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, 2005

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

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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer þ       Non-accelerated filer o

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, 2005 was $591,563,853. As of March 1, 2006, there were 21,719,675 shares of common stock of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement, dated March 22, 2006, for the 2006 annual meeting of shareholders to be held on April 28, 2006 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			14
Item 2		Properties			14
Item 3		Legal Proceedings			15
Item 4		Submission of Matters to a Vote of Security Holders			15
		PART II
Item 5		Registrant’s Common Equity and Related Shareholder Matters			15
Item 6		Selected Consolidated Financial Data			16
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 7A		Quantitative and Qualitative Disclosures About Market Risk			39
Item 8		Financial Statements and Supplemental Data			40
Item 9		Changes In and Disagreements with Accountants on Accounting and Financial Disclosure			40
Item 9A		Controls and Procedures			40
Item 9B		Other Information			42
		PART III
Item 10		Directors and Executive Officers of the Registrant			42
Item 11		Executive Compensation			44
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			44
Item 13		Certain Relationships and Related Transactions			45
Item 14		Principal Accountant Fees and Services			45
		PART IV
Item 15		Exhibits and Financial Statement Schedules			45
		Signatures			46
		Exhibit Index			48
		Reports of Independent Registered Public Accounting Firms			53
		Consolidated Statements of Operations			56
		Consolidated Statements of Cash Flows			57
		Consolidated Balance Sheets			58
		Consolidated Statements of Changes in Shareholders’ Equity			59
		Notes to Consolidated Financial Statements			60
		Schedule II – Valuation and Qualifying Accounts			98

ENPRO INDUSTRIES, INC.

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 sheet gaskets, metallic gaskets, rotary lip seals, compression packing, resilient metal seals, elastomeric seals, hydraulic components and expansion joints, as well as wheel-end component systems, PTFE products and industrial 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. 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 Garlock Sealing Technologies, Stemco, Plastomer Technologies and Garlock Rubber Technologies.

     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 lip 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 lip 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, rotating applications such as pumps and valves. Major markets for compression packing products are the pulp and paper and chemical processing industries. Branded products for these markets include EVSP™ and Synthepak®.

     Resilient metal seals provide extremely tight sealing performance for highly demanding applications such as semiconductor fabrication facilities, specific chemical processing applications, nuclear power generation 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™, Flowlock™ 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.

     In addition, 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 and fluid handling industries. 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 40% of sales delivered to customers outside the United States in 2005. Representative customers include Saudi Aramco, Electricite de France, Queensland Alumina, Honeywell Corporation, Morgan Construction Company, BASF Corporation, General Electric Company, Georgia-Pacific Corporation, Eastman Chemical Company, Exxon Mobil Corporation, AK Steel Corporation, Volvo Corporation, Wabash National Corporation, Great Dane, Mack Trucks, International Truck and PACCAR. In 2005, no single customer accounted for more than 3% 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 our long-standing reputation 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, Richard Klinger Pty, The Flexitallic Group, Inc., SKF USA Inc., Freudenberg-NOK and Federal-Mogul Corporation.

      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, air compressor systems and vacuum pumps, 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 France Compressor Products.

     GGB produces self-lubricating, non-rolling, metal 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 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.

     France Compressor Products designs and manufactures components for reciprocating compressors. 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. France Compressor Products 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 that bring air expertise, customer dedication and Quincy Compressor products to their geographic area. Quincy Compressor also sells directly to national accounts, OEMs and climate control houses. France Compressor Products sells its products globally through a network of company salespersons, independent sales representatives and distributors. In 2005, 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. France Compressor Products 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. Leek Cook, Compressor Products International and Hoerbiger Corporation. Price, availability, product quality and reliability are the primary competitive drivers in the markets served by France Compressor Products.

