NPO - Earnings call transcript Q2 2019

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Operator

Greetings and welcome to the EnPro Industries 2019 Second Quarter Results 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 Strategy, Corporate Development. you. Thank

begin. may You

Chris O'Neal

our call. find will morning, Riley, call. welcome our CFO, I’ll our webcast you CEO; also Good quarterly the call EnPro our moment. review their of earnings and being accompany can where enproindustries.com, conference quarter outgoing remind Childress, outlook performance a CEO; and Milt Marvin at slides everyone, Macadam, Steve Donna. our begin that to and Industries incoming is the our Thanks, second you in that

detail But begin we involve including historical statements reference in forward-looking we of that the in of our We before considered more point discussion, measures. Form These XX-K. these that with not filings out will the today’s a let our will number that a facts during are statements not are Also recent nature. call, in me undertake and update SEC, of do our we that forward-looking be risks making number described to any financial in most are uncertainties call and non-GAAP statements.

of long-term Power cycles businesses to we range couple exception demand these days Systems as backlogs have into regard that comparable most to is will guidance measures this of order-to-shipment in the are measures typical visibility months. appendix materials. to the reconciling this. and of to Tables a we our to order in relatively share With short have included limited from the handful call, the presentation a GAAP

accurate market indicators. not applications forecasting. which complicates is end well serve correlated with niche products, our further macro of for many Additionally, This demand

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

And over to Steve. now call I’ll turn the

Steve Macadam

Thank final support today. time for and Good I’d shareholders as joining my is this our today my call, during you, our earnings my kick yesterday. thanking morning their by retirement us and Chris. colleagues off to CEO for thanks tenure. given like Knowing that EnPro’s

lead of continued my been place planning succession from past going we growth process. confident received questions the success to the Marvin’s honor right in the and my EnPro right XX retire, to and over company It’s our leadership. that we’ve plans years, strategy, see to for forward the about have people announcement Since under investors I’m

to I’ll results. discussing a like just quarter over discussion topic. of for second minutes spend few that call our And to I’d and So, turn Marvin the Milt

that acumen nearly held him has he’s Marvin through EnPro very operational to strategic a in included various And and in EnPro lead role Chief to have years. of been helped since intentional and next recently XX steps our most with roles him during the July number his as Operating that that his organization chapter. necessary given expertise increased our This process be into time, developed next prepare our Officer has XXXX across appointment CEO. for that of then. EnPro’s responsibilities have Marvin

the areas which opportunity. increasing improving greatest that include is our returns, creating areas focus flow capability the the of of margins, company to deployed accelerating cash are and growth, Marvin’s our need resources center, several composed with

this values our deliver is drive Chairman and these great been always EnPro in and performance, to to EnPro’s has looking committed all his our respect my on and of phase that continue exceptional Vice EnPro Marvin’s full to has confident of and support core board, as we’re the goal strategic focus at forward directly company. next will excellence shareholder safety, leadership. as financial mission. Marvin and goals. at under Marvin of to future supports has Our the areas and I’m and

an company presidents Counsel, Marvin division strategy. all that to note team have Chris, our collectively we deep General And Chief confident of during knowledge our of Administrative want well to Robert that also are me have tenure. will McLean, exceptional Officer as support I our my shareholder and value. they will I’m the and Milt, management they Marvin, that implementing in tremendous suited supported just support create

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

Marvin Riley

Thanks, Steve, and everyone. good morning,

Steve growth. thank over developed for successful significant ACRP. Before I strategy created past begin, positioning permanently the to he EnPro years. the a employees for recognize want and by of value to our Steve resolve Most I XX for shareholders, notably, the leadership process and company and his customers, led the

thank to our me company’s the you, bottom-line equipment has our and board X,XXX our a From processes, dual upgraded profound company employees, level, and on of created he and on and facilities, culture. the survive world-class test time. our Steve. Steve’s and been impact of behalf will He

because We’re better much you. all of

in in Power and warranty control improvements, measures the Sealing to I’m the our X and turn Products lower in in pleased Slide company. parts in primarily charges let’s a increase We results. with second Systems, attention was charges that substantial result period our did prior-year the the unusual warranty that productivity in not during profitability across strength and performance year-over-year our Overall, experienced Now, aftermarket due quarter. services to recur of cost

