UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

þ		Annual report pursuant to Section 13 or 15(d) of the securities exchange act of 1934

For the fiscal year ended December 31, 2007

o		Transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934

ENPRO INDUSTRIES, INC.

(Exact name of registrant, as specified in its charter)

North Carolina		01-0573945
(State or other jurisdiction of incorporation)		(I.R.S. employer identification no.)
5605 Carnegie Boulevard, Suite 500,		28209
Charlotte, North Carolina		(Zip code)
(Address of principal executive offices)

(704) 731-1500
(Registrant’s telephone number, including area code)

		Name of each exchange
Title of each class		on which registered
Common stock, $0.01 par value Preferred stock purchase rights		New York Stock Exchange New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o                    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o                    No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ                    No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                    No þ

The aggregate market value of voting and nonvoting common stock of the registrant held by non-affiliates of the registrant as of June 30, 2007 was $909,937,000. As of February 15, 2008, there were 21,631,176 shares of common stock of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2008 annual meeting of shareholders are incorporated by reference into Part III.

 

 

TABLE OF CONTENTS

				Page
PART I
Item 1		Business			1
Item 1A		Risk Factors			7
Item 1B		Unresolved Staff Comments			13
Item 2		Properties			14
Item 3		Legal Proceedings			14
Item 4		Submission of Matters to a Vote of Security Holders			14
PART II
Item 5		Registrant’s Common Equity and Related Shareholder Matters			16
Item 6		Selected Consolidated Financial Data			18
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 7A		Quantitative and Qualitative Disclosures About Market Risk			35
Item 8		Financial Statements and Supplemental Data			37
Item 9		Changes In and Disagreements with Accountants on Accounting and Financial Disclosure			37
Item 9A		Controls and Procedures			37
Item 9B		Other Information			38
PART III
Item 10		Directors, Executive Officers and Corporate Governance			39
Item 11		Executive Compensation			39
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			39
Item 13		Certain Relationships and Related Transactions, and Director Independence			40
Item 14		Principal Accountant Fees and Services			40
PART IV
Item 15		Exhibits and Financial Statement Schedules			40
		Signatures			41
		Exhibit Index			43
		Report of Independent Registered Public Accounting Firm			47
		Consolidated Statements of Operations			49
		Consolidated Statements of Cash Flows			50
		Consolidated Balance Sheets			51
		Consolidated Statements of Changes in Shareholders’ Equity			52
		Notes to Consolidated Financial Statements			53
		Schedule II — Valuation and Qualifying Accounts			89
Exhibit 10.5
Exhibit 10.6
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.25
Exhibit 10.26
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 24.1
Exhibit 24.2
Exhibit 24.3
Exhibit 24.4
Exhibit 24.5
Exhibit 24.6
Exhibit 24.7
Exhibit 31.1
Exhibit 31.2
Exhibit 32

ENPRO INDUSTRIES, INC.

PART I

ITEM 1. BUSINESS

     As used in this report, the terms “we,” “us,” “our,” “EnPro” and “Company” mean EnPro Industries, Inc. and its subsidiaries (unless the context indicates another meaning). The term “common stock” means the common stock of EnPro Industries, Inc., par value $0.01 per share. The terms “convertible debentures” and “debentures” mean the 3.9375% Convertible Senior Debentures due 2015 issued by the Company in October 2005.

Background

     We were incorporated under the laws of the State of North Carolina on January 11, 2002, as a wholly owned subsidiary of Goodrich Corporation (“Goodrich”) in anticipation of Goodrich’s announced distribution of its Engineered Industrial Products segment to existing Goodrich shareholders, which took place on May 31, 2002 (the “Distribution”). We are a leader in the design, development, manufacturing, and marketing of proprietary engineered industrial products. We have 42 primary manufacturing facilities located in the United States and 10 other countries.

     Our sales by geographic region in 2007, 2006 and 2005 were as follows:

		2007				2006				2005
		(in millions)
United States		$	565.7			$	543.0			$	485.6
Europe			277.8				222.8				212.1
Other			186.5				162.6				140.9
Total		$	1,030.0			$	928.4			$	838.6

     We maintain an Internet website at www.enproindustries.com. We will make this annual report, in addition to our other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Our Corporate Governance Guidelines and the charters for each of our Board Committees (Audit and Risk Management, Compensation and Human Resources, Executive, and Nominating and Corporate Governance committees) are also available on our website, and copies of this information are available in print to any shareholder who requests it. Information included on or linked to our website is not incorporated by reference into this annual report.

Operations

     We manage our business as three segments: a sealing products segment, which includes our sealing products, heavy-duty wheel end components, polytetrafluoroethylene (“PTFE”) products, and rubber products; an engineered products segment, which includes our metal polymer bearings, rotary and reciprocating air compressors, vacuum pumps, air systems and reciprocating compressor components; and an engine products and services segment, which manufactures heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. For financial information with respect to our business segments, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations,” and Note 16 to our Consolidated Financial Statements. Item 7 and Note 16

contain information about sales and profits for each segment, and Note 16 contains information about each segment’s assets.

Sealing Products Segment

     Overview. Our Sealing Products segment designs, manufactures and sells sealing products, including metallic, non-metallic and composite material gaskets, rotary seals, compression packing, resilient metal seals, elastomeric seals, hydraulic components and expansion joints, as well as wheel-end component systems, PTFE products, conveyor belting and sheeted rubber products. These products are used in a variety of industries, including chemical and petrochemical processing, petroleum extraction and refining, pulp and paper processing, heavy-duty trucking, power generation, food and pharmaceutical processing, primary metal manufacturing, mining, water and waste treatment, aerospace, medical, filtration and semiconductor fabrication. In many of these industries, performance and durability are vital for safety and environmental protection. Many of our products are used in applications that are highly demanding, e.g., where extreme temperatures, extreme pressures, corrosive environments and/or worn equipment make sealing difficult.

     Products. Our Sealing Products segment includes the product lines described below, which are designed, manufactured and sold by our Garlock Sealing Technologies, Stemco, Plastomer Technologies and Garlock Rubber Technologies operations.

     Gasket products are used for sealing flange joints in chemical, petrochemical and pulp and paper processing facilities where high pressures, high temperatures and corrosive chemicals create the need for specialized and highly engineered sealing products. We sell these gasket products under the Garlock^®, Gylon^®, Blue-Gard^®, Stress-Saver^®, Edge^®, Graphonic^® and Flexseal^® brand names. These products have a long-standing reputation within the industries we serve for performance and reliability.

     Rotary seals are used in rotating applications to contain the lubricants that protect the bearings from excessive friction and heat generation. Because these sealing products are utilized in dynamic applications, they are subject to wear. Durability, performance, and reliability are, therefore, critical requirements of our customers. These rotary seals are used in demanding applications in the steel industry, mining and pulp and paper processing under well-known brand names including Klozure^® and Model 64^®.

     Compression packing is used to provide sealing in pressurized, static and dynamic applications such as pumps and valves. Major markets for compression packing products are the pulp and paper, mining, petrochemical and hydrocarbon processing industries. Branded products for these markets include EVSP™, Synthepak^® and Graph-lock^®.

     Resilient metal seals provide extremely tight sealing performance for highly demanding applications such as nuclear power generation, semiconductor fabrication facilities, specific chemical processing applications and race car engines. Branded products for these markets include Helicoflex^® and Ultraflex^®.

     Critical service flange gaskets, seals and electrical flange isolation kits are used in high-pressure wellhead equipment, flow lines, water injection lines, sour hydrocarbon process applications and crude oil and natural gas pipeline/transmission line applications. These products are sold under the brand names Pikotek^®, VCS™, Flowlo™ and PGE™.

     Stemco manufactures a variety of sealing products used by the heavy-duty trucking industry to improve the performance of wheel end systems and reduce fleet maintenance. Products for this market include hub oil seals, axle fasteners, hub caps, wheel bearings and mileage counters. We sell these

sealing products under the Stemco^®, Grit Guard^®, Guardian^®, Guardian HP^®, Voyager^®, Discover^®, Pro-Torq^®, Sentinel^®, and DataTrac^® brand names.

     Plastomer Technologies manufactures PTFE specialty tape, formed PTFE products, and PTFE sheets and shapes. These PTFE products provide highly specialized and engineered solutions to our customers in the aircraft, fluid handling and semiconductor industries, and are sold under the Plastolon^®, Texolon™ and Amicon™ brand names.

     Garlock Rubber Technologies manufactures rubber bearing pads, conveyor belts and other rubber products for industrial applications under the DuraKing^®, FlexKing^®, Viblon™, Techflex™ and HeatKing™ brand names.

     Customers. Our Sealing Products segment sells products to industrial agents and distributors, original equipment manufacturers (“OEMs”), engineering and construction firms and end users worldwide. Sealing products are offered to global customers, with approximately 43% of sales delivered to customers outside the United States in 2007. Representative customers include Saudi Aramco, Motion Industries, Applied Industrial Technologies, Electricite de France, AREVA, Bayer, BASF Corporation, General Electric Company, Georgia-Pacific Corporation, Eastman Chemical Company, Exxon Mobil Corporation, Minarra Resources, Queensland Alumina, AK Steel Corporation, Volvo Corporation, Utility Trailer, Great Dane, Mack Trucks, International Truck, PACCAR and Applied Materials. In 2007, no single customer accounted for more than 2% of segment revenues.

     Competition. Competition in the sealing markets in which we operate is based on proven product performance and reliability, as well as price, customer service, application expertise, delivery terms, breadth of product offering, reputation for quality and the availability of the product. Our leading brand names, including Garlock^® and Stemco^®, have been built upon long-standing reputations for reliability and durability. In addition, the breadth, performance and quality of our product offerings allow us to achieve premium pricing and have made us a preferred supplier among our agents and distributors. We believe that our record of product performance in the major markets in which this segment operates is a significant competitive advantage for us. Major competitors include A.W. Chesterton Company, Klinger Group, Teadit, Lamons, SIEM/Flexitallic, SKF USA Inc., Freudenberg-NOK, Federal-Mogul Corporation and Saint-Gobain.

     Raw Materials and Components. Our Sealing Products segment uses PTFE resins, aramid fibers, specialty elastomers, elastomeric compounds, graphite and carbon, common and exotic metals, cold-rolled steel, leather, aluminum die castings, nitrile rubber, powdered metal components, and various fibers and resins. We believe that all of these raw materials and components are readily available from various suppliers.

Engineered Products Segment

     Overview. Our Engineered Products segment includes operations that design, manufacture and sell self-lubricating, non-rolling, metal polymer bearing products, rotary and reciprocating air compressors, vacuum pumps, air systems and reciprocating compressor components.

     Products. Our Engineered Products segment includes the product lines described below, which are designed, manufactured and sold by GGB, Quincy Compressor and Compressor Products International.

     GGB produces self-lubricating, non-rolling, metal polymer, solid polymer and filament wound bearing products. The metal-backed or epoxy-backed bearing surfaces are made of PTFE or a mixture that includes PTFE to provide maintenance-free performance and reduced friction. These products

typically perform as sleeve bearings or thrust washers under conditions of no lubrication, minimal lubrication or pre-lubrication. These products are used in a wide variety of markets such as the automotive, pump and compressor, construction, power generation and machine tool markets. We have over 20,000 bearing part numbers of different designs and physical dimensions. GGB™ is a well recognized, leading brand name in this product area.

     Quincy Compressor^® designs and manufactures rotary screw and reciprocating air compressors and vacuum pumps, ranging from one-third to 500 horsepower, used in a wide range of industrial applications, including the pharmaceutical, pulp and paper, gas transmission, health, construction, petrochemical and automotive industries. Quincy^® also sells a comprehensive line of dryers, filters and air treatment products. In addition, Quincy performs comprehensive compressed air system audits under the Air Science Engineering™ brand name and manufactures a complete line of pneumatic and hydraulic cylinders under the Ortman™ brand name.

     Compressor Products International designs, manufactures and services components for reciprocating compressors and engines. These components (packing and wiper assemblies and rings, piston and rider rings, compressor valve assemblies and components) are primarily utilized in the refining, petrochemical, natural gas transmission and general industrial markets. Compressor Products International also designs and manufactures the Gar-Seal^® family of lined butterfly valves.

     Customers. Our Engineered Products segment sells its products to a diverse customer base using a combination of direct sales and independent distribution networks. GGB has customers worldwide in all major industrial sectors, and supplies products both directly to customers through their own local distribution system and indirectly to the market through independent agents and distributors with their own local network. Quincy Compressor products are sold through a global network of independent agents and distributors. Quincy Compressor also sells directly to national accounts, OEMs and climate control houses. Compressor Products International sells its products globally through a network of company salespersons, independent sales representatives and distributors. In 2007, no single customer accounted for more than 3% of segment revenues.

     Competition. GGB has a number of competitors, including Kolbenschmidt Pierburg AG, Norton Company and Federal-Mogul Corporation. In the markets in which GGB competes, competition is based primarily on performance of the product for specific applications, product reliability, delivery and price. Quincy Compressor’s major competitors include Gardner Denver, Inc., Sullair Corporation, Ingersoll-Rand Company, Atlas Copco North America Inc. and Kaeser Compressors, Inc. In the markets in which Quincy Compressor competes, competition generally is based on reliability, quality, delivery times, energy efficiency, service and price. Compressor Products International competes against original equipment manufacturers, such as Dresser Rand, Ingersoll-Rand Company, Cooper Energy Services, Nuovo Pignone and Ariel Compressor and other component manufacturers, such as C. Lee Cook and Hoerbiger Corporation. Price, availability, product quality and reliability are the primary competitive drivers in the markets served by Compressor Products International.

     Raw Materials and Components. GGB’s major raw material purchases include steel coil, bronze powder and PTFE. GGB sources components from a number of external suppliers. Quincy Compressor’s primary raw materials are iron castings. Components used by Quincy Compressor are motors, coolers and accessories such as air dryers, filters and electronic controls. Compressor Products International’s major raw material purchases include PTFE, PEEK (Polyetheretherketone), compound additives, cast iron, bronze, steel and stainless steel bar stock. We believe that all of these raw materials and components are readily available from various suppliers.

Engine Products and Services Segment

     Overview. Our Engine Products and Services segment designs, manufactures, sells and services heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. We market our products and services under the Fairbanks Morse Engine™ brand name.

