ENPRO INDUSTRIES, INC. |
(Exact name of Registrant, as specified in its charter) |
North Carolina | 001-31225 | 01-0573945 | ||
(State or other jurisdiction | (Commission file number) | (I.R.S. Employer | ||
of incorporation | Identification No.) |
5605 Carnegie Boulevard, Suite 500 |
Charlotte, North Carolina 28209 |
(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) |
¨ | 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)) |
(d) | Exhibit 99.1 – Press Release of EnPro Industries, Inc. dated April 30, 2015 |
ENPRO INDUSTRIES, INC. | ||
By: | /s/ Robert S. McLean | |
Robert S. McLean | ||
Vice President, General Counsel and Secretary |
Exhibit Number | Exhibit | |
99.1 | Press Release dated April 30, 2015 |
Investor Contact: | Dan Grgurich | EnPro Industries |
Director, Investor Relations and | 5605 Carnegie Boulevard | |
Corporate Communications | Charlotte, North Carolina 28209-4674 | |
Phone: | 704-731-1527 | Phone: 704-731-1500 |
Email: | dan.grgurich@enproindustries.com | Fax: 704-731-1511 |
www.enproindustries.com |
Consolidated Financial Results | Quarter Ended | % Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Net Sales | $ | 277.5 | $ | 287.2 | -3% | ||
Segment Profit | $ | 22.0 | $ | 29.1 | -24% | ||
Segment Margin | 7.9 | % | 10.1% | ||||
Net Income (loss) | $ | (1.6 | ) | $ | 1.3 | ||
Diluted EPS | $ | (0.07 | ) | $ | 0.05 |
Adjusted Consolidated Financial Results | Quarter Ended | % Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Adjusted EBITDA* | $ | 27.7 | $ | 32.2 | -14% | ||
Adjusted Net Income* | $ | 5.8 | $ | 9.8 | -41% | ||
Adjusted Diluted EPS* | $ | 0.25 | $ | 0.44 |
• | Unfavorable effect of foreign exchange translation reduced consolidated sales; organic sales were about the same as a year ago. |
• | Loss provision on euro denominated engine contract, adjustment to acquisition inventory value, restructuring and foreign exchange translation reduced segment profit by a total of $9.8 million. |
• | Pro forma sales†, which include sales of deconsolidated GST, were $320.3 million, 4% below the first quarter of 2014 largely due to unfavorable foreign exchange translation. |
• | Pro forma adjusted EBITDA† was $38.9 million, 15% below the first quarter of 2014 primarily due to the contract loss provision and foreign exchange translation. |
• | In the first quarter, EnPro spent $44.9 million to repurchase a portion of its convertible debentures and $47.4 million to repurchase 0.8 million common shares. |
• | After additional repurchases in the second quarter, EnPro has completed its $80 million authorization and repurchased 1.2 million shares at an average cost of $66.76 a share. |
($ Millions) | Quarter Ended | Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Sales | $ | 160.9 | $ | 155.0 | 4% | ||
EBITDA | $ | 26.5 | $ | 24.7 | 7% | ||
EBITDA Margin | 16.5% | 15.9% | |||||
Segment Profit | $ | 18.0 | $ | 17.1 | 5% | ||
Segment Margin | 11.2% | 11.0% |
($ Millions) | Quarter Ended | Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Sales | $ | 77.2 | $ | 91.8 | -16% | ||
EBITDA | $ | 8.0 | $ | 14.3 | -44% | ||
EBITDA Margin | 10.4% | 15.6% | |||||
Segment Profit | $ | 3.4 | $ | 8.7 | -61% | ||
Segment Margin | 4.4% | 9.5% |
