EnPro Industries 10Q 2024 Q1 Quarterly report

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, 2024


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

Commission File Number 001-31225

_________________________________________

ENPRO INC.

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

_____________________________________


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

(704) 731-1500

(Registrant’s telephone number, including area code)

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

__________________________________________


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

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

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

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


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 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 29, 2024, there were 20,952,146 shares of common stock of the registrant outstanding, which does not include 177,588 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 INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended March 31, 2024 and 2023

(in millions, except per share amounts)



	2024		2023
Net sales	$	257.5	$	282.6
Cost of sales	151.3		166.5
Gross profit	106.2		116.1
Operating expenses:
Selling, general and administrative	77.4		71.5

Other	0.8		0.8
Total operating expenses	78.2		72.3
Operating income	28.0		43.8
Interest expense	(10.3)		(11.7)
Interest income	2.1		3.8
Other expense	(5.5)		(1.8)
Income from continuing operations before income taxes	14.3		34.1
Income tax expense	(1.8)		(8.1)
Income from continuing operations	12.5		26.0
Income from discontinued operations, including gain on sale, net of tax	—		11.4
Net income	12.5		37.4


Comprehensive income	$	9.0	$	44.5






Basic earnings per share:
Continuing operations	$	0.60	$	1.25
Discontinued operations	—		0.55
Net income per share	$	0.60	$	1.80
Diluted earnings per share:
Continuing operations	$	0.59	$	1.24
Discontinued operations	—		0.55
Net income per share	$	0.59	$	1.79

See notes to consolidated financial statements (unaudited).

ENPRO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2024 and 2023

(in millions)


	2024		2023
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net income	$	12.5	$	37.4
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Income from discontinued operations, net of taxes	—		(11.4)
Taxes related to sale of discontinued operations	—		(3.5)
Depreciation	5.9		6.0
Amortization	18.7		17.6

Promissory note reserve	4.5		—
Deferred income taxes	(0.6)		(0.4)
Stock-based compensation	2.9		2.4
Other non-cash adjustments	2.0		1.1
Change in assets and liabilities, net of effects of acquisition and sale of businesses:
Accounts receivable, net	(14.7)		(11.5)
Inventories	0.6		(4.9)
Accounts payable	(7.7)		(4.6)

Other current assets and liabilities	(15.0)		(0.9)
Other non-current assets and liabilities	(2.8)		(0.9)
Net cash provided by operating activities of continuing operations	6.3		26.4
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Purchases of property, plant and equipment	(8.2)		(5.0)

Proceeds from sale of businesses, net	0.1		25.3
Purchase of short-term investments	—		(35.0)

Acquisition	(208.9)		—


Other	—		(0.1)
Net cash used in investing activities of continuing operations	(217.0)		(14.8)
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from debt	39.5		—
Repayments of debt	(6.5)		(4.0)
Purchase of non-controlling interest	(17.9)		—


Dividends paid	(6.4)		(6.2)
Other	(2.5)		(1.8)
Net cash provided by (used in) financing activities of continuing operations	6.2		(12.0)
CASH FLOWS OF DISCONTINUED OPERATIONS
Operating cash flows	—		(0.6)

Net cash used in discontinued operations	—		(0.6)
Effect of exchange rate changes on cash and cash equivalents	(1.4)		2.7
Net increase (decrease) in cash and cash equivalents	(205.9)		1.7
Cash and cash equivalents at beginning of period	369.8		334.4
Cash and cash equivalents at end of period	$	163.9	$	336.1

Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest	$	5.3	$	7.0
Income taxes, net of refunds	$	4.6	$	(0.1)
Non-cash investing and financing activities:
Non-cash acquisitions of property, plant, and equipment	$	1.6	$	0.1

See notes to consolidated financial statements (unaudited).

ENPRO INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)


	March 31, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	163.9	$	369.8
Accounts receivable, net	134.0		116.7
Inventories	146.4		142.6

Prepaid expenses and other current assets	19.9		21.2


Total current assets	464.2		650.3
Property, plant and equipment, net	194.7		193.8
Goodwill	903.4		808.4
Other intangible assets, net	853.1		733.5

Other assets	112.4		113.5

Total assets	$	2,527.8	$	2,499.5
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	10.1	$	8.1

Accounts payable	60.4		68.7
Accrued expenses	108.7		119.6


Total current liabilities	179.2		196.4
Long-term debt	670.0		638.7
Deferred taxes and non-current income taxes payable	152.7		120.7
Other liabilities	112.0		116.1

Total liabilities	1,113.9		1,071.9
Commitments and contingencies
Redeemable non-controlling interests	—		17.9
Shareholders’ equity
Common stock – $.01 par value; 100,000,000 shares authorized; issued, 21,129,575 shares in 2024 and 21,086,678 shares in 2023	0.2		0.2
Additional paid-in capital	306.4		304.9
Retained earnings	1,134.2		1,128.0
Accumulated other comprehensive loss	(25.7)		(22.2)
Common stock held in treasury, at cost – 177,943 shares in 2024 and 178,151 shares in 2023	(1.2)		(1.2)
Total shareholders’ equity	1,413.9		1,409.7
Total liabilities and equity	$	2,527.8	$	2,499.5

See notes to consolidated financial statements (unaudited).

ENPRO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Overview and Basis of Presentation

Overview

Enpro Inc. (“we,” “us,” “our,” “Enpro,” or the “Company”) is a leading-edge industrial technology company focused on critical applications across a diverse group of growing end markets such as semiconductor, industrial process, aerospace, food, photonics, biopharmaceuticals and life sciences. 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.

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. The accompanying interim consolidated financial statements 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, 2023 was derived from the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2023. 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, 2023 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. Actual results could differ from those estimates.

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

Recently Issued Accounting Guidance

In November 2023, an accounting standards update was issued that improves reportable segment disclosures surrounding significant segment expenses. The amendments in this guidance are effective for financial statements issued for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating this new guidance.

In December 2023, an accounting standards update was issued that will require changes in income tax disclosures. The standard is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The standard requires prospective adoption with the recognition that there will be a lack of comparability between reporting periods upon adopting this new standard. Alternatively, retrospective adoption is also permitted. We are currently evaluating this new guidance.

2. Acquisitions

Acquisition of business

On January 29, 2024, Enpro acquired all of the equity securities of Advanced Micro Instruments, Inc. ("AMI"), a privately held company, for $208.9 million, net of cash acquired, subject to standard purchase price adjustments. We anticipate making a payment of approximately a $0.6 million in the second quarter of 2024 when the purchase price adjustment is scheduled to be finalized. In connection with the acquisition of AMI, there were $3.3 million of acquisition-related costs incurred during the quarter ending March 31, 2024 which were expensed during the quarter 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.

