# Enpro Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Enpro Inc.](/companies/npo.md) (CIK 1164863)
- Form: 10-Q
- Filed: 2024-11-05
- Accepted by EDGAR: Nov 5, 2024, 11:25 ET
- Period: 2024-09-30
- Accession: 0001164863-24-000041
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1164863/000116486324000041/npo-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1164863/000116486324000041/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $260.9m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $790.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $150.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $454.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $110.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $335.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $71.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $219.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $34.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $110.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $10.4m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $31.4m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $15.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $19.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $59.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.94 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.80 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.94 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.82 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 21,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 21,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $18.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $19.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $206.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $519.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $2.53bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $188.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $1.08bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $627.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $14.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $1.46bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 64,695 characters.

*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, 2023.*

### 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, 2023, which include:

- economic conditions in the markets served by our businesses and the businesses of our customers, some of which are cyclical and experience periodic downturns;
- the impact of geopolitical activity on those markets, including instabilities associated with the armed conflict in Ukraine, the armed conflicts in the Middle East and any conflict or threat of conflict that may affect Taiwan;
- uncertainties with respect to the imposition of government embargoes, tariffs and trade protection measures, such as “anti-dumping” duties applicable to classes of products, and import or export licensing requirements, as well as the imposition of trade sanctions against a class of products imported from or sold and exported to, or the loss of “normal trade relations” status with, countries in which we conduct business, could significantly increase our cost of products or otherwise reduce our sales and harm our business;
- uncertainties with respect to prices and availability of raw materials, including as a result of instabilities from geopolitical conflicts;
- uncertainties with respect to our ability to achieve anticipated growth within the semiconductor, life sciences, and other technology-enabled markets, including uncertainties with respect to receipt of CHIPS Act support;
- the impact of fluctuations in relevant foreign currency exchange rates or unanticipated increases in applicable interest rates;
- unanticipated delays or problems in introducing new products;
- the impact of any labor disputes;
- announcements by competitors of new products, services or technological innovations;
- changes in our pricing policies or the pricing policies of our competitors;
- risks related to the reliance of our Advanced Surface Technologies segment on a small number of significant customers;
- uncertainties with respect to our ability to identify and complete business acquisitions consistent with our strategy and to successfully integrate any businesses that we acquire; and
- uncertainties with respect to the amount of any payments required to satisfy contingent liabilities, including those related to discontinued operations, other divested businesses and discontinued operations of our predecessors, including liabilities for certain products, environmental matters, employee benefit and statutory severance obligations and other matters.

We caution investors not to place undue reliance on our forward-looking 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, adjusted diluted earnings per share, 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 "— Results of Operations" and "—Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Measures"

We believe these 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, these non-GAAP measures we use are not necessarily comparable to similarly titled measures used by other companies.

### Discontinued Operations

On January 30, 2023, we completed the sale of Garlock Pipeline Technologies, Inc. ("GPT") for gross proceeds of $28.4 million. We recorded a pre-tax gain on the sale of discontinued operations of $14.6 million in the first quarter of 2023. This business comprised our remaining Engineered Materials segment ("Engineered Materials"). Accordingly, we have recast, for all periods presented, the financial condition, results of operations, and cash flows of Engineered Materials as discontinued operations in the accompanying financial statements. Furthermore, unless otherwise specified, amounts presented in Management's Discussion and Analysis are for continuing operations only.

### Overview

Overview. We are a leading-edge industrial technology company focused on critical applications across a diverse group of growing end markets such as semiconductor, photonics, industrial process, aerospace, food, biopharmaceutical, nuclear and life sciences. We have 13 primary manufacturing and service facilities located in 6 countries, including the United States. Enpro is a leader in applied engineering and designs, develops, manufactures, and markets proprietary, value-added products and solutions that safeguard a variety of critical environments.

Over the past several years, we have executed several strategic initiatives to create a portfolio of businesses that offer proprietary, industrial technology-related products and solutions with high barriers to entry, compelling margins, strong cash flow, and recurring aftermarket revenue in markets with favorable secular tailwinds.

We are committed to our strategy to create long-term shareholder value through earnings growth, strong free cash flow generation, and a balanced capital allocation approach. We will continue to focus our investments on new products, technology innovation, and productivity and continuous improvement initiatives. In connection with our growth strategy, we continue to evaluate acquisition opportunities that fit our strategic frameworks, based on a consistent criteria that includes compelling margins, leading technology, aftermarket/recurring revenue characteristics, and high cash flow return on investment in markets that have secular tailwinds.

We manage our business as two segments: a Sealing Technologies segment and an Advanced Surface Technologies segment.

Our Sealing Technologies segment engineers and manufactures value-added products and solutions that safeguard a variety of critical environments, including: metallic, non-metallic and composite material gaskets; dynamic seals; compression packing; elastomeric components; custom-engineered mechanical seals used in diverse applications; hydraulic components; test, measurement and sensing applications; sanitary gaskets; hoses and fittings for hygienic process industries; fluid transfer products for the pharmaceutical and biopharmaceutical industries; and commercial vehicle solutions used in wheel-end and suspension components that customers rely upon to ensure safety on our roadways.

