Enpro Inc.

Results of Operations

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, net of gains on restructuring-related sales of assets, 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.

Second Quarter of 2025 Compared to the Second Quarter of 2024

Sales of $288.1 million in the second quarter of 2025 increased 6.0% from $271.9 million last year. The following table summarizes the impact of foreign currency on segment sales:

Discussion of year-over-year operating performance for each segment for the second quarter of 2025:

Sealing Technologies. Sales of $187.5 million in the second quarter of 2025 increased 1.9% compared to $184.0 million in the same period of 2024. Excluding foreign exchange translation ($0.8 million), sales were up 1.5% or $2.7 million. Strength in aerospace and food and pharmaceutical demand, firm general industrial performance, and strategic pricing ($5.2 million) more than offset continued softness in the commercial vehicle OEM market and timing of the nuclear deliveries year-over-year.

Adjusted Segment EBITDA of $63.3 million in the second quarter of 2025 decreased 3.2% from $65.4 million in the second quarter of 2024. Segment AEBITDA margin narrowed slightly to 33.8% in the second quarter of 2025 from 35.5% last year. Excluding foreign exchange translation ($0.1 million), adjusted Segment EBITDA decreased 3.4%, or $2.2 million, driven by transactional foreign exchange headwinds ($1.9 million), slight variations in mix and timing of deliveries. Last year, segment profitability exceeded 35% for the first time.

Advanced Surface Technologies. Sales of $100.9 million in the second quarter of 2025 increased 14.5% or $12.8 million compared to sales of $88.1 million in the same period last year. Continued growth in precision cleaning solutions, optical coatings, and improved demand for in-chamber semiconductor tools and assemblies drove the sales increase.

Adjusted Segment EBITDA of $19.8 million in the second quarter of 2025 increased 3.7% from $19.1 million in the comparable period of 2024. Segment AEBITDA margin decreased to 19.6% from 21.7% in the second quarter of 2024. Contribution from the increase in sales was primarily offset by unfavorable foreign currency exchange rates ($2.8 million), a mix shift toward certain in-chamber tools and assemblies and increased labor and manufacturing overhead expenses ($2.5 million) in support of new platforms and long-term growth initiatives.

Corporate expenses for the second quarter of 2025 of $12.1 million increased $1.6 million as compared to the same period in 2024, primarily due to increased incentive compensation accruals and increased health insurance costs, partially offset by lower restructuring costs and professional fees.

Interest expense, net in the second quarter of 2025 decreased by $2.0 million from the second quarter of 2024 primarily driven by lower outstanding debt in 2025.

Other expense, net in the second quarter of 2025 increased $0.6 million compared to the same period in 2024, primarily due to a loss on the extinguishment of debt ($1.7 million), higher non-service pension related costs ($0.7 million), and an increase to insurance receivables in the prior year as a result of selling a claim from an insolvent carrier related to legacy matters ($0.6 million), partially offset by a year-over-year decrease in environmental costs ($2.8 million).

The effective tax rates for the quarters ended June 30, 2025 and 2024 were 25.5% and 26.7%, respectively. The effective tax rate for the quarters ended June 30, 2025 and June 30, 2024 are higher than the U.S. Federal tax rate primarily driven by higher tax rates in most foreign jurisdictions and state tax on domestic earnings partially offset by various tax credits.

Net income was $26.4 million, or $1.25 per share, in the second quarter of 2025 compared to $26.7 million, or $1.27 per share, in the second quarter of 2024. Earnings per share is expressed on a fully diluted basis.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

Sales of $561.3 million in the first six months of 2025 increased 6.0% from $529.4 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 six months of 2025:

Sealing Technologies: Sales of $367.1 million in the first six months of 2025 increased 3.2% compared to $355.6 million in the prior-year period. Excluding unfavorable foreign exchange translation ($2.1 million) and partial contribution from an acquisition completed in late January 2024 ($3.2 million), sales were up 2.9%, or $10.4 million. The increase in sales was driven primarily by strength in aerospace and food and pharmaceutical demand ($2.0 million) and strategic pricing and mix ($8.5 million), offset in part by weak commercial vehicle OEM demand.

Adjusted Segment EBITDA of $122.0 million in the first six months of 2025 increased 3.0% , or $3.6 million, from $118.4 million in the comparable period of 2024. Adjusted Segment EBITDA margin of 33.2% in the first six months of 2025 was flat compared to the prior-year period. Excluding the unfavorable foreign exchange translation ($1.1 million) and partial contribution from an acquisition completed in late January 2024 ($1.6 million), Adjusted Segment EBITDA increased 2.6%, or $3.1 million. Contribution from the increase in sales ($9.9 million) in the first six months of 2025 was partially offset by increased personnel and administrative costs ($1.6 million), incentive compensation accruals ($0.8 million), and unfavorable foreign currency exchange rates ($2.8 million).

Advanced Surface Technologies: Sales of $194.7 million in the first six months of 2025 increased 11.8%, or $20.6 million, compared to $174.1 million in the prior-year period. Continued growth in leading-edge precision cleaning solutions and optical coatings, as well as improved demand for in-chamber semiconductor tools and assemblies drove the increase in sales.

