EnPro : Reports Results for the Fourth Quarter and Full Year of 2014 and Announces $80 Million Share Repurchase Program

EnPro Industries (NYSE: NPO):

Consolidated Financial Highlights

(Amounts in millions except per share data and percentages)

*See attached schedules for adjustments

• Net sales for the fourth quarter of 2014 increased by 15% over the fourth quarter of 2013.
• Segment profit increased by 54%, and segment margin increased to 12% in the fourth quarter of 2014 from 9% in the fourth quarter of 2013 as volume and mix improved.
• Adjusted diluted EPS increased to $0.57 in the fourth quarter of 2014 from $0.50 in the fourth quarter of 2013.
• Adjusted EBITDA was $40.9 million in the fourth quarter and $155.4 million for the full year of 2014 compared to $34.2 million in the fourth quarter and $154.8 million for the full year of 2013.
• Pro forma sales†, which include sales of deconsolidated GST, increased to $360.9 million or 13% over the fourth quarter of 2013. Pro forma adjusted EBITDA† of $51.7 million increased 11% over the fourth quarter of 2013.
• For the full year, pro forma sales increased to $1.4 billion or 5% over 2013. Pro forma adjusted EBITDA† of $207.5 million decreased 4% from the full year of 2013.

^{† (Please refer to Pro Forma Condensed Consolidated Financial Statements attached)}

EnPro Industries (NYSE: NPO) today reported consolidated sales of $316.4 million in the fourth quarter of 2014, a $40.9 million or 15% increase over the fourth quarter of 2013. Excluding the effect of foreign exchange, sales grew 17%, primarily due to higher revenues from the Power Systems and Sealing Products segments.

Segment profit margin increased to 12.0% in the fourth quarter of 2014 from 9.0% in the fourth quarter of 2013 as a result of higher volumes and a more profitable mix, particularly in the Power Systems segment, partially offset by increases in research and development (“R&D”) and other selling, general and administrative (“SG&A”) expenses.

Net income in the fourth quarter of 2014 was $3.8 million, or $0.15 a share, compared to $5.2 million, or $0.22 a share, in the fourth quarter of 2013. Before selected items, including interest due to the deconsolidated Garlock Sealing Technologies LLC (GST) subsidiary and other items detailed in the attached financial schedules, adjusted net income was $13.4 million, or $0.57 a share. In the fourth quarter of 2013, adjusted net income was $11.0 million, or $0.50 a share.

Consolidated earnings before interest, income taxes, depreciation and amortization and other selected items (adjusted EBITDA) were $40.9 million in the fourth quarter of 2014, a 20% increase over the fourth quarter of 2013, when adjusted EBITDA was $34.2 million.

The company’s average diluted share count in the fourth quarter of 2014 increased by 1.6 million shares to 25.8 million shares, up 7% from the same period a year ago. The increase primarily reflects the net effect of exchanges in the first six months of 2014 of the company’s common stock for $97.7 million in aggregate principal convertible debentures offset in part by the cash purchase of $51.3 million in aggregate principal amount of the convertible debentures in September. The diluted share count does not include the unrealized benefit of a derivative transaction put in place in 2005 upon the issuance of the convertible debentures to mitigate their dilution effect. Upon maturity in the fourth quarter of 2015, this derivative will return 2.4 million shares to the company (assuming a stock price of $62.62 a share, which was the average share price during the fourth quarter of 2014).

Twelve Months Results

Sales for the full year were $1,219.3 million, a 7% increase over 2013. Sealing Products segment acquisitions contributed 1% of the gain. Foreign exchange impact was minimal. Stronger sales of engines and engine parts, truck parts, semiconductor equipment, high performance seals and bearings more than offset declines in demand for industrial sealing products, pipeline protection components, and compressor parts and services.

Adjusted EBITDA for the full year was $155.4 million, about the same as in 2013 when adjusted EBITDA was $154.8 million. While sales were higher for the year, 2014 Adjusted EBITDA reflects a year-over-year reduction in margins as a result of a higher mix of OEM sales, higher R&D spending and headcount to support growth initiatives, and lower R&D subsidies compared to the prior year. In addition, corporate expenses were higher compared to the twelve months of 2013 primarily as a result of increased headcount, medical expenses, IT expenses and higher incentive compensation accruals.

