Good morning. I will be your conference operator today. At this time, I would like to welcome everyone to the EnPro Industries second quarter earnings release teleconference. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to your moderator, Mr. Don Washington.

Good morning, everyone and welcome to EnPro Industries quarterly earnings conference call. In just a moment, Steve Macadam, our President and CEO and Bill Dries, our Senior Vice President and CFO will review the quarter and then we’ll open the lines for questions. As you probably are aware, there are slides accompanying our call on our website, which you can access through our home page. Before Steve and Bill make their remarks, I’d like to remind you that you may hear statements during the course of this call that express the belief, expectation or intention as well as those that are not historical fact. These statements are forward-looking and 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 are referenced in the Safe Harbor statement included in our press release and are described in more detail along with other risks and uncertainties in our filings with the SEC, including our Form 10-K for the year ended December 31, 2009 and our Form 10-Q for the quarter ended March 31, 2010. We do not undertake to update any forward-looking statements made on this conference call or reflect any change in management’s expectations or any change in the assumptions or circumstances on which such statements are based. In addition, EnPro owns a number of direct and indirect subsidiaries and from time-to-time we may refer collectively to EnPro and one or more of our subsidiaries as we; or to the business asset, debts, or affairs of EnPro or its subsidiary as ours. These in similar references are for convenience only and should not be construed to change the fact that EnPro and each subsidiary is an independent entity with separate management operations, obligations and affairs. The call is also being webcast on our website and a replay will also be available on our website. As usual we’ll conclude the call with a question-and-answer session. If your questions aren’t answered on the call or if you have any follow-up questions, you can contact me at 704-731-1527 and now I’ll turn the call over to Steve.

Thanks Don and good morning to everyone and thanks for taking the time to dial in this morning. The second quarter of 2010 was a very positive period for EnPro. First, the process of permanently resolving all asbestos claims against Garlock Sealing Technologies got underway on June 5. The ultimate result will be the establishment and funding of a trust to resolve all current and future claims against GST. When this is accomplished, we expect GST to emerge free of any liability for asbestos claims. Obviously, resolving these claims should have very positive implications for EnPro’s future and our perception in the financial markets. In the meantime, the expenses and cash flows GST has historically incurred to defend and resolve asbestos litigation came to a stop on June 5. As of that date, all pending and future asbestos claims against GST can be only pursued only in the bankruptcy court. We expect GST to incur a cost of administration in the case but those costs will be much, much lower than GST’s historical defense cost. In addition, the court has issued an order preventing asbestos claimants from proceeding against any other EnPro subsidiary. In addition to the asbestos claims resolution process we got strong financial results to talk about. All of our operations recorded healthy increases in sales as our markets continue to recover from the 2009 recession. Compared to a year ago, sales were up by 22% or about $45 million and this is even without including $12 million of third party sales that GST after it was deconsolidated, beginning June 5, 2010. Our segment profit margins in the second quarter exceeded 15% for the second consecutive quarter and improved by more than 5 percentage points over the second quarter of last year even after last year is adjusted…

Thanks Steve. As Steve said, the second quarter was a good one as we produced strong gains in sales and earnings over the second quarter of 2009 as well as over what was a solid first quarter of 2010. Before I discuss the operating results of the quarter, I want to briefly review the impact of the ACRP on our accounting and reporting going forward. I expect that many of you have heard this before but since it has a significant impact on the way we will report our results going forward, I think it’s worth repeating. As a result of the claims resolution process, we have deconsolidated the results of GST and its subsidiaries in Canada, Mexico and Australia; they’re shown here on the left. These entities are subsets of the Garlock family of companies, which includes all the entities you see here. The entities involved in the ACRP accounted for about 20% of EnPro’s total sales and segment earnings in 2009, which is in line with their relative contribution for each of the past three years. This slide summarizes the principle impact on EnPro’s accounting and reporting going forward. Effective June 5th, we stopped consolidating the operating results for GST and its subsidiaries and they will not be included in EnPro’s results for the duration of the claims resolution process. All of the assets and liabilities associated with these entities including the asbestos liability and insurance receivables have been collapsed into one line on our balance sheet and shown separately as an investment in GST. The carrying value of this investment has been adjusted to its estimated fair value, which resulted in a $54 million non-cash pretax gain in the second quarter. The adjusted investment will be frozen on our books for the duration of the claims resolution…

