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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 March 31, 2022
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 13(a) of the Exchange 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 April 27, 2022, there were 20,800,175 shares of common stock of the registrant outstanding, which does not include 180,257 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)
Three Months Ended March 31, 2022 and 2021
(in millions, except per share amounts)

20222021
Net sales$328.7 $279.3 
Cost of sales214.1 169.9 
Gross profit114.6 109.4 
Operating expenses:
Selling, general and administrative85.7 80.3 
Other1.5 1.9 
Total operating expenses87.2 82.2 
Operating income27.4 27.2 
Interest expense(7.1)(4.0)
Interest income0.2 0.2 
Other income (expense)0.7 (0.1)
Income before income taxes21.2 23.3 
Income tax expense(4.7)(5.2)
Net income16.5 18.1 
Less: net income attributable to redeemable non-controlling interests0.3 0.1 
Net income attributable to EnPro Industries, Inc.$16.2 $18.0 
Comprehensive income$3.8 $9.7 
Less: comprehensive loss attributable to redeemable non-controlling interests(0.7)(0.4)
Comprehensive income attributable to EnPro Industries, Inc.$4.5 $10.1 
Basic earnings per share attributable to EnPro Industries, Inc.$0.78 $0.87 
Diluted earnings per share attributable to EnPro Industries, Inc.$0.77 $0.87 










See notes to consolidated financial statements (unaudited).
1


ENPRO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 2022 and 2021
(in millions)
20222021
OPERATING ACTIVITIES
Net income $16.5 $18.1 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation7.9 6.9 
Amortization20.0 11.9 
Deferred income taxes(0.9)(1.6)
Stock-based compensation1.5 1.7 
Other non-cash adjustments2.2 3.6 
Change in assets and liabilities, net of effects of divestitures of businesses:
Accounts receivable, net(19.8)(19.8)
Inventories(0.6)(0.9)
Accounts payable8.9 4.3 
Other current assets and liabilities(6.8)(2.3)
Other non-current assets and liabilities1.8 (1.6)
Net cash provided by operating activities30.7 20.3 
INVESTING ACTIVITIES
Purchases of property, plant and equipment(3.8)(6.2)
Proceeds from (payments for) sale of businesses, net0.4 (2.3)
Other(0.1)0.2 
Net cash used in investing activities(3.5)(8.3)
FINANCING ACTIVITIES
Proceeds from debt4.5  
Repayments of debt(52.4)(1.0)
Dividends paid(5.9)(5.7)
Other(6.6)(1.4)
Net cash used in financing activities(60.4)(8.1)
Effect of exchange rate changes on cash and cash equivalents(11.5)(1.1)
Net increase (decrease) in cash and cash equivalents(44.7)2.8 
Cash and cash equivalents at beginning of period338.1 229.5 
Cash and cash equivalents at end of period$293.4 $232.3 
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest, net$0.1 $(2.3)
Income taxes, net$1.7 $4.8 
Non-cash investing and financing activities:
Non-cash acquisitions of property, plant, and equipment$0.3 $1.0 





See notes to consolidated financial statements (unaudited).
2


ENPRO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share amounts)
March 31,
2022
December 31,
2021
ASSETS
Current assets
Cash and cash equivalents$293.4 $338.1 
Accounts receivable, net196.4 177.0 
Inventories164.0 160.0 
Prepaid expenses and other current assets38.3 37.9 
Total current assets692.1 713.0 
Property, plant and equipment, net231.3 236.7 
Goodwill948.2 953.2 
Other intangible assets, net887.7 913.4 
Other assets153.5 153.5 
Total assets$2,912.8 $2,969.8 
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt$13.6 $12.7 
Short-term debt149.5 149.3 
Accounts payable90.9 81.9 
Accrued expenses137.7 135.2 
Total current liabilities391.7 379.1 
Long-term debt915.3 963.9 
Deferred taxes and non-current income taxes payable166.3 167.3 
Other liabilities128.9 142.8 
Total liabilities1,602.2 1,653.1 
Commitments and contingencies
Redeemable non-controlling interests49.3 50.1 
Shareholders’ equity
Common stock – $.01 par value; 100,000,000 shares authorized; issued, 20,980,432 shares in 2022 and 20,915,793 shares in 2021
0.2 0.2 
Additional paid-in capital299.6 303.6 
Retained earnings959.8 949.4 
Accumulated other comprehensive income2.9 14.6 
Common stock held in treasury, at cost – 180,576 shares in 2022 and 180,848 shares in 2021
(1.2)(1.2)
Total shareholders’ equity1,261.3 1,266.6 
Total liabilities and equity$2,912.8 $2,969.8 