These products are used in a variety of markets, including chemical and petrochemical processing, nuclear energy, hydrogen, natural gas, food and biopharmaceutical processing, primary metal manufacturing, mining, water and waste treatment, commercial vehicle, aerospace (including commercial space), medical, filtration and semiconductor fabrication. In all these industries, the performance and durability of our proprietary products and solutions are vital for the safety and environmental protection of our customers’ processes. Many of our products and solutions are used in highly demanding applications, often in harsh environments, where the cost of failure is extremely high relative to the cost of our offerings to our customers. These environments include those where extreme temperatures, extreme pressures, corrosive agents, strict tolerances, or worn equipment create challenges for product performance. Sealing Technologies offers customers widely recognized applied engineering, innovation, process know- how and enduring reliability, driving a lasting aftermarket for many of our products and solutions.

Our Advanced Surface Technologies (AST) segment applies proprietary technologies, processes, and capabilities to deliver a highly differentiated suite of products and solutions for challenging applications in high-growth markets. The segment’s products and solutions are used in demanding environments requiring performance, precision and repeatability, with a low tolerance for failure. AST’s products and solutions include: (i) cleaning, coating, testing, refurbishment and verification for critical components and assemblies used in semiconductor manufacturing equipment, with meaningful exposures to state-of-the-art advanced node chip applications; (ii) designing, manufacturing and selling specialized optical filters and proprietary thin-film coatings for the most challenging applications in the industrial technology, life sciences, and semiconductor markets; (iii) engineering and manufacturing complex front-end wafer processing sub-systems and new and refurbished electrostatic chuck pedestals for the semiconductor equipment industry; and (iv) engineering and manufacturing edge-welded metal bellows for the semiconductor equipment industry and critical applications in the space, aerospace and defense markets. In many instances, AST capabilities drive products and solutions that enable the performance of our customers’ high-value processes through an entire life cycle.

Our goodwill is not amortized, but instead is subject to impairment testing that is conducted at least once each calendar year in the fourth quarter. We review market expectations and our actual and projected financial performance quarterly to determine if a triggering event exists that warrants the performance of an interim impairment test. We performed an interim review as of September 30, 2024, and concluded that no triggering event existed as of that date.

We will perform our next annual goodwill impairment test in the fourth quarter of 2024. The market conditions in 2024 and the near-term outlook for the semiconductor industry, (including our Semiconductor reporting unit which is included in the Advanced Surface Technologies segment), has been and is projected to be softer than we projected at the time of our annual test in the fourth quarter of 2023. The fair value of our Semiconductor reporting unit at the time of our fourth quarter 2023 test exceeded its book value by approximately 20%, which we expect will be lower when we complete our test in the fourth quarter of 2024. The fair value of our three reporting units within our Sealing Technologies segment significantly exceeded their book value at the time of last year’s annual goodwill impairment tests.

#### Acquisitions

On January 29, 2024, Enpro acquired all of the equity securities of Advanced Micro Instruments, Inc. ("AMI"), a privately held company, for $209.4 million, net of cash acquired. In connection with the acquisition of AMI, there were $0.2 million and $3.7 million of acquisition-related costs incurred during the quarter and nine months ended September 30, 2024, respectively, which were expensed during such periods and included in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

AMI is a leading provider of highly-engineered, application-specific analyzers and sensing technologies that monitor critical parameters to maintain infrastructure integrity, enable process efficiency, enhance safety, and facilitate the clean energy transition. AMI is included within the Sealing Technologies segment.

Based in Costa Mesa, California, AMI serves customers in the midstream natural gas, biogas, industrial processing, cryogenics, food processing, laboratory wastewater and aerospace markets, The company offers a portfolio of oxygen, hydrogen, sulfide and moisture analyzers and proprietary sensing capabilities that detect contaminants in a variety of processes, including natural gas and biogas streams, which enable operators to avoid flaring and, thereby, reduce CO2 emissions.

Highlights. Financial highlights of our continuing operations for the quarters and nine months ended September 30, 2024 and September 30, 2023 are as follows:

*(in millions, except per share data)*

|  | Quarters Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $260.9 | $250.7 | $790.3 | $810.2 |
| Income from continuing operations attributable to Enpro Inc. | $19.8 | $8.3 | $59.0 | $15.7 |
| Net income attributable to Enpro Inc. | $19.8 | $8.3 | $59.0 | $27.1 |
| Diluted earnings per share from continuing operations attributable to Enpro Inc. | $0.94 | $0.39 | $2.80 | $0.75 |
| Adjusted income from continuing operations attributable to Enpro Inc.1 | $36.7 | $33.1 | $113.7 | $112.1 |
| Adjusted diluted earnings per share1 | $1.74 | $1.58 | $5.39 | $5.35 |
| Adjusted EBITDA 1 | $64.1 | $57.7 | $196.6 | $191.1 |

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.