Adjusted Segment EBITDA of $40.3 million in the first six months of 2025 increased 10.7%, or $3.9 million, from $36.4 million in the comparable period of 2024. Adjusted Segment EBITDA margin of 20.7% was down slightly from 20.9% in the prior-year period. Contribution from the increase in sales was partially offset by unfavorable foreign currency exchange rates ($3.0 million), increased operating expenses ($4.3 million) in support of new platforms and long-term growth initiatives.

Corporate expenses for the first six months of 2025 of $23.4 million increased $0.7 million as compared to the same period of 2024, primarily due to increased incentive compensation accruals and higher health insurance costs, partially offset by lower restructuring costs and professional fees.

Interest expense, net in the first six months of 2025 decreased by $2.2 million compared to the first six months of 2024 primarily driven by lower outstanding debt in 2025.

Other expense in the first six months of 2025 decreased $3.4 million compared to the same period last year, primarily due to the 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) and a decrease in environmental costs ($3.0 million), partially offset by a loss on the extinguishment of debt ($1.7 million), higher non-service pension related costs ($1.5 million), and an increase to insurance receivables in the prior year as a result of selling a claim from an insolvent carrier related to legacy matters ($0.6 million).

The effective tax rates for the six months ended June 30, 2025 and 2024 were 24.9% and 22.7%, respectively. The effective tax rate for the six months ended June 30, 2025 is higher than the U.S. Federal tax rate primarily driven by higher tax rates in most foreign jurisdictions and state tax on domestic earnings partially offset by various tax credits. The effective tax rate for the six months ended June 30, 2024 is higher than the U.S. Federal tax rate primarily driven by higher tax rates in most foreign jurisdictions partially offset by favorable state amended return filings and additional tax benefit related to share-based payment awards.

Net income was $50.9 million, or $2.40 per share, in the first six months of 2025 compared to $39.2 million, or $1.86 per share, in the first six months of 2024. Earnings per share is expressed on a diluted basis.

Backlog

As of June 30, 2025, the aggregate amount of transaction price of remaining performance obligations, or backlog, on a consolidated basis was $273.8 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 June 30, 2025, we held $14.8 million of cash and cash equivalents in the United States and $92.3 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 $174 million as of June 30, 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 six months of 2025, we repatriated $137.2 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 $73.2 million of cash in the first six months of 2025 and $49.5 million of cash in the first six months of 2024. The year-over-year increase was primarily driven by higher net income and lower cash payments of incentive compensation, partially offset by higher cash taxes paid.

Investing activities used $19.6 million of cash in the first six months of 2025 compared to $223.1 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 $194.9 million of cash in the first six months of 2025, primarily driven by $851.5 million in repayments of debt, $7.7 million in debt issuance costs, and $13.2 million used for dividends, partially offset by $680 million in proceeds from issuing debt. Financing activities in the first six months of 2024 used $19.0 million, primarily from $17.9 million used for the acquisition of Alluxa non-controlling interests and $12.7 million used for dividends paid partially offset by $13.9 million in net borrowings.

Capital Resources

Senior Secured Credit Facilities. 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”) among the Company and our subsidiary, EnPro Holdings, Inc. ("EnPro Holdings"), as borrowers, certain foreign subsidiaries of the Company from time to time party thereto, as designated borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer. The Amended Credit Facility Agreement amended the agreement then governing our senior secured credit facilities and provides for a senior secured revolving credit facility of up to $800.0 million (the “Revolving Credit Facility”), 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 term loan borrowings outstanding under the agreement governing our senior secured credit facilities prior to such amendment, 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.

Availability and Compliance. The borrowing availability under our Revolving Credit Facility at June 30, 2025 was $770.4 million after giving consideration to $9.6 million of outstanding letters of credit and $20.0 million of outstanding borrowings. We were in compliance with all covenants of the Amended Credit Facility Agreement as of June 30, 2025.

Senior Notes. On May 29, 2025, we completed the offering of $450 million in aggregate principal amount of 6.125% Senior Notes due 2033 (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 Inc. and mature on June 1, 2033. Interest on the Senior Notes accrues at a rate of 6.125% per annum and is payable semi-annually in cash in arrears on June 1 and December 1 of each year, commencing December 1, 2025. 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 above a specified threshold. We may, on any one or more occasions, redeem all or a part of the Senior Notes at specified redemption prices plus accrued and unpaid interest.

The indenture governing the Senior Notes includes covenants that restrict our ability, subject to specified exceptions and qualifications set forth in the indenture, to incur liens on assets, engage in certain asset sales, including sale and leaseback transactions, and merge, consolidate, transfer or dispose of all or substantially all assets. The indenture further requires us to offer to repurchase the Senior Notes at a price equal to 100.0% of the principal amount thereof plus accrued and unpaid interest, in the event that the net cash proceeds of certain asset sales are not reinvested in acquisitions, capital expenditures, or used to repay or otherwise reduce specified indebtedness within a specified period, to the extent the remaining net proceeds exceed a specified amount.

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.

We applied a portion of the net proceeds from the sale of the Senior Notes to fund the redemption on June 12, 2025 of all of our outstanding 5.75% Senior Notes due 2026 (having an aggregate principal amount of $350 million) at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued but unpaid interest to, but not including, the redemption date.

At June 30, 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 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.