See notes to consolidated financial statements (unaudited).
3


ENPRO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.    Overview and Basis of Presentation
Overview
EnPro Industries, Inc. (“we,” “us,” “our,” “EnPro,” or the “Company”) is a leader in designing, developing, manufacturing, servicing, and marketing proprietary engineered industrial products and serves a wide variety of customers in diverse industries around the world. Over the past several years, we have executed several strategic initiatives to change the portfolio of businesses that we operate to focus on industrial technology-related businesses with leading technologies, compelling margins, strong cash flow, and high levels of recurring revenue that serve markets with favorable secular tailwinds. These initiatives have increased our ability to provide solutions to the semiconductor, life sciences, and other technology industries.
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 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, 2021 was derived from the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2021. 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, 2021 included within our annual report on Form 10-K.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period.
All intercompany accounts and transactions between our consolidated operations have been eliminated.
2.    Acquisition
On December 17, 2021, our subsidiary, EnPro Holdings, Inc. ("EnPro Holdings"), completed the acquisition of all issued and outstanding membership interests of TCFII NxEdge LLC (“NxEdge”). Based in Boise, Idaho, NxEdge serves customers across the semiconductor supply chain, including top tier global integrated device manufacturers and original equipment manufacturers from six main facilities located in Idaho and California. With vertically integrated capabilities across the semiconductor value chain, including a robust aftermarket business, NxEdge is a leading supplier offering a set of integrated capabilities with unique processes resulting in a broad range of qualifications at top customers. NxEdge is included in our Advanced Surface Technologies segment.

The following pro forma condensed consolidated financial results of operations for EnPro are presented as if the acquisition had been completed prior to 2021:
Three Months Ended March 31,
(in millions)20222021
Pro forma net sales$328.7 $322.2 
Pro forma net income$25.2 $22.1 
These amounts have been calculated after applying our accounting policies and adjusting the results of NxEdge to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to inventory, property, plant and equipment and intangible assets had been applied prior to 2021 as well as additional interest expense to reflect financing required, together with the corresponding tax effects. The supplemental pro forma net income for the three months ended March 31, 2022 was adjusted to exclude $11.6 million of pre-tax costs related to the amortization of the backlog intangible asset, the amortization of the fair-value adjustment to acquisition date inventory and additional transaction-related expenses incurred during the period. These pro forma financial results have been prepared for comparative purposes only and do not reflect the effect of synergies that would have been expected to result from the integration of this acquisition. The pro
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forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred prior to 2021, or of future results of the consolidated entities.
We continue to evaluate the purchase price allocation of this acquisition, primarily the value of certain tangible and intangible assets and the related tax impacts, and, in accordance with applicable accounting guidance, we may revise the amounts initially recognized until these estimates are final. We expect to finalize these estimates no later than the fourth quarter of 2022.
3.    Income Taxes

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

The effective tax rates for the three months ended March 31, 2022 and 2021 were 22.3% and 22.2%, respectively. The effective tax rate for the three months ended March 31, 2022 is primarily the result of higher tax rates in most foreign jurisdictions partially offset by excess tax benefits related to share-based payment awards. The effective tax rate for the three months ended March 31, 2021 is primarily the result of higher tax rates in most foreign jurisdictions and an increase in valuation allowances related to certain net operating losses and tax attributes offset by the settlement of a state tax audit.
4.    Earnings Per Share
 Three Months Ended March 31,
 20222021
 (in millions, except per share amounts)
Numerator (basic and diluted):
Net income$16.5 $18.1 
Less: net income attributable to redeemable non-controlling interests0.3 0.1 
Net income attributable to EnPro Industries, Inc.$16.2 $18.0 
Denominator:
Weighted-average shares – basic20.8 20.6 
Share-based awards0.1 0.1 
Weighted-average shares – diluted20.9 20.7 
Basic earnings per share attributable to EnPro Industries, Inc.$0.78 $0.87 
Diluted earnings per share attributable to EnPro Industries, Inc.$0.77 $0.87 

5.    Inventories
March 31,
2022
December 31,
2021
 (in millions)
Finished products$57.8 $56.8 
Work in process37.8 41.8 
Raw materials and supplies74.0 66.2 
169.6 164.8 
Reserve to reduce certain inventories to LIFO basis(5.6)(4.8)
Total inventories$164.0 $160.0 
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.