     Products. In addition to our own designs, our Engine Products and Services segment manufactures licensed heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. The reciprocating engines range in size from 700 to 31,970 horsepower and from five to 20 cylinders. The government and the general industrial market for marine propulsion, power generation, and pump and compressor applications use these products. We have been building engines for over 115 years under the Fairbanks Morse Engine™ brand name and we have a large installed base of engines for which we supply aftermarket parts and service. Additionally, we have been the U.S. Navy’s supplier of choice for medium-speed diesel engines and have supplied engines to the U.S. Navy for over 70 years.

     Customers. Our Engine Products and Services segment sells its products to customers worldwide, including major shipyards, municipal utilities, institutional and industrial organizations, sewage treatment plants, nuclear power plants and offshore oil and gas platforms. We market our products through a direct sales force of engineers in North America and through independent agents worldwide. Our representative customers include Northrop Grumman, General Dynamics, Lockheed Martin, the U.S. Navy, the U.S. Coast Guard and Exelon. In 2007, the largest customer accounted for approximately 29% of segment revenues.

     Competition. Major competitors for our Engine Products and Services segment include MTU, Caterpillar Inc. and Wartsila Corporation. Price, delivery time, and engine efficiency relating to fuel consumption and emissions drive competition.

     Raw Materials and Components. Our Engine Products and Services segment purchases multiple ferrous and non-ferrous castings, forgings, plate stock and bar stock for fabrication and machining into engines. In addition, we buy a considerable amount of precision-machined engine components. We believe that all of these raw materials and components are readily available from various suppliers.

Research and Development

     We refer to our research and development efforts as our “EnNovation” program. The goal of the program is to strengthen our product portfolios for traditional markets while simultaneously creating distinctive and breakthrough products. “EnNovation” incorporates a process to move product innovations from concept to commercialization, and to identify, analyze, develop and implement new product concepts and opportunities aimed at business growth. An “EnNovation” steering team comprised of engineering and marketing leaders coordinates and oversees our new product development efforts.

     We employ scientists, engineers and technicians throughout our operations to develop, design and test new and improved products. We work closely with our customers to identify issues and develop technical solutions. The majority of our research and development expenditures are directed toward the development of new sealing products for hostile environments, the development of truck and trailer fleet information systems, the development of bearing products and materials with superior friction and wear characteristics, and the extension of our air compressor product line. Prior to introduction, new products are subject to extensive testing at our various facilities and at beta test sites in conjunction with our customers.

Backlog

     At December 31, 2007, we had a backlog of orders valued at $268.6 million compared with $192.4 million at December 31, 2006. Approximately 30% of the backlog, mainly at Fairbanks Morse Engine, is expected to be filled beyond 2008. Backlog represents orders on hand that we believe to be firm. However, there is no certainty that the backlog orders will in fact 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 because of our short lead times and some seasonality.

Quality Assurance

     We believe that product quality is among the most important factors in developing and maintaining strong, long-term relationships with our customers. In order to meet the exacting requirements of our customers, we maintain stringent standards of quality control. We routinely employ in-process inspection by using testing equipment as a process aid during all stages of development, design and production to ensure product quality and reliability. These include state-of-the-art CAD/CAM equipment, statistical process control systems, laser tracking devices, failure mode and effect analysis and coordinate measuring machines. We are also able to extract numerical quality control data as a statistical measurement of the quality of the parts being manufactured from our CNC machinery. In addition, we perform quality control tests on parts that we outsource. As a result, we are able to significantly reduce the number of defective parts and therefore improve efficiency, quality and reliability.

     As of December 31, 2007, 31 of our manufacturing facilities were ISO 9000, QS 9000 and/or TS 16949 certified with the remaining facilities working towards obtaining ISO and/or TS certification. Twelve of our facilities are ISO 14001 certified. OEMs are increasingly requiring these standards in lieu of individual certification procedures and as a condition of awarding business.

Patents, Trademarks and Other Intellectual Property

     We maintain a number of patents and trademarks issued by the U.S. and other countries relating to the name and design of our products and have granted licenses to some of these trademarks and patents. We routinely evaluate the need to protect new and existing products through the patent and trademark systems in the U.S. and other countries. We also have proprietary information, consisting of know-how and trade secrets relating to the design, manufacture and operation of our products and their use that is not patented. We do not consider our business as a whole to be materially dependent upon any particular patent, patent right, trademark, trade secret or license.

     In general, we are the owner of the rights to the products that we manufacture and sell. However, we also license patented and other proprietary technology and processes from various companies and individuals in order to broaden our product offerings. We are dependent on the ability of these third parties to diligently protect their intellectual property rights. In several cases, the intellectual property licenses are integral to the manufacture of our products. For example, Fairbanks Morse Engine licenses technology from MAN Diesel for the four-stroke reciprocating engine, and Quincy Compressor licenses from Svenska Rotor Maskiner AB its rotary screw compressor design and technology. A loss of these licenses or a failure on the part of the third party to protect its own intellectual property could reduce our revenues. Although these licenses are all long-term and subject to renewal, it is possible that we may not successfully renegotiate these licenses or that they could be terminated for a material breach. If this were to occur, our business, financial condition, results of operations and cash flows could be adversely affected.

Employees and Labor Relations

     We currently have approximately 4,700 employees worldwide. Approximately 2,700 employees are located within the U.S. and approximately 2,000 employees are located outside the U.S., primarily in Europe, Canada and Mexico. Approximately 29% of our U.S. employees are members of trade unions covered by collective bargaining agreements. Union agreements relate, among other things, to wages, hours and conditions of employment. The wages and benefits furnished are generally comparable to industry and area practices.

     We have collective bargaining agreements in place at five of our U.S. facilities. The hourly employees who are unionized are covered by collective bargaining agreements with a number of labor unions and with varying contract termination dates ranging from August 2008 to June 2012. In addition, some of our employees located outside the U.S. are subject to national collective bargaining agreements.

ITEM 1A. RISK FACTORS

     In addition to the risks stated elsewhere in this annual report, set forth below are certain risk factors that we believe are material. If any of these risks occur, our business, financial condition, results of operations, cash flows and reputation could be harmed. You should also consider these risk factors when you read “forward-looking statements” elsewhere in this report. You can identify forward-looking statements by terms such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” or “continue,” the negative of those terms or other comparable terms. Those forward-looking statements are only predictions and can be adversely affected if any of these risks occur.

Risks Related to Our Business

Certain of our subsidiaries are defendants in asbestos litigation.

     The historical business operations of certain subsidiaries of our subsidiary, Coltec Industries Inc (“Coltec”), principally Garlock Sealing Technologies LLC and The Anchor Packing Company, have resulted in a substantial volume of asbestos litigation in which plaintiffs have alleged personal injury or death as a result of exposure to asbestos fibers. Those subsidiaries manufactured and/or sold industrial sealing products, predominately gaskets and packing products, that contained encapsulated asbestos fibers. Anchor is an inactive and insolvent indirect subsidiary of Coltec. There is no remaining insurance coverage available to Anchor. Our subsidiaries’ exposure to asbestos litigation and their relationships with insurance carriers are actively managed through another Coltec subsidiary, Garrison Litigation Management Group, Ltd. Several risks and uncertainties may result in potential liabilities to us in the future that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Those risks and uncertainties include the following:

	•		the potential for a large number of future asbestos claims that are not covered by insurance because insurance coverage is, or will be, depleted;
	•		the uncertainty of the per claim value of pending and potential future asbestos claims;
	•		the results of litigation and the success of our litigation and settlement strategies;
	•		the potential for large adverse judgments against us resulting from any required payments not covered by insurance and any surety/appeal bonds (and related cash collateral) required in connection with appeals;

	•		an increase in litigation costs, fees and expenses that are not covered by insurance;
	•		the financial viability of our subsidiaries’ insurance carriers and their reinsurance carriers, and our subsidiaries’ ability to collect on claims from them;
	•		the timing of claims, payments and insurance recoveries, and limitations imposed on the amount that may be recovered from insurance in any year;
	•		the unavailability of any insurance for claims alleging first exposure to asbestos after July 1, 1984;
	•		the potential for asbestos exposure to extend beyond specific Coltec subsidiaries arising from corporate veil piercing efforts or other claims by asbestos plaintiffs;
	•		bankruptcies of other defendants; and
	•		the prospect for and impact of any federal legislation providing national asbestos litigation reform.

     To the extent our subsidiaries’ insurance is depleted or the payments required in any given year exceed the annual limitations on insurance recoveries from our subsidiaries’ carriers, our subsidiaries would be required to fund these obligations from available cash. This could adversely affect our ability to use cash for other purposes, including growth of our business, and adversely affect our financial condition.

     In addition, our estimated liability for claims is highly uncertain and is based on subjective assumptions. The actual liability could vary significantly from the estimate recorded in our financial statements.

     Because of the uncertainty as to the number and timing of potential future asbestos claims, as well as the amount that will have to be paid to settle or satisfy any such claims in the future (including significant bonds required by certain states while we appeal adverse verdicts), and the finite amount of insurance available for future payments, future asbestos claims could have a material adverse effect on our financial condition, results of operations and cash flows.

     For a further discussion of our asbestos exposure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contingencies — Asbestos.”

Our business and some of the markets we serve are cyclical and changes in general market conditions could have a material adverse effect on our business.

     The markets in which we sell our products, particularly chemical companies, petroleum refineries, heavy-duty trucking, semiconductor manufacturing, capital equipment and the automotive industry, are, to varying degrees, cyclical and have historically experienced periodic downturns. Prior downturns have been characterized by diminished product demand, excess manufacturing capacity and subsequent erosion of average selling prices in these markets resulting in negative effects on our net sales, gross margins and net income. Economic downturns or other material weakness in demand in any of these markets could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We face intense competition that could have a material adverse effect on our business.

     We encounter intense competition in almost all areas of our business. Customers for many of our products are attempting to reduce the number of vendors from which they purchase in order to reduce inventories. To remain competitive, we need to invest continuously in manufacturing, marketing, customer service and support and our distribution networks. We also need to develop new products to continue to meet the needs and desires of our customers. We may not have sufficient resources to continue to make such investments or maintain our competitive position. Additionally, some of our competitors are larger than we are and have substantially greater financial resources than we do. As a result, they may be better able to withstand the effects of periodic economic downturns. Pricing and other competitive pressures could adversely affect our business, financial condition, results of operations and cash flows.

If we fail to retain the independent agents and distributors upon whom we rely to market our products, we may be unable to effectively market our products and our revenue and profitability may decline.

     Our marketing success in the U.S. and abroad depends largely upon our independent agents’ and distributors’ sales and service expertise and relationships with customers in our markets. Many of these agents have developed strong ties to existing and potential customers because of their detailed knowledge of our products. A loss of a significant number of these agents or distributors, or of a particular agent or distributor in a key market or with key customer relationships, could significantly inhibit our ability to effectively market our products, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Increased costs for raw materials or the termination of existing supply agreements could have a material adverse effect on our business.

     The prices for raw materials we purchase increased in 2007. While we have been successful in passing along a portion of these higher costs, there can be no assurance that we will be able to continue doing so without losing customers. Similarly, the loss of a key supplier or the unavailability of a key raw material could adversely affect our business, financial condition, results of operations and cash flows.

We have exposure to some contingent liabilities relating to discontinued operations, which could have a material adverse effect on our financial condition, results of operations or cash flows in any fiscal period.

     We have some contingent liabilities related to discontinued operations of our predecessors, including environmental liabilities and liabilities for certain products and other matters. In some instances, we have indemnified others against those liabilities, and in other instances, we have received indemnities from third parties against those liabilities.

     Claims could arise relating to products or other matters related to our discontinued operations. Some of these claims could seek substantial monetary damages. Specifically, we may potentially be subject to the liabilities related to the firearms manufactured prior to 1990 by Colt Firearms, a former operation of Coltec, and for electrical transformers manufactured prior to 1994 by Central Moloney, another former Coltec operation. Coltec also has ongoing obligations with regard to workers compensation, retiree medical and other retiree benefit matters associated with discontinued operations that relate to Coltec’s periods of ownership of those operations.

     We have insurance, reserves and funds held in trust to address these liabilities. However, if our insurance coverage is depleted, our reserves are not adequate or the funds held in trust are insufficient,

environmental and other liabilities relating to discontinued operations could have a material adverse effect on our financial condition, results of operations and cash flows.

We conduct a significant amount of our sales activities outside of the U.S., which subjects us to additional business risks that may cause our profitability to decline.

     Because we sell our products in a number of foreign countries, we are subject to risks associated with doing business internationally. In 2007, we derived approximately 45% of our revenues from sales of our products outside of the U.S. Our international operations are, and will continue to be, subject to a number of risks, including:

	•		unfavorable fluctuations in foreign currency exchange rates;
	•		adverse changes in foreign tax, legal and regulatory requirements;
	•		difficulty in protecting intellectual property;
	•		trade protection measures and import or export licensing requirements;
	•		differing labor regulations;
	•		political and economic instability; and
	•		acts of hostility, terror or war.

Any of these factors, individually or together, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

     We intend to continue to pursue international growth opportunities, which could increase our exposure to risks associated with international sales and operations. As we expand our international operations, we may also encounter new risks that could adversely affect our revenues and profitability. For example, as we focus on building our international sales and distribution networks in new geographic regions, we must continue to develop relationships with qualified local agents, distributors and trading companies. If we are not successful in developing these relationships, we may not be able to increase sales in these regions.

If we are unable to protect our intellectual property rights and knowledge relating to our products, our business and prospects may be negatively impacted.

     We believe that proprietary products and technology are important to our success. If we are unable to adequately protect our intellectual property and know-how, our business and prospects could be negatively impacted. Our efforts to protect our intellectual property through patents, trademarks, service marks, domain names, trade secrets, copyrights, confidentiality, non-compete and nondisclosure agreements and other measures may not be adequate to protect our proprietary rights. Patents issued to third parties, whether before or after the issue date of our patents, could render our intellectual property less valuable. Questions as to whether our competitors’ products infringe our intellectual property rights or whether our products infringe our competitors’ intellectual property rights may be disputed. In addition, intellectual property rights may be unavailable, limited or difficult to enforce in some jurisdictions, which could make it easier for competitors to capture market share in those jurisdictions.

     Our competitors may capture market share from us by selling products that claim to mirror the capabilities of our products or technology. Without sufficient protection nationally and internationally for our intellectual property, our competitiveness worldwide could be impaired, which would negatively impact our growth and future revenue. As a result, we may be required to spend significant resources to monitor and police our intellectual property rights.

