EnPro Industries Reports Results for the Third Quarter and First Nine Months of 2015 and Announces New Share Repurchase Program

CHARLOTTE, N.C.--(BUSINESS WIRE)--EnPro Industries, Inc. (NYSE: NPO):

Consolidated Financial Highlights (Amounts in millions except per share data and percentages)
Consolidated Financial Results	Quarter Ended September 30								Nine Months Ended September 30
		2015			2014		% Change			2015			2014		% Change
Net Sales	$	306.6		$	302.6		1	%	$	882.5		$	902.9		-2	%
Segment Profit	$	33.2		$	38.6		-14	%	$	86.7		$	102.8		-16	%
Segment Margin		10.8	%		12.8	%				9.8	%		11.4	%
Net Income (loss)	$	11.4		$	8.6		33	%	$	(27.5	)	$	18.2		-251	%
Diluted EPS	$	0.51		$	0.33				$	(1.21	)	$	0.71
Adjusted EBITDA*	$	41.8		$	43.1		-3	%	$	113.6		$	115.0		-1	%
*See attached schedules for adjustments and reconciliations to GAAP numbers
Normalized Consolidated Results	Quarter Ended September 30								Nine Months Ended September 30
		2015			2014		% Change			2015			2014		% Change
Normalized Net Sales**	$	283.7		$	294.9		-4	%	$	865.5		$	878.2		-1	%
Normalized Segment Profit**	$	33.3		$	37.8		-12	%	$	96.7		$	99.5		-3	%
Normalized Segment Profit Margin**		11.7	%		12.8	%				11.2	%		11.3	%
**Normalized data adjusted for FX, acquisitions and divestitures, acquisition expenses, restructuring and EDF loss provision as set forth in the attached schedules
Pro Forma Financial Information	Quarter Ended September 30								Nine Months Ended September 30
including deconsolidated GST *		2015			2014		% Change			2015			2014		% Change
Pro Forma Net Sales	$	346.5		$	348.9		-1	%	$	1,009.5		$	1,043.2		-3	%
Pro Forma Net Income	$	19.8		$	18.7		6	%	$	1.5		$	51.7		-97	%
Pro Forma Adjusted EBITDA	$	53.0		$	55.7		-5	%	$	148.2		$	156.3		-5	%
*See attached pro forma schedules

• Net sales for the third quarter of 2015 decreased by 4% from the third quarter of 2014 after adjusting for foreign exchange translation, acquisitions and a divestiture.
• Segment profit for the third quarter decreased by 12% after adjusting for foreign exchange translation, acquisitions and divestitures and their related expenses, and restructuring.
• Diluted EPS increased to $0.51 in the third quarter of 2015 from $0.33 in the third quarter of 2014.
• Adjusted EBITDA was $41.8 million in the third quarter and $113.6 million for the first nine months of 2015 compared to $43.1 million in the third quarter and $115.0 million for the first nine months of 2014.
• Third quarter pro forma sales† (which includes the sales of deconsolidated GST) declined to $346.5 million, or 1%, from the third quarter of 2014. Pro forma Adjusted EBITDA† declined 5% to $53.0 million compared to the third quarter of 2014.
• For the first nine months of 2015, pro forma sales decreased 3% to $1,009.5 million from the first nine months of 2014. Pro forma Adjusted EBITDA† of $148.2 million decreased 5% from the first nine months of 2014.

† (Please refer to Pro Forma Condensed Consolidated Financial Statements attached)

EnPro Industries, Inc. (NYSE: NPO) today reported consolidated sales of $306.6 million in the third quarter of 2015, a $4.0 million, or 1%, increase from the third quarter of 2014. On a normalized basis, which excludes the effect of foreign exchange translation and the net impact of acquisitions and a divestiture, sales declined 4%. On a normalized basis, Power Systems segment sales were 6% higher than the third quarter of 2014 but this was more than offset by sales declines of 4% in Sealing Products and 8% in the Engineered Products segment.

Segment profit margin of 10.8% in the third quarter of 2015 was down from 12.8% in the third quarter of 2014 primarily as a result of lower volumes in the Sealing Products and Engineered Products segments and the expected low-contribution impact from the truck parts acquisitions in the Sealing Products segment. On a normalized comparison, segment profit margins for the quarter were 11.7% compared to 12.8% in the third quarter of last year.

EnPro reported net income in the third quarter of 2015 of $11.4 million, or $0.51 a share, compared to net income of $8.6 million, or $0.33 a share, in the third quarter of 2014. Contributing to the improved net income were lower corporate expenses of $3.8 million, lower other expense of $3.0 million, primarily related to a $4.0 million loss on the purchase of convertible debentures that occurred in the third quarter of last year, and $3.7 million lower income tax expense resulting from discrete items.

Consolidated earnings before interest, income taxes, depreciation and amortization and other selected items detailed in the attached financial schedules (adjusted EBITDA), were $41.8 million in the third quarter of 2015, a 3% decrease from the third quarter of 2014.

The company’s average diluted share count in the third quarter of 2015 decreased by 4.0 million shares to 22.1 million shares, down 15% from the same period a year ago. The decrease primarily reflects the net effect of the cash purchase of convertible debentures in September, 2014, as well as the unwinding of the hedge related to the original issue of convertible debentures and purchases of 1.2 million common shares occurring in the first four months of 2015.

Nine Months Results

Sales for the first nine months of 2015 were $882.5 million, a 2% decrease from 2014. Excluding foreign exchange translation and the net impact of acquisitions and dispositions, sales were 1% lower than the first nine months of 2014, as an increase in Power Systems was more than offset by a decline in the Engineered Products segment.

Segment profit margin of 9.8% in the first nine months of 2015 was down from 11.4% in the first nine months of 2014, primarily as a result of lower volumes in the Sealing Products and Engineered Products segments, higher restructuring and integration expenses and higher benefits costs partially offset by a favorable sales mix in Sealing Products, favorable pricing in all segments, lower material costs and lower incentive compensation expenses. On a normalized comparison, segment profit margins of 11.2% were essentially level from the first nine months of 2014.

Net loss for the first nine months of 2015 was $27.5 million, or $1.21 a share, compared to net income of $18.2 million, or $0.71 a share, in 2014. The year-to-date net loss is a result of the $45.8 million after tax goodwill impairment charge related to CPI that was recorded by the company in the second quarter of this year. Adjusted EBITDA for the first nine months was $113.6 million compared to adjusted EBITDA of $115.0 million in the first nine months of 2014. Adjusted EBITDA is calculated before selected items, including the goodwill and intangible asset impairment charge, interest due to GST, a loss on the exchange and repurchase of convertible debentures and other items detailed in the attached financial schedules.

Sealing Products Segment

	Quarter Ended								Nine Months Ended
($ Millions)		9/30/2015			9/30/2014		Change			9/30/2015			9/30/2014		Change
Sales	$	186.3		$	168.9		10	%	$	520.2		$	499.3		4	%
Segment Profit	$	22.5		$	23.0		-2	%	$	61.7		$	62.9		-2	%
Segment Margin		12.1	%		13.6	%				11.9	%		12.6	%
Normalized Net Sales	$	154.8		$	161.2		-4	%	$	474.6		$	474.6		0	%
Normalized Segment Profit	$	21.9		$	22.2		-1	%	$	62.3		$	59.5		5	%
Normalized Segment Margin		14.1	%		13.8	%				13.1	%		12.5	%
Adjusted EBITDA*	$	32.1		$	31.2		3	%	$	90.6		$	87.3		4	%
Adjusted EBITDA Margin **		17.2	%		18.5	%				17.4	%		17.5	%
*See attached schedules for adjustments.
** Adjusted EBITDA as a percentage of sales

In the third quarter of 2015, sales in the Sealing Products segment increased 10% from the third quarter of 2014. Acquisitions, net of a divestiture, contributed approximately $29.0 million of sales in the quarter, partially offset by lower volumes and unfavorable foreign exchange translation. Softer demand from oil and gas, truck parts, semiconductor and general industrial markets were partially offset by stronger nuclear market and aerospace sales.

The segment’s profits decreased by 2% and segment profit margins declined to 12.1% from 13.6% in the third quarter of 2015. On a normalized basis excluding the impact of foreign exchange translation, restructuring expenses, acquisitions and related expenses and a divestiture, segment profits were slightly lower than in the third quarter of 2014, and segment margins of 14.1% expanded 30 basis points compared to the third quarter 2014 segment margins of 13.8%, largely due to lower operating costs.