Net income for 2014 was $22.0 million, or $0.85 a share, compared to $27.4 million, or $1.17 a share, in the twelve months of 2013. Before selected items, adjusted net income in 2014 was $55.8 million, or $2.41 a share, compared to $56.0 million, or $2.59 a share, in 2013.

Sealing Products Segment

In the fourth quarter of 2014, sales in the Sealing Products segment increased 8% over the fourth quarter of 2013. Acquisitions contributed 2% but were offset by an unfavorable 2% impact from foreign exchange. Sales benefited from higher demand for heavy duty truck parts in North America and increased activity in semiconductor, aerospace and nuclear power markets. Lower demand for pipeline products and sealing products in European process industry markets partially offset these increases.

The segment’s profits decreased by 5% and segment profit margins declined to 13.8% in the fourth quarter of 2014. Higher but less profitable OEM sales, ongoing project related spending in Stemco’s distribution center (now substantially complete) and severance and restructuring expenses reduced margins. The comparison also reflects the benefit in the fourth quarter of 2013 of an acquisition-related earn-out adjustment and an R&D subsidy not repeated in the fourth quarter of 2014.

The segment’s sales for the full year of 2014 were 7% higher than in 2013, and 6% higher excluding the impact of foreign exchange. Segment profits and profit margins declined in 2014 compared to 2013 due to expenses associated with the Stemco distribution center implementation, bad debt and inventory reserve accruals, additions to selling resources and severance and restructuring. The comparison also reflects the benefit in 2013 of the acquisition-related earn-out adjustment and R&D subsidy noted above.

Engineered Products Segment

Excluding the negative impact of foreign exchange, the Engineered Products segment’s sales in the fourth quarter of 2014 were 1% higher than in the fourth quarter of 2013. Better pricing and stronger demand in the automotive, aerospace, refinery and petrochemical markets in Europe and North America offset continued weakness in the North American natural gas market.

Segment profits increased and segment margins grew to 3.9% due to price optimization programs and operational improvements. The comparison also reflects the benefit in 2013 of a favorable $1.2 million R&D governmental subsidy and restructuring costs that were $2.0 million lower compared to 2013.

For the full year of 2014, the Engineered Products segment’s sales were about the same as in 2013. Unfavorable foreign exchange and lower sales in Canada’s energy markets were offset by price improvements and stronger demand in certain bearings markets. Segment profits and profit margins increased in the twelve months of 2014 primarily due to improved pricing, lower raw material costs and operational improvements. The comparison also reflects the benefit in 2013 of the $1.2 million R&D subsidy and restructuring costs that were $3.8 million lower than in 2013.

Power Systems Segment

In the Power Systems segment, sales increased by $31.2 million, or 81%, from the fourth quarter of 2013. The increase includes $25.0 million in completed contract engine revenue recorded in the quarter compared to none in the fourth quarter of 2013, as well as stronger sales of parts, services and engine upgrade solutions.

Segment profits increased significantly and segment profit margins rose to 17.6% from 1.3% in the fourth quarter of 2013, primarily as a result of the completed contract revenues, higher parts volume, higher margin engine sales, and manufacturing cost reductions. Partially offsetting these benefits were higher SG&A expenses, largely related to increased R&D investment in the development of the OP 2.0 engine program.

The segment’s sales in the twelve months of 2014 were 19% higher than in the twelve months of 2013 due to higher revenues from completed contract engines, parts and service. Government spending constraints due to sequestration in 2013 eased in 2014, and ship overhaul schedules improved, both of which benefited sales in the segment. Segment profits of $28.5 million doubled in 2014 compared to 2013. Margins improved in 2014 primarily due to higher volume, a more favorable mix of high-margin parts and services and lower manufacturing costs, which more than offset increased research and development and other selling, general and administrative expense. The comparison also reflects expenses in 2013 associated with an early retirement program.

Garlock Sealing Technologies

^{*EBITDA-A Margin and Operating Profit Margin as shown above are based upon sales including inter-company (I/C) sales. In prior presentations, GST’s margin percentages were presented based upon sales excluding inter-company sales.}

Sales at the deconsolidated operations of GST and its subsidiaries in the fourth quarter of 2014 increased by 2.4% compared to the fourth quarter of 2013, excluding the negative effect of foreign exchange. The increase reflected higher sales from subsidiaries in Canada, Australia, and Mexico partly offset by lower sales in Japan and lower intercompany sales to Europe. Operating profits were down 22% from the fourth quarter of 2013, primarily due to a less-profitable mix, higher SG&A expenses, restructuring costs, and the write-down of a contested tax receivable from the state of New York related to investments in a brownfield cleanup program.

