Enpro Inc 8-K, filed Jan 21, 2020
Enpro Inc. (NPO)
8-K
2020-01-21
For: 2020-01-21
View Original
Added on
April 12, 2026
About this 8-K
Enpro Inc filed this 8-K on January 21, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 21, 2020
(Exact name of Registrant, as specified in its charter) |
(State or other jurisdiction | (Commission file number) | (I.R.S. Employer | ||
of incorporation) | Identification No.) | |||
(Address of principal executive offices, including zip code) |
(704 ) 731-1500
(Registrant’s telephone number, including area code)
Not Applicable |
(Former name or address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
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Item 2.01 Completion of Acquisition and Disposition of Assets
As previously announced, on December 12, 2019, EnPro Holdings, Inc. (“EnPro Holdings”) and Fairbanks Morse, LLC (“Fairbanks Morse”), wholly owned direct and indirect subsidiaries, respectively, of EnPro Industries, Inc. (the “Company”), entered into a Membership Interest Purchase Agreement dated as of December 12, 2019 (the Purchase Agreement”) with Arcline FM Holdings, LLC, a Delaware limited liability company (the “Buyer”) and an affiliate of Arcline Investment Management, LP, pursuant to which EnPro Holdings agreed to transfer all of the outstanding equity interests in Fairbanks Morse to the Buyer, and to cause one of its subsidiaries to sell certain related Canadian assets to an affiliate of the Buyer, for an aggregate purchase price of $450 million (the “Transaction”). The Transaction was completed on January 21, 2020. The purchase price is subject to adjustment based on Fairbanks Morse’s cash, debt and working capital on January 21, 2020.
Simultaneous with the closing of the Transaction and to facilitate the continued operation of the business conducted by Fairbanks Morse during a transition period, EnPro Holdings and the Buyer entered into a transition services agreement pursuant to which EnPro Holdings is to provide specified services, including payroll services and ERP system access, to the Buyer for periods specified therein for specified service charges.
The foregoing description does not purport to be a complete statement of the parties’ rights and obligations under the Purchase Agreement and the transactions contemplated thereby or a complete explanation of the material terms thereof. The foregoing description is subject to and qualified in its entirety by reference to the text of the Purchase Agreement, which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on December 13, 2019, and which is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure
On January 21, 2020, the Company issued a press release announcing the completion of the Transaction. A copy of this press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information furnished in Item 7.01, including Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 Financial Statements and Exhibits
(b) | Pro Forma Financial Information |
The following unaudited pro forma financial information, which is filed as Exhibit 99.2 hereto and incorporated by reference herein, gives effect to the completion of the Transaction pursuant to the Purchase Agreement as described under Item 2.01 above:
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• | Unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2019 and the years ended December 31, 2018, 2017 and 2016; |
• | Unaudited pro forma consolidated balance sheet as of September 30, 2019; and |
• | Notes to unaudited pro forma consolidated financial statements. |
(d) | Exhibits |
Exhibit Number | Exhibit Description |
Membership Interest Purchase Agreement dated as of December 12, 2019 among EnPro Holdings, Inc., Fairbanks Morse, LLC and Arcline FM Holdings, LLC, incorporated by reference to Exhibit 2.1 to the Current report on Form 8-K filed by EnPro Industries, Inc. on December 13, 2019* | |
Press release dated January 21, 2020 | |
Unaudited pro forma consolidated financial information | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
_________________
* | Certain schedules, annexes and exhibits referred to therein have been omitted pursuant to Item 601(b)(2) of Regulation S-K because the information set forth therein is both not material and would likely cause competitive harm to the Company if publicly disclosed. |
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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 hereunto duly authorized.