Risks Related to Ownership of Our Common Stock

The market price and trading volume of our common stock may be volatile.

     A relatively small number of shares traded in any one day could have a significant affect on the market price of our common stock. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section and elsewhere in this report or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability. In particular, reports concerning asbestos litigation or asbestos reform could cause a significant increase or decrease in the market price of our common stock.

Because our quarterly revenues and operating results may vary significantly in future periods, our stock price may fluctuate.

     Our revenue and operating results may vary significantly from quarter to quarter. A high proportion of our costs are fixed, due in part to significant selling and manufacturing costs. Small declines in revenues could disproportionately affect operating results in a quarter and the price of our common stock may fall. We may also incur charges to income to cover increases in the estimate of our subsidiaries’ future asbestos liability. Other factors that could affect quarterly operating results include, but are not limited to:

	•		demand for our products;
	•		the timing and execution of customer contracts;
	•		the timing of sales of our products;
	•		payments related to asbestos litigation or annual costs related to asbestos litigation that are not covered by insurance;
	•		the timing of receipt of insurance proceeds;
	•		increases in manufacturing costs due to equipment or labor issues;
	•		changes in foreign currency exchange rates;
	•		unanticipated delays or problems in introducing new products;
	•		announcements by competitors of new products, services or technological innovations;
	•		changes in our pricing policies or the pricing policies of our competitors;
	•		increased expenses, whether related to sales and marketing, raw materials or supplies, product development or administration;

	•		major changes in the level of economic activity in North America, Europe, Asia and other major regions in which we do business;
	•		costs related to possible future acquisitions or divestitures of technologies or businesses;
	•		an increase in the number or magnitude of product liability claims;
	•		our ability to expand our operations and the amount and timing of expenditures related to expansion of our operations, particularly outside the United States; and
	•		economic assumptions and market factors used to determine post-retirement benefits and pension liabilities.

Various provisions and laws could delay or prevent a change of control.

     The anti-takeover provisions of our articles of incorporation and bylaws, our shareholder rights plan and provisions of North Carolina law could delay or prevent a change of control or may impede the ability of the holders of our common stock to change our management. In particular, our articles of incorporation and bylaws, among other things, will:

	•		require a supermajority shareholder vote to approve any business combination transaction with an owner of 5% or more of our shares unless the transaction is recommended by disinterested directors;
	•		divide our board of directors into three classes, with members of each class to be elected for staggered three-year terms, if our board is expanded to nine members;
	•		limit the right of shareholders to remove directors and fill vacancies;
	•		regulate how shareholders may present proposals or nominate directors for election at shareholders’ meetings; and
	•		authorize our board of directors to issue preferred stock in one or more series, without shareholder approval.

     Our shareholder rights plan will also make an acquisition of a controlling interest in EnPro in a transaction not approved by our board of directors more difficult.

Future sales of our common stock in the public market could lower the market price for our common stock and adversely impact the trading price of our convertible debentures.

     In the future, we may sell additional shares of our common stock to raise capital. In addition, a substantial number of shares of our common stock are reserved for issuance upon the exercise of stock options and upon conversion of our convertible debentures. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sales of substantial amounts of common stock, or the perception that such issuances and sales may occur, could adversely affect the trading price of the debentures and the market price of our common stock.

Absence of dividends could reduce our attractiveness to investors.

     We have never declared or paid cash dividends on our common stock. Moreover, our current senior secured credit facility restricts our ability to pay cash dividends on common stock if availability under the facility falls below $20 million. As a result, our common stock may be less attractive to certain investors than the stock of companies with a history of paying regular dividends.

Risks Related to Our Capital Structure

Our debt agreement imposes limitations on our operations, which could impede our ability to respond to market conditions, address unanticipated capital investments and/or pursue business opportunities.

     We have a $75 million senior secured revolving credit facility that imposes limitations on our operations, such as limitations on distributions, limitations on incurrence and repayment of indebtedness, and maintenance of a fixed charge coverage financial ratio. These limitations could impede our ability to respond to market conditions, address unanticipated capital investment needs and/or pursue business opportunities.

We may not have sufficient cash to repurchase our convertible debentures at the option of the holder or upon a change of control or to pay the cash payable upon a conversion.

     Upon a change of control, subject to certain conditions, we will be required to make an offer to repurchase for cash all outstanding convertible debentures at 100% of their principal amount plus accrued and unpaid interest, including liquidated damages, if any, up to but not including the date of repurchase. Upon a conversion, we will be required to make a cash payment of up to $1,000 for each $1,000 in principal amount of debentures converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of tendered debentures or settlement of converted debentures. Any credit facility in place at the time of a repurchase or conversion of the debentures may also limit our ability to use borrowings to pay any cash payable on a repurchase or conversion of the debentures and may prohibit us from making any cash payments on the repurchase or conversion of the debentures if a default or event of default has occurred under that facility without the consent of the lenders under that credit facility. Our current $75 million senior secured credit facility prohibits distributions from our subsidiaries to us to make payments of interest on the debentures if a default or event of default exists under the facility. Our senior secured credit facility also prohibits prepayments of the debentures or distributions from our subsidiaries to us to make principal payments or payments upon conversion of the debentures if a default or event of default exists under the facility or the amount of the borrowing base under the facility, less the amount of outstanding borrowings under the facility and letters of credit and reserves, is less than $20 million. Our failure to repurchase tendered debentures at a time when the repurchase is required by the indenture or to pay any cash payable on a conversion of the debentures would constitute a default under the indenture. A default under the indenture or the change of control itself could lead to a default under the other existing and future agreements governing our indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the debentures or make cash payments upon conversion thereof.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     Not applicable.

ITEM 2. PROPERTIES

     We are headquartered in Charlotte, North Carolina and have 42 primary manufacturing facilities in 10 states within the U.S. and 10 countries outside of the U.S. The following table outlines the location, business segment and size of our largest facilities, along with whether we own or lease each facility:

				Owned/		Size
Location		Segment		Leased		(Square Feet)
U.S.
Palmyra, New York		Sealing Products		Owned		638,000
Longview, Texas		Sealing Products		Owned		210,000
Paragould, Arkansas		Sealing Products		Owned		142,000
Quincy, Illinois		Engineered Products		Owned		323,000
Bay Minette, Alabama		Engineered Products		Leased		143,000
Thorofare, New Jersey		Engineered Products		Owned		120,000
Beloit, Wisconsin		Engine Products and Services		Owned		433,000
Foreign
Mexico City, Mexico		Sealing Products		Owned		131,000
Saint Etienne, France		Sealing Products		Owned		108,000
Annecy, France		Engineered Products		Leased		196,000
Heilbronn, Germany		Engineered Products		Owned		127,000
Sucany, Slovakia		Engineered Products		Owned		109,000

     Our manufacturing capabilities are flexible and allow us to customize the manufacturing process to increase performance and value for our customers and meet particular specifications. We also maintain numerous sales offices and warehouse facilities in strategic locations in the U.S., Canada and other countries. We believe that all of our facilities and equipment are in good condition and are well maintained and able to continue to operate at present levels.

ITEM 3. LEGAL PROCEEDINGS

     Descriptions of environmental, asbestos and legal matters are included in Item 7 of this annual report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contingencies” and in Note 17 to our Consolidated Financial Statements which descriptions are incorporated by reference herein.

     In addition to the matters referenced above, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business. We believe that the outcome of such other litigation and legal proceedings will not have a material adverse affect on our financial condition, results of operations or cash flows.

     We were not required to pay any penalties for failure to disclose certain “reportable transactions” under Section 6707A of the Internal Revenue Code.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this annual report.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Information concerning our executive officers is set forth below:

Name		Age				Position
Ernest F. Schaub			64			President, Chief Executive Officer and Director
William Dries			56			Senior Vice President and Chief Financial Officer
Richard L. Magee			50			Senior Vice President, General Counsel and Secretary
J. Milton Childress II			50			Vice President, Strategic Planning and Business Development
Donald G. Pomeroy II			40			Vice President and Controller
Robert D. Rehley			47			Vice President and Treasurer

     Ernest F. Schaub is currently President and Chief Executive Officer and has held these positions since May 2002. He is also a director of the Company. From 1999 until joining the Company, he was Executive Vice President of Goodrich Corporation and President and Chief Operating Officer of Goodrich’s Engineered Industrial Products Segment. From 1990 to 1999, Mr. Schaub was Group President, Landing Systems of Goodrich. Mr. Schaub joined Goodrich in 1971, and held a variety of engineering, manufacturing and management positions.

     William Dries is currently Senior Vice President and Chief Financial Officer and has held these positions since May 2002. He served as a consultant to Goodrich Corporation from September 2001 through December 2001 and was employed by Coltec Industries Inc from January 2002 through April 2002. Prior to that, Mr. Dries was employed by United Dominion Industries, Inc. He was Senior Vice President and Chief Financial Officer of United Dominion from December 1999 until May 2001, having previously served as Senior Vice President — Finance, Vice President and Controller. Mr. Dries, a certified public accountant, was with Ernst & Young LLP in New York prior to joining United Dominion in 1985.

     Richard L. Magee is currently Senior Vice President, General Counsel and Secretary and has held these positions since May 2002. He served as a consultant to Goodrich Corporation from October 2001 through December 2001, and was employed by Coltec Industries Inc from January 2002 through April 2002. Prior to that, Mr. Magee was Senior Vice President, General Counsel and Secretary of United Dominion Industries, Inc. from April 2000 until July 2001, having previously served as Vice President, Secretary and General Counsel. Mr. Magee was a partner in the Charlotte, North Carolina law firm Robinson, Bradshaw & Hinson, P.A. prior to joining United Dominion in 1989.

     J. Milton Childress II joined the EnPro corporate staff in December 2005. Mr. Childress was elected Vice President, Strategic Planning and Business Development in February 2006. He was a co-founder of and served from October 2001 through December 2005 as Managing Director of Charlotte-based McGuireWoods Capital Group. Prior to that, Mr. Childress was Senior Vice President, Planning and Development of United Dominion Industries, Inc. from December 1999 until May 2001, having previously served as Vice President. Mr. Childress held a number of positions with Ernst & Young’s corporate finance consulting group prior to joining United Dominion in 1992.

     Donald G. Pomeroy II is currently Vice President and Controller and has held this position since September 2007. Mr. Pomeroy served as the Vice President, Finance for Garlock Sealing Technologies from August 2004 until August 2007, having previously served as the Company’s Vice President and Controller from May 2002 through August 2004. He was Vice President, Finance and Information Technology at Stemco for Coltec Industries Inc from August 1998 until October 2001, and an employee of Coltec Industries Inc from November 2001 through May 2002. From May 1995 to February 1996, Mr. Pomeroy was a financial analyst, and from February 1996 to August 1998, he was Controller — International Operations at Garlock Sealing Technologies. Prior to joining Garlock Sealing Technologies, Mr. Pomeroy, a certified public accountant, was with Coopers & Lybrand LLP.

     Robert D. Rehley is currently Vice President and Treasurer and has held these positions since May 2002. He was employed by Coltec Industries Inc from January 2002 through April 2002. Mr. Rehley was Assistant Treasurer of Metaldyne Corporation from October 2001 to January 2002, and was Executive Director — Corporate Tax for Metaldyne from December 2000 until October 2001. Previously, he was Treasurer of Simpson Industries from April 1998 until December 2000. Mr. Rehley was Director — Finance and Business Development for Cummins Engine Company, Inc. from October 1996 until April 1998.

PART II

ITEM 5. REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “NPO.” As required by Section 3.03A.12(a) of the NYSE listing standards, we filed with the NYSE the certification of our Chief Executive Officer that he is not aware of any violation by the Company of NYSE corporate governance listing standards.

     As of February 15, 2008, there were 5,440 holders of record of our common stock. The price range of our common stock from January 1, 2006 through December 31, 2007 is listed below by quarter:

		Low				High
		Sale Price				Sale Price
Fiscal 2007:
Fourth Quarter		$	29.65			$	43.32
Third Quarter			31.01				46.46
Second Quarter			35.85				44.99
First Quarter			30.87				40.70
Fiscal 2006:
Fourth Quarter		$	29.49			$	35.75
Third Quarter			29.28				35.01
Second Quarter			31.61				40.08
First Quarter			26.30				34.70

     We did not declare any cash dividends to our shareholders during 2007. For a discussion of the restrictions on payment of dividends on our common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Dividends.”

     The following table sets forth all purchases made by us or on our behalf or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the fourth quarter of 2007.

														(d) Maximum Number
														(or Approximate
										(c) Total Number of				Dollar Value) of
										Shares (or Units)				Shares (or Units)
		(a) Total Number				(b) Average Price				Purchased as Part of				that May Yet Be
		of Shares (or				Paid per Share				Publicly Announced				Purchased Under the
Period		Units)Purchased				(or Unit)				Plans or Programs				Plans or Programs(1)
October 1 — October 31, 2007			-0-				—				—				—
November 1 — November 30, 2007			-0-				—				—				—
December 1 — December 31, 2007			1,228	(1)		$	30.56				—				—
Total			1,228	(1)		$	30.56				—				—

CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH

     Set forth below is a line graph showing the yearly percentage change in the cumulative total shareholder return for our common stock as compared to similar returns for the Russell 2000^® Stock Index and a group of our peers consisting of Flowserve Corporation, Robbins & Myers, Inc., Gardner Denver, Inc., Circor International, Inc., IDEX Corporation and The Gormann-Rupp Company. These manufacturing companies were chosen because they are all similarly situated to EnPro in terms of size and markets served. Each of the returns is calculated assuming the investment of $100 in each of the securities on December 31, 2002 and reinvestment of dividends into additional shares of the respective equity securities when paid. The graph plots the respective values beginning on December 31, 2002 and continuing through December 31, 2007. Past performance is not necessarily indicative of future performance.