The purchase price of AMI was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the identifiable assets acquired less the liabilities assumed is reflected as goodwill, which is attributable primarily to the value of the workforce and the ongoing operations of the business. Goodwill recorded as part of the purchase price was $95.6 million, none of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition totaled $138.1 million, consisting of indefinite and definite-lived intangible assets. Indefinite lived intangible assets relates solely to future products that were in development as of the acquisition date. We will begin amortizing this asset over its estimated life once these products in development become commercially available. Definite-lived intangible assets include proprietary technology, customer relationships, trade names, and non-competition agreements. Inventory acquired included an adjustment to fair value of $1.7 million, all of which was amortized to cost of goods sold in the first quarter of 2024.

Identifiable intangible assets acquired are as follows:


			Weighted-average amortization period
Definite-lived intangible assets acquired:	(in millions)		(years)
Customer relationships	$	12.0	15.0
Existing technology	106.0		15.0
Trademarks	5.0		10.0
Other	1.1		3.3
Total definite-lived intangible assets	124.1		14.7

Indefinite-lived intangible assets acquired:
In-process research and development	14.0

Identifiable intangible assets acquired	$	138.1

We will continue to evaluate the purchase price allocation of this acquisition, including the value of intangible assets and income tax assets and liabilities and adjust this allocation as appropriate. The allocation of purchase price may be revised during the one-year measurement period as our initial estimates below are finalized. The following table represents the preliminary allocation of purchase price:


	(in millions)
Accounts receivable	$	3.3
Inventories	5.2
Property, plant, and equipment	0.2
Goodwill	95.6
Other intangible assets	138.1
Other assets	0.6
Deferred income taxes	(31.9)
Liabilities assumed	(1.6)
	$	209.5

Sales of $7.3 million and pre-tax income of $0.8 million for AMI are included in our Consolidated Statements of Operations for the period from acquisition through March 31, 2024. The following unaudited pro forma condensed consolidated financial results of operations for the three months ended March 31, 2024 and 2023 are presented as if the acquisition had been completed on January 1, 2023:


	Three Months Ended March 31,
		2024		2023
		(in millions)
Pro forma net sales		$	260.3	$	291.7
Pro forma income from continuing operations		$	14.7	$	24.3

These amounts have been calculated after applying our accounting policies and adjusting the results of AMI to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied as of January 1, 2023. The supplemental pro forma net income for the three months ended March 31, 2024 was adjusted to exclude $3.3 million of pre-tax acquisition-related costs related to AMI. The pro forma financial results have been prepared for comparative purposes only and do not reflect the effect of any potential synergies as a result of the integration of AMI. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition of AMI occurred on January 1, 2023, or of future results of Enpro Inc.

Acquisition of non-controlling interest

In connection with our acquisition of Alluxa in October 2020, three Alluxa executives (the "Alluxa Executives") received rollover equity interests in the form of approximately 7% of the total equity interest of an entity we formed for the purpose of acquiring Alluxa (the "Alluxa Acquisition Subsidiary"). Pursuant to the limited liability operating agreement (the "Alluxa LLC Agreement") that was entered into with the completion of the transaction, each Alluxa Executive had the right to sell to us, and we had the right to purchase from each Alluxa Executive (collectively, the "Put and Call Rights"), one-third of the Alluxa Executive equity interests in the Alluxa Acquisition Subsidiary during each of three exercise periods in 2024, 2025 and 2026, with any amount not sold or purchased in a prior exercise period being carried forward to the subsequent exercise periods. In January 2024, we agreed with the Alluxa Executives to change the terms of the Put and Call Rights so that all outstanding equity interests could be acquired in 2024. In February of 2024, we acquired all outstanding equity interests in the Alluxa Acquisition Subsidiary for $17.9 million, which was the minimum fixed price set in the Alluxa LLC Agreement. As this transaction was for the acquisition of all remaining shares of a consolidated subsidiary with no change in control, it was recorded within shareholder's equity and as a financing cash flow in the Consolidated Statement of Cash Flows. Enpro is now the sole owner of Alluxa.

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, 2024 and 2023 were 12.6% and 23.7%, respectively. The lower effective tax rate for the three months ended March 31, 2024 is primarily driven by favorable state amended return filings and additional tax benefit related to share-based payment awards partially offset by higher tax rates in most foreign jurisdictions. The effective tax rate for the three months ended March 31, 2023 is primarily the result of higher tax rates in most foreign jurisdictions partially offset by the release of a valuation allowance on certain foreign net operating losses and a tax benefit related to share-based payment awards.

The Organization for Economic Co-operation and Development (the “OECD”) has introduced a framework to implement a global minimum corporate tax of 15%, referred to as Pillar Two that was effective for tax years beginning in 2024. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation to enact Pillar Two. The adoption of Pillar Two has had no impact on our income tax expense for the three months ended March 31, 2024 and we expect there to be minimal impact in subsequent quarters.

4. Earnings Per Share


	Three Months Ended March 31,
		2024		2023
		(in millions, except per share amounts)
Numerator (basic and diluted):
Income from continuing operations		$	12.5	$	26.0


Income from discontinued operations, net of tax		—		11.4
Net income		$	12.5	$	37.4
Denominator:
Weighted-average shares – basic		20.9		20.8
Share-based awards		0.2		0.1

Weighted-average shares – diluted		21.1		20.9
Basic earnings per share:
Continuing operations		$	0.60	$	1.25
Discontinued operations		—		0.55
Basic earnings per share		$	0.60	$	1.80
Diluted earnings per share:
Continuing operations		$	0.59	$	1.24
Discontinued operations		—		0.55
Diluted earnings per share		$	0.59	$	1.79

5. Inventories


	March 31, 2024		December 31, 2023
	(in millions)
Finished products	$	52.6	$	53.6
Work in process	29.3		28.4
Raw materials	64.5		60.6





Total inventories	$	146.4	$	142.6

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, 2024, are as follows:


	Sealing Technologies		Advanced Surface Technologies		Total
	(in millions)
Goodwill as of December 31, 2023	$	276.2	$	532.2	$	808.4
Acquisition of business	95.6		—		95.6


Foreign currency translation	(0.6)		—		(0.6)

Goodwill as of March 31, 2024	$	371.2	$	532.2	$	903.4

The goodwill balances reflected above at March 31, 2024, are net of accumulated impairment losses of $27.8 million for the Sealing Technologies segment and $126.0 million for the Advanced Surface Technologies segment.