The segment’s sales for the first nine months of 2015 were 4% higher than in 2014, and approximately even on a normalized basis, excluding the impact of foreign exchange translation and the net impact of acquisitions and a divestiture. Higher revenues from truck parts, aerospace and chemical markets were partially offset by softer conditions in oil and gas, semiconductor and general industrial markets.

Segment profits were 2% lower year-to-date 2015 compared to 2014 largely due to the net impact of acquisitions and dispositions and foreign currency. On a normalized basis, excluding these items and 2014 restructuring expense, segment profits increased 5% year-over-year largely due to lower operating costs.

Engineered Products Segment

	Quarter Ended								Nine Months Ended
($ Millions)		9/30/2015			9/30/2014		Change			9/30/2015			9/30/2014		Change
Sales	$	72.1		$	88.1		-18	%	$	227.8		$	275.4		-17	%
Segment Profit	$	1.5		$	6.0		-75	%	$	8.9		$	23.6		-62	%
Segment Margin		2.1	%		6.8	%				3.9	%		8.6	%
Normalized Net Sales	$	80.7		$	88.1		-8	%	$	256.4		$	275.4		-7	%
Normalized Segment Profit	$	2.2		$	6.0		-63	%	$	13.3		$	23.7		-44	%
Normalized Segment Margin		2.7	%		6.8	%				5.2	%		8.6	%
Adjusted EBITDA*	$	7.0		$	11.6		-40	%	$	25.7		$	40.7		-37	%
Adjusted EBITDA Margin**		9.7	%		13.2	%				11.3	%		14.8	%
*See attached schedules for adjustments.
**Adjusted EBITDA as a percentage of Sales

Engineered Products sales in the third quarter of 2015 were 18% lower than the third quarter of 2014. On a normalized basis, excluding the negative impact of foreign exchange translation, the segment’s sales for the quarter were 8% lower than in 2014. This reduction was driven by lower sales of bearings, particularly in the fluid power and agricultural equipment markets, coupled with continued weakness in compressor parts and services demand from the Canadian natural gas market and in the U.K. and Middle East.

Segment profits declined $4.5 million or 75% for the third quarter of 2015 from the comparable period in 2014. On a normalized basis, excluding the impact of foreign exchange translation and restructuring charges, the decline was $3.8 million. Lower sales volumes were the primary drivers for the decline and more than offset cost reduction initiatives in the segment.

For the first nine months of 2015, the Engineered Products segment’s sales were 17% lower than the comparable period of 2014. On a normalized basis, excluding the impact of foreign exchange translation, sales declined 7% from the prior year. Lower sales of bearings in the U.S. and lower sales of reciprocating compressor parts and related services in Canada, the U.K., Middle East and the U.S. markets more than offset sales increases in other European markets. Normalized segment profits, excluding foreign exchange translation and restructuring charges, declined $10.4 million or 44% from the first nine months of 2014, as improved pricing and the favorable impact of cost reduction initiatives were more than offset by the impact of lower sales volumes.

Power Systems Segment

	Quarter Ended								Nine Months Ended
($ Millions)		9/30/2015			9/30/2014		Change			9/30/2015			9/30/2014		Change
Sales	$	49.1		$	46.5		6	%	$	137.2		$	130.6		5	%
Segment Profit	$	9.2		$	9.6		-4	%	$	16.1		$	16.3		-1	%
Segment Margin		18.7	%		20.6	%				11.7	%		12.5	%
Normalized Net Sales	$	49.1		$	46.5		6	%	$	137.2		$	130.6		5	%
Normalized Segment Profit	$	9.2		$	9.6		-4	%	$	21.1		$	16.3		29	%
Normalized Segment Margin		18.7	%		20.6	%				15.4	%		12.5	%
Adjusted EBITDA*	$	10.3		$	10.4		-1	%	$	19.2		$	18.9		2	%
Adjusted EBITDA Margin**		21.0	%		22.4	%				14.0	%		14.5	%
*See attached schedules for adjustments.
**Adjusted EBITDA as a percentage of Sales

In the Power Systems segment, sales increased by $2.6 million, or 6%, from the third quarter of 2014. The increase includes higher engine and service revenues partially offset by a decrease in repair parts. Segment profits decreased 4% and segment profit margins declined to 18.7% from 20.6% in the third quarter of 2014 primarily as a result of the lower mix of repair parts, new product development costs and higher selling, general and administrative expenses.

The segment’s sales in the first nine months of 2015 were 5% higher than in the comparable period of 2014 primarily due to higher revenues from parts and service. Engine revenues were $0.3 million lower. Segment profits of $16.1 million included a foreign exchange related $5.0 million loss provision associated with periods beyond 2015 for a multi-year contract to supply engines to EDF that is priced in euros. Normalized segment profits for the first nine months of 2015, excluding this foreign exchange loss provision, improved $4.8 million year-over-year, and margins were 15.4% compared to 12.5% in 2014. The higher margins were primarily due to higher volume, a more favorable mix of high-margin parts and services and improved pricing, which more than offset increased selling, general and administrative expense.

Garlock Sealing Technologies

	Quarter Ended								Nine Months Ended
($ Millions)		9/30/2015			9/30/2014		Change			9/30/2015			9/30/2014		Change
Net Sales*	$	54.0		$	61.1		-12	%	$	165.2		$	183.1		-10	%
Third Party Sales	$	48.8		$	53.8		-9	%	$	149.3		$	163.6		-9	%
Operating Income	$	8.9		$	10.5		-15	%	$	29.1		$	222.1		-87	%
Operating Income Margin		16.5	%		17.2	%				17.6	%		121.3	%
Normalized Net Sales	$	57.5		$	61.1		-6	%	$	173.3		$	183.1		-5	%
Normalized Operating Income	$	10.1		$	11.1		-9	%	$	31.4		$	37.1		-15	%
Normalized Oper. Inc. Margin		17.6	%		18.2	%				18.1	%		20.3	%
Adjusted EBITDA-A*	$	11.1		$	12.6		-12	%	$	34.5		$	41.3		-16	%
Adjusted EBITDA-A Margin**		20.6	%		20.6	%				20.9	%		22.6	%
* Includes inter-company sales
**Adjusted EBITDA-A as a percentage of Sales

Net sales at the deconsolidated operations of GST and its subsidiaries (collectively “GST”) in the third quarter of 2015 decreased by 12% compared to the third quarter of 2014. Excluding the negative effect of foreign exchange translation, the decline was 6%. Market conditions were soft in North America and Australia in most process industries including steel processing, metals & mining, and in downstream oil and gas, where refineries have continued to delay their maintenance work. Operating income was down 15% from the third quarter of 2014, primarily due to the lower volume and a less-profitable mix.

GST’s net sales in the first nine months of 2015 were 10% lower (5% lower excluding foreign exchange translation) than 2014 reflecting lower demand in North America and from foreign affiliates. Operating income declined as a result of unfavorable volume and mix and the impact of $186.6 million income reflected in the first nine months of 2014 related to a reduction in the asbestos liability accrual on GST’s balance sheet made in June 2014 to reflect GST’s amended plan of reorganization.

On a normalized basis excluding the impact of foreign exchange translation and the 2014 changes in GST’s asbestos liability accrual, GST’s operating income was down 15% from the first nine months of 2014.

The results of GST and certain subsidiaries were deconsolidated effective June 5, 2010, when GST filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy code. These filings were the initial step in a process to reach a permanent resolution of all of GST’s current and future asbestos claims. Tables attached to this press release illustrate, on a pro-forma basis, condensed consolidated financial results for the third quarter and nine months of 2015 and 2014 as if GST were reconsolidated with EnPro based on confirmation and consummation of GST’s second amended proposed plan of reorganization filed on January 14, 2015. The narrative preceding those tables includes an important discussion of the risks and uncertainties applicable to confirmation and consummation of the third amended plan of reorganization. Due to these risks and uncertainties, while management believes the plan of reorganization can be confirmed, management does not yet deem reconsolidation to be probable under Regulation S-X of the Securities and Exchange Commission (SEC). Therefore, pro forma financial statements are not required by the SEC. EnPro is providing the pro forma financial information in this release as supplemental information in response to requests from investors for this information.