Asbestos-related expense was $62.5 million in the fourth quarter of 2014 compared to $6.9 million in the fourth quarter of 2013. The year-over-year change in asbestos-related expense primarily reflects a charge taken in the fourth quarter of 2014 to increase the asbestos liability accrual on GST’s balance sheet. The accrual was adjusted in the fourth quarter to reflect amounts necessary to fund the second amended plan of reorganization submitted to the Bankruptcy Court in January 2015 following an agreement that GST and EnPro reached with the representative of future asbestos claimants (“FCR”). The proposed second amended plan, if approved by the Bankruptcy Court would resolve all current and future asbestos claims against GST. For the quarter, the recorded liability increased from $280.5 million to $337.5 million to reflect changes to the estimate of liability based on the changes in the terms of the GST’s proposed plan of reorganization reflected in the second amended plan filed with the Bankruptcy Court in January 2015 from the terms of the first amended plan filed in May 2014.

For the year, the net impact to GST’s income statement was a benefit of $110.7 million as the estimate of the liability decreased from $466.8 million at the beginning of the 2014 to $337.5 million. Also, legal expenses were lower in 2014 compared to 2013 because of the significantly higher fees incurred in connection with the estimation trial held in 2013.

GST’s sales in the twelve months of 2014 were 2% lower than 2013 reflecting lower demand in North America, Japan, and sales at its foreign subsidiaries. Operating profit and profit margins declined as a result of volume and mix, growth-related spending for selling and engineering resources, the reduction in the brownfield program receivable and the classification of expenses related to a profit sharing program in Mexico.

As mentioned above, GST recorded a $110.7 million asbestos-related benefit in 2014 compared to a $46.9 million expense in 2013.

The results of GST and certain subsidiaries were deconsolidated effective June 5, 2010, when GST filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy code. These filings were the initial step in a process to reach a permanent resolution of all of GST’s current and future asbestos claims. Tables attached to this press release illustrate, on a pro-forma basis, condensed consolidated financial results for the fourth quarter and twelve months of 2014 and 2013 as if GST were reconsolidated with EnPro based on confirmation and consummation of GST’s second amended proposed plan of reorganization. The narrative preceding those tables includes an important discussion of the risks and uncertainties applicable to confirmation and consummation of the second amended plan of reorganization. Due to these risks and uncertainties, while management believes the plan of reorganization can be confirmed, management does not yet deem reconsolidation to be probable under Regulation S-X of the Securities and Exchange Commission (SEC). Therefore, pro forma financial statements are not required by the SEC. We are providing the pro forma financial information in this release as supplemental information in response to requests from investors for this information.

Corporate Expenses

Corporate expenses increased $3.9 million in the fourth quarter of 2014 compared to the fourth quarter of 2013 primarily due to higher contributions to incentive compensation reserves and higher employee medical costs.

Corporate expenses for the twelve months of 2014 increased by $9.6 million compared to 2013. The increase was primarily driven by an increase in employee medical costs, employee incentive compensation, information technology costs, salaries, severance and consulting expenses, partially offset by a decrease in an inventory reserve.

As a result of the agreement of our consolidated subsidiary, Coltec Industries Inc, to fund a contribution of $30 million to a settlement facility under GST’s second amended plan of reorganization, we recorded a $30 million accrual for this liability in the fourth quarter of 2014.

Cash Flows

EnPro’s cash balance stood at $194.2 million at December 31, 2014 compared to $64.4 million at December 31, 2013. Cash flow for the twelve months ended December 31, 2014 was $129.8 million compared to $10.5 million in the same period of 2013. The increase in cash flow is primarily the result of net proceeds from EnPro’s recent issuance of $300 million in 5.875% senior notes. Financing activities provided $177.0 million of cash in 2014, after giving effect to purchases of the company’s convertible debentures under a tender offer in September, 2014. Financing activities in 2013 used cash of $19.5 million, primarily consisting of payments on amounts outstanding on our revolving credit facility.

Operating activities provided $32.2 million of cash in the twelve months of 2014 compared to $69.9 million in the same period a year ago. A significant factor was a contribution of $48.9 million to the company’s pension plans in 2014. The contribution significantly improved the plan’s funding status and will reduce certain future pension-related expenses. EnPro does not expect to make any further pension contributions for the foreseeable future. By comparison, the company contributed $22.8 million to the pension plan in 2013. In addition to the increase in pension contributions, income tax payments were $30.7 million higher in 2014 than in 2013.

