ENPRO INDUSTRIES, INC - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-31225

_________________________________________

ENPRO INDUSTRIES, INC.

(Exact name of registrant, as specified in its charter)

_____________________________________


North Carolina						01-0573945
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)
5605 Carnegie Boulevard
Suite 500
Charlotte
North Carolina						28209
(Address of principal executive offices)						(Zip Code)

(704) 731-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

__________________________________________


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	NPO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of July 30, 2021, there were 20,601,609 shares of common stock of the registrant outstanding, which does not include 181,412 shares of common stock held by a subsidiary of the registrant and accordingly are not entitled to be voted. There is only one class of common stock.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

ENPRO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Quarters and Six Months Ended June 30, 2021 and 2020

(in millions, except per share amounts)


	Quarters Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	298.6	$	247.0	$	577.9	$	529.7
Cost of sales	181.6		164.5		351.5		351.9
Gross profit	117.0		82.5		226.4		177.8
Operating expenses:
Selling, general and administrative	82.7		68.2		163.0		141.4
Other	2.4		12.5		4.3		14.1
Total operating expenses	85.1		80.7		167.3		155.5
Operating income	31.9		1.8		59.1		22.3
Interest expense	(4.0)		(3.9)		(8.0)		(8.6)
Interest income	0.2		0.4		0.4		1.1
Other income	1.9		0.3		1.8		1.7
Income (loss) from continuing operations before income taxes	30.0		(1.4)		53.3		16.5
Income tax expense	(0.8)		(1.8)		(6.0)		(9.5)
Income (loss) from continuing operations	29.2		(3.2)		47.3		7.0
Income (loss) from discontinued operations, including gain on sale, net of tax	—		(3.2)		—		205.4
Net income (loss)	29.2		(6.4)		47.3		212.4
Less: net income (loss) attributable to redeemable non-controlling interests	(0.1)		0.1		—		0.2
Net income (loss) attributable to EnPro Industries, Inc.	$	29.3	$	(6.5)	$	47.3	$	212.2
Comprehensive income	$	41.6	$	16.9	$	51.4	$	214.1
Less: comprehensive income attributable to redeemable non-controlling interests	0.5		0.7		0.2		1.7
Comprehensive income attributable to EnPro Industries, Inc.	$	41.1	$	16.2	$	51.2	$	212.4
Income (loss) attributable to EnPro Industries, Inc. common shareholders:
Income (loss) from continuing operations, net of tax	$	29.3	$	(3.3)	$	47.3	$	6.8
Income (loss) from discontinued operations, net of tax	—		(3.2)		—		205.4
Net income (loss) attributable to EnPro Industries, Inc.	$	29.3	$	(6.5)	$	47.3	$	212.2
Basic earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations	$	1.42	$	(0.16)	$	2.30	$	0.33
Discontinued operations	—		(0.15)		—		9.99
Net income (loss) per share	$	1.42	$	(0.31)	$	2.30	$	10.32
Diluted earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations	$	1.41	$	(0.16)	$	2.28	$	0.33
Discontinued operations	—		(0.15)		—		9.98
Net income (loss) per share	$	1.41	$	(0.31)	$	2.28	$	10.31

See notes to consolidated financial statements (unaudited).

ENPRO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30, 2021 and 2020

(in millions)


	2021		2020
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net income	$	47.3	$	212.4
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Income from discontinued operations, net of taxes	—		(205.4)

Depreciation	13.8		15.0
Amortization	23.7		19.4
Deferred income taxes	(2.2)		(1.6)
Stock-based compensation	3.3		2.8
Other non-cash adjustments	4.0		11.7
Change in assets and liabilities, net of effects of divestitures of businesses:

Accounts receivable, net	(24.3)		2.7
Inventories	(10.6)		(1.5)
Accounts payable	16.7		(13.7)

Other current assets and liabilities	(11.5)		(10.9)
Other non-current assets and liabilities	(1.7)		2.5
Net cash provided by operating activities of continuing operations	58.5		33.4
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Purchases of property, plant and equipment	(10.2)		(8.9)

Proceeds from (payments for) sale of businesses	(2.3)		444.9



Other	0.5		(2.4)
Net cash provided by (used in) investing activities of continuing operations	(12.0)		433.6
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from debt	—		24.9
Repayments of debt	(2.0)		(160.3)

Repurchase of common stock	—		(5.3)
Dividends paid	(11.3)		(10.8)
Other	(1.5)		(1.3)
Net cash used in financing activities of continuing operations	(14.8)		(152.8)
CASH FLOWS OF DISCONTINUED OPERATIONS
Operating cash flows	—		(6.2)

Net cash used in discontinued operations	—		(6.2)
Effect of exchange rate changes on cash and cash equivalents	0.7		(4.9)
Net increase in cash and cash equivalents	32.4		303.1
Cash and cash equivalents at beginning of period	229.5		121.2
Cash and cash equivalents at end of period	$	261.9	$	424.3

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net	$	7.5	$	8.4
Income taxes, net	$	18.1	$	11.2
Non-cash investing and financing activities:
Non-cash acquisitions of property, plant, and equipment	$	1.1	$	0.8

See notes to consolidated financial statements (unaudited).

ENPRO INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)


	June 30, 2021		December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	261.9	$	229.5
Accounts receivable, net	166.5		143.2
Inventories	149.1		139.1
Income tax receivable	51.9		49.6
Prepaid expenses and other current assets	16.7		17.6
Total current assets	646.1		579.0
Property, plant and equipment, net	189.6		195.0
Goodwill	621.4		621.8
Other intangible assets, net	532.2		553.6

Other assets	137.5		134.2
Total assets	$	2,126.8	$	2,083.6
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	3.9	$	3.8
Accounts payable	85.0		69.8
Accrued expenses	127.6		128.4

Total current liabilities	216.5		202.0
Long-term debt	486.3		487.5
Deferred taxes and non-current income taxes payable	125.0		130.5
Other liabilities	129.3		136.7
Total liabilities	957.1		956.7
Commitments and contingencies
Redeemable non-controlling interests	51.6		48.4
Shareholders’ equity
Common stock – $.01 par value; 100,000,000 shares authorized; issued, 20,783,021 shares in 2021 and 20,718,675 shares in 2020	0.2		0.2
Additional paid-in capital	292.2		289.6
Retained earnings	827.9		794.8
Accumulated other comprehensive loss	(1.0)		(4.9)
Common stock held in treasury, at cost – 181,484 shares in 2021 and 182,511 shares in 2020	(1.2)		(1.2)
Total shareholders’ equity	1,118.1		1,078.5
Total liabilities and equity	$	2,126.8	$	2,083.6

See notes to consolidated financial statements (unaudited).

ENPRO INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Overview, Basis of Presentation and Recently Issued Authoritative Accounting Guidance

Overview

EnPro Industries, Inc. (“we,” “us,” “our,” “EnPro”, or the “Company”) is a leader in designing, developing, manufacturing, servicing, and marketing proprietary engineered industrial products and serves a wide variety of customers in varied industries around the world. Over the past several years, we have executed several strategic initiatives to change the portfolio of businesses that we operate to focus on materials science-based businesses with leading technologies, compelling margins, strong cash flow, and high levels of recurring revenue that serve markets with favorable secular tailwinds.

Basis of Presentation

The accompanying interim consolidated financial statements are unaudited, and certain related information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted in accordance with Rule 10-01 of Regulation S-X. They were prepared following the same policies and procedures used in the preparation of our annual financial statements except as disclosed below and reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of results for the periods presented. The Consolidated Balance Sheet as of December 31, 2020 was derived from the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2020. The results of operations for the interim periods are not necessarily indicative of the results for the fiscal year. These consolidated financial statements should be read in conjunction with our annual consolidated financial statements for the year ended December 31, 2020 included within our annual report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period.

All intercompany accounts and transactions between our consolidated operations have been eliminated.

During March 2021, we identified two errors related to our accounting for the disposal of the Air Springs portion of the heavy-duty trucking business that closed in the fourth quarter of 2020. Such errors resulted in an understatement of the pre-tax loss on disposal for this disposition by approximately $2.0 million and an overstatement of net income by approximately $1.5 million in our previously issued consolidated financial statements for calendar 2020. Net income for calendar 2020 was $184.8 million. We evaluated the errors and concluded that they were not material to our previously issued consolidated financial statements and recorded the pre-tax loss on disposal as an out-of-period adjustment in other income in our Consolidated Statement of Operations for the first quarter of 2021.

Beginning with the first quarter of 2021, we modified the presentation of our Consolidated Statements of Operations to move income from discontinued operations directly following income from continuing operations before calculating a net income subtotal. Consistent with this change in presentation, we also began the Consolidated Statements of Cash Flows with net income rather than net income attributable to EnPro Industries, Inc. We have revised the prior period presented for these two financial statements to conform with this modified presentation. There is no impact to the Consolidated Balance Sheets as a result of this presentation change.

In January 2021, we adopted a standard that simplified the accounting for income taxes in nine unrelated areas. The adoption had no significant impact to our financial statements.

2. Acquisition

On October 26, 2020, a subsidiary of EnPro formed for this purpose (the "Alluxa Acquisition Subsidiary") acquired all of the equity securities of Alluxa, Inc. ("Alluxa"), a privately held, California-based company. Alluxa is an industrial technology company that provides specialized optical filters and thin-film coatings for the most challenging applications in the industrial technology, life sciences, and semiconductor markets. Alluxa's products are developed through a proprietary coating process using state-of-the-art advanced equipment. Alluxa’s global distribution capabilities support the company’s international reach, serving customers across the Americas, Europe, and Asia. Founded in 2007, Alluxa has two locations in California and is headquartered in Santa Rosa, California. Alluxa is included with the Advanced Surface Technologies segment.

The following pro forma condensed consolidated financial results of operations for the quarter and six months ended June 30, 2020 are presented as if the acquisition had been completed prior to 2020:


	Quarter Ended June 30, 2020		Six Months Ended June 30, 2020
(in millions)
Pro forma net sales	$	254.7	$	545.0
Pro forma income (loss) from continuing operations	$	(4.4)	$	4.9

These amounts have been calculated after applying our accounting policies and adjusting the results of Alluxa to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied prior to 2020 as well as additional interest expense to reflect financing required, together with the consequential tax effects. These pro forma financial results have been prepared for comparative purposes only and do not reflect the effect of synergies that would have been expected to result from the integration of this acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred prior to 2020, or of future results of the consolidated entities.

3. Income Taxes

Our income tax expense and resulting effective tax rate are based upon the estimated annual effective tax rates applicable for the respective periods adjusted for the effect of items required to be treated as discrete in the interim periods. This estimated annual effective tax rate is affected by the relative proportions of revenue and income before taxes in the jurisdictions in which we operate. Based on the geographical mix of earnings our annual effective tax rate fluctuates based on the portion of our profits earned in each jurisdiction.

The effective tax rates for the quarters ended June 30, 2021 and 2020 were 2.6% and (123.5)%, respectively. The effective tax rate for the three months ended June 30, 2021 is primarily the result of the release of a valuation allowance on certain foreign net operating losses (7.9%), the favorable conclusion of the IRS examination (4.7%), and the release of certain uncertain tax positions (4.4%). The high effective tax rate for the three months ended June 30, 2020 is primarily the result of a geographical mix of lower pre-tax income in the U.S. combined with minimum tax on certain non-U.S. earnings, disproportionately higher pre-tax income in higher foreign tax jurisdictions and an increase in valuation allowance against certain net operating losses.

The effective tax rates for the six months ended June 30, 2021 and 2020 were 11.2% and 57.3%, respectively. The effective tax rate for the six months ended June 30, 2021 is primarily the result of the release of a valuation allowance on certain foreign net operating losses, the favorable conclusion of the IRS examination, and the release of certain uncertain tax positions, partially offset by higher tax rates in most foreign jurisdictions. The effective tax rate for the six months ended June 30, 2020 is primarily the result of a geographical mix of lower pre-tax income in the U.S. combined with the minimum tax on certain non-U.S. earnings, current year increase of valuation allowance against certain net operating losses, and higher tax rates in most foreign jurisdictions.

In June 2017, the IRS began an examination of our 2014 through 2017 U.S. federal income tax returns. The IRS audit has concluded during the quarter ended June 30, 2021 and as a result of the conclusion of the audit, we expect to receive a cash refund of approximately $24.7 million, plus any applicable interest. The net receivable balance related to the IRS audit was $21.8 million at December 31, 2020. Various foreign and state tax returns are also currently under examination and some of these exams may conclude within the next twelve months. The final outcomes of these audits are not yet determinable; however, management believes that any assessments that may arise will not have a material effect on our financial results.

4. Earnings Per Share


	Quarters Ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Numerator (basic and diluted):
Income (loss) from continuing operations, net of tax	$	29.2	$	(3.2)	$	47.3	$	7.0
Less: net income (loss) attributable to redeemable non-controlling interests	(0.1)		0.1		—		0.2
Income (loss) from continuing operations attributable to EnPro Industries, Inc.	29.3		(3.3)		47.3		6.8
Income (loss) from discontinued operations, net of tax	—		(3.2)		—		205.4
Net income (loss) attributable to EnPro Industries, Inc.	$	29.3	$	(6.5)	$	47.3	$	212.2
Denominator:
Weighted-average shares – basic	20.6		20.5		20.6		20.6
Share-based awards	0.2		—		0.2		—

Weighted-average shares – diluted	20.8		20.5		20.8		20.6
Basic earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations	$	1.42	$	(0.16)	$	2.30	$	0.33
Discontinued operations	—		(0.15)		—		9.99
Net income (loss) per share	$	1.42	$	(0.31)	$	2.30	$	10.32
Diluted earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations	$	1.41	$	(0.16)	$	2.28	$	0.33
Discontinued operations	—		(0.15)		—		9.98
Net income (loss) per share	$	1.41	$	(0.31)	$	2.28	$	10.31

5. Inventories


	June 30, 2021		December 31, 2020
	(in millions)
Finished products	$	69.3	$	69.4
Work in process	28.0		24.8
Raw materials and supplies	55.9		48.7
	153.2		142.9
Reserve to reduce certain inventories to LIFO basis	(4.1)		(3.8)




Total inventories	$	149.1	$	139.1

We use the last-in, first-out (“LIFO”) method of valuing certain of our inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, which are subject to change until the final year-end LIFO inventory valuation.