      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. France Compressor Products’ major raw material purchases include PTFE, Peek (Polyetherertherketone), compound additives, cast iron, 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 . Our engine products and services segment manufactures under license heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. The reciprocating engines range in size from 1,050 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 110 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 60 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 Northrup Grumman, General Dynamics, the U.S. Navy, the U.S. Coast Guard and Exelon. In 2005, the largest customer accounted for approximately 20% 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 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, 2005, we had a backlog of orders valued at $212.6 million compared with $191.4 million at December 31, 2004. Approximately 31% of the backlog, mainly at Fairbanks Morse Engine, is expected to be filled beyond 2006. 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, quality control tests are performed on all 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, 2005, 24 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. Ten 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 a pool of 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 B&W and S.E.M.T. Pielstick 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 4,200 employees worldwide. Approximately 2,600 employees are located within the U.S. and approximately 1,600 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 November 2006 to February 2009. 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 Coltec Industries Inc, 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 volume of future asbestos claims to the extent such claims 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 timing of payout of claims relative to recoveries of amounts covered by insurance from our subsidiaries’ insurance carriers and limitations imposed on the amount that may be recovered in any given year;
	•		the financial viability of our subsidiaries’ insurance carriers and their reinsurance carriers, and our subsidiaries’ ability to collect on claims from them;
	•		an increase in litigation or other costs that are not covered by insurance;
	•		the unavailability of any insurance for claims alleging first exposure to asbestos after July 1, 1984;
	•		the unavailability of insurance coverage in the event of ongoing disputes with insurance carriers over the scope of insurance coverage;

	•		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;
	•		liquidity pressures in the event of large negative 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;
	•		the impact of any federal legislation providing national asbestos litigation reform; and
	•		the results of litigation and the efficacy of our litigation and settlement strategies.

     Potential liability for asbestos claims may adversely affect our ability to retain and attract customers and quality personnel. 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, even if such amounts are recoverable under these insurance policies in later years. 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 early-stage and potential future asbestos claims that may be received, which is highly uncertain, is based on subjective assumptions and is at the low end of a range of possible values. 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 actions, as well as the amount that will have to be paid to settle or satisfy any such actions 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 actions 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 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. Additionally, 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 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.

     Our businesses rely on stable prices for energy, steel and other raw materials, the prices for which increased dramatically in 2005. 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 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.

     Under federal and state environmental laws, Coltec or one of its subsidiaries has been named as a potentially responsible party, or is otherwise involved, at 20 sites at each of which the costs to it are expected to exceed $100,000. Investigations have been completed or are near completion for 15 of these sites and are in progress at the other five sites. The majority of these sites relate to remediation projects at former operating facilities that have been sold or closed and primarily deal with soil and groundwater contamination. We believe that any liability incurred for cleanup at these sites will be satisfied over a number of years, and, in some cases, the costs will be shared with other potentially responsible parties. However, unforeseen circumstances relating to these and other remediation projects could affect the timing or allocation of these liabilities or costs and our actual liabilities or costs relating to remediation projects could be significantly higher than anticipated.

     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 2005, we derived approximately 42% 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 infringing upon our intellectual property rights. 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 the possibility of national asbestos litigation 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. 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 or that exceed the annual limits in place with our insurance companies;
	•		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 the U.S., Canada, Europe 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 that you may favor.

     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 that you may favor 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 the 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 agreement restricts our ability to pay cash dividends on common stock. 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 agreements impose limitations on our operations, which could impede our ability to respond to market conditions, address unanticipated capital investments and/or pursue business opportunities.

     The agreements relating to the 7 ¹ / 2 % senior notes due 2008 issued by Coltec impose limitations on our operations. We also have a $60 million senior secured revolving credit facility that imposes additional and, in some cases, more restrictive limitations, such as limitations on distributions, limitations on incurrence 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 $60 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 and 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 $30 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.

Risks Related to Our Spin-off from Goodrich Corporation

Coltec’s historical consolidated financial information may not be representative of our historical results as an independent company; therefore, it may not be reliable as an indicator of historical or future results.

