EnPro Industries(US:NPO)2021-11-05 17:33Financial Performance - Net sales for Q3 2021 were $283.1 million, a 5.5% increase from $268.3 million in Q3 2020 [142]. - Income from continuing operations attributable to EnPro Industries, Inc. was $27.5 million in Q3 2021, compared to a loss of $21.6 million in Q3 2020 [139]. - Adjusted Segment EBITDA for Sealing Technologies increased to $34.5 million in Q3 2021, up 7.8% from $32.0 million in Q3 2020 [144]. - Advanced Surface Technologies reported sales of $64.3 million in Q3 2021, reflecting a 44.2% increase compared to $44.6 million in Q3 2020 [146]. - Engineered Materials sales increased 9.0% to $73.8 million in Q3 2021 from $67.7 million in Q3 2020 [148]. - Adjusted diluted earnings per share from continuing operations were $1.40 in Q3 2021, compared to $1.01 in Q3 2020 [139]. - Net income attributable to EnPro Industries, Inc. was $27.5 million, or $1.33 per share, in Q3 2021, compared to a net loss of $19.7 million, or $(0.96) per share, in Q3 2020 [153]. - Sales for the first nine months of 2021 reached $861.0 million, a 7.9% increase from $798.0 million in the same period of 2020 [154]. - Adjusted Segment EBITDA for the first nine months of 2021 was $110.8 million, a 15.3% increase from $96.1 million in the same period of 2020, with margins increasing to 24.3% from 19.9% [156]. - Advanced Surface Technologies reported sales of $178.2 million in the first nine months of 2021, reflecting a 46.9% increase compared to $121.3 million in the same period of 2020 [157]. - Engineered Materials sales increased 16.3% to $234.2 million in the first nine months of 2021, up from $201.4 million in the same period of 2020 [160]. - Total adjusted segment EBITDA for the nine months ended September 30, 2021, was $128.4 million, compared to $84.3 million in the same period of 2020, marking a 52.2% increase [205]. - Adjusted EBITDA for the nine months ended September 30, 2021, was $160.8 million, up from $120.2 million in the same period of 2020, reflecting a year-over-year increase of 33.7% [207]. Acquisitions and Divestitures - The company reported a pre-tax gain of $19.5 million from the sale of its polymer components business unit, which generated approximately $20 million in sales prior to the sale [127]. - An agreement was made for the sale of the CPI Business for an aggregate purchase price of $195 million, with an anticipated pre-tax book gain exceeding $100 million [128]. - The divestiture of the polymer components business was completed in Q3 2021, with an agreement to sell the CPI business reached in October 2021 [136]. - EnPro Industries plans to evaluate additional acquisitions and divestitures to refocus its portfolio on high-margin businesses [138]. - The company entered into a Purchase Agreement to acquire NxEdge for $850 million, focusing on advanced manufacturing in the semiconductor value chain [130]. - The company has secured commitments for a $265 million incremental term loan and a $135 million 364-day term loan facility to fund the acquisition of NxEdge [133]. Operational Highlights - The company operates three segments: Sealing Technologies, Advanced Surface Technologies, and Engineered Materials, focusing on high-margin, technology-driven markets [122]. - The company has 20 principal manufacturing and service facilities across 13 countries, enhancing its operational capabilities [121]. - The COVID-19 pandemic has impacted demand for the company's products, with ongoing uncertainties regarding economic recovery and supply chain challenges [134]. - The company has developed contingency plans to adjust production levels in response to potential operational disruptions due to COVID-19 [135]. - The company emphasizes the importance of non-GAAP financial measures to evaluate ongoing operations and performance [120]. - The company is focused on materials science-based businesses with strong cash flow and recurring revenue, targeting markets with favorable growth trends [121]. Financial Position and Management - Cash provided by operating activities was $97.8 million in the first nine months of 2021, compared to $48.4 million in the same period of 2020 [169]. - Corporate expenses for the first nine months of 2021 increased by $8.7 million compared to the same period in 2020, driven by higher incentive compensation costs [162]. - As of September 30, 2021, the company held $212.3 million of its $330.0 million cash and cash equivalents outside the United States [166]. - As of September 30, 2021, the borrowing availability under the Revolving Credit Facility was $388.5 million, with $11.5 million reserved for outstanding letters of credit [179]. - The Company had $142.5 million of outstanding borrowings on its Term Loan Facility as of September 30, 2021 [179]. - The total assets of the Parent and Guarantor Subsidiaries as of September 30, 2021, were $1,219.1 million, with total liabilities of $778.9 million [192]. - The company incurred a net interest expense of $10.2 million for the nine months ended September 30, 2021, down from $11.4 million in the same period of 2020, indicating improved financial management [207]. Tax and Environmental Considerations - The company reported an income tax expense of $15.1 million for Q3 2021, compared to a benefit of $7.3 million in Q3 2020, indicating a shift in tax position [204]. - Environmental reserve adjustments for Q3 2021 amounted to $4.5 million, down from $14.0 million in Q3 2020, showing a reduction in environmental liabilities [204]. - The adjusted income tax expense for the nine months ended September 30, 2021, was calculated using a normalized effective tax rate of 30.0% [206]. - Environmental reserve adjustments amounted to $4.5 million for both the quarter and nine months ended September 30, 2021, consistent with the previous year, highlighting stable environmental cost management [207]. Market and Commodity Risks - Commodity raw materials such as steel and copper are subject to price fluctuations, which could negatively impact results, emphasizing the need for effective cost management strategies [213]. - The company aims to pass along commodity price increases to customers to avoid profit margin erosion, demonstrating proactive pricing strategies in response to market conditions [213].