6. Goodwill and Other Intangible Assets

The changes in the net carrying value of goodwill by reportable segment for the six months ended June 30, 2021, are as follows:


	Sealing Technologies		Advanced Surface Technologies		Engineered Materials		Total
	(in millions)


Goodwill as of December 31, 2020	$	297.4	$	307.7	$	16.7	$	621.8



Foreign currency translation	(1.0)		0.6		—		(0.4)



Goodwill as of June 30, 2021	$	296.4	$	308.3	$	16.7	$	621.4

The goodwill balances reflected above are net of accumulated impairment losses of $27.8 million for the Sealing Technologies segment and $154.8 million for the Engineered Materials segment as of June 30, 2021 and December 31, 2020.

Identifiable intangible assets are as follows:


	As of June 30, 2021				As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(in millions)
Amortized:
Customer relationships	$	507.0	$	192.2	$	505.5	$	177.8
Existing technology	179.9		47.5		179.6		41.3
Trademarks	44.4		26.7		44.6		25.7
Other	37.7		23.8		37.6		22.3
	769.0		290.2		767.3		267.1
Indefinite-Lived:
Trademarks	53.4		—		53.4		—
Total	$	822.4	$	290.2	$	820.7	$	267.1

Amortization for the quarters and six months ended June 30, 2021 and 2020 were $11.3 million, $8.9 million, $22.6 million and $17.9 million, respectively.

7. Accrued Expenses


	June 30, 2021		December 31, 2020
	(in millions)
Salaries, wages and employee benefits	$	46.5	$	46.3
Interest	4.4		4.4
Environmental	12.6		12.6

Income taxes	10.1		9.9
Taxes other than income taxes	11.8		9.4
Operating lease liabilities	9.6		10.1

Other	32.6		35.7
	$	127.6	$	128.4

8. Long-Term Debt

Revolving Credit Facility

On September 25, 2019, we entered into a First Amendment (the "First Amendment") to our Second Amended and Restated Credit Agreement (the "Credit Agreement”) among EnPro Industries, Inc. and EnPro Holdings, Inc., a wholly owned subsidiary of the Company (“EnPro Holdings”), as borrowers, the guarantors party thereto, the lenders party thereto and Bank

of America, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $400.0 million (the “Revolving Credit Facility”) and a five-year, senior secured term loan facility of $150.0 million (the "Term Loan Facility" and, together with the Revolving Credit Facility, the "Facilities"). The Amended Credit Agreement also provides that the borrowers may seek incremental term loans and/or additional revolving credit commitments in an amount equal to the greater of $225.0 million and 100% of consolidated EBITDA (as defined) for the most recently ended four-quarter period for which we have reported financial results, plus additional amounts based on a consolidated senior secured leverage ratio.

Initially, borrowings under the Facilities bore interest at an annual rate of LIBOR plus 1.50% or base rate plus 0.50%, with the interest rates under the Facilities being subject to incremental increases based on a consolidated total net leverage ratio. In addition, a commitment fee accrues with respect to the unused amount of the Revolving Credit Facility at an annual rate of 0.175%, which rate is also subject to incremental increase or decrease based on a consolidated total net leverage ratio.

The Term Loan Facility amortizes on a quarterly basis in an annual amount equal to 2.50% of the original principal amount of the Term Loan Facility in each of years one through three, 5.00% of such original principal amount in year four, and 1.25% of such original principal amount in each of the first three quarters of year five, with the remaining outstanding principal amount payable at maturity.

The Facilities are subject to prepayment with the net cash proceeds of certain asset sales, casualty or condemnation events, and non-permitted debt issuances.

EnPro and EnPro Holdings are the permitted borrowers under the Revolving Credit Facility. We have the ability to add foreign subsidiaries as borrowers under the Revolving Credit Facility for up to $100.0 million (or its foreign currency equivalent) in aggregate borrowings, subject to certain conditions. Each of our domestic, consolidated subsidiaries are required to guarantee the obligations of the borrowers under the Revolving Credit Facility, and each of our existing domestic, consolidated subsidiaries has entered into the Credit Agreement to provide such a guarantee.

Borrowings under the Revolving Credit Facility are secured by a first-priority pledge of certain assets. The Credit Agreement contains certain financial covenants and required financial ratios including a maximum consolidated total net leverage and a minimum consolidated interest coverage as defined in the Credit Agreement. We were in compliance with all covenants of the Credit Agreement as of June 30, 2021.

The borrowing availability under the Revolving Credit Facility at June 30, 2021 was $388.6 million after giving consideration to $11.4 million of outstanding letters of credit. At June 30, 2021, we had $143.4 million outstanding on our Term Loan Facility borrowings.

Senior Notes

In October 2018, we completed the offering of $350.0 million aggregate principal amount of 5.75% Senior Notes due 2026 (the "Senior Notes").

The Senior Notes are unsecured, unsubordinated obligations of EnPro and mature on October 15, 2026. Interest on the Senior Notes accrues at a rate of 5.75% per annum and is payable semi-annually in cash in arrears on April 15 and October 15 of each year, commencing on April 15, 2019. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of EnPro's existing and future direct and indirect domestic subsidiaries that is a borrower under, or guarantees, our indebtedness under the Revolving Credit Facility or guarantees any other Capital Markets Indebtedness (as defined in the indenture governing the Senior Notes) of EnPro or any of the guarantors.

On or after October 15, 2021, we may, on any one or more occasion, redeem all or part of the Senior Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may redeem a portion of the aggregate principal amount of the Senior Notes before October 15, 2021 with the net cash proceeds from certain equity offerings at a specified redemption price plus accrued and unpaid interest, if any, to, but not including, the redemption price. We may also redeem some or all of the Senior Notes before October 15, 2021 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, but not including, the redemption date, plus a "make whole" premium.

Each holder of the Senior Notes may require us to repurchase some or all of the Senior Notes held by such holder for cash upon the occurrence of a defined "change of control" event.

The indenture governing the Senior Notes includes covenants that restrict our ability to engage in certain activities, including incurring additional indebtedness, paying dividends, and repurchasing shares of our common stock, subject in each case to specified exceptions and qualifications set forth in the indenture.

In April of 2021, we met all reinvestment requirements outlined in the indenture governing the Senior Notes with respect to the net cash proceeds from the sale of Fairbanks Morse in January 2020.

9. Pensions and Postretirement Benefits

The components of net periodic benefit cost for our U.S. and foreign defined benefit pension and other postretirement plans for the quarters and six months ended June 30, 2021 and 2020, are as follows:


	Quarters Ended June 30,								Six months ended June 30,
	Pension Benefits				Other Benefits				Pension Benefits				Other Benefits
	2021		2020		2021		2020		2021		2020		2021		2020
	(in millions)
Service cost	$	0.4	$	1.2	$	—	$	—	$	0.8	$	2.2	$	—	$	—
Interest cost	2.2		2.6		0.1		0.1		4.5		5.4		0.1		0.1
Expected return on plan assets	(4.6)		(4.8)		—		—		(9.1)		(9.5)		—		—
Amortization of prior service cost	0.1		—		—		—		0.1		—		—		—
Amortization of net loss (gain)	0.2		1.3		—		—		0.3		2.6		—		(1.1)
Curtailment loss	—		—		—		—		—		0.3		—		—
Net periodic benefit cost (benefit)	$	(1.7)	$	0.3	$	0.1	$	0.1	$	(3.4)	$	1.0	$	0.1	$	(1.0)

No contributions were made in the six months ended June 30, 2021 to our U.S. defined benefit pension plans and we do not anticipate making contributions in 2021 to these plans. Benefits relating to our U.S. defined benefit pension plans were frozen for all salaried employees as of January 1, 2021.

10. Shareholders' Equity

Changes in shareholders' equity for the six months ended June 30, 2021 are as follows:


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity		Redeemable Non-controlling Interests
(in millions, except per share data)	Shares	Amount
Balance, December 31, 2020	20.5	$	0.2	$	289.6	$	794.8	$	(4.9)	$	(1.2)	$	1,078.5	$	48.4

Net income	—	—		—		18.0		—		—		18.0		0.1
Other comprehensive loss	—	—		—		—		(7.9)		—		(7.9)		(0.5)
Dividends ($0.27 per share)	—	—		—		(5.7)		—		—		(5.7)		—

Incentive plan activity	0.1	—		1.2		—		—		—		1.2		—
Other	—	—		(0.1)		(3.1)		—		—		(3.2)		3.2
Balance, March 31, 2021	20.6	0.2		290.7		804.0		(12.8)		(1.2)		1,080.9		51.2
Net income (loss)	—	—		—		29.3		—		—		29.3		(0.1)
Other comprehensive income	—	—		—		—		11.8		—		11.8		0.6
Dividends ($0.27 per share)	—	—		—		(5.6)				—		(5.6)		—

Incentive plan activity	—	—		1.6		—		—		—		1.6		—
Other	—	—		(0.1)		0.2		—		—		0.1		(0.1)
Balance, June 30, 2021	20.6	$	0.2	$	292.2	$	827.9	$	(1.0)	$	(1.2)	$	1,118.1	$	51.6

Changes in shareholders' equity for the six months ended June 30, 2020 are as follows:


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity		Redeemable Non-controlling Interests
(in millions, except per share data)	Shares	Amount
Balance, December 31, 2019	20.6	$	0.2	$	292.1	$	632.2	$	(36.4)	$	(1.2)	$	886.9	$	28.0
Adoption of new accounting standard	—	—		—		(0.1)		—		—		(0.1)		—
Net income	—	—		—		218.7		—		—		218.7		0.1
Other comprehensive income (loss)	—	—		—		—		(22.5)		—		(22.5)		0.9
Dividends ($0.26 per share)	—	—		—		(5.3)		—		—		(5.3)		—
Share repurchases	(0.1)	—		(5.3)		—		—		—		(5.3)		—
Incentive plan activity	—	—		1.0		—		—		—		1.0		—
Other	—	—		(1.5)		—		—		—		(1.5)		—
Balance, March 31, 2020	20.5	0.2		286.3		845.5		(58.9)		(1.2)		1,071.9		29.0
Net income (loss)	—	—		—		(6.5)		—		—		(6.5)		0.1
Other comprehensive income	—	—		—		—		22.7		—		22.7		0.6
Dividends ($0.26 per share)	—	—		—		(5.4)		—		—		(5.4)		—

Incentive plan activity	—	—		1.5		—		—		—		1.5		—
Balance, June 30, 2020	20.5	$	0.2	$	287.8	$	833.6	$	(36.2)	$	(1.2)	$	1,084.2	$	29.7

We intend to declare regular quarterly cash dividends on our common stock, as determined by our board of directors, after taking into account our current and projected cash flows, earnings, financial position, debt covenants and other relevant factors. In accordance with the board of directors' declaration, total dividend payments of $11.3 million were made during the six months ended June 30, 2021.

In July 2021, our board of directors declared a dividend of $0.27 per share, payable on September 15, 2021 to all shareholders of record as of September 1, 2021.

In October 2018, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares. During the six months ended June 30, 2020 we repurchased 0.1 million shares for $5.3 million. Prior to the expiration of the authorization in October 2020, total repurchases under the October 2018 authorization aggregated 0.3 million shares for $20.3 million.

In October 2020, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares through October 2022. We have not made any repurchases under this authorization.

In February 2021, we issued stock options to certain key executives for 0.1 million common shares with an exercise price of $80.00 per share. The options vest pro-rata on the first, second and third anniversaries of the grant date, subject to continued employment. No options have a term greater than 10 years.

We determine the fair value of stock options using the Black-Scholes option pricing formula as of the grant date. Key inputs into this formula include expected term, expected volatility, expected dividend yield, and the risk-free interest rate. This fair value is amortized on a straight line basis over the vesting period.

The expected term represents the period that our stock options are expected to be outstanding, and is determined based on historical experience of similar awards, given the contractual terms of the awards, vesting schedules, and expectations of future employee behavior. The fair value of stock options reflects a volatility factor calculated using historical market data for EnPro's common stock. The time frame used was approximated as a six-year period from the grant date for the awards. The dividend

assumption is based on our expectations as of the grant date. We base the risk-free interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining life equal to the option's expected life.

The option awards issued in 2021 had a fair value of $27.46 per share at their grant date. The following assumptions were used to estimate the fair value of the 2021 option awards:


Average expected term	6 years
Expected volatility	40.29	%
Risk-free interest rate	1.02	%
Expected dividend yield	1.35	%

11. Business Segment Information

We aggregate our operating businesses into three reportable segments. The factors considered in determining our reportable segments are the economic similarity of the businesses, the nature of products sold or services provided, the production processes and the types of customers and distribution methods. Our reportable segments are managed separately based on these differences.

Our Sealing Technologies segment designs, manufactures and sells sealing products, including: metallic, non-metallic and composite material gaskets, dynamic seals, compression packing, resilient metal seals, elastomeric seals, custom-engineered mechanical seals for applications in the aerospace industry and other markets, hydraulic components, expansion joints, sanitary gaskets, hoses and fittings for the hygienic process industries, fluid transfer products for the pharmaceutical and biopharmaceutical industries, hole forming products, bellows and bellows assemblies, PTFE products, and heavy-duty commercial vehicle parts used in wheel-end and suspension components. These products are used in a variety of industries, including chemical and petrochemical processing, pulp and paper processing, power generation, food and pharmaceutical processing, primary metal manufacturing, mining, water and waste treatment, heavy-duty trucking, aerospace, medical, filtration and semiconductor fabrication. In many of these industries, performance and durability are vital for safety and environmental protection. Many of our products are used in highly demanding applications, e.g., where extreme temperatures, extreme pressures, corrosive environments, strict tolerances, and/or worn equipment make product performance difficult.

