NPO - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the EnPro Industries Third Quarter 2019 Earnings Conference Call. [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, Investor Relations, Strategy and Corporate Development. Please go ahead, Chris.

Chris O'Neal

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

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

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

which not correlated has demand well our for end of applications many macro market niche Additionally, indicators. serve products with

forecasting. accurate complicates further This

quarter; quarter; of end costs of the tensions subsequent the end rate of legacy changes trade related excludes to guidance litigation tariffs exchange third impacts of to and impacts and the charges. the impact number costs; subsequent market in outstanding; the foreign environmental transaction and acquisitions, demand and from of changes costs; Our and shares the the future restructuring third divestitures and

call to I'll Marvin. now the turn And over

Marvin Riley

Thanks, Chris, morning, everyone. good and

thoughts on time investors third-quarter with a road Before to our first transition my business intimacy, as my have we provide serve. each my want I've Having on improve forward. role few the update employees, spending and CEO the I competitiveness time moving on my how to to I completed remarks on of share spending can quarter results, I and also we our an my CEO, efficiencies understand in with customer speaking our our each market operational out customers. been and strategy been

being during the with the of of LeanTeq the excited to development businesses Enpro time Aseptic, of their during extremely and the are Additionally, and and the I part was quarter, family. quarter. the about spend a able acquired They two teams businesses their leaders

delighted the Aseptic supporting and I'm we the have and those personally to LeanTeq teams capabilities businesses of to growth Enpro. at using developed board look have on the forward

a we future. While have of for strengths acknowledging our number current build the to which upon challenges,

emphasizes are place. development, culture a see excellence safety-first outstanding not strategy dual the be This results brands we with challenge aftermarket that market-leading products, XX% and strong that manufacturing any bottom-line cannot mindset. do overcome human putting includes an with financial both revenue in and I

the margins and capability call in improving been cash of system The as we is recurring priority a exposure balanced and capability Enpro of our will to allocation, center part elements a operating the center. aftermarket approach forward our key strategy support while has maintaining The what reshaping which revenue created housed to our of our increasing capital the flow. involve system, operating and going increasing portfolio leveraging opportunities,

host structural our you detail issues new provide taken and and outlined We're have an above an and the in address dynamics and strategic investor bright platform XXXX beyond, planning forward. updates our for execute provide toward I will progress future Looking regarding the I a calls. to as implementing to our which day we the We're our for results. priorities on extremely path we meet mid-XXXX, plan Enpro. update market future actions on actively more much strategy see to impacting in to

we're of Enpro. a initiatives now detail and new urgency, how you sense future these we've a attention that to Our to detail further crafting I'll into will certainly go bias into action for place address on of short-term sense challenges. for the put give

results Overall, in company. year-over-year trucking in heavy-duty products of portion operating of a our sealing our overshadowed third-quarter performance rest the strong segment the

Third-quarter EBITDA versus was down both sales year. down XX%, X%, prior and adjusted were the

that the lower quality trucking year-over-year million, warranty product market-related volumes a by settlement the fixed a impacting of were also last identified in earnings XXXX driven and year, legal decline to a prior-year third-quarter reflects challenges result As in $X.X expenses favorably heavy-duty related problem by and of period.

the trucking year. they heavy-duty our power EBITDA systems been quarter for and have all throughout prior as was flat third were and up adjusted the and sales X% notably, the date, year. to business, results the year-to-date, X% the in X% the up strong Most versus in quarter quarter were year Excluding segment

engineered heavy-duty and in products, excluding trucking EBITDA segment our markets. a conditions business, products served despite number the year-over-year, up also of Adjusted were in sealing challenging

declines, overhead actions benefit our quarter SG&A results. the reductions we're staff included Actions the resized products, in seeing engineered half spending. our cost We first we management taken and of several improve In in taken plant our year improved to this in and of structure have business. have in the response to reductions, operational the efficiencies volume

aggressively trucking, Relative our performance of center operational cost team's of we're the completed this structure, In to reflect sealing and the focus in and improve into on sealing projects. a heavy-duty one actions products our optimization fronts business. capability we products, the our improvements. impact These to moving consolidated various U.S. several on cost and products engineered and of commercial plants facility U.K. in

to improvement costs, cut SG&A freight charges We've already actions quality conduct taken and reduce initiatives.

