Enpro Inc.

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 expenses, restructuring costs, 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.

Other expense in the table above represents other expense (non-operating) on our Consolidated Statements of Operations for the respective periods presented.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Sales of $273.2 million in the first three months of 2025 increased 6.1% from $257.5 million last year. The following table summarizes the impact of an acquisition and foreign currency on segment sales:

Discussion of year-over-year operating performance for each segment for the first three months of 2025:

Sealing Technologies: Sales of $179.6 million in the first three months of 2025 increased 4.7% compared to $171.6 million last year. Excluding unfavorable foreign exchange translation ($3.0 million) and partial contribution from an acquisition completed in late January 2024 ($3.2 million), sales were up 4.5%, or $7.8 million. Higher demand increased sales $4.7 million, with pricing and mix contributing an additional $3.1 million. Strength in aerospace, general industrial and food and pharmaceutical drove the increase in sales, offset in part by weakness in the commercial vehicle market.

Adjusted Segment EBITDA of $58.7 million in the first three months of 2025 increased 10.8% from $53.0 million last year. Adjusted Segment EBITDA margin of 32.7% in the first three months of 2025 expanded 180 basis points from 30.9% last year. Excluding the unfavorable foreign exchange translation ($1.2 million) and partial contribution from an acquisition completed in late January 2024 ($1.6 million), Adjusted Segment EBITDA increased 10.0%, or $5.3 million. The increase in adjusted segment EBITDA was primarily driven by the increase in sales ($7.3 million), partially offset by increased selling, general, and administrative expense ($2.0 million) primarily due to unfavorable foreign currency exchange rates, and increases in wages and professional fees.

Advanced Surface Technologies: Sales of $93.8 million in the first three months of 2025 increased 9.1%, or $7.8 million, compared to $86.0 million last year. Continued growth in leading-edge precision cleaning solutions, increased demand for optical coatings and filter solutions and strength in aerospace applications drove the increase in sales.

Adjusted Segment EBITDA of $20.5 million in the first three months of 2025 increased 18.5% from $17.3 million last year. Adjusted Segment EBITDA margin expanded 180 basis points to 21.9% from 20.1% last year, driven by the increase in sales ($6.4 million), partially offset by increased labor and manufacturing overhead expenses ($3.2 million) in support of new platforms and long-term growth initiatives.

Corporate expenses for the first three months of 2025 decreased $0.9 million as compared to last year, driven by lower restructuring costs and professional fees.

Interest expense, net in the first three months of 2025 remained relatively flat compared to the first three months of 2024.

Other expense in the first three months of 2025 decreased $4.0 million compared to the same period last year, primarily due to a prior-year 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 higher non-service pension related costs ($0.8 million).

The effective tax rates for the three months ended March 31, 2025 and 2024 were 24.3% and 12.6%, respectively. The effective tax rate for the three months ended March 31, 2025 is higher than the U.S. Federal tax rate primarily driven by higher tax rates in most foreign jurisdictions, partially offset by an additional tax benefit related to share-based payment awards. The effective tax rate for the three months ended March 31, 2024 is lower than the U.S. Federal tax rate 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.

Net income was $24.5 million, or $1.15 per share, in the first three months of 2025 compared to $12.5 million, or $0.59 per share, in the first three months of 2024. Earnings per share is expressed on a diluted basis.

Backlog

As of March 31, 2025, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $259.1 million. Approximately 95% 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, backlog is not particularly predictive of future performance due to shorter lead times for our leading-edge aftermarket or recurring solutions across both segments 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, 2025, we held $94.3 million of cash and cash equivalents in the United States and $146.0 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 $187.1 million at December 31, 2023 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 $212.3 million as of March 31, 2025. 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 2025, we repatriated $60.0 million. 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 provided $21.0 million of cash in the first three months of 2025 and $6.3 million of cash in the first three months of 2024. The year-over-year increase was primarily driven by the increased revenue and improved profit margins.

Investing activities used $9.4 million of cash in the first three months of 2025 compared to $217.0 million of cash used in investing activities last year. This decrease is primarily driven by the 2024 acquisition of AMI ($209.4 million).

Financing activities used $13.3 million of cash in the first three months of 2025, driven by $6.6 million used for dividends and $4.0 million in repayments of debt. Financing activities in the first three months of 2024 provided $6.2 million, primarily from $33.0 million in net borrowings on our revolving credit facility partially offset by $17.9 million used in the acquisition of Alluxa non-controlling interests and $6.4 million used for dividends paid.

Capital Resources

Senior Secured Credit Facilities. On December 17, 2021, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) among the Company and its 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 Credit Agreement provided 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 (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 364-Day Facility was repaid in full in the third quarter of 2022, and, in the third quarter of 2023, we voluntarily prepaid all then-outstanding borrowings and accrued and unpaid interest under the Term Loan A-1 Facility.

On November 8, 2022, we entered into a First Amendment to the Credit Agreement, which provided that borrowings under the Revolving Credit Facility and the Term Loan A-2 Facility would bear interest at an annual rate of a base rate plus 0.75% or Term SOFR ("Secured Overnight Financing Rate") plus (i) a credit spread adjustment of 0.10% and (ii) 1.75%, although these interest rates were subject to incremental increase or decrease based on a consolidated total net leverage ratio. In addition, a commitment fee accrued 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-2 Facility amortized 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.

