NPO - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to the EnPro Industries First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Chris O’Neal, Senior Vice President of Corporate Development and Investor Relations. sir. ahead, go Please

Chris O’Neal

call, days of handful of that regard cycles a typical have With couple presentation filings more the short these to of relatively the out on order from morning and Systems discussion, number that Form not a in financial reconciling will our We in measures do I recent first the are to future detail call a let included But remind SEC order at risks begin uncertainties involve we Marvin forward-looking of on a me range can of begin visibility measures. and considered measures in being shipment Good comparable number our statements of point and in to Steve Also are review most are the earnings facts and materials. update statements these quarter we our most of share making their that Childress, moment. our appendix including Macadam, limited our that is Industries’ our reference demand the GAAP not conference our webcast CEO; we before this be find Tables you outlook where a Power XX-K. forward-looking we call. you call our of enproindustries.com will described that and are to and with statements. Kevin. accompany These of performance this to to backlogs EnPro with exception nature. guidance we historical that call. COO; welcome Riley, undertake quarterly to the non-GAAP also months. the the slides any businesses Milt call, Thanks, that will our CFO in have during

our of many the nature correlations indicators. of macro end products, market obscures Additionally, often component with

and acquisitions future rate, first impacts tensions to incremental cost to the litigation restructuring subsequent environmental number quarter, first of of and changes and and subsequent the costs, of in exchange quarter charges. demand from guidance of shares impacts the excludes end of market foreign changes acquisition-related the Our trade outstanding, and impact tariffs costs, end the and the

Now, over to I’ll call turn the Steve.

Steve Macadam

services. Good and thanks in joining and for year had due earnings demand engines the Thank you, Chris. both for military quarter and marine segment today. the of a sales first compared We significantly and Power strong morning us up strong Systems our quarter very to parts to aftermarket prior

year-over-year were and These year-over-year in food general pharma We due the industrial automotive exit by year’s turbine differences and and businesses Products, products. also mix. saw declines positive and sealing Asia. product offset the anticipated petrochem ship timing-related unexpected in and market, to Europe in business softer from in and industrial in a semiconductor weakness strengthened midyear results last more Sealing, in And by related – softness gas to patterns than Engineered shipment

adjusted EBITDA primarily to plan EDF in contract foreign due sealing we’re a conditions than related provision, market and this stronger adjusting, the Products relatively on our on full-year the both We the general and was Engineered quarter quarter only quarter Products the automotive loss practice. exchange and the approximately markets in expectations industrial foreign of Against weakness earnings result of outlook or in in $XXX the normal both, an a earnings XX% $X the exchange versus the anticipate segment. million. guidance the This currency Systems current differences and about the As remainder diluted which due Based of $X.XX quarter adjusted impact products million Asian in impact end Of our excluding EBITDA $X the of anticipated been prior down XXXX about million the the of the rates first to last Power European has first translates the EDF $X.XX in our the softer-than-expected the Power our million. at shortfall $XXX periods. Systems. $X was of million impact guidance greater the anticipated year, for and was to impact X% is on for for currently EDF to in EBITDA year. revised our per And down adjusted first contract Engineered to strong adjusted share for and dollar to second of quarter,

some to over call the on details in some provide highlights. taking additional we’re on turn our Marvin, will and comments Engineered who I’ll additional Now, countermeasures guidance. More Products

Marvin Riley

everyone. good noting XXXX like several and our the confidence reasons by start for morning Steve Thanks, I’d guidance. full-year to in

year, year-over-year in First, experience reasons. unanticipated a results typical in and our quarterly anticipated for we fluctuations both

guidance recall and you XXXX, prior As year. achieved of while our forth beginning last the this expecting are quarter were the full-year first results we of in may the that still set stronger below we some of than anticipated soft first quarter was despite the a half year, at we year, year, a second

address Second, we our began experiencing began and to European the Asian market general industrial this action quarter taking year, and to in adjust first cost structure specific Engineered Products in weakness markets. in and the automotive to we

inventory action hiring have businesses. conditions, a workers. to control some and response Asian we and parts in a Systems in automotive freeze and reduction to service in market softer upside plan, expected temporary Power plan. the industrial aftermarket to We’ve that and provide these European Finally, original general and strong we our cost reorganization than have a In backlog also implemented reduce a launched measures taken

