket? ago from difference Okay, much of because a the of on top even adjusted expecting bigger EBITDA a you're of that

Stephen Macadam

expectations factor that year-over-year the Power that was the one into I taking EBITDA some see improved in we'll adjusted that impact account Systems line. at or was

Joe Mondillo

XXXX increase number segments still quarter the the what adjusted going you adjusted a to to fourth is are of what quarter so going be XXXX to compared fourth two big it's Right, for of that taking because is relative the EBITDA be saying? for to aftermarkets, other

Stephen Macadam

last of in it impact of do have some fourth we is quarter the the have currency, don't aftermarket currency to see, Partially is of I I year? details

Joe Mondillo

fine. I that That’s we're just want talking about… sure make to

Stephen Macadam

aftermarket. a have to going and combination Yes, currency of

Joe Mondillo

if one was this that at if you with there's have than sale margin better all Okay, you're, and just of lack different sale it the you off, for an if that's looking of expectation the fine. see year. and OPX.X engines, in of beginning Power Systems we the XXXX, this And year were new of a get do on with wondering, XXXX the a there's much Power dynamics looking associated costs it at seems for then like aftermarket actually then and segment Systems, just we lot but

growth sort just Systems? So, of on for if have wondering Power and insight revenue any XXXX you for margins

Stephen Macadam

think accounting Well, benefit generally past marine we'll would of side we on this we've that would percentage of a more over Systems. so expect the Power see continued And had start about wins that nice we will the start that completion some talked and and progress over I quarters. more we recognizing government growth time. We've in and

of expect a maybe real or impact the making. a to of of the that of kind in a we're in evolve over time in forth, to see year going something investment some of benefit kind we're Now and this but that OPX.X. making so rollout partners so, launch investment we don't engine five-plus that's [indiscernible] That’s XXXX, the large

Joe Mondillo

in little revenue going at thinking you're there didn't even a you in aftermarket bit terms up new of plans…? can that really are then see far you any, terms so and be to of guys Okay, is mention engine there all aftermarket wins

Milton Childress

Steve described ebbs and It's little flows. bit a it like nuclear earlier

term bit be think a a the, long installed good notice, is aftermarket that's get we ebbs health the base parts time and of schedule there indicator a as of Obviously our little Now what the grows business. over flows we will bit. but advanced it of a

Stephen Macadam

the the you'll number cylinders that more in in requires of eight an we Guard so Navy, that cylinder a that's that Navy which measure because showed time in key over the installed use slide Investor on than Day forth. that the to base Coast showed cylinder Joe power XX remember service obviously and and the

installed our which we And have you installed that reflected and you the Old more vessels wins retirements some base had power to go slide power the time base of this if an subclass offsetting of the the we World total So over even at shows that that shows increase time. it it than see, it by cylinders War in II measure the back of can – cylinders.

we know the flow aftermarket the from over as that benefit of next should you decade. So

Joe Mondillo

it it just margins a see Right, sort look have are we maybe just fair so at revenue of put segment? a so modest at maybe to next year XXXX looking little say directionally simple idea, then pressured is and way is just increase maybe we that a in that an to to fair year-over-year,

Stephen Macadam

call if on we the until next thoughts Joe, rather that guidance could our because… Well, I'd save

Joe Mondillo

one just of a little as had terms to last about this the think in continues here corporate wondering I they corporate right. we question quarter, increasing All recover? should bit costs costs how up were just business

Stephen Macadam

that less well. the in be third third increase year this suspect of Joe last magnitudes and that and for Yes, of I did some third as QX year. than obviously quarter is delta compensation the that almost better in all year quarter accounts year-over-year and And the QX. of than the this between quarter costs. related of last we so the year-over-year much fourth are see differences having year have of we'll for We a to really year would in the quarter

Joe Mondillo

Okay, O’Neal I’ll There you. time. Mr. no over back call further Operator the are questions to okay this turn thanks. at

Chris O’Neal

Thank this you, us and joining morning. thank for Kelly you all

If questions, please a have everyone. additional XXX-XXX-XXXX. you day any give good a me at call Have

Operator

concludes today's This conference call.

may You now disconnect.

EnPro Industries (NPO) 31 Oct 172017 Q3 Earnings call transcript