Company Quick10K Filing
Enpro Industries
Price69.22 EPS1
Shares21 P/E107
MCap1,440 P/FCF18
Net Debt586 EBIT45
TEV2,026 TEV/EBIT45
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-03
10-Q 2020-06-30 Filed 2020-08-04
10-Q 2020-03-31 Filed 2020-05-05
10-K 2019-12-31 Filed 2020-03-11
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-25
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-01
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-22
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-04
10-K 2014-12-31 Filed 2015-02-25
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-02-27
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-16 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-08
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-09
10-K 2010-12-31 Filed 2011-03-15
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-03
8-K 2020-11-03 Earnings, Exhibits
8-K 2020-10-26 M&A, Exhibits
8-K 2020-09-25 Enter Agreement, Regulation FD, Exhibits
8-K 2020-08-14 Other Events
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-06-19
8-K 2020-06-12
8-K 2020-05-05
8-K 2020-04-30
8-K 2020-02-25
8-K 2020-02-19
8-K 2020-01-21
8-K 2019-12-12
8-K 2019-11-05
8-K 2019-10-30
8-K 2019-09-25
8-K 2019-09-25
8-K 2019-07-29
8-K 2019-07-29
8-K 2019-07-19
8-K 2019-05-02
8-K 2019-04-30
8-K 2019-04-11
8-K 2019-03-11
8-K 2019-02-14
8-K 2019-01-11
8-K 2018-11-01
8-K 2018-10-31
8-K 2018-10-17
8-K 2018-10-02
8-K 2018-10-01
8-K 2018-08-02
8-K 2018-06-28
8-K 2018-05-03
8-K 2018-05-03
8-K 2018-02-21
8-K 2018-02-14

NPO 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-31.1 npo-2020930xex311q3.htm
EX-31.2 npo-2020930xex312q3.htm
EX-32 npo-2020930xex32q3.htm

Enpro Industries Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02012201420172020
Assets, Equity
0.50.40.30.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

npo-20200930
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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 September 30, 2020
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 Carolina28209
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueNPONew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 30, 2020, there were 20,536,015 shares of common stock of the registrant outstanding, which does not include 182,511 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 Nine Months Ended September 30, 2020 and 2019
(in millions, except per share amounts)

Quarters Ended September 30,Nine Months Ended September 30,
2020201920202019
Net sales$268.3 $299.0 $798.0 $919.2 
Cost of sales173.8 201.3 525.7 613.5 
Gross profit94.5 97.7 272.3 305.7 
Operating expenses:
Selling, general and administrative73.2 77.1 214.6 235.4 
Other28.8 1.5 42.9 3.9 
Total operating expenses102.0 78.6 257.5 239.3 
Operating income (loss)(7.5)19.1 14.8 66.4 
Interest expense(4.0)(4.1)(12.6)(13.8)
Interest income0.1 0.3 1.2 1.3 
Other expense(17.2)(24.6)(15.5)(27.3)
Income (loss) from continuing operations before income taxes(28.6)(9.3)(12.1)26.6 
Income tax benefit (expense)7.3 0.9 (2.2)(10.6)
Income (loss) from continuing operations(21.3)(8.4)(14.3)16.0 
Less: income attributable to redeemable non-controlling interest, net of tax0.3  0.5  
Income (loss) from continuing operations attributable to EnPro Industries, Inc.(21.6)(8.4)(14.8)16.0 
Income from discontinued operations, net of tax1.9 6.9 207.3 19.5 
Net income (loss) attributable to EnPro Industries, Inc.$(19.7)$(1.5)$192.5 $35.5 
Comprehensive income (loss)$(13.1)$3.7 $200.8 $44.9 
Less: comprehensive income attributable to redeemable non-controlling interest0.5  2.0  
Comprehensive income (loss) attributable to EnPro Industries, Inc.$(13.6)$3.7 $198.8 $44.9 
Basic earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations$(1.05)$(0.41)$(0.72)$0.77 
Discontinued operations0.09 0.33 10.09 0.94 
Net income (loss) per share$(0.96)$(0.08)$9.37 $1.71 
Diluted earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations$(1.05)$(0.41)$(0.72)$0.77 
Discontinued operations0.09 0.33 10.09 0.94 
Net income (loss) per share$(0.96)$(0.08)$9.37 $1.71 