and We’re the improvement early year. anticipate remainder continued the already of benefits throughout these the seeing of actions

level Although the majority throughout acceptable we and Company. performance the communicated total of quarter to our do this the Company shortfall of in has anticipated, this year-over-year not consider was be message

that of every have a We high excellence standard during be achieved environment. must market

lead the we’ve shareholder drive pleased focused quarter, first value. a been the acutely place continuous capability system has part and support system our Day, the to improving forward margins created person increasing on step our to operating organization which leveraging right improvement of a our to large operating Investor I’m that EnPro’s flow. cash EnPro our and during to as calls of prior took the priority During by in within we announce center, putting for been

exceptional We team have to that lead identified operational and drive the practices an organization. leader improvements the best across will

on during our to like Investor discussed increased Additionally, growth we I’d as efforts also to in our Day March. comment achieve

within grow aerospace, at we’re focusing committed to our and a portfolio. of semiconductor and opportunities quarter market. actively and aerospace markets. continue to and in We’re to that remain variety growth In food looking pharma, our out opportunities to expand this we pharma, Food grow seeking

already are progress semiconductor, with is in our effort. the this strategy Finally further aftermarket, and expand into to seeing we

will to Milt turn call our I the to financial discuss the Now results over for quarter.

Milt Childress

of after during food Products the compared Marvin in quarter and quarter and engines sales our of the declines anticipated performance The by and in in currency Marvin. Adjusted and sales, growth Asian the with we in strong as softer the military Steve businesses, primarily and drop quarter, discussed first prior period weakness and strong was XXXX about semiconductor from and million the power translation experienced Sealing Products of first which services, in mid-year of conditions XX.X% in The $XX.X in Thanks excluding We despite in EBITDA sales market, by and Asian prior the Products Power & demand offset decline have divestitures pharma about revenues and offset which the Products. impact driven gas demand industrial marine European largely as part parts quarter, European mixed same Engineered petrochem being generation turbine in in flat Products, Engineered the and were defined decline first and Sealing year, a semiconductor organic $X.X over market. last Engineered Power business, function general Systems, was In million down the relatively period, automotive both acquisitions, softer in in the exit industrial year Systems. contributed the the in strong with total, year. in was to markets.

As And anticipated Europe was weakness softer the due product an and and mix. industrial the related year-over-year the Engineered to Sealing market Products year-over-year Steve automotive declines to in Asia. in semiconductor in decline differences patterns and by driven expected timing related noted, and and by general softness businesses shipment

foreign to decline. quarter points down quarter three impact drivers compared about of margin Gross margin XX.X% down contract, percentage Excluding on of the prior in the quarter, XX.X% year-over-year exchange the first adjusted for was year. X.X the primary period. There were the first the last EBITDA the of was the gross to compared first EDF profit year in

last is cost to which year goods allocation improved moving of First, sold. the were margins in by second of of IT implemented from which in affected quarter resulted certain costs, cost SG&A an and

higher Second, to our by and to our transition levels margins indirect Products affected were spend Products. Sealing friction Engineered due lower in outsource production in

Third, our the industrial quarter the the exit result market including pharma gas the X.X% sealing prior year’s year turbine translation, were period. foreign of were as timing softness a related despite down in to Products product semiconductor last affected In our Sealing mix. products sales margins overall by from being of in segment, food core strong and excluding down by and compared in encouraged markets, the petrochemical, to exchange many impact performance the sales were of business and we

from segment high acquisition adjusted related EBITDA decreased we lines SG&A semiconductor as excluding by in some in timing which to of exchange driven the The foreign by over million mix, expenses compared period, of of and foreign Asian last China. automotive unfavorable or was margin X.X% of partially by in related impact impact we product improved anticipate and Asia Products challenges and $X.X offset European primarily to decline previously primarily in industrial resulting prior decrease softness translation. the certain uncertainties driven due year. the segment excludes Excluding exchange down in costs. aforementioned were discussed. X.X% into restructuring general year, the translation, the sales weakness tariff markets was year-over-year The Coming Sales the in lower year Engineered impact