Our Advanced Surface Technologies segment applies proprietary technologies, processes, and capabilities to deliver highly differentiated suites of products and services for the most challenging applications in high growth markets. The segment’s products and services are used in highly demanding environments requiring performance, precision and repeatability, with a low tolerance for failure. The segment’s services include cleaning, coating, testing, refurbishment and verification services for critical components and assemblies used in state-of-the-art advanced node semiconductor manufacturing equipment. It designs, manufactures and sells specialized optical filters and thin-film coatings for the most challenging applications in the industrial technology, life sciences, and semiconductor markets and complex front-end wafer processing sub-systems, new and refurbished electrostatic chuck pedestals, thin film coatings, and edge-welded metal bellows for the semiconductor equipment industry and for critical applications in the space, aerospace and defense markets.

Our Engineered Materials segment includes operations that design, manufacture and sell self-lubricating, non-rolling metal-polymer, engineered plastics, and fiber reinforced composite bearing products, precision engineered components and lubrication systems for reciprocating compressors and engines, critical service flange gaskets, seals and electrical flange isolation kits used in high-pressure wellhead equipment, flow lines, water injection lines, sour hydrocarbon process applications, and crude oil and natural gas pipeline/transmission line applications. These products are used in a wide range of applications, including the automotive, aerospace, pharmaceutical, pulp and paper, natural gas, health, power generation, machine tools, air treatment, refining, petrochemical and general industrial markets.

We measure operating performance based on segment earnings before interest, income taxes, depreciation, amortization, and other selected items ("Adjusted Segment EBITDA"), which is segment revenue reduced by operating expenses and other costs identifiable with the segment, excluding acquisition and divestiture expenses, restructuring costs, impairment charges, non-controlling interest compensation, amortization of the fair value adjustment to acquisition date inventory, and depreciation and amortization. Adjusted Segment EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies. Corporate expenses include general corporate administrative costs. Expenses not directly attributable to the segments, corporate expenses, net interest expense, gains and losses related to the sale of assets, and income taxes are not included in the computation of Adjusted Segment EBITDA. The accounting policies of the reportable segments are the same as those for EnPro.

Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisitions of LeanTeq and Alluxa being subject to reduction for certain types of employment terminations of the sellers. This expense is recorded in selling, general, and administrative expenses on our Consolidated Statements of Operations and is directly related to the terms of the acquisitions. This expense will continue to be recognized as compensation expense over the term of the put and call options associated with the acquisitions unless certain employment terminations have occurred.

Segment operating results and other financial data for the quarters and six months ended June 30, 2021 and 2020 were as follows:


	Quarters Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in millions)
Sales
Sealing Technologies	$	162.5	$	150.6	$	309.0	$	324.2
Advanced Surface Technologies	59.2		40.0		113.9		76.7
Engineered Materials	80.0		58.6		160.4		133.7
	301.7		249.2		583.3		534.6
Intersegment sales	(3.1)		(2.2)		(5.4)		(4.9)
Total sales	$	298.6	$	247.0	$	577.9	$	529.7

Adjusted Segment EBITDA
Sealing Technologies	$	42.4	$	30.5	$	76.4	$	64.1
Advanced Surface Technologies	15.6		11.0		32.9		18.3
Engineered Materials	13.0		4.9		25.6		13.2
	$	71.0	$	46.4	$	134.9	$	95.6

Reconciliation of Adjusted Segment EBITDA to income (loss) from continuing operations before income taxes
Adjusted Segment EBITDA	$	71.0	$	46.4	$	134.9	$	95.6
Acquisition and divestiture expenses	—		(0.5)		(0.1)		(1.3)
Non-controlling interest compensation allocation	(1.3)		(0.5)		(2.9)		(1.1)
Amortization of fair value adjustment to acquisition date inventory	(2.3)		—		(4.8)		—
Restructuring and impairment expense	(2.7)		(17.5)		(4.5)		(18.9)
Depreciation and amortization expense	(18.5)		(17.2)		(37.4)		(34.5)
Corporate expenses	(12.8)		(7.1)		(24.3)		(15.6)
Interest expense, net	(3.8)		(3.5)		(7.6)		(7.5)
Other income (expense), net	0.4		(1.5)		—		(0.2)
Income (loss) from continuing operations before income taxes	$	30.0	$	(1.4)	$	53.3	$	16.5

Segment assets are as follows:


	June 30, 2021		December 31, 2020
	(in millions)
Sealing Technologies	$	744.5	$	741.9
Advanced Surface Technologies	761.8		768.2
Engineered Materials	256.5		245.8
Corporate	364.0		327.7

	$	2,126.8	$	2,083.6

Backlog

As of June 30, 2021, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $284.7 million. Approximately 96% of these obligations are expected to be satisfied within one year. There is no certainty these orders will result in actual sales at the times or in the amounts ordered. In addition, for most of our business, this total is not particularly predictive of future performance because of our short lead times and some seasonality.

Revenue by End Market

Due to the diversified nature of our business and the wide array of products that we offer, we sell into a number of end markets. Underlying economic conditions within these markets are a major driver of our segments' sales performance. Below is a summary of our third-party sales by major end market with which we did business for the quarters and six months ended June 30, 2021 and 2020:


	Quarter Ended June 30, 2021
(in millions)	Sealing Technologies		Advanced Surface Technologies		Engineered Materials		Total
Aerospace	$	8.3	$	3.0	$	1.5	$	12.8
Automotive	0.6		0.2		16.3		17.1
Chemical and material processing	19.0		—		11.4		30.4
Food and pharmaceutical	16.6		—		0.3		16.9
General industrial	44.9		5.8		30.6		81.3
Medium-duty/heavy-duty truck	47.6		—		2.7		50.3
Oil and gas	5.4		1.7		15.8		22.9
Power generation	9.6		—		0.9		10.5
Semiconductors	5.4		47.9		—		53.3
Other	2.3		0.5		0.3		3.1
Total third-party sales	$	159.7	$	59.1	$	79.8	$	298.6


	Quarter Ended June 30, 2020
(in millions)	Sealing Technologies		Advanced Surface Technologies		Engineered Materials		Total
Aerospace	$	10.4	$	2.1	$	1.2	$	13.7
Automotive	0.2		—		7.8		8.0
Chemical and material processing	12.8		—		11.6		24.4
Food and pharmaceutical	13.6		—		0.3		13.9
General industrial	36.7		—		19.7		56.4
Medium-duty/heavy-duty truck	54.1		—		1.2		55.3
Oil and gas	5.2		0.2		15.0		20.4
Power generation	11.1		—		1.6		12.7
Semiconductors	3.9		37.7		—		41.6
Other	0.5		—		0.1		0.6
Total third-party sales	$	148.5	$	40.0	$	58.5	$	247.0


	Six Months Ended June 30, 2021
(in millions)	Sealing Technologies		Advanced Surface Technologies		Engineered Materials		Total
Aerospace	$	15.0	$	4.5	$	2.8	$	22.3
Automotive	1.0		0.5		35.0		36.5
Chemical and material processing	36.6		—		21.9		58.5
Food and pharmaceutical	33.0		—		0.8		33.8
General industrial	87.6		12.2		60.8		160.6
Medium-duty/heavy-duty truck	86.5		—		5.5		92.0
Oil and gas	9.6		2.4		30.7		42.7
Power generation	20.7		—		1.8		22.5
Semiconductors	10.1		92.8		—		102.9
Other	4.1		1.4		0.6		6.1
Total third-party sales	$	304.2	$	113.8	$	159.9	$	577.9


	Six Months Ended June 30, 2020
(in millions)	Sealing Technologies		Advanced Surface Technologies		Engineered Materials		Total
Aerospace	$	20.8	$	4.2	$	3.5	$	28.5
Automotive	0.4		—		24.1		24.5
Chemical and material processing	25.7		—		21.7		47.4
Food and pharmaceutical	24.8		—		0.8		25.6
General industrial	82.7		—		44.0		126.7
Medium-duty/heavy-duty truck	122.9		—		3.3		126.2
Oil and gas	12.0		1.5		32.3		45.8
Power generation	21.0		—		3.4		24.4
Semiconductors	7.1		71.0		—		78.1
Other	2.4		—		0.1		2.5
Total third-party sales	$	319.8	$	76.7	$	133.2	$	529.7

In 2021, we refined the end market classification of certain sales in the Engineered Materials segment for the quarter and six months ended June 30, 2020. This refinement resulted in a reduction in sales reported for the quarter ended June 30, 2020 in the power generation market of approximately $2.8 million and an offsetting increase in the automotive, general industrial, and medium duty/heavy duty truck markets of approximately $0.5 million, $1.1 million , and $1.2 million, respectively. For the six months ended June 30, 2020, this refinement resulted in a reduction to the automotive and power generation markets of approximately $3.7 million and $5.4 million, respectively, and an offsetting increase to our general industrial and medium-duty/heavy-duty truck markets of approximately $6.0 million and $3.2 million, respectively.

12. Derivatives and Hedging

In September 2018, we entered into cross-currency swap agreements (the "Original Swap") with a notional amount of $200.0 million to manage foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate U.S. Dollar (“USD”)-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 172.8 million EUR with a weighted average interest rate of 2.8%, with interest payment dates of March 15 and September 15 of each year. The Original Swap agreement matures on September 15, 2022.

In May 2019, we entered into additional cross-currency swap agreements (the "Additional Swap") with a notional amount of $100.0 million to manage an increased portion of our foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate USD-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 89.6 million EUR with a weighted average interest rate of 3.5%, with interest payment dates of April 15 and October 15 of each year. The Additional Swap agreement matures on October 15, 2026.

During the term of the swap agreements, we will receive semi-annual payments from the counterparties due to the difference between the interest rate on the Senior Notes and the interest rate on the Euro debt underlying each of the swaps. There was no principal exchange at the inception of the arrangements, and there will be no exchange at maturity. At maturity (or earlier at our option), we and the counterparties will settle the swap agreements at their fair value in cash based on the aggregate notional amount and the then-applicable currency exchange rate compared to the exchange rate at the time the swap agreements were entered into.

We have designated these cross-currency swaps as qualifying hedging instruments and are accounting for them as a net investment hedge. At June 30, 2021, the cross-currency swap agreements were recorded as a $1.5 million asset and a $3.4 million liability within other assets and other liabilities, respectively, on the Consolidated Balance Sheet. The gains and losses resulting from fair value adjustments to the cross currency-swap agreements, excluding interest accruals related to the above receipts, are recorded in accumulated other comprehensive loss within our cumulative foreign currency translation adjustment, as the swaps are effective in hedging the designated risk. Cash flows related to the cross-currency swaps are included in operating activities in the Consolidated Statements of Cash Flows, aside from the ultimate settlement at maturity with the counterparties, which will be included in investing activities.

13. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	Fair Value Measurements as of
	June 30, 2021		December 31, 2020
	(in millions)
Assets
Time deposits	$	4.2	$	4.2
Foreign currency derivatives	1.5		—
Deferred compensation assets	9.8		8.6
	$	15.5	$	12.8
Liabilities
Deferred compensation liabilities	$	10.2	$	8.9
Foreign currency derivatives	3.4		9.5
	$	13.6	$	18.4

Our time deposits and deferred compensation assets and liabilities are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Our foreign currency derivatives are classified as Level 2 as their value is calculated based upon observable inputs including market USD/Euro exchange rates and market interest rates.

The carrying values of our significant financial instruments reflected in the Consolidated Balance Sheets approximated their respective fair values except for the following instruments:


	June 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
Long-term debt	$	490.2	$	513.3	$	491.3	$	520.8

The fair values for long-term debt are based on quoted market prices for identical liabilities, but these are considered Level 2 computations because the market is not active.

14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component (after tax) for the quarter ended June 30, 2021 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension and Other Postretirement Plans		Total
Beginning balance	$	23.7	$	(36.5)	$	(12.8)
Other comprehensive income before reclassifications	12.2		—		12.2
Amounts reclassified from accumulated other comprehensive loss	—		0.2		0.2
Net current-period other comprehensive income	12.2		0.2		12.4
Less: other comprehensive income attributable to redeemable non-controlling interests	0.6		—		0.6
Net current-period other comprehensive income attributable to EnPro Industries, Inc.	11.6		0.2		11.8
Ending balance	$	35.3	$	(36.3)	$	(1.0)

Changes in accumulated other comprehensive loss by component (after tax) for the quarter ended June 30, 2020 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension and Other Postretirement Plans		Total
Beginning balance	$	(13.2)	$	(45.7)	$	(58.9)
Other comprehensive income before reclassifications	22.4		—		22.4
Amounts reclassified from accumulated other comprehensive loss	—		0.9		0.9
Net current-period other comprehensive income	22.4		0.9		23.3
Less: other comprehensive income attributable to redeemable non-controlling interests	0.6		—		0.6
Net current-period other comprehensive income attributable to EnPro Industries, Inc.	21.8		0.9		22.7
Ending balance	$	8.6	$	(44.8)	$	(36.2)

Changes in accumulated other comprehensive loss by component (after tax) for the six months ended June 30, 2021 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension and Other Postretirement Plans		Total
Beginning balance	$	31.7	$	(36.6)	$	(4.9)


Other comprehensive income before reclassifications	3.8		—		3.8
Amounts reclassified from accumulated other comprehensive loss	—		0.3		0.3
Net current-period other comprehensive income	3.8		0.3		4.1
Less: other comprehensive income attributable to redeemable non-controlling interests	0.2		—		0.2
Net current-period other comprehensive income attributable to EnPro Industries, Inc.	3.6		0.3		3.9
Ending balance	$	35.3	$	(36.3)	$	(1.0)

Changes in accumulated other comprehensive loss by component (after tax) for the six months ended June 30, 2020 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension and Other Postretirement Plans		Total
Beginning balance	$	9.8	$	(46.2)	$	(36.4)


Other comprehensive income before reclassifications	0.3		—		0.3
Amounts reclassified from accumulated other comprehensive loss	—		1.4		1.4
Net current-period other comprehensive income	0.3		1.4		1.7
Less: other comprehensive income attributable to redeemable non-controlling interests	1.5		—		1.5
Net current-period other comprehensive income (loss) attributable to EnPro Industries, Inc.	(1.2)		1.4		0.2
Ending balance	$	8.6	$	(44.8)	$	(36.2)

Reclassifications out of accumulated other comprehensive loss for the quarters and six months ended June 30, 2021 and 2020 are as follows:


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss								Affected Statement of Operations Caption
	Quarters Ended June 30,				Six Months Ended June 30,
(in millions)	2021		2020		2021		2020
Pension and other postretirement plans adjustments:
Actuarial losses	$	0.2	$	1.3	$	0.3	$	1.5	(1)
Prior service costs	0.1		—		0.1		—		(1)
Curtailment	—		—		—		0.3		(1)
Total before tax	0.3		1.3		0.4		1.8		Income before income taxes
Tax benefit	(0.1)		(0.4)		(0.1)		(0.4)		Income tax expense
Net of tax	$	0.2	$	0.9	$	0.3	$	1.4	Net income

(1)These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. As these are components of net periodic pension cost other than service cost, the affected Statement of Operations captions are other income and income (loss) from discontinued operations, including gain on sale, net of taxes (See Note 9, “Pensions and Postretirement Benefits” for additional details).