5


6.    Goodwill and Other Intangible Assets
The changes in the net carrying value of goodwill by reportable segment for the three months ended March 31, 2022, are as follows:
Sealing
Technologies
Advanced Surface TechnologiesEngineered
Materials
Total
 (in millions)
Goodwill as of December 31, 2021
279.4 668.7 5.1 $953.2 
Acquisition of business (0.6) (0.6)
Foreign currency translation(0.5)(3.9) (4.4)
Goodwill as of March 31, 2022
$278.9 $664.2 $5.1 $948.2 

The goodwill balances reflected above are net of accumulated impairment losses of $27.8 million for the Sealing Technologies segment and $108.7 million for the Engineered Materials segment as of March 31, 2022 and December 31, 2021.
Identifiable intangible assets are as follows:
  As of March 31, 2022 As of December 31, 2021
 Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
 (in millions)
Amortized:
Customer relationships$530.1 $172.2 $536.5 $166.0 
Existing technology480.6 58.3 480.8 49.5 
Trademarks70.5 26.0 70.9 24.9 
Other41.2 24.8 41.4 22.4 
1,122.4 281.3 1,129.6 262.8 
Indefinite-Lived:
Trademarks46.6 — 46.6 — 
Total$1,169.0 $281.3 $1,176.2 $262.8 
Amortization for the three months ended March 31, 2022 and 2021 were $19.8 million and $11.3 million, respectively.
7.    Accrued Expenses
March 31,
2022
December 31,
2021
 (in millions)
Salaries, wages and employee benefits$45.0 $60.5 
Interest9.8 4.9 
Environmental17.2 11.3 
Income taxes15.2 10.6 
Taxes other than income taxes11.8 9.4 
Operating lease liabilities9.9 10.0 
Other28.8 28.5 
$137.7 $135.2 



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8.     Long-Term Debt
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 amends, restates and replaces the Second Amended and Restated Credit Agreement dated as of June 28, 2018, as amended, among the Company and EnPro Holdings as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and 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 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.

Initially, borrowings under the Facilities (other than the 364-Day Facility) bear interest at an annual rate of LIBOR plus 1.75% or base rate plus 0.75%, although these interest rates are subject to incremental increase or decrease based on a consolidated total net leverage ratio. Borrowings under the 364-Day Facility bear interest at an annual rate of LIBOR plus 1.50% or base rate plus 0.50%. 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 Amended Credit Agreement contains customary LIBOR replacement provisions.

The Term Loan A-1 Facility will amortize 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 will amortize 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 will not amortize and will be payable in full at maturity. The Facilities are subject to prepayment with the net cash proceeds of certain asset sales, casualty or condemnation events and non-permitted debt issuances.