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ENPRO INDUSTRIES, INC.,
RUSSELL 2000 INDEX AND PEER GROUP INDEX

ASSUMES $100 INVESTED ON DEC. 31, 2002
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2007

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following historical consolidated financial information as of and for each of the years ended December 31, 2007, 2006, 2005, 2004 and 2003 has been derived from, and should be read together with, our audited Consolidated Financial Statements and the related notes, for each of those years. The audited Consolidated Financial Statements and related notes as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 are included elsewhere in this annual report. The information presented below with respect to the last three completed fiscal years should also be read together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

		Year Ended December 31,
		2007				2006				2005				2004				2003
		(in millions, except per share data)
Statement of Operations Data:
Net sales		$	1,030.0			$	928.4			$	838.6			$	826.3			$	730.1
Income (loss) from before extraordinary item		$	37.7			$	(158.9	)		$	58.6			$	33.8			$	33.2
Balance Sheet Data:
Total assets (1)		$	1,470.3			$	1,406.6			$	1,276.2			$	1,181.0			$	1,020.7
Long-term debt (including current portion)		$	185.7			$	185.7			$	185.2			$	164.8			$	170.2
Per Common Share Data — Diluted:
Income (loss) from continuing operations		$	1.80			$	(7.60	)		$	2.75			$	1.60			$	1.61

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following is management’s discussion and analysis of certain significant factors that have affected our consolidated financial condition and operating results during the periods included in the accompanying audited Consolidated Financial Statements and the related notes. You should read the following discussion in conjunction with our audited Consolidated Financial Statements and the related notes, included elsewhere in this annual report.

Forward-Looking Statements

     This report contains certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”) and releases issued by the Securities and Exchange Commission. The words “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. We believe that it is important to communicate our future expectations to our shareholders, and we therefore make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control, and our actual results may differ materially from the expectations we describe in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We advise you to read further about certain of these and other risk factors set forth in Item 1A of this annual report, entitled “Risk Factors” We undertake no obligation to publicly update or revise any forward-looking statement, either as a result of new information, future events or otherwise. Whenever you read or hear any subsequent written or oral forward-looking statements attributed to us or any person acting on our behalf, you should keep in mind the cautionary statements contained or referred to in this section.

Overview

     Overview. EnPro is a leader in the design, development, manufacturing and marketing of proprietary engineered industrial products. We have 42 primary manufacturing facilities located in the United States and 10 countries outside the United States.

     We focus on four management initiatives: improving operational efficiencies through our Total Customer Value, or TCV, lean enterprise program; expanding our product offerings and customer base through our EnNovation initiative and new operations in new geographic markets; strengthening the mix of our business by strategic acquisitions and divestitures; and managing the asbestos settlements of our subsidiaries to minimize the impact on cash flows and enhance our liquidity. We believe these strategic initiatives will increase our sales growth, increase our gross profit, provide additional earnings leverage over time through reduced manufacturing, selling and administrative expenses as a percent of revenue, increase our income from continuing operations, and provide the cash required to sustain and grow the Company.

     We manage our business as three segments: a sealing products segment, an engineered products segment, and an engine products and services segment.

     Our Sealing Products segment designs, manufactures and sells sealing products, including metallic, non-metallic and composite material gaskets, rotary seals, compression packing, resilient metal seals, elastomeric seals, hydraulic components and expansion joints, as well as wheel-end component

systems, PTFE products, conveyor belting and sheeted rubber products. These products are used in a variety of industries, including chemical and petrochemical processing, petroleum extraction and refining, pulp and paper processing, heavy-duty trucking, power generation, food and pharmaceutical processing, primary metal manufacturing, mining, water and waste treatment and semiconductor fabrication.

     Our Engineered Products segment includes operations that design, manufacture and sell self-lubricating, non-rolling, metal-polymer bearings, filament wound solid polymer bearings, aluminum blocks for hydraulic applications, rotary and reciprocating air compressors, vacuum pumps, air systems and reciprocating compressor components. These products are used in a wide range of applications, including the automotive, pharmaceutical, pulp and paper, gas transmission, health, construction, petrochemical and general industrial markets.

     On July 31, 2007, we acquired Compressor Products International Ltd. and combined its operations with the operations of France Compressor Products in the Engineered Products segment. Beginning in May 2006, we completed four smaller acquisitions for France Compressor Products. The four are Allwest Compressor Services, Southwest Compressor Services, H.A.R. Compressor Products and Texflo Machining Ltd. This combination of companies created the world’s leading manufacturer of reciprocating compressor components and one of the world’s largest producers of reciprocating compressor valves. To accurately reflect the combined company’s products, international presence and objectives for growth, these operations conduct business under the Compressor Products International brand name. We now refer to these operations as Compressor Products International, or CPI.

     Our Engine Products and Services segment designs, manufactures, sells and services heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. The United States government and general market for marine propulsion, power generation, and pump and compressor applications use these products and services.

     As described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we actively manage the asbestos claims against our subsidiaries and have a sizeable amount of insurance remaining for the payment of these claims. We accrue an estimated liability for both pending and future asbestos claims for the next ten years. For additional information on this subject, see “— Contingencies-Asbestos.”

Outlook

     We continue to make progress in connection with our strategies to improve operating efficiency through our TCV initiative; to expand our product offerings, our markets, and our customer base; to strengthen the mix of our businesses; and to manage asbestos settlements by our subsidiaries. Our strong liquidity, cash flows and relatively low debt ratio provide us with a sound financial base upon which we can continue to grow the company.

     We expect sales to increase in 2008 compared to 2007, mainly because of improved volumes from market share gained as a result of new products and geographic expansion; market growth; full year results associated with the acquisitions completed in 2007; and price increases. We expect higher sales volumes, productivity improvements and restructuring initiatives associated with our TCV lean manufacturing program, continued focus on low cost manufacturing operations, and price increases to contribute to operating margins and increased operating profits in 2008.

     Improvements in operating margins may be offset, in whole or in part, by the effect of the acquisition of operations with operating margins less than our existing businesses primarily due to amortization of the intangible assets of the acquired operations. We expect gross profit will continue to

increase as a result of acquisitions, but operating margins may increase, be flat or decline depending on the operating margins of the acquired operations and their proportion of our total results.

     We anticipate that cash flows in 2008 will benefit from improved operating income partially offset by increases in capital expenditures and net asbestos-related payments. Capital spending in 2008 is expected to be higher than 2007 levels as a result of continued investments to expand geographically, and our strategy to improve operational efficiency. Net asbestos-related payments are expected to increase in 2008 because we expect to collect significantly less from our insurance than in 2007.

     As part of our operating strategy to strengthen our mix of businesses, we will continue to evaluate strategic acquisitions and divestitures in 2008; however, the impact of such acquisitions or divestitures cannot be predicted and therefore is not reflected in this outlook.

Results of Operations

		Years Ended December 31,
		2007				2006				2005
		(in millions)
Sales
Sealing Products		$	457.3			$	432.5			$	392.9
Engineered Products			445.5				391.7				346.0
Engine Products and Services			128.1				105.2				101.1
			1,030.9				929.4				840.0
Intersegment sales			(0.9	)			(1.0	)			(1.4	)
Total sales		$	1,030.0			$	928.4			$	838.6
Segment Profit
Sealing Products		$	78.0			$	76.5			$	66.1
Engineered Products			69.4				61.5				45.4
Engine Products and Services			15.3				4.9				5.9
Total segment profit			162.7				142.9				117.4
Corporate expenses			(34.1	)			(31.6	)			(25.5	)
Asbestos-related expenses			(68.4	)			(359.4	)			(11.7	)
Gain (loss) on sale of assets, net			—				(0.6	)			5.8
Interest income (expense), net			0.2				(3.2	)			(6.1	)
Other income (expense), net			(2.4	)			(2.3	)			12.2
Income (loss) before income taxes			58.0				(254.2	)			92.1
Income tax benefit (expense)			(20.3	)			95.3				(33.5	)
Income (loss) before extraordinary item			37.7				(158.9	)			58.6
Extraordinary item, net of taxes			2.5				—				—
Net income (loss)		$	40.2			$	(158.9	)		$	58.6

     Segment profit is total segment revenue reduced by operating expenses and restructuring and other costs identifiable with the segment. Corporate expenses include general corporate administrative costs. Expenses not directly attributable to the segments, corporate expenses, net interest expense, asbestos-related expenses, gains/losses or impairments related to the sale of assets and income taxes are not included in the computation of segment profit. The accounting policies of the reportable segments are the same as those for EnPro.

     2007 Compared to 2006

     Sales were $1.03 billion in 2007, a new record and an 11% increase compared to the $928.4 million recorded in 2006. Increases in foreign currency exchange rates relative to the U.S. dollar, with the euro being the most significant, and acquisitions completed in 2007 added approximately six percentage points to revenue growth on a year-over-year basis. The five percentage points of organic growth were the result of stronger demand from Garlock Sealing Technologies’ U.S. and European markets, higher shipments from GGB’s European operations, continued strong demand in the energy-related markets of Compressor Products International, increased engine and parts shipments from Fairbanks Morse Engine, and selected price increases at several businesses. These favorable variances were partially offset by lower OEM and aftermarket volumes in Stemco’s heavy duty truck market, a drop in demand for Plastomer Technologies’ products in the semiconductor and industrial markets, and a small decrease in shipments from Quincy Compressor, coming off of a strong year in 2006, for key markets such as energy, industrial and contractors.

     Segment profit, one of management’s primary measures of how our operations perform, increased 14% from $142.9 million in 2006 to $162.7 million in 2007. Segment profit was impacted by selected price increases and increased sales volume at several businesses, improved margins on Fairbanks Morse Engine shipments, a contract loss provision for Fairbanks Morse Engine in 2006 that did not recur this year, a reduction in U.S. defined benefit pension expense, contributions from acquisitions, and favorable foreign currency exchange rates. The defined benefit pension expense declined because amendments to our U.S. salaried defined benefit plan implemented in the first quarter of 2007 lowered service costs and because returns on pension assets improved. Despite the lower demand experienced by Quincy Compressor and Garlock Rubber Technologies, each contributed to the year-over-year increase in segment profit as a result of cost savings and price increases. Volume declines at Stemco and Plastomer Technologies and an increase in restructuring expenses in 2007 partially offset the favorable affects of the previously mentioned items. Restructuring expenses in 2007 were $6.0 million compared to $2.3 million in 2006. The restructuring costs in each year were primarily for the modernization project at the Garlock Sealing Technologies facilities in Palmyra, New York. Segment margins, defined as segment profit divided by sales, increased from 15.4% in 2006 to 15.8% in 2007.

     Asbestos expenses in 2007 were $68.4 million and included net cash outlays of $25.8 million for legal fees and expenses incurred during the year and $42.6 million in non-cash charges to maintain a ten-year liability estimate for future claims and to reflect an adjustment to our internal estimate of the liability. In 2006, asbestos expenses were $359.4 million. The higher expense in 2006 was primarily the result of an adjustment we made to record the asbestos liability at a point that we believe to be the best estimate within our outside expert’s range of equally likely estimates for the next ten years. For a further discussion of asbestos expenses, see “— Contingencies — Asbestos.”

     Net interest income in 2007 was $0.2 million compared to net interest expense of $3.2 million last year. The net interest income was a result of the increase in invested cash balances while the yield on those funds was essentially flat.

     Our effective tax rate for 2007 was 35.0% compared to 37.5% in 2006. The decrease in the rate for 2007 was principally due to the effect on our deferred tax balances of the enactment of reduced income and trade tax rates in Germany. This was partially offset by an unfavorable change in the mix of foreign and U.S. state and local taxable income.

     In 2007, we recorded an extraordinary gain of $2.5 million, net of $1.6 million of taxes, related to the acquisition of the outstanding shares of a subsidiary held by minority shareholders.

     Following is a discussion of operating results for each segment during the year:

     Sealing Products. Sales of $457.3 million in 2007 were 6% higher than the $432.5 million reported in 2006. The favorable impact of the euro accounted for three percentage points of the growth. Sales at Garlock Sealing Technologies benefited from increased demand in its European markets, continued strength in the oil and gas sector, selected price increases and the stronger euro. Aftermarket and OEM sales decreased at Stemco due to lower demand in the U.S. heavy-duty truck market. Fewer new trucks and trailers were built as usage of existing trucks declined. A decline in sales to Plastomer Technologies’ semiconductor market partially offset the increase attributable to including the Amicon business, acquired in July 2006, for a full year in 2007.

     Segment profit increased by 2% from $76.5 million in 2006 to $78.0 million in 2007. Profits at Garlock Sealing Technologies benefited from higher volumes and selected price increases. These benefits were partially offset by increased restructuring costs for the modernization project at the Garlock Sealing Technologies facilities in Palmyra, NY and additional spending in marketing, business development and R&D. Stemco reported a decline in profit in connection with its sales decrease and increased costs, but the decline was partially mitigated by price increases. Garlock Rubber Technologies increased its profit significantly in 2007 by focusing on cost reductions that increased operating margins. Lower volumes negatively impacted Plastomer Technologies’ results, as did increased restructuring expenses for the reorganization of its facilities. Segment margins decreased from 17.7% in 2006 to 17.1% in 2007.

     Engineered Products. Sales of $445.5 million in 2007 were 14% higher than the $391.7 million reported in 2006. The increase in the value of the euro and the acquisitions completed in 2007 favorably impacted revenue by eleven percentage points when compared to 2006. Sales for Compressor Products International were higher in 2007 due to the additional volume from the acquisitions completed in 2006 and 2007 and increased activity in its North American and European markets. In 2007, GGB benefited from the favorable euro exchange rate and increased volume in Europe. Quincy Compressor’s sales were below the record levels of 2006 as demand declined in energy and construction markets.

     Segment profits of $69.4 million in 2007 were 13% higher than the $61.5 million reported in 2006. GGB’s profits increased in 2007, when compared to 2006, due to higher volumes, a stronger euro and selected price increases. Profits at Compressor Products International improved principally as a result of the acquisitions and selected price increases. However, amortization of intangible assets associated with the acquisitions resulted in lower operating margins at both CPI and the segment. Despite the decline in revenue, Quincy Compressor was able to increase its profitability slightly as a result of price increases and cost reductions. Segment margins were essentially flat at 15.6% in 2007 and 15.7% in 2006.

     Engine Products and Services. Sales increased 22% from the $105.2 million reported in 2006 to $128.1 million in 2007. About half of the increase was attributable to additional engine and related parts shipments for U.S. Navy shipbuilding programs with the other half from sales of aftermarket parts and service and selected price increases.

     The segment reported a profit of $15.3 million in 2007 compared to $4.9 million in 2006. The year-over-year improvement was a result of better margins on engine shipments, an increase in parts shipments, which have better margins than engine sales, net cost savings in manufacturing and administration expenses, and a $3.1 million contract loss on a U.S. Navy engine program recorded in 2006. Segment margins in 2007 were 11.9% compared to 4.7% in 2006.