Corporate Expenses

Corporate expenses decreased $3.8 million to $6.3 million in the third quarter of 2015 compared to the third quarter of 2014. The decrease was primarily driven by lower employee costs, including benefits and incentive compensation, lower professional service costs and share-based compensation to directors due to the decreased fair value of certain awards accounted for as liabilities. For the first nine months of 2015, corporate expenses declined $11.4 million to $19.5 million for the same reasons as given above for the quarter.

Goodwill and Other Intangible Asset Impairment

Due to the continuing deterioration in the oil and gas markets in which our CPI reporting unit operates, the company concluded that events had occurred and circumstances had changed that required it to recognize a goodwill impairment charge ($46.1 million pre-tax) and an impairment of the amortized trademarks carried by CPI ($0.9 million pre-tax) in the second quarter of 2015. Together these impairment charges totaled $45.8 million on an after-tax basis.

Income tax

For the third quarter of 2015 income tax expense was $0.8 million compared to $4.5 million in the third quarter of 2014. The low tax expense in the third quarter of 2015 primarily results from additional discrete items recorded including a $0.9 million benefit from provision-to-return adjustments, and a $1.5 million net benefit from the reversal of a previously recorded state tax liability related to the sale of GRT. Without discrete items, the effective tax rate was 22.5% in the third quarter of 2015 versus 29.4% in the third quarter of 2014.

For the first nine months of 2015, income tax expense was $0.7 million compared to $8.7 million for the comparable period last year. The volatility in the tax is primarily the result of significant discrete items that were recorded during the first nine months of 2015. Without discrete items, the effective tax rate was 26% in the first nine months of 2015 versus 29.5% in the first nine months of 2014. The company’s effective tax rate is directly impacted by the relative proportions of revenue and income before taxes in the jurisdictions in which it operates.

Cash Flows

EnPro’s cash balance stood at $92.0 million at September 30, 2015 compared to $194.2 million at December 31, 2014. Operating activities provided $32.0 million of cash in the first nine months of 2015 compared to using $9.9 million in the same period last year. The increase in cash from operating activities was primarily due to lower pension contributions of approximately $49.0 million, lower increases in operating working capital of approximately $11.0 million, and lower income taxes paid of approximately $8.0 million partially offset by higher interest paid of approximately $14.0 million in 2015.

Investing activities used $72.2 million of cash during the first nine months of 2015 compared to $31.7 million in 2014, primarily to fund acquisitions, capital expenditures and ERP system implementations.

Financing activities used $59.3 million in cash in the first nine months of 2015, primarily from $44.9 million spent to repurchase the majority of the remaining outstanding convertible debentures, $80.0 million spent to repurchase 1.2 million shares of outstanding common stock and the payment of $13.8 million of dividends. These activities were funded by cash on hand and additional borrowings of $77.9 million from the company’s revolving credit facility. Financing activities in the first nine months of 2014 provided cash of $176.9 million, primarily from proceeds on the 5.875% senior notes.

GST’s cash and investment balance was $263.3 million at September 30, 2015 compared to $229.3 million at December 31, 2014. The increase includes the collection of $21.0 million of asbestos-related insurance proceeds since December 31, 2014.

Outlook

“Market conditions remain soft, and global economic volatility and sluggish oil and gas markets have resulted in lower demand levels in several of our businesses” said Steve Macadam, president and chief executive officer. “We have sound demand levels in the nuclear, petrochemical, and engine parts and service markets. However, softer conditions in many of our other markets and the strong dollar continue to affect our results. Given these ongoing market headwinds and our results for the quarter, we expect segment profit for the year to be at, or slightly below the low end of the guidance previously provided, excluding the impact of additional restructuring charges expected in the fourth quarter of 2015. We estimate restructuring charges for the year to be in the range of $10.0 to $13.0 million compared to the $3.2 million included in our previous guidance. We expect GST’s results to be within the range previously provided. This revised guidance is based on exchange rates in effect at the end of the third quarter. Despite current challenging market conditions, longer term, we expect continued benefits from our strategic growth initiatives including growth from recent and future strategic acquisitions and continued emphasis on improving operational efficiencies,” he added.

CPI Restructuring

Earlier this week, the Company filed a Form 8-K disclosing plans for restructuring of certain operations of the Company’s Compressor Products International (CPI) unit, in connection with which the Company expects to incur total restructuring expense in the range of $7.8 million to $10.0 million. Approximately 90% of these expenses are expected to be incurred in the fourth quarter of 2015, with the balance to be incurred in the first half of fiscal 2016. “Upon completion, we expect this restructuring plan will result in annualized savings of $3.0 million to $4.0 million” Mr. Macadam commented.

Share Repurchase Program

Yesterday, the Board of Directors approved a new program authorizing the company to repurchase up to $50.0 million of its common shares. Under this program, the company may repurchase shares in both open market and privately negotiated transactions. The company’s management will determine the timing and amount of the transactions based on its evaluation of market conditions and other factors. Repurchases may also be made under Rule 10b5-1 plans, which permit the company to repurchase shares when it otherwise would be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time and expires in two years.

"This repurchase authorization illustrates our confidence in EnPro’s sustained cash flow and our commitment to maintaining long-term shareholder value," said Mr. Macadam.

Conference Call and Webcast Information

EnPro will hold a conference call today, October 29, at 10:00 a.m. Eastern Time to discuss third quarter 2015 results. Investors who wish to participate in the call should dial 1-800-851-4704 approximately 10 minutes before the call begins and provide conference id number 83302606. A live audio webcast of the call and accompanying slide presentation will be accessible from the company’s website, http://www.enproindustries.com. To access the presentation, log on to the webcast by clicking the link on the company’s home page.

Deconsolidation and Pro Forma Results of Garlock Sealing Technologies LLC

Results for the third quarters of 2015 and 2014 reflect the deconsolidation of Garlock Sealing Technologies LLC (GST) and its subsidiaries, effective June 5, 2010, when GST filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code to begin a process in pursuit of an efficient and permanent resolution to all current and future asbestos claims against it. Deconsolidation is required by generally accepted accounting principles. To aid in comparisons of year-over-year data, the company has attached a schedule to this press release showing key operating measures for both EnPro and GST on a pro forma basis.

Tables attached to this press release illustrate, on a pro-forma basis, condensed consolidated financial results for the third quarters of 2015 and 2014 as if GST were reconsolidated with EnPro based on confirmation and consummation of GST’s second amended proposed plan of reorganization. The narrative preceding those tables includes an important discussion of the risks and uncertainties applicable to confirmation and consummation of the second amended plan of reorganization. Due to these risks and uncertainties, while management believes the plan of reorganization can be confirmed, management does not yet deem reconsolidation to be probable under Regulation S-X of the Securities and Exchange Commission (SEC). Therefore, pro forma financial statements are not required by the SEC. We are providing the pro forma financial information in this release as supplemental information in response to requests from investors for this information.

Non-GAAP Financial Information

This press release contains financial measures that have not been prepared in accordance with GAAP. They include income before asbestos-related expenses and other selected items, EBITDA-A, EBITDA and related per share amounts. Tables showing the effect of these non-GAAP financial measures for third quarters of 2015 and 2014 are attached to the release.

Forward-Looking Statements

Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: general economic conditions in the markets served by our businesses, some of which are cyclical and experience periodic downturns; prices and availability of raw materials; and the amount of any payments required to satisfy contingent liabilities related to discontinued operations of our predecessors, including liabilities for certain products, environmental matters, guaranteed debt payments, employee benefit obligations and other matters. In addition, adverse developments could arise in regard to voluntary petitions filed by certain of our subsidiaries in U.S. Bankruptcy Court to establish a trust that would resolve all current and future asbestos claims. Our filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2014 and Form 10-Q for the quarter ended June 30, 2015, describe these and other risks and uncertainties in more detail. We do not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based.

About EnPro Industries

EnPro Industries, Inc. is a leader in sealing products, metal polymer and filament wound bearings, components and service for reciprocating compressors, diesel and dual-fuel engines and other engineered products for use in critical applications by industries worldwide. For more information about EnPro, visit the company’s website at http://www.enproindustries.com.