EBITDA was Our adjusted up XX% second year-over-year. quarter

I’d Investor also to comment like execute March. strategy efforts to Day outlined our in our on during growth our

announced investments, to semiconductor, focusing in of on of growth we focused on addition on semiconductor. EnPro portfolio, commitment the discussed, and and our growth we our markets. As pharma, the one aerospace recently new pharma disciplined strategy and other support the In businesses and the food we’re two to strategic

to recognized of commitment The invest continuing Aseptic a growth Group, On industries. The of designs of fluid This pharmaceutical Aseptic acquisition distributes the we and held designing privately a manufactures that the largest the part Group in plan for components company represents will and XX path acquisition some Xnd, that products announced transfer supplier serving over July company the of a Garlock being key integrate sterile the fluid Companies adopted industries. these is and biopharmaceutical in for Group our Products of forefront Family Garlock at solutions Sealing of The the the to next-generation high-purity largest be part been drugs. Aseptic has technologies, segment. produce strategic biopharmaceutical The companies world’s the of pharma for to single-use, currently is manufacturing years.

cleaning, acquire in for is On privately July assemblies verification announced company. state-of-the-art used wireless to advanced Taiwan This a held services the a we plans provides smartphones, other connectivity, part and will applications. segment. critical and equipment intelligence, be latest the primarily for technologically components LeanTeq artificial used XXnd, and microchips equipment. the based LeanTeq Technetics semiconductor Products testing, Sealing produce and Group to most of leading-edge XG, vehicles, autonomous LeanTeq, high-speed in

differentiated and contribution. criteria LeanTeq service Upon a our niche focus our LeanTeq with of aftermarket. on growth technical industry with focus the This acquisition the capabilities semiconductor highly a with strategy and proprietary and expertise, offering completion, and strengthen expand will for our semiconductor acquisition the a acquisition primary manufacturing in technology $XXX-plus existing markets, on fits presence equipment. aftermarket adds significant million applications, aligns mission-critical

record. and And profile to the generation full in following margin with cash LeanTeq year first has a growth adjusted accretive a track be expected the EPS to the compelling acquisition is consistent closing.

businesses portfolio. strengthens in Both of transaction close fourth to our LeanTeq this EnPro quarter the fit year. the of these criteria expect We acquisition and the

We’re employees value to excited and Aseptic working EnPro and to to look together Group create The partners, our welcome and customers, LeanTeq to forward for shareholders.

the over Now, our quarter. to for financial discuss results call I’ll Milt turn to the

Milt Childress

the primarily not same of services everybody. morning, good compared and Sealing year. and to in prior-year and year-over-year lower unusual productivity strength to year adjusted the parts warranty control charges $XX in Adjusted company. up to across was on Systems, Marvin, charges Thanks, quarter, the result increase prior of The million the EBITDA period warranty EBITDA did the quarter that that overall relatively measures Products in the sales period the second Power XX.X% due second were in recur improvements compared was cost aftermarket last and in in flat

foreign the the period. exchange contract on the and Excluding was compared in foreign in prior-year XX.X% EDF both exchange impact up second quarter adjusted periods, to translation the EBITDA of

compared about across and year. lower points increase margin the Products was quarter last The year-over-year Gross productivity up in second second gross of profit in parts improvements percentage warranty XX.X%, by the driven quarter margin Sealing Systems, for was the measures the to Power control volume three charges cost the in increase and company.

gas and impact year’s and the gas turbine the in X.X% Sealing and heavy-duty semiconductor Strong trucking markets segment were softness period, prior industrial our foreign to by capital offset Sales the of was excluding translation. exchange performance the market exit from last more aerospace oil business. Products than in and midstream by down in year equipment compared the

primarily Excluding measures, last we’ve translation, compared the benefit resulted prior the XXXX. increased market by cost year productivity mentioned the non-recurrence that our gas industrial the the from in control improvements, from charges turbine XX.X% and EBITDA exchange driven exit of of impact to lower charges, that foreign unusual segment-adjusted from warranty year,

and period, Products in primarily general Engineered X.X% the markets. segment in driven over Sales foreign automotive decline translation. industrial impact exchange weakness were down by excluding prior-year the of The was

foreign due over quarter exchange prior-year translation, decreased lower the impact the of sales EBITDA primarily Excluding second volume. in segment-adjusted the period, to X.X%

offset to parts The quarter, increase and marine prior-year Power aftermarket sales in sales, period. Systems to partially were military XX% generation power lower by sales the market. the second up engine In over due the was strong