our to the contracts support Additionally, our staffing manufacturing with our resizing lower levels and we're evaluating demand of suppliers. to the footprint, network levels reduce renegotiating

competitiveness taken sale of swiftly In in announced. the Georgia, review action September on of unit One structural in shoe competitiveness addition, manufacturing of we're result the previously evaluating brake a Rome, in trucking. business heavy quarter was unit XX, a business closed our as located as the business which every Duty

unwavering in the we work outside is business overall I to expect the mind-set striving have cost to economic trucking this results structure. My the and saw business and mind-set its trucking team I heavy-duty fundamentally during the third reshape for excellent be results want of our an unacceptable. impact businesses heavy-duty find and for on-going, we this We quarter about throughout in emphasize the that to all quarter. cycle. Our of

in of in high sale based are The of of brake facility. of structurally decision our December last year portfolio to these moves with Rome the customers. is an strategy Both friction extension on manufacturing our attractive new consistent of the provided business to that cash returns their and shoe value margins our generate products shifting to EnPro services flow markets and command in discontinue strong

part our continue the businesses completed portfolio lens as of is in this lens the shaping through our will strategy. third acquisitions to shaping We evaluate This quarter. in portfolio also evident

equipment. the and completed other which announced The transfer refurbishment products and of distributes, services critical acquisition we we components biopharmaceutical assemblies of Aseptic provides pharmaceutical In acquisition designs which Group, for September, semiconductor cleaning LeanTeq, manufacturers industries. and the and July, in In state-of-the-art the for used aseptic fluid

revenue. collectively is integration process to great the contribute EnPro's Overall, $XX annualized a we to million businesses of businesses that approximately start. these feel initial will off These

cash anticipate combined products The and specifically will to to accretive high products, flow Focusing segment impact approximately sealing on points more consistent XXX XXX margins the the transactions Both Group be generate basis capital. we annualized Aseptic and an to on operating basis. by sealing returns on LeanTeq

of we our committed employees. during Additionally, I would development inaugural both to issued results we like maximizing quarter, At and share to EnPro, strong the report. sustainability the that financial delivering our are

and committed practices, and The is report, environmental initiatives, and our across protecting planet our innovation efforts, cultural and which website, development our highlights our minimizing safety environmental impact employee our ethics accomplishments. to compliance performance, We're available overall initiatives our on programs also operations.

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

Milt Childress

everyone. Marvin and good morning, Thanks,

same quarter, extent, general engine heavy-duty and sales, was and During industrial, in military offset capital to compared oil aerospace and a automotive the lesser engine sales and, midstream parts, equipment marine more decreased semiconductor of in weakness XXXX. by third X.X% to aftermarket Growth principally markets. in the trucking than period gas

In the from stronger exit by industrial company's and impacted XXXX. were the our the dollar in results gas addition, turbine market

translation and sales acquisitions of quarter and X.X% for compared divestitures, the of Excluding by foreign third the XXXX. exchange quarter declined the impact to

XX.X% Adjusted EBITDA to in third of the $XX.X quarter year. the last million, was quarter third down compared

an our last trucking quarter in results over business third-quarter performance, year. noted, Marvin trucking growing otherwise the heavy-duty adjusted EBITDA, strong of the third excluding X.X% overshadowed with heavy-duty business, As year-over-year

in margin quarter Performance the percentage the gross in last margin in of points compared quarter declining for our third heavy-duty X.X to gross business trucking the third by year. resulted

mix this part lower year-over-year power decrease primarily our in unfavorable margin driven was of high increase in systems. aftermarket the gross in and heavy-duty by The mix and part accruals in trucking in parts warranty volume by offset the business, of

Sales heavy-duty extent, oil and year-over-year the equipment in Strength in principally offset in excluding than impact semiconductor and of trucking compared the translation lesser period, sales. the to segment divestitures. foreign products was midstream a down market sealing prior-year the more by X.X% declines, to and, were acquisitions exchange capital and in gas

trucking, were organic heavy-duty sales X.X%. down Excluding

primarily XX.X% of by divestitures, and year, acquisitions in last decreased impact EBITDA compared the exchange foreign and Excluding adjusted trucking. translation driven heavy-duty results segment to

prior-year the from changes, impact XXXX were which, settlement, mentioned trucking heavy-duty most in heavy-duty a $X.X trucking million as and resulted of earlier, impacting legal business. the heavy-duty trucking, earnings volume in The pronounced quarter charges warranty decline our I in favorably also period third

warranty we the XXXX reflect the quality noted, since for expense third-quarter warranty in claim issue Marvin related our product. year-over-year quarter, a fixed. expectations As warranty has to the during been increased And identified to in increase current product that accrual is

EBITDA and divestitures. impact the the translation in last results exchange was heavy-duty and and versus acquisition quarter up Segment foreign trucking year, adjusted of third of excluding X.X% the

was prior-year aerospace. in Sales markets, automotive in foreign were industrial decline the down to the exchange segment of due strength engineered X.X% over and translation. The weakness period, by offset products general the excluding the partially primarily impact in

exchange of increased year impact market the of the cost first segment the to primarily implemented adjusted in the previously. over half response challenges, to in Marvin due the foreign period, in X.X% reduction noted EBITDA as third quarter prior-year Excluding translation, initiatives