Segment working capital increased by approximately $13 million in 2014 compared to $8 million in 2013 as the result of investments in inventory at Stemco’s distribution center and inventory for several large engine programs underway at Fairbanks Morse.

Cash used in investing activities, which mainly includes capital expenditures and the proceeds or outlays from business divestitures or acquisitions, was $74.7 million for the twelve months of 2014 compared to $41.5 million for the comparable period in 2013. Included in 2014 were $39.3 million in proceeds from the sale of GRT and the use of $61.9 million for three acquisitions. This compares to the use of $2.0 million for one acquisition in 2013.

GST’s cash and investment balance was $229.3 million at the end of 2014 compared to $177.8 million at the end of 2013. The increase included the collection of $21.3 million of asbestos-related insurance proceeds since December 31, 2013.

Outlook

“At this point in 2015, OEM order activity remains firm in our semiconductor, aerospace and trucking markets, and we have a healthy first quarter backlog and order rate in Power Systems,” said Steve Macadam, president and chief executive officer. “Our automotive and general industrial markets are also strong at this point in the year as consumers have benefitted from lower gasoline prices and an improving U.S. economy. However, economic volatility outside of North America and slowing project and maintenance spending in the oil and gas markets could result in lower demand levels in a few of our businesses. In addition, the weakening of the euro and other foreign currencies will likely have a negative translation effect on our sales and earnings for the year. Longer term, we expect continued benefits from our strategic growth initiatives including growth from recent and future strategic acquisitions,” he added.

Share Repurchase Program

Today, the Board of Directors approved a new program authorizing the company to repurchase up to $80 million of its common shares. Under this program, the company may repurchase shares in both open market and privately negotiated transactions. The company’s management will determine the timing and amount of the transactions based on its evaluation of market conditions and other factors. Repurchases may also be made under Rule 10b5-1 plans, which permit the company to repurchase shares when it otherwise would be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time and expires in two years.

"This repurchase authorization illustrates our confidence in EnPro’s long-term cash flow and our commitment to increasing shareholder value," said Steve Macadam, president and chief executive officer of EnPro Industries. "This is another component of our capital allocation plan that complements the recent introduction of a quarterly stock dividend and our on-going investment in capital improvements and acquisitions to fulfill the strategic growth plans of our businesses”, he added.

As of December 31, 2014, the Company had outstanding approximately 24 million shares of common stock, and its balance of cash and cash equivalents was approximately $194 million.

Conference Call and Webcast Information

EnPro will hold a conference call tomorrow, February 20, at 10:00 a.m. Eastern Time to discuss fourth quarter and full year 2014 results. Investors who wish to participate in the call should dial 1-800-851-4704 approximately 10 minutes before the call begins and provide conference id number 83274022. A live audio webcast of the call and accompanying slide presentation will be accessible from the company’s website, http://www.enproindustries.com. To access the presentation, log on to the webcast by clicking the link on the company’s home page.

Deconsolidation of Garlock Sealing Technologies LLC

Results for the fourth quarters and full years of 2014 and 2013 reflect the deconsolidation of Garlock Sealing Technologies LLC (GST) and its subsidiaries, effective June 5, 2010, when GST filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code to begin a process in pursuit of an efficient and permanent resolution to all current and future asbestos claims against it. Deconsolidation is required by generally accepted accounting principles. To aid in comparisons of year-over-year data, the company has attached a schedule to this press release showing key operating measures for both EnPro and GST on a pro forma basis.

Non-GAAP Financial Information

This press release contains financial measures that have not been prepared in accordance with GAAP. They include income before asbestos-related expenses and other selected items, EBITDA-A, EBITDA and related per share amounts. Tables showing the effect of these non-GAAP financial measures for fourth quarters and full years of 2014 and 2013 are attached to the release.