Second the sevenfold SG&A and period, quarter prior-year driven was segment-adjusted by and aftermarket service up in over parts the sales EBITDA more reduced of $XX than costs. higher-margin million increase

periods, EDF or second Excluding up Power Systems both XXX% the contract the segment-adjusted of of foreign the impact over on last year. exchange EBITDA $X quarter in million was in

second this spares. of the million sets favorable plus quarter XX in The in of impact contract was year, production year. unfavorable the foreign the generator $XXX,XXX two $X.X second of EDF and exchange last contract The on includes quarter

the We to complete. track remaining six production have now the production year. to XX% sets are shipped the XX by sets of on manufacturing ship generator is date the end of and The sets

in the We XXXX. expect to two ship spares

the of quarter of XX.X% XXXX. the per diluted for earnings Adjusted to share was up quarter $X.XX second compared

shares Average slightly million million second the second XX.X interest driven primarily by XX.X $XX million segment in shares for for were XXXX, same net increase outstanding expense a the outstanding. in EBITDA, from a increase adjusted million period shares ago. year diluted The of $X.X decrease quarter in down quarter decrease a diluted and was

our Now turning capital to the uses of summarizes which in XX, major Slide quarter.

the compared $X.X to the $XX.X in facilities, software, in quarter, equipment, million second million prior-year period. the and invested During company

on in the possible by software made return to of is While capital and spending quarter flow expect the evidence the made company is capital. cash years. second in half half, spending on the the capital across we past be invested to over compared of investments the our first spending second the and such lower year focus in several lower And higher infrastructure year-over-year

Also $X.X quarter, in a approximately value of program shares the by paid for the totaling second authorized million October. XXX,XXX under last million and we total the $XX.X million $XX approximately dividend, per share board $X.XX a repurchased

for announced shares a this As of anticipate not result the do additional recently remainder acquisitions, of our repurchasing we year.

approximately announced second was lower continue of than at the and with borrowings X.X XX, our was June and to June At adjusted at sheet have ratio net debt acquisitions Net approximately to When about debt times. our million. adjusted at balance recently balance the taking two of approximately totaled end forma our of and quarter will strong $XXX million into times. we approximately XX consideration, $XXX a XXXX, pro EBITDA our is net million debt-to-EBITDA the cash end $XX leverage X.X

pro The leverage second than our expect be this – and year year pro forma us level the lower to typically a is period strong cash by flow for half the we of end. than forma operating

provide announced additional we provides provision Form increase Marvin Before tax in last want the to guidance, commentary $X in you our our I evening information regarding X-K XXXX filing. on income million with that

and reporting our revised statements. we XXXX balance errors and on this have concluded our expense increase in associated noted book to financial Nonetheless, we tax reflect our year-end taxes the issued sheet accounts As to in statements Form balance income immaterial the that the X-K, increase we previously in were sheet.

will filing also be that cash Form the reflect quarter flows to XXXX will We amendment related expense no XX-Q amendment filing adjusted tax XXXX balance changes adjusted XXXX on revision to the XX-K The sheet to And has also or have an impact to we XXXX tax income EBITDA, income XXXX no the will to or either our expense our impact revisions. an Form reported filed will and on be results. tax previously reflect increase. EPS XXXX for XXXX first

root the the which specific to evaluating deficiencies weakness for and in income X-K two begun weaknesses. Form relatively over already we determined be controls. errors, a we of the enhanced cause accounting in the noted also areas, As to implementing taxes, we’ve to internal internal provision and identified The such internal in our control narrow, remediate tax in material constitute these are controls easy-to-fix controls steps

expect remediation our We filing XXXX completed such to XX-K. to prior be

Now, I’ll back call to turn the Marvin.

Marvin Riley

for Milt. take close current questions. of and with XXXX outlook and of We’ll the our Thanks, then a market discussion conditions rest

in performance and year our the $XXX $XXX of represents the to approximately EBITDA first which to of outlook Given the X% of million, the over year, range increase X% full-year guidance we’re of million half for our remainder to tightening year. our a adjusted last an