     The historical consolidated financial information of our wholly owned subsidiary Coltec included in this report may not reflect what our financial condition, results of operations and cash flows would have been on a historical basis had we operated the EnPro business as an independent company during the period presented or what our financial condition, results of operations and cash flows will be in the future. This is because Coltec’s historical consolidated financial statements include allocations for services provided or procured by Goodrich. In addition, we have not made adjustments to Coltec’s historical consolidated financial information to reflect other changes that occurred in our cost structure, financing and operations as a result of the Distribution. Finally, as a result of the Distribution, Goodrich, not EnPro, owns the aerospace business reflected in Coltec’s historical consolidated financial information as a discontinued operation. Therefore, Coltec’s historical consolidated financial statements may not be indicative of our future performance as an independent company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     Not applicable.

Financial Condition and Results of Operations — Liquidity and Capital Resources — Dividends” and Note 11 to our Consolidated Financial Statements.

     The following table sets forth all purchases made by or on behalf of EnPro 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 2005.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following historical consolidated financial information as of and for each of the years ended December 31, 2005, 2004, 2003 and 2002 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, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003 are included elsewhere in this annual report. The historical consolidated financial information as of and for the year ended December 31, 2001 has been derived from, and should be read together with, Coltec’s audited Consolidated Financial Statements and the related notes.

     During the pre-Distribution period presented, Coltec completed a number of acquisitions and divestitures, some of which were significant. As a result, Coltec’s and our historical financial results for the periods presented may not be directly comparable. 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.”

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.

      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.

Overview

      Overview . EnPro was incorporated on January 11, 2002, as a wholly owned subsidiary of Goodrich Corporation 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.

     Since the Distribution, we have focused 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 organic sales growth, improve our gross profit margins, provide additional 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, which includes our sealing products, heavy-duty wheel end components, PTFE products and rubber products; an engineered products segment, which includes our metal polymer bearings, air compressor systems and vacuum pumps, 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. Prior to our annual report for 2004, we reported our results of operations under two business segments, a sealing products segment and an engineered products segment. Our segment disclosures for prior periods have been reclassified to reflect the fact that our former engineered products segment has been classified into two segments, our engineered products segment and our engine products and services segment.

     Our sealing products segment designs, manufactures and sells sealing products, including sheet gaskets, metallic gaskets, critical service flange gaskets, rotary lip 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 bearing products, air compressor systems and vacuum pumps, 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.

     Our engine products and services segment designs, manufactures, sells and services heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines. The 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. Because we accrue an estimated liability for both pending and future claims likely to be paid during the next ten years, most of that insurance is already committed to claims. At the point where our insurance is fully committed, we will incur charges to income to cover additional future claims. However, these charges will not impact our future cash flows for asbestos-related claims above what they otherwise would have been.

     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.

      2005 Compared to 2004

     Sales increased to $838.6 million in 2005, compared to $826.3 million in 2004. Sales in 2005 were favorably impacted by strong demand in the heavy-duty truck market served by Stemco, increased requirements in the industrial markets served by Quincy Compressor and France Compressor Products, higher demand in the North American industrial bearing markets, and increased volumes in the upstream oil and gas markets, as well as price increases at most operations. These increases were partially offset by lower sales in the engine products and services segment due to fewer engine shipments to the U.S. Navy. The comparability of sales for the two periods is affected by the 2004 divestiture of our Haber Tool and Sterling Die operations, which contributed $11.0 million in sales in 2004.

     Segment profit increased by 27% in 2005 to $117.4 million, compared to $92.1 million in 2004. Volume increases at Stemco, strong demand at Quincy Compressor and France Compressor Products, and higher aftermarket and service revenue in the engine products and service segment favorably impacted the 2005 segment profit. Price increases and cost reduction initiatives implemented at most of our operations also contributed to higher profitability in 2005. The 2005 results were negatively impacted by a contract loss provision of $3.5 million at Fairbanks Morse Engine, while the 2004 results were adversely impacted by a $7.5 million contract loss provision for expected cost overruns on engine programs. In 2005, we incurred restructuring expense of $1.0 million, compared to $9.4 million in 2004. The 2005 expense was related to restructuring activities associated with a modernization project at our Garlock Sealing Technologies manufacturing facilities in Palmyra, New York. The 2004 restructuring expense was a result of the relocation and consolidation of facilities for a domestic operation and start-up costs associated with two new foreign facilities. Segment margins were 14.0% in 2005, compared to 11.1% in 2004.