($ Millions) | Quarter Ended | Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Sales | $ | 40.2 | $ | 41.1 | -2% | ||
EBITDA | $ | 1.5 | $ | 4.2 | -64% | ||
EBITDA Margin | 3.7% | 10.2% | |||||
Segment Profit | $ | 0.6 | $ | 3.3 | -82% | ||
Segment Margin | 1.5% | 8.0% |
($ Millions) | Quarter Ended | Change | |||||
3/31/2015 | 3/31/2014 | ||||||
Sales (Includes I/C) | $ | 54.2 | $ | 59.0 | -8% | ||
Third Party Sales | $ | 48.9 | $ | 52.8 | -7% | ||
EBITDA-A | $ | 11.2 | $ | 13.5 | -17% | ||
EBITDA-A Margin* | 20.7% | 22.9% | |||||
Operating Profit | $ | 9.5 | $ | 11.8 | -19% | ||
Operating Profit Margin* | 17.5% | 20.0% |
2015 | 2014 | |||||||
Net sales | $ | 277.5 | $ | 287.2 | ||||
Cost of sales | 187.7 | 190.7 | ||||||
Gross profit | 89.8 | 96.5 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 77.3 | 78.9 | ||||||
Other | 1.1 | 0.2 | ||||||
Total operating expenses | 78.4 | 79.1 | ||||||
Operating income | 11.4 | 17.4 | ||||||
Interest expense | (13.0 | ) | (11.1 | ) | ||||
Interest income | 0.1 | 0.2 | ||||||
Other expense | (4.1 | ) | (4.2 | ) | ||||
Income (loss) before income taxes | (5.6 | ) | 2.3 | |||||
Income tax benefit (expense) | 4.0 | (1.0 | ) | |||||
Net income (loss) | $ | (1.6 | ) | $ | 1.3 | |||
Basic earnings (loss) per share | $ | (0.07 | ) | $ | 0.06 | |||
Average common shares outstanding (millions) | 23.8 | 21.3 | ||||||
Diluted earnings (loss) per share | $ | (0.07 | ) | $ | 0.05 | |||
Average common shares outstanding (millions) | 23.8 | 25.1 |
2015 | 2014 | |||||||
Operating activities | ||||||||
Net income (loss) | $ | (1.6 | ) | $ | 1.3 | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation | 7.2 | 7.5 | ||||||
Amortization | 6.9 | 6.7 | ||||||
Accretion of debt discount | 0.3 | 1.8 | ||||||
Loss on exchange and repurchase of convertible debentures | 2.8 | 3.6 | ||||||
Deferred income taxes | 1.5 | (12.3 | ) | |||||
Stock-based compensation | 1.3 | 2.2 | ||||||
Other non-cash adjustments | 0.3 | (0.6 | ) | |||||
Change in assets and liabilities, net of effects of acquisitions of businesses: | ||||||||
Accounts receivable, net | (4.1 | ) | (21.0 | ) | ||||
Inventories | (11.5 | ) | (9.3 | ) | ||||
Accounts payable | (1.2 | ) | 2.8 | |||||
Other current assets and liabilities | (21.0 | ) | (10.5 | ) | ||||
Other non-current assets and liabilities | (2.4 | ) | 2.8 | |||||
Net cash used in operating activities | (21.5 | ) | (25.0 | ) | ||||
Investing activities | ||||||||
Purchases of property, plant and equipment | (9.1 | ) | (6.7 | ) | ||||
Payments for capitalized internal-use software | (1.1 | ) | (2.8 | ) | ||||
Acquisitions, net of cash acquired | (30.6 | ) | (1.9 | ) | ||||
Other | — | 0.1 | ||||||
Net cash used in investing activities | (40.8 | ) | (11.3 | ) | ||||
Financing activities | ||||||||
Net proceeds from short-term borrowings | 0.8 | 0.7 | ||||||
Proceeds from debt | 41.4 | 70.3 | ||||||
Repayments of debt | (23.3 | ) | (34.5 | ) | ||||
Repurchase of common stock | (47.4 | ) | — | |||||
Dividends paid | (4.8 | ) | — | |||||
Repurchase of convertible debentures conversion option | (21.6 | ) | — | |||||
Other | (2.0 | ) | (4.7 | ) | ||||
Net cash provided by (used in) financing activities | (56.9 | ) | 31.8 | |||||