     2006 Compared to 2005

     Sales increased 11% from $838.6 million in 2005 to $928.4 million in 2006. Sales in 2006 were favorably impacted by increased demand in Garlock Sealing Technologies’ markets and increased activity in Stemco’s heavy-duty truck market. Sales in 2006 also benefited from strong market demand and new product introductions at Quincy Compressor, increased activities in the industrial markets of GGB Europe and the automotive markets of GGB Americas, and higher value engine shipments at Fairbanks Morse Engine. Additionally, the acquisitions completed earlier in the year and favorable foreign currency rates accounted for two percentage points of the sales increase in 2006.

     Segment profit, one of management’s primary measures of how our operations performed during the year, increased 22% from $117.4 million in 2005 to $142.9 million in 2006. Higher volumes, price increases and cost reduction initiatives associated with our TCV program contributed to higher profitability in 2006. These favorable variances were partially offset by lower segment profit at Garlock Rubber Technologies due to productivity issues and lower aftermarket sales at Fairbanks Morse Engine. Segment margins were 15.4% in 2006 compared to 14.0% in 2005.

     Corporate expenses for 2006 were $31.6 million compared to $25.5 million in 2005. This increase was primarily the result of higher achievement levels associated with performance-based compensation in 2006.

     Asbestos expenses in 2006 were $359.4 million, compared to $11.7 million in 2005. The increase in 2006 was primarily the result of a revision to our estimated asbestos liability. Previously, we had recorded the liability at the low end of a broad ten-year range of equally likely estimates provided by an outside expert. In the fourth quarter of 2006, based on our experience over the last two years, we identified a best estimate within the expert’s range and adjusted the liability accordingly. As a result, the estimated liability recorded at December 31, 2006 was $567.9 million. For additional information on this subject, see “Contingencies — Asbestos” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Net interest expense for the year ending December 31, 2006 was $3.2 million, compared to $6.1 million in 2005. The decrease in net interest expense in 2006 was a result of lower interest rates associated with our convertible debt financing completed in the second half of 2005, as well as an increase in interest income in 2006 associated with higher short-term interest rates.

     Other income, net for 2005 was $12.2 million compared to an expense of $2.3 million in 2006. The results in 2005 benefited from the receipt of $11.0 million associated with excess assets in a trust that was established for a divested business and a reduction in liabilities due to the dismissal of product liability and indemnity lawsuits associated with a previously owned subsidiary.

     Our effective tax rate for the year ending December 31, 2006 was 37.5%, compared to 36.3% in 2005. The increase in 2006 was largely due to a change in the mix of our pre-tax earnings between the U.S. and non-U.S. jurisdictions.

     The net loss for 2006 was $(158.9) million, or $(7.60) per share, compared to net income of $58.6 million, or $2.75 per share, in 2005. The decline was the result of the asbestos charge recorded in the fourth quarter of 2006. Earnings per share are expressed on a diluted basis.

     Following is a discussion of the 2006 operating results for each segment.

     Sealing Products. Sales increased 10% for the year ending December 31, 2006 to $432.5 million from $392.9 million in 2005. Sales at Stemco increased as original equipment demand in the heavy-duty truck market exceeded prior year requirements and aftermarket activity improved compared to 2005. Sales at Garlock Sealing Technologies increased in 2006 due to higher demand and selected price increases in its major markets, including the oil and gas and power generation markets. Plastomer Technologies benefited from increased demand in sheet products, machined components, and the incremental revenue from the Amicon acquisition completed early in the third quarter of 2006.

     Segment profit increased from $66.1 million in 2005 to $76.5 million for the year ending December 31, 2006. Profits at Garlock Sealing Technologies were favorably impacted by higher volumes and selected price increases, partially offset by charges for the modernization project at the Palmyra, New York facility. Plastomer Technologies’ profit increased as a result of higher demand and the accretive impact of the Amicon acquisition. Stemco’s profit in 2006 was favorably impacted by increased volumes and selected price increases, partially offset by unfavorable product mix and higher manufacturing costs; while Garlock Rubber Technologies’ profit was negatively impacted by lower productivity. Segment margins increased from 16.8% in 2005 to 17.7% in 2006.

     Engineered Products. Sales of $391.7 million for the year ending December 31, 2006 were 13% higher than the $346.0 million reported in 2005. Sales volumes at Quincy Compressor were significantly higher in 2006 as a result of strength in its U.S. markets and new product introductions. Sales increased at GGB in 2006 due to higher volumes in the industrial markets of Europe and increased automotive demand in the Americas. Sales at France Compressor Products exceeded 2005 levels due to higher volumes in Europe and the favorable impact associated with the Allwest acquisition completed in the second quarter of 2006.

     Segment profits were $61.5 million for the year ending December 31, 2006, or 35% higher than the $45.4 million reported in 2005. Profits at Quincy Compressor increased as a result of higher sales volume, selected price increases and cost reduction initiatives. GGB’s profits increased in 2006 due to higher volumes, improved operating efficiencies at its Slovakian manufacturing facility and cost reduction initiatives associated with our TCV program. Profits at France Compressor Products exceeded 2005 levels as a result of higher volumes in Europe, selected price increases and the favorable impact associated with the Allwest acquisition. Segment margins increased from 13.1% in 2005 to 15.7% in 2006.

     Engine Products and Services. Sales in 2006 were $105.2 million, compared to $101.1 million in 2005. Higher revenue associated with U.S. Navy shipbuilding programs contributed to the increase in 2006. However, this increase was partially offset by lower parts and service revenue.

     The segment reported a profit of $4.9 million in 2006, compared to a profit of $5.9 million in 2005. The results in 2006 were impacted by an unfavorable product mix associated with lower aftermarket and service revenue. Results in 2006 also include a loss contract charge of $3.1 million while a loss contract charge of $3.5 million was recorded in 2005. Segment margins in 2006 were 4.7%, compared to 5.8% in 2005.

Restructuring and Other Costs

     Restructuring expense was $6.0 million, $2.3 million and $1.0 million for 2007, 2006 and 2005, respectively. The expense in all three years was primarily related to restructuring activities associated with the modernization project at our Garlock Sealing Technologies manufacturing facilities in Palmyra, New York. Garlock Sealing Technologies has been on its current site since the early 1900s, with buildings dating from 1907 to 1956. The project, which is ongoing, will reduce the number of buildings on the site from 26 to 7 and eliminate approximately 350,000 square feet of space, or approximately half

of the space under roof at the beginning of the project. The modernization will be completed over five years at an expected cost, including expenses and capital expenditures, of approximately $35 million, excluding the impact of economic development grants, tax abatements and tax credits. See Note 3 to the Consolidated Financial Statements for additional information regarding restructuring and other costs in each year.

Critical Accounting Policies and Estimates

     The preparation of our Consolidated Financial Statements, in accordance with accounting principles generally accepted in the United States, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures pertaining to contingent assets and liabilities. Note 1, “Overview and Significant Accounting Policies,” to the Consolidated Financial Statements describes the significant accounting policies used to prepare the Consolidated Financial Statements. On an ongoing basis we evaluate our estimates, including, but not limited to, those related to bad debts, inventories, intangible assets, income taxes, warranty obligations, restructuring, pensions and other postretirement benefits, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

     We believe that the following accounting policies and estimates are the most critical. Some of them involve significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions.

     Revenue Recognition

     Revenue is recognized at the time title and risk of ownership is transferred or when services are rendered. Any shipping costs billed to customers are recognized as revenue and expensed in cost of goods sold.

     Asbestos

     In 2005 and the first three quarters of 2006, we recorded a liability related to asbestos claims at the low end of a broad ten-year range of equally likely estimates provided by the firm of Bates White, LLC (“Bates White”), a recognized expert in the field of estimating asbestos-related liabilities. Due to the uncertain nature of the estimated liability, we and Bates White believed that no single amount in the range was a better estimate than any other amount in the range. In accordance with the applicable accounting rules, we recorded a liability for these claims at the low end of the range of estimated potential liabilities. In the fourth quarter of 2006, based on our experience during the preceding two years and other factors, we identified a best estimate within the Bates White range and adjusted the liability accordingly.

     The significant assumptions underlying the material components of the estimated liability include: the number and trend of claims to be asserted; the mix of alleged diseases or impairment; the trend in the number of claims for non-malignant cases; the probability that some existing and potential future claims will eventually be dismissed without payment; the estimated amount to be paid per claim; and the timing and impact of large amounts that will become available for the payment of claims from the 524(g) trusts of former defendants in bankruptcy. The actual number of future actions filed per year and the payments made to resolve those claims could exceed those reflected in our estimate.

     With the assistance of Bates White, we periodically review the period over which we can make a reasonable estimate, the assumptions underlying our estimate, the range of reasonably possible potential liabilities and management’s estimate of the liability, and we adjust the liability if necessary. Changing circumstances and new data that may become available could cause a change in the estimated liability in

the future by an amount that cannot currently be reasonably estimated, and that increase could be significant and material. Additional discussion is included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations in “Contingencies — Asbestos.”

     Foreign Currency Translation

     The financial statements of our operations whose functional currency is a foreign currency are translated into U.S. dollars using the current rate method. Under this method, all assets and liabilities are translated in U.S. dollars using current exchange rates, and income statement activities are translated using weighted average exchange rates. The foreign currency translation adjustment is reflected in our Consolidated Statements of Changes in Shareholders’ Equity and is included in accumulated other comprehensive income in the Consolidated Balance Sheets.

     Derivative Instruments and Hedging Activities

     We have entered into contracts to hedge forecasted transactions occurring at various dates through December 2010 that are denominated in foreign currencies. These contracts are accounted for as cash flow hedges. As cash flow hedges, the effective portion of the gain or loss on the contracts is reported in other comprehensive income and the ineffective portion is reported in income. Amounts in accumulated other comprehensive income are reclassified into income in the period when the hedged transactions occur.

     Pensions and Postretirement Benefits

     We and certain of our subsidiaries sponsor domestic and foreign defined benefit pension and other postretirement plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets, rate of increase in employee compensation levels and assumed health care cost trend rates. Assumptions are determined based on data available to us and appropriate market indicators, and are evaluated each year as of the plans’ measurement date. A change in any of these assumptions could have a material effect on net periodic pension and postretirement benefit costs reported in the Consolidated Statements of Operations, as well as amounts recognized in the Consolidated Balance Sheets. See Note 13 to the Consolidated Financial Statements for a discussion of pension and postretirement benefits.

     Income Taxes

     We use the asset and liability method of accounting for income taxes. Temporary differences arising from the difference between the tax and book basis of an asset or liability are used to compute future tax assets or liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income (losses) in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period that includes the enactment date. See Note 6 to the Consolidated Financial Statements for a discussion of income taxes.

New Accounting Pronouncements

     See Note 1 to the Consolidated Financial Statements for a description of new accounting pronouncements, including the expected dates of adoption and the expected effects on results of operations, cash flows and financial condition, if any.

Liquidity and Capital Resources

     Operating Cash Flows

     Operating activities provided $104.8 million, $75.6 million and $76.4 million in 2007, 2006 and 2005, respectively. In 2007, operating cash flows increased from the prior year chiefly as a result of higher net earnings, lower net asbestos payments and a decrease in working capital levels compared to 2006. These improvements were partially offset by an increase in payments for environmental remediation activities in 2007, which were included in the change in other noncurrent assets and liabilities. In 2006, working capital increased primarily due to higher inventories and customer receivables at several of our operations. Inventory levels were higher in 2006 primarily due to higher material requirements for engine programs at Fairbanks Morse Engine. Although the 2006 working capital was impacted by an increase in accounts receivable relating to increased sales activity, the days sales outstanding for receivables remained constant on a year-over-year basis at 51 days. Payments for asbestos-related claims and expenses, net of insurance recoveries, were $24.9 million in 2007 compared to $38.0 million in 2006.

     Investing Cash Flows

     We used $142.3 million, $27.5 million and $64.1 million in investing activities in 2007, 2006 and 2005, respectively. Investing activities in 2007 and 2006 included net payments of $77.0 million and $27.3 million, respectively, associated with acquisitions, primarily related to the newly constituted Compressor Products International. Our investing activities in 2007 also included capital expenditures of $46.8 million associated with our manufacturing facilities, compared to $41.3 million in 2006 and $32.2 million in 2005. The increases in capital expenditures in 2007 and 2006 reflected spending associated with the modernization activities at our manufacturing facilities in Palmyra, New York and our continued strategy to expand geographically and to increase investments in our operations as part of an effort to improve customer satisfaction and reduce costs. The results in 2007 were impacted by the reclassification of $19.5 million of unrestricted cash balances to other current and noncurrent assets based on changes in expected maturity dates of the underlying investments. The results in 2005 were impacted by a $41.1 million reclassification of unrestricted cash balances to restricted cash balances as a result of posting cash collateral required to secure bonds associated with adverse asbestos verdicts on appeal. The 2006 results benefited from the reclassification of $39.8 million from restricted cash to unrestricted cash due to the resolution of several verdicts on appeal.

     Financing Cash Flows

     Financing activities provided $2.7 million and $0.9 million, respectively, in 2007 and 2006, and used $9.1 million in cash in 2005. Financing cash flows in 2005 included proceeds from the sale of $172.5 million of our convertible debentures. We used a substantial portion of the net proceeds from this sale to redeem the $145 million of outstanding Convertible Preferred Securities — Term Income Deferred Equity Securities, or TIDES. We also used a portion of the net proceeds from the sale of the debentures to enter into hedge and warrant transactions, which will reduce potential dilution of our common stock from the conversion of the debentures by increasing their effective conversion price. Debt issuance costs associated with this transaction were $5.2 million and are being amortized over the term of the debentures. Subsequent to the debenture offering, we sold our Goodrich call options and received proceeds of $3.0 million (which is included in net cash used in investing activities described above).

     Capital Resources

     Our primary U.S. operating subsidiaries have a senior secured revolving credit facility with a group of banks which matures on April 21, 2011. We have not borrowed against this facility. The

facility is collateralized by our receivables, inventories, intellectual property, insurance receivables and all other personal property assets (other than fixed assets), and by pledges of 65% of the capital stock of our direct foreign subsidiaries and 100% of the capital stock of our direct and indirect U.S. subsidiaries. The facility contains covenants and restrictions that are customary for an asset-based loan, including limitations on dividends, limitations on incurrence and repayment of indebtedness and maintenance of a fixed charge coverage financial ratio. Certain of the covenants and restrictions apply only if availability under the facility falls below certain levels.