See notes to consolidated financial statements (unaudited).
1


ENPRO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, 2020 and 2019
(in millions)
20202019
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net income attributable to EnPro Industries, Inc.$192.5 $35.5 
Adjustments to reconcile net income attributable to EnPro Industries, Inc. to net cash provided by operating activities of continuing operations:
Income from discontinued operations, net of taxes(207.3)(19.5)
Taxes paid related to sale of discontinued operations(35.4) 
Depreciation22.4 22.4 
Amortization29.1 25.6 
Deferred income taxes(2.4)(3.8)
Stock-based compensation4.1 5.0 
Other non-cash adjustments31.5 14.0 
Change in assets and liabilities, net of effects of acquisitions and divestitures of businesses:
Asbestos insurance receivables2.5 5.8 
Accounts receivable, net(3.4)(3.1)
Inventories11.7 3.4 
Accounts payable(5.9)(18.4)
Other current assets and liabilities12.5 8.4 
Other non-current assets and liabilities(3.5)15.8 
Net cash provided by operating activities of continuing operations48.4 91.1 
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Purchases of property, plant and equipment(11.8)(15.1)
Proceeds from sale of businesses453.9 3.6 
Acquisitions, net of cash acquired0.1 (310.4)
Other(2.7)(2.1)
Net cash provided by (used in) investing activities of continuing operations 439.5 (324.0)
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from debt24.9 566.9 
Repayments of debt(161.4)(365.1)
Repurchase of common stock(5.3)(15.0)
Dividends paid(16.2)(15.7)
Other(2.0)(5.0)
Net cash provided by (used in) financing activities of continuing operations(160.0)166.1 
CASH FLOWS OF DISCONTINUED OPERATIONS
Operating cash flows(6.2)59.6 
Investing cash flows (8.7)
Net cash provided by (used in) discontinued operations(6.2)50.9 
Effect of exchange rate changes on cash and cash equivalents(1.9)(1.6)
Net increase (decrease) in cash and cash equivalents319.8 (17.5)
Cash and cash equivalents at beginning of period121.2 129.6 
Cash and cash equivalents at end of period$441.0 $112.1 
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net$6.1 $7.9 
Income taxes, net$52.0 $2.5 
Non-cash investing and financing activities:
Non-cash acquisitions of property, plant, and equipment$1.2 $0.1 
See notes to consolidated financial statements (unaudited).
2


ENPRO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share amounts)
September 30,
2020
December 31,
2019
ASSETS
Current assets
Cash and cash equivalents$441.0 $121.2 
Accounts receivable, net163.4 160.8 
Inventories124.8 157.1 
Prepaid expenses and other current assets46.1 56.3 
Current assets held for sale41.2 254.1 
Total current assets816.5 749.5 
Property, plant and equipment, net182.5 218.8 
Goodwill486.9 485.3 
Other intangible assets, net422.5 466.9 
Other assets115.6 114.6 
Total assets$2,024.0 $2,035.1 
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt$3.9 $4.1 
Accounts payable69.0 82.7 
Accrued expenses154.1 137.3 
Current liabilities held for sale16.1 89.5 
Total current liabilities243.1 313.6 
Long-term debt489.3 625.2 
Deferred taxes and non-current income taxes payable97.9 74.6 
Other liabilities97.3 106.8 
Total liabilities927.6 1,120.2 
Commitments and contingencies
Redeemable non-controlling interest30.5 28.0 
Shareholders’ equity
Common stock – $.01 par value; 100,000,000 shares authorized; issued, 20,718,526 shares in 2020 and 20,785,346 shares in 2019
0.2 0.2 
Additional paid-in capital288.5 292.1 
Retained earnings808.5 632.2 
Accumulated other comprehensive loss(30.1)(36.4)
Common stock held in treasury, at cost – 183,418 shares in 2020 and 186,516 shares in 2019
(1.2)(1.2)
Total shareholders’ equity1,065.9 886.9 
Total liabilities and equity$2,024.0 $2,035.1 