Identifiable intangible assets are as follows:


	March 31, 2024				December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(in millions)
Amortized:
Customer relationships	$	498.5	$	191.6	$	486.6	$	184.8
Existing technology	571.3		115.9		465.2		106.1
Trademarks	69.8		30.8		64.9		29.6
Other	28.4		21.4		27.4		20.9
	1,168.0		359.7		1,044.1		341.4
Indefinite-Lived:
In-process research and development	14.0		—		—		—
Trademarks	30.8		—		30.8		—
Total	$	1,212.8	$	359.7	$	1,074.9	$	341.4

Amortization for the three months ended March 31, 2024 and 2023 was $18.6 million, and $17.4 million, respectively.

The estimated amortization expense for definite-lived (amortized) intangible assets for the next five years is as follows (in millions):


2024	$	77.1
2025	$	76.8
2026	$	73.1
2027	$	72.5
2028	$	71.8

7. Accrued Expenses


	March 31, 2024		December 31, 2023
	(in millions)
Salaries, wages and employee benefits	$	40.1	$	56.0
Interest	9.4		4.2
Environmental	8.2		8.2

Income taxes	9.8		10.0
Taxes other than income taxes	7.4		5.1
Operating lease liabilities	10.2		10.0

Other	23.6		26.1
	$	108.7	$	119.6

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 our subsidiary, EnPro Holdings, Inc. ("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 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.

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, 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, 2024.

The borrowing availability under our Revolving Credit Facility at March 31, 2024 was $355.0 million after giving consideration to $10.0 million of outstanding letters of credit and $35.0 million of outstanding borrowings. The balance of borrowings outstanding under the Term Loan A-2 Facility at March 31, 2024 was $297.3 million.

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"). 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. 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.

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 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.

We were in compliance with all of the covenants under the indenture governing the Senior Notes as of March 31, 2024

9. Pension

The components of net periodic benefit cost for our U.S. and foreign defined benefit pension plans for the three months ended March 31, 2024 and 2023, are as follows:


	Three Months Ended March 31,

		2024		2023
		(in millions)
Service cost		$	0.1	$	0.1
Interest cost		3.2		3.3
Expected return on plan assets		(3.6)		(3.4)

Amortization of net loss		0.4		0.4

Net periodic benefit cost		$	0.1	$	0.4

We do not anticipate making any contributions to our U.S. defined benefit pension plans in calendar year 2024.

10. Shareholders' Equity

The quarterly changes in shareholders' equity during the three months ended March 31, 2024 are as follows:


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity		Redeemable Non-controlling Interests
(in millions, except per share data)	Shares	Amount
Balance, December 31, 2023	21.0	$	0.2	$	304.9	$	1,128.0	$	(22.2)	$	(1.2)	$	1,409.7	$	17.9

Net income	—	—		—		12.5		—		—		12.5		—
Other comprehensive income	—	—		—		—		(3.5)		—		(3.5)		—
Dividends ($0.30 per share)	—	—		—		(6.3)		—		—		(6.3)		—

Incentive plan activity	—	—		1.5		—		—		—		1.5		—
Acquisition of Alluxa minority ownership	—	—		—		—		—		—		—		(17.9)

Balance, March 31, 2024	21.0	$	0.2	$	306.4	$	1,134.2	$	(25.7)	$	(1.2)	$	1,413.9	$	—

The quarterly changes in shareholders' equity during the three months ended March 31, 2023 are as follows:


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity		Redeemable Non-controlling Interests
(in millions, except per share data)	Shares	Amount
Balance, December 31, 2022	20.8	$	0.2	$	299.2	$	1,130.2	$	(33.3)	$	(1.2)	$	1,395.1	$	17.9

Net income	—	—		—		37.4		—		—		37.4		—
Other comprehensive loss	—	—		—		—		7.1		—		7.1		—
Dividends ($0.29 per share)	—	—		—		(6.1)		—		—		(6.1)		—

Incentive plan activity	0.1	—		1.6		—		—		—		1.6		—

Balance, March 31, 2023	20.9	$	0.2	$	300.8	$	1,161.5	$	(26.2)	$	(1.2)	$	1,435.1	$	17.9

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 $6.4 million were made during the three months ended March 31, 2024.

In May 2024, our board of directors declared a dividend of $0.30 per share, payable on June 20, 2024, to all shareholders of record as of June 5, 2024.

In October 2022, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares through October 2024. We have not made any repurchases under this authorization.

In 2023, we changed our performance share awards so that awards granted under our equity compensation plan to executives and other key employees are to be paid in shares of our common stock at the end of the three-year vesting period. Awards issued in 2022 will be payable in cash at the end of the vesting period based upon the performance of Enpro’s share price relative to an industry peer group. Compensation expense related to performance shares granted in 2023 and 2024 is computed using the fair value of the awards on the grant date, which is expensed on a straight-line basis over the three-year vesting period. Compensation expense for awards granted in 2022 is computed based upon the current estimate of total projected cash to be paid at vesting and the portion of the vesting period that has elapsed.

In February 2024, we issued stock options to certain key executives for approximately 50 thousand common shares with an exercise price of $156.20 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 and recorded in selling, general and administrative costs on our Consolidated Income Statement.

The expected term represents the period that our stock options are expected to be outstanding and is determined based on historical experience of similar awards, given the contractual terms of the awards, vesting schedules, and expectations of future employee behavior. The fair value of stock options reflects a volatility factor calculated using historical market data for Enpro's common stock. The time frame used was approximated as a six-year period from the grant date for the awards. The dividend assumption is based on our expectations as of the grant date. We base the risk-free interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining life equal to the option's expected life.

The option awards issued in February 2024 had a fair value of $66.84 per share at their grant date. The following assumptions were used to estimate the fair value of the 2024 option awards:


Average expected term	6 years
Expected volatility	40.61	%
Risk-free interest rate	4.33	%
Expected dividend yield	0.77	%

11. Business Segment Information

We aggregate our operating businesses into two reportable segments, Sealing Technologies and Advanced Surface Technologies. Factors considered in determining our reportable segments include the economic similarity of the businesses, the nature of products sold, or solutions provided, the production processes and the types of customers and distribution methods.

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.

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.

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. Segments non-operating expenses and income, corporate expenses, net interest expense, 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 March 31, 2023, we recast our results to decrease Advanced Surface Technologies adjusted segment EBITDA by $0.1 million and increased corporate expenses by $0.3 million.

Non-controlling interest compensation allocation represents compensation expense associated with a portion of the rollover equity from the acquisition of Alluxa. This expense was recorded in selling, general, and administrative expenses in our Consolidated Statements of Operations and is directly related to the terms of the acquisition. In February 2024, Enpro acquired all of the Alluxa non-controlling interests and became the sole owner of Alluxa.