Effect of exchange rate changes on cash and cash equivalents | (2.8 | ) | (0.1 | ) | ||||
Net decrease in cash and cash equivalents | (122.0 | ) | (4.6 | ) | ||||
Cash and cash equivalents at beginning of period | 194.2 | 64.4 | ||||||
Cash and cash equivalents at end of period | $ | 72.2 | $ | 59.8 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 27.0 | $ | 18.1 | ||||
Income taxes | $ | 2.2 | $ | 13.3 |
March 31, 2015 | December 31, 2014 | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 72.2 | $ | 194.2 | |||
Accounts receivable | 209.8 | 205.2 | |||||
Inventories | 168.8 | 159.7 | |||||
Other current assets | 38.0 | 44.0 | |||||
Total current assets | 488.8 | 603.1 | |||||
Property, plant and equipment | 199.3 | 199.3 | |||||
Goodwill | 237.1 | 232.4 | |||||
Other intangible assets | 210.8 | 202.8 | |||||
Investment in GST | 236.9 | 236.9 | |||||
Deferred income taxes and income tax receivable | 99.1 | 80.3 | |||||
Other assets | 47.4 | 49.2 | |||||
Total assets | $ | 1,519.4 | $ | 1,604.0 | |||
Current liabilities | |||||||
Short-term borrowings from GST | $ | 24.0 | $ | 23.6 | |||
Notes payable to GST | 12.2 | 11.7 | |||||
Current maturities of long-term debt | 2.2 | 22.5 | |||||
Accounts payable | 89.5 | 87.8 | |||||
Accrued expenses | 108.7 | 131.6 | |||||
Total current liabilities | 236.6 | 277.2 | |||||
Long-term debt | 340.1 | 298.6 | |||||
Notes payable to GST | 271.0 | 259.3 | |||||
Other liabilities | 131.7 | 130.5 | |||||
Total liabilities | 979.4 | 965.6 | |||||
Temporary equity | 0.1 | 1.0 | |||||
Shareholders' equity | |||||||
Common stock | 0.2 | 0.2 | |||||
Additional paid-in capital | 402.4 | 477.3 | |||||
Retained earnings | 188.9 | 195.3 | |||||
Accumulated other comprehensive loss | (50.3 | ) | (34.1 | ) | |||
Common stock held in treasury, at cost | (1.3 | ) | (1.3 | ) | |||
Total shareholders' equity | 539.9 | 637.4 | |||||
Total liabilities and equity | $ | 1,519.4 | $ | 1,604.0 |
Sales | ||||||||
2015 | 2014 | |||||||
Sealing Products | $ | 160.9 | $ | 155.0 | ||||
Engineered Products | 77.2 | 91.8 | ||||||
Power Systems | 40.2 | 41.1 | ||||||
278.3 | 287.9 | |||||||
Less intersegment sales | (0.8 | ) | (0.7 | ) | ||||
$ | 277.5 | $ | 287.2 |
Segment Profit | ||||||||
2015 | 2014 | |||||||
Sealing Products | $ | 18.0 | $ | 17.1 | ||||
Engineered Products | 3.4 | 8.7 | ||||||
Power Systems | 0.6 | 3.3 | ||||||
$ | 22.0 | $ | 29.1 |
Segment Margin | ||||||
2015 | 2014 | |||||
Sealing Products | 11.2 | % | 11.0 | % | ||
Engineered Products | 4.4 | % | 9.5 | % | ||
Power Systems | 1.5 | % | 8.0 | % | ||
7.9 | % | 10.1 | % |
Reconciliation of Segment Profit to Net Income (Loss) | ||||||||
2015 | 2014 | |||||||
Segment profit | $ | 22.0 | $ | 29.1 | ||||
Corporate expenses | (9.8 | ) | (10.1 | ) | ||||
Interest expense, net | (12.9 | ) | (10.9 | ) | ||||
Other expense, net | (4.9 | ) | (5.8 | ) | ||||
Income (loss) before income taxes | (5.6 | ) | 2.3 | |||||
Income tax benefit (expense) | 4.0 | (1.0 | ) | |||||
Net income (loss) | $ | (1.6 | ) | $ | 1.3 |
2015 | 2014 | ||||||||||||||
$ | Per share | $ | Per share | ||||||||||||
Adjusted net income | $ | 5.8 | $ | 0.25 | $ | 9.8 | $ | 0.44 | |||||||
Adjustments (net of tax): | |||||||||||||||
Restructuring costs | (0.6 | ) | (0.03 | ) | (0.1 | ) | — | ||||||||