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 our businesses, some of which are cyclical and experience periodic downturns; prices and availability of raw materials; and the amount of any payments required to satisfy contingent liabilities related to discontinued operations of our predecessors, including liabilities for certain products, environmental matters, guaranteed debt payments, employee benefit obligations and other matters. In addition, adverse developments could arise in regard to voluntary petitions filed by certain of our subsidiaries in U.S. Bankruptcy Court to establish a trust that would resolve all current and future asbestos claims. Our filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2013 and Form 10-Q for the quarter ended September 30, 2014, describe these and other risks and uncertainties in more detail. We do not undertake to update any forward-looking statement 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 leader in sealing products, metal polymer and filament wound bearings, components and service for reciprocating compressors, diesel and dual-fuel engines and other engineered products for use in critical applications by industries worldwide. For more information about EnPro, visit the company’s website at http://www.enproindustries.com.

Unaudited Pro Forma Information Reflecting the Reconsolidation of Garlock Sealing Technologies

The historical business operations of Garlock Sealing Technologies LLC (“GST LLC”) and The Anchor Packing Company (“Anchor”) resulted in a substantial volume of asbestos litigation in which plaintiffs alleged personal injury or death as a result of exposure to asbestos fibers. Those subsidiaries manufactured and/or sold industrial sealing products, predominately gaskets and packing, that contained encapsulated asbestos fibers. Anchor is an inactive and insolvent indirect subsidiary of Coltec Industries Inc (“Coltec”). EnPro’s subsidiaries’ exposure to asbestos litigation and their relationships with insurance carriers have been managed through another Coltec subsidiary, Garrison Litigation Management Group, Ltd. (“Garrison”). GST LLC, Anchor and Garrison are collectively referred to as “GST.”

On June 5, 2010 (the “Petition Date”), GST filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of North Carolina in Charlotte (the “Bankruptcy Court”). The filings were the initial step in an asbestos claims resolution process, which is ongoing. The filings did not include EnPro Industries, Inc., or any other EnPro Industries, Inc. operating subsidiary.

The financial results of GST and its subsidiaries are included in our consolidated results through June 4, 2010, the day prior to the Petition Date. However, U.S. generally accepted accounting principles require an entity that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, whose financial statements were previously consolidated with those of its parent, as GST’s and its subsidiaries’ were with EnPro’s, generally must be prospectively deconsolidated from the parent and the investment accounted for using the cost method. Accordingly, the financial results of GST and its subsidiaries are not included in EnPro’s consolidated results after June 4, 2010.

On January 14, 2015, EnPro announced that GST and it had reached agreement with the court-appointed legal representative of future asbestos claimants (the "Future Claimants' Representative") that includes a second amended plan of reorganization (the “Amended Plan”). The Amended Plan was filed with the Bankruptcy Court on January 14, 2015 and supersedes the prior plans filed by GST. If approved by the Bankruptcy Court and implemented, the Amended Plan will provide certainty and finality to the expenditures necessary to resolve all current and future asbestos claims against GST and against its Garrison and Anchor Packing subsidiaries. The Future Claimants' Representative has agreed to support, recommend and vote in favor of the Amended Plan, which provides payments to all claimants who have a compensable disease and had meaningful contact with GST asbestos containing products.

The Amended Plan provides for (a) the treatment of present and future asbestos claims against GST that have not been resolved by settlement or verdict prior to the Petition Date, and (b) administrative and litigation costs. The Amended Plan provides for the establishment of two facilities — a settlement facility (which would receive $220 million from GST and $30 million from Coltec, upon consummation of the Amended Plan and additional contributions by GST aggregating $77.5 million over the seven years following consummation of the Amended Plan) and a litigation fund (which would receive $30 million from GST upon consummation of the Amended Plan) to fund the defense and payment of claims of claimants who elect to pursue litigation under the Amended Plan rather than accept the settlement option under the Amended Plan. Funds contained in the settlement facility and the litigation fund would provide the exclusive remedies for current and future GST asbestos claimants other than claimants whose claims had been resolved by settlement or verdict prior to the Petition Date and were not paid prior to the Petition Date. The Amended Plan provides that GST will pay in full claims that had been resolved by settlement or verdict prior to the Petition Date that were not paid prior to the Petition Date (with respect to claims resolved by verdict, such payment will be made only to the extent the verdict becomes final). The amount of such claims resolved by verdict is $2.5 million. GST estimates the range of its aggregate liability for such unpaid settled asbestos claims to be from $3.1 million to $16.4 million, and the Amended Plan provides that if the actual amount is less than $10.0 million GST will contribute the difference to the settlement facility. In addition, the Amended Plan provides that, during the 40-year period following confirmation of the Amended Plan, GST would make supplementary annual contributions, subject to specified maximum annual amounts that decline over the period, to maintain a specified balance at specified dates of the litigation fund. The maximum aggregate amount of all such contingent supplementary contributions over that period is $132 million. GST believes that initial contributions to the litigation fund may likely be sufficient to permit the balance of that facility to exceed the specified thresholds over the 40-year period and, accordingly, that the low end of a range of reasonably possible loss associated with these contingent supplementary contributions is $0.