See notes to consolidated financial statements (unaudited).
3


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 the design, development, manufacture, and marketing of proprietary engineered industrial products, applying material science expertise largely across the portfolio. Our industrial products primarily include: sealing products; heavy-duty truck wheel-end component systems; self-lubricating non-rolling bearing products; precision engineered components and lubrication systems for reciprocating compressors; hoses and fittings for the hygienic process industries; bellows and bellow assemblies; pedestals for semiconductor manufacturing; and PTFE products. In addition to these products, we also provide cleaning and refurbishment services for critical components and assemblies used in state-of-the-art semiconductor equipment.
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, 2019 was derived from the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2019. 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, 2019 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. The recent outbreak of the coronavirus, or COVID-19, which has been declared by the World Health Organization to be a "pandemic," has caused us to evaluate our accounting estimates that require the consideration of forecasted financial information, including, but not limited to, our allowance for credit losses and the carrying value of our goodwill, intangible assets, and other long-lived assets.
In the second quarter of 2020 we moved the oil and gas component of our Garlock Pipeline Technologies ("GPT") business from the Sealing Products segment to the Engineered Products segment. This move allowed us to group our two oil and gas businesses, GPT and Compressor Products International, together so that they can be managed as one business unit. This change is reflected in all periods presented in Note 13, "Business Segment Information". The change also involved the transfer of $5.8 million of goodwill from the Sealing Products Segment to the Engineered Products segment which is reflected in all periods presented in Note 8, "Goodwill and Other Intangible Assets". As a result of the move of the oil and gas component of the GPT business, an interim goodwill impairment test was performed in the second quarter of 2020 for all reporting units and we determined that the carrying amount of our goodwill was not impaired either before or after the move.
This interim goodwill impairment assessment, performed in the second quarter, was conducted in the context of information that was reasonably available to us, as well as our consideration of the future potential impacts of COVID-19 on our business. The fair value of our Technetics Group reporting unit within the Sealing Products segment, which was allocated $243.7 million of goodwill as of June 30, 2020, exceeded its carrying value by an estimated 5% as of the interim testing date. The fair values of all of our other reporting units exceeded their carrying values by at least 20%. However, because of uncertainties at this time with respect to the severity and duration of the COVID-19 outbreak, the duration and terms of related governmental orders restricting activities, and the timing and pace of any economic recovery as COVID-19 impacts ultimately abate, we cannot predict with specificity the extent and duration of any future impact on our business and financial results from COVID-19. In addition, although most of our operations have been treated as “essential” operations under applicable government orders restricting business activities that have been issued to date, and accordingly have been permitted to continue to operate, it is possible that they may not continue to be so treated under future government orders, or, even if so treated, site-specific health and safety concerns might otherwise require certain of our operations to be halted for some period of time. Accordingly, if the impact is more severe or longer in duration than we have projected, such impact could potentially result in impairments of assets in future periods. We will conduct our next annual goodwill impairment assessment as of October 1, 2020.

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

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Our acquisition of all of the equity securities of LeanTeq Co, Ltd. and its affiliate LeanTeq LLC (collectively "LeanTeq") in 2019 resulted in rollover equity from two of the LeanTeq sellers (the “Sellers”) who were executives of the acquired entity. This rollover equity gives the Sellers approximately a 10% ownership share (the "Rollover Equity") of Lunar Investment LLC, our subsidiary that purchased LeanTeq. We have the right to buy, and the non-controlling interest holders have the right to sell, the Rollover Equity within 90 days following the third anniversary of the closing of the acquisition of LeanTeq. We have accounted for this transaction as a redeemable non-controlling interest which is recorded in the mezzanine section on our accompanying consolidated balance sheets, located between liabilities and equity. Earnings associated with the redeemable non-controlling interest are reflected as income attributable to redeemable non-controlling interest, net of tax in the accompanying consolidated statements of operations.