     Net income of $58.6 million in 2005 was 73% higher than net income of $33.8 million in 2004. In addition to the increase in segment profit described above, net income was impacted by various other items, including:

     Corporate expenses decreased 5% to $25.5 million in 2005, compared to $26.8 million in 2004. The lower expense in 2005 was primarily due to a decrease in EnPro’s stock price and a corresponding decrease in expense for share-based compensation, and a decrease in consulting fees related to our compliance with the Sarbanes-Oxley Act of 2002.

     Asbestos-related expenses were $11.7 million in 2005, compared to $10.4 million in 2004. A significant increase in legal fees and defense costs associated with 2005 trial activities was largely offset by a net increase in recoveries from insolvent insurance carriers.

     In 2005, we recognized a gain of $5.8 million primarily associated with the sale of a building. In 2004, we recognized a loss of $3.7 million in connection with the divestiture of our Haber Tool and Sterling Die businesses, partially offset by a gain of $1.9 million primarily associated with the sale of a building.

     Net interest expense decreased from $7.1 million in 2004 to $6.1 million in 2005 primarily due to an increase in interest income associated with higher short-term interest rates in 2005.

     In 2005 we recognized other income of $11.0 million from a cash distribution of excess assets in a trust that was established for a divested business. For more information about the trust and the 2005 distribution, see the section entitled “Contingencies – Crucible Materials Corporation” included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Additionally, in 2005 our results were favorably impacted by a $5.9 million reduction in liabilities due to the dismissal of product liability and indemnity lawsuits associated with a previously owned subsidiary. Our results in 2004 were favorably affected by $10.0 million we received from an insurer to settle our claims for reimbursement of past costs relating to certain environmental matters and estimated future claims.

     Our effective tax rate in 2005 was 36.3%, compared to 33.7% in 2004. The rate in 2004 benefited from the reversal of previously established foreign tax accruals that were no longer necessary.

     Following is a discussion of the 2005 operating results for each segment.

      Sealing Products. Sales increased 5% in 2005 to $392.9 million from $374.7 million in 2004. Foreign currency rates accounted for one percentage point of the increase 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 2004. Sales at Garlock Sealing Technologies were negatively impacted by the discontinuance of unprofitable product lines in North America and customer ordering delays associated with the impact of hurricanes in the Gulf Coast region. Unfavorable volumes at Garlock Sealing Technologies were largely offset by selected price increases across several product lines and stronger demand in the upstream oil and gas production industries. Plastomer Technologies experienced an increase in sales, when compared to 2004, due to higher volumes in Texolon products and specialty tapes, and selected price increases. Garlock Rubber Technologies’ sales increased in 2005 as a result of price increases implemented to offset higher raw material costs.

     Segment profit increased from $58.6 million in 2004 to $66.1 million in 2005, a 13% improvement on a year-over-year basis. Profits at Garlock Sealing Technologies benefited from selected price increases, higher volumes in several markets, product rationalization activities, and cost reduction initiatives. Higher volumes and price increases at Stemco resulted in higher profits in 2005. Selected price increases at Garlock Rubber Technologies favorably impacted 2005 profits. Plastomer Technologies benefited from a favorable product mix, price increases and cost reduction initiatives. Operating margins for the segment for 2005 were 16.8%, compared to 15.6% in 2004.

      Engineered Products. Sales in 2005 were 3% higher at $346.0 million, compared to $335.8 million in 2004. Foreign currency rates accounted for one percentage point of the increase in 2005. Increased industrial demand for compressors and aftermarket parts resulted in higher revenue at Quincy Compressor, while sales at France Compressor Products were higher in 2005 due to increased demand in its North American and European markets. GGB sales increased in 2005, when compared to 2004, as a result of higher shipments and price increases in the North and South American industrial markets. However, these favorable variances were partially offset by soft demand in the European industrial and automotive markets. The Haber Tool and Sterling Die operations, which we sold in 2004, contributed $11.0 million in sales in 2004.