The Amended Plan incorporates the Bankruptcy Court’s determination in January 2014 that $125 million is sufficient to satisfy GST’s aggregate liability for present and future mesothelioma claims; however, it also provides additional funds to provide full payment for non-mesothelioma claims and to gain the support of the Future Claimants’ Representative of the Amended Plan. Under the terms of the Amended Plan, EnPro will retain 100% of the equity interests of GST LLC.

If the Amended Plan is confirmed by the Bankruptcy Court and is consummated, GST will be re-consolidated with EnPro’s results for financial reporting purposes. The Amended Plan is subject to confirmation by the Bankruptcy Court and EnPro cannot assure you that GST will be able to obtain necessary Bankruptcy Court approval of the Amended Plan, including the settlement of asbestos claims and related releases of claims against us included therein, and that the Amended Plan will be consummated.

Confirmation and consummation of the Amended Plan are subject to a number of risks and uncertainties, including the actions and decisions of creditors and other third parties that have an interest in the bankruptcy proceedings, delays in the confirmation or effective date of the Amended Plan due to factors beyond GST's or EnPro’s control, which would result in greater costs and the impairment of value of GST, appeals and other challenges to the Amended Plan and risks and uncertainties affecting GST and Coltec's ability to fund anticipated contributions under the Amended Plan as a result of adverse changes in their results of operations, financial condition and capital resources, including as a result of economic factors beyond their control.

In light of the risks and uncertainties, including those noted above, we believe the confirmation and consummation of the Amended Plan is confirmable as presented to the bankruptcy court but is not currently probable under Regulation S-X of the SEC and therefore, the reconsolidation of GST LLC with EnPro’s results for financial reporting purposes on the basis of confirmation and consummation of the Amended Plan is not currently probable. Accordingly, pro forma financial statements are not required by the SEC and the following pro forma condensed consolidated financial information may not include all information required to be included in pro forma financial statements prepared in accordance with Regulation S-X of the SEC. EnPro is providing the unaudited pro forma condensed consolidated financial information which assumes the confirmation and consummation of the Amended Plan for illustrative purposes only in light of specific requests for such pro forma information by investors.

The unaudited pro forma condensed consolidated financial information presented below has been prepared to illustrate the effects of the reconsolidation of GST and its subsidiaries with EnPro assuming the confirmation and consummation of the Amended Plan and is based upon the historical balance sheet of EnPro as of December 31, 2014, the estimated fair value of assets and liabilities of GST as of December 31, 2014 and the historical results of GST operations after consideration of the adjustments to the fair value of assets and liabilities. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2014 gives effect to the reconsolidation as if it occurred on December 31, 2014. The unaudited pro forma condensed consolidated statements of operations for the quarters and full year ended December 31, 2014 and 2013 give effect to the reconsolidation as if it had occurred on January 1, 2013.

Under generally accepted accounting principles, the reconsolidation of GST requires that the tangible and intangible assets and liabilities of GST be reflected at their estimated fair values. The preliminary fair value amounts used in the unaudited pro forma condensed consolidated financial information reflects management’s best estimates of fair value. Upon completion of detailed valuation studies and the final determination of fair value, EnPro may make additional adjustments to the fair value allocation, which may differ significantly from the valuations set forth in the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated statements of operations are based on estimates and assumptions, which have been made solely for the purposes of developing such pro forma information. The unaudited pro forma condensed consolidated statements of operations also include certain adjustments such as increased depreciation and amortization expense on tangible and intangible assets, increased interest expense on the debt incurred to complete the reconsolidation as well as the tax impacts related to these adjustments. The pro forma adjustments are based upon available information and certain assumptions that EnPro believes are reasonable.

The unaudited pro forma condensed consolidated financial information has been presented for information purposes only and is not necessarily indicative of what the consolidated company’s financial position or results of operations actually would have been had the reconsolidation been completed as of the dates indicated, nor is it necessarily indicative of the future operating results or financial position of the consolidated company. Therefore, the actual amounts recorded at the date the reconsolidation occurs may differ from the information presented herein.