In January 2020, we adopted a new accounting standard that changes how we measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables. The standard requires us to estimate our lifetime “expected credit loss” for such assets at inception, and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

We applied a current expected credit loss model ("CECL") to our trade receivables. Given the nature of our trade receivables, a complex system to develop forward-looking models was not deemed necessary. Since our receivables are short-term, reasonable and supportable forecasted information was not readily available and our application of CECL relied on historical information and existing economic conditions. We will continue to monitor the collectability of our receivables as well as apply any supportable forecast information as it becomes available to make adjustments to our estimated reserve.

We applied our CECL model to our trade receivables at January 1, 2020 using a modified retrospective transition approach. Upon adoption, we recorded a $0.1 million increase to our allowance for credit losses with a corresponding decrease to retained earnings.

Changes in our allowance for doubtful accounts for the nine months ended September 30, 2020 were as follows:

(in millions)
Balance at December 31, 2019$3.7 
Adoption of new accounting standard0.1 
Charge to expense1.2 
Write-off of receivables(1.0)
Other(0.2)
Balance at September 30, 2020$3.8 

Additionally, in January 2020, we adopted a standard to simplify annual and interim goodwill impairment testing. Under the standard, we will perform our annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Upon adoption, there was no impairment of goodwill recorded and this standard is applied following adoption on a prospective basis for all annual and interim goodwill impairment assessments.

Recently Issued Authoritative Accounting Guidance
    
In December 2019, a standard was issued that will simplify the accounting for income taxes in nine unrelated areas. The standard is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. We are currently evaluating the new guidance and do not expect its impact to be material to our consolidated financial statements.
2.    Discontinued Operations

During the fourth quarter of 2019, we entered into an agreement to sell the Fairbanks Morse division, which comprised our entire Power Systems segment. The sale of Fairbanks Morse to an affiliate of funds managed by private equity firm Arcline Investment Management closed on January 21, 2020 for a sales price of $450.0 million. The pre-tax gain on the disposition of
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Fairbanks Morse was $274.3 million. We have reported, for all periods presented, the financial condition, results of operations, and cash flows of Fairbanks Morse as discontinued operations in the accompanying financial statements.

Tax expense of $65.9 million on the sale of discontinued operations was recorded for the nine months ended September 30, 2020. This is a decrease in tax expense of $1.9 million in the quarter ended September 30, 2020, which is due to the increase of the foreign derived intangible income ("FDII") tax benefit and a decrease in the global intangible low taxed income ("GILTI") tax expense that are allocated to discontinued operations.

For the quarters and nine months ended September 30, 2020 and 2019, the results of operations for Fairbanks Morse were as follows:
Quarters Ended 
 September 30,
Nine Months Ended 
 September 30,
2020201920202019
(in millions)
Net sales$ $74.7 $7.6 $203.1 
Cost of sales 57.4 7.6 155.6 
Gross profit 17.3  47.5 
Operating expenses:
Selling, general, and administrative expenses 7.0 1.5 20.3 
Other 0.8 (0.1)0.8 
Total operating expenses 7.8 1.4 21.1 
Income (loss) from discontinued operations before income taxes 9.5 (1.4)26.4 
Income tax benefit (expense) (2.6)0.3 (6.9)
Income (loss) from discontinued operations, net of taxes 6.9 (1.1)19.5 
Gain from sale of discontinued operations, net of taxes1.9  208.4  
Income from discontinued operations, net of taxes$1.9 $6.9 $207.3 $19.5 
The major classes of assets and liabilities for Fairbanks Morse as of December 31, 2019 are shown below:
(in millions)
Assets:
Accounts receivable$107.8 
Inventories60.2 
Property, plant, and equipment63.0 
Goodwill11.8 
Other assets11.3 
Total assets of discontinued operations$254.1 
Liabilities:
Accounts payable$36.9 
Accrued expenses48.2 
Other liabilities4.4 
Total liabilities of discontinued operations$89.5 
3.    Acquisitions and Divestitures
Acquisitions