### Results of Operations

*(in millions)*

| Sales | Quarters Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Sealing Technologies | $168.6 | $161.4 | $524.2 | $511.4 |
| Advanced Surface Technologies | 92.5 | 89.4 | 266.6 | 299.1 |
|  | 261.1 | 250.8 | 790.8 | 810.5 |
| Intersegment sales | (0.2) | (0.1) | (0.5) | (0.3) |
| Net sales | $260.9 | $250.7 | $790.3 | $810.2 |
| Income from continuing operations attributable to Enpro Inc., net of tax | $19.8 | $8.3 | $59.0 | $15.7 |
| Adjusted Segment EBITDA |  |  |  |  |
| Sealing Technologies | $55.1 | $47.9 | $173.5 | $153.9 |
| Advanced Surface Technologies | 19.2 | 19.3 | 55.6 | 72.8 |
| Total Adjusted Segment EBITDA | $74.3 | $67.2 | $229.1 | $226.7 |
| **Reconciliations of Income from Continuing Operations to Adjusted Segment EBITDA** |  |  |  |  |
| Income from continuing operations attributable to Enpro Inc., net of tax | $19.8 | $8.3 | $59.0 | $15.7 |
| Plus: net loss attributable to redeemable non-controlling interests | — | (0.1) | — | (4.3) |
| Income from continuing operations | 19.8 | 8.2 | 59.0 | 11.4 |
| Income tax expense | (4.2) | (14.7) | (15.7) | (17.0) |
| Income from continuing operations before income taxes | 24.0 | 22.9 | 74.7 | 28.4 |
| Acquisition expenses | 0.3 | — | 3.8 | — |
| Non-controlling interest compensation allocation | — | — | — | (0.3) |
| Amortization of the fair value adjustment to acquisition date inventory | — | — | 1.7 | — |
| Restructuring and impairment expense | 4.4 | 2.0 | 5.5 | 2.6 |
| Depreciation and amortization expense | 25.2 | 23.5 | 75.0 | 70.9 |
| Corporate expenses | 10.3 | 9.8 | 33.0 | 36.4 |
| Interest expense, net | 9.0 | 7.1 | 26.7 | 23.6 |
| Goodwill impairment | — | — | — | 60.8 |
| Other expense (income), net | 1.1 | 1.9 | 8.7 | 4.3 |
| Adjusted Segment EBITDA | $74.3 | $67.2 | $229.1 | $226.7 |

We measure operating performance of our reportable segments 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. Segment non-operating expenses and income, corporate expenses, net interest expense, goodwill impairment, 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.

In the first quarter of 2024, we refined our definition of Adjusted Segment EBITDA and corporate expenses to include certain other income or expenses previously reported in other expense, net. These items were primarily comprised of bank fees and certain foreign exchange transaction gains and losses. As a result of this change, for the quarter ended September 30, 2023, we recast our results to decrease Sealing Technologies Adjusted Segment EBITDA by $0.1 million, increase Advanced Surface Technologies Adjusted Segment EBITDA by $0.3 million, and increase corporate expenses by $0.4 million. For the nine months ended September 30, 2023, we increased Advanced Surface Technologies Adjusted Segment EBITDA by $0.2 million and increased corporate expenses by $1.3 million.

Other expense, net in the table above contains all items included in other expense (non-operating) on our Consolidated Statements of Operations for the respective periods presented.

### Third Quarter of 2024 Compared to the Third Quarter of 2023

Sales of $260.9 million in the third quarter of 2024 increased 4.1% from $250.7 million last year. The following table summarizes the impact of a divestiture and foreign currency on sales by segment:

| Sales increase/(decrease) | Percent Change Quarter Ended September 30, 2024 vs. Quarter Ended September 30, 2023 Acquisition | Foreign Currency | Organic | Total |
| --- | ---: | ---: | ---: | ---: |
| Enpro Inc. | 3.4% | (0.2)% | 0.9% | 4.1% |
| Sealing Technologies | 5.1% | (0.2)% | (0.4)% | 4.5% |
| Advanced Surface Technologies | —% | —% | 3.5% | 3.5% |

Following is a discussion of operating results for each segment for the third quarter of 2024 as compared to the third quarter of 2023:

*Sealing Technologies*. Sales of $168.6 million in the third quarter of 2024 increased 4.5% compared to $161.4 million in the same period of 2023. Excluding the unfavorable foreign exchange translation ($0.4 million) and the sales from a recent acquisition ($8.3 million), sales were down 0.4% or $0.7 million. Organic sales were relatively flat as strategic pricing actions, strength in general industrial, particularly in Europe, aerospace and firm food and pharma and nuclear demand offset a 33% decline in commercial vehicle OEM sales and slow Asian industrial markets.

Adjusted Segment EBITDA of $55.1 million in the third quarter of 2024 increased 15.0% from $47.9 million in the third quarter of 2023. Segment AEBITDA margin increased to 32.7% in the third quarter of 2024 from 29.7% last year. Excluding the unfavorable foreign exchange translation ($0.4 million) and the contribution from a business recently acquired of $4.2 million, adjusted Segment EBITDA increased 7.1%, or $3.4 million. The increase was driven primarily by strategic pricing actions, favorable aftermarket sales mix and continuous improvement initiatives.

*Advanced Surface Technologies*. Sales of $92.5 million in the third quarter of 2024 increased 3.5% or $3.1 million compared to sales of $89.4 million in the same period last year. Growth in advanced node cleaning solutions sales offset a difficult demand environment for wafer fab equipment and slow optical filter sales.

Adjusted Segment EBITDA of $19.2 million in the third quarter of 2024 decreased 0.5% from $19.3 million in the comparable period of 2023. Segment AEBITDA margin decreased to 20.8% from 21.6% in the third quarter of 2023. The $0.1 million decrease in Adjusted Segment EBITDA was primarily driven by higher labor and manufacturing overhead ($1.9 million) and increased selling, general, and administrative expenses ($1.8 million) mostly offset by higher volume and favorable mix ($3.6 million).

Corporate expenses for the third quarter of 2024 increased $0.5 million as compared to the same period in 2023, primarily due to an increase in share price-based incentive compensation expense, partially offset by lower current-year annual incentive compensation expense and professional fees.

Interest expense, net in the third quarter of 2024 increased by $1.9 million from the third quarter of 2023 primarily driven by lower interest income on cash balances following the acquisition of AMI, partially offset by lower average outstanding debt.