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 certain assets. The Amended Credit Agreement contains certain financial covenants and required financial ratios including a maximum consolidated total net leverage and a minimum consolidated interest coverage as defined in the Amended Credit Agreement. We were in compliance with all covenants of the Amended Credit Agreement as of March 31, 2022.
The borrowing availability under our Revolving Credit Facility at March 31, 2022 was $258.6 million after giving consideration to $11.4 million of outstanding letters of credit and $130.0 million of outstanding borrowings. The balance of our outstanding Term Loan A-1 Facility, Term Loan A-2 Facility and 364-Day Facility at March 31, 2022 was $140.6 million, $313.0 million and $150.0 million, respectively.
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Senior Notes
On October 17, 2018, we completed the offering of $350.0 million aggregate principal amount of 5.75% Senior Notes due 2026 (the "Senior Notes") and applied the net proceeds of that offering, together with borrowings under the Revolving Credit Facility, to redeem on October 31, 2018 the full $450.0 million aggregate principal amount of the outstanding 5.875% Senior Notes due 2022 (the "Old 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. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of EnPro’s existing and future direct and indirect domestic subsidiaries that is a borrower under, or guarantees, our indebtedness under the Revolving Credit Facility or guarantees any other Capital Markets Indebtedness (as defined in the indenture governing the Senior Notes) of EnPro or any of the guarantors.
On or after October 15, 2021, we may, on any one or more occasions, redeem all or a part of the Senior Notes at specified redemption prices plus accrued and unpaid interest. 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 includes covenants that restrict our ability to engage in certain activities, including incurring additional indebtedness, paying dividends and repurchasing shares of our common stock, subject in each case to specified exceptions and qualifications set forth in the indenture. The indenture further requires us to apply the net cash proceeds of certain asset sales not reinvested in acquisitions, or used to repay or otherwise reduce specified indebtedness within a specified period, in the event of the net proceeds exceeding a specified amount, to offer to repurchase the Senior Notes at a price equal to 100.0% of the principal amount thereof plus accrued and unpaid interest.
9.    Pensions
The components of net periodic benefit cost for our U.S. and foreign defined benefit pension plans for the three months ended March 31, 2022 and 2021, are as follows:
 20222021
 (in millions)
Service cost$0.4 $0.4 
Interest cost2.4 2.3 
Expected return on plan assets(3.3)(4.6)
Amortization of net loss0.1 0.1 
Net periodic benefit cost (benefit)$(0.4)$(1.8)

No contributions were made in the three months ended March 31, 2022 to our U.S. defined benefit pension plans and we do not anticipate making contributions in 2022 to these plans.
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10.    Shareholders' Equity
Changes in shareholders' equity for the three months ended March 31, 2022 are as follows:
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive IncomeTreasury StockTotal Shareholders' EquityRedeemable Non-controlling Interests
(in millions, except per share data)SharesAmount
Balance, December 31, 2021
20.7 $0.2 $303.6 $949.4 $14.6 $(1.2)$1,266.6 $50.1 
Net income— — — 16.2 — — 16.2 0.3 
Other comprehensive loss— — — — (11.7)— (11.7)(1.0)
Dividends ($0.28 per share)
— — — (5.8)— — (5.8)— 
Incentive plan activity0.1 — (4.1)— — — (4.1)— 
Other— — 0.1 — — — 0.1 (0.1)
Balance, March 31, 2022
20.8 $0.2 $299.6 $959.8 $2.9 $(1.2)$1,261.3 $49.3 
Changes in shareholders' equity for the three months ended March 31, 2021 are as follows:
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Shareholders' EquityRedeemable Non-controlling Interests
(in millions, except per share data)SharesAmount
Balance,December 31, 2020
20.5 $0.2 $289.6 $794.8 $(4.9)$(1.2)$1,078.5 $48.4 
Net income— — — 18.0 — — 18.0 0.1 
Other comprehensive loss— — — — (7.9)— (7.9)(0.5)
Dividends ($0.27 per share)
— — — (5.7)— — (5.7)— 
Incentive plan activity0.1 — 1.2 — — — 1.2 — 
Other— — (0.1)(3.1)— — (3.2)3.2 
Balance, March 31, 2021
20.6 $0.2 $290.7 $804.0 $(12.8)$(1.2)$1,080.9 $51.2 
We intend to declare regular quarterly cash dividends on our common stock, as determined by our board of directors, after taking into account our current and projected cash flows, earnings, financial position, debt covenants and other relevant factors. In accordance with the board of directors' declaration, total dividend payments of $5.9 million were made during the three months ended March 31, 2022.
In April 2022, our board of directors declared a dividend of $0.28 per share, payable on June 15, 2022 to all shareholders of record as of June 1, 2022.
In October 2020, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares through October 2022. We have not made any repurchases under this authorization.
In February 2022, we issued stock options to certain key executives for 0.1 million common shares with an exercise price of $106.54 per share. The options vest pro-rata on the first, second and third anniversaries of the grant date, subject to continued employment. No options have a term greater than 10 years.
We determine the fair value of stock options using the Black-Scholes option pricing formula as of the grant date. Key inputs into this formula include expected term, expected volatility, expected dividend yield, and the risk-free interest rate. This fair value is amortized on a straight line basis over the vesting period.
The expected term represents the period that our stock options are expected to be outstanding, and is determined based on historical experience of similar awards, given the contractual terms of the awards, vesting schedules, and expectations of future
9


employee behavior. The fair value of stock options reflects a volatility factor calculated using historical market data for EnPro's common stock. The time frame used was approximated as a six-year period from the grant date for the awards. The dividend assumption is based on our expectations as of the grant date. We base the risk-free interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining life equal to the option's expected life.