Borrowings under the Facilities were secured by a first-priority pledge of certain assets. The Credit Agreement contained certain financial covenants and required financial ratios including a maximum consolidated total net leverage and a minimum consolidated interest coverage as defined in the Credit Agreement. We were in compliance with all covenants of the Credit Agreement as of March 31, 2025.

The borrowing availability under the Revolving Credit Facility at March 31, 2025 was $390.2 million after giving consideration to $9.8 million of outstanding letters of credit. The balance of borrowings outstanding under the Term Loan A-2 Facility at March 31, 2025 was $287.4 million.

On April 9, 2025, we entered into a Second Amendment to Third Amended and Restated Credit Agreement dated as of April 9, 2025 (the “Amended Credit Facility Agreement”) to amend the Credit Agreement. The Amended Credit Facility Agreement provides for a Revolving Credit Facility of up to $800.0 million, which will mature on April 9, 2030. On April 9, 2025, in connection with our entry into the Amended Credit Facility Agreement, we repaid the remaining outstanding principal amount of borrowings outstanding under the Term Loan A-2 Facility funded by borrowings under the Revolving Credit Facility and $59.8 million of available cash.

The Amended Credit Facility Agreement 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. Any incremental term loans will be subject to prepayment with the net cash proceeds of non-permitted debt issuances and with the net cash proceeds of certain asset sales and casualty or condemnation events not reinvested in our business or applied to prepay such term loans within a specified period.

Borrowings under the Revolving Credit Facility, at our option, bear interest at either (1) an alternate base rate (the highest of (a) the federal funds effective rate plus 0.50%, (b) the prime rate of Bank of America, N.A., and (c) the one-month Term SOFR rate plus 1.00%) or (2) the Term SOFR rate for the applicable interest period plus, in each case, an applicable margin percentage, which initially is 1.375% for Term SOFR borrowings and 0.375% for alternate base rate borrowings and is 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 0.175% initially, which rate is also subject to incremental increase or decrease based on a consolidated total net leverage ratio.

Enpro Inc. and EnPro Holdings are the permitted borrowers under the Amended Credit Facility Agreement. We have the ability to add wholly owned foreign subsidiaries as borrowers under the Revolving Credit Facility. Each of our domestic, consolidated subsidiaries (subject to certain exclusions) is required to guarantee the obligations of the borrowers under the Amended Credit Facility Agreement and, subject to the permitted exceptions, each of the Company’s existing domestic subsidiaries has entered into the Amended Credit Facility Agreement to provide such a guarantee.

Collateral. Borrowings under the Amended Credit Facility Agreement are secured by a first priority pledge of the following assets:

•100% of the capital stock of each domestic, consolidated subsidiary of Enpro Inc.;

•65% of the capital stock of any first tier foreign subsidiary of Enpro Inc. and its domestic subsidiaries (subject to certain exclusions); 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 Enpro Inc. and the subsidiary guarantors.

Financial Covenants. The Amended Credit Facility Agreement contains certain financial covenants and required financial ratios, including:

•a maximum consolidated total net leverage ratio of not more than 4.0 to 1.0 (with total debt, for the purposes of such ratio, to be net of unrestricted cash of Enpro Inc. and its consolidated subsidiaries), which ratio may be increased (up to three times) at the borrowers’ option to not more than 4.5 to 1.0 for the four-quarter period following a significant acquisition; and

•a minimum consolidated interest coverage ratio of at least 2.5 to 1.0.

Affirmative and Negative Covenants. The Amended Credit Facility 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.

Events of Default. The Amended Credit Facility Agreement contains events of default including, but not limited to, nonpayment of principal or interest, violation of covenants, breaches of representations and warranties, cross-default to other debt, bankruptcy and other insolvency events, material judgments, certain ERISA events, actual or asserted invalidity of loan documentation, certain changes of control of Enpro Inc. and the invalidity of subordination provisions of subordinated indebtedness.

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, 2025, we were in compliance with all of the covenants of the indenture governing the Senior Notes.

Share Repurchase Program. Enpro’s board of directors approved a new share repurchase authorization in October 2024, replacing the previous $50.0 million authorization that had expired. No shares were purchased under the prior repurchase program. Under the replacement authorization, which is identical to the prior authorization, the Company may repurchase up to $50.0 million of shares in both open market and privately negotiated transactions. The Company’s management is authorized to determine the timing and amount of any such repurchases based on its evaluation of market conditions, capital alternatives, and other factors. Repurchases may also be made under Rule 10b5-1 plans, which could result in the repurchase of shares during periods when the Company otherwise would be precluded from doing so under insider trading laws. The renewed share repurchase authorization expires in October 2026.

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, 2024, for a discussion of our critical accounting estimates, which is incorporated here by reference.

Contingencies

A description of our contingencies is included in Note 14 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, 2025 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, 2025 were as follows:

The summarized balance sheet at March 31, 2025 was as follows:

The table above reflects $10.3 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $8.9 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, 2024 were as follows:

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

The table above reflects $14.1 million of current intercompany receivables due to the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries and $8.1 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.