Thanks Bill. As Bill and I have both mentioned, we’re pleased with our prospects for the second half of 2010. The deconsolidation of GST LLC will have a significant effect on the way year-over-year comparisons of our results are reported but the slide and the appendix to our presentation should help you understand that effect. As Bill said, within the limitations imposed on us we’ll do everything we can to help you make year-over-year comparisons on a consistent basis. I will also remind you that in the past, we have always called your attention to the fact that FME shipments can be very lumpy from quarter to quarter. This year is no different and the acceleration of $21 million of engine shipments ended the second quarter from our original plan will also affect our second half since activity at Fairbanks Morse will be lower in the third quarter because of this. Our outlook for FME’s full year results in 2010 has not changed and we continue to expect sales will be about the same as in 2009, which was a record year. However, we expect sales to reach their low point in the third quarter of 2010 before they pick up in the fourth quarter on higher engine shipments. Our markets show signs for sustained recovery and our businesses are performing well across the board. We’re especially encouraged by the year-over-year growth that we’re seeing at Stemco and at GGB. The increase at Stemco should be a good leading indicator of improvement in general economic conditions since Stemco’s aftermarket demand is driven by increases in the heavy duty truck loadings and truck ton miles. At GGB, it’s not only pleasing to see markets recover but also to see that we’re benefiting from the measures we took last year to help improve the cost structure and performance of that business. Those are only two examples of the encouraging developments we see throughout EnPro. I remain optimistic not only about the rest of 2010 but about 2011 and beyond. Our businesses are performing well and improving. Our markets are healthy. Our acquisition program has regained traction after slowing down during the recession and we have ample resources to fund it. With the initiation of the ACRP, we finally have the prospects of an asbestos-free Garlock and the resulting benefits to the value of EnPro. So we have a lot to be excited about and we look forward to sharing it with you as we move ahead. So with that we can open the lines for your questions.

(Operator Instructions) Your first question comes from the line of Todd Vencil with Davenport & Company. Todd Vencil – Davenport & Company: Bill, you gave us a lot of detail on the deconsolidation and I appreciate that, and I completely understand that it’s inappropriate for you guys to comment on what a pro forma number would look like, assuming the reconsolidation of GST and I wholly support that. That having been said, I think it is completely appropriate for me to do it. So if you wouldn’t mind helping me out Bill, I just want to make sure that I’m thinking about this the right way. You guys reported $0.87 of net income before asbestos-related expenses and other selected items. And if I am looking at the math right, I think that the GST operating profit that you talk about would be about $0.07 a share if it was tax effective; is that the way to think about that?

Yes, that’s exactly right way. Todd Vencil – Davenport & Company: Okay, so if I add that back, then if I’m looking at it the right way I need to take away the $0.06 from interest expense and royalties with GST that’s already added back into that $0.87, is that correct?

No, I don’t think you need to do anything. The $0.87 does not include that $0.06. Todd Vencil – Davenport & Company: So it would be $0.87 plus $0.07, which would be $0.94?

Exactly. Todd Vencil – Davenport & Company: Moving on to things that are more fundamentally interesting I guess. On the engine side, am I correct in remembering that margins on the original equipment are lower than the aftermarket margins?

Yes, that’s right. Todd Vencil – Davenport & Company: But you guys had a really nice margin quarter even including, what I think by anybody’s measure would be an outsized contribution from original equipment.

Yes, that’s right. Todd Vencil – Davenport & Company: So how should we think about that going forward? Is there some reason that these higher levels of margins that we have seen wouldn’t be sustainable?

I think if you take last year of FME and bake in a little bit of improvement in the operation to the business, that’s really quite frankly a reflection of a lot of their work on improving operations and so forth. I think you’ll come to a reasonable number for 2010 and then just back out the first half and you ought to be able to figure out what the second half is going to be.

Yes, I think if you look, obviously the kind of our engine margins are a little more than half of what our typical aftermarket would be. We had good strong margin in the second quarter plus they were down from the first quarter. If you recall, our first quarter margins at FME were 25%. So we’re a little over 20%, almost 21% in the second quarter. So there was some mixing down because of that disproportionate share of the engines in that quarter but your point is still a good one. Todd Vencil – Davenport & Company: So just to circle around on that, there was some mixing down in the second quarter from the first quarter but I think from 25% to 20% –

Because we had a disproportionately larger share of engine shipments in the second quarter than we did in the first quarter. Todd Vencil – Davenport & Company: Steve, appreciate your general comments about the continued strength in the market. I assume you would have let us know if there was some intra-quarter shift in ‘10 or there, or since the end of the quarter but since I’ve got you, did you see any improvement or softening of the market time either as you move through the quarter or kind of since the end of the quarter, if you want to talk about that in any of your end markets?

As we’ve always said on this call with you guys that our businesses, other than FME, are pretty short cycle visibility. So we don’t have great visibility outside of the next 30-45 days. But we certainly haven’t seen anything really change from the end of the quarter till now in our order pattern. That’s what I’m saying that it won’t I mean I’m not the best economic forecaster in the world. I read the same thing that everybody on the call reads in terms of concern about slowing growth of the economy and GDP and so forth. But terms of our business is things seem to be holding up just fine.