On September 25, 2019, we acquired all of the equity securities of LeanTeq. LeanTeq primarily provides refurbishment services for critical components and assemblies used in state-of-the-art semiconductor equipment. This equipment is used to produce the latest and most technologically advanced microchips for smartphones, autonomous vehicles, high-speed wireless
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connectivity, artificial intelligence, and other leading-edge applications. Founded in 2011 and headquartered in Taoyuan City, Taiwan, LeanTeq has two locations in Taiwan and one in the United States (Silicon Valley). LeanTeq is included as part of our Technetics Group within the Sealing Products segment.
On July 2, 2019, we acquired 100% of the stock of The Aseptic Group (comprising Aseptic Process Equipment SAS and Aseptic Services SARL, collectively referred to as “Aseptic”), which distributes, designs and manufactures aseptic fluid transfer products for the pharmaceutical and biopharmaceutical industries. Aseptic, headquartered in Limonest, France, is included as part of our Garlock group of companies within the Sealing Products segment.

The following pro forma condensed consolidated financial results of operations for the quarter and nine months ended September 30, 2019 are presented as if the acquisitions had been completed prior to 2019:
Quarter Ended September 30, 2019Nine Months Ended September 30, 2019
 (in millions)
Pro forma net sales$305.8 $948.2 
Pro forma income (loss) from continuing operations $(5.4)$17.0 
These amounts have been calculated after applying our accounting policies and adjusting the results of LeanTeq and Aseptic 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 2019 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 these acquisitions. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred prior to 2019, or of future results of the consolidated entities.
We received $0.1 million in the first quarter of 2020 as a result of the final working capital adjustment that related to our LeanTeq acquisition.
Since the completion of the acquisition of Taiwan-based LeanTeq in September 2019, we commenced an analysis regarding whether we would permanently retain LeanTeq’s earnings in Taiwan or repatriate them to the United States. During the second quarter of 2020 we finalized our analysis and determined that, given the significance of the incremental tax cash cost to EnPro of repatriating LeanTeq earnings to the United States, we will retain any earnings generated by LeanTeq in Taiwan as long as there was a significant incremental tax cash cost of repatriating amounts to the United States.
As a result of the decision to retain earnings in Taiwan, the income tax rate utilized in establishing deferred tax liabilities in the acquisition date balance sheet of LeanTeq was increased from 20% to 23.6%, reflecting a local tax of approximately 3.6% on undistributed earnings. The increase in the income tax rate results in an increase in goodwill and deferred tax liabilities in the acquisition date balance sheet of $7.2 million, which was initially reflected in the consolidated balance sheet as of June 30, 2020. The decision on our retention of LeanTeq’s earnings in Taiwan was our final required purchase accounting determination. Management concluded that the purchase accounting for the LeanTeq acquisition was finalized at June 30, 2020.
Divestitures
In August of 2020, subsequent to announcing the exit of our Motor Wheel® brake drum and Crewson® brake adjuster brands in the second quarter of 2020, we identified a buyer and entered into a definitive agreement to sell the assets related to the businesses. On September 2, 2020, we completed the sale for $8.9 million, net of transaction fees.
This transaction resulted in a $3.7 million reversal of previously accrued restructuring charges consisting of severance, contract cancellation costs, and other costs recorded in other operating expense on our consolidated statements of operations. In the third quarter of 2020, we also recorded a $3.6 million loss on sale of the business in other non-operating expense on our consolidated statements of operations.
On August 3, 2020 we announced that we entered into a definitive agreement to sell the Air Springs portion of our heavy-duty trucking business for $32.0 million in cash and a long-term promissory note with a face value of $7.5 million that will be stated at fair value. Subsequent to the announcement, we agreed with the purchaser to retain the outstanding accounts receivable in the United States, which aggregated $7.2 million at September 30, 2020. The purchase price is subject to adjustment based on the amount of cash and working capital on the closing date. We expect a negative net working capital adjustment on the closing date that approximates the net book value of the accounts receivable retained as a result of our agreement to retain the
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accounts receivable. The sale is expected to close in the fourth quarter of 2020 and is subject to antitrust approvals and typical closing conditions. We expect the gain or loss to be at approximately breakeven.
As a result of this definitive agreement, we classified the Air Springs business as held for sale and reclassified all assets and liabilities of the business to be sold as current assets and current liabilities held for sale on our consolidated balance sheet as of September 30, 2020.
On June 18, 2020, we communicated our intent to exit the bushing block business of the Engineered Products segment principally located in Dieuze, France. Because the restructuring charges associated with that planned exit were not estimable, we did not record any restructuring charges related to this plan in the second quarter. During the third quarter, we continued to explore the possible sale of the business as we proceeded with plans to exit the business through a shutdown and identified a buyer to purchase the business operated at the Dieuze facility. We have classified the assets and liabilities of the business as held for sale on our consolidated balance sheet at September 30, 2020 and we have entered into a binding put option agreement with such buyer, which provides GGB France the right to sell the business to such buyer pending conclusion of a review process by the Works Councils representing the employees at the Dieuze facility. We recorded an impairment of the business, which includes non-cash impairments of long-lived assets and cash payable to the buyer upon closing.