EnPro Industries, Inc.
Consolidated Statements of Operations (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars, Except Per Share Data)
			Quarters Ended						Nine Months Ended
			September 30,			September 30,			September 30,			September 30,
				2015			2014			2015			2014
Net sales			$	306.6		$	302.6		$	882.5		$	902.9
Cost of sales				205.2			196.4			590.0			592.1
	Gross profit			101.4			106.2			292.5			310.8
Operating expenses:
	Selling, general and administrative			74.8			77.4			226.2			239.8
	Goodwill and other intangible asset impairment			-			-			47.0			-
	Other			1.7			1.2			3.3			1.9
		Total operating expenses		76.5			78.6			276.5			241.7
	Operating income			24.9			27.6			16.0			69.1
Interest expense				(12.9	)		(10.8	)		(39.0	)		(32.3	)
Interest income				0.1			0.3			0.4			0.8
Other income (expense)				0.1			(4.0	)		(4.2	)		(10.7	)
	Income (loss) before income taxes			12.2			13.1			(26.8	)		26.9
Income tax expense				(0.8	)		(4.5	)		(0.7	)		(8.7	)
	Net income (loss)		$	11.4		$	8.6		$	(27.5	)	$	18.2
Basic earnings (loss) per share			$	0.52		$	0.36		$	(1.21	)	$	0.80
Average common shares outstanding (millions)				22.0			24.0			22.7			22.7
Diluted earnings (loss) per share			$	0.51		$	0.33		$	(1.21	)	$	0.71
Average common shares outstanding (millions)				22.1			26.1			22.7			25.7

EnPro Industries, Inc.
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
					2015			2014
Operating activities
	Net income (loss)			$	(27.5	)	$	18.2
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
			Depreciation		22.4			22.2
			Amortization		20.9			20.8
			Loss on exchange and repurchase of convertible debentures		2.8			10.0
			Goodwill and other intangible asset impairment		47.0			-
			Deferred income taxes		0.3			(22.4	)
			Stock-based compensation		3.6			7.8
			Other non-cash adjustments		1.1			4.8
	Change in assets and liabilities, net of effects of acquisitions of businesses:
			Accounts receivable, net		(2.1	)		(27.2	)
			Inventories		(12.6	)		(9.8	)
			Accounts payable		(9.5	)		(2.8	)
			Other current assets and liabilities		-			10.4
			Other non-current assets and liabilities		(14.4	)		(41.9	)
			Net cash provided by (used in) operating activities		32.0			(9.9	)
Investing activities
	Purchases of property, plant and equipment				(23.4	)		(20.4	)
	Payments for capitalized internal-use software				(3.6	)		(7.1	)
	Acquisitions, net of cash acquired				(45.5	)		(4.3	)
	Other				0.3			0.1
			Net cash used in investing activities		(72.2	)		(31.7	)
Financing activities
	Net proceeds from short-term borrowings				3.6			1.9
	Proceeds from debt				177.7			637.0
	Repayments of debt				(123.1	)		(399.0	)
	Repurchase of common stock				(80.0	)		-
	Dividends paid				(13.8	)		-
	Debt issuance costs				-			(5.2	)
	Repurchase of convertible debentures conversion option				(21.6	)		(53.6	)
	Other				(2.1	)		(4.2	)
			Net cash provided by (used in) financing activities		(59.3	)		176.9
Effect of exchange rate changes on cash and cash equivalents					(2.7	)		(1.3	)
	Net increase (decrease) in cash and cash equivalents				(102.2	)		134.0
Cash and cash equivalents at beginning of period					194.2			64.4
Cash and cash equivalents at end of period				$	92.0		$	198.4
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
		Interest		$	35.8		$	22.3
		Income taxes		$	22.8		$	31.1

EnPro Industries, Inc.
Consolidated Balance Sheets (Unaudited)
As of September 30, 2015 and December 31, 2014
(Stated in Millions of Dollars)
			September 30,			December 31,
				2015			2014
Current assets
	Cash and cash equivalents		$	92.0		$	194.2
	Accounts receivable			223.6			205.2
	Inventories			178.0			159.7
	Other current assets			52.3			44.0
		Total current assets		545.9			603.1
Property, plant and equipment				210.9			199.3
Goodwill				196.6			232.4
Other intangible assets				198.1			202.8
Investment in GST				236.9			236.9
Deferred income taxes and income tax receivable				107.6			80.3
Other assets				43.8			49.2
		Total assets	$	1,539.8		$	1,604.0
Current liabilities
	Short-term borrowings from GST		$	24.0		$	23.6
	Notes payable to GST			12.2			11.7
	Current maturities of long-term debt			2.3			22.5
	Accounts payable			90.9			87.8
	Accrued expenses			135.2			131.6
		Total current liabilities		264.6			277.2
Long-term debt				376.7			298.6
Notes payable to GST				271.0			259.3
Other liabilities				143.8			130.5
		Total liabilities		1,056.1			965.6
Temporary equity				-			1.0
Shareholders' equity
	Common stock			0.2			0.2
	Additional paid-in capital			376.9			477.3
	Retained earnings			154.0			195.3
	Accumulated other comprehensive loss			(46.1	)		(34.1	)
	Common stock held in treasury, at cost			(1.3	)		(1.3	)
		Total shareholders' equity		483.7			637.4
		Total liabilities and equity	$	1,539.8		$	1,604.0

EnPro Industries, Inc.
Segment Information (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
Sales
	Quarters Ended						Nine Months Ended
	September 30,						September 30,
		2015			2014			2015			2014
Sealing Products	$	186.3		$	168.9		$	520.2		$	499.3
Engineered Products		72.1			88.1			227.8			275.4
Power Systems		49.1			46.5			137.2			130.6
		307.5			303.5			885.2			905.3
Less intersegment sales		(0.9	)		(0.9	)		(2.7	)		(2.4	)
	$	306.6		$	302.6		$	882.5		$	902.9
Segment Profit
	Quarters Ended						Nine Months Ended
	September 30,						September 30,
		2015			2014			2015			2014
Sealing Products	$	22.5		$	23.0		$	61.7		$	62.9
Engineered Products		1.5			6.0			8.9			23.6
Power Systems		9.2			9.6			16.1			16.3
	$	33.2		$	38.6		$	86.7		$	102.8
Segment Margin
	Quarters Ended						Nine Months Ended
	September 30,						September 30,
		2015			2014			2015			2014
Sealing Products		12.1	%		13.6	%		11.9	%		12.6	%
Engineered Products		2.1	%		6.8	%		3.9	%		8.6	%
Power Systems		18.7	%		20.6	%		11.7	%		12.5	%
		10.8	%		12.8	%		9.8	%		11.4	%
Reconciliation of Segment Profit to Net Income (Loss)
	Quarters Ended						Nine Months Ended
	September 30,						September 30,
		2015			2014			2015			2014
Segment profit	$	33.2		$	38.6		$	86.7		$	102.8
Corporate expenses		(6.3	)		(10.1	)		(19.5	)		(30.9	)
Goodwill and other intangible asset impairment		-			-			(47.0	)		-
Interest expense, net		(12.8	)		(10.5	)		(38.6	)		(31.5	)
Other expense, net		(1.9	)		(4.9	)		(8.4	)		(13.5	)
Income (loss) before income taxes		12.2			13.1			(26.8	)		26.9
Income tax expense		(0.8	)		(4.5	)		(0.7	)		(8.7	)
Net income (loss)	$	11.4		$	8.6		$	(27.5	)	$	18.2
Segment profit is total segment revenue reduced by operating expenses and restructuring and other costs identifiable with the segment.  Corporate expenses include general corporate administrative costs.  Expenses not directly attributable to the segments, corporate expenses, impairment charges, net interest expense, gains/losses related to the sale of assets and income taxes are not included in the computation of segment profit.  The accounting policies of the reportable segments are the same as those for the Company.