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

primarily Third-quarter higher-margin segment the XX.X% over due sales. was up increase in period, to the EBITDA parts prior-year adjusted aftermarket

the the the periods, up segment third year, quarter last in unfavorable adjusted EDF of over quarter unfavorable which both was in was systems and third year. impact quarter in year of last EBITDA this contract $X.X of million the of exchange $XXX,XXX million Excluding in third foreign on or the $X.X XX.X% power

As sets a includes plus contract two generator production EDF spares. reminder, XX the

shipped to of have We manufacturing complete. by by delivery ship sets generator the next production now of estimate year. prior updated XX expect is our to year, January remaining of date The sets production end from this of XX% the the sets four and

the to XXXX. ship We in two expect spares

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

truck decrease The drop by a the in resulting was and diluted in -- expense, decrease earnings expense by business, outstanding. offset million shares decrease tax adjusted $X.X a driven third-quarter income million slight decrease heavy-duty net interest a $X.X in earnings diluted from in the

of expense GAAP is the the brake million shoe The and of $XX.X totaled of expense million $XX.X quarter, the reserve largely the increase third quarter our environmental adjustments. loss result in to loss net other for in million business non-cash $X.X the a on sale XXXX. non-operating a Contributing

the from hard environmental time resolve working We discrete EnPro very XXXX. of spinoff Goodrich to at contributed matters its have been in to

the third settlements reached matters. very positive we quarter, During two in

in with liabilities York, completely increase to of we New of Onondaga reserve clean-up a First, environmental $X.X resulted settlement Lake Honeywell a related reached Honeywell's in resolve million. to which

a resulted Second, settling which, site we Water other matters. of of portion resolved reserve resolving of step Mississippi landowners, significant significant related along a matters, a $X.X in million. pre-spin environmental the are group Valley, to settlements these in with private the increase These lawsuits by liabilities a of

of major the our in uses capital summarizes XX Slide quarter.

cash importantly, investment First Aseptic acquisitions million. The most and businesses Marvin the in noted, Group and The two combined was we the approximately as both in completed LeanTeq quarter. $XXX

consideration equity. LeanTeq acquisitions $XXX was including Total approximately the when the for million rollover two

equipment, also We and million $X.X XXXX. plant the compared property, of of million during period $XX.X to invested same purchases in

on in invested full flow the on of the While we expect return our cash flow capital this months higher spending be we focus than to average capital. nine and cash considerably quarter year spending be below year, anticipate for fourth to reflecting XXXX, through the

additional Also repurchase for third We totaling shares dividend in a this and anticipate repurchasing in the $X.XX the third do quarter, any we not not per of quarter, we million. the paid year. share did remainder $X.X shares

cash lower of for For to in same ago, cash offset working million, XX-year the net resulting from the carry from plant XX, $XXX.X back. year connection operations, and was property, flow nine capital months lower equipment, ended ACRP-related the year-over-year September purchases refund $XXX.X spending and changes, period compared of million interest loss and income by this capital expense, tax lower last the year's year with partially a

At September $XXX acquisitions and higher September million, the of million. end at cash $XXX than XX a debt borrowings at of completed balance approximately the result approximately was the in our $XXX XXXX XX, was approximately quarter. Net totaled our million as

X.X end the When ratio full-year be ratio from earnings at EBITDA lower. approximately net third our into expected taking adjusted completed the leverage account Our acquisitions, would was forma to our times. debt the quarter pro of two

Post well-balanced to completion continue debt of floating have structure with and bonds. favorable we capital the rate of acquisitions, mix rate a long-term pre-payable fixed a

During through our combination a revolver the our LeanTeq of of million. we capacity $XXX we our quarter, and with of million acquisition, in had increased end the expansion $XXX loan term million $XXX from credit quarter, approximately A under $XXX $XXX by the of facility At to availability revolver. million million the conjunction

loss I the carryback XX-year an you of related our tax Before turning our want return. the update refund connection subsequent in to back the with on and to ACRP loss remaining call provide status XXXX Marvin, with

of As we $XX.X balance million expected a approximate refund of first this previously million year by the quarter and tax the the a communicated, federal of refund in had received of $XX due year. the the from refund earliest. this Based we quarter on feedback the at expect to next the however, third in end year carryback IRS, processed latest be the now of final

the to Marvin call turn guidance quarter. the to our back I'll Now for discuss

Marvin Riley

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

year, guidance performance guidance our $X.XX per the the $XXX transaction. and outlook to third anticipated a $X.XX. our of fourth Given we our range earnings for in quarter impact million LeanTeq $XXX share the million diluted are includes of of the adjusted to our the to EBITDA and adjusted lowering quarter to This the guidance remainder full-year of range