     The maximum initial amount available for borrowings under the facility is $75 million. Under certain conditions, the borrowers may request that the facility be increased by up to $25 million, to $100 million in total. Actual borrowing availability at any date is determined by reference to a borrowing base of specified percentages of eligible accounts receivable and inventory and is reduced by usage of the facility (including outstanding letters of credit) and any reserves. The actual borrowing availability at December 31, 2007, under our senior secured revolving credit facility was $69.8 million. The borrowing availability was less than the full amount of the facility because the borrowing base was less than the facility limit at December 31, 2007.

     We issued $172.5 million of convertible debentures in 2005. The debentures bear interest at an annual rate of 3.9375%, and we pay accrued interest on April 15 and October 15 of each year. The debentures will mature on October 15, 2015. The debentures are direct, unsecured and unsubordinated obligations and rank equal in priority with our unsecured and unsubordinated indebtedness and will be senior in right of payment to all subordinated indebtedness. They effectively rank junior to our secured indebtedness to the extent of the value of the assets securing such indebtedness. The debentures do not contain any financial covenants. Holders may convert the debentures into cash and shares of our common stock, if any, at an initial conversion rate of 29.5972 shares of common stock per $1,000 principal amount of debentures (which is equal to an initial conversion price of $33.79 per share), subject to adjustment, before the close of business on October 15, 2015. Upon conversion, we would deliver (i) cash equal to the lesser of the aggregate principal amount of the debentures to be converted or our total conversion obligation, and (ii) shares of our common stock in respect of the remainder, if any, of our conversion obligation. Conversion is permitted only under certain circumstances that had not occurred at December 31, 2007. Additional discussion regarding the convertible debentures is included in Note 11 to the Consolidated Financial Statements.

     We used a portion of the net proceeds from the sale of the debentures to enter into call options (hedge and warrant transactions), which entitle us to purchase shares of our stock from a financial institution at $33.79 per share and entitle the financial institution to purchase shares of our stock from us at $46.78 per share. This will reduce potential dilution to our common stock from conversion of the debentures and have the effect to us of increasing the conversion price of the debentures to $46.78 per share.

     Dividends

     To date, we have not paid dividends. If availability under our senior secured revolving credit facility falls below $20 million, we would be limited in our ability to pay dividends. The indenture that governs the convertible debentures does not restrict us from paying dividends.

Contingencies

     General

     Various claims, lawsuits and administrative proceedings with respect to commercial, product liability, asbestos and environmental matters, all arising in the ordinary course of business, are pending or

threatened against us or our subsidiaries and seek monetary damages and/or other remedies. We believe that any liability that may finally be determined with respect to commercial and non-asbestos product liability claims should not have a material effect on our consolidated financial condition or results of operations. From time to time, we and our subsidiaries are also involved as plaintiffs in legal proceedings involving contract, patent protection, environmental, insurance and other matters.

     Environmental

     Our facilities and operations are subject to federal, state and local environmental and occupational health and safety requirements of the U.S. and foreign countries. We take a proactive approach in our efforts to comply with all environmental, health and safety laws as they relate to our manufacturing operations and in proposing and implementing any remedial plans that may be necessary. We also regularly conduct comprehensive environmental, health and safety audits at our facilities to maintain compliance and improve operational efficiency.

     Although we believe past operations were in substantial compliance with the then applicable regulations, we or one of our subsidiaries have been named as a potentially responsible party, or are otherwise involved, at 21 sites where the costs to us are expected to exceed $100,000. Investigations have been completed for 15 sites and are in progress at the other six sites. The majority of these sites relate to remediation projects at former operating facilities that were sold or closed and primarily deal with soil and groundwater contamination.

     As of December 31, 2007 and 2006, EnPro had accrued liabilities of $27.7 million and $33.2 million, respectively, for estimated future expenditures relating to environmental contingencies. See Note 17 to the Consolidated Financial Statements for additional information regarding our environmental contingencies.

     Colt Firearms and Central Moloney

     We have contingent liabilities related to divested businesses for which certain of our subsidiaries retained liability or are obligated under indemnity agreements. These contingent liabilities include, but are not limited to, potential product liability and associated claims related to Coltec’s former Colt Firearms subsidiary for firearms manufactured prior to its divestiture in 1990 and Coltec’s former Central Moloney subsidiary for electrical transformers manufactured prior to its divestiture in 1994. No product liability claims are currently pending against Coltec related to Colt Firearms or Central Moloney. Coltec also has ongoing obligations, which are included in retained liabilities of previously owned businesses in our Consolidated Balance Sheets, with regard to workers’ compensation, retiree medical and other retiree benefit matters that relate to Coltec’s periods of ownership of these operations.

     Crucible Materials Corporation

     Crucible Materials Corporation (“Crucible”), which is engaged primarily in the manufacture and distribution of specialty metal products, was a wholly owned subsidiary of Coltec until 1985 when a majority of the outstanding shares were sold. Coltec sold its remaining minority interest in 2004. See Note 17 to the Consolidated Financial Statements for information about certain liabilities relating to Coltec’s ownership of Crucible.

     Debt and Capital Lease Guarantees

     As of December 31, 2007, we had contingent liabilities for potential payments on guarantees of certain debt and lease obligations totaling $9.9 million. These guarantees arose from the divestitures of Crucible, Central Moloney and Haber Tool, and expire at various dates through 2010. There is no

liability for these guarantees reflected in our Consolidated Balance Sheets. In the event that the other parties do not fulfill their obligations under the debt or lease agreements, we could be responsible for these obligations.

     Asbestos

     History. Certain of our subsidiaries, primarily Garlock Sealing Technologies LLC (“Garlock”) and The Anchor Packing Company (“Anchor”), are among a large number of defendants in actions filed in various states by plaintiffs alleging injury or death as a result of exposure to asbestos fibers. Among the products at issue in these actions are industrial sealing products, including gaskets and packing products. Since the first asbestos-related lawsuits were filed against Garlock in 1975, Garlock and Anchor have processed approximately 900,000 asbestos claims to conclusion (including judgments, settlements and dismissals) and, together with their insurers, have paid approximately $1.3 billion in settlements and judgments and over $400 million in fees and expenses. See Note 17 to the Consolidated Financial Statements for information on the disease mix in the claims, new claims recently filed, product defenses asserted by our subsidiaries, recent trial and appeal results, and settlements.

     Status of Anchor. Anchor is an inactive and insolvent indirect subsidiary of Coltec. There is no remaining insurance coverage available to Anchor. Anchor has no remaining assets and has not committed to settle any actions since 1998. As cases reach the trial stage, Anchor is typically dismissed without payment.

     Insurance Coverage. At December 31, 2007, Garlock had available $381.5 million of solvent insurance and trust coverage that we believe will be available to cover future asbestos claims and certain expense payments. In addition, at December 31, 2007, Garlock classified $56 million of otherwise available insurance as insolvent. We believe that Garlock will recover some of the insolvent insurance over time. In fact, Garlock collected approximately $1 million from insolvent carriers in 2007, bringing total collections from insolvent carriers from 2002 through 2007 to approximately $39.3 million. There can be no assurance that Garlock will collect any of the remaining insolvent insurance. See Note 17 to the Consolidated Financial Statements for additional information about the quality of Garlock’s insurance, arrangements for payments with certain insurers, the resolution of past insurance disputes, and coverage exclusions for exposure after July 1, 1984.

     Our Liability Estimate. Prior to mid-2004, we maintained that our subsidiaries’ liability for unasserted claims was not reasonably estimable. We estimated and recorded liabilities only for pending claims in advanced stages of processing, for which we believed we had a basis for making a reasonable estimate. We disclosed the significance of the total potential liability for unasserted claims in considerable detail. By 2004, however, most asbestos defendants who disclose their liabilities were recording estimates of their liabilities for pending and unasserted claims. In view of the change in practice by other defendants, during 2004 we authorized counsel to retain a recognized expert to assist in estimating our subsidiaries’ liability for pending and future asbestos claims. After interviewing and qualifying several recognized experts with us, counsel selected Bates White.

     Bates White’s first report, dated February 17, 2005, provided an estimate of the liability as of December 31, 2004 for the following ten years, which represented a time horizon within which Bates White believed such liability was both probable and estimable within a range of values. Bates White opined that each value within the range of $227 million to $382 million was an equally likely estimate of the liability. We adopted the Bates White estimate and, accordingly, recorded an additional liability for pending and unasserted claims as of December 31, 2004 to increase our liability to an amount equal to the low end of the estimated range ($227 million). The recording of such increased asbestos liability resulted in our also recording an increase to our insurance receivable.

     Bates White has updated its estimate every quarter since the end of 2004. The estimated range of potential liabilities provided by Bates White at December 31, 2007 was $431 million to $626 million. According to Bates White, increases have been attributable primarily to (1) an increase in settlement values of mesothelioma claims, (2) an increase in claims filings and values in some jurisdictions, most notably California, and (3) the delay in, and uncertain impact of, the funding and implementation of trusts formed under Section 524(g) of the United States Bankruptcy Code to pay asbestos claims against numerous defendants in Chapter 11 reorganization cases. Because the 524(g) trusts are estimated to have more than $30 billion that will be available for the payment of asbestos claims, they could have a significant impact on our future settlement payments and could therefore significantly affect our liability.

     Each quarter until the fourth quarter of 2006, we adopted the Bates White estimate and adjusted the liability to equal the low end of the then-current range. Until the second quarter of 2006, the additional liability was recorded with a corresponding increase in our insurance receivable, and thus did not affect net income. During the second quarter of 2006, however, our insurance was fully allocated to past, present and future claims, and therefore subsequent changes to the Bates White estimate were recorded as charges to income.

     We have independently developed internal estimates for asbestos-related liabilities. We have used those estimates for a variety of purposes, including guidance for settlement negotiations and trial strategy, in our strategic planning, budgeting and cash flow planning processes, and in setting targets for annual and long-term incentive compensation. Until the end of 2006, we did not have sufficient history comparing claims payments to our internal estimates to allow us to identify a most likely point within the Bates White range. Therefore, prior to the fourth quarter of 2006, we had adopted the low-end of the range provided by Bates White. However, our internal estimate has been within the Bates White range of equally likely estimates and has proven to be a more precise predictor of the actual amounts spent on settlements and verdicts than the low end of the range. As a result, while the low end of the Bates White range still provides a reasonable lower boundary of possible outcomes, Bates White and management believe that our internal estimate for the next ten years represents the most likely point within the range. Accordingly, we adjusted the recorded liability from the low end of the Bates White estimate to our point estimate in the fourth quarter of 2006 and have adjusted the liability in each subsequent quarter consistent with our internal estimate. During the fourth quarter of 2006, we recorded a pre-tax charge of $305.1 million to reflect our estimate.

     We focus on future cash flows to prepare our estimate. We make assumptions about declining future asbestos spending based on (1) past trends, (2) publicly available epidemiological data, (3) current agreements with plaintiff firms and our judgment about the current and future litigation environment, (4) the availability to claimants of other payment sources, both co-defendants and the 524(g) trusts, and (5) the input and insight provided to us by Bates White. We adjust our estimate when current cash flow results and long-term trends suggest that our targets cannot be met. As a result, we have a process that we believe produces the best estimate of the future liability for the ten-year time period within the Bates White range.

     We currently estimate that the liability of our subsidiaries for the indemnity cost of resolving asbestos claims for the next ten years will be $519.0 million. The estimated liability of $519.0 million is before any tax benefit and is not discounted to present value, and it does not include fees and expenses, which are recorded as incurred. The recorded liability will continue to be impacted by our actual claims and settlement experience and any change in the legal environment that could cause a significant increase or decrease in the long-term expectations of management and Bates White. We expect the recorded liability to fluctuate, perhaps significantly. Any significant change in the estimated liability could have a material effect on our consolidated financial position and results of operations.

     Although we believe that our estimate is the best estimate within the Bates White range of reasonable and probable estimates of Garlock’s future obligation, we note that Bates White also indicated a broader range of potential estimates from $199 million to $733 million. We caution that points within that broader range remain possible outcomes. Also, while we agree with our expert that “beyond two to four years for Garlock’s economically-driven non-malignant claims and beyond ten years for Garlock’s cancer claims and medically-driven non-malignant claims, there are reasonable scenarios in which the [asbestos] expenditure is de minimus,” we caution that the process of estimating future liabilities is highly uncertain. Adjusting our liability to the best estimate within the range does not change that fact. In the words of the Bates White report, “the reliability of estimates of future probable expenditures of Garlock for asbestos-related personal injury claims declines significantly for each year further into the future.” Scenarios continue to exist that could result in a total future asbestos liability for Garlock in excess of $1 billion.

     As previously mentioned, the liability estimate does not include legal fees and expenses, which add considerably to the costs each year. Over the last two years, these expenses have averaged approximately $7 million per quarter. In addition to these legal fees and expenses, we expect to continue to record charges to income in future quarters for:

	•		Increases, if any, in our estimate of Garlock’s potential liability, plus
	•		Increases, if any, that result from additional quarters added to maintain the ten-year estimation period (increases of this type have averaged approximately $7 — 8 million per quarter for the last two years), plus
	•		Amounts, if any, of solvent insurance lost or commuted, offset by insolvent recoveries and earnings from insurance settlement trusts.

     In 2007, we recorded a pre-tax charge to income of $68.4 million to reflect net cash outlays of $25.8 million for legal fees and expenses incurred during the year, and a $42.6 million non-cash charge. The non-cash charge included $23.2 million related to the addition of periods to maintain a ten-year liability estimate and $19.4 million to adjust the liability based on revisions to management’s estimate. A portion of the non-cash charge ($19.4 million) resulted from adjustments made to management’s estimation model in the fourth quarter of 2007. We made this adjustment based on our review of negotiations and payment trends and our belief that it is more likely that, in the future, a higher percentage of settlement commitments made in any year will also be paid in that same year.

     Quantitative Claims and Insurance Information. Our liability as of December 31, 2007 was $524.4 million (our estimate of the liability described above of $519.0 million plus $5.4 million of accrued legal and other fees already incurred but not yet paid). The total liability as of December 31, 2007, included $86.9 million classified as a current liability and $437.5 million classified as a noncurrent liability. The recorded amounts do not include legal fees and expenses to be incurred in the future. See Note 17 to the Consolidated Financial Statements for additional information about pending cases, insurance, cash flows and our liability.