Segment operating results and other financial data for the three months ended March 31, 2024 and 2023 were as follows:


	Three Months Ended March 31,
		2024		2023
		(in millions)
Sales
Sealing Technologies		$	171.6	$	173.3
Advanced Surface Technologies		86.0		109.4
		257.6		282.7
Intersegment sales		(0.1)		(0.1)
Total sales		$	257.5	$	282.6

Adjusted Segment EBITDA
Sealing Technologies		$	53.0	$	49.7
Advanced Surface Technologies		17.3		29.4
		$	70.3	$	79.1

Reconciliation of Income from Continuing Operations Before Income Taxes to Adjusted Segment EBITDA
Income from continuing operations before income taxes		$	14.3	$	34.1
Acquisition expenses		3.3		—
Non-controlling interest compensation allocation		—		0.4
Amortization of fair value adjustment to acquisition date inventory		1.7		—
Restructuring expense		0.5		0.4
Depreciation and amortization expense		24.6		23.5
Corporate expenses		12.2		11.0
Interest expense, net		8.2		7.9

Other expense, net		5.5		1.8
Adjusted Segment EBITDA		$	70.3	$	79.1

Segment assets are as follows:


	March 31, 2024		December 31, 2023
	(in millions)
Sealing Technologies	$	934.6	$	687.1
Advanced Surface Technologies	1,369.4		1,385.9
Corporate	223.8		426.5

	$	2,527.8	$	2,499.5

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, 2024 and 2023:


	Three Months Ended March 31, 2024
(in millions)	Sealing Technologies		Advanced Surface Technologies		Total
Aerospace	$	14.2	$	2.8	$	17.0

Chemical and material processing	22.3		—		22.3
Food and pharmaceutical	17.0		—		17.0
General industrial	41.5		6.1		47.6
Commercial vehicle	44.9		—		44.9
Oil and gas	12.3		1.5		13.8
Power generation	17.5		—		17.5
Semiconductors	1.9		75.5		77.4

Total third-party sales	$	171.6	$	85.9	$	257.5


	Three Months Ended March 31, 2023
(in millions)	Sealing Technologies		Advanced Surface Technologies		Total
Aerospace	$	12.5	$	1.6	$	14.1

Chemical and material processing	21.6		—		21.6
Food and pharmaceutical	18.7		—		18.7
General industrial	43.9		8.8		52.7
Commercial vehicle	52.4		—		52.4
Oil and gas	5.9		1.6		7.5
Power generation	16.1		—		16.1
Semiconductors	2.2		97.3		99.5
Total third-party sales	$	173.3	$	109.3	$	282.6

12. Derivatives and Hedging

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 have entered into a forward contract to hedge a 95 million Euro exposure on an intercompany note agreement related to proceeds from the sale of our former GGB business, allocated to foreign subsidiaries. We expect this intercompany note to be settled by December 2024. The notional amount of foreign exchange contracts was $108.0 million and $110.5 million at March 31, 2024 and December 31, 2023 respectively. All foreign exchange contracts outstanding at March 31, 2024 expired in April 2024.

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 (the "Swap") with an aggregate 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 Swap matures on October 15, 2026.

During the term of the Swap, we will receive semi-annual payments from the counterparties due to the difference between the interest rate on the Senior Notes and the interest rate on the Euro debt underlying the Swap. There was no principal exchange at the inception of the arrangement, and there will be no exchange at maturity. At maturity (or earlier at our option), we and the counterparty will settle the Swap at its 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 was entered into.

We have designated the Swap as a qualifying hedging instrument and are accounting for it as a net investment hedge. At March 31, 2024, the fair value of the Swap equaled $5.6 million and was recorded within our other (non-current) assets on the Consolidated Balance Sheet. The gains and losses resulting from fair value adjustment to the Swap, excluding interest accruals related to the above receipts, are recorded in accumulated other comprehensive income within our cumulative foreign currency translation adjustment, as the Swap is effective in hedging the designated risk. Cash flows related to the Swap are included in operating activities in the Consolidated Statements of Cash Flows, aside from the ultimate settlement at maturity with the counterparty, which will be included in investing activities.

13. Fair Value Measurements

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


	Fair Value Measurements as of
	March 31, 2024		December 31, 2023
	(in millions)
Assets


Foreign currency derivatives	5.6		3.1
Deferred compensation assets	12.6		12.5
	$	18.2	$	15.6
Liabilities
Deferred compensation liabilities	$	13.4	$	13.3

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 and short-term investments 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, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
Long-term debt	$	644.9	$	648.4	$	646.8	$	649.8

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

14. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component (after tax) for the three months ended March 31, 2024 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension Plans		Total
Beginning balance	$	24.1	$	(46.3)	$	(22.2)


Other comprehensive loss before reclassifications	(3.8)		—		(3.8)
Amounts reclassified from accumulated other comprehensive loss	—		0.3		0.3


Net current-period other comprehensive income	(3.8)		0.3		(3.5)
Ending balance	$	20.3	$	(46.0)	$	(25.7)

Changes in accumulated other comprehensive income (loss) by component (after tax) for the three months ended March 31, 2023 are as follows:


(in millions)	Unrealized Translation Adjustments		Pension Plans		Total
Beginning balance	$	11.8	$	(45.1)	$	(33.3)


Other comprehensive income before reclassifications	6.8		—		6.8
Amounts reclassified from accumulated other comprehensive (loss)	—		0.3		0.3


Net current-period other comprehensive income	6.8		0.3		7.1
Ending balance	$	18.6	$	(44.8)	$	(26.2)

Reclassifications out of accumulated other comprehensive income (loss) for the quarters and three months ended March 31, 2024 and 2023 are as follows:


Details about Accumulated Other Comprehensive Income (Loss) Components		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Statement of Operations Caption
	Three Months Ended March 31,
(in millions)		2024		2023
Pension adjustments:
Actuarial losses		$	0.4	$	0.4	Other expense


Total before tax		0.4		0.4		Income before income taxes
Tax expense		(0.1)		(0.1)		Income tax benefit (expense)
Net of tax		$	0.3	$	0.3	Net income

15. Commitments and Contingencies

General

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

Environmental

Our facilities and operations are subject to federal, state and local environmental and occupational health and safety laws and regulations of the U.S. and foreign countries. We take a proactive approach in our efforts to comply with these laws and

regulations as they relate to our manufacturing operations and in proposing and implementing any remedial plans that may be necessary. We also regularly conduct comprehensive environmental, health and safety audits at our facilities to maintain compliance and improve operational efficiency.

Although we believe past operations were in substantial compliance with the then applicable regulations, we or one or more of our subsidiaries are involved with various investigation and remediation activities at 19 sites. At 14 of these sites, the future cost per site for us or our subsidiaries is expected to exceed $100,000. We do not conduct manufacturing operations at any of these sites. At all 19 sites, one or more of our subsidiaries formerly conducted business operations but no longer do. Among these 19 sites, investigations have been completed for 15 sites and are in progress at 4 sites. Among the 15 sites where investigations have been completed, 7 sites have remediation systems that are operating and our only obligation at the other 8 sites is to conduct periodic monitoring. In addition to the 19 sites referenced above, the United States Environmental Protection Agency (the "EPA") has provided us notice that Enpro has potential responsibility at 1 additional site where one of our subsidiaries formerly conducted business operations but no longer does. We have responded to the EPA that we do not have responsibility at that site and are awaiting EPA's response.