The option awards issued in 2022 had a fair value of $39.07 per share at their grant date. The following assumptions were used to estimate the fair value of the 2022 option awards:
Average expected term6 years
Expected volatility39.88 %
Risk-free interest rate1.89 %
Expected dividend yield1.05 %
11.    Business Segment Information

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

Our Sealing Technologies segment designs, manufactures and sells sealing products, including: metallic, non-metallic and composite material gaskets, dynamic seals, compression packing, resilient metal seals, elastomeric seals, custom-engineered mechanical seals for applications in the aerospace industry and other markets, hydraulic components, expansion joints, sanitary gaskets, hoses and fittings for the hygienic process industries, fluid transfer products for the pharmaceutical and biopharmaceutical industries, and heavy-duty commercial vehicle parts used in wheel-end and suspension components. These products are used in a variety of industries, including chemical and petrochemical processing, pulp and paper processing, power generation, food and pharmaceutical processing, primary metal manufacturing, mining, water and waste treatment, heavy-duty trucking, aerospace, medical, filtration and semiconductor fabrication. In many of these industries, performance and durability are vital for safety and environmental protection. Many of our products are used in highly demanding applications, e.g., where extreme temperatures, extreme pressures, corrosive environments, strict tolerances, and/or worn equipment create challenges for product performance.
Our Advanced Surface Technologies segment applies proprietary technologies, processes, and capabilities to deliver highly differentiated suites of products and services for the most challenging applications in high growth markets. The segment’s products and services are used in highly demanding environments requiring performance, precision and repeatability, with a low tolerance for failure. The segment’s services include cleaning, coating, testing, refurbishment and verification services for critical components and assemblies used in state-of-the-art advanced node semiconductor manufacturing equipment. It designs, manufactures and sells specialized optical filters and thin-film coatings for the most challenging applications in the industrial technology, life sciences, and semiconductor markets and complex front-end wafer processing sub-systems, new and refurbished electrostatic chuck pedestals, thin film coatings, and edge-welded metal bellows for the semiconductor equipment industry and for critical applications in the space, aerospace and defense markets.
Our Engineered Materials segment includes operations that design, manufacture and sell self-lubricating, non-rolling metal-polymer, engineered plastics, and fiber reinforced composite bearing products, critical service flange gaskets, seals and electrical flange isolation kits used in high-pressure wellhead equipment, flow lines, water injection lines, sour hydrocarbon process applications, and crude oil and natural gas pipeline/transmission line applications. These products are used in a wide range of applications, including the automotive, aerospace, pharmaceutical, pulp and paper, natural gas, health, power generation, machine tools, air treatment, refining, petrochemical and general industrial markets.
We measure operating performance based on segment earnings before interest, income taxes, depreciation, amortization, and other selected items ("Adjusted Segment EBITDA"), which is segment revenue reduced by operating expenses and other costs identifiable with the segment, excluding acquisition and divestiture expenses, restructuring costs, impairment charges, non-controlling interest compensation, amortization of the fair value adjustment to acquisition date inventory, and depreciation and amortization. Adjusted Segment EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies. Corporate expenses include general corporate administrative costs. Expenses not directly attributable to the segments, corporate expenses, net interest expense, gains and losses related to the sale of assets, and income
10