EnPro Industries, Inc.
Reconciliation of Adjusted Net Income to Net Income (Loss) (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars, Except Per Share Data)
		Quarters Ended September 30,
		2015						2014
			$		Per share				$		Per share
Adjusted net income		$	9.8		$	0.44		$	12.3		$	0.52
Adjustments (net of tax):
	Restructuring costs		(0.5	)		(0.03	)		(0.3	)		(0.01	)
	Loss on exchange and repurchase of convertible debentures		-			-			(2.5	)		(0.10	)
	Environmental reserve adjustment		(0.5	)		(0.02	)		-			-
	Fair value adjustment to acquisition date inventory		(0.2	)		(0.01	)		-			-
	Acquisition expenses		(0.3	)		(0.01	)		-			-
	Other		-			-			(0.4	)		(0.01	)
	Tax accrual adjustments		3.1			0.14			(0.5	)		(0.02	)
	Impact of shares deliverable under convertible debenture hedge		N/A		NA				N/A			(0.05	)
Impact			1.6			0.07			(3.7	)		(0.19	)
Net income		$	11.4		$	0.51		$	8.6		$	0.33
		Nine Months Ended September 30,
		2015						2014
			$		Per share				$		Per share
Adjusted net income		$	21.1		$	0.94		$	26.9		$	1.16
Adjustments (net of tax):
	Restructuring costs		(1.4	)		(0.06	)		(0.7	)		(0.02	)
	Loss on exchange and repurchase of convertible debentures		(1.8	)		(0.08	)		(6.2	)		(0.24	)
	Environmental reserve adjustment		(0.6	)		(0.03	)		(0.4	)		(0.02	)
	Goodwill and other intangible asset impairment		(45.8	)		(2.02	)		-			-
	Fair value adjustment to acquisition date inventory		(0.8	)		(0.03	)		-			-
	Acquisition expenses		(1.4	)		(0.06	)		(0.3	)		(0.01	)
	Other		(1.0	)		(0.03	)		(0.5	)		(0.02	)
	Tax accrual adjustments		4.2			0.18			(0.6	)		(0.02	)
	Impact of shares deliverable under convertible debenture hedge		N/A			(0.02	)		N/A			(0.12	)
Impact			(48.6	)		(2.15	)		(8.7	)		(0.45	)
Net income (loss)		$	(27.5	)	$	(1.21	)	$	18.2		$	0.71
Management of the Company believes that it would be helpful to the readers of the financial statements to understand the impact of certain selected items on the Company's reported net income and earnings per share, including items that may recur from time to time.  This presentation enables readers to better compare EnPro Industries, Inc. to other diversified industrial manufacturing companies that do not incur the sporadic impact of restructuring activities or other selected items. Management acknowledges that there are many items that impact a company's reported results and this list is not intended to present all items that may have impacted these results.
The amounts above, which may be considered non-GAAP financial measures, are shown on an after-tax basis and have been calculated by applying the Company's tax rate to the pre-tax amount. The fair value adjustment to acquisition date inventory is included in cost of sales, the acquisition expenses are included in selling, general and administrative expenses, and the restructuring costs, loss on exchange and repurchase of convertible debentures, environmental reserve adjustment and other are included as part of other operating expense and other income (expense).  Per share amounts were calculated by dividing by the weighted-average shares of diluted common stock outstanding during the periods  The impact of shares deliverable under convertible debenture hedge represents the per share effect of the call options purchased to reduce the potential dilution to our common shareholders from the conversion of our convertible debentures.  For accounting purposes, during the periods they were outstanding, the call options were excluded from the GAAP diluted earnings per share computation because they were antidilutive.  They were settled and the corresponding value was realized in the second quarter of 2015.

EnPro Industries, Inc.
Reconciliation of Adjusted Segment EBITDA to Segment Profit (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
		Quarter Ended September 30, 2015
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Earnings before interest, income taxes, depreciation, amortization, and other selected items (adjusted EBITDA)		$	32.1		$	7.0		$	10.3		$	49.4
	Acquisition expenses		(1.1	)		-			-			(1.1	)
	Restructuring costs		(0.1	)		(0.7	)		-			(0.8	)
	Depreciation and amortization expense		(8.4	)		(4.8	)		(1.1	)		(14.3	)
Segment profit		$	22.5		$	1.5		$	9.2		$	33.2
Adjusted EBITDA margin			17.2	%		9.7	%		21.0	%		16.1	%
		Quarter Ended September 30, 2014
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Earnings before interest, income taxes, depreciation, amortization, and other selected items (adjusted EBITDA)		$	31.2		$	11.6		$	10.4		$	53.2
	Restructuring costs		(0.5	)		-			-			(0.5	)
	Depreciation and amortization expense		(7.7	)		(5.6	)		(0.8	)		(14.1	)
Segment profit		$	23.0		$	6.0		$	9.6		$	38.6
Adjusted EBITDA margin			18.5	%		13.2	%		22.4	%		17.6	%
		Nine Months Ended September 30, 2015
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Earnings before interest, income taxes, depreciation, amortization, and other selected items (adjusted EBITDA)		$	90.6		$	25.7		$	19.2		$	135.5
	Acquisition expenses		(3.5	)		-			-			(3.5	)
	Restructuring costs		-			(2.2	)		-			(2.2	)
	Depreciation and amortization expense		(25.4	)		(14.6	)		(3.1	)		(43.1	)
Segment profit		$	61.7		$	8.9		$	16.1		$	86.7
Adjusted EBITDA margin			17.4	%		11.3	%		14.0	%		15.4	%
		Nine Months Ended September 30, 2014
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Earnings before interest, income taxes, depreciation, amortization, and other selected items (adjusted EBITDA)		$	87.3		$	40.7		$	18.9		$	146.9
	Acquisition expenses		(0.2	)		-			-			(0.2	)
	Restructuring costs		(1.1	)		-			-			(1.1	)
	Depreciation and amortization expense		(23.1	)		(17.1	)		(2.6	)		(42.8	)
Segment profit		$	62.9		$	23.6		$	16.3		$	102.8
Adjusted EBITDA margin			17.5	%		14.8	%		14.5	%		16.3	%
For a reconciliation of segment profit to net income (loss), please refer to the Segment Information (Unaudited) schedule.

EnPro Industries, Inc.
Reconciliation of Adjusted EBITDA to Net Income (Loss) (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
			Quarters Ended						Nine Months Ended
			September 30,						September 30,
				2015			2014			2015			2014
Earnings before interest, income taxes, depreciation, amortization, and other selected items (adjusted EBITDA) *			$	41.8		$	43.1		$	113.6		$	115.0
Adjustments to arrive at earnings before interest, income taxes, depreciation and amortization (EBITDA):
	Restructuring costs			(0.8	)		(0.5	)		(2.2	)		(1.1	)
	Environmental reserve adjustment			(0.8	)		-			(1.0	)		(0.7	)
	Loss on exchange and repurchase of convertible debentures			-			(4.0	)		(2.8	)		(10.0	)
	Goodwill and other intangible asset impairment			-			-			(47.0	)		-
	Acquisition expenses			(0.5	)		(0.1	)		(2.2	)		(0.5	)
	Fair value adjustment to acquisition date inventory			(0.3	)		-			(1.3	)		-
	Other			(0.1	)		(0.8	)		(2.0	)		(1.3	)
		EBITDA		39.3			37.7			55.1			101.4
Adjustments to arrive at net income (loss):
	Interest expense, net			(12.8	)		(10.5	)		(38.6	)		(31.5	)
	Income tax expense			(0.8	)		(4.5	)		(0.7	)		(8.7	)
	Depreciation and amortization expense			(14.3	)		(14.1	)		(43.3	)		(43.0	)
Net income (loss)			$	11.4		$	8.6		$	(27.5	)	$	18.2
*	Adjusted EBITDA as presented also represents the amount defined as "EBITDA" under the indenture governing the Company's 5.875% senior notes due 2022.

EnPro Industries, Inc.
Reconciliation of Normalized Net Sales to Net Sales (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
		Quarter Ended September 30, 2015
		Sealing			Engineered			Power		Intersegment
		Products			Products			Systems		sales			Consolidated
Normalized net sales		$	154.8		$	80.7		$	49.1	$	(0.9	)	$	283.7
Adjustments:
	Foreign exchange translation		(5.4	)		(8.6	)		-		-			(14.0	)
	Acquisitions		36.9			-			-		-			36.9
Net sales		$	186.3		$	72.1		$	49.1	$	(0.9	)	$	306.6
		Quarter Ended September 30, 2014
		Sealing			Engineered			Power		Intersegment
		Products			Products			Systems		sales			Consolidated
Normalized net sales		$	161.2		$	88.1		$	46.5	$	(0.9	)	$	294.9
Adjustments:
	Divestitures		7.7			-			-		-			7.7
Net sales		$	168.9		$	88.1		$	46.5	$	(0.9	)	$	302.6
		Nine Months Ended September 30, 2015
		Sealing			Engineered			Power		Intersegment
		Products			Products			Systems		sales			Consolidated
Normalized net sales		$	474.6		$	256.4		$	137.2	$	(2.7	)	$	865.5
Adjustments:
	Foreign exchange translation		(18.2	)		(28.6	)		-		-			(46.8	)
	Acquisitions		63.8			-			-		-			63.8
Net sales		$	520.2		$	227.8		$	137.2	$	(2.7	)	$	882.5
		Nine Months Ended September 30, 2014
		Sealing			Engineered			Power		Intersegment
		Products			Products			Systems		sales			Consolidated
Normalized net sales		$	474.6		$	275.4		$	130.6	$	(2.4	)	$	878.2
Adjustments:
	Divestitures		24.7			-			-		-			24.7
Net sales		$	499.3		$	275.4		$	130.6	$	(2.4	)	$	902.9
For a reconciliation of segment net sales to net sales, please refer to the Segment Information (Unaudited) schedule.