Asia So then environments ended we case. being in anticipate up constructive a both Europe more the and

in absorption to and sales XX% in quarter, marine exchange impact noted volumes over In the first adjusted and prior partially due that strong Systems, prior translation, and aftermarket parts as production first ability sales. The the the offset segment lower and primarily Marvin under services gen Power year-over-year decreased due power was to the short the increase XX.X% decreased strong of to were related period. our engine year to quarter spend EBITDA over lower reduce Excluding revenues, outpaced foreign year term. sales in military engine period, by up sales

reduced $X.X mix services the SG&A costs. driven by parts period, of year the EBITDA adjusted favorable EDF program and was segment of by quarter and lesser million to program. a the a loss included prior aftermarket XX% for $X over quarter Results First the million degree first up of for

compared on exchange $XXX,XXX the quarterly XXXX. loss impact in EDF million Foreign the $X.X for contract to of positive a the of first accounted quarter of program

of in quarter year. on up $X.X periods, we EBITDA the shipped exchange compared XXXX. expect program of first year. to production contract engines $X.X the end Excluding quarter the the last had million or quarter quarter, of engines related the remaining the by of to impact the XX in the were was ship seven Through end million in production in first segment to and of foreign adjusted $X.X million Systems Sales over EDF the both last Power EDF XXX%

of had two ship to $XX in XX% investment is a the the billings, end net quarter mostly of end Production XX% at had working program the XX the million of XXXX. approximately deliveries, the value. compared total $XX expect the at the engines capital complete timing million triggered of of contract of and approximately we of was engines spare build end to Due in XXXX. we by which quarter EDF at to approximately we Additionally, the the engine

networking remaining expect to continue of to we complete production the much convert deliver to cash as this capital We engines. and in XXXX,

XX% level our a quarter much and half adjusted very Power on than to This for and distribution current was quarterly first compared evenly in adjusted Systems of half the Power the XX% the weighted XXXX be will of half Adjusted year. engine EBITDA the XX% approximately backlog. based in half. to XX% EBITDA the down Systems per to in second share to the the year throughout first diluted We more expect was first with it second be the the year to XX% earnings aftermarket in estimate of last and compares of $X.XX XXXX. quarter for XX% weighted to XX.X% We that different

quarter $X.X segment interest offset diluted in diluted decrease adjusted in decrease $X.X decrease shares million million quarter expense first and outstanding same incentive repurchases, outstanding. by $XX.X reduction shares driven driven Average equity First was primarily million by were a partially a net the decrease period the year the share of to in $XX.X by for million ago. XXXX, of in was awards. The compared a profit, net

As are acquisition attached litigation, adjusted such refer summarizes a select in Slide quarter. per and normalized to release. restructuring reminder, our costs, expenses XX and when charges of as earnings the impairment environmental we the rates, uses as all diluted legacy we items in earnings for capital charges major adjusting share, tax tables shown to our reserve

dividend dividend announced compared share we invested $XX.X $X.X we in the million quarter, to ago. totaling quarter a $X.XX first the During paid million. million with and equipment per in facilities, previously software, year Consistent first $XX.X increase, our our

During capital by seasonal We the from the XX as XXXX. uncertain. of of approximately although In the was we the total Board refund debt ACRP carryback payment for year, March million receiving the first million final XXXX, a last the received primarily connection slightly first of refund in our At in authorized of remains subsequent net result up we anticipate XXXX of return, with end payment million XX,XXX final quarter, repurchased under the loss filing program of quarter value of the tax also of federal $XX.X a of $XX.X loss our and XX, last XX-year timing a legacy working $X.X $XX the shares by million October. needs. related December the

Our cash million totaled borrowings million. balance $XXX our was $XXX and

adjusted as We trailing our of at was questions. quarter for leverage debt can line quarter, XX-month are X.Xx open approximately on leverage the the net we’ll Slide now XX, at see our And the ratio XX-month trailing you first end ratio the of EBITDA. the end

Operator

you. Thank

& question-and-answer We from Ian now Zaffino will conducting Oppenheimer be is Instructions] coming Our first from [Operator session. question today Company.