year. in in expected and fourth sealing year primarily in decline last In by is strength general continued and other in to outlook expect the number semiconductor assumes a for compared year-over-year automotive industrial Group outlook LeanTeq, demand in of in continued markets, European throughout improved the flat capital a the and The year, products, for and in moderate softness relatively we gas. trucking This markets. driven quarter, Aseptic results heavy-duty sales midstream to trucking decline end of heavy-duty and equipment oil continued softness be the inclusive of the

lower EBITDA Group contributions adjusted quarter result The improvements fourth as primarily of and from and sealing charges, and heavy-duty well year, warranty expect up prior we a contrast, over as in structure meaningfully as Aseptic productivity LeanTeq. trucking, to products In be cost

year. we engineered weakness sales year control sales high quarter expect be to EBITDA result be in cost We in industrial implemented this and continues. as of flat products, measures and to single down the earlier general digits fourth the In prior anticipate automotive productivity compared to as relatively despite a drop in

be quarter. well record with a for we of line the systems, aftermarket fourth EBITDA power quarters, results in for past Lastly, expect in level the high parts, adjusted few below to backlog prior-year the with but

line the questions. now, for And we'll open

Operator

Zaffino first Thank Ian question Oppenheimer. is of coming you. Our today [Operator instructions] from

is line live. Your now

Ian Zaffino

would you does rid very trying got And Thanks. what business, truck a guess, Rome. a us also, the bring to try a I maybe you bit mean for rationale be to cyclical? side. portfolio more then on why to truck you're the much. especially, Thank maybe bit of of Give little reshape to Question little that it Great. Hi. more as the

Milt Childress

made we making I'll Marvin We We Hi. about jump -- well. the in as Ian, as and Rome address we shoes. this Rome one best facility, brake margins to things. is line because in a we did line generate like felt time, friction you'll not we down decision weren't last we it product manufacturing, shut the the were that We provider were added the was December the Milt. recall. at But the question that several that, of friction can that could decided and acceptable us. to we then

facility then as move shoes making and So facility we brake essentially the was Rome and selling that kits took left shoe and that it. that

profitable at of standards. through reshape it it looking frankly, lens at part our portfolio. looking a that quite was made Marvin it It the as our meet decision. wasn't outlined the business, didn't result so our we it we've and And a just that now lens, of we're

actually sold been earnings accretive the going be fact we've we So forward. so losing have money that it will to our

of So first I the question. think that answers your part

second The your it? you repeat question, of part could

Ian Zaffino

of I look on guess was now. some the shed guess, broadly the just that. we we the What I third portfolio, at more to thinking, going that? revenue And as starting of forward? was Rome you contribution the Do XXXX? are portfolio how a do And how follow-up you're also, of about businesses as quarter speaking, then in expect the far question

Marvin Riley

Yes.

chance to Rome. So the start look details as and relates Milt portfolio I'll about talking up give a it to the

looking margins through. than a as assets flow we're That's investment ECFROI greater of that our than thinking picture, EBITDA sort formula. we're X% greater cash lens thinking greater year, thinking we're we're on return growing we're about that using big XX%, portfolio, about the XX% are the thinking So about than about

have are businesses. value We enduring that strong really really want strong a proposition, businesses that

And that stifled, businesses for quite high-quality businesses that our of some portfolio, in example. like assets the that they're Rome, are today. frankly, that well, structurally criteria have being We by performing not exceptional meet number are disadvantaged, a of

we're And of on we from portfolio thinking businesses fair businesses price. that underperforming of strong really can the and assets so at how perspective that very as the just it a the do profile, high get portfolio, about we're quality that thinking more in about really prune we have the have focus and the we businesses that we acquire very

we focus picture, that on we're where think strong how value. going portfolio. it add this I on can of capability a and point about a a how focus have the strong recurring and revenue That's about would strong one is, big I aftermarket And forward. Ian, center focus thinking missed that's on our a lot the and businesses

Some good of find etc. capability using our the capabilities really centers, the within supply manufacturing, perform businesses can center. like essentially We things chain that we pricing, capability to to activate want better excellence,

Ian Zaffino

you Thank Okay. very much.

Operator

Thank you.

question today from from Justin Research. Bergner is next coming G. Our

now is line Your live.

Justin Bergner

Marvin. morning, Good morning, Good Milt.