     Segment profit increased to $45.4 million in 2005 from $32.6 million in 2004. Segment profits in 2004 included $8.5 million of restructuring expenses, while 2005 results were not impacted by restructuring expenses. Profits at Quincy benefited in 2005 from an increase in volume across most of its product lines, a more favorable product mix and selected price increases. Profits at GGB in 2005 were favorably impacted by lower restructuring expense and price increases, partially offset by lower volumes, an unfavorable product mix in Europe, and activities associated with the start-up of the new Slovakian manufacturing site. Lower restructuring expenses at France Compressor Products in 2005, as well as an

increase in volume, resulted in higher profits when compared to 2004. Operating margins for the segment were 13.1% in 2005, compared to 9.7% in 2004.

      Engine Products and Services . Sales in 2005 were $101.1 million, compared to $116.9 million in 2004. Lower engine shipments associated with U.S. Navy shipbuilding programs contributed to the decrease in revenue during 2005. However, this decrease was partially offset by higher parts and service revenue.

     The segment reported a profit of $5.9 million in 2005, compared to a profit of $0.9 million in 2004. In 2005 we recorded a $3.5 million contract loss provision associated with several engine manufacturing programs, while a $7.5 million loss provision was established in 2004. In addition, higher aftermarket and service revenue in 2005 also contributed to the increase in segment profits. Operating margins for the segment in 2005 were 5.8%, compared to 0.8% in 2004.

      2004 Compared to 2003

     Sales increased 13% in 2004 to $826.3 million, compared to $730.1 million in 2003. Nearly every operation experienced an increase in volume, with several operations experiencing double-digit percentage increases. In addition to the higher volumes, the increase in the value of the euro, when compared to the dollar, accounted for approximately three percentage points of the increase in sales. This change favorably impacted revenue at the European operations of Garlock Sealing Technologies, GGB and France Compressor Products for the year.

     Segment profit was $92.1 million in 2004, which was a 5% improvement over the $87.6 million reported in 2003. Higher volumes at most operations, selected price increases, and the impact of stronger foreign currency rates had a favorable impact on segment profits. These improvements were partially offset by a less favorable product mix, increased raw materials prices, especially in metals, and higher energy costs. The 2004 results also include a loss of $7.5 million for expected cost overruns on engine programs at Fairbanks Morse Engine. Performance issues surrounding the production of new engine models and a weaker dollar, which increased the costs for engine components manufactured outside of the United States, required us to establish this provision. Additionally, we incurred restructuring and other expense of $9.4 million in 2004, compared to $2.6 million in 2003, primarily associated with activities at our France Compressor Products operations in the U.S. and the GGB operations in France. Segment margins were 11.1% in 2004, compared to 12.0% in 2003.

     Net income of $33.8 million in 2004 was higher than the reported net income of $33.2 million in 2003. Net income was impacted by the items discussed below:

     Corporate expenses increased to $26.8 million in 2004, compared to $22.5 million in 2003. The increase in 2004 was primarily due to the rise in EnPro’s stock price and the effect that had on stock-based compensation.

     Asbestos-related expenses were $10.4 million in 2004, compared to $9.8 million in 2003. Higher defense costs associated with an increase in trials and lower recoveries from insolvent insurance carriers in 2004 contributed to the increase.

     In 2004 we recognized a loss of $3.7 million in connection with the divestiture of our Haber Tool and Sterling Die businesses, partially offset by a gain of $1.9 million primarily associated with the sale of a building we no longer needed as a result of our restructuring initiatives. Results of operations in 2003 were favorably impacted by the combined gains of $2.5 million on the sale of two buildings.

     Net interest expense decreased from $7.6 million in 2003 to $7.1 million in 2004 due to the repayment of variable rate promissory notes and industrial revenue bonds.

     During 2004, we received $10.0 million from an insurer to settle our claims for (1) reimbursement of past costs relating to certain environmental matters, and (2) estimated future claims that had previously been reserved by us.