Your next question comes from the line of Joe Mondillo with Sidoti & Company. Joe Mondillo – Sidoti & Company: My first question has to do with the Engineered Products side of the business. If I’m not mistaken it looks like margins did increase year-over-year but sequentially it looks like they ticked down just on the top line there, I was expecting a little more growth than expected. It looks like it’s over there at that CPI business. Could you just give us some more color on what’s going on there?

Yes, the margins were down a little bit. I think that’s more sequentially anyway, I think that’s more a function of the mix of the product in terms of little more higher mix on the OEM side than the aftermarket though. So we’ve also incurred some expenses in the CPI side related to opening up some service centers but we’ve also been incurring some expenses as well; we’re putting a new ERP system there. So there was some margin pressure at CPI level, although it’s not like I said more of function of mix and some expenses associated with activities that will actually help us going forward. Joe Mondillo – Sidoti & Company: The demand on that side of the business, do you expect that to somewhat accelerate in the back half or what are you seeing in terms of demand?

I wouldn’t say that we expected to accelerate. I think things seem to feel pretty stable and solid. Bill did indicate in his remarks that we have not seen a strong gas market. CPI competes in a number of different markets for gas reciprocating compressors, one of which is the natural gas market and that has continued to be weak as gas prices are still low, and that’s mostly in Western Canada as he mentioned, and we don’t see that changing. So we don’t feel like it’ll get worse but we don’t think it’ll get better at least not in the short term. So I think that I would describe the demand for Engineered Products as pretty stable. We’re starting to see some of the European industrial markets that GGB serves come back a little bit but auto has weakened a little bit but that’s been offset by finally some recovery in the industrial side of what GGB does in Europe.

I think I will caution you too, you mentioned you didn’t see the sequential growth. First quarter was very strong. These businesses don’t tend to be as seasonal as some of the others. And so I think we look at it as second quarter compared to a very strong first quarter and we basically pretty much held steady. So I wouldn’t read anything into that sequential change from Q1. Joe Mondillo – Sidoti & Company: I guess my second question just has to do with the Fairbanks Morse business. Looking at your backlog today compared to say a year ago, how does that compare and how is your outlook 6 to 18 months down the road of that business?

The backlog is up substantially from a year ago and if you recall, earlier this year we announced the booking of almost a $100 million nuclear contract down in South Texas. So it’s well ahead of where we were at the end of the year. Total backlog was a little over $300 million at June 30, about two thirds of that is at Fairbanks. We’ve got an excess of $200 million there; down a little bit from March. Obviously we had the big shipment quarter that we talked about before but the backlog is still in great shape, and I’ll let Steve talk about the longer term outlook but I think we’re still very sanguine about FME and its prospects.

I think that’s right. We feel like we’re positioned well for the nuclear side of the businesses we’ve talked about before. There’s still a lot of new nuclear plants that are being proposed and being worked on and we’re pretty much talking to all of the folks that are building them. So I’m not saying we’re going to win them all but there’ve been two nuclear awards in the last 30 years and we’ve gotten both of them, both within the last year. So we’re pretty well positioned there and I think that will be a nice supplement for new engines to the ongoing navy work. Joe Mondillo – Sidoti & Company: My last question just has to do with the Garlock scenario here. I know you said that it’s going to be a long process here. I just wanted to ask if there was any update to the timeline that you have put out in the past.

No, there’s really not. We’re still really too early in it to have any new read on the timeline. It’s going to be a three to five year process in our view. Joe Mondillo – Sidoti & Company: I know I have asked this in the past as well, but what is your outlook of Garlock returning? Just if you can reiterate I guess what you have said in the –

What do you mean outlook of it returning? Joe Mondillo – Sidoti & Company: Returning to the EnPro business?

In terms of what timing or –? Joe Mondillo – Sidoti & Company: No, if it will in fact return.

Absolutely. I mean of course it will return. We still own 100% of it and once we fund the trust, yes and remember it’s not all that Garlock did file but it’s only GST LLC, which is about half of Garlock. So all the international operations and other parts of it stand like that company are not in the process. So there’s really no question about whether it will return to EnPro, I mean in sense it has not left. We have to deconsolidate it for reporting purposes. But same teams run in Garlock, that was run in Garlock before the process. And like I said I mean if you went to visit the facility and talk to the customers and employees and vendors and so forth, they’ve already moved on. They’re still running the business the way they run the business. This is an asbestos program that handles the litigation. So there’s no doubt it will come back to us, that’s never in question. Joe Mondillo – Sidoti & Company: All right, I think I understood that. I just wanted to hear you reiterate it.