EnPro Industries, Inc.
Reconciliation of Normalized Segment Profit to Segment Profit (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
		Quarter Ended September 30, 2015
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Normalized segment profit		$	21.9		$	2.2		$	9.2		$	33.3
Adjustments:
	Acquisitions		0.7			-			-			0.7
	Restructuring		(0.1	)		(0.7	)		-			(0.8	)
Segment profit		$	22.5		$	1.5		$	9.2		$	33.2
		Quarter Ended September 30, 2014
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Normalized segment profit		$	22.2		$	6.0		$	9.6		$	37.8
Adjustments:
	Divestitures		1.3			-			-			1.3
	Restructuring		(0.5	)		-			-			(0.5	)
Segment profit		$	23.0		$	6.0		$	9.6		$	38.6
		Nine Months Ended September 30, 2015
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Normalized segment profit		$	62.3		$	13.3		$	21.1		$	96.7
Adjustments:
	Foreign exchange translation		(1.0	)		(2.2	)		-			(3.2	)
	Acquisitions		0.4			-			-			0.4
	Restructuring		-			(2.2	)		-			(2.2	)
	EDF contract		-			-			(5.0	)		(5.0	)
Segment profit		$	61.7		$	8.9		$	16.1		$	86.7
		Nine Months Ended September 30, 2014
		Sealing			Engineered			Power			Total
		Products			Products			Systems			Segments
Normalized segment profit		$	59.5		$	23.7		$	16.3		$	99.5
Adjustments:
	Acquisitions/Divestitures		4.5			(0.1	)		-			4.4
	Restructuring		(1.1	)		-			-			(1.1	)
Segment profit		$	62.9		$	23.6		$	16.3		$	102.8
For a reconciliation of segment profit to net income (loss), please refer to the Segment Information (Unaudited) schedule.

Unaudited Pro Forma Information Reflecting the Reconsolidation of Garlock Sealing Technologies

The historical business operations of Garlock Sealing Technologies LLC (“GST LLC”) and The Anchor Packing Company (“Anchor”) resulted in a substantial volume of asbestos litigation in which plaintiffs alleged personal injury or death as a result of exposure to asbestos fibers. Those subsidiaries manufactured and/or sold industrial sealing products, predominately gaskets and packing, that contained encapsulated asbestos fibers. Anchor is an inactive and insolvent indirect subsidiary of Coltec Industries Inc (“Coltec”). EnPro’s subsidiaries’ exposure to asbestos litigation and their relationships with insurance carriers have been managed through another Coltec subsidiary, Garrison Litigation Management Group, Ltd. (“Garrison”). GST LLC, Anchor and Garrison are collectively referred to as “GST.”

On June 5, 2010 (the “Petition Date”), GST filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of North Carolina in Charlotte (the “Bankruptcy Court”). The filings were the initial step in an asbestos claims resolution process, which is ongoing. The filings did not include EnPro Industries, Inc., or any other EnPro Industries, Inc. operating subsidiary.

The financial results of GST and its subsidiaries are included in our consolidated results through June 4, 2010, the day prior to the Petition Date. However, U.S. generally accepted accounting principles require an entity that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, whose financial statements were previously consolidated with those of its parent, as GST’s and its subsidiaries’ were with EnPro’s, generally must be prospectively deconsolidated from the parent and the investment accounted for using the cost method. Accordingly, the financial results of GST and its subsidiaries are not included in EnPro’s consolidated results after June 4, 2010.

On January 14, 2015, EnPro announced that GST and it had reached agreement with the court-appointed legal representative of future asbestos claimants (the "Future Claimants' Representative") that includes a second amended plan of reorganization (the “Amended Plan”). The Amended Plan was filed with the Bankruptcy Court on January 14, 2015 and supersedes the prior plans filed by GST. If approved by the Bankruptcy Court and implemented, the Amended Plan will provide certainty and finality to the expenditures necessary to resolve all current and future asbestos claims against GST and against its Garrison and Anchor Packing subsidiaries. The Future Claimants' Representative has agreed to support, recommend and vote in favor of the Amended Plan, which provides payments to all claimants who have a compensable disease and had meaningful contact with GST asbestos containing products.

The Amended Plan provides for (a) the treatment of present and future asbestos claims against GST that have not been resolved by settlement or verdict prior to the Petition Date, and (b) administrative and litigation costs. The Amended Plan provides for the establishment of two facilities—a settlement facility (which would receive $220.0 million from GST and $30.0 million from Coltec, upon consummation of the Amended Plan and additional contributions by GST aggregating $77.5 million over the seven years following consummation of the Amended Plan) and a litigation fund (which would receive $30.0 million from GST upon consummation of the Amended Plan) to fund the defense and payment of claims of claimants who elect to pursue litigation under the Amended Plan rather than accept the settlement option under the Amended Plan. Funds contained in the settlement facility and the litigation fund would provide the exclusive remedies for current and future GST asbestos claimants other than claimants whose claims had been resolved by settlement or verdict prior to the Petition Date and were not paid prior to the Petition Date. The Amended Plan provides that GST will pay in full claims that had been resolved by settlement or verdict prior to the Petition Date that were not paid prior to the Petition Date (with respect to claims resolved by verdict, such payment will be made only to the extent the verdict becomes final). The amount of such claims resolved by verdict is $2.5 million. GST estimates the range of its aggregate liability for such unpaid settled asbestos claims to be from $3.1 million to $16.4 million, and the Amended Plan provides that if the actual amount is less than $10.0 million GST will contribute the difference to the settlement facility. In addition, the Amended Plan provides that, during the 40-year period following confirmation of the Amended Plan, GST would make supplementary annual contributions, subject to specified maximum annual amounts that decline over the period, to maintain a specified balance at specified dates of the litigation fund. The maximum aggregate amount of all such contingent supplementary contributions over that period is $132.0 million. GST believes that initial contributions to the litigation fund may likely be sufficient to permit the balance of that facility to exceed the specified thresholds over the 40-year period and, accordingly, that the low end of a range of reasonably possible loss associated with these contingent supplementary contributions is $0.

The Amended Plan incorporates the Bankruptcy Court’s determination in January 2014 that $125.0 million is sufficient to satisfy GST’s aggregate liability for present and future mesothelioma claims; however, it also provides additional funds to provide full payment for non-mesothelioma claims and to gain the support of the Future Claimants’ Representative of the Amended Plan. Under the terms of the Amended Plan, EnPro will retain 100% of the equity interests of GST LLC.

If the Amended Plan is confirmed by the Bankruptcy Court and is consummated, GST will be re-consolidated with EnPro’s results for financial reporting purposes. The Amended Plan is subject to confirmation by the Bankruptcy Court and EnPro cannot assure you that GST will be able to obtain necessary Bankruptcy Court approval of the Amended Plan, including the settlement of asbestos claims and related releases of claims against us included therein, and that the Amended Plan will be consummated.

Confirmation and consummation of the Amended Plan are subject to a number of risks and uncertainties, including the actions and decisions of creditors and other third parties that have an interest in the bankruptcy proceedings, delays in the confirmation or effective date of the Amended Plan due to factors beyond GST's or EnPro’s control, which would result in greater costs and the impairment of value of GST, appeals and other challenges to the Amended Plan and risks and uncertainties affecting GST and Coltec's ability to fund anticipated contributions under the Amended Plan as a result of adverse changes in their results of operations, financial condition and capital resources, including as a result of economic factors beyond their control.