taxes are not included in the computation of Adjusted Segment EBITDA. The accounting policies of the reportable segments are the same as those for EnPro.
Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisitions of LeanTeq and Alluxa being subject to reduction for certain types of employment terminations of the sellers. This expense is recorded in selling, general, and administrative expenses on our Consolidated Statements of Operations and is directly related to the terms of the acquisitions. This expense will continue to be recognized as compensation expense over the term of the put and call options associated with the acquisitions unless certain employment terminations have occurred.
Segment operating results and other financial data for the three months ended March 31, 2022 and 2021 were as follows:
20222021
 (in millions)
Sales
Sealing Technologies$153.6 $146.5 
Advanced Surface Technologies116.7 54.7 
Engineered Materials59.0 80.4 
329.3 281.6 
Intersegment sales(0.6)(2.3)
Total sales$328.7 $279.3 
Adjusted Segment EBITDA
Sealing Technologies$33.5 $33.9 
Advanced Surface Technologies34.9 17.3 
Engineered Materials9.2 12.6 
$77.6 $63.8 
Reconciliation of Adjusted Segment EBITDA to income before income taxes
Adjusted Segment EBITDA$77.6 $63.8 
Acquisition and divestiture expenses(0.2)(0.1)
Non-controlling interest compensation allocation0.9 (1.6)
Amortization of fair value adjustment to acquisition date inventory(10.3)(2.4)
Restructuring and impairment expense(0.4)(1.8)
Depreciation and amortization expense(27.9)(18.8)
Corporate expenses(13.4)(11.6)
Interest expense, net(6.9)(3.8)
Other income (expense), net1.8 (0.4)
Income before income taxes$21.2 $23.3 








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Segment assets are as follows:
March 31, 2022December 31, 2021
(in millions)
Sealing Technologies$705.3 $697.5 
Advanced Surface Technologies1,652.9 1,686.5 
Engineered Materials169.8 160.3 
Corporate384.8 425.5 
$2,912.8 $2,969.8 
 
Backlog

As of March 31, 2022, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $394.1 million. Approximately 90% of these obligations are expected to be satisfied within one year. There is no certainty these orders will result in actual sales at the times or in the amounts ordered. In addition, for most of our business, this total is not particularly predictive of future performance because of our short lead times and some seasonality.

Revenue by End Market

Due to the diversified nature of our business and the wide array of products that we offer, we sell into a number of end markets. Underlying economic conditions within these markets are a major driver of our segments' sales performance. Below is a summary of our third-party sales by major end market with which we did business for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022
(in millions)Sealing TechnologiesAdvanced Surface TechnologiesEngineered MaterialsTotal
Aerospace$8.1 $2.0 $3.2 $13.3 
Automotive0.7 0.2 15.4 16.3 
Chemical and material processing20.3   20.3 
Food and pharmaceutical19.0   19.0 
General industrial42.0 6.5 31.1 79.6 
Medium-duty/heavy-duty truck44.8  2.2 47.0 
Oil and gas5.1 0.6 6.1 11.8 
Power generation10.4 0.1 0.7 11.2 
Semiconductors1.3 106.0  107.3 
Other1.8 1.1  2.9 
Total third-party sales$153.5 $116.5 $58.7 $328.7 
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Three Months Ended March 31, 2021
(in millions)Sealing TechnologiesAdvanced Surface TechnologiesEngineered MaterialsTotal
Aerospace$6.7 $1.5 $1.3 $9.5 
Automotive0.4 0.3 18.7 19.4 
Chemical and material processing17.6  10.5 28.1 
Food and pharmaceutical16.4  0.5 16.9 
General industrial42.7 6.4 30.2 79.3 
Medium-duty/heavy-duty truck38.9  2.8 41.7 
Oil and gas4.2 0.7 14.9 19.8 
Power generation11.1  0.9 12.0 
Semiconductors4.7 44.9  49.6 
Other1.8 0.9 0.3 3.0 
Total third-party sales$144.5 $54.7 $80.1 $279.3 
12.    Derivatives and Hedging
In September 2018, we entered into cross-currency swap agreements (the "Original Swap") with a notional amount of $200.0 million to manage foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate U.S. Dollar (“USD”)-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 172.8 million EUR with a weighted average interest rate of 2.8%, with interest payment dates of March 15 and September 15 of each year. The Original Swap agreement matures on September 15, 2022.
In May 2019, we entered into additional cross-currency swap agreements (the "Additional Swap") with a notional amount of $100.0 million to manage an increased portion of our foreign currency risk by effectively converting a portion of the interest payments related to our fixed-rate USD-denominated Senior Notes, including the semi-annual interest payments thereunder, to interest payments on fixed-rate Euro-denominated debt of 89.6 million EUR with a weighted average interest rate of 3.5%, with interest payment dates of April 15 and October 15 of each year. The Additional Swap agreement matures on October 15, 2026.
During the term of the swap agreements, we will receive semi-annual payments from the counterparties due to the difference between the interest rate on the Senior Notes and the interest rate on the Euro debt underlying each of the swaps. There was no principal exchange at the inception of the arrangements, and there will be no exchange at maturity. At maturity (or earlier at our option), we and the counterparties will settle the swap agreements at their fair value in cash based on the aggregate notional amount and the then-applicable currency exchange rate compared to the exchange rate at the time the swap agreements were entered into.
We have designated these cross-currency swaps as qualifying hedging instruments and are accounting for them as a net investment hedge. At March 31, 2022, the fair value of the Swap and the Additional Swap equaled $10.7 million and $2.9 million and were recorded within our other current assets and other (non-current) assets, respectively, on the Consolidated Balance Sheet.The gains and losses resulting from fair value adjustments to the cross currency-swap agreements, excluding interest accruals related to the above receipts, are recorded in accumulated other comprehensive income within our cumulative foreign currency translation adjustment, as the swaps are effective in hedging the designated risk. Cash flows related to the cross-currency swaps are included in operating activities in the Consolidated Statements of Cash Flows, aside from the ultimate settlement at maturity with the counterparties, which will be included in investing activities.