Unidentified Analyst

Thanks This is Ian. for questions. Mark taking our for on

you Thanks. cost areas help this specifically implementing you can the control guys details the and expect measures just during guys how much are year? So, capture guys some and to margins provide regarding can additional you cuts extent of cost the

Marvin Riley

also are difficult really is a that a is European our Mark. are during get a headcount the specifically you, Engineered through most headcount started Thank in I mean there after bit Yes, permanent to through saw issues. we but also temporary headcount executing because articulated we reduction the activity that we little within well. – script, permanent more of as out, focused we March, where cost April so as we’ve gone We’ve that’s and ongoing because Products, program fairly in And February, May. operations substantial

can measures our in So every we you have through we the you imagine. category – will February-March as time pretty everything can but are going can hitting strong cost indirect think of The May. focus plan, was capital terms indirect most in can, frame, with of, cost continue reduction we a the of labor control it we direct you just of working about everything on spend, labor, think and are

Steve Macadam

Go ahead Mark.

Unidentified Analyst

margin guess on I’m can sorry, into capture I just you any question XXXX? I how much could insight in the

Milt Childress

ballpark intent margins we – on is on last we’re year. with the work track. the guess were but got is high very a but we Marvin cutting, where we’ve actions back to track of to – slightly in of that goal And some do, that in to Well, the toward obviously maybe other cost at below, or the level and comparable our working get described

So that’s towards. what where we’re working

Steve Macadam

was respect directly we just to thing seen out automotive we’ve important in not the Mark, that not of the it’s to first industrial actually but know that pushing canceling the Products. business let think was weakness and question, phenomenon one orders, quarter in of I related The me add to Engineered with orders. And the saw the the

right year. coming out, to who book stuff of knows get that QX. pushed order lot April, but things the pushed rest again, have the the the as now book of now, few of quite to a a So basically bad year, weeks actually month strong got into of through – the not actually and stabilized was of and they continue But for will order through seemed is if the out

we’re we’re So, based – a we but anticipating what just and – weeks. anticipating on still recovery, seen we’ve is few going this in not certainly last are on this has again, been

little a see to beginning We’re of stabilization.

to an our have increasing that in on is and won’t get books have we orders permanent month. always can we we volume mid-February but cost we’ve difficult reductions for issue as ongoing – Marvin control happened have started those this and continuing that are on everything additional the said and employees sometimes But, reductions we the because in with will markets. on SG&A out, they visibility hopefully temp script, what us as we and pushed his said So, that’s positioned in for labor really the

we So, stand. that’s where

Unidentified Analyst

going insight actually O much I Steve, you the how for be specifically sealing and you ay, question appreciated? on the [indiscernible] look over details like any Products, for within will into thanks products for guess XXXX balance next of Thanks. went book. Engineered – does is order book semiconductor, the my great. into order That

Steve Macadam

Yes.

the broadly, for feel first still So, segment fine. things

globally it until the trough we the products nuclear last is We and which years XXXX industry to have true But, extend three longer-term is view was fueling nuclear, even these this year, on trough than and really that, because That us. portion XXX% XXXX last two cycles, weak that due these and said maintenance decent have petrochem in the have for created In cycle visibility this still and to the fact not basically be XXXX. coming XXXX weak in call like the we year calls, happen. Sealing or to tried with recovery of next refueling different it’s will year it’s those nuclear in – over four that just the as to cycles refining.

that, gasketing still year-over-year and decent orders. of had be volume order is anticipate, mix in business on one we’ve the really one still and about the going that’s in – it will and pattern and of terms sold in don’t a with of The products we end is the returned year basically, of talked for of we Garlock to So our Stemco Technetics because to differences of be that, high us QX a I our place. we product, broader the was levels. in that one good bunch sold bit last a lot of that’s But going forward. new normal product continue launch to

But their XXXX. But pretty out. a firm, months early in how XX of We a telling fourth terms fair they end this against way So we just about Semiconductors or do of confident it. again, we of of to I major don’t quarter some good for give – predominant kind they for really what see kind but and rough and of Mark, have is – that’s our They feel us what fairly again percentage because us started – one, they’re year actually mix know that is it. is good that are it’s to a us rolling in to give anticipate of their one into tough lift view changes quarterly in the what they forecast, our hard to is planning whether are about certainly us and customer, view who’s is have a forward anticipating look a that. one bit have total the a the frequently. and at

further to recovery. we a don’t So, question a really it when see start to you of it’s level but deteriorating want it’s any see Milt something? again we’ll add some where and of market