15. Commitments and Contingencies

General

A detailed description of environmental and other legal matters relating to certain of our subsidiaries is included in this section. In addition to the matters noted herein, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business. We believe the outcome of such other litigation and legal proceedings will not have a material adverse effect on our financial condition, results of operations and cash flows. Expenses for administrative and legal proceedings are recorded when incurred.

Environmental

Our facilities and operations are subject to federal, state and local environmental and occupational health and safety laws and regulations of the U.S. and foreign countries. We take a proactive approach in our efforts to comply with these laws and regulations as they relate to our manufacturing operations and in proposing and implementing any remedial plans that may be necessary. We also regularly conduct comprehensive environmental, health and safety audits at our facilities to maintain compliance and improve operational efficiency.

Although we believe past operations were in substantial compliance with the then applicable regulations, we or one or more of our subsidiaries are involved with various remediation activities or an investigation to determine responsibility for environmental conditions at 20 sites. At 14 of these sites, the future cost per site for us or our subsidiary is expected to exceed $100,000. Of these 20 sites, 18 are sites where we or one or more of our subsidiaries formerly conducted business operations but no longer do, and 2 are sites where we conduct manufacturing operations. Investigations have been completed for 16 sites and are in progress at 3 sites. An investigation to determine responsibility for environmental conditions is ongoing at one site.

Our policy is to accrue environmental investigation and remediation costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. For sites with multiple future projected cost scenarios for identified feasible investigation and remediation options where no one estimate is more likely than all the others, our policy is to accrue the lowest estimate among the range of estimates. The measurement of the liability is based on an evaluation of currently available facts with respect to each individual situation and takes into consideration factors such as existing technology, presently enacted laws and regulations and prior experience in the remediation of similar contaminated sites. Liabilities are established for all sites based on these factors. As assessments and remediation progress at individual sites, these liabilities are reviewed and adjusted to reflect additional technical data and legal information. As of June 30, 2021 and December 31, 2020, we had accrued liabilities aggregating $39.9 million and $42.2 million, respectively, for estimated future expenditures relating to environmental contingencies. The current portion of our aggregate environmental liability at June 30, 2021 was $12.6 million. These amounts have been recorded on an undiscounted basis in the Consolidated Balance Sheets. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other parties potentially being fully

or partially liable, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities.

We believe that our accruals for specific environmental liabilities are adequate based on currently available information. Based upon limited information regarding any incremental remediation or other actions that may be required at these sites, we cannot estimate any further loss or a reasonably possible range of loss related to these matters. Actual costs to be incurred in future periods may vary from estimates because of the inherent uncertainties in evaluating environmental exposures due to unknown and changing conditions, changing government regulations and legal standards regarding liability.

Based on our prior ownership of Crucible Steel Corporation a/k/a Crucible, Inc. (“Crucible”), we may have additional contingent liabilities in one or more significant environmental matters. One such matter, which is included in the 20 sites referred to above, is the Lower Passaic River Study Area of the Diamond Alkali Superfund Site in New Jersey. Crucible operated a steel mill abutting the Passaic River in Harrison, New Jersey from the 1930s until 1974, which was one of many industrial operations on the river dating back to the 1800s. Certain contingent environmental liabilities related to this site were retained by a predecessor of our EnPro Holdings, Inc. subsidiary (which, including its corporate predecessors is referred to as "EnPro Holdings") when it sold a majority interest in Crucible Materials Corporation (the successor of Crucible) in 1985. The United States Environmental Protection Agency (the “EPA”) notified our subsidiary in September 2003 that it is a potentially responsible party (“PRP”) for Superfund response actions in the lower 17-mile stretch of the Passaic River known as the Lower Passaic River Study Area.

EnPro Holdings and approximately 70 of the numerous other PRPs, known as the Cooperating Parties Group, are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of the contaminants in the Lower Passaic River Study Area. In September 2018, EnPro Holdings withdrew from the Cooperating Parties Group but remains a party to the May 2007 Administrative Order on Consent. The RI/FS was completed and submitted to the EPA at the end of April 2015. The RI/FS recommends a targeted dredge and cap remedy with monitored natural recovery and adaptive management for the Lower Passaic River Study Area. The cost of such remedy is estimated to be $726 million. Previously, on April 11, 2014, the EPA released its Focused Feasibility Study (the “FFS”) with its proposed plan for remediating the lower eight miles of the Lower Passaic River Study Area. The FFS calls for bank-to-bank dredging and capping of the riverbed of that portion of the river and estimates a range of the present value of aggregate remediation costs of approximately $953 million to approximately $1.73 billion, although estimates of the costs and the timing of costs are inherently imprecise. On March 3, 2016, the EPA issued the final Record of Decision (ROD) as to the remedy for the lower eight miles of the Lower Passaic River Study Area, with the maximum estimated cost being reduced by the EPA from $1.73 billion to $1.38 billion, primarily due to a reduction in the amount of cubic yards of material that will be dredged. In October 2016, Occidental Chemical Corporation, the successor to the entity that operated the Diamond Alkali chemical manufacturing facility, reached an agreement with the EPA to develop the design for this proposed remedy at an estimated cost of $165 million. The EPA has estimated that it will take approximately four years to develop this design. On June 30, 2018, Occidental Chemical Corporation sued over 120 parties, including the Company, in the United States District Court for New Jersey seeking recovery of response costs under the Federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").

No final allocations of responsibility have been made among the numerous PRPs that have received notices from the EPA, there are numerous identified PRPs that have not yet received PRP notices from the EPA, and there are likely many PRPs that have not yet been identified. In September 2017, EPA hired a third-party allocator to develop an allocation of costs among a large number of the parties identified by EPA as having potential responsibility, including the Company. In the fourth quarter of 2020, the third-party allocator issued his report, which determined the range for EnPro's liability for the lower eight miles of the river to be between $35,000 and $950,000. Our reserve at June 30, 2021 was $1.0 million.

On April 14, 2021, the EPA issued its proposed remedy for the upper nine miles of the river, with an estimated present value cost of approximately $441 million. The proposed remedy would involve dredging and capping of the river sediment as an interim remedy followed by a period of monitoring to evaluate the response of the river system to the interim remedy.

When the EPA initiated the allocation process in 2017, it explained that a fair, carefully structured, information-based allocation was necessary to promote settlements. With the completion of the allocation process, the EPA has begun settlement negotiations with the parties that participated in the allocation process, including EnPro. Further adjustments to our reserve for this site are possible as further information is developed in the course of these discussions.

Except with respect to the lower eight miles of the Lower Passaic River Study Area, we are unable to estimate a reasonably possible range of loss related to any other contingent environmental liability based on our prior ownership of Crucible. See the section entitled “Crucible Steel Corporation a/k/a Crucible, Inc.” in this footnote for additional information.

Crucible Steel Corporation a/k/a Crucible, Inc.

Crucible, which was engaged primarily in the manufacture and distribution of high technology specialty metal products, was a wholly owned subsidiary of EnPro Holdings until 1983 when its assets and liabilities were distributed to a new subsidiary, Crucible Materials Corporation. EnPro Holdings sold a majority of the outstanding shares of Crucible Materials Corporation in 1985 and divested its remaining minority interest in 2004. Crucible Materials Corporation filed for Chapter 11 bankruptcy protection in May 2009 and is no longer conducting operations.

We have certain ongoing obligations, which are included in other liabilities in our Consolidated Balance Sheets, including workers’ compensation, retiree medical and other retiree benefit matters, in addition to those mentioned previously related to EnPro Holdings' period of ownership of Crucible. Based on EnPro Holdings' prior ownership of Crucible, we may have certain additional contingent liabilities, including liabilities in one or more significant environmental matters included in the matters discussed in “Environmental” above. We are investigating these matters. Except with respect to those matters for which we have an accrued liability as discussed in "Environmental" above, we are unable to estimate a reasonably possible range of loss related to these contingent liabilities.

Warranties

We provide warranties on many of our products. The specific terms and conditions of these warranties vary depending on the product and the market in which the product is sold. We record a liability based upon estimates of the costs we may incur under our warranties after a review of historical warranty experience and information about specific warranty claims. Adjustments are made to the liability as claims data, historical experience, and trends result in changes to our estimate.

Changes in the product warranty liability for the six months ended June 30, 2021 and 2020 are as follows:


	2021		2020
	(in millions)
Balance at beginning of year	$	6.7	$	10.1
Net charges to expense	1.0		1.0
Settlements made	(1.5)		(2.3)
Balance at end of period	$	6.2	$	8.8

Asbestos Insurance Receivables

The historical business operations of certain of our subsidiaries resulted in a substantial volume of asbestos litigation in which plaintiffs alleged personal injury or death as a result of exposure to asbestos fibers. In 2010, certain of these subsidiaries, including Garlock Sealing Technologies, LLC ("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 (the "Bankruptcy Court"). An additional subsidiary filed a Chapter 11 bankruptcy petition with the Bankruptcy Court in 2017. The filings were part of a claims resolution process for an efficient and permanent resolution of all pending and future asbestos claims through court approval of a plan of reorganization to establish a facility to resolve and pay these asbestos claims.

These claims against GST and other subsidiaries were resolved pursuant to a joint plan of reorganization (the "Joint Plan") filed with the Bankruptcy Court which was consummated on July 29, 2017. Under the Joint Plan, GST and EnPro Holdings retained their rights to seek reimbursement under insurance policies for any amounts they have paid in the past to resolve asbestos claims, including contributions made to the asbestos claims resolution trust established under the Joint Plan (the "Trust"). These policies include a number of primary and excess general liability insurance policies that were purchased by EnPro Holdings and were in effect prior to January 1, 1976 (the “Pre-GST Coverage Block”). The policies provide coverage for “occurrences” happening during the policy periods and cover losses associated with product liability claims against EnPro Holdings and certain of its subsidiaries. Asbestos claims against GST are not covered under these policies because GST was not a subsidiary of EnPro Holdings prior to 1976. The Joint Plan provides that EnPro Holdings may retain the first $25 million of any settlements and judgments collected for non-GST asbestos claims related to insurance policies in the Pre-GST Coverage Block and EnPro Holdings and the Trust will share equally in any settlements and judgments EnPro Holdings may collect in excess of $25 million. To date, EnPro Holdings has collected almost $22 million in settlements for non-GST asbestos claims related to the Pre-GST Coverage Block and anticipates further collections once the Trust begins making claims payments on non-GST Claims.

As of June 30, 2021, approximately $4.2 million of available products hazard limits or insurance receivables existed under primary and excess general liability insurance policies other than the Pre-GST Coverage Block (the "GST Coverage Block") from solvent carriers, which we believe is available to cover contributions made to the Trust under the Joint Plan as the Trust

uses those contributions to pay GST asbestos claims covered by policies in the GST Coverage Block. There are specific agreements in place with carriers regarding the remaining available coverage. We believe that all of the $4.2 million of insurance proceeds will ultimately be collected, although there can be no assurance that the insurance companies will make the payments as and when due. We have billed an insurer in the GST Coverage Block $0.9 million for GST Claims paid by the Trust through June 2021. These amounts are included in Other Assets on our Consolidated Balance Sheet at June 30, 2021.

We also believe that EnPro Holdings will bill, and could collect over time, as much as $10 million of insurance coverage for non-GST asbestos claims to reimburse it for Trust payments to non-GST Trust claimants. After EnPro Holdings collects the first approximately $3 million of that coverage, remaining collections for non-GST asbestos claims from the Pre-GST Coverage Block will be shared equally with the Trust.

GST has received $8.8 million of insurance recoveries from insolvent carriers since 2007, and may receive additional payments from insolvent carriers in the future. No anticipated insolvent carrier collections are included in the $4.2 million of anticipated collections. The insurance available to cover current and future asbestos claims is from comprehensive general liability and excess liability policies that cover EnPro Holdings and certain of its other subsidiaries in addition to GST for periods prior to 1985 and therefore could be subject to potential competing claims of other covered subsidiaries and their assignees.

16. Discontinued Operations

On January 21, 2020 we sold our Fairbanks Morse division, which comprised our entire Power Systems segment, for a sales price of $450.0 million. The pre-tax gain on the disposition of Fairbanks Morse was $274.3 million. We have reported, for all periods presented, results of operations and cash flows of Fairbanks Morse as discontinued operations in the accompanying financial statements.