XX% XX% per earnings last share range adjusted $X.XX from to to expect approximately the We $X.XX year. to for or year, over diluted

guidance of announced our of and of the the since LeanTeq Group of acquisition includes impact Aseptic not excludes of closed. has clarity, closed the For The recently the that transaction recently acquisition the impact sake

sales the an In year year relatively and semiconductor second of softness equipment we year-over-year to during the in fourth trucking in last year. assumes improvement flat to Products, quarter. continued end Sealing capital be expect half for demand of the in This outlook the through compared the

primarily Products expectations We of reductions. benefit expect to in of year and prior the compared and a up charges the productivity in half Sealing driven lower of The adjusted cost continued EBITDA year, from the Group, second addition Aseptic to the improvements warranty by modestly be

to relatively flat, to year compared the EBITDA In implemented of measures and on adjusted to based earlier second meaningfully the we half expect up be prior year, cost sales year. be control this Engineered in Products,

adjusted first year. level although prior strong in record to the second in a expecting Lastly, the backlog results, EBITDA Power high above with half aftermarket and we’re Systems the be of the for half parts, of below year

questions. now we’ll And line for open the

Operator

go floor [Operator Zaffino of Ian is open Our Oppenheimer. for ahead. now you. Thank first question questions. Please The from coming instructions] is

Mark Zhang

Hi, on good our Mark Thanks Ian. is for taking morning, for guys. This questions.

improving. of I already? would there EBITDA be just do the there outlook, speak cost So is as – Can first reduction think on you’ve well? Thank that and you Engineered measures bit into opportunities how margin done and little guys XXXX How sort to question the much the that translates on a you. expansion

Milt Childress

were compared in It’s to you of compare the have this as decline. performance quarter, cost. our Engineered in would a while the compared that earnings – you’ll fixed high sales to first second pattern overall, saw more in we you down we we Mark, the normal relatively our quarter if in evidence you Products improvement more quarter. Yes. And expect in – have Engineered know first the Products, what than see segment, our

we as So leverage on well the upside, leverage on downside. the well. We

costs. consideration. It’s So the a big volume impossible is problem slowly solve to through volume

but would time of quarter the implemented the expect to by a in However, in reductions. benefit the to – second the of all we our quarter. in of team benefit the third quarter that much first year, nearly that has some see cost partially. the the only saw get benefit fourth and We number of half the of We

So revenues half sales, what do performance look last as as in focus in saw of projects from guidance, dropped we under the QX. believe the we maintaining us second have really second QX half in in that story on real especially result to our we in when Marvin considerably will are way we excess our and that off for of year of ahead the good year, the and is described

our believe half year. segment. of to half year, saw the the year-over-year in – comparison And at of Engineered, the have benefit stop first relatively we this second the So up we’re of the be of the first second reductions but that will earnings our the then that the down year and last the if it implemented to look results half we that’s be flat, in expecting to that meaningfully sales why reason in that half – in cost in compared negative overall you that start to were the

Mark Zhang

very just quick And Milt. and you specifically Thank trucking. Great. Okay. in follow-up then heavy-duty much, a Sealing

to mentioned bit a there’s headwind. guys a going be little of You

market into Just out going given here fundamentals guys from you do of on but well? is, where see the market stay in XXXX, of where Thanks. the terms and as

Marvin Riley

fundamentals only Is trucking? in that market

Mark Zhang

guess, I Yes, like, more trucking? specifically toward

Marvin Riley

end we’ll accelerate Yes. I will – is the we a more We toward right in And of mean, what that just now QX. did see we’re bit experiencing that trucking. our that weakness expectation is frankly, We continue. in anticipate little more have balance forward. much throughout add quite more going else. There’s I anyone softness the than color we much year continued than can more have of don’t than the insight not trucking because that,

Mark Zhang

much. guys, Thank Terrific. Okay. you, very

Operator

Thank you.

next ahead. coming Our question is G. Bergner of Please go Research. Justin from

Justin Bergner

best, Congratulations. Milt. Good Marvin. morning, All Good Steve. morning, the

Milt Childress

you, Thank Justin.

Justin Bergner

of some is I current the couple first for for outlook XXXX? quick have a CapEx questions here, just ones. What

Milt Childress

It’s $XX had roughly, million, million over $XX in to that roughly XXXX. we that compares and

had in may XXXX. we Power You pretty investment Systems during remember, heavy a

reducing spending my So we’ve you’re of focus prepared had evidence capital a noted seeing that. and I on in remarks, as

the see of year. this first and You months first the see in the it last months six compared six of full to year, you’ll for year

Justin Bergner

And sort rate normalized XXXX? great. or as I a of look percentage mean, sales we Okay, of out CapEx there beyond is

Milt Childress

we’ll of that based the diet. we’re $XX businesses on business require million a about level those a million to roughly current probably to on of will the $XX Well, revenues I $XX $XX talking and spending have with million, on core sales more percentage little same a but look think – think if average diet you acquisitions, size, range our that I an bit our at current million the basis, probably

Justin Bergner

just million associated the no income book terms true... tax, that’s purely helpful. of verify, to a cash then tax this with there in that’s $X is true, tax issue, And Okay, income outlay

Milt Childress

correct. That’s

Justin Bergner

Okay.