Other expense, net in the third quarter of 2024 decreased $0.8 million compared to the same period in 2023, primarily driven by decreased environmental related costs ($0.4 million) and lower non-service pension related costs ($0.4 million).

The effective tax rates for the quarters ended September 30, 2024 and 2023 were 17.4% and 63.9%, respectively. The effective tax rate for the quarter ended September 30, 2024 is lower than the U.S. Federal tax rate primarily driven by favorable adjustments resulting from the completion of the 2023 year-end U.S. Federal income tax return. The effective tax rate for the quarter ended September 30, 2023 is higher than the U.S. Federal tax rate primarily driven by the impact of the second quarter 2023 impairment of non-deductible goodwill on the annual effective tax rate and an increase in the valuation allowance in the third quarter 2023 on certain foreign net operating losses.

Income from continuing operations attributable to Enpro Inc., net of tax was $19.8 million, or $0.94 per share, in the third quarter of 2024 compared to $8.3 million, or $0.39 per share, in the third quarter of 2023. Earnings per share is expressed on a fully diluted basis.

### Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Sales of $790.3 million in the first nine months of 2024 decreased 2.5% from $810.2 million in the first nine months of 2023. The following table summarizes the impact of an acquisition and foreign currency on sales by segment:

| Sales increase/(decrease) | Percent Change Nine Months Ended September 30, 2024 vs. Nine Months Ended September 30, 2023 Acquisition | Foreign Currency | Organic | Total |
| --- | ---: | ---: | ---: | ---: |
| Enpro Inc. | 3.1% | (0.1)% | (5.5)% | (2.5)% |
| Sealing Technologies | 4.9% | (0.1)% | (2.3)% | 2.5% |
| Advanced Surface Technologies | —% | —% | (10.9)% | (10.9)% |

Following is a discussion of operating results for each segment for the first nine months of 2024 as compared to the first nine months of 2023:

*Sealing Technologies*. Sales of $524.2 million in the first nine months of 2024 reflect a 2.5% increase compared to the $511.4 million in the same period of 2023. Excluding the unfavorable foreign exchange translation ($0.7 million) and the sales from a recent acquisition of $25.1 million, sales were down 2.3%, or $11.6 million. The decrease in sales was driven by weakness in commercial vehicle OEM sales largely offset by firm demand across other markets and the impact of strategic pricing actions.

Adjusted Segment EBITDA of $173.5 million in the first nine months of 2024 increased 12.7% from $153.9 million in the first nine months of 2023. Segment AEBITDA margin of 33.1% in the first nine months of 2024 increased from 30.1% last year. Excluding the unfavorable foreign exchange translation ($0.4 million) and the contribution from a business recently acquired of $13.4 million, adjusted Segment EBITDA increased 4.3%, or $6.6 million. The increase in segment AEBITDA was primarily driven by strategic pricing, favorable mix, and the benefit from continuous improvement initiatives.

*Advanced Surface Technologies*. Sales of $266.6 million in the first nine months of 2024 decreased 10.9%, or $32.5 million, compared to the $299.1 million in the same period of 2023. The decrease was driven primarily by weakness in the semiconductor capital equipment demand.

Adjusted Segment EBITDA of $55.6 million in the first nine months of 2024 decreased 23.6% from $72.8 million in the comparable period last year. Segment AEBITDA margins decreased to 20.9% from 24.3% in the first nine months of 2023. The decrease in adjusted Segment EBITDA was driven by lower sales volumes ($19.4 million), higher selling, general, and administrative costs ($2.2 million), and higher labor and manufacturing overhead ($1.3 million), partially offset by a favorable mix ($5.7 million).

Corporate expenses for the first nine months of 2024 decreased $3.4 million as compared to the same period in 2023 driven primarily by a decrease in share price-based incentive compensation expense, lower current-year annual incentive compensation expense, and decreased professional fees.

Interest expense, net in the first nine months of 2024 increased by $3.1 million compared to the first nine months of 2023, driven by lower interest income on cash balances following the acquisition of AMI, partially offset by lower average outstanding debt.

Other expense, net in the first nine months of 2024 increased $4.4 million compared to the same period last year, primarily due to the increase in the valuation reserve on a long-term promissory note received in partial consideration for the sale of a non-strategic business in 2020 ($4.5 million) and increased environmental related costs ($1.8 million), partially offset by income realized from the settlement of a legacy claim ($0.6 million) and lower non-service pension related costs ($1.0 million).

The effective tax rates for the nine months ended September 30, 2024 and 2023 were 21.0% and 59.8%, respectively. The effective tax rate for the nine months ended September 30, 2024 is consistent with the U.S. Federal tax rate as a result of higher tax rates in most foreign jurisdictions offset by the favorable adjustments resulting from the completion of the 2023 year-end U.S. Federal income tax return and an additional tax benefit related to share-based payment awards. The effective tax rate for the nine months ended September 30, 2023 is higher than the U.S. Federal tax rate primarily driven by impairment of non-deductible goodwill, valuation allowance on certain foreign net operating losses, and higher tax rates in most foreign jurisdictions partially offset by a tax benefit related to share-based payment awards.

Income from continuing operations attributable to Enpro Inc., net of tax was $59.0 million, or $2.80 per share, in the first nine months of 2024 compared to $15.7 million, or $0.75 per share, in the first nine months of 2023. Earnings per share is expressed on a diluted basis.

