EnPro Industries Investor Presentation Engineered Products for a Demanding and Safer World Q1 2018 1
Forward-Looking Statements Statements in presentation 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; the effect of changes in currency exchange rates, expected volumes of purchases of parts denominated in euros used for engines to be sold in U.S. dollars; 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, 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, 2016, describe these and other risks and uncertainties in more detail. We do not undertake to update any forward-looking statement made in this presentation to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based. We own a number of direct and indirect subsidiaries and, from time to time, we may refer collectively to EnPro and one or more of our subsidiaries as we or to the businesses, assets, debts or affairs of EnPro or a subsidiary as ours. These and similar references are for convenience only and should not be construed to change the fact that EnPro and each subsidiary is an independent entity with separate management, operations, obligations and affairs. This presentation also contains certain non-gaap financial measures as defined by the Securities Exchange Commission. A reconciliation of these measures to the most directly comparable GAAP equivalents is included as an appendix to this presentation. We will also be referencing certain pro forma unaudited condensed consolidated financials. Please refer to our earnings releases for important information regarding how pro forma financial information is derived, as well as related risks and uncertainties. 2
EnPro Introduction Company Snapshot Company Overview: Founded in 2002 (spin-off from Goodrich Corp.) Portfolio of niche businesses Several brands over 100 years old Corporate HQ in Charlotte, NC 6,000+ employees worldwide Reporting Segments: Sealing Products Engineered Products Power Systems Trading Statistics (1) : NYSE Ticker: NPO Market Cap: ~$1.7 billion Shares Outstanding: ~21.8 million Dividend: $0.96/share Dividend Yield: ~1.2% $ in millions $ in millions $ in millions Pro Forma Sales & Gross Margin (2) $1,371 $1,338 $1,403 35% 35% 35% 2015 2016 2017 Pro Forma Adjusted EBITDA & Margin (2) $200 $186 $215 15% 14% 15% 2015 2016 2017 Free Cash Flow & Conversion Rate (3) $144 $132 $168 72% 71% 78% 2015 2016 2017 (1) Trading metrics as of 2/16/18. (2) See appendix for pro forma financial reconciliations. (3) FCF Conversion Rate defined as (EBITDA less capex less changes in NWC) / EBITDA. 3
Attractive Portfolio of Businesses Business Characteristics Target Applications Commercial & Strategic Advantages Highly demanding and extreme operating environments Leadership in niche markets with established, premium brands Mission-critical applications that require high product quality and reliability High level of customer loyalty with significant switching costs & barriers to entry Product & market characteristics provide granular pricing opportunities Sales Mix (1) Sales by Geography Sales by Market Sales by Channel Europe 21% ROW 12% Semiconductor Automotive Oil & Gas Aerospace Other 7% 7% 8% 4% 4% HD/MD Truck 26% 51% Aftermarket (1) Based on pro forma sales. 67% North America Chemical & Material Processing 9% Navy & Marine 10% 11% 15% General Industrial Power Generation OEM 49% 4
Segment Overview Sealing Products Engineered Products Power Systems Representative Markets: Representative Markets: Representative Markets: Aerospace Food & Pharma Processing Semiconductor Automotive ConAg General Industrial Navy & Marine Oil & Gas Heavy-Duty Trucking Metals & Mining Oil & Gas Chemical Processing Natural Gas Transmission Power Generation Segment FY 2017 Pro Forma (1) : Sales: $894M Adjusted EBITDA Margin: 19% Segment FY 2017 Pro Forma (1) : Sales: $302M Adjusted EBITDA Margin: 16% Segment FY 2017 Pro Forma (1) : Sales: $212M Adjusted EBITDA Margin: 17% (1) See appendix for pro forma financial reconciliations. 5
Sealing Products Snapshot Pro Forma Historical Financials (1) Representative Products $868 $852 $894 36% 36% 35% Sanitary Hoses Hydrodynamic Seals Bearing Isolators 19% 18% 19% 2015 2016 2017 Sales Gross Margin Adjusted EBITDA Margin Metal Seals Wheel End Products Sales Mix (2) Sales by Geography Sales by Market Sales by Channel Europe 13% ROW 12% 75% North America Chemical & Material Processing Powergen Oil & Gas Aerospace Other 8% 9% Semicon 6% 5% 6% 11% 15% HD/MD Truck 40% General Industrial OEM 45% 55% Aftermarket (1) See appendix for pro forma financial reconciliations. (2) Based on pro forma segment sales. 6