Loss on exchange and repurchase of convertible debentures | (1.8 | ) | (0.07 | ) | (2.3 | ) | (0.09 | ) | |||||||
Fair value adjustment to acquisition date inventory | (0.6 | ) | (0.02 | ) | — | — | |||||||||
Interest expense and royalties with GST | (5.0 | ) | (0.21 | ) | (4.8 | ) | (0.19 | ) | |||||||
Other | (0.9 | ) | (0.04 | ) | (0.4 | ) | (0.02 | ) | |||||||
Tax accrual adjustments | 1.5 | 0.06 | (0.9 | ) | (0.04 | ) | |||||||||
Impact of shares deliverable under outstanding convertible debenture hedge | N/A | (0.01 | ) | N/A | (0.05 | ) | |||||||||
Impact | (7.4 | ) | (0.32 | ) | (8.5 | ) | (0.39 | ) | |||||||
Net income | $ | (1.6 | ) | $ | (0.07 | ) | $ | 1.3 | $ | 0.05 |
Quarter Ended March 31, 2015 | |||||||||||||
Sealing | Engineered | Power | Total | ||||||||||
Products | Products | Systems | Segments | ||||||||||
Earnings before interest, income taxes, depreciation | |||||||||||||
and amortization (EBITDA) | $ | 26.5 | $ | 8.0 | $ | 1.5 | $ | 36.0 | |||||
Deduct depreciation and amortization expense | (8.5 | ) | (4.6 | ) | (0.9 | ) | (14.0 | ) | |||||
Segment profit | $ | 18.0 | $ | 3.4 | $ | 0.6 | $ | 22.0 | |||||
EBITDA margin | 16.5 | % | 10.4 | % | 3.7 | % | 13.0 | % |
Quarter Ended March 31, 2014 | |||||||||||||
Sealing | Engineered | Power | Total | ||||||||||
Products | Products | Systems | Segments | ||||||||||
Earnings before interest, income taxes, depreciation | |||||||||||||
and amortization (EBITDA) | $ | 24.7 | $ | 14.3 | $ | 4.2 | $ | 43.2 | |||||
Deduct depreciation and amortization expense | (7.6 | ) | (5.6 | ) | (0.9 | ) | (14.1 | ) | |||||
Segment profit | $ | 17.1 | $ | 8.7 | $ | 3.3 | $ | 29.1 | |||||
EBITDA margin | 15.9 | % | 15.6 | % | 10.2 | % | 15.0 | % |
2015 | 2014 | ||||||
Earnings before interest, income taxes, depreciation, | |||||||
amortization, and other selected items (adjusted EBITDA)* | $ | 27.7 | $ | 32.2 | |||
Adjustments to arrive at earnings before interest, income taxes, depreciation and amortization (EBITDA): | |||||||
Restructuring costs | (1.0 | ) | (0.1 | ) | |||
Loss on exchange and repurchase of convertible debentures | (2.8 | ) | (3.6 | ) | |||
Fair value adjustment to acquisition date inventory | (1.0 | ) | — | ||||
Other | (1.5 | ) | (1.1 | ) | |||
EBITDA | 21.4 | 27.4 | |||||
Adjustments to arrive at net income: | |||||||
Interest expense, net | (12.9 | ) | (10.9 | ) | |||
Income tax benefit (expense) | 4.0 | (1.0 | ) | ||||
Depreciation and amortization expense | (14.1 | ) | (14.2 | ) | |||
Net income (loss) | $ | (1.6 | ) | $ | 1.3 |
* | Adjusted EBITDA as presented also represents the amount defined as "EBITDA" under the indenture governing the Company's 5.875% senior notes due 2022. |
Pro Forma | |||||||||||||
Pro Forma | Pro Forma | Adjustments | |||||||||||
EnPro | GST | Adjustments | Consolidated | Reference | |||||||||
Net sales | $ | 277.5 | $ | 54.2 | $ | (11.4 | ) | $ | 320.3 | (1) | |||
Cost of sales | 187.7 | 33.8 | (11.1 | ) | 210.4 | (1), (2) | |||||||
Gross profit | 89.8 | 20.4 | (0.3 | ) | 109.9 | ||||||||
Operating expenses: | |||||||||||||
Selling, general and administrative | 77.3 | 10.7 | 2.9 | 90.9 | (3) | ||||||||
Other | 1.1 | (0.1 | ) | 0.1 | 1.1 | (4) | |||||||