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13.    Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis are summarized as follows:
Fair Value Measurements as of
 March 31, 2022December 31, 2021
 (in millions)
Assets
Foreign currency derivatives13.6 8.7 
Deferred compensation assets11.0 10.9 
$24.6 $19.6 
Liabilities
Deferred compensation liabilities$11.6 $11.4 
Our deferred compensation assets and liabilities are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Our foreign currency derivatives are classified as Level 2 since their value is calculated based upon observable inputs including market USD/Euro exchange rates and market interest rates.
The carrying values of our significant financial instruments reflected in the Consolidated Balance Sheets approximated their respective fair values except for the following instruments:
 March 31, 2022December 31, 2021
 Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
 (in millions)
Long-term debt$928.9 $942.3 $976.6 $998.3 
The fair values for long-term debt are based on quoted market prices for identical liabilities, but these are considered Level 2 computations because the market is not active.

14.    Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income by component (after tax) for the three months ended March 31, 2022 are as follows:
(in millions)Unrealized
Translation
Adjustments
Pension and
Other
Postretirement
Plans
Total
Beginning balance$46.7 $(32.1)$14.6 
Other comprehensive loss before reclassifications(12.8) (12.8)
Amounts reclassified from accumulated other comprehensive income 0.1 0.1 
Net current-period other comprehensive income (loss)(12.8)0.1 (12.7)
Less: other comprehensive loss attributable to redeemable non-controlling interests(1.0) (1.0)
Net current-period other comprehensive income (loss) attributable to EnPro Industries, Inc. (11.8)0.1 (11.7)
Ending balance$34.9 $(32.0)$2.9 






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Changes in accumulated other comprehensive loss by component (after tax) for the three months ended March 31, 2021 are as follows:
(in millions)Unrealized
Translation
Adjustments
Pension and
Other
Postretirement
Plans
Total
Beginning balance$31.7 $(36.6)$(4.9)
Other comprehensive loss before reclassifications(8.5) (8.5)
Amounts reclassified from accumulated other comprehensive loss 0.1 0.1 
Net current-period other comprehensive income (loss)(8.5)0.1 (8.4)
Less: other comprehensive loss attributable to redeemable non-controlling interests(0.5) (0.5)
Net current-period other comprehensive income (loss) attributable to EnPro Industries, Inc.(8.0)0.1 (7.9)
Ending balance$23.7 $(36.5)$(12.8)
Reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021 are as follows:
Details about Accumulated Other Comprehensive Income (Loss) ComponentsAmount Reclassified from Accumulated Other
Comprehensive Income (Loss)
Affected Statement of
Operations Caption
(in millions)20222021
Pension and other postretirement plans adjustments:
Actuarial losses$0.1 $0.1 (1)
Total before tax0.1 0.1 Income before income taxes
Tax benefit  Income tax expense
Net of tax$0.1 $0.1 Net income
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