For a further discussion of the impairment charges recorded in connection with the sale of the Dieuze Facility, see Note 4, "Restructuring and Impairment".
In the second quarter of 2020 we entered into an agreement to sell the Lunar® air disc brake business and subsequently classified the business as held for sale. An impairment charge of $2.1 million was recognized in the second quarter. A subsequent increase in the fair value of the business in the third quarter resulted in a partial reversal of the second quarter impairment charge of $0.2 million. The sale of the U.S. assets of the business closed in the third quarter of 2020 for $0.3 million, resulting in a gain of $0.2 million. The sale of the Lunar® manufacturing facility located in Shanghai, China is expected to close in the fourth quarter of 2020 and its related assets and liabilities have been classified as current assets and liabilities held for sale on our consolidated balance sheet since June 30, 2020. We estimate the closing to result in an approximately breakeven pretax gain or loss.
Current assets and liabilities held for sale as of September 30, 2020 are comprised of the following items:
($ in millions)
Assets
Accounts receivable$3.1 
Inventory12.6 
Property, plant and equipment, net12.6 
Other assets12.9 
Current assets held for sale$41.2 
Liabilities
Accounts payable$6.9 
Accrued expenses5.2 
Other liabilities4.0 
Current liabilities held for sale$16.1 
Current assets held for sale excludes accounts receivables of the Air Springs business that we have agreed to retain at closing. At September 30, 2020, the accounts receivable to be retained aggregated $7.2 million.
4.    Restructuring and Impairment
In the second quarter of 2020, we announced a restructuring plan to exit our STEMCO Brake Products business involving the exit of manufacturing operations related to our Motor Wheel® brake drum and Crewson® brake adjuster brands and the sale of our Lunar® air disc brake product line and related manufacturing facility in Shanghai, China. Additionally, we had a number of smaller restructuring activities at several of our other divisions.
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In the third quarter of 2020, we announced the sale of our Motor Wheel® brake drum and Crewson® brake adjuster brands, the Air Springs portion of our heavy duty trucking business, our bushing block business located in Dieuze, France, evaluated several indefinite-lived trademarks for impairment, and took several restructuring actions. For a further discussion of the businesses held for sale, see Note 3, "Acquisitions and Divestitures."
For the quarter and nine months ended September 30, 2020, respectively, we recorded $21.1 million and $40.0 million of restructuring and impairment charges. Of these charges, $21.1 million and $35.1 million are recorded in other operating expense on our consolidated income statements for the respective periods. For the nine months ended September 30, 2020, $4.9 million were recorded as cost of sales on our consolidated income statements as they pertain to impairments of inventory.
In the third quarter of 2020, sales declines by businesses utilizing two of the indefinite-lived trademarks within our Sealing Products segment were determined to be triggering events for an interim impairment analysis. Based on the results of this analysis, we recorded a $16.1 million impairment of indefinite-lived trademarks in the third quarter.
As a result of classifying the bushing block business operated at the Dieuze facility as held for sale at September 30, 2020, we evaluated the business and determined it was impaired. We recorded a $6.2 million impairment charge that consists of $1.8 million of non-cash impairments of long-lived assets and $4.4 million (3.7 million EUR) of cash payments to be due to the buyer at closing.
The exit from our Motor Wheel® brake drum and Crewson® brake adjuster brands resulted in restructuring and impairment charges of $11.1 million in the second quarter of 2020, of which $3.6 million was related to inventory impairment charges, $3.5 million was impairment of intangible assets, and $4.0 million related to severance, contract cancellation costs, and other expenses. Subsequent to announcing the exit of our Motor Wheel® brake drum and Crewson® brake adjuster brands, we identified a buyer and completed the sale of the business in the third quarter of 2020. As a result of our ability to sell the business, we reversed $3.7 million of expenses accrued in the second quarter related to severance, contract cancellation costs, and other expenses and recognized a loss on sale of the business of $3.6 million.
In the second quarter of 2020, we entered into an agreement to sell the Lunar® air disc brake business. As a result of this agreement, we recorded the business as held for sale and incurred $2.1 million in impairment charges, of which $1.6 million related to impairment of long-lived assets and $0.5 million related to impairment of inventory. The sale of U.S. assets closed in the third quarter and the sale of the assets located in Shanghai, China is expected to close in the fourth quarter of 2020. In the third quarter of 2020, a subsequent increase in the Lunar® air disc brake assets fair value resulted in a partial reversal of the second quarter impairment charge of $0.2 million.
For the quarter and nine months ended September 30, 2019, respectively, we recorded $1.4 million and $3.7 million of restructuring and impairment charges. These charges are recorded in other expense on our consolidated income statements.
5.    Income Taxes