Total operating expenses | 78.4 | 10.6 | 3.0 | 92.0 | |||||||||
Operating income | 11.4 | 9.8 | (3.3 | ) | 17.9 | ||||||||
Interest expense | (13.0 | ) | (0.1 | ) | 7.8 | (5.3 | ) | (5) | |||||
Interest income | 0.1 | 8.1 | (7.8 | ) | 0.4 | (5) | |||||||
Other expense | (4.1 | ) | (3.5 | ) | 3.5 | (4.1 | ) | (4) | |||||
Income (loss) before income taxes | (5.6 | ) | 14.3 | 0.2 | 8.9 | ||||||||
Income tax benefit (expense) | 4.0 | (4.8 | ) | (0.1 | ) | (0.9 | ) | (6) | |||||
Net income (loss) | $ | (1.6 | ) | $ | 9.5 | 0.1 | $ | 8.0 | |||||
Basic earnings (loss) per share | $ | (0.07 | ) | N/A | N/A | $ | 0.34 | ||||||
Average common shares outstanding (millions) | 23.8 | 23.8 | |||||||||||
Diluted earnings (loss) per share | $ | (0.07 | ) | N/A | N/A | $ | 0.31 | ||||||
Average common shares outstanding (millions) | 23.8 | 1.6 | 25.4 | (7) |
(1 | ) | Eliminate intercompany sales of $11.4 million. |
(2 | ) | Reflects the increase in depreciation expense of $0.3 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years. |
(3 | ) | Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years. |
(4 | ) | Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan. |
(5 | ) | Eliminate intercompany interest. |
(6 | ) | For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments. |
(7 | ) | Represents shares that would no longer be antidilutive since the pro forma consolidated company would have net income. |
Pro Forma | |||||||||||||
Pro Forma | Pro Forma | Adjustments | |||||||||||
EnPro | GST | Adjustments | Consolidated | Reference | |||||||||
Net sales | $ | 287.2 | $ | 59.0 | $ | (13.1 | ) | $ | 333.1 | (1) | |||
Cost of sales | 190.7 | 35.9 | (12.8 | ) | 213.8 | (1), (2) | |||||||
Gross profit | 96.5 | 23.1 | (0.3 | ) | 119.3 | ||||||||
Operating expenses: | |||||||||||||
Selling, general and administrative | 78.9 | 10.9 | 2.9 | 92.7 | (3) | ||||||||
Other | 0.2 | 0.8 | (0.4 | ) | 0.6 | (4) | |||||||
Total operating expenses | 79.1 | 11.7 | 2.5 | 93.3 | |||||||||
Operating income | 17.4 | 11.4 | (2.8 | ) | 26.0 | ||||||||
Interest expense | (11.1 | ) | — | 7.5 | (3.6 | ) | (5) | ||||||
Interest income | 0.2 | 7.6 | (7.5 | ) | 0.3 | (5) | |||||||
Other expense | (4.2 | ) | (2.9 | ) | 2.9 | (4.2 | ) | (4) | |||||
Income before income taxes | 2.3 | 16.1 | 0.1 | 18.5 | |||||||||
Income tax expense | (1.0 | ) | (5.6 | ) | — | (6.6 | ) | (6) | |||||
Net income | $ | 1.3 | $ | 10.5 | 0.1 | $ | 11.9 | ||||||
Basic earnings per share | $ | 0.06 | N/A | N/A | $ | 0.56 | |||||||
Average common shares outstanding (millions) | 21.3 | 21.3 | |||||||||||
Diluted earnings per share | $ | 0.05 | N/A | N/A | $ | 0.47 | |||||||
Average common shares outstanding (millions) | 25.1 | 25.1 |
(1 | ) | Eliminate intercompany sales of $13.1 million. |
(2 | ) | Reflects the increase in depreciation expense of $0.3 million due to adjusting property, plant and equipment to fair value. The total fair value adjustment to property, plant and equipment was $19.8 million of which $14.6 million related to depreciable buildings and improvements and machinery and equipment that have a net estimated remaining economic life of 14.1 years. |