Tax expense of $67.8 million on discontinued operations was recorded for the six months ended June 30, 2020. This was an increase in tax expense of $3.2 million in the quarter ended June 30, 2020, which was primarily due to a reduction in the foreign tax credit benefit because of a decrease in tax on the global intangible low-taxed income (“GILTI”) tax. The GILTI decrease was driven by the reduction in projected calendar 2020 pre-tax income in foreign jurisdictions in the second quarter of 2020.

The results of operations for Fairbanks Morse were as follows:


	Quarter Ended June 30, 2020		Six Months Ended June 30, 2020


Net sales	$	—	$	7.6
Cost of sales	—		7.6
Gross profit	—		—
Operating expenses:
Selling, general, and administrative expenses	—		1.5
Other	—		(0.1)
Total operating expenses	—		1.4

Loss from discontinued operations before income taxes	—		(1.4)
Income tax benefit	—		0.3
Loss from discontinued operations, net of taxes	—		(1.1)
Gain (loss) from sale of discontinued operations, net of taxes	(3.2)		206.5
Income (loss) from discontinued operations, including gain on sale, net of taxes	$	(3.2)	$	205.4

17. Subsequent Event

On August 2, 2021, Marvin Riley, by mutual agreement with our Board of Directors, resigned from the positions of President and Chief Executive Officer of EnPro and as a member of EnPro's Board of Directors, effective immediately. The terms of Mr. Riley's separation will result in additional expense of approximately $0.6 million to be recognized in the quarter ending September 30, 2021. Eric Vaillancourt, President of our Sealing Technologies segment, was appointed Interim President and Chief Executive Officer of EnPro on August 2, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition, cash flows and operating results during the periods included in the accompanying unaudited consolidated financial statements and the related notes. You should read this in conjunction with those financial statements and the audited consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

Forward-Looking Information

This quarterly report on Form 10-Q includes statements that reflect projections or expectations of the future financial condition, results of operations and business of EnPro that are subject to risk and uncertainty. We believe those statements to be “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” and other expressions generally identify forward-looking statements.

We cannot guarantee actual results or events will not differ materially from those projected, estimated, assigned or anticipated in any of the forward-looking statements contained in this report. Important factors that could result in those differences include those specifically noted in the forward-looking statements and those identified in Item 1A, “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2020, which include:

•impacts from the coronavirus (or COVID-19) pandemic and governmental responses to limit the further spread of COVID-19, including impacts on our company’s operations, and the operations and businesses of our customers and vendors, including whether our operations and those of our customers and vendors will continue to be treated as “essential” operations under government orders restricting business activities or, even if so treated, whether site-specific health and safety concerns might otherwise require certain of our operations to be halted for some period of time;

•uncertainty with respect to the duration and severity of these impacts from the COVID-19 pandemic, including impacts on the general economy, the markets served by our customers, and consequent reductions in the demand for our products and services, which could result in additional intangible asset impairment charges beyond the charges recognized in the third quarter of 2020;

•general economic conditions in the markets served by our businesses and the businesses of our customers, some of which are cyclical and experience periodic downturns;

•prices and availability of raw materials, including as a result of the COVID-19 pandemic;

•the impact of fluctuations in currency exchange rates;

•unanticipated delays or problems in introducing new products;

•the incurrence of contractual penalties for the late delivery of long lead-time products;

•announcements by competitors of new products, services or technological innovations;

•changes in our pricing policies or the pricing policies of our competitors; and

•the amount of any payments required to satisfy contingent liabilities, including those related to discontinued operations of our predecessors, including liabilities for certain products, environmental matters, employee benefit obligations and other matters.

We caution our shareholders not to place undue reliance on these statements, which speak only as of the date on which such statements were made.

Whenever you read or hear any subsequent written or oral forward-looking statements attributed to us or any person acting on our behalf, you should keep in mind the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information

In our discussion of our outlook and results of operations, we utilize financial measures that have not been prepared in conformity with generally accepted accounting principles in the United States ("GAAP"). They include adjusted income from continuing operations attributable to EnPro Industries, Inc., adjusted diluted earnings per share attributable to EnPro Industries,

Inc. continuing operations, adjusted earnings before interest, taxes, depreciation, and amortization ("adjusted EBITDA"), and total adjusted segment EBITDA. Tables showing the reconciliation of these non-GAAP financial measures to the comparable GAAP measures are included in "—Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Measures"

We believe non-GAAP metrics are commonly used financial measures for investors to evaluate our operating performance and, when read in conjunction with our consolidated financial statements, present a useful tool to evaluate our ongoing operations and performance from period to period. In addition, these non-GAAP measures are some of the factors we use in internal evaluations of the overall performance of our businesses. We acknowledge that there are many items that impact our reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, the non-GAAP measures we use are not necessarily comparable to similarly titled measures used by other companies.

Overview and Outlook

Overview. We design, develop, manufacture, service and market proprietary engineered industrial products. We have 45 primary manufacturing and service facilities located in 13 countries, including the United States. Over the past several years, we have executed several strategic initiatives to change the portfolio of businesses that we operate to focus on materials science-based businesses with leading technologies, compelling margins, strong cash flow, and high levels of recurring revenue that serve markets with favorable secular tailwinds. These initiatives have increased our ability to provide solutions to the semiconductor, life sciences, and other technology industries.

We manage our business as three segments: a Sealing Technologies segment, an Advanced Surface Technologies segment, and an Engineered Materials segment.

Our Advanced Surface Technologies segment applies proprietary technologies, processes, and capabilities to deliver highly differentiated suites of products and services for the most challenging applications in high growth markets. The segment’s products and services are used in highly demanding environments requiring performance, precision and repeatability, with a low tolerance for failure. The segment’s services include cleaning, coating, testing, refurbishment and verification services for critical components and assemblies used in state-of-the-art advanced node semiconductor manufacturing equipment. The segment also designs, manufactures and sells specialized optical filters and thin-film coatings for the most challenging applications in the industrial technology, life sciences, and semiconductor markets and complex front-end wafer processing sub-systems, new and refurbished electrostatic chuck pedestals, thin film coatings, and edge-welded metal bellows for the semiconductor equipment industry and for critical applications in the space, aerospace and defense markets.

COVID-19 Impacts. COVID-19 has significantly impacted the health and economic environment around the world. Our customers are principally global manufacturers and the impact of the COVID-19 pandemic on general economic conditions, and more deleterious effects on certain markets, have had and may continue to have negative implications on demand for their goods and consequently on their demand for our products and services. Because of uncertainties with respect to the continuing severity and duration of the COVID-19 outbreak, which may vary significantly in different regions of the world and could be impacted by new variants, the duration and terms of related governmental orders restricting activities, and the timing and pace

of any economic recovery as COVID-19 impacts abate in different regions, we cannot predict with precision the extent and duration of any future changes in demand for our products and services due to COVID-19 impacts and the consequent impact on our business and financial results.

All of our primary manufacturing facilities are currently open and generally have not experienced significant supply chain disruptions. Certain operations are experiencing upstream supply chain challenges for raw materials, including certain metals and rubber-related chemicals, as raw material supply, which was reduced in response to the economic slowdown related to the COVID-19 pandemic, has not sufficiently increased to address increasing demand, including inventory restocking, as general economic activity has improved. Additionally, each of our businesses has developed continuity and contingency plans, based on various scenarios in preparation for potential operational disruptions, to permit us to adjust production levels to demand. We cannot predict if and when closures or production changes may arise as a result of implications related to the COVID-19 pandemic.

Outlook

Financial highlights for the quarters and six months ended June 30, 2021 and 2020 are as follows:


	Quarters Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in millions, except per share data)
Net sales	$	298.6	$	247.0	$	577.9	$	529.7
Income (loss) from continuing operations attributable to EnPro Industries, Inc.	$	29.3	$	(3.3)	$	47.3	$	6.8
Net income (loss) attributable to EnPro Industries, Inc.	$	29.3	$	(6.5)	$	47.3	$	212.2
Diluted earnings (loss) per share from continuing operations attributable to EnPro Industries, Inc.	$	1.41	$	(0.16)	$	2.28	$	0.33
Adjusted income from continuing operations attributable to EnPro Industries, Inc.1	$	32.4	$	18.0	$	60.7	$	37.7
Adjusted diluted earnings per share attributable to EnPro Industries, Inc. continuing operations 1	$	1.56	$	0.88	$	2.92	$	1.83
Adjusted EBITDA 1	$	57.2	$	37.5	$	109.3	$	78.1

1 A reconciliation of non-GAAP measures to their respective GAAP measure is located in the Reconciliation of Non-GAAP Financial Measures to the Comparable GAAP Measure at the end of this section.

We continue to experience strong demand growth and improved momentum across all of our businesses in the first six months of 2021 as the global economic recovery from the pandemic continues. While results were strong across all segments, we saw a particularly strong performance within Sealing Technologies as a result of improved results in our Garlock business and realizing the benefits from portfolio reshaping within our Stemco business.

We believe that our strong performance in the first six months of 2021 was likely enhanced to some extent by customers restocking as the economy in the United States and certain other regions continue to recover from the pandemic, however, we are unable to quantify the amount or the extent to which we benefited from these restocking purchases. We expect to continue to see strong demand in many of the industries we serve.

In connection with our growth strategy, we will continue to evaluate making additional acquisitions to take advantage of opportunities that arise. We will consider making additional divestitures over time, and under the right circumstances, to further our long-term strategic goals of refocusing our portfolio on businesses with compelling margins, leading technology, high cash flow return on investment, and favorable secular tailwinds.

Results of Operations


	Quarters Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in millions)
Sales
Sealing Technologies	$	162.5	$	150.6	$	309.0	$	324.2
Advanced Surface Technologies	59.2		40.0		113.9		76.7
Engineered Materials	80.0		58.6		160.4		133.7
	301.7		249.2		583.3		534.6
Intersegment sales	(3.1)		(2.2)		(5.4)		(4.9)
Net sales	$	298.6	$	247.0	$	577.9	$	529.7

Income (loss) from continuing operations attributable to EnPro Industries, Inc.	$	29.3	$	(3.3)	$	47.3	$	6.8

Adjusted Segment EBITDA
Sealing Technologies	$	42.4	$	30.5	$	76.4	$	64.1
Advanced Surface Technologies	15.6		11.0		32.9		18.3
Engineered Materials	13.0		4.9		25.6		13.2
Total Adjusted Segment EBITDA	$	71.0	$	46.4	$	134.9	$	95.6

Reconciliation of Adjusted Segment EBITDA to income (loss) from continuing operations attributable to EnPro Industries, Inc.
Adjusted Segment EBITDA	$	71.0	$	46.4	$	134.9	$	95.6
Acquisition and divestiture expenses	—		(0.5)		(0.1)		(1.3)
Non-controlling interest compensation allocation	(1.3)		(0.5)		(2.9)		(1.1)
Amortization of fair value adjustment to acquisition date inventory	(2.3)		—		(4.8)		—
Restructuring and impairment expense	(2.7)		(17.5)		(4.5)		(18.9)
Depreciation and amortization expense	(18.5)		(17.2)		(37.4)		(34.5)
Corporate expenses	(12.8)		(7.1)		(24.3)		(15.6)
Interest expense, net	(3.8)		(3.5)		(7.6)		(7.5)
Other income (expense), net	0.4		(1.5)		—		(0.2)
Income (loss) from continuing operations before income taxes	30.0		(1.4)		53.3		16.5
Income tax expense	(0.8)		(1.8)		(6.0)		(9.5)
Income (loss) from continuing operations	29.2		(3.2)		47.3		7.0
Less: net income (loss) attributable to redeemable non-controlling interests	(0.1)		0.1		—		0.2
Income (loss) from continuing operations attributable to EnPro Industries, Inc.	$	29.3	$	(3.3)	$	47.3	$	6.8

We measure operating performance based on segment earnings before interest, income taxes, depreciation, amortization, and other selected items ("Adjusted Segment EBITDA" or "Segment AEBITDA"), which is segment revenue reduced by operating expenses and other costs identifiable with the segment, excluding acquisition and divestiture expenses, restructuring costs, impairment charges, non-controlling interest compensation, amortization of the fair value adjustment to acquisition date inventory, and depreciation and amortization. Adjusted Segment EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies. Corporate expenses include general corporate administrative costs. Expenses not directly attributable to the segments, corporate expenses, net interest expense, gains and losses related to the sale of assets, and income taxes are not included in the computation of Adjusted Segment EBITDA. The accounting policies of the reportable segments are the same as those for EnPro.

Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisitions of LeanTeq and Alluxa being subject to reduction for certain types of employment terminations of the sellers. This expense is recorded in selling, general, and administrative expenses on our Consolidated Statements of Operations and is directly related to the terms of the acquisitions. This expense will continue to be recognized as compensation expense over the term of the put and call options associated with each of these acquisitions unless certain employment terminations have occurred.

Other income (expense), net in the table above contains all items included in other (operating) expense and other income (non-operating) on our Consolidated Statements of Operations for the quarters and six months ended June 30, 2021 and 2020 with the exception of $2.7 million, $12.5 million, $4.5 million, and $14.0 million, respectively, of restructuring costs. As noted previously, restructuring costs are excluded from Adjusted Segment EBITDA. Additionally, other income (expense), net in the table above for the quarters and six months ended June 30, 2021 and 2020 includes $1.8 million, $1.8 million, $2.0 million, and $1.8 million, respectively, of miscellaneous expenses that are either not associated with a particular segment or not considered part of administering the corporate functions. These expenses are included in selling, general and administrative expense on our Consolidated Statements of Operations.