### Backlog

As of September 30, 2024, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $241.6 million. Approximately 95% 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, backlog is not particularly predictive of future performance because of our short lead times and some seasonality.

### 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, revolver borrowings and cash generated from operations. We are proactively pursuing acquisition opportunities. Should we need additional capital, we have resources available, which are discussed in this section under the heading “Capital Resources.”

As of September 30, 2024, we held $27.6 million of cash and cash equivalents in the United States and $179.3 million of cash 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 repatriate without significant tax effects, including repayment of intercompany loans, distributions subject to a 100 percent dividends-received deduction for income tax purposes, or distributions of previously-taxed earnings.

Because of the transition tax, GILTI, and Subpart F provisions, undistributed earnings of our foreign subsidiaries totaling $187.1 million at December 31, 2023 have been subjected to U.S. income tax or are eligible for the 100 percent dividends-received deduction under Section 245A of the Internal Revenue Code provided in the Tax Cuts and Jobs Act. Additionally, undistributed earnings are estimated to be $230.5 million as of September 30, 2024. Whether through the application of the 100 percent dividends received deduction, or 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. During the first nine months of 2024, we repatriated $42.6 million which was utilized to paydown our U.S.-based indebtedness and reduce our interest expense. We have determined that estimating any tax liability on our investment in foreign subsidiaries is not practicable. Therefore, we have not recorded any deferred tax liability on undistributed earnings of foreign subsidiaries.

### Cash Flows

Operating activities of continuing operations provided $103.5 million of cash in the first nine months of 2024 and $154.8 million of cash in the first nine months of 2023. The year-over-year decrease was primarily driven by the decline in revenue, timing of working capital, and payments related to short-term operating liabilities, as well as $19.2 million of additional tax payments made in 2024.

Investing activities of continuing operations used $229.5 million of cash in the first nine months of 2024 compared to $4.7 million of cash provided by investing activities last year. The acquisition of AMI ($209.4 million) and capital expenditures ($18.8 million) were the primary uses of cash for investing activities in the year-to-date period. In the first nine months of 2023, investing activities provided $4.7 million, with $25.7 million received from the sale of businesses more than offsetting $20.7 million for capital expenditures.

Financing activities of continuing operations used $44.0 million of cash in the first nine months of 2024, driven by $18.3 million used for the acquisition of non-controlling interests, primarily for the acquisition of the Alluxa non-controlling interests, $19.0 million used for dividends and $6.1 million in net repayments of debt. Financing activities in the first nine months of 2023 used $162.8 million, primarily from $143.1 million in net repayments of debt and $18.3 million used for dividends paid.

### Capital Resources

Senior Secured Credit Facilities. On December 17, 2021, we entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) among the Company and EnPro Holdings, as borrowers, certain foreign subsidiaries of the Company from time-to-time party thereto, as designated borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The Amended Credit Agreement provides for credit facilities in the initial aggregate principal amount of $1,007.5 million, consisting of a five-year, senior secured revolving credit facility of $400.0 million (the “Revolving Credit Facility”), a $142.5 million senior secured term loan facility in replacement of the our existing senior secured term loan facility, maturing September 25, 2024 (the “Term Loan A-1 Facility”), a five-year, senior secured term loan facility of $315.0 million (the “Term Loan A-2 Facility”) and a 364-day, senior secured term loan facility of $150.0 million (the “364-Day Facility” and together with the Revolving Credit Facility, the Term Loan A-1 Facility and the Term Loan A-2 Facility, the “Facilities”). The Amended Credit Agreement also provides that we may seek incremental term loans and/or additional revolving credit commitments in an amount equal to the greater of $275.0 million and 100% of consolidated EBITDA 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 Amended Credit Agreement became effective on December 17, 2021.

Borrowings under the 364-Day Facility bore interest at an annual rate of LIBOR plus 1.50% or base rate plus 0.50%. Initially, borrowings under the Facilities (other than the 364-Day Facility) bore interest at an annual rate of LIBOR plus 1.75% or base rate plus 0.75%, although these interest rates were subject to incremental increase or decrease based on a consolidated total net leverage ratio. On November 8, 2022, we entered into a First Amendment to the Amended Credit Agreement, which replaced the LIBOR-based interest rate option with an option based on Term SOFR ("Secured Overnight Financing Rate") plus (i) a credit spread adjustment of 0.10% and (ii) 1.75%, again subject to incremental increase or decrease 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 0.225%, which rate is also subject to incremental increase or decrease based on a consolidated total net leverage ratio.

The Term Loan A-1 Facility amortized on a quarterly basis in an annual amount equal to 2.50% of the original principal amount of the Term Loan A-1 Facility ($150.0 million) in year one after the closing, 5.00% of such original principal amount in year two and 1.25% of such original principal amount in each of the first three quarters of year three, with the remaining outstanding principal amount payable at maturity. The Term Loan A-2 Facility amortizes on a quarterly basis in an annual amount equal to 2.5% of the original principal amount of the Term Loan A-2 Facility in each of years one through three, 5.0% 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 364-Day Facility did not amortize and was repaid in full in the third quarter of 2022. On July 26, 2023, we voluntarily prepaid all outstanding borrowings and accrued and unpaid interest under the Term Loan A-1 Facility (a remaining principal balance of $133.1 million and accrued interest of $0.6 million). The Facilities are subject to prepayment with the net cash proceeds of certain asset sales not reinvested in acquisitions within a specified period, casualty or condemnation events, and non-permitted debt issuances. There is no prepayment penalty for a full or partial repayment of the Facilities at any time.