Our policy is to accrue environmental investigation and remediation costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. For sites with multiple future projected cost scenarios for identified feasible investigation and remediation options where no one estimate is more likely than all the others, our policy is to accrue the lowest estimate among the range of estimates. The measurement of the liability is based on an evaluation of currently available facts with respect to each individual situation and takes into consideration factors such as existing technology, presently enacted laws and regulations and prior experience in the remediation of similar contaminated sites. Liabilities are established for all sites based on these factors. As assessments and remediation progress at individual sites, these liabilities are reviewed and adjusted to reflect additional technical data and legal information. As of March 31, 2024 and December 31, 2023, we had recorded liabilities aggregating $37.8 million and $39.0 million, respectively, for estimated future expenditures relating to environmental contingencies. The current portion of our aggregate environmental liability included in accrued liabilities was $8.2 million at March 31, 2024. These amounts have been recorded on an undiscounted basis in the Consolidated Balance Sheets. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other parties potentially being fully or partially liable, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities.

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

Lower Passaic River Study Area

Based on our prior ownership of Crucible Steel Corporation a/k/a Crucible, Inc. (“Crucible”), we may have additional contingent liabilities in one or more significant environmental matters. One such matter, which is included in the 19 sites referred to above, is the Lower Passaic River Study Area of the Diamond Alkali Superfund Site in New Jersey. Crucible operated a steel mill abutting the Passaic River in Harrison, New Jersey from the 1930s until 1974, which was one of many industrial operations on the river dating back to the 1800s. Certain contingent environmental liabilities related to this site were retained by a predecessor of EnPro Holdings when it sold a majority interest in Crucible Materials Corporation (the successor of Crucible) in 1985. The EPA notified our subsidiary in September 2003 that it is a potentially responsible party (“PRP”) for Superfund response actions in the lower 17-mile stretch of the Passaic River known as the Lower Passaic River Study Area.

EnPro Holdings and approximately 70 of the numerous other PRPs, known as the Cooperating Parties Group, are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of the contaminants in the Lower Passaic River Study Area. In September 2018, EnPro Holdings withdrew from the Cooperating Parties Group but remains a party to the May 2007 Administrative Order on Consent. The RI/FS was completed and submitted to the EPA at the end of April 2015. The RI/FS recommends a targeted dredge and cap remedy with monitored natural recovery and adaptive management for the Lower Passaic River Study Area. The cost of such remedy is estimated to be $726 million. Previously, on April 11, 2014, the EPA released its Focused Feasibility Study (the “FFS”) with its proposed plan for remediating the lower eight miles of the Lower Passaic River Study Area. The FFS calls for bank-to-bank dredging and capping of the riverbed of that portion of the river and estimates a range of the present value of aggregate remediation costs of approximately $953 million to approximately $1.73 billion, although estimates of the costs and the timing of costs are inherently imprecise. On March 3, 2016, the EPA issued the final Record of Decision (ROD) as to the remedy for the lower eight miles of the Lower Passaic River Study Area, with the maximum estimated cost being reduced by the EPA from $1.73 billion to $1.38 billion, primarily due to a reduction in the amount of cubic yards of material that will be dredged. In October

2016, Occidental Chemical Corporation, the successor to the entity that operated the Diamond Alkali chemical manufacturing facility, reached an agreement with the EPA to develop the design for this proposed remedy at an estimated cost of $165 million. The EPA has estimated that it will take approximately four years to develop this design. On June 30, 2018, Occidental Chemical Corporation sued over 120 parties, including the Company, in the United States District Court for New Jersey seeking recovery of response costs under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").

No final allocations of responsibility have been made among the numerous PRPs that have received notices from the EPA, there are numerous identified PRPs that have not yet received PRP notices from the EPA, and there are likely many PRPs that have not yet been identified.

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

When the EPA initiated the allocation process in 2017, it explained that a fair, carefully structured, information-based allocation was necessary to promote settlements. With the completion of the allocation process, in the second quarter of 2021 the EPA began settlement negotiations with the parties that participated in the allocation process, including EnPro Holdings. In September 2022, EnPro Holdings paid $5.9 million as part of a settlement between those parties and EPA. The payment will be held in escrow until court approval of the settlement. Our reserve for this site at March 31, 2024 was $0.7 million. Further adjustments to our reserve for this site are possible as new or additional information becomes available.

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

Arizona Uranium Mines

EnPro Holdings has received notices from the EPA asserting that it is a potentially responsible party under the CERCLA as the successor to a former operator of eight uranium mines in Arizona. The former operator conducted operations at the mines from 1954 to 1957. In the 1990s, remediation work performed by others at these sites consisted of capping the exposed areas of the mines. We have previously reserved amounts of probable loss associated with these mines, principally including the cost of the investigative work to be conducted at such mines. We entered into an Administrative Settlement Agreement and Order on Consent for Interim Removal Action with the EPA effective November 7, 2017 for the performance of this work. We entered into a First Modification of Original Administrative Settlement Agreement and Order on Consent effective July 8, 2022 for the performance of Engineering Evaluations and Cost Analyses of potential remedial options at each of the sites. In 2020, the EPA initiated group discussions with EnPro Holdings and other potentially responsible parties to resolve various technical issues, including the development of cleanup standards. Based on these discussions and subsequent discussions with other responsible parties with similar sites, we have concluded that further remedial work beyond maintenance of and minor repairs to the existing caps is probable, and we have evaluated the feasibility of various remediation scenarios. Our reserve at March 31, 2024 for this site was $11.3 million, which reflects the low end of the range of our reasonably likely liability with respect to these sites. Some available remediation scenarios have higher associated costs and, if required by EPA, would require an upward adjustment of the reserve. We are not able at this time to estimate the upper end of a range of liability with respect to these sites.

On October 18, 2021, the United States District Court for the District of Arizona approved and entered a Consent Decree pursuant to which the U.S government will reimburse the Company for 35% of necessary costs of response, as defined in 42 U.S.C. section 9601(25), previously or to be in the future incurred by the Company which arise out of or in connection with releases or threatened releases of hazardous substances at or emanating from the mine sites. We expect future contributions of $2.8 million from the U.S. government towards remediation of the site. This amount was included in other assets in the accompanying consolidated balance sheet at March 31, 2024.