Second Quarter of 2021 Compared to the Second Quarter of 2020

Sales of $298.6 million in the second quarter of 2021 increased 20.9% from $247.0 million in the second quarter of 2020. The following table summarizes the impact of acquisitions, divestitures, and foreign currency on sales by segment:


Sales	Percent Change Second Quarter 2021 vs. Second Quarter 2020
increase/(decrease)	Acquisitions and Divestitures		Foreign Currency		Organic		Total
EnPro Industries, Inc.	(10.4)	%	4.2	%	27.1	%	20.9	%
Sealing Technologies	(20.9)	%	3.5	%	25.3	%	7.9	%
Advanced Surface Technologies	22.3	%	1.9	%	23.8	%	48.0	%
Engineered Materials	(5.2)	%	7.5	%	34.2	%	36.5	%

Following are the key effects of acquisitions and divestitures on sales for the second quarter of 2021 compared to the same period in 2020:

•Acquisition of Alluxa (Advanced Surface Technologies) in October 2020

•Divestiture of Technetics Group UK Limited (Sealing Technologies) in December 2020

•Divestiture of the bushing block business principally located in Dieuze, France (Engineered Materials) in November 2020

•Divestiture of the Air Springs portion of our heavy duty trucking business (Sealing Technologies) in November 2020

•Divestiture of Motorwheel® brake drum and Crewson® brake adjuster brands (Sealing Technologies) in September 2020

•Divestiture of the Lunar® air disc brake business, both the U.S. and Shanghai China operations (Sealing Technologies), in the second and third quarters of 2020

Following is a discussion of operating results for each segment during the second quarter of 2021:

Sealing Technologies. Sales of $162.5 million in the second quarter of 2021 reflect a 7.9% increase compared to the $150.6 million reported in the same period of 2020. Excluding the favorable foreign exchange translation ($5.3 million) and the sales from businesses that have since been divested ($25.2 million) from 2020 results, sales were up 25.3%, or $31.7 million. This increase was driven by strong demand in general industrial, food and pharmaceutical, petrochemical and heavy-duty truck markets.

Adjusted Segment EBITDA of $42.4 million in the second quarter of 2021 increased 39.0% from $30.5 million reported in the same period of 2020. Segment AEBITDA margins for the segment increased from 20.3% in the second quarter of 2020 to 26.1% for the second quarter of 2021. Excluding the favorable foreign exchange translation ($1.6 million) and the Segment AEBITDA earned from businesses that have since been divested ($2.5 million) from 2020 results, Adjusted Segment EBITDA increased 45.6%, or $12.8 million, to $40.9 million. The increase in Segment AEBITDA was driven primarily by higher sales

volume ($15.2 million), increased pricing ($2.4 million), manufacturing efficiencies driven by higher production volume ($0.8 million), partially offset by unfavorable product mix ($3.5 million) and higher incentive compensation ($1.7 million), and higher selling, general and administrative costs ($0.4 million).

Advanced Surface Technologies. Sales of $59.2 million in the second quarter of 2021 reflect a 48.0% increase compared to the $40.0 million reported in the same period of 2020. Excluding the favorable foreign exchange translation ($0.8 million) and the sales from a recent acquisition ($8.9 million) from 2021 results, sales were up 23.8% or $9.5 million. This increase was driven primarily by stronger demand in the semiconductor market.

Adjusted Segment EBITDA of $15.6 million in the second quarter of 2021 increased 41.8% from $11.0 million reported in the same period of 2020. Segment AEBITDA margins for the segment decreased from 27.5% in the second quarter of 2020 to 26.4% in the second quarter of 2021. Excluding the favorable foreign exchange translation ($0.4 million) and the Segment AEBITDA contributed from a business recently acquired ($4.2 million) from our 2021 results, Adjusted Segment EBITDA was flat from the prior year. The increase in Adjusted Segment EBITDA driven by increased sales ($3.3 million) was offset by increased operating costs supporting capacity expansion.

Engineered Materials. Sales in the second quarter of 2021 increased 36.5% to $80.0 million from $58.6 million reported in the same period of 2020. Excluding the impact of favorable foreign exchange translation ($4.5 million) and the sales from a business that has since been divested ($2.2 million), sales were up 34.2% or $19.3 million primarily driven by stronger sales across all major end markets including general industrial, automotive, aerospace, petrochemical, and oil and gas.

Adjusted Segment EBITDA in the second quarter of 2021 was $13.0 million compared to Segment EBITDA of $4.9 million in the same period of 2020, an increase of $8.1 million, or 165.3%. Adjusted Segment EBITDA margins for the segment were 16.3%, which was an increase from 8.4% in the second quarter of 2020. Excluding the impact of favorable foreign exchange translation ($1.0 million) and the Segment AEBITDA contributed from a business that has since been divested ($0.2 million), Segment AEBITDA increased $7.3 million, or 155.3%, driven mainly by increased sales ($8.7 million), manufacturing efficiencies driven by increased manufacturing volume and cost saving initiatives ($3.1 million), and increased pricing ($1.1 million), partially offset by an unfavorable product mix ($2.5 million), increased incentive compensation ($1.9 million) and higher selling, general, and administrative costs as a result of higher sales and the easing of 2020 cost-reduction measures implemented at the start of the COVID-19 pandemic ($1.0 million).

Corporate expenses for the second quarter of 2021 increased $5.7 million as compared to the same period in 2020. The increase was driven primarily by increased incentive compensation costs due to higher projected attainment in 2021.

Interest expense, net in the second quarter of 2021 remained about even with the prior year, with an increase of $0.3 million as compared to the same period of 2020.

Other expense, net in the second quarter of 2021 decreased by $1.9 million as compared to the same period of 2020, primarily due to a $1.5 million increase in pension income (non-service cost) and a $0.3 million gain on the sale of assets reported in 2021.

Net income attributable to EnPro Industries, Inc. was $29.3 million, or $1.41 per share, in the second quarter of 2021 compared to net loss of $6.5 million, or $(0.31) per share, in the same period of 2020. Earnings per share is expressed on a diluted basis.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Sales of $577.9 million in the first six months of 2021 increased 9.1% from $529.7 million in the first six months of 2020. The following table summarizes the impact of acquisitions, divestitures, and foreign currency on sales by segment:


Sales	Percent Change Six Months Ended June 30, 2021 vs. Six Months Ended June 30, 2020
increase/(decrease)	Acquisitions and Divestitures		Foreign Currency		Organic		Total
EnPro Industries, Inc.	(10.1)	%	3.5	%	15.7	%	9.1	%
Sealing Technologies	(19.8)	%	2.7	%	12.4	%	(4.7)	%
Advanced Surface Technologies	23.1	%	2.1	%	23.3	%	48.5	%
Engineered Materials	(3.9)	%	6.0	%	17.9	%	20.0	%

Following are the key effects of acquisitions and divestitures on sales for the first six months of 2021 compared to the same period in 2020:

•Acquisition of Alluxa (Advanced Surface Technologies) in October 2020

•Divestiture of Technetics Group UK Limited (Sealing Technologies) in December 2020

•Divestiture of the bushing block business principally located in Dieuze, France (Engineered Materials) in November 2020

•Divestiture of the Air Springs portion of our heavy duty trucking business (Sealing Technologies) in November 2020

•Divestiture of Motorwheel® brake drum and Crewson® brake adjuster brands (Sealing Technologies) in September 2020

•Divestiture of the Lunar® air disc brake business, both the U.S. and Shanghai China operations (Sealing Technologies), in the second and third quarters of 2020

Following is a discussion of operating results for each segment during the first six months of 2021:

Sealing Technologies. Sales of $309.0 million in the first six months of 2021 reflect a 4.7% decrease compared to the $324.2 million reported in the same period of 2020. Excluding the favorable foreign exchange translation ($9.0 million) on our 2021 sales and the sales from businesses that have since been divested ($57.2 million) from 2020 results, sales were up 12.4% or $33.0 million. This increase was driven by increased demand in food and pharmaceuticals, petrochemical, heavy-duty truck, and general industrial markets partially offset by decline in demand in aerospace and oil and gas markets.

Adjusted Segment EBITDA of $76.4 million in the first six months of 2021 increased 19.2% from $64.1 million reported in the same period of 2020. Segment AEBITDA margins for the segment increased from 19.8% in the first six months of 2020 to 24.7% in the first six months of 2021. Excluding the favorable foreign exchange translation ($2.4 million) and the Segment AEBITDA earned from businesses that have since been divested ($4.7 million) from 2020 results, Adjusted Segment EBITDA increased 24.6%, or $14.6 million, to $74.0 million. The increase in Segment AEBITDA was driven by increased sales volume ($16.0 million), increased pricing ($3.6 million), manufacturing efficiencies driven by higher production volume ($2.9 million) less travel-related expense ($1.3 million), reduced selling, general, and administrative costs, primarily as the result of marketing and selling cost saving initiatives ($0.6 million), partially offset by an unfavorable product mix ($5.8 million), higher incentive compensation ($2.3 million), and unfavorable year over year foreign exchange transaction costs ($1.6 million).

Advanced Surface Technologies. Sales of $113.9 million in the first six months of 2021 reflect a 48.5% increase compared to the $76.7 million reported in the same period of 2020. Excluding the favorable foreign exchange translation ($1.6 million) and the sales from a recent acquisition ($17.8 million) from 2021 results, sales were up 23.3% or $17.9 million. This increase was driven primarily by stronger demand in the semiconductor market.

Adjusted Segment EBITDA of $32.9 million in the first six months of 2021 increased 79.8% from $18.3 million reported in the same period of 2020. Segment AEBITDA margins for the segment increased from 23.9% in the first six months of 2020 to 28.9% in the first six months of 2021. Excluding the favorable foreign exchange translation ($0.9 million) and the Segment AEBITDA contributed from a business recently acquired ($9.5 million) from our 2021 results, Adjusted Segment EBITDA increased $4.1 million, or 22.4%, to $22.4 million. The increase in Adjusted Segment EBITDA was driven by increased sales ($9.1 million) and a favorable product mix ($0.3 million), partially offset by increased manufacturing costs as a result of sales

growth and supporting capacity expansion ($2.0 million), increased incentive compensation costs ($0.9 million), increased selling, general, and administrative costs ($0.8 million), increased foreign exchange transaction related costs ($0.8 million), and reduced pricing ($0.7 million).

Engineered Materials. Sales in the first six months of 2021 increased 20.0% to $160.4 million from $133.7 million reported in the same period of 2020. Excluding the impact of favorable foreign exchange translation ($8.0 million) and the sales from a business that has since been divested ($4.3 million), sales were up 17.9% or $23.0 million, primarily due to stronger demand in automotive and general industrial markets, partially offset by weakness in the oil and gas and aerospace markets.

Adjusted Segment EBITDA in the first six months of 2021 was $25.6 million compared to Segment EBITDA of $13.2 million in the first six months of 2020, an increase of $12.4 million, or 93.9%. Adjusted Segment EBITDA margins for the segment were 16.0%, which was an increase from 9.9% in the first six months of 2020. Excluding the impact of favorable foreign exchange translation ($1.9 million) and the Segment AEBITDA contributed from a business that has since been divested ($0.2 million), Segment AEBITDA increased $10.7 million, or 81.7%, driven mainly by increased sales ($9.6 million), manufacturing efficiencies driven by cost saving initiatives and increased production volume ($6.3 million), increased pricing ($1.4 million), and reduced travel ($0.5 million), partially offset by increased incentive compensation costs ($3.3 million), an unfavorable product mix ($2.3 million), and higher selling, general, and administrative costs to support the higher sales volume and the easing of 2020 cost-reduction measures implemented at the start of the COVID-19 pandemic ($1.5 million).

Corporate expenses for the first six months of 2021 increased $8.7 million as compared to the same period in 2020. The increase was driven primarily by higher incentive compensation costs due to higher projected attainment in 2021 partially offset by lower employee medical benefit costs.

Interest expense, net in the first six months of 2021 remained about even with the prior year, with a $0.1 million increase from 2020.

Other expense in the first six months of 2021 declined by $0.2 million as compared to other expense reported in the same period of 2020, primarily due to a $2.9 million increase in pension income (non-service costs) and $0.3 million decrease in costs from previously divested businesses, partially offset by to $2.0 million in loss on sale of businesses in 2021 compared to a gain of $1.1 million on sale of businesses in 2020 (a year-over-year increased expense of $3.1 million).

Income from continuing operations attributable to EnPro Industries, Inc. was $47.3 million, or $2.28 per share, in the first six months of 2021 compared to income from continuing operations attributable to EnPro Industries, Inc. of $6.8 million, or $0.33 per share, in the same period of 2020. Earnings per share is expressed on a diluted basis.

Liquidity and Capital Resources

Cash requirements for, but not limited to, working capital, capital expenditures, acquisitions, and debt repayments have been funded from cash balances on hand. We continue to consider acquisition opportunities that align with our long-term strategic goals of refocusing our portfolio on businesses with compelling margins, leading technology, high cash flow return on investment, and favorable secular tailwinds. It is possible our cash requirements for one or more acquisition opportunities could exceed our cash balance at the time of closing. Should we need additional capital, we have resources available, which are discussed in this section under the heading “Capital Resources.”

As of June 30, 2021, we held $186.6 million of our $261.9 million cash and cash equivalents outside of the United States. If the funds held outside the United States were needed for our operations in the U.S., we have several methods to access funds without a significant incremental tax cost, including repayment of intercompany loans or distributions of previously taxed income. In addition, as of June 30, 2021, we had a net current income tax receivable totaling $41.8 million, which includes a refund of approximately $24.7 million related to the conclusion of an IRS examination of our 2014 through 2017 U.S. federal income tax returns. We expect to collect this refund by year end, however, COVID-19 related processing delays could adversely impact timing.

Because of the transition tax and tax on the global intangible low-taxed income provisions, undistributed earnings of our foreign subsidiaries totaling $188.8 million at June 30, 2021 have been subjected to U.S. income tax. Whether through the application of the 100 percent dividends-received deduction provided in the Tax Cuts and Jobs Act, or the distribution of these previously-taxed earnings, we do not intend to distribute foreign earnings that will be subject to any significant incremental U.S. or foreign tax.