Marvin Riley

Justin. Hi,

Justin Bergner

I to comments Hey, to start, couple made guess, during remarks. your I wanted of a prepared just clarify

that hear $XX I the did sales? million expected are acquisitions So contribute of to annualized

Milt Childress

Yes, annualized million roughly. sales, of $XX

Justin Bergner

Okay.

sort million where $XX unchanged from indicated of the those in So is deals. the you announcement of had

was that. there missed I Okay. the $XXX than higher might improvement have to $XXX was XXX? margin band then a upper And or

Milt Childress

to improvement was the the to $XXX acquisitions. $XXX $XXX consistent about again EBITDA once once products that's That at and, again, once sealing that's our the our expectations $XXX margins. call basis that's -- points with of of time And again,

Justin Bergner

one guidance, guide Okay. than there that. for year, in making vis-à-vis down? more suggest quarter to of Thank pronounced at the EBITDA from fourth reported lowered that of contributing anything If they're sort the this the organic of is your the worth you contribution look guide acquisitions down I the quarter, sort clarifying not

Milt Childress

-- or prior indicated sales from flat that relatively does to fourth products expect include indicated to one-quarter the be benefit benefit Aseptic. from in sealing quarter sales the -- in -- and benefit Marvin that the we getting year. we're in additional-quarter LeanTeq That Yes. We compared

principally call the guidance the It's to than you that more other on are seen with results in we suggest it's of heavy-duty additions sealing. parts because those trucking So fact our correct down we now. when in provided are previously going we've of flat last that thought the in that be

Justin Bergner

a either prepared could of if maybe on warranty past, impact I or reason And in expense you is may third have in Okay. in Great. the think the you heavy-duty hone in just remarks Q&A. there quarter? quantified why haven't I the in trucking, the the

Milt Childress

a quarter. roughly was It in $X third charge the million Yes.

Justin Bergner

wrap guard, just the Okay. help and just is And horizon. or to or get maybe whether issue been to there the in can that not what why a more or fixed, whether be that problem could given we expect sense the of exactly up caught clarify that had not to this off as you sort

Milt Childress

quarter, reserved. appreciate you warranty claims that we as diligently experience can you know, as properly work Every make and based sure on Yes. we're to

product. at thought we to our quarter. that we another it so needed reserve the for this the Based this particular properly were we year, experience take And reserved we in past, on up. We look concluded this took

we do we year. so that regarding last to diagnosed again, And that have need was we point, the at and everything fixed this believe done itself product line. Once product

year So that identified with -- products brake line. product is what last of particular we're were the dealing with this the runoff just problems

Justin Bergner

just then business market But the XX%-plus On question. last trucking aftermarket. I what is the And obviously, very Okay. understand, STEMCO, is heavy-duty from weak. one

overall be is if you the could aftermarket understand versus to weakness the aftermarket So you if hone mix, weak within driving the on what in very OE and exactly maybe that.

Marvin Riley

majority business and quite causing No drag on is dramatic OE you're the the decline which the on what's in the of -- the general. side, side, is the it's OE right, overall on

since And aftermarket, the in see, nowhere drop-off softness the that's dramatic some July, causing as We what's to really at have near it's STEMCO. started but OE. as impact the in

Justin Bergner

for questions. taking my all Thanks Okay.

Marvin Riley

Thank you.

Operator

next Our instructions] today Company. [Operator you. & is Sidoti from question from Joe coming Thank Mondillo

now Your line is live.

Joe Mondillo

Good guys. Hi, morning.

Marvin Riley

Good morning, Joe.

Joe Mondillo

guidance. the on question quick one just So

includes million to your EDF $X roughly verify about expenses? to related guidance is wanted it Just

Milt Childress

the through of the nine year. It months includes EDF accounting all

So --

Joe Mondillo

amount Can is? that you verify what

Milt Childress

a Give second. on Hold Yes. second. me a

in of was roughly that For the the this million the million, complete estimated was cost then and $X.X an million. to increase impact contract. the impact $X quarter, of currency, $X.X

a second, for find I give quarter. full this was year. that the need I me need -- to So

Joe Mondillo

look my Okay. of up if you can second I and question, Sure. you can as sort want, ask that speak. I

Milt Childress

Yes. Go ahead.

Joe Mondillo

revenue to initiatives products related the down that So at some restructuring to you year. what get margins place took you earlier expanded trying sense -- the of the engineered on cost that that of being in in And commentary, a just your prepared took largely segment, some was -- X%. and in I mean, mentioned of the

trying to anticipating think can decremental terms Just declines for margins. understand expect what believe in I quarter. decrementals, that mentioned in single-digit you're we in But fourth terms of you that the high of revenue quarter? we fourth about how the can

Milt Childress

And products? referring engineered specifically to you're

Joe Mondillo

Yes, that's correct.

Milt Childress

I to though that cited, expect compared to for high Yes, Marvin digits we to relatively fourth last revenues think EBITDA quarter the the year, reasons even down we flat. for be single expect be

And quarter by earlier last and structure done fourth to expecting engineered expecting up this the that's to other teams -- the in response our of year. our cost volume so accordingly, we're of be because we're year and in over expecting we're work rightsizing margins measures,

Joe Mondillo

Okay.

of fully terms of -- cost of in expected effects side you've the lower offset to initiatives are any the volumes? are that So offset taken the things from fully

Milt Childress

That's correct.