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

      Sealing Products. Sales increased 13% in 2004 to $374.7 million from $333.0 million in 2003. Foreign currency rates accounted for four percentage points of this increase in 2004. Stemco experienced higher volumes as a result of improved aftermarket activity and higher OEM production order levels in the heavy-duty truck and trailer markets. Sales at Garlock Sealing Technologies increased in 2004 due to higher demand from the steel and nuclear industries, as well as increased shipments to the upstream oil and gas production industries as a result of the Pikotek acquisition. Garlock Rubber Technologies’ sales increased compared to 2003 as a result of higher demand in the conveyor belt market. Additionally, Plastomer Technologies experienced an increase in sales, when compared to 2003, due to higher demand for PTFE components and specialty tapes.

     Segment profit increased 20% to $58.6 million in 2004, compared to $48.7 million in 2003. This increase was primarily a result of volume gains, and selected price increases. However, higher raw material costs, as well as an unfavorable product mix, partially offset these improvements. Segment margins increased from 14.6% in 2003 to 15.6% in 2004.

      Engineered Products. Sales were $335.8 million in 2004, which was 10% higher than the $304.2 million reported in 2003. Foreign currency rates accounted for four percentage points of this increase in 2004. Increased industrial demand for compressors and aftermarket parts resulted in higher sales at Quincy Compressor in 2004. Additionally, GGB experienced higher demand in the industrial and automotive markets in the Americas and Europe. Sales at France Compressor Products in 2004 increased due to higher European sales and the impact of favorable exchange rates. Haber Tool and Sterling Die, which were sold in mid-year 2004, contributed $20.4 million in sales in 2003, compared to $11.0 million in 2004.

     In 2004, segment profit increased to $32.6 million from $30.9 million in 2003. Despite $3.2 million of restructuring costs, GGB profits increased in 2004 as a result of volume gains, a more favorable product mix, benefits from restructuring in prior years, and the positive impact of the foreign currency rates. Increased demand and selected price increases resulted in higher profits for Quincy in 2004. Restructuring expense of $4.6 million, associated with the relocation of France Compressor Products to Houston, resulted in lower profits at that business in 2004. As a result of the mid-year divestiture of the Haber Tool and Sterling Die businesses, segment profit in 2004 included only two quarters of results for these operations compared to a full year in 2003. Segment margins decreased from 10.2% in 2003 to 9.7% in 2004.

      Engine Products and Services . Sales increased 24% in 2004 to $116.9 million from $94.4 million in 2003. Fairbanks Morse Engine reported higher revenue due to an increase in engine shipments associated with U.S. Navy shipbuilding programs. However, this increase was partially offset by lower parts and service sales in 2004.

     Segment profit decreased to $0.9 million in 2004, compared to $8.0 million in 2003. The decline in profit was the result of lower aftermarket sales and a $7.5 million loss recorded in the third quarter of 2004 in connection with cost overruns on several engine programs. Segment margins in 2004 were 0.8% compared to 8.5% in 2003.

Restructuring and Other Costs

     Restructuring expense was $1.0 million, $9.4 million and $2.6 million for 2005, 2004 and 2003, respectively. The 2005 expense was primarily related to restructuring activities associated with a 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 the buildings dating from 1907 to 1956. The project, which is ongoing, will reduce the number of buildings on the site to 7 from 26 and eliminate 350,000 square feet of obsolete space, or approximately half of the space currently under roof. The 2004 restructuring expense was primarily related to the relocation and consolidation of facilities for a domestic operation and start-up costs associated with two new foreign facilities. These activities support our management initiatives to increase productivity and expand our product offerings in new geographic markets. See Note 3 to the Consolidated Financial Statements for a discussion of restructuring and other costs in 2005, 2004 and 2003.

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 product returns, bad debts, inventories, intangible assets, income taxes, warranty obligations, restructuring, pensions and other post-retirement 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 because 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.

      Provisions for Excess and Obsolete Inventory

     We balance the need to maintain adequate inventory levels to ensure customer delivery requirements are met with the risk of excess or obsolete inventory due to changing technology and market demands. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based on our estimated forecast for product demand and production requirements.