Milt Childress

sequentially to see flattened in quarter our Well, give it QX in if But just deterioration idea. at we I’ll kind down just look of down [indiscernible] some We were we sequentially. in XX% – add didn’t the semiconductor first – did you business. you year-over-year roughly

about. So what support Steve color just talking a little was additional to

Unidentified Analyst

you great. much guys Okay, all very the for Thank color.

Operator

you. Thank

Joe from Your next Mondillo question is Sidoti Company. & from coming

now Your line live. is

Steve Macadam

Joe. Hi

Milt Childress

Joe. Hi

Joe Mondillo

Just, April, on early bit Investor Back zero or tackle the in you’re year trajectory in Engineered have Day the seeing did to so I worse you more just that or went this off at that is about basis wanted had of things so probably you guess I worse were little on. a March, in sort but down activity Products. little than think April maybe a stable, get points you quarter of more seems in things get sort it like worse started Did talked point incrementally to and things margins or XX that you expecting in and said time. as I March

Marvin Riley

way were best – So weren’t as right. the the is, that orders the to engineered think described, moved about situation Steve canceled, out, order in they

in pushing So, numbers the quarter. the look as good, quite you look numbers, of out the were at but aggregate still they

the we And – taking things it and so, it they to place emissions under quarter so in Industrial we real to we go. know lot were we Automotive actually continue it started from a related, of is is to were, are the get and concentrated started activities that with exactly cost in lot of never sort the aggressively as perspective, we industrial to out A of completely really determined until do see difference. that had moved Europe, and impression that European cost far Where macro the materially has weakness would out would really the really automotive. of our a moved European how things adjust didn’t not the would so that’s

Steve Macadam

to let me just – me add add Marvin let said, Joe, that, just weakness was. to that where and what that’s the Yes,

it Engineered, of refining portion business and had we to oil Now, gas, but all and expected. actually there, obviously, and it’s globally was petrochem our a smaller this

around we expectations turn because started French been while and in actually weak well. right. is the QX facilities, this, we’ve part one a quite the thing, year to of disappoint our level we in move right didn’t and seasonal our see would of First was the to of actually that and where compete and weakness. that completed of that’s of was in working move always that they CPI relocated of engineered QX the that market any that on And customers then location physically and executed happen all, we was addition It in

CPI, look QX you in globally book-to-bill at was X.X. the if However,

and the So order and behave in pretty petrochem industrial of refining that because the those automotive book and the actually and is healthy backlog not portion, market, orders engineered are gas like deliveries that does shorter-term for they automotive general and and bigger in production don’t further within OEs next industrial get typically factories few moved because the general for they are are their whereas the weeks, forecasting ahead. move

and that’s shifting to subject described, so And as we’ve moving

Milt Childress

to we products. reference I’ll just Investor for Day want margins I’ll both Engineered and add, the sales said and in what

are low puts thinking growth we’d in our more that think to side Products. petrochemical happening the are flip said what of flattish, cuts flat have engineered lot heavy goal with the industrial toward the in flat and we and it’s drive basis general weakness Steve quarter just in to as cost So, on business some the of due products. decline lower comparable We hold Engineered margins Europe we side, for were that’s to And I fact and probably had reductions previously points for cost takes first restructuring that single-digit mentioned but last given where got the bearings in we is just then the the the and auto described. Steve, to describing still the in We And and segment. and sales XX had year, softness we’ve Asia. I to

Joe Mondillo

Okay.

improve along. things the that things the timing So maybe and it definitely like sounds goes the restructuring as year order will with

Milt Childress

That’s certainly our view.