Marvin Riley

how earlier in this because to that foresight to in -- started and business we business it indicate had early of we've the that we're had That's things job early. to sort right of done that now, seen degrade a -- year, jump and thinking right. we how it that's on That's Everything now. an all indications we've see it right sort date about nice we pretty obviously,

the of that. starting we're benefit see so to And

Joe Mondillo

then… And Great. Okay.

Milt Childress

Joe. ahead, yes, And go Joe --

Joe Mondillo

going I move to systems. to was power just

ideas So -- actually if other you have

Milt Childress

Yeah, keep going. going. Keep

Joe Mondillo

$X we're the maybe XX% of be could Just have from looks I should -- of -- And going be quarter, in a you that or growth different in you I the are it maybe to higher how million realized systems, a looking given little thinking looking exclude the the thought knew the operating I factors? that quarter of quarter, op to -- itself? margins. terms this margins to are chunk power any margins be about going mix like you're then terms revenue about the -- roughly just been be excluding you going any if at that fourth that at aftermarket. other How in was large was

Milt Childress

had quarter last in power. quarter you we year, as a blowout the Well, realize, in fourth

expect highlighted when And and so don't was and year. kind about he of performance, that for that the of kinds guidance margins those Marvin talking

what throughout we So for power results in be seen. the to We've with in performance power fourth we've quarter year in good expect line had generally systems. in the

that the do last I some we the in quarter, obviously, in saw below what possible strong had think on we of sequential it's quarter in see fourth the improvement year, our we volume but really margins fourth last year.

Marvin Riley

on agreement quarter a in that. Yes. for I'm with fourth Milt that It's is typically business. quarter strong

but So of versus look QX we QX QX, what it up, at might if you not be in XXXX. slightly saw definitely

Milt Childress

year. for The months. impact contract for EDF about this year for a the of And then, full $X impact -- currency so on are me Joe, the on the full the year is million, And million. approximately on let the total your question, give million the the $X year for nine costs you answer roughly quickly the your question additional for $X

Joe Mondillo

terms just mean, Appreciate guys you business. this power I of pretty Okay. then some in And have in systems, good looking Great. you. with Thank that. visibility

months thinking how of at are sort you maybe about, should year, you comp. side, that standpoint, up? EDF, you're than this this comp, Just about in to probably a XXXX be a So revenue with point, how left sort a how less on curious of two year, shaping of on have you're the margin ex that? going are pretty tough And the thinking then comp terms anticipating pretty good this in

Milt Childress

working the good systems. The know, backlog for Well as you new is year team be to I to power shape. identify expect XXXX in hard And there. really mean, really, opportunities another I has decent been

but now you helpful would in We're power year EnPro give So to XXXX. be be expect percent XXXX in I a a for think etcetera, will position systems. I right increases, the power good to systems not for portfolio

Joe Mondillo

Okay. -- changes about Anything there? OP X.X? to that? Or then say with update And any is Any

Milt Childress

endurance the very last, looking as paces No that relates testing, No. it launch, our as opportunities to communicated updates. do identified, Continuing work to the there major has going continuing team we with through its etcetera, at diligently.

So no at this updates major point.

team is I still issues was visiting work the and there But spirits, continuing out market. recently, in working team every here and it. the resolving day to the And diligently, upbeat, identifying high

So update. that the be would

Joe Mondillo

sort in of main sort we're everything of we And those are headcount, some I where headwinds the that the going then are cost two to some seeing, Where just the are we already that? initiatives terms combat of Are you're amongst still segments? implemented? and that of guess, your things? restructuring and midst in implementing Okay. through doing we Or of at

Milt Childress

on the alarming obviously, We would and I market very run if right? I is. is feel, with may to feeling would the right locked We if size of outside We in top up with in way systems really the comfortable not to make see we're rates experiencing obviously, changes trucking. But the be feel we necessary do heavy-duty engineered trucking. of, in So most, really further to are is continue have that good adjustment. don't is. say to markets all, that related, some it that line. where where line And energy our everything is now erode, The anything power everyone is with

general in industrial everywhere. general, obviously, -- soft We is

our I little little bit business industrial bit businesses, action. challenged but acutely is more tell headwinds think a in which and each requires you a that, every combat than those poised more of trucking really others, just our to heavy-duty would likely we're

in about heavy-duty thinking place what at get give and we're a of hard feel feel do is issue we're necessary that's But what trucking not you good think trucking right? it's waking else. importantly, we fast about in pace or a good I as taking about and, in, we to moving to inning I would behind the sense but every are are quarter I pace, up the day that anywhere us possible. that So say, heavy-duty as pace the actions more this we're

right what important piece. mean, most I with. the we're that's think I is pace the for dealing