The Company and EnPro Holdings are the permitted borrowers under the Facilities. The Company may also from time to time designate any of its wholly owned foreign subsidiaries as a borrower under the Revolving Credit Facility. Each of the Company’s domestic subsidiaries (other than any subsidiaries that may be designated as “unrestricted” by the Company from time to time, and inactive subsidiaries) is required to guarantee the obligations of the borrowers under the Facilities, and each of the Company’s existing domestic subsidiaries (other than inactive subsidiaries) has entered into the Amended 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 subsidiary of the Company (other than unrestricted or inactive subsidiaries);
- 65% of the capital stock of any first-tier foreign subsidiary of the Company and its domestic subsidiaries (other than unrestricted or inactive subsidiaries); and
- substantially all of the assets (including, without limitation, machinery and equipment, inventory and other goods, accounts receivable, 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, but excluding real estate interests) of the Company and its domestic, consolidated subsidiaries (other than unrestricted or inactive subsidiaries).

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

- a maximum consolidated total net leverage ratio of not more than 4.75 to 1.0 (with total debt, for the purposes of such ratio, to be net of up to $150 million of unrestricted cash of Enpro Inc. and its consolidated subsidiaries), which ratio will decrease to 4.5 to 1.0 for each fiscal quarter beginning with the fiscal quarter ending March 31, 2022 and ending with the fiscal quarter ending December 31, 2022, and to 4.0 to 1.0 for each quarter thereafter; 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 Amended 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 of the covenants of the Amended Credit Agreement as of September 30, 2024.

The borrowing availability under our Revolving Credit Facility at September 30, 2024 was $390.0 million after giving consideration to $10.0 million of outstanding letters of credit. The balance of borrowings outstanding under the Term Loan A-2 Facility at September 30, 2024 was $293.3 million.

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. 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.

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. Our ability to redeem the Senior Notes prior to maturity is subject to certain conditions, including in certain cases the payment of make-whole amounts.

The indenture governing the Senior Notes requires us to offer to repurchase the Senior Notes at a price equal to 100.0% of the principal amount thereof plus accrued and unpaid interest, in the event that the net cash proceeds of certain asset sales are not reinvested in acquisitions, capital expenditures, or used to repay or otherwise reduce specified indebtedness within a specified period, to the extent the remaining net proceeds exceed a specified amount.

At September 30, 2024, we were in compliance with all of the covenants of the indenture governing the Senior Notes.

Share Repurchase Program. Enpro’s board of directors approved a new share repurchase authorization in October 2024, replacing the previous $50.0 million authorization that recently expired. No shares were purchased under the prior repurchase program. Under the replacement authorization, which is identical to the prior authorization, the Company may repurchase up to $50.0 million of shares in both open market and privately negotiated transactions. The Company’s management is authorized to determine the timing and amount of any such repurchases based on its evaluation of market conditions, capital alternatives, and other factors. Repurchases may also be made under Rule 10b5-1 plans, which could result in the repurchase of shares during periods when the Company otherwise would be precluded from doing so under insider trading laws. The renewed share repurchase authorization expires in October 2026.

### Critical Accounting Estimates

Please refer to "Critical Accounting Estimates" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the fiscal year ended December 31, 2023, for a discussion of our critical accounting estimates, which is incorporated here by reference.

### 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 September 30, 2024 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 Inc. (the "Parent") and the Guarantor Subsidiaries on a combined basis after intercompany eliminations.

The summarized results of operations for the nine months ended September 30, 2024 were as follows:

*(in millions)*

|  | Parent and Guarantor Subsidiaries |
| --- | ---: |
| Net sales | $559.6 |
| Gross profit | $206.7 |
| Net income | $(1.0) |

The summarized balance sheet at September 30, 2024 was as follows:

*(in millions)*

| ASSETS | Parent and Guarantor Subsidiaries |
| --- | ---: |
| Current assets | $248.7 |
| Non-current assets | 1,589.6 |
| Total assets | $1,838.3 |
| **LIABILITIES AND EQUITY** |  |
| Current liabilities | $133.4 |
| Non-current liabilities | 943.8 |
| Total liabilities | 1,077.2 |
| Shareholders’ equity | 761.1 |
| Total liabilities and equity | $1,838.3 |

The table above reflects $10.5 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $8.5 million of current intercompany payables due to the Non-Guarantor Subsidiaries from the Guarantor Subsidiaries within total current assets and liabilities.

The summarized results of operations for the year ended December 31, 2023 were as follows:

*(in millions)*

|  | Parent and Guarantor Subsidiaries |
| --- | ---: |
| Net sales | $754.3 |
| Gross profit | $256.9 |
| Loss from continuing operations | $(68.2) |
| Income from discontinued operations, net of taxes | $11.4 |
| Net loss | $(56.8) |
| Net loss attributable to Enpro Inc. | $(52.9) |

Of the $11.4 million reported in income from discontinued operations, net of taxes, $11.2 million related to gain on the sale of discontinued operations recognized by a subsidiary that is a guarantor of the Senior Notes and the remaining $0.2 million related to the operations of former subsidiary guarantors of the Senior Notes included in discontinued operations. All discontinued operations were divested by March 31, 2023 and are no longer guarantors of the Senior Notes.