In addition to the two sites discussed above, we have additional reserves of $25.8 million, of which $12.5 million pertains to implementing and managing a solution to clean trichloroethylene soil and groundwater contamination at the location of a former operation in Water Valley, Mississippi. These amounts represent a reasonable estimate of our probable future costs to remediate these sites given the facts and circumstances known at March 31, 2024.

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

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

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

Warranties

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

Changes in the product warranty liability for the three months ended March 31, 2024 and 2023 are as follows:


	2024		2023
	(in millions)
Balance at beginning of year	$	6.4	$	5.2
Net charges to expense	0.2		0.3
Settlements made	(0.3)		(0.3)
Balance at end of period	$	6.3	$	5.2

16. Divestitures

On January 30, 2023, we completed the sale of Garlock Pipeline Technologies, Inc. ("GPT"). In the first quarter of 2023, we received $28.4 million, net of transaction fees. 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"). In connection with the divestiture of our Engineered Materials segment, we paid $3.1 million in the first quarter of 2023 related to the finalization of the sale of our GGB business, which closed in December of 2022. 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.

For the three months ended March 31, 2023, the results of operations from the discontinued Engineered Materials segment were as follows:



(in millions)	2023
Net sales	$	2.0
Cost of sales	1.3
Gross profit	0.7
Operating expenses:
Selling, general and administrative	0.4

Total operating expenses	0.4


Income from discontinued operation before income tax	0.3
Income tax expense	(0.1)
Income from discontinued operations, net of tax	0.2
Gain from sale of discontinued operation, net of tax	11.2
Income from discontinued operations, including gain on sale, net of tax	$	11.4

Pursuant to applicable accounting guidance for the reporting of discontinued operations, allocations to Engineered Materials for corporate services not expected to continue at the divested business subsequent to closing have not been reflected in the above results of discontinued operations and have been reclassified to income from continuing operations in the accompanying consolidated financial statements of the Company for all periods. In addition, divestiture-related costs previously not allocated to Engineered Materials that were incurred as a result of the divestiture of Engineered Materials have been reflected in the financial results of discontinued operations.

In connection with the sale of a business in 2020, which was not classified as a discontinued operation, we received a long-term promissory note as partial consideration. We evaluate the collectability of the note at least quarterly and based on the evaluation as of March 31, 2024, we provided a $4.5 million reserve in the first quarter of 2024. The net book value of the note after the reserve was $4.0 million as of March 31, 2024. We will continue to monitor the collectability of the note and will record adjustments to the estimated net realizable value as deemed necessary until the note is settled. This note matures in 2026.

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

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition, cash flows and operating results during the periods included in the accompanying unaudited consolidated financial statements and the related notes. You should read this in conjunction with those financial statements and the audited consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 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 conflict between Israel and Hamas 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 net income attributable to Enpro Inc., adjusted diluted earnings per share attributable to Enpro Inc., 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, biopharma, 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.

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

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.

Acquisitions.

On January 29, 2024, Enpro acquired all of the equity securities of Advanced Micro Instruments, Inc. ("AMI"), a privately held company, for $208.9 million, net of cash acquired, subject to standard purchase price adjustments. We anticipate making approximately a $0.6 million payment in the second quarter of 2024 when the purchase price adjustments are scheduled to be finalized. In connection with the acquisition of AMI, there were $3.3 million of acquisition-related costs incurred and expensed during the quarter ended March 31, 2024 which are included in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

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 three months ended March 31, 2024 and 2023 are as follows:


	Three Months Ended March 31,
		2024		2023
		(in millions, except per share data)
Net sales		$	257.5	$	282.6
Income from continuing operations		$	12.5	$	26.0
Net income		$	12.5	$	37.4
Diluted earnings per share from continuing operations		$	0.59	$	1.24
Adjusted income1		$	33.1	$	40.7
Adjusted diluted earnings per share1		$	1.57	$	1.95
Adjusted EBITDA 1		$	58.4	$	68.6

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.

First quarter sales declined 8.9%, with weakness in the Advanced Surface Technologies segment pairing with a 1.0% decrease in sales in the Sealing Technologies segment. Slow semiconductor markets, as well as weaker demand in commercial vehicle and food and pharmaceutical, more than offset the contribution from pricing actions and strength in the nuclear and aerospace markets.

Income from continuing operations decreased compared to the prior-year period driven primarily by results in the Advanced Surface Technologies (or “AST”) segment and an 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.

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 both of our segments. In connection with our growth strategy, we continue to evaluate acquisition opportunities that fit our strategic frameworks in both segments, 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.

Results of Operations


	Three Months Ended March 31,
		2024		2023
		(in millions)
Sales
Sealing Technologies		$	171.6	$	173.3
Advanced Surface Technologies		86.0		109.4
		257.6		282.7
Intersegment sales		(0.1)		(0.1)
Net sales		$	257.5	$	282.6

Income from continuing operations		$	12.5	$	26.0

Adjusted Segment EBITDA
Sealing Technologies		$	53.0	$	49.7
Advanced Surface Technologies		17.3		29.4
Total Adjusted Segment EBITDA		$	70.3	$	79.1

Reconciliations of Income from Continuing Operations to Adjusted Segment EBITDA
Income from continuing operations		$	12.5	$	26.0


Income tax expense		(1.8)		(8.1)
Income from continuing operations before income taxes		14.3		34.1
Acquisition expenses		3.3		—
Non-controlling interest compensation allocation		—		0.4
Amortization of the fair value adjustment to acquisition date inventory		1.7		—
Restructuring and impairment costs		0.5		0.4
Depreciation and amortization expense		24.6		23.5
Corporate expenses		12.2		11.0
Interest expense, net		8.2		7.9

Other expense (income), net		5.5		1.8
Adjusted Segment EBITDA		$	70.3	$	79.1

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, 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 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 March 31, 2023, we recast our results to decrease Advanced Surface Technologies adjusted segment EBITDA by $0.1 million and increased corporate expenses by $0.3 million.

Non-controlling interest compensation allocation represents compensation expense associated with the rollover equity subject to put and call options from the acquisition of Alluxa. This expense was recorded in selling, general, and administrative expenses on our Consolidated Statements of Operations and is directly related to the terms of the acquisition. This expense was

recognized as compensation expense over the term of the respective put and call options. The Alluxa non-controlling interests were acquired by Enpro in February 2024.