Joe Mondillo

wanted on that the progressed update where sourcing, that’s sealing and in get where friction great. Okay, an terms how to at – the segment? I at we’re of

Marvin Riley

reasonably progress supply we’ve make with supply. securing team chain good there our continued Yes, to

about first and is meeting we So, relates to it and as think it quality. as our deliveries customer foremost, timing

there. like perspective, to where cost this are our now, it a From supply we are job chain good our from exactly perspective, So not cost from continuing see that continuing doing we’re we’re work the right folks decent supply. team. working macro signs to a It’s down the to but a in issue we’d take on

as things. continue to of competitively bid So of continue source throughout as all do we the our we’ll those we course pricing the better and year, think, get and we better types and

Joe Mondillo

in lastly, wondering given you trucking with things some with going may fully a And then EnPro your you operating that what could deal sort was on on and Day. cyclicality of management is touch with that’s and of Marvin, talked have is I time centralized or are sort the you how helped the that how the any And wanted of Investor at just if the basis? market? other update future. sort now know in in issues the this outlook the issues what Stemco that’s on about Engineered I in point right also place the Okay. just products in hoping, system, heavy-duty that maybe you I to of see

Marvin Riley

don’t with capabilities mind. start I’ll about come you Sure, I’ll and Milt the let back if the and talk then outlook

Milt Childress

were you truck heavy-duty outlook And specifically for business, about the Joe? the talking

Joe Mondillo

Yes, Stemco.

Milt Childress

I the the aftermarket expect it relatively mean we is Yes. steady. way is, I describe we think stable would and

of We nearly couple because, are we declines period the some aftermarket, our are of over drive OE market had to profitability years. you expecting we a see does expecting build market, much strong OEM the in which time but last over as as such the know, as not

last in standpoint, Obviously we that see that’s the we’ve year. the how our from had from we market that year-over-year actions hits of standpoint, very some improvement performance our specific So we’re in earnings isolated expecting it. because taken the earnings of

but year. performance this don’t will that So I think we that to level of are business the earnings – throughout expecting balance improvement you’ll we see we see in detail, provide of that,

Marvin Riley

I EnPro say am where a capability I off time. little spending emotion up how system, that, It’s every feel would EnPro bit Just to I I day where to most and gauge wake of the my where see and center charts. talking it’s sort level excitement it’s a about I as it we’re opportunity, mean in of lot relates of that operating using about were we the how excited the is frankly. about the I quite if

If specifically. you lean we’re at the manufacturing, center, looking think about excellence, looking commercial at manufacturing we’re capability

driving chain. We’re looking at in supply improvements

at platform Company. for really, rapid improvement creating response the a throughout looking and We’re

look never we if started in what’s deploy happened we that at see example, have things able didn’t in up to resources, So for you the like, to been shape once direction immediately Engineered, we right. before

foremost, folks an start and situation to a response we and initiative So situation [indiscernible] and improvements saw. of improvement to of first the sort we in to that are assessment of the above or create to of the make events drive real-time to deploy more able all sort make

So, that ecstatic where about mention capability sit, not I’m the the what’s fact in from to staffed. it’s center, happening I basically appropriately

Now, company we the proven value, with of XX that’s to contributed exceptionally it’s years creating been and for for focused right. have amazing on leader over exceptional Company the that’s be being

we’re be excited about it’s doing. from I what So to sit, where very reason a

Joe Mondillo

Okay, taking the great. thanks my for for year. and the rest of questions luck Well, good

Steve Macadam

Thanks Joe.

Operator

G. from Bergner Your Research. Justin next question from is coming

Your now line is live.

Justin Bergner

Good Milt. morning, Steve. Marvin. morning, Good morning, Good

Steve Macadam

Justin. Hi

Milt Childress

Hi Justin.

Marvin Riley

Hi Justin.

Justin Bergner

to and much much I Engineered guess the there producing which how of With below Products the, at in, sales related to organic for you level respect declined or decline EBITDA was performance it operating it isolate X%-ish actually decline? how of your due to is the to in sort sales the possible profit was under-absorption

Steve Macadam

I Well, was… it combined, think

Marvin Riley

that. demand, million. you combined, almost a take it’s $X to Milt, want absorption under Those look at loan