Yes, okay, good, thanks. Joe Mondillo – Sidoti & Company: Lastly, I just was wondering if you have the sales and net income for Garlock for the entire quarter.

Yes, I’m thinking it’s kind of mid 30s in sales and about 6.5% to 7% segment OI. Joe Mondillo – Sidoti & Company: Okay lastly, the asbestos receivable as this went into a frozen state, what was that receivable at?

About $190 million.

Your next question comes from the line of Gary Farber with CL King. Gary Farber – CL King & Associates: Just had a couple of questions. One, as it pertains to the EnPro corporate; are there any legal actions or anything going on specific to your Company excluding Garlock?

No. Gary Farber – CL King & Associates: No? Okay, and there is no –?

Not that I have been informed about, unless you know something I don’t know. Gary Farber – CL King & Associates: No, I’m just asking. I mean I thought there was – is there a stay in place or something like that in regards to anybody pursuing action against the company itself?

Oh, I’m sorry, yes. That is as part of the asbestos resolution process, we asked the court and they granted an injunction, which prevents any asbestos claims from being filed against any part of EnPro. We were concerned that the adversaries would try to retaliate on the asbestos front in other aspects of EnPro. So we asked the court to step in and rule an injunction to prevent that from happening, should it – I mean we don’t know if it would have happened or not, but it tends to be the way the other side operates, and the court did in fact grant that injunction. So what that means is nobody can concoct an asbestos claim against any part of EnPro during this process. Gary Farber – CL King & Associates: That’s a permanent one or a temporary one, a permanent injunction?

It’s temporary but it’s through the duration of the process. Gary Farber – CL King & Associates: If you could just comment on raw materials, if you are seeing any changes in trends as far as your input costs?

No, I mean we’re feeling a little bit of pressure but certainly not as much pressure as we felt as we were starting to see build in the first quarter. So, year to date we’ve seen copper go up a percent or two, we’ve seen cold-rolled steel is down now since the beginning of the year, still up 20% from last summer. So we’ve seen things flatten out whereas in the beginning of the year we were concerned that commodities were going to show some strength. So that’s really kind of leveled off and it’s a bit of a mixed bag but I’d say on balance it’s certainly leveled off and some are even down a few percentage points. Gary Farber – CL King & Associates: On these acquisitions you announced recently, how much leverage is there to put all those products through your distribution network?

Those are CPI deals and what we did is we bought two companies that both do lubrication system products. The lubrication systems that distribute lubrication onto natural gas reciprocating compressors. And CPI’s core business is directly on those same machines and we have historically sold the sealing products and ware products, so the packing rings and rider rings and piston rings as well as compressor valves and piston rods, etc. into that market. And what typically happens is when you have an issue, when a customer, a user or an operator has an issue with the compressor performance obviously the sealing system and the lubrication system are integrally related. And so the problem is many times when you have an issue that kind of the wear ring people point to the lubrication and the lubrication people point to the wear ring. So we basically bought these two companies that do lubrication systems and our hope is to really now go to the market with an integrated and combined package, so a value proposition that says, “Look, we’re going to take care of your lubrication and sealing needs, and we’re responsible for the performance of the compressor, so that you don’t have to worry about whether it was a lubrication problem or a sealing component problem because we own both of them.” So we think there’s a ton of synergy between what we’ve just bought and what we do in CPI. We’re actually quite excited about it. It’s a whole new product line for CPI and just very, very synergistic with our core CPI business, sold to the exact same customers. And really, like I said, the performance of the two are really integrally linked from a technical standpoint. Gary Farber – CL King & Associates: How quickly can you integrate those into your offering, immediately or does it take a couple of months?

Oh no, they are being integrated as we speak and we closed one of them last Friday and closed one of them on Monday. So, we’ve got one of our guys who is going in and operating it. We’re inheriting a good team by the way; they’re both good companies. A couple of the really key technical leaders of the businesses are staying with us. We’re going to figure out how to get those guys working together. They had been competitors before. We are trying to figure out how to get them to combine those product lines, take the best of both those companies and integrate it with everything that we offer in CPI. So, it’ll probably start out more. Those businesses are both US based but we’ll start out being mostly a US based business for the first several months and then we’ll take it globally, take that value proposition globally as well. Gary Farber – CL King & Associates: That’s what you’d expect with the additional acquisitions primarily US-based products to leverage overseas?

In this case; obviously, we’ve done that in reverse as well. In some cases we’ve done the opposite. We’ve bought companies that are international and brought it the other way. So our strategy in CPI and in Garlock is to go both ways with that.

There are no further questions at this time.

Thank you everyone for dialing in and we appreciate your participation and if you have any further questions, please give me a call.

This concludes today’s conference call, you may now disconnect.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!