Other expense, net in the table above contains all items included in other expense (non-operating) on our Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Sales of $257.5 million in the first three months of 2024 decreased 8.9% from $282.6 million in the first three months of 2023. The following table summarizes the impact of an acquisition and foreign currency on sales by segment:


Sales	Percent Change Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023
increase/(decrease)	Acquisition		Foreign Currency		Organic		Total
Enpro Inc.	2.6	%	0.1	%	(11.6)	%	(8.9)	%
Sealing Technologies	4.2	%	0.2	%	(5.4)	%	(1.0)	%
Advanced Surface Technologies	—	%	—	%	(21.4)	%	(21.4)	%

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

Sealing Technologies. Sales of $171.6 million in the first three months of 2024 reflect a 1.0% decrease compared to the $173.3 million reported in the same period of 2023. Excluding the favorable foreign exchange translation $0.4 million and the sales from a recent acquisition $7.3 million from 2023 results, sales were down 5.4% or $9.4 million. The decrease in sales was driven by declines in commercial vehicle original equipment manufacturer, general industrial, and food and pharmaceuticals, offset in part by the impact of pricing actions and strength in aerospace and nuclear.

Adjusted Segment EBITDA of $53.0 million in the first three months of 2024 increased 6.6% from $49.7 million reported in the first three months of 2023. Segment AEBITDA margins for the segment increased from 28.7% in the first three months of 2023 to 30.9% in the first three months of 2024. Excluding the favorable foreign exchange translation $0.3 million and the contribution from a business recently acquired of $4.0 million, Adjusted Segment EBITDA decreased 2.0%, or $1.0 million. The decrease in Segment AEBITDA was primarily driven by decreased sales volume ($11.3M) partially offset by higher sales pricing ($5.7 million), favorable product mix ($2.8 million), decrease in labor and overhead costs ($1.0 million), lower foreign exchange transaction related losses ($0.6 million), and lower segment selling, general, and administrative costs ($0.2 million).

Advanced Surface Technologies. Sales of $86.0 million in the first three months of 2024 reflect a 21.4% decrease, or $23.4 million, compared to the $109.4 million reported in the same period of 2023. The decrease was driven primarily by the slowdown in the global semiconductor industry and to a lesser extent, lower sales of optical filter solutions.

Adjusted Segment EBITDA of $17.3 million in the first three months of 2024 decreased 41.2% from $29.4 million reported in the comparable period of 2023. Segment AEBITDA margins for the segment decreased from 26.9% in the first three months of 2023 to 20.1% in the first three months of 2024. The decrease in Adjusted Segment EBITDA was primarily driven by decreased sales volume ($16.3M) partially offset by favorable product mix ($2.0 million), higher sales pricing ($1.6 million), and decrease in labor and overhead costs ($0.8 million).

Corporate expenses for the first three months of 2024 increased $1.2 million as compared to the same period in 2023. Lower current year short term incentive expenses ($1.0 millon) were more than offset by the year-over-year impact of income in the first quarter associated with share-price-driven long-term incentive plan costs ($1.9 million).

Interest expense, net was slightly up in the first three months of 2024 compared to the first three months of 2023 driven by lower interest income associated with decreased cash equivalent investment balances, mostly offset by lower average outstanding debt balances

Other expense, net in the first three months of 2024 of $5.5 million increased from $1.8 million reported in the same period of 2023, 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), partially offset by lower non-service pension

related costs ($0.4 million) and decreased foreign exchange losses related to an intercompany note denominated in Euros ($0.2 million).

Income from continuing operations was $12.5 million, or $0.59 per share, in the first three months of 2024 compared to $26.0 million, or $1.24 per share, in the first three months of 2023. Earnings per share is expressed on a diluted basis.

Backlog

As of March 31, 2024, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $242.8 million. Approximately 93% 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.

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 March 31, 2024, we held $2.1 million of cash and cash equivalents in the United States and $161.9 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 $251.0 million at December 31, 2022 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 $198.7 million as of March 31, 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 three months of 2024, we repatriated $10.2 million which was utilized to paydown our U.S.-based indebtedness and reduce our interest expense. We have targeted the repatriation of an additional $165.0 million by December 31, 2024 for potential unscheduled paydowns of our indebtedness. 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 $6.3 million of cash in the first three months of 2024 and $26.4 million of cash in the first three months of 2023. The year-over-year decrease was primarily driven by the decline in revenue, timing of working capital collections, and payments related to short-term operating liabilities.

Investing activities of continuing operations used $217.0 million of cash in the first three months of 2024 compared to $14.8 million of cash used during the first three months of 2023. The cash used by investing activities in the first quarter of 2024 was primarily driven by the $208.9 million used for acquisition of AMI and $7.3 million used for capital expenditures focused primarily on growth opportunities. This compares to the first quarter of 2023 where $35.0 million was used to purchase short-term investments and $5.0 million used to purchase property, plant and equipment. This was partially offset by $25.3 million of net cash proceeds from the sale of a business.

Financing activities of continuing operations provided $6.2 million of cash in the first three months of 2024, primarily from $33.0 million in net borrowings on our revolving credit facility partially offset by $17.9 million used for the acquisition of

Alluxa non-controlling interests and $6.4 million used for dividends paid. Financing activities in the first three months of 2023 used $12.0 million, primarily from $6.2 million used for dividends paid and $4.0 million used for debt repayments.

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. The 364-Day Facility did not amortize and was repaid in full in the third quarter of 2022. 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 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.

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 March 31, 2024.

On July 26, 2023, Enpro 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).

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 March 31, 2024, we were in compliance with all of the covenants of the indenture governing the Senior Notes.

Share Repurchase Program. In October 2022, our board of directors authorized the expenditure of up to $50.0 million for the repurchase of our outstanding common shares through October 2024. We have not made any repurchases under this authorization.

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 March 31, 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 three months ended March 31, 2024 were as follows:


(in millions)	Parent and Guarantor Subsidiaries
Net sales	$	181.5
Gross profit	64.5


Net loss	$	(6.3)

The summarized balance sheet at March 31, 2024 was as follows:


(in millions)	Parent and Guarantor Subsidiaries
ASSETS
Current assets	$	211.3
Non-current assets	1,623.3
Total assets	$	1,834.6
LIABILITIES AND EQUITY
Current liabilities	$	126.0
Non-current liabilities	981.3
Total liabilities	1,107.3

Shareholders’ equity	727.3
Total liabilities and equity	$	1,834.6

The table above reflects $9.3 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $10.2 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)	Parent and Guarantor Subsidiaries
ASSETS
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 from continuing operations attributable to Enpro Inc., net of tax to adjusted net income attributable to Enpro Inc. and adjusted diluted earnings per share and (ii) income from continuing operations attributable to Enpro Inc., net of tax to adjusted EBITDA for the three months ended March 31, 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


	Three Months Ended March 31,
	2024						2023
(in millions, except per share amounts)	$		Average common shares outstanding, diluted	Per Share			$		Average common shares outstanding, diluted	Per Share
Income from continuing operations	$	12.5	21.1	$	0.59		$	26.0	20.9	$	1.24

Income tax expense	1.8						8.1
Income from continuing operations before income taxes	14.3						34.1