The summarized balance sheet at December 31, 2023 was as follows:

*(in millions)*

| ASSETS | Parent and Guarantor Subsidiaries |
| --- | ---: |
| Current assets | $407.8 |
| Non-current assets | 1,403.1 |
| Total assets | $1,810.9 |
| **LIABILITIES AND EQUITY** |  |
| Current liabilities | $144.3 |
| Non-current liabilities | 921.5 |
| Total liabilities | 1,065.8 |
| Redeemable non-controlling interests | 17.9 |
| Shareholders’ equity | 727.2 |
| Total liabilities and equity | $1,810.9 |

The table above reflects $9.6 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $8.6 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 Inc. and diluted earnings per share attributable to Enpro Inc. continuing operations, 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 (loss) from continuing operations attributable to Enpro Inc., net of tax to adjusted income from continuing operations and adjusted diluted earnings per share and (ii) income (loss) from continuing operations attributable to Enpro Inc., net of tax to adjusted EBITDA for the quarters and nine months ended September 30, 2024 and 2023. The adjustments in the table below relate solely to expenses attributable to Enpro Inc. and have been adjusted to remove any amounts attributable to non-controlling interests.

### Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations and Adjusted Diluted Earnings Per Share

*(in millions, except per share amounts)*

|  | Quarters Ended September 30, 2024 $Average common shares outstanding, diluted |  | Per Share |  | 2023 $Average common shares outstanding, diluted |  | Per Share |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Income from continuing operations attributable to Enpro Inc., net of tax | $19.8 | 21.1 | $0.94 |  | $8.3 | 21.0 | $0.39 |  |
| Net loss from redeemable non-controlling interests | — |  |  |  | (0.1) |  |  |  |
| Income tax expense | 4.2 |  |  |  | 14.7 |  |  |  |
| Income from continuing operations before income taxes | 24.0 |  |  |  | 22.9 |  |  |  |
| Adjustments from selling, general, and administrative: |  |  |  |  |  |  |  |  |
| Acquisition expenses | 0.3 |  |  |  | — |  |  |  |
| Amortization of acquisition-related intangible assets | 19.1 |  |  |  | 17.1 |  |  |  |
| Adjustments from other operating expense and cost of sales: |  |  |  |  |  |  |  |  |
| Restructuring and impairment expense | 4.5 |  |  |  | 2.2 |  |  |  |
| Adjustments from other non-operating expense: |  |  |  |  |  |  |  |  |
| Environmental reserve adjustment | — |  |  |  | 0.4 |  |  |  |
| Costs associated with previously disposed businesses | 0.4 |  |  |  | 0.4 |  |  |  |
| Pension expense - non-service cost | — |  |  |  | 0.4 |  |  |  |
| Foreign exchange losses related to the divestiture of a discontinued operation2 | 0.7 |  |  |  | 0.5 |  |  |  |
| Other adjustments: |  |  |  |  |  |  |  |  |
| Other4 | — |  |  |  | 0.2 |  |  |  |
| Adjusted income from continuing operations before income taxes | 49.0 |  |  |  | 44.1 |  |  |  |
| Adjusted income tax expense5 | (12.3) |  |  |  | (11.1) |  |  |  |
| Net loss from redeemable non-controlling interests | — |  |  |  | 0.1 |  |  |  |
| Adjusted income from continuing operations attributable to Enpro Inc. | $36.7 | 21.1 | $1.74 | 1 | $33.1 | 21.0 | $1.58 | 1 |

39

*(in millions, except per share amounts)*

|  | Nine Months Ended September 30, 2024 $Average common shares outstanding, diluted |  | Per Share |  | 2023 $Average common shares outstanding, diluted |  | Per Share |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Income from continuing operations attributable to Enpro Inc., net of tax | $59.0 | 21.1 | $2.80 |  | $15.7 | 21.0 | $0.75 |  |
| Net loss from redeemable non-controlling interests | — |  |  |  | (4.3) |  |  |  |
| Income tax expense | 15.7 |  |  |  | 17.0 |  |  |  |
| Income from continuing operations before income taxes | 74.7 |  |  |  | 28.4 |  |  |  |
| Adjustments from selling, general, and administrative: |  |  |  |  |  |  |  |  |
| Acquisition expenses | 3.8 |  |  |  | 0.1 |  |  |  |
| Non-controlling interest compensation allocations2 | — |  |  |  | (0.3) |  |  |  |
| Amortization of acquisition-related intangible assets | 56.7 |  |  |  | 51.5 |  |  |  |
| Adjustments from other operating expense and cost of sales: |  |  |  |  |  |  |  |  |
| Restructuring and impairment expense | 6.0 |  |  |  | 3.2 |  |  |  |
| Amortization of the fair value adjustment to acquisition date inventory | 1.7 |  |  |  | — |  |  |  |
| Adjustments from other non-operating expense: |  |  |  |  |  |  |  |  |
| Asbestos receivable adjustment | (0.6) |  |  |  | — |  |  |  |
| Environmental reserve adjustment | 2.3 |  |  |  | 0.5 |  |  |  |
| Costs associated with previously disposed businesses | 0.8 |  |  |  | 0.8 |  |  |  |
| Pension expense - non-service cost | 0.1 |  |  |  | 1.1 |  |  |  |
| Goodwill impairment | — |  |  |  | 56.6 |  |  |  |
| Foreign exchange losses related to the divestiture of a discontinued operation2 | 1.6 |  |  |  | 1.5 |  |  |  |
| Long-term promissory note reserve3 | 4.5 |  |  |  | — |  |  |  |
| Other adjustments: |  |  |  |  |  |  |  |  |
| Other4 | — |  |  |  | 0.3 |  |  |  |
| Adjusted income from continuing operations before income taxes | 151.6 |  |  |  | 143.7 |  |  |  |
| Adjusted income tax expense5 | (37.9) |  |  |  | (35.9) |  |  |  |
| Net loss from redeemable non-controlling interests | — |  |  |  | 4.3 |  |  |  |
| Adjusted income from continuing operations attributable to Enpro Inc. | $113.7 | 21.1 | $5.39 | 1 | $112.1 | 21.0 | $5.35 | 1 |

1 Adjusted diluted earnings per share, which amounts were calculated by dividing by the weighted-average shares of diluted common stock outstanding during the periods.