Milt Childress

provision. book purely It’s cash on no the income taxes has The impact taxes.

Justin Bergner

sort to more shifting And of Okay. fundamentals.

enable to half, And from As be some contribution include that flat you versus negative in the growth does the Group? in half the to second Aseptic the going half? Products look first The Sealing into what’s second

Milt Childress

contribution from The Aseptic we some is that guidance. since There included Group our in

And the so capital IGT market that some some of to year, the trucking we about, things heavy-duty offset this the last year. market, provides talked from semiconductor like that exit headwinds the equipment

will that time of the of you – will – sales, because of the moderate One longer the loss second the the up it’s get quarter, was of to we last no of – half impact fourth the the to is much reasons by to impact comp the have going third IGT wrapped year-over-year we pretty year-over-year the in year that get quarter the in year. when

expecting, also our We this, fourth also better year-over-year in we’re are business. the in part and comp expecting Marvin the semiconductor of mentioned a quarter

to quarter started that that the in see market last We segment fourth in of in business turndown our year. the in in

So, semi. orders weaker fourth mentioned, the to combination Marvin of quarter, in pick plus by the in last fourth as expecting the quarter up being year

a Justin. those highlights, are couple of So,

Marvin Riley

bit the European a little up well. And year even is a quite more robust It’s showing holding softening. the expect mean in year the aerospace in be to robust is quite bit of in the we of of also and market resiliency, sealing. second be our second though, industrial half business Garlock half sort color. Just of to pharma I sealing, food

be believe why we would really second that’s okay. half So the

Justin Bergner

then heavy-duty and in with last respect the just one, I may, STEMCO? to things and one sort markets, the seeing then back you’re could And end aftermarket truck, of versus truck the of I STEMCO end hop you’re trailer seeing in guess, you queue. great. maybe what OE The if I’ll compare versus what Okay, in

Marvin Riley

the and softness here, Overall, to and and this we’re QX truck frankly. starting aftermarket the see we’re starting the – see sort toward of side, on side of is OE trailer end to

– I’d sort still of know be would down So, is you tap is the more see sort slowdown. helpful do the one since this additional macro Steve, he’s think on color Steve the degree of here? don’t have of, you than but others, obviously, OE significantly if starting we’re I a call. any I to

Steve Macadam

to I sales both understand always the than Well, are we’re lot a we front. and exposed more aftermarket margin to important think everybody that it’s for the particularly activity on OE, on

slow much it on in aftermarket, even than less So, EBITDA things has our typically the sales. as impact

– And we of they order what that So think I say, to are, we are kind I that’s Marvin. is fleets what our or and hear beginning cancel orders what cancellations we’re the read is that, have for four basically now, OEs would beginning but from to customers producing the the both strong the product that’s still are because three, pointing months that really so they trailers are trucks, from and backlog so full. now, toward more still is

would And builds that’s we’re peak kind that’s of that’s I the say of industry, new of trailer. we’re what – not very think seeing. thing. OE it’s and truck a typical So, But on not don’t through the anybody

Milt Childress

said. one just And just quantify to on add Steve to comment what

truck the – We’re roughly business; in we’re XX% heavy-duty OE. XX% aftermarket,

Justin Bergner

Okay. for detail. that thanks

Operator

Thank you.

Our coming of go Markets. KeyBanc Capital Hammond from next question ahead. Please is Jeff

Jeff Hammond

Hey, new good Congrats Steve morning, positions. Marvin guys. on and to the

Marvin Riley

Jeff. you, Thank

Jeff Hammond

confidence think you I challenge, in understand, like trying Europe Just the bit on see And and has you of half just weaker. Products, flat know I’m little said some the first back half. sales just out? I And do more where been industrial relatively seems color auto that was Engineered a to a relatively it on flattening

Marvin Riley

is lot that’s saw cost sort that started what of and of, So reduction efforts QX, European out and – and automotive we European got A automotive, in right? through our early in given foremost. Yes. first we Asian industrial,

were we aggressive So, there.