For the quarter ended September 30, 2020, in accordance with applicable accounting guidance, we modified our interim period income tax provision methodology. The volatility in jurisdictional income impacts our ability to effectively determine an annual effective tax rate. Accounting guidance provides an alternate approach under these circumstances, whereby the actual effective tax rate for the interim period is used. We applied this approach as it is a better representation of the tax expense allocable to the third quarter results.

The effective tax rates for the quarters ended September 30, 2020 and 2019 were 25.4% and 8.9%, respectively. The effective tax rate for the three months ended September 30, 2020 is primarily the result of lower pre-tax income overall, a geographical mix of lower pre-tax income in the U.S. combined with higher pre-tax income in higher tax foreign jurisdictions as well as the recognition of a deferred tax liability in the amount of $4.5 million associated with the Air Springs business classification as held for sale at September 30, 2020, and a $4.9 million tax benefit associated with the final regulations issued during the third quarter of 2020 under the Tax Cuts and Jobs Act.

The effective tax rates for the nine months ended September 30, 2020 and 2019 were (17.9)% and 40.0%, respectively. The effective tax rate for the nine months ended September 30, 2020 is primarily the result of lower pre-tax income overall, 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. The effective tax rate for the nine months ended September 30, 2019 reflects the minimum tax on certain non-U.S. earnings, higher tax rates in most foreign jurisdictions and adjustments to state net operating losses.