2 In connection with the sale of GGB, accounted for as a discontinued operation, in the fourth quarter of 2022, we issued an intercompany note between a domestic and foreign entity that is denominated in a foreign currency. As a result of this note, we have recorded losses due to the changes in the foreign exchange rate. The outstanding note is hedged in order to minimize related gains or losses.

3 We issued a long-term promissory note in connection to the sale of a divested business. As part of our regular review of the note, in the first quarter of 2024 we concluded a reserve was needed for expected credit losses. We will continue to monitor the note regularly and make adjustments to the reserve as needed based on known facts and circumstances.

4 Other 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 25.0%.

### Reconciliation of Income from Continuing Operations to Adjusted EBITDA

*(in millions)*

|  | Quarters Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Income from continuing operations attributable to Enpro Inc., net of tax | $19.8 | $8.3 | $59.0 | $15.7 |
| Net loss attributable to redeemable non-controlling interests | — | (0.1) | — | (4.3) |
| Income from continuing operations | 19.8 | 8.2 | 59.0 | 11.4 |
| Adjustments to arrive at earnings before interest, income taxes, depreciation, amortization, and other selected items (Adjusted EBITDA): |  |  |  |  |
| Interest expense, net | 9.0 | 7.1 | 26.7 | 23.6 |
| Income tax expense | 4.2 | 14.7 | 15.7 | 17.0 |
| Depreciation and amortization expense | 25.2 | 23.6 | 75.0 | 71.1 |
| Restructuring and impairment expense | 4.5 | 2.2 | 6.0 | 3.2 |
| Environmental reserve adjustments | — | 0.4 | 2.3 | 0.5 |
| Costs associated with previously disposed businesses | 0.4 | 0.4 | 0.8 | 0.8 |
| Acquisition expenses | 0.3 | — | 3.8 | 0.1 |
| Pension expense - non-service cost | — | 0.4 | 0.1 | 1.1 |
| Non-controlling interest compensation allocation | — | — | — | (0.3) |
| Asbestos receivable adjustment | — | — | (0.6) | — |
| Amortization of the fair value adjustment to acquisition date inventory | — | — | 1.7 | — |
| Goodwill impairment | — | — | — | 60.8 |
| Foreign exchange losses related to the divestiture of a discontinued operation1 | 0.7 | 0.5 | 1.6 | 1.5 |
| Long-term promissory note reserve2 | — | — | 4.5 | — |
| Other | — | 0.2 | — | 0.3 |
| Adjusted EBITDA | $64.1 | $57.7 | $196.6 | $191.1 |

1 In connection with the sale of GGB, accounted for as a discontinued operation, in the fourth quarter of 2022, we issued an intercompany note between a domestic and foreign entity that is denominated in a foreign currency. As a result of this note, we have recorded losses due to the changes in the foreign exchange rate. The outstanding note is hedged in order to minimize related gains or losses.

2 We issued a long-term promissory note in connection to the sale of a divested business. As part of our regular review of the note, in the first quarter of 2024 we concluded a reserve was needed for expected credit losses. We will continue to monitor the note regularly and make adjustments to the reserve as needed based on known facts and circumstances.

Adjusted EBITDA as presented in the table above also represents the amount defined as "EBITDA" under the Indenture.

## Market risk

As filed, 4,067 characters.

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, 2023.

### 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 on our foreign subsidiaries’ balance sheets, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. We strive to control our exposure to these risks through our normal operating activities and, where appropriate, through derivative instruments. We periodically enter into contracts to hedge forecasted transactions that are denominated in foreign currencies. As part of our regular practice, we entered into a forward contract to hedge a 95 million Euro exposure on an intercompany note agreement related to proceeds from the GGB sale allocated to foreign subsidiaries. We expect this intercompany note to be settled during 2024. The notional amount of foreign exchange contracts was $111.8 million and $110.5 million September 30, 2024 and December 31, 2023, respectively. All foreign exchange contracts outstanding at September 30, 2024 expired in October 20224.

The earnings impact of these foreign exchange contract are recorded in selling, general and administrative expense in the Consolidated Statements of Operations. The balances of foreign exchange derivative assets are recorded in other current assets and the balances of foreign exchange derivative liabilities are recorded in accrued expenses in the Consolidated Balance Sheets.

In May 2019, we entered into cross-currency swap agreements with an aggregate 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. These swap agreements mature on October 15, 2026.

During the term of these 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 additional swap agreements. 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 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 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, which could have a negative impact on our results. We strive to pass along such 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.

## Controls and procedures

As filed, 1,773 characters.

### 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 September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### PART II

### OTHER INFORMATION

Filed Nov 5, 2024.
Source: SEC EDGAR, the filing index for accession 0001164863-24-000041. Last ingested by Listed: Nov 6, 2026, 14:34 ET. No prices; not investment advice.