Our oil is okay, holding in up market and gas Engineered.

business. Those lot of big same So, ones. have and we of that control we’re cost in a the measures in are GGB pressure gas, implementing the in the of sort some we oil CPI the not are business but seeing

– in the do quite on a sort end. of helping a back seeing bit are have little activity aerospace that’s we We Engineered,

QX. pickup the end as well, some automotive on in European in seeing are We back

that’s So balancing outside really what’s reductions. out cost the of

Milt Childress

between last in half noticeable look first year, a you, half. pretty at half remind I And got Jeff, information. second you’ve if the there the of revenues second know difference But the you to and the was just

too a that’s relatively So factor second flat. think flat, being sales half about we the when year-over-year in

Jeff Hammond

you just quarter? then business, core What kind the in positive – And your going to that’s sealing informs you that from are of are hearing Good. on the what customers fourth semiconductor that better the XQ? in inflect

Marvin Riley

we’re the here Well, QX. to up end at show started It intake of seeing QX. for better order

that’s what’s informing So really our decision.

Jeff Hammond

And a you sealing, in. how know you’re some then of Good. to core just just Technetics and just organic on Garlock, full-year noise segment? I lot the that on true here, the the growth and FX, all look exit, for pieces If coming strip the like moving kind of basis, out at so get there’s IGT kind trend. kind underlying Aseptic like, I’m a trying and thinking about like can STEMCO and understand of of we

Milt Childress

Yes.

look I gas quantify pull In year, last in relatively it of sales. roughly $X was not second business, into roughly Chris, I’m an easily. we XXXX, turbine at $X was this $X will of the of that can the had million If million annual have you, we It number? just industrial And – that at sales quarter you was XXXX. we you one million looking the will in –

Chris O'Neal

was that the first No, half.

Milt Childress

– of half first the first sorry, The year. half

about three the million at last quarter $X running were first through a $X quarters. to pace, we million per million So, pace $X year

roughly that in of $XX call So, let’s XXXX. impact on sales million

decrease see is So, some that of just you the that.

to at Sealing by months if did prepared six with hurt us look I but we indirectly And our quantify about currency Products, that first the of you the translation, remarks, give million. of you then year can you, impact in which $X can the

what’s roughly had we translation. regular trucking we pluses months So, you then of being semiconductor to continue compared in the roughly of year, last in half million the year. markets of being down the Heavy-duty the $X first to of a down first six the year-over-year. $X had bit year minuses, And and also with IGT, the million serve happening

strip if growth out you if picture. single-digit a the it’s low out you it’s probably, So, low – a strip translation, IGT,

Jeff Hammond

comp revenues, Aseptic. know The would second Aseptic the a the and core underlying half, don’t And down but then by you IGT little we get be bit, the offset

Milt Childress

if sales we Well, year-over-year, expect at said sales, you we notwithstanding. look

flat only IGT benefit quarter IGT, Some of the because – essentially there’s a year. quarter, be the include Aseptic. year-over-year, relatively one does from would noise on smaller It’ll in that of some the there’s it’s but back impact half one

the So I net-net, yes, it’s in flat of second relatively call year. it, – half the would still

the you you out strip IGT. out strip Aseptic of impact can If Group,

Jeff Hammond

last Sealing. And then just the question on

said, make the had think half, like – up second want profitability And to second in I how Marvin, to you you you I think you’re second I moderately expect just to half. understand, half sure be year-on-year, I a Like, included, of in how included? about credit that up or I’m $X $X that comp million XQ credit wondering XXXX? make hit? exclude you just how And to it’s think that from Does that? million if do kind that

Marvin Riley

Yes.

QX. settlement year in was QX on was that warranty last that in QX. TrailerTail In QX, You’re referring, year. of we in business favorable The believe, to the last had charge I

Milt Childress

some unusual We you warranty year, as of Yes. some in may had – last charges recall. also the fourth had quarter

going going recurrence not we’re had is fact the So, it is to in of of fourth unusual that a part warranty expecting part be that Aseptic, the have of the to the of moderate a charges to quarter. some we the increase be

than is bounce this And semiconductor did fourth some we a in business, of it think some in year. actually where have last could semiconductor year quarter back we that the stronger we

Jeff Hammond

Thanks, That’s Okay. all very guys. helpful.