Date: January 21, 2020
ENPRO INDUSTRIES, INC. | ||
By: | /s/ Robert S. McLean | |
Robert S. McLean | ||
Executive Vice President, General Counsel and Secretary | ||
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Exhibit 99.1
News Release
Investor Contact: | Chris O'Neal | EnPro Industries |
Senior Vice President, Strategy, Corporate | 5605 Carnegie Boulevard | |
Development and Investor Relations | Charlotte, North Carolina 28209-4674 | |
Phone: | 704-731-1527 | Phone: 704-731-1500 |
Email: | investor.relations@enproindustries.com | Fax: 704-731-1511 |
www.enproindustries.com | ||
EnPro Industries Announces Successful Completion of Fairbanks Morse Sale
for $450 Million in Cash
CHARLOTTE, N.C., January 21, 2020 -- EnPro Industries, Inc. (NYSE: NPO) today announced that it has closed the previously announced sale of Fairbanks Morse to an affiliate of funds managed by private equity firm Arcline Investment Management (together with its consolidated subsidiaries, “Arcline”) for a purchase price of $450 million, subject to closing date purchase price adjustments. EnPro announced the agreement to sell Fairbanks Morse on December 12, 2019.
EnPro expects to use net proceeds from the transaction to pay down a portion of its outstanding debt, while maintaining a disciplined approach to deploying capital for increased shareholder value, which could include future acquisitions and share repurchases.
DC Advisory served as exclusive financial advisor to EnPro, and Robinson Bradshaw served as legal counsel.
Forward-Looking Statements
Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: general economic conditions in the markets served by EnPro’s businesses, some of which are cyclical and experience periodic downturns; prices and availability of its raw materials; the impact of fluctuations in relevant foreign currency exchange rates; unanticipated delays or problems in introducing new products; the incurrence of contractual penalties for the late delivery of long lead-time products; announcements by competitors of new products, services or technological innovations; changes in pricing policies or the pricing policies of competitors; the impact of the acquisition of LeanTeq on its existing customer relationships; the amount of any payments required to satisfy contingent liabilities related to discontinued operations of EnPro’s predecessors, including liabilities for certain products, environmental matters, employee benefit obligations and other matters. EnPro’s filings with the Securities and Exchange Commission, including its most recent Form 10-K and Form 10-Q, describe these and other risks and uncertainties in more detail. EnPro does not undertake to update any forward-looking statements made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based.
About EnPro Industries
EnPro Industries, Inc. is a niche provider of precision components, solutions, and services with a well-diversified customer base. For more information about EnPro, visit the company’s website at http://www.enproindustries.com.
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About Arcline Investment Management
Arcline is a private equity firm with $1.5 billion in capital, investing in niche, market-leading companies that we are passionate about growing. Arcline approaches investments from multiple perspectives but shares a single vision - to identify and unlock the breakout potential in its companies. While we are deliberately sector generalists, some of our primary interest areas include Industrials, Technology, Life Sciences, and Specialty Chemicals.
About Fairbanks Morse
Fairbanks Morse (FM) develops and manufactures heavy-duty, medium-speed reciprocating engines under the Fairbanks Morse® and ALCO® brand names, which are used primarily in marine and power generation applications. FM has been the original equipment manufacturer of its engines for over 120 years and has a large installed base for which it supplies aftermarket parts and services. FM is the principal supplier of diesel engines to the U.S. Navy, U.S. Coast Guard and Canadian Coast Guard. One hundred percent of manufacturing is conducted in its U.S. based facility in Beloit, WI, while parts and services are delivered through its network of five service centers. Learn more about Fairbanks Morse by visiting www.fairbanksmorse.com.
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Exhibit 99.2
EnPro Industries, Inc. Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements are based upon the historical financial statements of EnPro Industries, Inc. (EnPro), adjusted to reflect the sale of all of the outstanding equity interests in Fairbanks Morse LLC , and certain related Canadian assets. The aggregate sale price is $450.0 million in cash, less estimated purchase price adjustments for changes in specified balance sheet items (primarily working capital) as compared to the amounts set forth in the definitive Membership Interest Purchase Agreement dated as of December 12, 2019, the final amount of which will be determined subsequent to closing. These operations formerly constituted the entirety of EnPro’s Power Systems segment which will be accounted for as a discontinued operation beginning with EnPro’s Form 10-K for the year ended December 31, 2019.