Cash Flows

Operating activities provided $58.5 million of cash in the first six months of 2021 and $33.4 million of cash in the first six months of 2020. The year-over-year increase was driven by increased income, partially offset by a build in accounts receivable, inventories, and accounts payable ($5.7 million) and higher income tax payments ($6.9 million).

Investing activities used $12.0 million of cash in the first six months of 2021 and provided $433.6 million of cash during the first six months of 2020. The decrease in cash provided is primarily driven by $444.9 million in cash proceeds from the sale of businesses in 2020, due primarily to the closing on the sale of Fairbanks Morse in January 2020.

Financing activities used $14.8 million of cash in the first six months of 2021, primarily from $11.3 million used for dividends paid and $2.0 million in repayments of debt, primarily term loan amortization payments. Financing activities in the first six months of 2020 used $152.8 million, primarily used in net payments of $133.9 million on our revolving credit facility, $10.8 million used for dividend payments, and $5.3 million used in the repurchase of our common shares.

Capital Resources

Senior Secured Credit Facilities. On September 25, 2019, we entered into a First Amendment (the “First Amendment”) to our Second Amended and Restated Credit Agreement (the “Credit Agreement”) among EnPro Industries, Inc. and EnPro Holdings, Inc., a wholly owned subsidiary of the Company (“EnPro Holdings”), as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $400.0 million (the “Revolving Credit Facility”) and a five-year, senior secured term loan facility of $150.0 million (the "Term Loan Facility" and, together with the Revolving Credit Facility, the “Facilities”). The Amended Credit Agreement also provides that the borrowers may seek incremental term loans and/or additional revolving credit commitments in an amount equal to the greater of $225.0 million and 100% of consolidated EBITDA (as defined) for the most recently ended four-quarter period for which we have reported financial results, plus additional amounts based on a consolidated senior secured leverage ratio.

The Facilities are subject to prepayment with the net cash proceeds of certain asset sales, casualty or condemnation events, and non-permitted debt issuances.

The Company and EnPro Holdings are the permitted borrowers under the Revolving Credit Facility. We have the ability to add foreign subsidiaries as borrowers under the Revolving Credit Facility for up to $100.0 million (or its foreign currency equivalent) in aggregate borrowings, subject to certain conditions. Each of our domestic, consolidated subsidiaries are required to guarantee the obligations of the borrowers under the Revolving Credit Facility, and each of our existing domestic, consolidated subsidiaries has entered into the Credit Agreement to provide such a guarantee.

Borrowings under the Facilities are secured by a first-priority pledge of the following assets:

•100% of the capital stock of each domestic, consolidated subsidiary of the Company (other than unrestricted subsidiaries);

•65% of the capital stock of any first tier foreign subsidiary of the Company and its domestic, consolidated subsidiaries (other than unrestricted subsidiaries); and

•substantially all of the assets (including, without limitation, machinery and equipment, inventory and other goods, accounts receivable, certain owned real estate and related fixtures, bank accounts, general intangibles, financial

assets, investment property, license rights, patents, trademarks, trade names, copyrights, chattel paper, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds and cash) of the Company and its domestic, consolidated subsidiaries (other than unrestricted subsidiaries)

The Credit Agreement contains certain financial covenants and required financial ratios, including:

•a maximum consolidated total net leverage ratio of not more than 4.25 to 1.0 (with total debt, for the purposes of such ratio, to be net of up to $125 million of unrestricted cash of EnPro Industries, Inc. and its domestic, consolidated subsidiaries), which ratio will decrease to 4.0 to 1.0 for each fiscal quarter beginning with the fiscal quarter ending December 31, 2020 and, once so decrease, may be increased (up to three times) at the borrowers' option to not more than 4.5 to 1.0 for the for-quarter period following a significant acquisition; and

•a minimum consolidated interest coverage ratio of at least 2.5 to 1.0.

The Credit Agreement contains affirmative and negative covenants (subject, in each case, to customary exceptions and qualifications), including covenants that limit our ability to, among other things:

•grant liens on our assets;

•incur additional indebtedness (including guarantees and other contingent obligations);

•make certain investments (including loans and advances);

•merge or make other fundamental changes;

•sell or otherwise dispose of property or assets;

•pay dividends and other distributions and prepay certain indebtedness;

•make changes in the nature of our business;

•enter into transactions with our affiliates;

•enter into burdensome contracts; and

•modify or terminate documents related to certain indebtedness.

We were in compliance with all covenants of the Revolving Credit Facility as of June 30, 2021.

The borrowing availability at June 30, 2021 under the Revolving Credit Facility was $388.6 million, representing the full $400.0 million of availability less $11.4 million reserved for outstanding letters of credit. At June 30, 2021, we had $143.4 million of outstanding borrowings on our Term Loan Facility.

Senior Notes. In October 2018, we completed the offering of $350.0 million aggregate principal amount of 5.75% Senior Notes due 2026 (the "Senior Notes").

The Senior Notes were issued to investors at 100% of the principal amount thereof. The Senior Notes are unsecured, unsubordinated obligations of EnPro and mature on October 15, 2026. Interest on the Senior Notes accrues at a rate of 5.75% per annum and is payable semi-annually in cash in arrears on April 15 and October 15 of each year, commencing April 15, 2019. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of EnPro’s existing and future direct and indirect domestic subsidiaries that is a borrower under, or guarantees, our indebtedness under the Revolving Credit Facility or guarantees any other Capital Markets Indebtedness (as defined in the indenture governing the Senior Notes) of EnPro or any of the guarantors.

On or after October 15, 2021, we may, on any one or more occasions, redeem all or a part of the Senior Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may redeem a portion of the aggregate principal amount of the Senior Notes before October 15, 2021 with the net cash proceeds from certain equity offerings at a specified redemption price plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem some or all of the Senior Notes before October 15, 2021 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make whole” premium.

Each holder of the Senior Notes may require us to repurchase some or all of the Senior Notes held by such holder for cash upon the occurrence of a defined “change of control” event.

The indenture governing the Senior Notes includes covenants that restrict our ability to engage in certain activities, including incurring additional indebtedness, paying dividends and repurchasing shares of our common stock, subject in each case to specified exceptions and qualifications set forth in the indenture.

In April of 2021, we met all reinvestment requirements outlined in the indenture governing the Senior Notes with respect to the net cash proceeds from the sale of Fairbanks Morse in January 2020.

Share Repurchase Program. In October 2018, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares. During the six months ended June 30, 2020, we repurchased 0.1 million shares for $5.3 million. Prior to the expiration of the authorization in October 2020, total repurchases under the October 2018 authorization aggregated 0.3 million shares for $20.3 million.

In October 2020, our board of directors authorized the expenditure of up to $50 million for the repurchase of our outstanding common shares through October 2022. No repurchases have been made under this program.

Critical Accounting Policies and Estimates

Please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2020, for a discussion of our critical accounting policies and estimates.

Contingencies

A description of our contingencies is included in Note 15 to the Consolidated Financial Statements in this report, which is incorporated herein by reference.

Supplemental Guarantor Financial Information

On October 17, 2018, we completed the offering of the Senior Notes. The Senior Notes are fully and unconditionally guaranteed on an unsecured, unsubordinated, joint and several basis by our wholly owned direct and indirect domestic subsidiaries, that are each guarantors of our Revolving Credit Facility, including subsidiaries that were wholly owned at the time they provided the guarantee but thereafter became majority owned subsidiaries (collectively, the “Guarantor Subsidiaries”). The Guarantor Subsidiaries at June 30, 2021 comprise all of our consolidated domestic subsidiaries at that date. Our subsidiaries organized outside of the United States (collectively, the “Non-Guarantor Subsidiaries”) do not guarantee the Senior Notes.

The Guarantor Subsidiaries jointly and severally guarantee on an unsecured, unsubordinated basis the performance and punctual payment when due, whether at stated maturity of the Senior Notes, by acceleration or otherwise, all of our obligations under the Senior Notes and the indenture governing the Senior Notes (the “Indenture”), whether for payment of principal of, premium, if any, or interest on the Senior Notes, expenses, indemnification or otherwise (all such obligations guaranteed by the Guarantor Subsidiaries are referred to as the “Guaranteed Obligations”). The Guarantor Subsidiaries have jointly and severally agreed to pay, in addition to the obligations stated above, any and all expenses (including reasonable counsel fees and expenses) incurred by the trustee (the “Trustee”) under the Indenture in enforcing any rights under their guarantees of the Guaranteed Obligations.

Each guarantee of a Guarantor Subsidiary is limited to an amount not to exceed the maximum amount that can be guaranteed by it without rendering the guarantee, as it relates to such Guarantor Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each guarantee of a Guarantor Subsidiary is a continuing guarantee and shall inure to the benefit of and be enforceable by the Trustee, the holders of the Senior Notes and their successors, transferees and assigns and, subject to the provisions described in the following sentence, remains in full force and effect until payment in full of all of the Guaranteed Obligations of such Guarantor Subsidiary and is binding upon such Guarantor Subsidiary and its successors. A guarantee of the Senior Notes by a Guarantor Subsidiary is subject to release in the following circumstances: (i) the sale, disposition, exchange or other transfer (including through merger, consolidation, amalgamation or otherwise) of the capital stock of the subsidiary made in a manner not in violation of the Indenture; (ii) the designation of the subsidiary as an “Unrestricted Subsidiary” under the Indenture; (iii) the legal defeasance or covenant defeasance of the Senior Notes in accordance with the terms of the Indenture; or (iv) the subsidiary ceasing to be our subsidiary as a result of any foreclosure of any pledge or security interest securing our Revolving Credit Facility or other exercise of remedies in respect thereof.

The following tables present summarized financial information for EnPro Industries, Inc. (the "Parent") and the Guarantor Subsidiaries on a combined basis after intercompany eliminations.

The summarized results of operations for the six months ended June 30, 2021 were as follows:


	Parent and Guarantor Subsidiaries
Net sales	$	333.9
Gross profit	$	107.6
Income from continuing operations attributable to EnPro Industries, Inc.	$	4.5

Net income attributable to EnPro Industries, Inc.	$	4.5
Comprehensive income attributable to EnPro Industries, Inc.	$	10.3

The summarized balance sheet at June 30, 2021 was as follows:


	Parent and Guarantor Subsidiaries
ASSETS
Current assets	$	315.5
Non-current assets	888.2
Total assets	$	1,203.7
LIABILITIES AND EQUITY
Current liabilities	$	129.8
Non-current liabilities	643.9
Total liabilities	773.7
Redeemable non-controlling interests	51.6
Shareholders’ equity	378.4
Total liabilities and equity	$	1,203.7

The table above reflects $16.1 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $4.9 million of current intercompany payables due to the Non-Guarantor Subsidiaries from the Guarantor Subsidiaries within current assets and liabilities.

The summarized results of operations for the year ended December 31, 2020 were as follows:


	Parent and Guarantor Subsidiaries
Net sales	$	632.9
Gross profit	$	172.4
Loss from continuing operations attributable to EnPro Industries, Inc.	$	(67.1)
Income from discontinued operations, net of taxes	$	208.9
Net income attributable to EnPro Industries, Inc.	$	141.8
Comprehensive income attributable to EnPro Industries, Inc.	$	133.5

The summarized balance sheet at December 31, 2020 was as follows:


	Parent and Guarantor Subsidiaries
ASSETS
Current assets	$	300.4
Non-current assets	904.4
Total assets	$	1,204.8
LIABILITIES AND EQUITY
Current liabilities	$	122.8
Non-current liabilities	653.9
Total liabilities	776.7
Redeemable non-controlling interests	48.4
Shareholders’ equity	379.7
Total liabilities and equity	$	1,204.8

The table above reflects $11.8 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $4.4 million of current intercompany payables due to the Non-Guarantor Subsidiaries from the Guarantor Subsidiaries within current assets and liabilities.

The Senior Notes are structurally subordinated to the indebtedness and other liabilities of the Non-Guarantor Subsidiaries. The Non-Guarantor Subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Senior Notes or the Indenture, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that the Company or the Guarantor Subsidiaries have to receive any assets of any of the Non-Guarantor Subsidiaries upon the liquidation or reorganization of any Non-Guarantor Subsidiary, and the consequent rights of holders of Senior Notes to realize proceeds from the sale of any of a Non-Guarantor Subsidiary’s assets, would be effectively subordinated to the claims of such Non-Guarantor Subsidiary’s creditors, including trade creditors and holders of preferred equity interests, if any, of such Non-Guarantor Subsidiary. Accordingly, in the event of a bankruptcy, liquidation or reorganization of any of the Non-Guarantor Subsidiaries, the Non-Guarantor Subsidiaries will pay the holders of their debts, holders of preferred equity interests, if any, and their trade creditors before they will be able to distribute any of their assets to the Company or any Guarantor Subsidiaries.

If a Guarantor Subsidiary were to become a debtor in a case under the U.S. Bankruptcy Code or encounter other financial difficulty, under federal or state fraudulent transfer or conveyance law, a court may avoid, subordinate or otherwise decline to enforce its guarantee of the Senior Notes. A court might do so if it is found that when such Guarantor Subsidiary entered into its guarantee of the Senior Notes, or in some states when payments became due under the Senior Notes, such Guarantor Subsidiary received less than reasonably equivalent value or fair consideration and either:

•was insolvent or rendered insolvent by reason of such incurrence;

•was left with unreasonably small or otherwise inadequate capital to conduct our business; or

•believed or reasonably should have believed that it would incur debts beyond its ability to pay.

The court might also avoid the guarantee of the Senior Notes without regard to the above factors, if the court found that the Guarantor Subsidiary entered into its guarantee with actual intent to hinder, delay or defraud our creditors.