Operator

next Thank Please instructions] is from Sidoti ahead. coming of you. Company. & go question Joe Mondillo Our [Operator

Joe Mondillo

Hi, guys. morning. Good

line questioning. last on follow-up a that Just of

going warranties in little our that we are on going or of to the you the the different still year? XXXX, the half issues and terms benefits back those in of – friction, in are and issues bit all Sealing we had most in of past still of Regarding at the point, see slow a this

Marvin Riley

pay. the have resolving try Yes. some progress issues; issues. We working for should would we’re a been of we’ll might majority cleanup resolved some those in business, going the still kinds has But have, be way those STEMCO We’ve And do than just forward. where sourcing of price to the, our the due issues we We cost to things, paying demand, part, made most we still meet say, think of majority we’re to higher with, through. I the customer that tremendous get that dealing we done.

Milt Childress

And very side, on Joe. we’re comfortable warranty the

state we’re reserved. feel adequately just we So, that, to like

Joe Mondillo

at Okay. it talk you recently maybe you of, year. improvement at day-to-day those looking confidence Products, if seems three, anything improved second a just like And were GGB, And ago? about trends, four monthly you has just indicated curious, to basis? have the of sort or sort you’re say, the about of then Could sort that least flatter from monthly gives on just talk of of months half trends Engineered what some

Marvin Riley

And Asia soft we’ll and looking see see said would do for some slightly. I just of that would word et what intake. look think like drop-off the appropriately stabilized, business. shakes in how this order And is still like a The it’s stabilized, that We’d before, internally to use and in business what Yes. that so like deal out, to aggressive that’s some cetera. European things those cetera, fairly year, flat. industrial, have right? We spaces are beginning et us, that in automotive we as European automotive, general, Asian up we in saw some sense sized we’ve QX. our is pick would with pretty But And it’s of is I level still feeling, the fairly benefit have but ConAg now,

So that’s I language use. the would

Joe Mondillo

Systems, been a Great. into the then that. Power you backlog EDF. I huge year, and great. performance going appreciate have has had the there But still we Okay. And

sure I’m a the that into the time I’m That looks too backlog color a Thanks. type if early, order would trends XXXX, so Any not it’s know of what sort that? like. or do of sort I like, just you helpful. And looking but it’s regarding sort commentary can long curious been lead have of what business. be of provide any

Marvin Riley

engineering QX now, We’ll Systems situation. of at XX%. of sense We aftermarket. mean, magnitude, a XXXX. to for the be XXXX expect up But situation out that spares Yes. to end Power was to two The and backlog solid looks QX backlog need comparison to of we’ll in in XXXX, have aftermarket you on year have EDF the I produce. should over right give just the I a good the

and into half the back solid into XXXX should year going they’re go pretty of pretty the solid. So,

Joe Mondillo

think flow. free trying Okay, about And then lastly, just great. cash to

still expecting, tax guidance, terms it’s out. related free there’s sort there’s of how unusual could related included how to or any any I know guidance And that? of – that Thanks. to just I you’re that, if cash if different about would about works receivables. a lot or give talk of sort us parts Could of your any receivables you sort of moving whether you’re thinking of in then the EBITDA In guess, be you liabilities, taxes of flow? items – sort cash That there’s great.

Milt Childress

didn’t good about Joe. talk on question. receivable We Yes, the A tax the call.

of funding ACRP. that with conjunction the Let first. year, we receive the from concluded loss the would was IRS that the in expectations this me hit we trust one payment final carryback Earlier the XX-year on had that that

this that to because think, IRS – receive and the it expected get expected didn’t timing, the was to to of to We way. of at is confidence, uncertain, before because we won’t roughly comment We I’m I million $XX year. roughly final that’s that we’re that it year. stated the on subject I end it. by this we this right? under time, that we audit, have that’s not saying don’t Right now, timing going which get be,

card. a wild a and of little that’s bit So question mark a

about we get year, but that should So, We’ve if we spending. get audit next talked year, IRS don’t underway. this capital is early

on can think – of to for pretty read at and that, what second were good where expense, that’s sizable half working then from the quarter second flow expense, the core because look year. $XX in and investment likely the before for to look you interest project. can of cost the year of how a capital of an pretty decrease the the spending get put We partly fairly the the typically half you And period place. into going a a that still standpoint. do for the capital if a can year, million we nice we’re some to you cash of good is cross-currency second acquisition-related And the which cash in want business the half you have take we get acquisitions, indication be at year-over-year us to idea I the of much working good expect the a have particular, swaps back interest related is we So, of a of before we EDF

where tied also that $XX advances. get in able to working up then million some and we to down year. this prepaid, Systems, some that, be about pull EDF, $XX million some so And this year. cash should we may I Power We $XX contracts million partially capital in in other would we expect should And in had of work have we