Engineered Products Snapshot Pro Forma Historical Financials (1) Representative Products $299 $278 $302 35% 38% 39% Bushings Metal Bearings Plastic & Polymer Bearings 11% 13% 16% 2015 2016 2017 Sales Gross Margin Adjusted EBITDA Margin Ring Valves Lubrication Systems Sales by Geography Sales Mix (2) Sales by Market Sales by Channel ROW 16% Europe Aerospace Other Powergen 7% 3% 2% Oil & Gas 8% Automotive 31% Aftermarket 33% North America 33% 51% Chemical & Material Processing 22% 27% General Industrial OEM 67% (1) See appendix for pro forma financial reconciliations. (2) Based on pro forma segment sales. 7
Power Systems Snapshot Pro Forma Historical Financials (1) Representative Products $207 $211 $212 29% 28% 24% 15% 17% 11% 2015 2016 2017 Colt-Pielstick Engine Model PA6B Opposed Piston Engine Model 38 Nextgen Opposed Piston Engine (4Q17 launch) Sales Gross Margin EBITDA Margin Sales Mix (2) Sales by Geography Sales by Market Sales by Channel ROW Europe 13% 7% Powergen 32% OEM 41% 80% 65% 59% North America Navy & Marine Aftermarket (1) See appendix for pro forma financial reconciliations. (2) Based on pro forma segment sales. 8
Poised to Accelerate Shareholder Value Completed Asbestos Claims Resolution Process Investments In Infrastructure & People Poised to Accelerate Shareholder Value Investments In Innovation & New Product Development Active Portfolio Management Including Strategic Acquisitions 9
EnPro s Plan for Shareholder Value Creation Segment-Specific Value Creation Strategies Sealing Products Engineered Products Power Systems Disciplined Capital Allocation Net working capital management Capex and inorganic investments Dividends & share repurchases 10
Segment-Specific Value Creation Strategy Sealing Products Engineered Products Power Systems Strategy Overview: Leverage leading market positions to grow business units with excellent financial characteristics Strategy Overview: Rigorously manage the business to significantly improve margins and ROIC Strategy Overview: Defend military marine core while transforming into a comprehensive power systems provider Leverage Market Leading Brands Drive Productivity & Efficiency Defend Military Marine Core Enhance Access to Markets & Customers Eliminate Unprofitable Business Commercialize Trident OP Engine Grow Technical Expertise Reduce Costs Grow In Distributed Power Markets 11
Disciplined Capital Allocation Capital Allocation Strategy Long-Term R&D Growth Capex 10% Key Objectives Invest in new product development, new applications, and new markets Shareholder Dividends 15% Sustaining & Maintenance Capex 25% Strategic Acquisitions 50% Pursue bolt-on acquisitions to support business unit growth strategies Fund disciplined growth and maintenance capital expenditures Return capital to shareholder base Pro forma net leverage was ~1.9x at the end of Q4 Note 1: Percentages indicate the estimated portion of total capital allocated to each respective area going forward; dollar ranges indicate estimated allocation of current annual cash flows. Note 2: Net debt ratio above excludes the carryback of the 2017 loss resulting from the ACRP trust funding, which is expected in 2018. 12
2018 Guidance Guidance Commentary We expect 2018 sales to be up between 3% and 5% over 2017, resulting in adjusted EBITDA of between $216 and $222 million in 2018 We received $9.1 million of positive foreign exchange impact related to the EDF contract during the course of 2017 and when normalized for this item, the difference in average exchange rates in 2017 compared to current rates, and for several smaller items including the full-year effect of the Qualiseal and CVC acquisitions, our guidance represents a 5% to 7% increase in Adjusted EBITDA $ in millions 2018 Guidance (1) Low High EBITDA $216M $222M (1) Ranges includes the impact from the previously announced Qualiseal and CVC acquisitions and excludes any impact of further M&A activity, changes in foreign exchange rates from the end of the third quarter, accounting adjustments associated with the reconsolidation of GST and OldCo, and any litigation or environmental charges. 13
3-Year Segment Targets Segment performance goals will be achieved via strategy execution at the granular business unit level Achievement of the segment targets will result in a total adjusted EBITDA CAGR of ~5.5% - 7.5% versus the 2016 baseline 3-Year Performance Targets Segment 3-Year Sales Growth CAGR Adjusted EBITDA Margin 2019 Target Adjusted EBITDA $ 2019 Target Sealing Products 2.0% - 2.5% 19.5% - 20.5% $175M - $185M Engineered Products 1.0% - 1.5% 15.5% - 16.5% $43M - $48M Power Systems 3.5% - 4.5% 14.0% - 15.0% $32M - $37M Total Segment 2.0% - 2.5% 18.0% - 19.0% $250M - $270M Total EnPro (1) 2.0% - 2.5% 15.5% - 16.5% $220M - $230M (1) Excludes future acquisitions, restructuring costs and the impact of changes driven by foreign exchange and any litigation or environmental charges. 14