The following unaudited pro forma consolidated financial statements of EnPro should be read in conjunction with the related notes and with the historical consolidated financial statements of EnPro and the related notes included in previous filings with the Securities and Exchange Commission. The unaudited pro forma consolidated balance sheet reflects the sale of the Power Systems segment as if it occurred on September 30, 2019 while the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2019 and the years ended December 31, 2018, 2017 and 2016 give effect to the sale as if it occurred on January 1, 2016, the beginning of the earliest period presented.
The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that EnPro management believes are reasonable. Pro forma adjustments included in the unaudited pro forma consolidated financial statements are limited to those that are (i) directly attributable to the sale, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the results of EnPro.
The unaudited pro forma consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X. They are provided for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the sale of the Power Systems segment closed on September 30, 2019 for the unaudited pro forma consolidated balance sheet or on January 1, 2016 for the unaudited pro forma consolidated statements of operations. For example, these financial statements do not reflect any potential earnings or other impacts from the use of the proceeds from the sale or cost reductions of previously allocated corporate costs and potential subsequent restructuring charges. Readers should not rely on the unaudited pro forma consolidated financial statements as being indicative of the historical operating results that EnPro would have achieved or any future operating results or financial position that it will experience.
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EnPro Industries, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2019
(in millions, except per share data)
As Reported | Pro Forma Adjustments (a) | Pro Forma | |||||||
Net sales | $ | 1,120.3 | $ | (201.1 | ) | $ | 919.2 | ||
Cost of sales | 767.1 | (153.6 | ) | 613.5 | |||||
Gross profit | 353.2 | (47.5 | ) | 305.7 | |||||
Operating expenses: | |||||||||
Selling, general and administrative | 255.7 | (20.3 | ) | 235.4 | |||||
Other | 4.7 | (0.8 | ) | 3.9 | |||||
Total operating expenses | 260.4 | (21.1 | ) | 239.3 | |||||
Operating income | 92.8 | (26.4 | ) | 66.4 | |||||
Interest expense | (13.8 | ) | — | (13.8 | ) | ||||
Interest income | 1.3 | — | 1.3 | ||||||
Other expense | (27.3 | ) | — | (27.3 | ) | ||||
Income from continuing operations before income taxes | 53.0 | (26.4 | ) | 26.6 | |||||
Income tax expense | (17.5 | ) | 6.9 | (10.6 | ) | ||||
Income from continuing operations | $ | 35.5 | $ | (19.5 | ) | 16.0 | |||
Earnings per share from continuing operations: | |||||||||
Basic | $ | 1.71 | $ | 0.77 | |||||
Diluted | $ | 1.71 | $ | 0.77 | |||||
Cash dividends per share | $ | 0.75 | $ | 0.75 | |||||
See accompanying notes to unaudited pro forma consolidated financial statements.
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EnPro Industries, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2018
(in millions, except per share data)
As Reported | Pro Forma Adjustments (a) | Pro Forma | |||||||
Net sales | $ | 1,532.0 | $ | (257.9 | ) | $ | 1,274.1 | ||
Cost of sales | 1,053.0 | (197.4 | ) | 855.6 | |||||
Gross profit | 479.0 | (60.5 | ) | 418.5 | |||||
Operating expenses: | |||||||||
Selling, general and administrative | 340.4 | (28.8 | ) | 311.6 | |||||
Other | 21.3 | (0.2 | ) | 21.1 | |||||
Total operating expenses | 361.7 | (29.0 | ) | 332.7 | |||||
Operating income | 117.3 | (31.5 | ) | 85.8 | |||||
Interest expense | (28.5 | ) | — | (28.5 | ) | ||||
Interest income | 1.2 | — | 1.2 | ||||||
Other expense | (43.4 | ) | — | (43.4 | ) | ||||
Income from continuing operations before income taxes | 46.6 | (31.5 | ) | 15.1 | |||||
Income tax expense | (27.0 | ) | 7.2 | (19.8 | ) | ||||
Income (loss) from continuing operations | $ | 19.6 | $ | (24.3 | ) | (4.7 | ) | ||
Earnings (loss) per share from continuing operations: | |||||||||
Basic | $ | 0.94 | $ | (0.22 | ) | ||||
Diluted | $ | 0.93 | $ | (0.22 | ) | ||||
Cash dividends per share | $ | 0.96 | $ | 0.96 | |||||
See accompanying notes to unaudited pro forma consolidated financial statements.