So to a half a expecting all, be the it in of cash perspective. year really strong all second from we’re flow

on that on insurance and call $X get our come or asbestos-related that We about also have comment year to books, expecting from this the receivable $X million we’re that. didn’t we this million in

we kind some that of that’s expect. would from So non-operating sources cash additional

all, I acquisitions about on if So, with you June pro at all at earlier basis, a forma XX. in at it’s sheet X.X balance the good. were our times, we look mentioned

what So, about we’re cash I expect flow that year, talking by below the be of the of considerably because end to the level. and

when and be the year. by of times half margin a two we’ll I and below got I mentioned the think two half think of times. end I I’ve a the error, a well And

Joe Mondillo

Appreciate great. Okay, that.

Milt Childress

yes. Yes,

Operator

you. Thank

G. Our next is of go ahead. Please Research. from coming Justin Bergner question

Justin Bergner

follow-up. Thanks, guys for the

clarifications. quick Products being Sealing growth The in the is half currency excluding Just some flat rate? second that

Marvin Riley

is. It

Justin Bergner

the and the engine more on drivers strength any sustainable just the how aftermarket are then they what And midterm? are of into Okay. commentary

Marvin Riley

of a it customer. won, are our getting into those programs being and with Well, the – we’ve the the field, all lot ships engine And the field into and they has just meaning now strength, the water. now provided to commissioned the aftermarket are in hitting units end to do mean, of out I water. From that

number meaningful the a increase in pretty So, we’re seeing of cylinders that’s out there.

primary And that’s driver. the really

from making We the the number be power coming won some have you and look that of recapture if then at there’s CVN, of work business. those a field as to long we business. back the in is a some go TAO, to gen really and aftermarket list their just the programs for most also providing do But units LPD, part, cutter, all, of started the will nice it programs into a way bulk the offshore of patrol steady stream well

Justin Bergner

not us it the like strength – there surprised analysts guess, mean, Okay. is internally. and but seems it has aftermarket any investors, your And I just surprised I somewhat team

So – on mean, predictable strength of of consequence side? delivering OE I surprised maybe just aftermarket versus more what you sort the a has about been the

Marvin Riley

Well, I’m one of – surprised. all, sort changes not but first excited, of not quite of surprised. the I’m

the changes working U.S. was big of and contract a parts is on vessels. with Navy, an that’s sort to contract we there the sort their of Command of that to IDIQ One were that services Sealift provide aftermarket

but not spend they’re to they a through a what because before. a budget, Now, when get was had And years. they little go more, through going because number to of spending, spend lifted, bit able reduced able their sequestration appropriate sequestration levels, of were were we to for

think I that about so think to, have they’re would no budget longer I that operate now sequestration. how is can a they it they subject that’s to And

what order to normally the taking that. of do and appropriately advantage maintained would can they So, do appropriately we’re keep vessels they and

Justin Bergner

lastly, OP. without That’s to there? an share call wouldn’t helpful. complete And then Anything on be Trident very update

Marvin Riley

We No, is our work. the continuing technical here visit R&D with to of number lately, weeks. team last experts I their to four in mean, a within had the team do

an set Just job your were to development. great to we confirm a seeing, words make of was sure just that we eyes in have a you guys got done different excellent had what we intent; you’ve

cetera. et best-in-class cetera, you with on et agree et performance, We cetera, its

more success. So me that is the some have open the testing, we’ll field go into team once their inspiration more endurance finished gives and with and that

So, still Trident. update. of focus on maintain appropriate The of focus. I’m is we’re We a disciplined the developers excited team that’s We our and of about still have pretty as doing pretty what it. excited excited about about engines, sort pretty it. OP the level we’re

We’re regular updates having still we’re working and hard.

Justin Bergner

questions. the follow-up for Thanks Great.

Operator

floor would like I closing At to this time, comments. to turn back the O’Neal Thank Mr. you. over for

Chris O'Neal

you, And this you Thank all us thank All Donna. for joining right. morning.

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

Operator

today’s participation. thank for Ladies and gentlemen, teleconference. This your concludes you

day. a may your have lines You at disconnect this wonderful and time

EnPro Industries (NPO) 31 Jul 192019 Q2 Earnings call transcript