A court would likely find that a Guarantor Subsidiary did not receive reasonably equivalent value or fair consideration for its guarantee of the Senior Notes, if such Guarantor Subsidiary did not substantially benefit directly or indirectly from the funding made available by the issuance of the Senior Notes. If a court were to avoid a guarantee of the Senior Notes provided by a Guarantor Subsidiary, holders of the Senior Notes would no longer have any claim against such Guarantor Subsidiary. The measures of insolvency for purposes of these fraudulent transfer or conveyance laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer or conveyance has occurred, such that we cannot predict what standards a court would use to determine whether or not a Guarantor Subsidiary was solvent at the relevant time or, regardless of the standard that a court uses, that the guarantee of a Guarantor Subsidiary would not be subordinated to such Guarantor Subsidiary’s other debt. As noted above, each guarantee provided by a Guarantor Subsidiary includes a provision intended to

limit the Guarantor Subsidiary’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer or conveyance. This provision may not be effective to protect those guarantees from being avoided under fraudulent transfer or conveyance law, or it may reduce that Guarantor Subsidiary’s obligation to an amount that effectively makes its guarantee worthless, and we cannot predict whether a court will ultimately find it to be effective.

On the basis of historical financial information, operating history and other factors, we believe that each of the Guarantor Subsidiaries, after giving effect to the issuance of its guarantee of the Senior Notes when such guarantee was issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Measures

We believe that it would be helpful to the readers of the financial statements to understand the impact of certain selected items on our reported income from continuing operations attributable to EnPro Industries, Inc., diluted earnings per share attributable to EnPro Industries, Inc. continuing operations, and total adjusted segment EBITDA, including items that may recur from time to time. The items adjusted for in these non-GAAP financial measures are those that are excluded by management in budgeting or projecting for performance in future periods, as they typically relate to events specific to the period in which they occur. Accordingly, these are some of the factors the company uses in internal evaluations of the overall performance of its businesses. In addition, management believes these non-GAAP financial measures are commonly used financial measures for investors to evaluate the company’s operating performance and, when read in conjunction with the company’s consolidated financial statements, present a useful tool to evaluate the company’s ongoing operations and performance from period to period. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP financial measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

The following presents a reconciliation of (i) income from continuing operations attributable to EnPro Industries, Inc. to adjusted income from continuing operations attributable to EnPro Industries, Inc. and (ii) income from continuing operations attributable to EnPro Industries, Inc. to adjusted EBITDA for the quarters and six months ended June 30, 2021 and 2020.

Reconciliation of Income (Loss) from Continuing Operations Attributable to EnPro Industries, Inc. to Adjusted Income from Continuing Operations Attributable to EnPro Industries, Inc. and Adjusted Diluted Earnings Per Share


	Quarters Ended June 30,
	2021						2020
	$		Average common shares outstanding, diluted (millions)	Per Share			$		Average common shares outstanding, diluted (millions)	Per Share
Income (loss) from continuing operations attributable to EnPro Industries, Inc.	$	29.3	20.8	$	1.41		$	(3.3)	20.5	$	(0.16)
Net income (loss) from redeemable non-controlling interest	(0.1)						0.1
Income tax expense	0.8						1.8
Income (loss) from continuing operations before income taxes	30.0						(1.4)

Adjustments from selling, general, and administrative:
Acquisition and divestiture expenses	0.7						0.5
Non-controlling interest compensation allocations2	1.3						0.5
Amortization of acquisition-related intangible assets	11.3						9.0
Adjustments from other operating expense and cost of sales:
Restructuring and impairment expense	2.7						17.5
Amortization of the fair value adjustment to acquisition date inventory	2.3						—


Adjustments from other non-operating expense:

Costs associated with previously disposed businesses	0.1						0.3
Net loss on sale of businesses	0.1						—
Pension income (non-service cost)	(2.1)						(0.6)
Other adjustments:
Other4	(0.3)						—
Adjusted income from continuing operations before income taxes	46.1						25.8
Adjusted income tax expense5	(13.8)						(7.7)
Net loss (income) from redeemable non-controlling interest	0.1						(0.1)
Adjusted income from continuing operations attributable to EnPro Industries, Inc.	$	32.4	20.8	$	1.56	1	$	18.0	20.63	$	0.88	1


	Six Months Ended June 30,
	2021						2020
	$		Average common shares outstanding, diluted (millions)	Per Share			$		Average common shares outstanding, diluted (millions)	Per Share
Income from continuing operations attributable to EnPro Industries, Inc.	$	47.3	20.8	$	2.28		$	6.8	20.6	$	0.33
Net income from redeemable non-controlling interests	—						0.2
Income tax expense	6.0						9.5
Income from continuing operations before income taxes	53.3						16.5

Adjustments from selling, general, and administrative:
Acquisition and divestiture expenses	0.7						1.3
Non-controlling interest compensation allocations2	2.9						1.1
Amortization of acquisition-related intangible assets	22.5						18.0
Adjustments from other operating expense and cost of sales:
Restructuring and impairment expense	4.5						18.9
Amortization of the fair value adjustment to acquisition date inventory	4.8						—


Adjustments from other non-operating expense:

Costs associated with previously disposed businesses	0.4						0.7
Net loss (gain) on sale of businesses	2.0						(1.1)
Pension income (non-service cost)	(4.2)						(1.3)
Other adjustments:
Other4	(0.2)						—
Adjusted income from continuing operations before income taxes	86.7						54.1
Adjusted income tax expense5	(26.0)						(16.2)
Net income from redeemable non-controlling interests	—						(0.2)
Adjusted income from continuing operations attributable to EnPro Industries, Inc.	$	60.7	20.8	$	2.92	1	$	37.7	20.6	$	1.83	1

1 Adjusted diluted earnings per share attributable to EnPro Industries, Inc. continuing operations. Per share amounts were calculated by dividing by the weighted-average shares of diluted common stock outstanding during the periods.

2 Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisitions of LeanTeq and Alluxa that is subject to reduction for certain types of employment terminations of the LeanTeq and Alluxa sellers and is directly related to the terms of the respective acquisitions. This expense will continue to be recognized as compensation expense over the term of the put and call options associated with the acquisitions unless certain employment terminations have occurred.

3There were 0.1 million potentially dilutive shares that were excluded from the computation of diluted earnings per share for the quarter ended June 30, 2020 because they were antidilutive. These shares were included in the computation of adjusted diluted earnings per share for that period.

4Other adjustments are included in selling, general, and administrative, cost of sales, and other operating expenses on the consolidated statements of operations.

5 The adjusted income tax expense presented above is calculated using a normalized company-wide effective tax rate excluding discrete items of 30.0% for continuing operations.

Reconciliation of Income (Loss) from Continuing Operations Attributable to EnPro Industries, Inc. to Adjusted EBITDA


(Stated in Millions of Dollars)
	Quarters Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Income (loss) from continuing operations attributable to EnPro Industries, Inc.	$	29.3	$	(3.3)	$	47.3	$	6.8
Net income (loss) attributable to redeemable non-controlling interests	(0.1)		0.1		—		0.2
Income (loss) from continuing operations	29.2		(3.2)		47.3		7.0

Adjustments to arrive at earnings from continuing operations before interest, income taxes, depreciation, amortization, and other selected items (Adjusted EBITDA):
Interest expense, net	3.8		3.5		7.6		7.5
Income tax expense	0.8		1.8		6.0		9.5
Depreciation and amortization expense	18.6		17.2		37.5		34.5
Restructuring and impairment expense	2.7		17.5		4.5		18.9

Costs associated with previously disposed businesses	0.1		0.3		0.4		0.7
Net loss (gain) on sale of businesses	0.1		—		2.0		(1.1)
Acquisition and divestiture expenses	0.7		0.5		0.7		1.3
Pension income (non-service cost)	(2.1)		(0.6)		(4.2)		(1.3)
Non-controlling interest compensation allocation1	1.3		0.5		2.9		1.1


Amortization of the fair value adjustment to acquisition date inventory	2.3		—		4.8		—
Other	(0.3)		—		(0.2)		—
Adjusted EBITDA	$	57.2	$	37.5	$	109.3	$	78.1

1 Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisitions of LeanTeq and Alluxa that is subject to reduction for certain types of employment terminations of the LeanTeq and Alluxa sellers and is directly related to the terms of the respective acquisitions. This expense will continue to be recognized as compensation expense over the term of the put and call options associated with the acquisitions unless certain employment terminations have occurred.

Adjusted EBITDA as presented in the table above also represents the amount defined as "EBITDA" under the indenture governing the Senior Notes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in foreign currency exchange rates and interest rates that could impact our financial condition, results of operations and cash flows. We manage our exposure to these and other market risks through regular operating and financing activities and through the use of derivative financial instruments. We intend to use derivative financial instruments as risk management tools and not for speculative investment purposes. For information about our interest rate risk, see “Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Risk” in our annual report on Form 10-K for the year ended December 31, 2020.

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of our foreign subsidiaries, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to control our exposure to these risks and limit the volatility in our reported earnings due to foreign currency fluctuations through our normal operating activities and, where appropriate, through foreign currency forward contracts and option contracts. The notional amount of foreign exchange contracts hedging foreign currency transactions was $3.2 million and $3.3 million at June 30, 2021 and December 31, 2020, respectively.

In September 2018, we entered into cross-currency swap agreements with a notional amount of $200.0 million to manage foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate U.S. Dollar (“USD”)-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 172.8 million EUR with a weighted average interest rate of 2.8%, with interest payment dates of March 15 and September 15 of each year. The swap agreement matures on September 15, 2022.

In May 2019, we entered into additional cross-currency swap agreements with a notional amount of $100.0 million to manage foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate USD-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 89.6 million EUR with a weighted average interest rate of 3.5% , with interest payment dates of April 15 and October 15 of each year. The swap agreement matures on October 15, 2026.

During the term of the swap agreements, we will receive semi-annual payments from the counterparties due to the difference between the interest rate on the Senior Notes and the interest rate on the Euro debt underlying the swap. There was no principal exchange at the inception of the arrangements, and there will be no exchange at maturity. At maturity (or earlier at our option), we and the counterparties will settle the swap agreements at their fair value in cash based on the aggregate notional amount and the then-applicable currency exchange rate compared to the exchange rate at the time the swap agreements were entered into.

Commodity Risk

We source a wide variety of materials and components from a network of global suppliers. While such materials are typically available from numerous suppliers, commodity raw materials such as steel, engineered plastics, copper and polymers, are subject to price fluctuations (including increases due to new or increased tariffs), which could have a negative impact on our results. The impacts from the COVID-19 pandemic may further increase the risk of price fluctuations or the availability of necessary raw materials. We strive to pass along commodity price increases to customers to avoid profit margin erosion and utilize lean initiatives to further mitigate the impact of commodity raw material price fluctuations as we achieve improved efficiencies. We do not hedge commodity risk with any market risk sensitive instruments.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The purpose of our disclosure controls and procedures is to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, including this report, is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to our management to allow timely decisions regarding disclosure.

Based on the controls evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that management will be timely alerted to material information required to be included in our periodic reports filed with the Securities and Exchange Commission.

In addition, no change in our internal control over financial reporting has occurred during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

A description of environmental and other legal matters is included in Note 15 to the Consolidated Financial Statements in this report, which is incorporated herein by reference. In addition to the matters noted and discussed in those sections of this report, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business. We believe that the outcome of such other litigation and legal proceedings will not have a material adverse effect on our financial condition, results of operations and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth all purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the second quarter of 2021.


Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)			(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
April 1 - April 30, 2021	—		—			—	$50,000,000	(1)
May 1 - May 31, 2021	—		—			—	$50,000,000	(1)
June 1 - June 30, 2021	304	(2)	$	97.43	(2)	—	$50,000,000	(1)
Total	304	(2)	$	97.43	(2)	—	$50,000,000	(1)

(1)On October 28, 2020, our board of directors authorized the repurchase of up to $50.0 million of our outstanding common shares, and we announced the share repurchase authorization in a press release issued on November 3, 2020. Pursuant to this authorization, $50.0 million remained available at the end of the period.

(2)In June 2021, a total of 304 shares were transferred to a rabbi trust that we established in connection with our Deferred Compensation Plan for Non-Employee Directors, pursuant to which non-employee directors may elect to defer directors’ fees into common stock units. EnPro Holdings furnished these shares in exchange for management and other services provided by EnPro. Of these shares, 72 were valued at a price of $98.35, the closing trading price of our common stock on June 16, 2021, and 232 of these shares were valued at a price of $97.15 per share, the closing trading price of our common stock on June 30, 2021. Accordingly, the total 304 shares were valued at a weighted average price of $97.43. We do not consider the transfer of shares from EnPro Holdings in this context to be pursuant to a publicly announced plan or program.

Item 6. Exhibits.

The exhibits to this report on Form 10-Q are listed in the accompanying Exhibit Index.

EXHIBIT INDEX


2.1			Merger Agreement dated as of September 25, 2020 among EnPro Industries, Inc., Vision Investment, LLC, Vision Investment Merger Sub, Inc., Alluxa, Inc., Michael Scobey, as representative of the equityholders of Alluxa, Inc. and certain specified shareholders of Alluxa, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8‑K filed by EnPro Industries, Inc. on September 28, 2020 (File No. 001-31225))

31.1†			Certification of Chief Executive Officer pursuant to Rule 13a – 14(a)/15d – 14(a)

31.2†			Certification of Chief Financial Officer pursuant to Rule 13a – 14(a)/15d – 14(a)

32†			Certification pursuant to Section 1350

101.SCH†			InlineXBRL Taxonomy Extension Schema Document

101.CAL†			InlineXBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†			InlineXBRL Taxonomy Extension Definitions Linkbase Document

101.LAB†			InlineXBRL Taxonomy Extension Label Linkbase Document

101.PRE†			InlineXBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibits 101.*)

† Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, North Carolina on this 4th day of August, 2021.


ENPRO INDUSTRIES, INC.

By:			/s/ Robert S. McLean
			Robert S. McLean
			Executive Vice President, General Counsel and Secretary


By:			/s/ Steven R. Bower
			Steven R. Bower
			Senior Vice President, Chief Accounting Officer and Controller