Joe Mondillo

making bit have there but Okay. that that. in up I ramping also sure been guys settlements. terms been to reserve environmental seems it's about reserve payments, to little must making -- of have related then wanted close And these like you costs the to it these I'm a you been ask have

this What smaller is two big of Or us? behind going sort Should be describe -- you these of -- this how settlements? to going forward, there now much a is this we've some still significant major can how forward? you is made to get issue that sort that progress make have

Milt Childress

in in put been the that's monitoring cost remediation of environmental you'll Joe, disclosure which modest. in and to those it's plan we're fairly But just XX Qs sites. fairly a find good K the are on on-going matters. up summarize activities clean place, in and The modest. involved our roughly been that there's just activities, and most is already of remediation is But of

reserves which what And with address, being We're quarter. then for we where items these we that leaves significant those able very had the situations. that we are the us for appropriate get and established this pleased behind settlement terms know matters And three have of evaluate continue negotiate, where those situations and to are in two we with to us. we then

a really have is that yet just required, not we're situations it. But But at quantified. a dealing news really with might to we're there provide only remaining three can we good -- three where estimate full a what the small point evaluating be be it's are because -- these we're of ultimately, situations that

a pretty in these have really We a we're don't lot forward. bringing of shape. step And So big to completion exposure. good was

Marvin Riley

But the the some you script. we we'd in mood hard big relative pretty darn We've about it. It's how excited convey that pretty got to these check to that Yes. a about issues, these deal move be if feel of of up beyond taking have these been some around the resources, it's in big and behind team, issues to sort past. issues energy. lingering leadership were time And us here

so the certainly script, that about And really we're I consuming business focus running good issues so the energy, in these not us that no on we're to today. the are convey feel behind that appropriately and we able but and time can longer fact

So I mean to issues. everyone should feeling as these have it the that's relates

Milt Childress

from I spinoff that sure, but at -- contributed clear, created just the are we in these this just evaluation sites be EnPro it's before talked EnPro. of And matters clear, make are require about think to go we to. that significant Goodrich what is well back These today to none that certain

a So the liabilities these of Enpro matters had of are result been spin. very as that old

I just sure just So clear. make -- to that's wanted

important Our we really that's stewardship a a and the facilities, became good record company. have and something track separate is on and we environmental our since case to us, we operate in how been that's spin the

Joe Mondillo

D&A, sort that. forward, your of done question, sure to the the amortization if acquisitions? Wondering just annualized accounting sort normal yet, what would you clarifying My sort of calculation expect annualized Not have really Great. last going D&A. be that Thanks what but including purchase quick. of for

Milt Childress

Yes.

that I that at different have mean, We obviously, on but balance call, the have me, think into preliminary to front sheet, to I we'll our I of since we'll number cover accounting. did another time. was, have our purchase baked cut have that cover don't a in that

Joe Mondillo

these accounting you acquisitions? do the recent related have Well, excluding purchase number to the

Milt Childress

Yeah. of Joe. I in have mean, we've -- I front it don't just me,

Joe Mondillo

follow can That's up. I fine. Okay.

Milt Childress

And yeah. for at in -- months can nine our can You look statements. financial you D&A the

amortization There's of the of amortization fact, million. acquisition. not lot nine a And acquisitions. it, million; a and $XX in depreciation. going annualize to around months of bit of -- D&A that the going considerable $XX obviously, intangibles because step matter There, with As But around is will months obviously, up. to nine up pull depreciation you a take connection the you if can it's is, be it's that I be

obviously, the nine annualize a And bit. which months depreciation. give depreciation, amortization, then pretty that step going to to is XX.X%, you up was close if for So you will

Joe Mondillo

Appreciate Thanks. right. taking questions. All you my Okay.

Operator

Thank you.

Capital from question is next from Markets. Our Hammond KeyBanc coming Jeff

live. now is line Your

Jeff Hammond

Hey. me guys. Good here. Thanks putting morning, in for

Marvin Riley

morning, Jeff. Yeah. Good

Jeff Hammond

on to you looks just into weak versus Can kind teens of Just it declines. backing how high a aftermarket? truck, mid like of sense OE is us give

Milt Childress

X% July, since or like nowhere That's Yes. maybe near but accelerated OE it I about bit say, is more call that, down down, up. OE. Aftermarket in the would little size X% is so, a something or business. it, how XX% I'd as as drastic

Jeff Hammond

you And in of drop-off and is Okay. I the see expectation the be guess, into head continues we big as just expectations? production weak 'XX to OE then just, kind

Marvin Riley

Yes.

be expect to to continue weak. we OE So

to market else the seeing would business expect be line in in our everything with size we're steady. and We right what now

Milt Childress

continues truck probably those -- is or experience -- OE on maybe -- side observed chase decline year the the Our we drop Trailers, like They've have to, view XX% team's the teens made more market is which latest also XXXX. and mid-to-high-teens. high down. truck will comment it's actual that exposure more that to information over year in chasing

don't know, we the information data. based industry So have really from best now but right team the on we that's our