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EnPro Industries, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2017
(in millions, except per share data)
As Reported | Pro Forma Adjustments (a) | Pro Forma | |||||||
Net sales | $ | 1,309.6 | $ | (208.2 | ) | $ | 1,101.4 | ||
Cost of sales | 865.3 | (149.3 | ) | 716.0 | |||||
Gross profit | 444.3 | (58.9 | ) | 385.4 | |||||
Operating expenses: | |||||||||
Selling, general and administrative | 325.7 | (27.4 | ) | 298.3 | |||||
Other | 16.9 | — | 16.9 | ||||||
Total operating expenses | 342.6 | (27.4 | ) | 315.2 | |||||
Operating income | 101.7 | (31.5 | ) | 70.2 | |||||
Interest expense | (50.9 | ) | — | (50.9 | ) | ||||
Interest income | 1.5 | — | 1.5 | ||||||
Gain on reconsolidation of GST and OldCo | 534.4 | — | 534.4 | ||||||
Other expense | (9.2 | ) | — | (9.2 | ) | ||||
Income from continuing operations before income taxes | 577.5 | (31.5 | ) | 546.0 | |||||
Income tax expense | (37.7 | ) | 9.6 | (28.1 | ) | ||||
Income from continuing operations | $ | 539.8 | $ | (21.9 | ) | 517.9 | |||
Earnings per share from continuing operations: | |||||||||
Basic | $ | 25.28 | $ | 24.25 | |||||
Diluted | $ | 24.76 | $ | 23.76 | |||||
Cash dividends per share | $ | 0.88 | $ | 0.88 | |||||
See accompanying notes to unaudited pro forma consolidated financial statements.
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EnPro Industries, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2016
(in millions, except per share data)
As Reported | Pro Forma Adjustments (a) | Pro Forma | |||||||
Net sales | $ | 1,187.7 | $ | (208.4 | ) | $ | 979.3 | ||
Cost of sales | 791.9 | (157.8 | ) | 634.1 | |||||
Gross profit | 395.8 | (50.6 | ) | 345.2 | |||||
Operating expenses: | |||||||||
Selling, general and administrative | 302.7 | (30.4 | ) | 272.3 | |||||
Asbestos settlement | 80.0 | — | 80.0 | ||||||
Other | 15.6 | (0.4 | ) | 15.2 | |||||
Total operating expenses | 398.3 | (30.8 | ) | 367.5 | |||||
Operating loss | (2.5 | ) | (19.8 | ) | (22.3 | ) | |||
Interest expense | (55.9 | ) | — | (55.9 | ) | ||||
Interest income | 0.8 | — | 0.8 | ||||||
Other expense | (11.1 | ) | — | (11.1 | ) | ||||
Loss from continuing operations before income taxes | (68.7 | ) | (19.8 | ) | (88.5 | ) | |||
Income tax benefit | 28.6 | 5.6 | 34.2 | ||||||
Loss from continuing operations | $ | (40.1 | ) | $ | (14.2 | ) | (54.3 | ) | |
Loss per share from continuing operations: | |||||||||
Basic | $ | (1.86 | ) | $ | (2.52 | ) | |||
Diluted | $ | (1.86 | ) | $ | (2.52 | ) | |||
Cash dividends per share | $ | 0.84 | $ | 0.84 | |||||
See accompanying notes to unaudited pro forma consolidated financial statements.