     Strategy. Garlock’s strategy is to focus on trial-listed cases and other cases in advanced stages, to reduce new settlement commitments each year, to carefully manage and maximize insurance collections, and to proactively support legislative and other efforts aimed at meaningful asbestos reform. We believe that this strategy should result in the continued reduction of the negative annual cash flow impact from asbestos claims. However, the risk of large verdicts sometimes impacts the implementation of the strategy, and therefore it is likely that, from time to time, Garlock will enter into settlements that involve large numbers of cases, including early-stage cases, when it believes that the risk outweighs the benefits of the strategy. We believe that, as predicted in various epidemiological studies that are publicly

available, the incidence of asbestos-related disease is in decline and should continue to decline steadily over the next decade and thereafter, so that claims activity against Garlock will eventually decline to a level that can be paid from the cash flow expected from Garlock’s operations, even after Garlock exhausts its insurance coverage. However, there can be no assurance that epidemiological predictions about incidence of asbestos-related disease will prove to be accurate, or that, even if they are, there will be a commensurate decline in the number of asbestos-related claims filings.

     Considering the foregoing, as well as the experience of our subsidiaries and other defendants in asbestos litigation, the likely sharing of judgments among multiple responsible defendants, bankruptcies of other defendants, and legislative efforts, and given the amount of insurance coverage available to our subsidiaries from solvent insurance carriers, we believe that pending asbestos actions against our subsidiaries are not likely to have a material adverse effect on our financial condition, but could be material to our results of operations or cash flows in given future periods. We anticipate that asbestos claims will continue to be filed against our subsidiaries. Because of (1) the uncertainty as to the number and timing of potential future claims and the amount that will have to be paid to litigate, settle or satisfy claims, and (2) the finite amount of insurance available for future payments, future claims could have a material adverse effect on our financial condition, results of operations and cash flows.

     Reform Legislation. While reform measures have been adopted in several states and are likely to be considered from time-to-time on a state-by-state basis in a number of other jurisdictions, the outlook for federal legislation to provide national asbestos litigation reform continues to be uncertain. While reform legislation ultimately may be adopted by the U.S. Congress, it appears unlikely that any federal asbestos legislation will be enacted in the near future.

Off Balance Sheet Arrangements

     Lease Agreements

     We have several operating leases primarily for real estate, equipment and vehicles. Operating lease arrangements are generally utilized to secure the use of assets from time to time if the terms and conditions of the lease or the nature of the asset makes the lease arrangement more favorable than a purchase. As of December 31, 2007, approximately $43.9 million of future minimum lease payments were outstanding under these agreements. See Note 17, “Commitments and Contingencies — Other Commitments,” to the Consolidated Financial Statements for additional disclosure.

     Debt and Capital Lease Guarantees

     At December 31, 2007, we have outstanding contingent liabilities for guaranteed debt and lease payments of $9.9 million related to previously divested businesses.

Contractual Obligations

     A summary of our contractual obligations and commitments at December 31, 2007 is as follows:

		Payments Due by Period (in millions)
						Less than												More than
Contractual Obligations		Total				1 Year				1-3 Years				3-5 Years				5 Years
Long-term debt		$	185.7			$	3.6			$	9.6			$	—			$	172.5
Interest on long-term debt			54.3				7.5				13.7				13.6				19.5
Operating leases			43.9				9.8				16.0				10.4				7.7
Other long-term liabilities			60.1				8.7				6.4				5.7				39.3
Total		$	344.0			$	29.6			$	45.7			$	29.7			$	239.0

     Payment for long-term debt may be accelerated under certain circumstances because the convertible debentures due in 2015 may be converted earlier, requiring payment of the principal amount thereof in cash. Additional discussion regarding the convertible debentures is included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations in “Liquidity and Capital Resources — Capital Resources,” and in Note 11 to the Consolidated Financial Statements.

     Payments for other long-term liabilities are estimates of amounts that will be paid for environmental and retained liabilities of previously owned businesses included in the Consolidated Balance Sheets at December 31, 2007. These estimated payments are based on information currently known to us. However, it is possible that these estimates will vary from actual results if new information becomes available in the future or if there are changes in the facts and circumstances related to these liabilities. Additional discussion regarding these liabilities is included earlier in this Management’s Discussion and Analysis of Financial Condition and Results of Operations in “Contingencies — Environmental, — Other Contingent Liability Matters,” and in Note 17 to the Consolidated Financial Statements.

     At December 31, 2007, we had a $17.2 million reserve for unrecognized tax benefits which is not reflected in the table above. Substantially all of this tax reserve is classified in other long-term liabilities and deferred income taxes in our Consolidated Balance Sheet. The table also does not include obligations under our pension and postretirement benefit plans, which are included in Note 13 to the Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in interest rates and foreign currency exchange rates that could impact our financial condition, results of operations and cash flows. We plan to manage our exposure to these and other market risks through regular operating and financing activities, and on a limited basis, through the use of derivative financial instruments. We intend to use such derivative financial instruments as risk management tools and not for speculative investment purposes.

Interest Rate Risk

     We are exposed to interest rate risk as a result of our outstanding debt obligations. The table below provides information about our debt obligations as of December 31, 2007. The table represents principal cash flows (in millions) and related weighted average interest rates by expected (contractual) maturity dates.

		2008				2009				2010				2011				2012				Thereafter				Total				Fair Value
Fixed rate debt		$	3.6			$	9.6				—				—				—			$	172.5			$	185.7			$	215.9
Average interest rate			7.2	%			6.5	%			—				—				—				3.9	%			4.1	%

Foreign Currency Risk

     We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances on our foreign subsidiaries’ balance sheets, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to control our exposure to these risks through our normal operating activities and, where appropriate, through foreign currency forward or option contracts. The following table provides information about our outstanding foreign currency forward and option contracts as of December 31, 2007.

Notional Amount

Outstanding in

Millions of U.S.

Transaction Type

Dollars (USD)

Maturity Dates

Exchange Rate Ranges

Forward Contracts

Sell Slovakian koruna/buy euro

$

26.9

Jan 2008

33.660 to 33.671 koruna/euro

Sell British pound/buy euro

19.7

Jan 2008

0.723 to 0.724 euro/pound

Buy euro/sell US dollar

17.6

Jan 2008 — Jan 2010

1.275 to 1.450 USD/euro

Buy US dollar/sell euro

14.1

Jan 2008 — Dec 2008

1.377 to 1.382 USD/euro

Sell euro/buy Australian dollar

9.4

Jan 2008

1.660 to 1.664 Australian dollar/euro

Buy US dollar/sell Canadian dollar

8.0

Jan 2008 — Dec 2008

1.041 to 1.042 Canadian dollar/USD

Buy Slovakian koruna/sell euro

7.3

Jan 2008 — Dec 2008

32.829 to 33.021 koruna/euro

Buy US dollar/sell Australian dollar

4.2

Jan 2008 — Dec 2008

0.859 to 0.876 Australian dollar/USD

Buy euro/sell peso

3.9

Jan 2008

15.53 to 15.57 peso/euro

Sell US dollar/buy peso

2.7

Jan 2008 — Dec 2008

10.996 to 11.268 peso/USD

Sell Singapore dollar/buy euro

0.2

Jan 2008

2.092 to 2.094 euro/Singapore dollar

114.0

Option Contracts

Buy euro/sell US dollar

27.5

May 2008 — Dec 2010

1.336 USD/euro

$

141.5

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

ENPRO INDUSTRIES, INC.
Index to Consolidated Financial Statements

		Page
Report of Independent Registered Public Accounting Firm			47
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005			49
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005			50
Consolidated Balance Sheets as of December 31, 2007 and 2006			51
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2007, 2006 and 2005			52
Notes to Consolidated Financial Statements			53

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

     Disclosure Controls and Procedures

     As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The purpose of our disclosure controls and procedures is to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, including this report, is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to our management to allow timely decisions regarding disclosure.

     Management does not expect that our disclosure controls and procedures or internal controls will prevent all errors and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with polices or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

     Based on the controls evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to reasonably ensure that information

required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that management will be timely alerted to material information required to be included in our periodic reports filed with the Securities and Exchange Commission.

     In addition, no change in our internal control over financial reporting has occurred during the quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

     We carried out an evaluation, under the supervision and with the participation of our chief executive officer and our chief financial officer, of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. However, the assessment did not include the following operations that we acquired within the past year, none of which, individually or in the aggregate, would be considered significant under Rule 1-02(w) of Regulation S—X of the SEC: Compressor Products International Ltd., Texflo Machining Ltd and Böhringer GmbH. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we have concluded that, as of December 31, 2007, our internal control over financial reporting was effective based on those criteria.

     The effectiveness of our internal control over financial reporting as of December 31, 2007, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

     Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Information concerning our directors and officers appearing under the captions “Election of Directors,” “Legal Proceedings,” “Corporate Governance Policies and Practices,” and information under the caption “Security Ownership of Certain Beneficial Owners and Management — Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for the 2008 annual meeting of shareholders is incorporated herein by reference.

     We adopted a written Code of Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The Code is available on our Internet site at www.enproindustries.com. We intend to disclose on our Internet site any substantive changes to the Code and any waivers granted under the Code to the specified officers.

ITEM 11. EXECUTIVE COMPENSATION

     A description of the compensation of our executive officers is set forth under the caption “Executive Compensation” in our definitive proxy statement for the 2008 annual meeting of shareholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  SHAREHOLDER MATTERS

     Security ownership data appearing under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2008 annual meeting of shareholders is incorporated herein by reference.

     The table below contains information as of February 15, 2008, about our Amended and Restated 2002 Equity Compensation Plan, the only compensation plan or arrangement (other than our tax-qualified plans) under which we have equity securities authorized for issuance.

Number of Securities

Remaining Available for

Number of Securities

Future Issuance Under

to be Issued Upon

Weighted-Average

Equity Compensation

Exercise of Outstanding

Exercise Price of

Plans (Excluding

Options, Warrants

Outstanding Options,

Securities Reflected in

Plan Category

and Rights

Warrants and Rights

Column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders

1,606,784

$

4.97

954,175

Equity compensation plans not approved by security holders

—

—

—

Total

1,606,784

$

4.97

954,175

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

     Information concerning the independence of our directors is set forth under the caption “Corporate Governance Policies and Practices — Director Independence” in our definitive proxy statement for the 2008 annual meeting of shareholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Information appearing under the caption “Independent Registered Public Accounting Firm” in our definitive proxy statement for the 2008 annual meeting of shareholders is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this report:

1.

Financial Statements

     The financial statements filed as part of this report are listed in Part II, Item 8 of this report on the Index to Consolidated Financial Statements.

2.

Financial Statement Schedule

     Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005 appears on page 89.

     Other schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the Consolidated Financial Statements or notes thereto.

3.

Exhibits

     The exhibits to this report on Form 10-K are listed in the Exhibit Index appearing on pages 43 to 46.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, North Carolina on this 25^th day of February, 2008.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, or in their behalf by their duly appointed attorney-in-fact, on behalf of the registrant in the capacities and on the date indicated.

Signatures		Title		Date
/s/ Ernest F. Schaub   Ernest F. Schaub		President and Chief Executive Officer (Principal Executive Officer) and Director		February 25, 2008
/s/ William Dries   William Dries		Senior Vice President and Chief Financial Officer		February 25, 2008
/s/ William R. Holland		Chairman of the Board and Director		February 25, 2008
William R. Holland*
/s/ J. P. Bolduc		Director		February 25, 2008
J. P. Bolduc*
/s/ Peter C. Browning   Peter C. Browning*		Director		February 25, 2008
/s/ Joe T. Ford   Joe T. Ford*		Director		February 25, 2008
/s/ Gordon D. Harnett   Gordon D. Harnett*		Director		February 25, 2008
/s/ David L. Hauser   David L. Hauser*		Director		February 25, 2008
/s/ Wilbur J. Prezzano, Jr.   Wilbur J. Prezzano, Jr.*		Director		February 25, 2008

EXHIBIT INDEX

3.1		Restated Articles of Incorporation of EnPro Industries, Inc., as amended (incorporated by reference to Exhibits 4.3 and 4.4 to the Registration Statement on Form S-8 filed by EnPro Industries, Inc., the EnPro Industries, Inc. Retirement Savings Plan for Hourly Workers and the EnPro Industries, Inc. Retirement Savings Plan for Salaried Workers (File No. 333-89576))
3.2		Amended Bylaws of EnPro Industries, Inc. (incorporated by reference to Exhibit 99.1 to the Form 8-K dated December 12, 2007 filed by EnPro Industries, Inc. (File No. 001-31225))
4.1		Form of certificate representing shares of common stock, par value $0.01 per share, of EnPro Industries, Inc. (incorporated by reference to Amendment No. 4 of the Registration Statement on Form 10 of EnPro Industries, Inc. (File No. 001-31225))
4.2		Rights Agreement between EnPro Industries, Inc. and The Bank of New York, as rights agent (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-8 filed by EnPro Industries, Inc., the EnPro Industries, Inc. Retirement Savings Plan for Hourly Workers and the EnPro Industries, Inc. Retirement Savings Plan for Salaried Workers (File No. 333-89576))
4.3		Indenture dated as of April 16, 1998, between Coltec Industries Inc and Bankers Trust Company as Trustee, relating to the Coltec Industries Inc 71/2% Senior Notes due 2008 (incorporated by reference to Exhibit 4.1 to Coltec Industries Inc’s Registration Statement on Form S-4 (File No. 333-53005))
4.4		Form of 71/2% Senior Note due 2008 (included in Exhibit 4.3 above)
4.5		Indenture dated as of October 26, 2005 between EnPro Industries, Inc. and Wachovia Bank, National Association, as trustee (incorporated by reference to Exhibit 10.1 to the Form 8-K dated October 26, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.1		Form of Indemnification Agreement for directors and officers (incorporated by reference to Exhibit 10.5 to Amendment No. 3 of the Registration Statement on Form 10 of EnPro Industries, Inc. (File No. 001-31225))
10.2+		EnPro Industries, Inc. 2002 Equity Compensation Plan (2005 Amendment and Restatement) (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A dated March 29, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.3+		EnPro Industries, Inc. Senior Executive Annual Performance Plan (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A dated March 22, 2007 filed by EnPro Industries, Inc. (File No. 001-31225))
10.4+		EnPro Industries, Inc. Long-Term Incentive Plan (incorporated by reference to Appendix B to the Proxy Statement on Schedule 14A dated March 22, 2007 filed by EnPro Industries, Inc. (File No. 001-31225))
10.5+*		Form of EnPro Industries, Inc. Long-Term Incentive Plan Award Grant
10.6+*		Form of EnPro Industries, Inc. Phantom Share Award Grant for Outside Directors (2005 Amendment and Restatement)