Jeff Hammond

fall seems these Good. like that businesses And portfolio your through cut then it Marvin, I of the maybe sector. truck Okay. comments, noncore about some if within

how And think about those of where waiting at we time you're cyclical facing divesting kind so should just recovery? for cyclical challenges businesses a versus

Marvin Riley

would Yes. that's mean, to that I will. get versus we we for have so time It's something sense we what to how are the where long take, wait ideal to value doing to the that as long the situations. would we take a as possible business, doing some be Obviously, opportunity advantage a get how take will markets is can of to feel and like for of the question, an hard long right? improve those we Obviously, value that at that predict but now. analysis

at company. or day, that do or a with competitive lot the us, has having the we're it how think the belief so advantage end mean, inside And about I the and And for our whether sort of that's has it to of we're business it. a just not real thinking the And conversation strong not. that's has I

Jeff Hammond

down Okay. much that it into then, the versus isolate consider the EBITDA the And Can like just was much truck guide? about or you how this And then you $XX $XX contributes brought you guess, looks million million-plus, million. just acquisition $XX on how about -- other? I of guidance acquisition, if Thanks. by

Milt Childress

I acquisitions when on to the going talked provided We on we, understand the think in announced -- the Jeff with this enough to are us impact tried to information we provide aggregate. call overall that about the the you we've acquisitions. have

still into don't contribution. want and we changed. has we the But didn't just reasons, want that specifics get dollars to I to, of commercial nothing EBITDA say terms in For of will

to We semiconductor. very pharmaceutical additions, the into about the continue expansion and excited be

softness So engineered and general automotive now where in of view European heavy-duty is the and industrial drop and were really a ago, continued products. well of from the guidance quarter a we industrial, as function more general trucking in a different primarily as

expectations for heavy-duty two the the in also in the had we've trucking. expectations a now if factors, is engineered our are largest, by quarter for those products you between look delta So the versus decline But reasons I far, mentioned. at a just ago,

Jeff Hammond

Thanks, Okay. guys.

Operator

you. Thank

Research. next is Our Bergner from question follow-up a from G. Justin

line live. Your is now

Justin Bergner

for guys. you up, follow Thank the

quarter? absorbing So just you're an costs $X to clarify, the that EDF coming wasn't guidance out in million your second of power extra of systems, in anticipated

Milt Childress

That's correct.

Justin Bergner

aftermarket the then seeing you're quarters weakness STEMCO in in that's going going expect is Is related? believe coming business. side? of there the end and stocking anything from Okay. like view, market to particularly an back the Great. of the And see on point inventory Or to do you

Marvin Riley

is than obviously, of take more supply I you driver so We -- sort we its little there's believe end primary sit some bit obviously, in But to don't that bullwhip driven market-related, related, end effect side. markets the exactly, a certainly the the of why certainly little everyone to have by run is been down a don't a on normalize markets. believe and is some aggressive down primarily get, chains chain adjust. We whether trade when new that end of and talk markets. adjusting and a place that The obviously, their our supply bit the But others, businesses maybe And further to rate. inventory the adjustments etcetera. here that's it's want etcetera, about end you

back On the come some stronger a bit may little upside, well. as

market we certainly end related. it's think So

Justin Bergner

STEMCO back at trucking potentially up that you to inorganically changed a If maybe just STEMCO about margins, from of besides Okay. an years a state rethink attractive where trailer EBITDA you one has new with advantage. up the example view as And competitive of might the back? then comment a really sort what cycle and EnPro of on a cause years building to few the investor made that business STEMCO's few wrap of day goes to presentations one was earlier held

Marvin Riley

we're dramatic businesses. mean, than else. I I'm has But the what acutely weakness in you trucking just view the have as changed. let's anyone way view STEMCO business do is in we new is new and in is, that have, some affecting far give a I'll face affecting any more view market, other which my or seeing So industrial guy, not obviously, you it, anywhere the tell the it's the general not in drop-off

So something quite there. there significant is

to we like And then the strategy thinking turn I've a versus lot those thinking businesses to where just with say, unattractive that acquire we I with would businesses, time. at price and we And went bought a put businesses we at was around. come businesses that in what that's our the the those structurally some, improve And in we'd to fair buy could of have resources in better businesses. that

what's Some bad, have us of ones -- not hurting And worked some that's would those The thought have We haven't. businesses it some perform we bought, are gone we greatly. we could right? and around that worked. turn perform and primarily and that well worked have have would not they

I say, the And would way again. forward to be, that that And not is would lesson do the so learned.

Justin Bergner

Okay. Understood. Thank you.

Operator

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

Chris O'Neal

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

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

EnPro Industries (NPO) 9 Nov 192019 Q3 Earnings call transcript