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In June 2017, the IRS began an examination of our 2014 U.S. federal income tax return. Although this examination is part of a routine and recurring cycle, we cannot predict the final outcome or expected conclusion date of the audit. 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.
6.    Earnings Per Share
 Quarters Ended   
 September 30,
Nine months ended September 30,
 2020201920202019
 (in millions, except per share amounts)
Numerator (basic and diluted):
Income (loss) from continuing operations attributable to EnPro Industries, Inc.$(21.6)$(8.4)$(14.8)$16.0 
Income from discontinued operations, net of taxes1.9 6.9 207.3 19.5 
Net income (loss) attributable to EnPro Industries, Inc.$(19.7)$(1.5)$192.5 $35.5 
Denominator:
Weighted-average shares – basic20.5 20.6 20.5 20.7 
Share-based awards   0.1 
Weighted-average shares – diluted20.5 20.6 20.5 20.8 
Basic earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations$(1.05)$(0.41)$(0.72)$0.77 
Discontinued operations0.09 0.33 10.09 0.94 
Net income (loss) per share$(0.96)$(0.08)$9.37 $1.71 
Diluted earnings (loss) per share attributable to EnPro Industries, Inc.:
Continuing operations$(1.05)$(0.41)$(0.72)$0.77 
Discontinued operations0.09 0.33 10.09 0.94 
Net income (loss) per share$(0.96)$(0.08)$9.37 $1.71 

In the quarter and nine months ended September 30, 2020 and the quarter ended September 30, 2019, there were losses from continuing operations attributable to common shares. There were 0.1 million of potentially dilutive shares excluded from the calculation of diluted earnings per share during each of those periods since they were antidilutive.

7.    Inventories
September 30,
2020
December 31,
2019
 (in millions)
Finished products$56.6 $80.6 
Work in process23.1 23.7 
Raw materials and supplies48.7 56.1 
128.4 160.4 
Reserve to reduce certain inventories to LIFO basis(3.6)(3.3)
Total inventories$124.8 $157.1 
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.


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8.    Goodwill and Other Intangible Assets
The changes in the net carrying value of goodwill by reportable segment for the nine months ended September 30, 2020, are as follows:
Sealing
Products
Engineered
Products
Total
 (in millions)
Goodwill as of December 31, 2019$468.6 $16.7 $485.3 
Acquisition of business7.1  7.1 
Divestiture of businesses(7.0) (7.0)
Foreign currency translation1.6 (0.1)1.5 
Goodwill as of September 30, 2020$470.3 $16.6 $486.9 

The goodwill balances reflected above are net of accumulated impairment losses of $27.8 million for the Sealing Products segment and $154.8 million for the Engineered Products segment as of September 30, 2020 and December 31, 2019.
Identifiable intangible assets are as follows:
  As of September 30, 2020 As of December 31, 2019
 Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
 (in millions)
Amortized:
Customer relationships$455.8 $168.2 $470.1 $166.2 
Existing technology98.8 38.3 117.5 50.8 
Trademarks37.5 24.7 39.4 24.1 
Other33.4 24.8 33.6 24.0 
625.5 256.0 660.6 265.1 
Indefinite-Lived:
Trademarks53.0 — 71.4 — 
Total$678.5 $256.0 $732.0 $265.1 
Amortization for the quarters ended September 30, 2020 and 2019 were $8.9 million, and $7.4 million, respectively. Amortization for the nine months ended September 30, 2020 and 2019 were $26.8 million and $21.4 million, respectively.
Impairments of indefinite-lived trademarks during the nine months ended September 30, 2020 were $18.2 million.

9.    Accrued Expenses
September 30,
2020
December 31,
2019
 (in millions)
Salaries, wages and employee benefits$45.9 $43.7 
Interest9.7 5.1 
Environmental26.1 25.2 
Income taxes9.7 13.5 
Taxes other than income taxes9.7 9.1 
Operating lease liabilities8.9 9.3 
Legal settlement7.8 0.4 
Other36.3 31.0 
$154.1 $137.3 

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10.