In light of the risks and uncertainties, including those noted above, we believe the confirmation and consummation of the Amended Plan is confirmable as presented to the bankruptcy court but is not currently probable under Regulation S-X of the SEC and therefore, the reconsolidation of GST LLC with EnPro’s results for financial reporting purposes on the basis of confirmation and consummation of the Amended Plan is not currently probable. Accordingly, pro forma financial statements are not required by the SEC and the following pro forma condensed consolidated financial information may not include all information required to be included in pro forma financial statements prepared in accordance with Regulation S-X of the SEC. EnPro is providing the unaudited pro forma condensed consolidated financial information which assumes the confirmation and consummation of the Amended Plan for illustrative purposes only in light of specific requests for such pro forma information by investors.

The unaudited pro forma condensed consolidated financial information presented below has been prepared to illustrate the effects of the reconsolidation of GST and its subsidiaries with EnPro assuming the confirmation and consummation of the Amended Plan and is based upon the historical balance sheet of EnPro as September 30, 2015, the estimated fair value of assets and liabilities of GST as of September 30, 2015 and the historical results of GST operations after consideration of the adjustments to the fair value of assets and liabilities. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2015 gives effect to the reconsolidation as if it occurred on September 30, 2015. The unaudited pro forma condensed consolidated statements of operations for the quarters ended September 30, 2015 and 2014 give effect to the reconsolidation as if it had occurred on January 1, 2014.

Under generally accepted accounting principles, the reconsolidation of GST requires that the tangible and intangible assets and liabilities of GST be reflected at their estimated fair values. The preliminary fair value amounts used in the unaudited pro forma condensed consolidated financial information reflects management’s best estimates of fair value. Upon completion of detailed valuation studies and the final determination of fair value, EnPro may make additional adjustments to the fair value allocation, which may differ significantly from the valuations set forth in the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated statements of operations are based on estimates and assumptions, which have been made solely for the purposes of developing such pro forma information. The unaudited pro forma condensed consolidated statements of operations also include certain adjustments such as increased depreciation and amortization expense on tangible and intangible assets, increased interest expense on the debt incurred to complete the reconsolidation as well as the tax impacts related to these adjustments. The pro forma adjustments are based upon available information and certain assumptions that EnPro believes are reasonable.

The unaudited pro forma condensed consolidated financial information has been presented for information purposes only and is not necessarily indicative of what the consolidated company’s financial position or results of operations actually would have been had the reconsolidation been completed as of the dates indicated, nor is it necessarily indicative of the future operating results or financial position of the consolidated company. Therefore, the actual amounts recorded at the date the reconsolidation occurs may differ from the information presented herein.

EnPro Industries, Inc.
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Quarter Ended September 30, 2015
(Stated in Millions of Dollars, Except Per Share Data)
															Pro Forma
									Pro Forma			Pro Forma			Adjustments
			EnPro			GST			Adjustments			Consolidated			Reference
Net sales			$	306.6		$	54.0		$	(14.1	)	$	346.5		(1)
Cost of sales				205.2			33.8			(13.9	)		225.1		(1), (2)
	Gross profit			101.4			20.2			(0.2	)		121.4
Operating expenses:
	Selling, general and administrative			74.8			10.6			3.0			88.4		(3)
	Other			1.7			0.7			(1.0	)		1.4		(4)
		Total operating expenses		76.5			11.3			2.0			89.8
	Operating income			24.9			8.9			(2.2	)		31.6
Interest expense				(12.9	)		(0.2	)		8.1			(5.0	)	(5)
Interest income				0.1			8.0			(8.1	)		-		(5)
Other income (expense)				0.1			(5.0	)		5.0			0.1		(4)
	Income before income taxes			12.2			11.7			2.8			26.7
Income tax expense				(0.8	)		(5.1	)		(1.0	)		(6.9	)	(6)
	Net income		$	11.4		$	6.6		$	1.8		$	19.8
Basic earnings per share			$	0.52			N/A			N/A		$	0.90
Average common shares outstanding (millions)				22.0									22.0
Diluted earnings per share			$	0.51			N/A			N/A		$	0.90
Average common shares outstanding (millions)				22.1									22.1
(1)		Eliminate intercompany sales of $14.1 million.
(2)		Reflects the increase in depreciation expense of $0.2 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years.
(3)		Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years.
(4)		Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan.
(5)		Eliminate intercompany interest.
(6)		For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments.

EnPro Industries, Inc.
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended September 30, 2015
(Stated in Millions of Dollars, Except Per Share Data)
															Pro Forma
									Pro Forma			Pro Forma			Adjustments
			EnPro			GST			Adjustments			Consolidated			Reference
Net sales			$	882.5		$	165.2		$	(38.2	)	$	1,009.5		(1)
Cost of sales				590.0			102.2			(37.5	)		654.7		(1), (2)
	Gross profit			292.5			63.0			(0.7	)		354.8
Operating expenses:
	Selling, general and administrative			226.2			33.0			8.8			268.0		(3)
	Other			50.3			0.9			(1.3	)		49.9		(4)
		Total operating expenses		276.5			33.9			7.5			317.9
	Operating income			16.0			29.1			(8.2	)		36.9
Interest expense				(39.0	)		(0.5	)		23.8			(15.7	)	(5)
Interest income				0.4			24.3			(23.8	)		0.9		(5)
Other expense				(4.2	)		(16.7	)		16.7			(4.2	)	(4)
	Income (loss) before income taxes			(26.8	)		36.2			8.5			17.9
Income tax expense				(0.7	)		(12.6	)		(3.1	)		(16.4	)	(6)
	Net income (loss)		$	(27.5	)	$	23.6		$	5.4		$	1.5
Basic earnings (loss) per share			$	(1.21	)		N/A			N/A		$	0.07
Average common shares outstanding (millions)				22.7									22.7
Diluted earnings (loss) per share			$	(1.21	)		N/A			N/A		$	0.06
Average common shares outstanding (millions)				22.7									23.7		(7)
(1)		Eliminate intercompany sales of $38.2 million.
(2)		Reflects the increase in depreciation expense of $0.7 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years.
(3)		Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years.
(4)		Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan.
(5)		Eliminate intercompany interest.
(6)		For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments.
(7)		Represents shares that would no longer be antidilutive since the pro-forma consolidated company would have net income.

EnPro Industries, Inc.
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Quarter Ended September 30, 2014
(Stated in Millions of Dollars, Except Per Share Data)
															Pro Forma
									Pro Forma			Pro Forma			Adjustments
			EnPro			GST			Adjustments			Consolidated			Reference
Net sales			$	302.6		$	61.1		$	(14.8	)	$	348.9		(1)
Cost of sales				196.4			37.4			(14.6	)		219.2		(1), (2)
	Gross profit			106.2			23.7			(0.2	)		129.7
Operating expenses:
	Selling, general and administrative			77.4			12.5			3.0			92.9		(3)
	Other			1.2			0.7			(0.7	)		1.2		(4)
		Total operating expenses		78.6			13.2			2.3			94.1
	Operating income			27.6			10.5			(2.5	)		35.6
Interest expense				(10.8	)		(0.1	)		7.7			(3.2	)	(5)
Interest income				0.3			7.7			(7.7	)		0.3		(5)
Other expense				(4.0	)		(4.4	)		4.4			(4.0	)	(4)
	Income before income taxes			13.1			13.7			1.9			28.7
Income tax expense				(4.5	)		(4.8	)		(0.7	)		(10.0	)	(6)
	Net income		$	8.6		$	8.9		$	1.2		$	18.7
Basic earnings per share			$	0.36			N/A			N/A		$	0.78
Average common shares outstanding (millions)				24.0									24.0
Diluted earnings per share			$	0.33			N/A			N/A		$	0.72
Average common shares outstanding (millions)				26.1									26.1
(1)		Eliminate intercompany sales of $14.8 million.
(2)		Reflects the increase in depreciation expense of $0.2 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years.
(3)		Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years.
(4)		Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan.
(5)		Eliminate intercompany interest.
(6)		For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments.