Adjustments from selling, general, and administrative:
Acquisition expenses	3.3						—
Non-controlling interest compensation allocations2	—						0.3
Amortization of acquisition-related intangible assets	18.6						17.2
Adjustments from other operating expense and cost of sales:
Restructuring expense	0.8						0.8
Amortization of the fair value adjustment to acquisition date inventory	1.7						—


Adjustments from other non-operating expense:

Environmental reserve adjustment	0.2						0.1
Costs associated with previously disposed businesses	0.3						0.2

Pension income	—						0.4

Foreign exchange losses related to the divestiture of a discontinued operation3	0.5						0.7
Long-term promissory note reserve4	4.5						—
Other adjustments:
Other5	—						0.4
Adjusted income from continuing operations before income taxes	44.2						54.2
Adjusted income tax expense6	(11.1)						(13.5)

Adjusted income from continuing operations	$	33.1	21.1	$	1.57	1	$	40.7	20.9	$	1.95	1

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

2 Non-controlling interest compensation allocation represents compensation expense adjustment associated with a portion of the rollover equity from the acquisition of Alluxa that was subject to reduction for certain types of employment terminations of the Alluxa sellers and is directly related to the terms of the acquisition. This expense was recognized as compensation expense over the term of the put and call option associated with the acquisition unless certain employment terminations occurred. The Alluxa non-controlling interests were acquired in February 2024.

3In 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.

4We 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.

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

6 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



	Three Months Ended
	March 31,
(in millions)		2024		2023
Income from continuing operations		$	12.5	$	26.0



Adjustments to arrive at earnings before interest, income taxes, depreciation, amortization, and other selected items (Adjusted EBITDA):
Interest expense, net		8.2		7.9
Income tax expense		1.8		8.1
Depreciation and amortization expense		24.6		23.6
Restructuring expense		0.8		0.8

Environmental reserve adjustments		0.2		0.1
Costs associated with previously disposed businesses		0.3		0.2

Acquisition expenses		3.3		—
Pension income		—		0.4
Non-controlling interest compensation allocation1		—		0.4
Amortization of the fair value adjustment to acquisition date inventory		1.7		—

Foreign exchange losses related to the divestiture of a discontinued operation2		0.5		0.7
Long-term promissory note reserve3		4.5		—
Other		—		0.4
Adjusted EBITDA		$	58.4	$	68.6

1 Non-controlling interest compensation allocation represents compensation expense adjustment associated with a portion of the rollover equity from the acquisition of Alluxa that was subject to reduction for certain types of employment terminations of the Alluxa sellers and is directly related to the terms of the acquisition. This expense was recognized as compensation expense over the term of the put and call option associated with the acquisition unless certain employment terminations occurred. The Alluxa non-controlling interests were acquired in February 2024.

2In 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.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in foreign currency exchange rates and interest rates that could impact our financial condition, results of operations and cash flows. We manage our exposure to these and other market risks through regular operating and financing activities and through the use of derivative financial instruments. We intend to use derivative financial instruments as risk management tools and not

for speculative investment purposes. For information about our interest rate risk, see “Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Risk” in our annual report on Form 10-K for the year ended December 31, 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. We regularly enter 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 $108.0 million and $110.5 million March 31, 2024 and December 31, 2023 respectively. All foreign exchange contracts outstanding at March 31, 2024 expired in April 2024.

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

During the term of the additional swap agreement, 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 the additional 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 additional 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Based on the controls evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that

management will be timely alerted to material information required to be included in our periodic reports filed with the Securities and Exchange Commission.

In addition, no change in our internal control over financial reporting has occurred during the quarter ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

The following table sets forth all purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the third quarter of 2023.


Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)			(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 2024	—		—			—	$50,000,000	(1)
February 1 - February 29, 2024	641	(2)	158.77		(2)	—	$50,000,000	(1)
March 1 - March 31, 2024	355	(2)	$	167.27	(2)	—	$50,000,000	(1)
Total	996	(2)	$	161.80	(2)	—	$50,000,000	(1)

(1)In October 2022, our board of directors authorized an expenditure program of up to $50.0 million for the repurchase of our outstanding common shares through October 2024. We have not made any repurchases under this authorization.

(2)In connection with the exercise of a vested employee stock option on February 27, 2024, we accepted 641 shares of outstanding common stock in payment of the option exercise price, which surrendered shares were valued at $158.77 per share, the closing trading price of our common stock on that date. In March 2024, a total of 355 shares were transferred to a rabbi trust that we established in connection with our Deferred Compensation Plan for Non-Employee Directors, pursuant to which non-employee directors may elect to defer directors’ fees into common stock units. EnPro Holdings furnished these shares in exchange for management and other services provided by Enpro. Of these shares, 59 shares were valued at a price of $159.77 per share, the closing trading price of our common stock on March 20, 2024, and 296 of these shares were valued at a price of $168.77 per share, the closing trading price of our common stock on March 28, 2024. Accordingly, the total 996 shares were valued at a weighted average price of $161.80 per share. We do not consider the transfer of shares from EnPro Holdings in this context to be pursuant to a publicly announced plan or program.

Item 5. Other Information.

During the three months ended March 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408 of Regulation S-K).

Item 6. Exhibits.

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

EXHIBIT INDEX


2.1			Equity Purchase Agreement dated as of September 5, 2022 between EnPro Holdings, Inc. EnPro Luxembourg Holding Company S.A.R.L., EnPro German Holding GmbH, Coltec Industries Pacific PTE. LTD. and Garlock GmbH and The Timken Company, Groeneveld-Beka GmbH, Groeneveld-Beka France S.a.r.l and Timken Europe B.V. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8 K filed by EnPro Industries, Inc. on September 6, 2022 (File No. 001-31225))

2.2			Put Option Agreement dated as of September 5, 2022 between EnPro Holdings, Inc., EnPro Luxembourg Holding Company S.a.r.l., The Timken Company and Groeneveld-Beka France S.a.r.l. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8 K filed by EnPro Industries, Inc. on September 6, 2022 (File No. 001-31225))

10.1			Amendment to Management Continuity Agreement dated as of February 27, 2024, by and between Enpro Inc. and J. Milton Childress II (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8 K filed by the Company on February 29, 2024 (File No. 001-31225))

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

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

32†			Certification pursuant to Section 1350

101.SCH†			InlineXBRL Taxonomy Extension Schema Document

101.CAL†			InlineXBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†			InlineXBRL Taxonomy Extension Definitions Linkbase Document

101.LAB†			InlineXBRL Taxonomy Extension Label Linkbase Document

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

† Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, North Carolina on this 8th day of May, 2024.


ENPRO INC.

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


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

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Avg

EnPro Industries (NPO) 10-Q2024 Q1 Quarterly report

Content analysis