Milt Childress

a of about and was strong those we and million of not strength. just, in had really anticipating that some again, were so Just year, of last $X level that so QX markets and expected so because and so we

of $X million just about into of so, the And head, kind or the probably our was off of top built that. $X and my million, of plan plus million top minus $X on was

set. that’s there, what the lot versus a you look difference that difference just guys that the the year-over-year drove comparison So plan between our but at in of internal

to address from it Things the is. plan, we million my So Company aggressive off mid taken pretty through $X we internal exactly in mid-February. where and it rolling as script, internal good. look in action starting the said – across We’ve bucks in know plan QX our

of darn really change pretty guidance. quarter, take lands wherever end obviously the it relates always down EDF I relates as feel to it we we is a which mean it’s translation the why our of bigger it move the confident currency we we up why for and – or then the on year, that’s it based So rest always general. at move as didn’t in to

on – juice in take to do That’s it change the margin we you because high about, to or got if we shortfall $X our sealing. nuclear our as that in in in know we plenty a and a how you even as just business saw really, have concentrated products last really to we’ve well I at hard other didn’t of year’s overcome Company, about QX, have because guidance you if lot – we’re if the thing visibility but got think of we out, don’t we you think that, we that we QX. that’s it to across million got – you really really, board in So the look are compare thinking right.

And quite Power perfect and a is And so of shifts when example, these mix it little the Systems the bit, just mix that typically timing – bit, which little it moves does, our right. a bit a shifts a when the right. numbers

shop, and reasons was million. EDF the or One in of patent were $X down had parts $X Systems last nothing, $XX but the year, so Power of when bogged service revenue is million year was last million much like this year better than what good, EDF in we and we the but this doing year engines

the to and marine on stuff. as aftermarket its engines time shop is profitable was able military the well as So reasonably spend

And numbers behind huge us, so, the here Company better. of help be will we’ve look which always a Power just specifically why we’re lot heck really about EDF program to getting the the Systems. and the a said, That’s

Steve Macadam

just Justin, let down. pipe me

highlighted extremely this get an you because in thing of year-over-year The look quarter and was strong of that you Steve bit it remember, of last quarter-to-quarter, note other the was little you go at back first would you’ll earlier, quarter talking Products Engineered unpredictability if and about I in is, Products. year, Engineered if we that from

Engineered not the last different to the year-over-year always not it understanding and that year quarter too, in happened lot for So always case. be kind of to Products, that’s of requires understanding It’s a strongest reasons. our

Marvin Riley

yes. Well,

environment Justin If the I was industrial world got frankly it in bit, little going macro ahead. you the almost, year last frothy remember, into believe a was very and

decent QX right, strong year view that’s So, expecting but and of so was year, kind gangbuster like was our in my year customers last engineered. of this ordering were a it

Justin Bergner

if what there, and two was I questions $X of – just million? follow-up the under-absorption, other mean, some $X volume the million was decline I

Marvin Riley

SG&A, $X probably had We about it some is million.

Justin Bergner

Okay. any there pieces? Were other

Steve Macadam

in with some Probably year-over-year… CPI

Marvin Riley

which Steve French highlighted things, $X.X million of use of there’s there would and rounding probably other good – mean it are facility, right fairly a a bridge, I a detailed which the into still now. get time the was move not

Justin Bergner

it Systems a to to safe a below? little is Okay, the Products a your tracking And bit that understood. is is where full year of out you maintained you play Engineered Power tracking couple as say year anticipated above and little months then, guide ago bit

Marvin Riley

accurate. That’s

Just to last Power look on the end give a Systems backlog for basis, it’s sense, XX%. you of example a at it, if and parts up year-over-year you at almost aftermarket week, services the

sense of So magnitude just to you give the a

Steve Macadam

was And it’s year. stronger going even than into late it last now

QX year, very, don’t think Justin, as Now, we is of you we it strong remember, as was last that. as much shipable for if quite very had

back-end not for percentages year year, loaded half strong. don’t we last EBITDA anticipate that it as of first this expect through the went the be Milt as being Power that all So relative to the it it right. was we but will Systems, split in

stronger. the year balance, on it but will So, be

Justin Bergner

looking cost somewhat you know As the structure Does there? for, slow it push center acquisitions? transition sort relates button CEO capability focused pipeline to and to the down bolt-on the of the or but pause that improving you’re on for cause stands the does where I products, engineer