EnPro Industries, Inc.
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended September 30, 2014
(Stated in Millions of Dollars, Except Per Share Data)
															Pro Forma
									Pro Forma			Pro Forma			Adjustments
			EnPro			GST			Adjustments			Consolidated			Reference
Net sales			$	902.9		$	183.1		$	(42.8	)	$	1,043.2		(1)
Cost of sales				592.1			110.6			(42.1	)		660.6		(1), (2)
	Gross profit			310.8			72.5			(0.7	)		382.6
Operating expenses:
	Selling, general and administrative			239.8			35.2			8.8			283.8		(3)
	Other			1.9			(184.8	)		185.2			2.3		(4)
		Total operating expenses		241.7			(149.6	)		194.0			286.1
	Operating income			69.1			222.1			(194.7	)		96.5
Interest expense				(32.3	)		(0.1	)		22.8			(9.6	)	(5)
Interest income				0.8			23.0			(22.8	)		1.0		(5)
Other expense				(10.7	)		(12.3	)		12.3			(10.7	)	(4)
	Income before income taxes			26.9			232.7			(182.4	)		77.2
Income tax expense				(8.7	)		(82.5	)		65.7			(25.5	)	(6)
	Net income		$	18.2		$	150.2		$	(116.7	)	$	51.7
Basic earnings per share			$	0.80			N/A			N/A		$	2.28
Average common shares outstanding (millions)				22.7									22.7
Diluted earnings per share			$	0.71			N/A			N/A		$	2.01
Average common shares outstanding (millions)				25.7									25.7
(1)		Eliminate intercompany sales of $42.8 million.
(2)		Reflects the increase in depreciation expense of $0.7 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years.
(3)		Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years.
(4)		Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan.
(5)		Eliminate intercompany interest.
(6)		For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments.

EnPro Industries, Inc.
Pro forma Condensed Consolidated Balance Sheets (Unaudited)
As of September 30, 2015
(Stated in Millions of Dollars)
							Second								Pro Forma
							Amended			Pro Forma			Pro Forma		Adjustments
			EnPro		GST		Plan impact (1)			Adjustments			Consolidated		Reference
Current assets
	Cash and investments		$	92.0	$	263.3	$	(193.4	)	$	-		$	161.9
	Accounts receivable			223.6		32.0		-			(23.9	)		231.7	(4)
	Inventories			178.0		20.0		-			5.8			203.8	(2)
	Notes receivable from EnPro			-		36.2		-			(36.2	)		-	(3)
	Other current assets			52.3		46.4		-			(23.3	)		75.4	(4)
		Total current assets		545.9		397.9		(193.4	)		(77.6	)		672.8
Property, plant and equipment				210.9		42.4		-			19.8			273.1	(2)
Goodwill				196.6		18.2		-			(18.2	)		196.6	(2)
Other intangible assets				198.1		4.5		-			242.3			444.9	(2)
Investment in GST				236.9		-		-			(236.9	)		-	(6)
Notes receivable from EnPro				-		271.0		-			(271.0	)		-	(3)
Asbestos insurance receivable				-		62.0		(4.2	)		-			57.8
Deferred income taxes and income taxes receivable				107.6		97.7		(101.8	)		(94.0	)		9.5	(5)
Other assets				43.8		5.7		-			(1.1	)		48.4	(4)
		Total assets	$	1,539.8	$	899.4	$	(299.4	)	$	(436.7	)	$	1,703.1
Current liabilities
	Short-term borrowings from GST		$	24.0	$	-	$	-		$	(24.0	)	$	-	(3)
	Notes payable to GST			12.2		-		-			(12.2	)		-	(3)
	Current maturities of long-term debt			2.3		-		-			-			2.3
	Accounts payable			90.9		27.2		-			(23.9	)		94.2	(4)
	Accrued expenses			134.0		10.2		-			(23.3	)		120.9	(4)
	Deferred income taxes and income taxes payable			1.2		0.6		-			-			1.8
		Total current liabilities		264.6		38.0		-			(83.4	)		219.2
Long-term debt				376.7		-		-			-			376.7
Notes payable to GST				271.0		-		-			(271.0	)		-	(3)
Asbestos liability				30.0		339.1		(295.2	)		-			73.9
Deferred income taxes and income taxes payable				23.7		96.0		(1.6	)		(17.4	)		100.7	(5), (7)
Other liabilities				90.1		11.2		-			(1.1	)		100.2	(4)
		Total liabilities		1,056.1		484.3		(296.8	)		(372.9	)		870.7
Shareholders' equity				483.7		415.1		(2.6	)		(63.8	)		832.4	(8)
		Total liabilities and equity	$	1,539.8	$	899.4	$	(299.4	)	$	(436.7	)	$	1,703.1
(1)  We determined that the  establishment of the settlement facility and litigation facility contemplated by the Second Amended Plan, payments of claims resolved by settlement or verdict prior to the Petition Date that were not paid prior to the Petition Date and other liabilities subject to compromise would be funded by cash on hand.  The existing deferred tax asset on the asbestos liability was eliminated and a new deferred tax asset on the remaining trust liability payments was established.  The asbestos insurance receivable , remaining payments required under the settlement facility and the related tax effects were discounted to their present value using a 6% discount rate.  We have not reflected any amounts for the contingent funding under the litigation guarantee as we feel these will be largely unnecessary.  The maximum after-tax net present value of these payments over 40 years would be $31 million.
(2)  Upon reconsolidation, the assets and liabilities of  GST will need to be recognized at fair value.  Inventory is valued at net realizable value which required a  $5.8 million  adjustment to the carrying value.  We reflected a $19.8 million fair value adjustment to property, plant and equipment.  We eliminated GST's pre-existing goodwill and other identifiable intangible assets of $18.2 million and  $4.5 million, respectively.  We  identified finite-lived intangible assets with an estimated fair value of  $181.5 million.  In addition, we identified  $65.3 million of indefinite-lived intangible assets.  The carrying value of all other assets and liabilities approximated fair value.
(3)  Eliminate intercompany notes receivable/payable.
(4)  Eliminate intercompany trade receivables/payables , intercompany interest receivable/payable and other intercompany receivables/payables.
(5)  Eliminate $94.0 million of intercompany income taxes payable.
(6)  Eliminate the investment in GST which is carried at historical cost.
(7)  The elimination of the deferred tax liability on the investment in GST and establish a deferred tax  liability on the step-up in fair value of assets resulted in a net increase in long-term tax liabilities of  $76.6 million.
(8)  The entries above resulted in reflecting a $348.7 million after-tax gain upon reconsolidation.

EnPro Industries, Inc.
Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Income (Unaudited)
For the Quarters and Nine Months Ended September 30, 2015 and 2014
(Stated in Millions of Dollars)
			Quarters Ended						Nine Months Ended
			September 30,						September 30,
				2015			2014			2015			2014
Pro forma earnings before interest, income taxes, depreciation, amortization and other selected items (pro forma adjusted EBITDA):			$	53.0		$	55.7		$	148.2		$	156.3
Adjustments to arrive at pro forma earnings before interest, income taxes, depreciation and amortization (pro forma EBITDA):
	Restructuring costs			(1.1	)		(0.6	)		(2.7	)		(1.7	)
	Loss on exchange and repurchase of convertible debentures			-			(4.0	)		(2.8	)		(10.0	)
	Goodwill and other intangible asset impairment			-			-			(47.0	)		-
	Acquisition expenses			(0.5	)		(0.1	)		(2.2	)		(0.5	)
	Fair value adjustment to acquisition date inventory			(0.3	)		-			(1.3	)		-
	Environmental reserve adjustment			(0.8	)		-			(1.0	)		(0.7	)
	Other			0.7			(0.4	)		(0.6	)		(0.4	)
		Pro forma EBITDA		51.0			50.6			90.6			143.0
Adjustments to arrive at pro forma net income:
	Interest expense, net			(5.0	)		(2.9	)		(14.8	)		(8.6	)
	Income tax expense			(6.9	)		(10.0	)		(16.4	)		(25.5	)
	Depreciation and amortization expense			(19.3	)		(19.0	)		(57.9	)		(57.2	)
Pro forma net income			$	19.8		$	18.7		$	1.5		$	51.7
The foregoing table provides a reconciliation of pro forma net income set forth in the accompanying unaudited pro forma condensed consolidated statements of operations reflecting reconsolidation of GST to pro forma earnings before interest, income taxes, depreciation, amortization and other selected items (adjusted EBITDA). The methodology for reconciliation is the same as presented on the table titled "Reconciliation of Adjusted EBITDA to Net Income (Unaudited)".