(3 | ) | Reflects the increase in amortization expense as a result of the estimated fair value adjustment due to the creation of the finite-lived intangible assets. The estimated useful life of the finite-lived intangible assets is 15 years. |
(4 | ) | Eliminate asbestos-related expenses which would cease upon confirmation and consummation of the Second Amended Plan. |
(5 | ) | Eliminate intercompany interest. |
(6 | ) | For purposes of the consolidated pro forma financial information, the estimated effective tax rate of 36% has been used for all periods presented to calculate the tax effect associated with the pro forma adjustments. |
Second | Pro Forma | |||||||||||||||
Amended | Pro Forma | Pro Forma | Adjustments | |||||||||||||
EnPro | GST | Plan impact (1) | Adjustments | Consolidated | Reference | |||||||||||
Current assets | ||||||||||||||||
Cash and investments | $ | 72.2 | $ | 237.2 | $ | (193.7 | ) | $ | — | $ | 115.7 | |||||
Accounts receivable | 209.8 | 34.4 | — | (16.3 | ) | 227.9 | (4) | |||||||||
Inventories | 168.8 | 18.1 | — | 5.6 | 192.5 | (2) | ||||||||||
Notes receivable from EnPro | — | 36.2 | — | (36.2 | ) | — | (3) | |||||||||
Other current assets | 38.0 | 33.6 | — | (7.7 | ) | 63.9 | (4) | |||||||||
Total current assets | 488.8 | 359.5 | (193.7 | ) | (54.6 | ) | 600.0 | |||||||||
Property, plant and equipment | 199.3 | 43.2 | — | 19.8 | 262.3 | (2) | ||||||||||
Goodwill | 237.1 | 18.5 | — | (18.5 | ) | 237.1 | (2) | |||||||||
Other intangible assets | 210.8 | 4.7 | — | 242.1 | 457.6 | (2) | ||||||||||
Investment in GST | 236.9 | — | — | (236.9 | ) | — | (6) | |||||||||
Notes receivable from EnPro | — | 271.0 | — | (271.0 | ) | — | (3) | |||||||||
Asbestos insurance receivable | — | 80.7 | (7.5 | ) | — | 73.2 | ||||||||||
Deferred income taxes and income taxes receivable | 99.1 | 87.8 | (101.5 | ) | (78.5 | ) | 6.9 | (5) | ||||||||
Other assets | 47.4 | 6.0 | — | (1.1 | ) | 52.3 | (4) | |||||||||
Total assets | $ | 1,519.4 | $ | 871.4 | $ | (302.7 | ) | $ | (398.7 | ) | $ | 1,689.4 | ||||
Current liabilities | ||||||||||||||||
Short-term borrowings from GST | $ | 24.0 | $ | — | $ | — | $ | (24.0 | ) | $ | — | (3) | ||||
Notes payable to GST | 12.2 | — | — | (12.2 | ) | — | (3) | |||||||||
Current maturities of long-term debt | 2.2 | — | — | — | 2.2 | |||||||||||
Accounts payable | 89.5 | 22.3 | — | (16.3 | ) | 95.5 | (4) | |||||||||
Accrued expenses | 106.3 | 9.8 | — | (7.7 | ) | 108.4 | (4) | |||||||||
Deferred income taxes and income taxes payable | 2.4 | 0.4 | — | — | 2.8 | |||||||||||
Total current liabilities | 236.6 | 32.5 | — | (60.2 | ) | 208.9 | ||||||||||
Long-term debt | 340.1 | — | — | — | 340.1 | |||||||||||
Notes payable to GST | 271.0 | — | — | (271.0 | ) | — | (3) | |||||||||
Asbestos liability | 30.0 | 339.1 | (295.2 | ) | — | 73.9 | ||||||||||
Deferred income taxes and income taxes payable | 15.7 | 78.9 | (2.8 | ) | (1.9 | ) | 89.9 | (5), (7) | ||||||||
Other liabilities | 86.0 | 12.8 | — | (1.1 | ) | 97.7 | (4) | |||||||||
Total liabilities | 979.4 | 463.3 | (298.0 | ) | (334.2 | ) | 810.5 | |||||||||
Temporary equity | 0.1 | — | — | — | 0.1 | |||||||||||
Shareholders' equity | 539.9 | 408.1 | (4.7 | ) | (64.5 | ) | 878.8 | (8) | ||||||||
Total liabilities and equity | $ | 1,519.4 | $ | 871.4 | $ | (302.7 | ) | $ | (398.7 | ) | $ | 1,689.4 |