Net Debt & Liquidity Summary Pro Forma Net Debt Bridge $ millions Dec. 31, 2017 Credit Facility $174 Senior Notes 450 A Debt Components $623 Cash and Equivalents 189 Asbestos Insurance Receivable 17 B Cash and Equivalents $206 C = (A B) Net Debt $418 D TTM Pro Forma Adjusted EBITDA $214 E = (C / D) Leverage Ratio 1.9x (1) Does not include expected tax benefits from funding asbestos claims trust as contemplated in the terms of the consensual comprehensive settlement. Including the approximate $85 million tax refund that we expect to receive in 2018, the adjusted net debt-to-ltm pro forma adjusted EBITDA multiple would be approximately ~1.5x. 15
Why Invest in EnPro? Attractive Share Price Relative to Peers Critical Nature of Products Leads to Commercial & Strategic Advantages Leading Brands Drive a Portfolio of Attractive, Recurring Business ACRP Resolution Complete Highly Diversified Business Leads to Stable Cash Flows Disciplined Capital Allocation Strategy Growth Focus Includes Multiple Levers 16
Appendix 17
Pro Forma Adjusted EBITDA & FCF Reconciliation ($ in millions) 2015 2016 2017 Pro Forma Net Income (Loss) 28.1 40.2 53.7 Plus: Interest Expense, net 23.7 23.5 29.9 Income Tax Expense (Benefit) 13.6 24.2 32.3 Depreciation and Amortization 71.9 73.4 73.3 Restructuring Costs 6.8 14.1 5.1 Environmental Reserve Adjustment 1.4 8.6 8.7 Goodwill and Intangible Impairment 47.0 - - Loss on Debt Exchange 2.8 - - AT Dynamics Impairment Charge - - 10.1 Acquisition Expenses 2.6 1.0 0.8 Other 1.6 0.6 0.6 Pro Forma Adjusted EBITDA 199.5 185.6 214.5 Less: Capital Expenditures (1) (52.5) (52.1) (48.6) Less: Changes in Net Working Capital (2) (2.8) (2.0) 2.0 Pro Forma Free Cash Flow (3) 144.2 131.5 167.9 (1) Includes PP&E and software capex and includes capex which EnPro had purchased during the period but for which cash payments had not yet been made. See footnote 1 in the Notes to Consolidated Financial Statements of the 2016 Form 10-K for reference. (2) Net Working Capital defined as (trade accounts receivables plus inventories plus prepaid expenses) less (accounts payables plus accrued expenses). For purposes of clarity, net working capital used herein excludes cash and tax assets and debt, interest, tax, and asbestos liabilities. (3) FCF defined as adjusted EBITDA less capex less changes in net working capital. 18
Reconciliation of Net Sales to Pro Forma Net Sales $ in millions Sealing Products 2015 2016 2017 Net Sales 705.6 705.6 804.3 Adjustments: Sales of Unconsolidated Entities 210.4 189.2 119.1 Intercompany Sales (47.6) (42.5) (29.6) Pro Forma Net Sales 868.4 852.3 893.8 Engineered Products 2015 2016 2017 Net Sales 297.8 277.1 301.1 Adjustments: Sales of Unconsolidated Entities 3.0 2.4 1.5 Intercompany Sales (1.7) (1.5) (1.1) Pro Forma Net Sales 299.1 278.0 301.5 Power Systems 2015 2016 2017 Net Sales 204.6 208.3 208.2 Adjustments: Sales of Unconsolidated Entities 4.2 4.2 5.3 Intercompany Sales (1.8) (1.4) (2.0) Pro Forma Net Sales 207.0 211.1 211.5 EnPro 2015 2016 2017 Net Sales 1,204.4 1,187.7 1,309.6 Adjustments: Sales of Unconsolidated Entities 217.6 195.8 125.9 Intercompany Sales (51.4) (45.8) (33.0) Pro Forma Net Sales 1,370.6 1,337.7 1,402.5 19
Reconciliation of Segment Profit to Pro Forma Adjusted Segment EBITDA $ in millions Sealing Products 2015 2016 2017 Segment Profit 84.3 81.8 90.9 Adjustments: Segment Profit of Unconsolidated Entities 34.5 28.3 22.3 Pro Forma Acquisition Date FV Inventory Adjustment - - 4.1 Pro Forma D&A Adjustments (6.6) (10.0) (5.8) Pro Forma Segment Profit 112.2 100.1 111.5 Acquisition Expenses 3.8 1.0 1.2 Restructuring Costs 0.6 4.0 3.6 Depreciation and Amortization Expenses 48.1 51.3 51.3 Pro Forma Adjusted Segment EBITDA 164.7 156.4 167.6 Engineered Products 2015 2016 2017 Segment Profit 6.4 12.4 29.8 Adjustments: Segment Profit of Unconsolidated Entities 1.0 0.6 0.2 Pro Forma D&A Adjustments - - - Pro Forma Segment Profit 7.4 13.0 30.0 Acquisition Expenses - 0.1 0.1 Restructuring Costs 6.2 6.8 1.5 Depreciation and Amortization Expenses 19.5 17.6 16.8 Pro Forma Adjusted Segment EBITDA 33.1 37.5 48.4 Power Systems 2015 2016 2017 Segment Profit 27.1 17.0 29.0 Adjustments: Segment Profit of Unconsolidated Entities 0.8 0.7 1.5 Pro Forma D&A Adjustments - - - Pro Forma Segment Profit 27.9 17.7 30.5 Restructuring Costs - 0.4 - Depreciation and Amortization Expenses 4.1 4.5 5.2 Pro Forma Adjusted Segment EBITDA 32.0 22.6 35.7 20