Steve Macadam

a didn’t now for been Not he since Marvin has slow all. COO. team down it at it No named was at all. key part years of two the

of on in still been. time Marvin well half Company everything lockstep we with role, the We’re and to year have the I’m through to as with spending be different do, a continue second so going And we forth. the that

very, going beat. not – pipeline we’ve been a targeting. got planned thing looking that to got nice out very well now miss a we’re So a and in We’ve we’ve we’ve this markets the three

Marvin Riley

continue I Investor markets we those Yes, the in pipeline Day, is communication we been of we I it’s think as areas mean just be the and now level articulated be focused focused those ever during in healthy areas my going have collaboration add here the that and as at the articulated. really that is to color would that and that only end, the we that is, successful would and is on was as takes excellent place we’ve expectation the

Justin Bergner

Okay, Thank you. great.

Operator

next is KeyBanc Markets. [Operator from Our question Jeff Instructions] from Capital coming Hammond

Your line is live. now

Jeff Hammond

good Hey, morning.

Steve Macadam

morning. Good

Milt Childress

Good morning.

Marvin Riley

Hi Jeff.

Jeff Hammond

I it wasn’t back, was in. go to pieces. I just just that going to nervous to the out make Hey, guidance maybe round

how basis think XXX sealing, This margin that points seems and in to basis to confidence the feel kind point XXX had whole on Day in get just of about that? starting and easy comp flat Analyst you revenue and in are want the you’re like said the front, you your jump? pretty I margin a sealing in for you

Milt Childress

Yes.

still good sealing feel the it full the about that if for you guidance the year. provided we in we at for year, Now, look

last I had in is top and to we which flat of IGT. driven points from is line in So fairly well XXX trucking the indicated, XXX improvement, we decline the basis improvements as on true, because exit as by think semiconductor point the primarily year which basis the had

Jeff changes. back start in and like you’ll what quarter. in there. for we QX in to if real to real on see – hit changes We’ll the for on our for still – expecting expectations back no I our the We the products think for the feel no be of track outlook So, balance sealing year generally see you’re it year,

Jeff Hammond

XQ top Products. have production line. I China to looks in of data, it then you And continue Engineered just tough like looks into the look Europe are both and If like be Okay. It macros fairly going markets I a and some and know weak at margin comp to on challenging. those on seem auto the

can up a So if would us into be that you sense you think helpful? of just going XQ EP give shapes how

Marvin Riley

in the year. multiyear Obviously, more that at the the QX little on Products And of typical QX then – the and places some taking and we That’s we Well, we we, part our soft. improvement. to been think in segment I sequentially look increase line more year business that’s over case, repeat because if have to of – top part if typically Company the of in that typically you going and sequentially, that expect Marvin at because from bit pattern a slowdown We engineered in a engineered of you if European see in QX, holidays. would But at QX that with it’s this in Engineered XX%. quarter and the summer period. to an expect than the We be exposure we and has because revenues. actions of look we you expect look we’re strongest described some the in expecting the of are other

the noticable expect quarter be and a second in our improvement, profitability in we also our improvement up So in we to margins the quarter. expect revenues and second

mentioned we Engineered mean quarter, Products in certainly in [indiscernible] it’s I have, part that. second for yes, strong So our and of outlook Steve is the relatively back

I we’re mean, improvement So, did I we Systems and stronger second overall. this the strong full year strong very year. moderate, Systems with Sealing first quarter when a we’re say in had in year in clearly for margins a sequentially. Power in – last have such than we is going power to It’s in systems in quarter to expecting outlook because quarter. a both really Power The and the moderate may see Engineered second bit,

Jeff Hammond

Okay. Thanks guys.

Marvin Riley

Yes.

Steve Macadam

you. Thank

Operator

reached or Thank Chris to our question-and-answer back floor end turn the We’ve the over any you. closing to for further comments. of session. I’d

Chris O’Neal

and Kevin, us this joining thank you Thanks, for all morning.

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

Operator

you. teleconference. That today’s conclude Thank does

day. and your disconnect wonderful your have We may thank today. participation this You line you at time for a

EnPro Industries (NPO) 3 May 192019 Q1 Earnings call transcript