(1 | ) | We determined that the establishment of the settlement facility and litigation facility contemplated by the Second Amended Plan, payments of claims resolved by settlement or verdict prior to the Petition Date that were not paid prior to the Petition Date and other liabilities subject to compromise would be funded by cash on hand. The existing deferred tax asset on the asbestos liability was eliminated and a new deferred tax asset on the remaining trust liability payments was established. The asbestos insurance receivable, remaining payments required under the settlement facility and the related tax effects were discounted to their present value using a 6% discount rate. We have not reflected any amounts for the contingent funding under the litigation guarantee as we feel these will be largely unnecessary. The maximum after-tax net present value of these payments over 40 years would be $31 million. |
(2 | ) | Upon reconsolidation, the assets and liabilities of GST will need to be recognized at fair value. Inventory is valued at net realizable value which required a $5.6 million adjustment to the carrying value. We reflected a $19.8 million fair value adjustment to property, plant and equipment. We eliminated GST's pre-existing goodwill and other identifiable intangible assets of $18.5 million and $4.7 million, respectively. We identified finite-lived intangible assets with an estimated fair value of $181.5 million. In addition, we identified $65.3 million of indefinite-lived intangible assets. The carrying value of all other assets and liabilities approximated fair value. |
(3 | ) | Eliminate intercompany notes receivable/payable. |
(4 | ) | Eliminate intercompany trade receivables/payables, intercompany interest receivable/payable and other intercompany receivables/payables. |
(5 | ) | Eliminate $78.5 million of intercompany income taxes payable. |
(6 | ) | Eliminate the investment in GST which is carried at historical cost. |
(7 | ) | The elimination of the deferred tax liability on the investment in GST and establish a deferred tax liability on the step-up in fair value of assets resulted in a net increase in long-term tax liabilities of $76.6 million. |
(8 | ) | The entries above resulted in reflecting a $338.9 million after-tax gain upon reconsolidation. |
2015 | 2014 | ||||||
Pro forma earnings before interest, income taxes, depreciation, | |||||||
amortization and other selected items (pro forma adjusted EBITDA) | $ | 38.9 | $ | 45.6 | |||
Adjustments to arrive at pro forma earnings before interest, income taxes, depreciation and amortization (pro forma EBITDA): | |||||||
Restructuring costs | (1.1 | ) | (0.6 | ) | |||
Loss on exchange and repurchase of convertible debentures | (2.8 | ) | (3.6 | ) | |||
Fair value adjustment to acquisition date inventory | (1.0 | ) | — | ||||
Other | (1.3 | ) | (0.6 | ) | |||
Pro forma EBITDA | 32.7 | 40.8 | |||||
Adjustments to arrive at pro forma net income: | |||||||
Interest expense, net | (4.9 | ) | (3.3 | ) | |||
Income tax expense | (0.9 | ) | (6.6 | ) | |||
Depreciation and amortization expense | (18.9 | ) | (19.0 | ) | |||
Pro forma net income | $ | 8.0 | $ | 11.9 |
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