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EnPro Industries, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2019
(in millions)
As Reported | Pro Forma Adjustments (b) | Pro Forma | |||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 112.1 | $ | 445.0 | $ | 557.1 | |||
Accounts receivable | 287.1 | (112.7 | ) | 174.4 | |||||
Inventories | 225.5 | (63.0 | ) | 162.5 | |||||
Income tax receivable | 38.5 | — | 38.5 | ||||||
Other current assets | 34.4 | (6.9 | ) | 27.5 | |||||
Total current assets | 697.6 | 262.4 | 960.0 | ||||||
Property, plant and equipment | 284.9 | (62.9 | ) | 222.0 | |||||
Goodwill | 485.0 | (11.7 | ) | 473.3 | |||||
Other intangible assets | 494.3 | — | 494.3 | ||||||
Other assets | 107.9 | (4.7 | ) | 103.2 | |||||
Total assets | $ | 2,069.7 | $ | 183.1 | $ | 2,252.8 | |||
Current liabilities | |||||||||
Current maturities of long-term debt | $ | 0.4 | $ | — | $ | 0.4 | |||
Accounts payable | 105.6 | (28.5 | ) | 77.1 | |||||
Accrued expenses | 183.6 | (46.0 | ) | 137.6 | |||||
Income taxes payable | 17.2 | 63.5 | 80.7 | ||||||
Total current liabilities | 306.8 | (11.0 | ) | 295.8 | |||||
Long-term debt | 665.9 | — | 665.9 | ||||||
Deferred taxes | 80.4 | — | 80.4 | ||||||
Other liabilities | 112.2 | (5.9 | ) | 106.3 | |||||
Total liabilities | 1,165.3 | (16.9 | ) | $ | 1,148.4 | ||||
Redeemable non-controlling interest | 28.0 | — | 28.0 | ||||||
Shareholders' equity | |||||||||
Common stock | 0.2 | — | 0.2 | ||||||
Additional paid-in capital | 290.5 | — | 290.5 | ||||||
Retained earnings | 634.6 | 200.0 | 834.6 | ||||||
Accumulated other comprehensive loss | (47.6 | ) | — | (47.6 | ) | ||||
Common stock held in treasury, at cost | (1.3 | ) | — | (1.3 | ) | ||||
Total shareholders' equity | 876.4 | 200.0 | 1,076.4 | ||||||
Total liabilities and equity | $ | 2,069.7 | $ | 183.1 | $ | 2,252.8 | |||
See accompanying notes to unaudited pro forma consolidated financial statements.
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EnPro Industries, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(a) | These adjustments eliminate the operating results of the Power Systems segment as if the transaction occurred on January 1, 2016. The amounts eliminated do not include allocations of corporate expenses. These corporate expenses were $1.8 million for the nine months ended September 30, 2019 and were $2.2 million, $2.1 million and $2.1 million for years ended December 31, 2018, 2017 and 2016, respectively. Allocations of corporate overhead remaining with EnPro may not be allocated to discontinued operations for financial statement presentation. |
For purposes of these unaudited pro forma consolidated financial statements, an estimated income tax rate of 26.0% was used for the nine months ended September 30, 2019 and estimated income tax rates of 22.7%, 30.5% and 28.1% have been used for years ended December 31, 2018, 2017 and 2016, respectively, for the disposal group. The estimated income tax rates are based on the application of current accounting guidance and rates in effect during these periods.
(b) | The net increase to stockholders' equity of $200.0 million at September 30, 2019 approximates the estimated after-tax gain on the disposition of the Power Systems segment to be reported in the first quarter of 2020. This amount consists of the estimated pre-tax gain on sale of $263.5 million, which includes estimated transaction costs of $5.0 million and a curtailment loss of $0.4 million on the retained pension and other postretirement plans, reduced by the accrual of estimated income taxes payable of $63.5 million. Estimates used may change as additional information about actual results becomes available and such changes could be material. |
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