10.7+		Form of EnPro Industries, Inc. Restricted Share Award Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K dated February 14, 2008 filed by EnPro Industries, Inc. (File No. 001-31225))
10.8+*		EnPro Industries, Inc. Defined Benefit Restoration Plan (amended and restated effective as of January 1, 2007) (incorporated by reference to Exhibit 10.25 to the Form 10-K for the year ended December 31, 2006 filed by EnPro Industries, Inc. (File No. 001-31225))
10.9+*		EnPro Industries, Inc. Deferred Compensation Plan (as amended and restated effective January 1, 2007)
10.10+*		EnPro Industries, Inc. Deferred Compensation Plan for Non-Employee Directors (as amended and restated effective January 1, 2007)
10.11+		EnPro Industries, Inc. Outside Directors’ Phantom Share Plan (incorporated by reference to Exhibit 10.14 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.12		Amended and Restated Loan and Security Agreement, dated April 26, 2006 by and among Coltec Industries Inc, Coltec Industrial Products LLC, Garlock Sealing Technologies LLC, GGB LLC, Corrosion Control Corporation and Stemco LP, as Borrowers; EnPro Industries, Inc., as Parent; QFM Sales and Services, Inc., Coltec International Services Co, Garrison Litigation Management Group, Ltd., GGB, Inc., Garlock International Inc, Stemco Delaware LP, Stemco Holdings, Inc., Stemco Holdings Delaware, Inc. and Garlock Overseas Corporation, as Subsidiary Guarantors; the various financial institutions listed on the signature pages thereof, as Lenders; Bank of America, N.A., as Agent and Issuing Bank; and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager (incorporated by reference to Exhibit 10.1 to the Form 8-K dated April 26, 2006 filed by EnPro Industries, Inc. (File No. 001-31225))
10.13+		Management Continuity Agreement dated as of August 1, 2002 between EnPro Industries, Inc. and Ernest F. Schaub (incorporated by reference to Exhibit 10.21 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.14+		Management Continuity Agreement dated as of August 1, 2002 between EnPro Industries, Inc. and William Dries (incorporated by reference to Exhibit 10.23 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.15+		Management Continuity Agreement dated as of August 1, 2002 between EnPro Industries, Inc. and Richard L. Magee (incorporated by reference to Exhibit 10.25 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.16+		Management Continuity Agreement dated as of August 1, 2002 between EnPro Industries, Inc. and Robert D. Rehley (incorporated by reference to Exhibit 10.28 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.17+		Management Continuity Agreement dated as of January 30, 2006 between EnPro Industries, Inc. and J. Milton Childress II (incorporated by reference to Exhibit 10.28 to the Form 10-K for the year ended December 31, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.18+		Management Continuity Agreement dated as of September 1, 2007 between EnPro Industries, Inc. and Donald G. Pomeroy II (incorporated by reference to Exhibit 10.1 to the Form 8-K dated August 17, 2007 filed by EnPro Industries, Inc. (File No. 001-31225))

10.19+		Death Benefits Agreement dated as of December 12, 2002 between EnPro Industries, Inc. and Ernest F. Schaub (incorporated by reference to Exhibit 10.29 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.20+		Death Benefits Agreement dated as of December 12, 2002 between EnPro Industries, Inc. and William Dries (incorporated by reference to Exhibit 10.31 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.21+		Death Benefits Agreement dated as of December 12, 2002 between EnPro Industries, Inc. and Richard L. Magee (incorporated by reference to Exhibit 10.33 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
10.22+		Supplemental Retirement and Death Benefits Agreement dated as of November 8, 2005 between EnPro Industries, Inc. and Ernest F. Schaub (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended September 30, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.23+		Supplemental Retirement and Death Benefits Agreement dated as of November 8, 2005 between EnPro Industries, Inc. and William Dries (incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended September 30, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.24+		Supplemental Retirement and Death Benefits Agreement dated as of November 8, 2005 between EnPro Industries, Inc. and Richard L. Magee (incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended September 30, 2005 filed by EnPro Industries, Inc. (File No. 001-31225))
10.25+*		EnPro Industries, Inc. Senior Officer Severance Plan (effective as of January 1, 2008)
10.26+*		Summary of Executive and Director Compensation Arrangements
14		EnPro Industries, Inc. Code of Business Conduct (incorporated by reference to Exhibit 14 to the Form 10-K for the year ended December 31, 2002 filed by EnPro Industries, Inc. (File No. 001-31225))
21*		List of Subsidiaries
23.1*		Consent of PricewaterhouseCoopers LLP
23.2*		Consent of Bates White, LLC
24.1*		Power of Attorney from J. P. Bolduc
24.2*		Power of Attorney from Peter C. Browning
24.3*		Power of Attorney from Joe T. Ford
24.4*		Power of Attorney from Gordon D. Harnett
24.5*		Power of Attorney from David L. Hauser
24.6*		Power of Attorney from William R. Holland

24.7*		Power of Attorney from Wilbur J. Prezzano, Jr.
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a — 14(a)/15d — 14(a)
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a — 14(a)/15d — 14(a)
32*		Certification pursuant to Section 1350

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of EnPro Industries, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of EnPro Industries, Inc. and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina
February 25, 2008

PART I. FINANCIAL INFORMATION
ENPRO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2007, 2006 and 2005
(in millions, except per share data)

		2007				2006				2005
Net sales		$	1,030.0			$	928.4			$	838.6
Cost of sales			670.0				621.1				565.7
Gross profit			360.0				307.3				272.9
Operating expenses:
Selling, general and administrative expenses			228.4				196.3				183.8
Asbestos-related expenses			68.4				359.4				11.7
Restructuring and other costs			6.0				2.3				1.0
Loss (gain) on sale of assets, net			—				0.6				(5.8	)
			302.8				558.6				190.7
Operating income (loss)			57.2				(251.3	)			82.2
Interest expense			(8.1	)			(8.1	)			(9.7	)
Interest income			8.3				4.9				3.6
Other income, net			0.6				0.3				16.0
Income (loss) before income taxes			58.0				(254.2	)			92.1
Income tax benefit (expense)			(20.3	)			95.3				(33.5	)
Income (loss) before extraordinary item			37.7				(158.9	)			58.6
Extraordinary item, net of taxes			2.5				—				—
Net income (loss)		$	40.2			$	(158.9	)		$	58.6
Basic earnings (loss) per share:
Income (loss) before extraordinary item		$	1.77			$	(7.60	)		$	2.83
Extraordinary item			0.12				—				—
Net income (loss)		$	1.89			$	(7.60	)		$	2.83
Diluted earnings (loss) per share:
Income (loss) before extraordinary item		$	1.69			$	(7.60	)		$	2.75
Extraordinary item			0.11				—				—
Net income (loss)		$	1.80			$	(7.60	)		$	2.75

See notes to Consolidated Financial Statements.

ENPRO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2007, 2006 and 2005
(in millions)

		2007				2006				2005
OPERATING ACTIVITIES
Net income (loss)		$	40.2			$	(158.9	)		$	58.6
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			29.1				26.4				24.0
Amortization			11.1				8.8				7.3
Deferred income taxes			(8.4	)			(104.5	)			14.6
Stock-based compensation			3.6				5.5				2.9
Excess tax benefits from stock-based compensation			(3.8	)			(1.3	)			(1.3	)
Extraordinary gain, net of taxes			(2.5	)			—				—
Loss (gain) on sale of assets, net			—				0.6				(5.8	)
Change in assets and liabilities, net of effects of acquisitions of businesses:
Asbestos liabilities, net of receivables			43.0				321.4				(10.1	)
Receivables			(11.0	)			(7.9	)			(3.7	)
Inventories			18.2				(9.7	)			(8.6	)
Accounts payable			11.9				3.7				2.6
Other current assets and liabilities			(6.4	)			(2.9	)			5.7
Other noncurrent assets and liabilities			(20.2	)			(5.6	)			(9.8	)
Net cash provided by operating activities			104.8				75.6				76.4
INVESTING ACTIVITIES
Purchases of property, plant and equipment			(46.8	)			(41.3	)			(32.2	)
Proceeds from sales of assets			0.3				0.2				7.9
Reclassification of investments from cash equivalents			(19.5	)			—				—
Receipts from (deposits into) restricted cash accounts			0.2				39.8				(41.1	)
Acquisitions, net of cash acquired			(77.0	)			(27.3	)			(1.7	)
Other			0.5				1.1				3.0
Net cash used in investing activities			(142.3	)			(27.5	)			(64.1	)
FINANCING ACTIVITIES
Borrowings			—				—				172.5
Repayments of debt			(2.1	)			(0.5	)			(152.1	)
Purchase of call options related to convertible debentures			—				—				(26.7	)
Debt issue costs			—				(0.6	)			(5.2	)
Proceeds from issuance of common stock			1.0				0.7				1.1
Excess tax benefits from stock-based compensation			3.8				1.3				1.3
Net cash provided by (used in) financing activities			2.7				0.9				(9.1	)
Effect of exchange rate changes on cash and cash equivalents			3.0				2.5				(1.7	)
Net increase (decrease) in cash and cash equivalents			(31.8	)			51.5				1.5
Cash and cash equivalents at beginning of year			161.0				109.5				108.0
Cash and cash equivalents at end of year		$	129.2			$	161.0			$	109.5
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest		$	8.1			$	7.9			$	10.1
Income taxes		$	21.7			$	13.0			$	13.1
Payments for asbestos-related claims and expenses, net of insurance recoveries		$	24.9			$	38.0			$	21.8

See notes to Consolidated Financial Statements.

ENPRO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2007 and 2006
(in millions, except share amounts)

		2007				2006
ASSETS
Current assets
Cash and cash equivalents		$	129.2			$	161.0
Accounts and notes receivable, less allowance for doubtful accounts of $3.6 in 2007 and $2.8 in 2006			167.6				138.3
Asbestos insurance receivable			70.0				71.3
Inventories			70.3				79.3
Other current assets			55.3				22.4
Total current assets			492.4				472.3
Property, plant and equipment			193.5				166.3
Goodwill			213.8				161.6
Other intangible assets			103.5				70.1
Asbestos insurance receivable			311.5				396.7
Deferred income taxes			90.3				80.2
Other assets			65.3				59.4
Total assets		$	1,470.3			$	1,406.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt		$	3.6			$	—
Accounts payable			80.1				62.2
Asbestos liability			86.9				88.8
Other accrued expenses			89.8				74.1
Total current liabilities			260.4				225.1
Long-term debt			182.1				185.7
Retained liabilities of previously owned businesses			31.0				30.3
Environmental liabilities			20.4				25.1
Asbestos liability			437.5				479.1
Other liabilities			63.8				57.4
Total liabilities			995.2				1,002.7
Commitments and contingencies
Shareholders’ equity
Common stock — $.01 par value; 100,000,000 shares authorized; issued 21,631,176 shares at December 31, 2007 and 21,211,044 shares at December 31, 2006			0.2				0.2
Additional paid-in capital			427.2				418.9
Accumulated deficit			(0.7	)			(41.0	)
Accumulated other comprehensive income			49.9				27.3
Common stock held in treasury, at cost — 223,081 shares at December 31, 2007 and 228,126 shares at December 31, 2006			(1.5	)			(1.5	)
Total shareholders’ equity			475.1				403.9
Total liabilities and shareholders’ equity		$	1,470.3			$	1,406.6

See notes to Consolidated Financial Statements.

ENPRO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years Ended December 31, 2007, 2006 and 2005
(dollars and shares in millions)

														Retained				Accumulated
										Additional				Earnings				Other								Total
		Common Stock								Paid-in				(Accumulated				Comprehensive				Treasury				Shareholders’
		Shares				Amount				Capital				Deficit)				Income				Stock				Equity
Balance, December 31, 2004			20.6			$	0.2			$	411.6			$	59.3			$	7.0			$	(1.6	)		$	476.5
Net income			—				—				—				58.6				—				—				58.6
Other comprehensive income:
Cumulative translation adjustment			—				—				—				—				10.0	(1)			—				10.0	(1)
Minimum pension liability adjustment			—				—				—				—				(4.7	)			—				(4.7	)
Loss on cash flow hedges			—				—				—				—				(0.3	)			—				(0.3	)
Total comprehensive income																											63.6
Purchase of call options related to convertible debentures, net of tax benefit of $21.3 million			—				—				(5.4	)			—				—				—				(5.4	)
Exercise of stock options and other incentive plan activity			0.2				—				5.2				—				—				—				5.2
Balance, December 31, 2005			20.8				0.2				411.4				117.9				12.0				(1.6	)			539.9
Net loss			—				—				—				(158.9	)			—				—				(158.9	)
Other comprehensive loss:
Cumulative translation adjustment			—				—				—				—				17.3				—				17.3
Minimum pension liability adjustment			—				—				—				—				11.9				—				11.9
Gain on cash flow hedges			—				—				—				—				0.7				—				0.7
Total comprehensive loss																											(129.0	)
Adjustment to initially apply SFAS No. 158, net of tax benefit of $8.7 million			—				—				—				—				(14.6	)			—				(14.6	)
Exercise of stock options and other incentive plan activity			0.2				—				7.5				—				—				0.1				7.6
Balance, December 31, 2006			21.0				0.2				418.9				(41.0	)			27.3				(1.5	)			403.9
Net income			—				—				—				40.2				—				—				40.2
Other comprehensive income:
Cumulative translation adjustment			—				—				—				—				25.3				—				25.3
Pension and other postretirement benefit plans			—				—				—				—				(2.7	)							(2.7	)
Total comprehensive income																											62.8
Adjustment to initially apply FIN 48			—				—				—				0.1				—				—				0.1
Exercise of stock options and other incentive plan activity			0.4				—				8.3				—				—				—				8.3
Balance, December 31, 2007			21.4			$	0.2			$	427.2			$	(0.7	)		$	49.9			$	(1.5	)		$	475.1