      Asbestos

     Historically, we recorded an accrual related to asbestos claims for actions in advanced stages of processing and settled claims only. No accrual was recorded for claims in early procedural stages or for unasserted claims. In 2004, we established an accrual for early-stage and unasserted claims estimated for a future period over which management believes the liability can reasonably be estimated. We have

engaged the firm of Bates White, LLC, a recognized expert in the field of estimating asbestos-related liabilities, to assist us in estimating the liability. Due to the uncertain nature of the estimated liability, management’s estimate covers a range, and we believe no single amount in the range is a better estimate than any other amount in the range. In accordance with the applicable accounting rules, we recorded a liability for these claims and a corresponding receivable from our insurance carrier at the lower end of the range of estimated potential liability.

     The significant assumptions underlying the material components of the estimated range of 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; and the estimated amount to be paid per claim. The actual number of future actions filed per year and the payments made to resolve those claims could exceed our past experience and those reflected in our estimate.

     With the assistance of Bates White, LLC, we periodically review the period over which we can make a reasonable estimate, the assumptions underlying our estimate, and the range of reasonably possible potential liabilities, and 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. If the amount of the estimated liability ever exceeds the amount of insurance available for asbestos claims, the excess will be charged to earnings.

      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. Under this method, all assets and liabilities are translated in U.S. dollars using current exchange rates, and income statement items 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.

     In our Consolidated Statements of Changes in Shareholders’ Equity for 2005, the cumulative translation adjustment of $10.0 million includes a $32.2 million addition representing cumulative corrections of immaterial errors in the translation of foreign currency denominated goodwill and other intangible assets during years prior to 2005. Such errors had no effects upon net income, earnings per share or cash flows for any period. Additional discussion regarding this immaterial correction is included in Note 1 to the Consolidated Financial Statements.

      Derivative Instruments and Hedging Activities

     Upon the adoption of Statement of Financial Accounting Standards No. 133, we elected not to apply the provisions of the statement to embedded derivatives existing before January 1, 1999, as permitted by the transition provisions of the statement. As a result, the feature of the TIDES that allowed them to be converted into Goodrich common stock was not accounted for separately as a derivative. We purchased call options on shares of Goodrich common stock in 2002 in an amount that would have been required if all TIDES holders converted. Following the redemption of the TIDES in 2005, we sold the Goodrich call options.

     We also have entered into foreign currency forward and option exchange contracts to hedge forecasted transactions occurring at various dates through February 2008 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 Post-Retirement Benefits

     We and certain of our subsidiaries sponsor domestic and foreign defined benefit pension and other post-retirement 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 post-retirement 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 post-retirement 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 respective 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 $76.4 million, $41.1 million and $44.0 million in 2005, 2004 and 2003, respectively. In 2005, working capital increased primarily due to higher inventories and customer receivables. GGB’s inventory increased in Europe in order to meet customer requirements impacted by the start-up activities at the Slovakian facility. Quincy Compressor increased inventory as a result of additional customer requirements within its respective markets. Our days’ sales outstanding of inventory for the Company increased to 53 in 2005, compared to 44 days in 2004. Although 2005 working capital was impacted by an increase in accounts receivable, the days’ sales outstanding of receivables remained constant on a year-over-year basis at 51 days. In 2005, 2004 and 2003, we added $10.1 million, $29.9 million and $25.7 million, respectively, of the net cash flows to the asbestos receivables in the Consolidated Balance Sheets. We benefited in 2005 from the resolution of a dispute between Garlock and a number of its London market insurance carriers, which resulted in receipt of $22 million of delinquent proceeds in 2005.

      Investing Cash Flows

     We used $64.1 million, $26.8 million and $36.8 million in investing activities in 2005, 2004 and 2003, respectively. Our investing activities in 2005 related to capital expenditures of $32.2 million

associated with our manufacturing facilities, compared to $36.9 million in 2004 and $22.7 million in 2003. The increase in capital expenditures in 2004 and 2005 reflects our strategy to increase investments in our operations as part of an effort to improve customer satisfaction, reduce costs and restructure our operations. In 2005, we posted $41.1 million of cash collateral to secure bonds associated with adverse asbestos trial verdicts that we are appealing. We are required to provide cash collateral to secure the full amount of the bonds, which will restrict the use of the cash during the periods of such appeals. During 2005, we received proceeds of $7.9 million primarily related to the sale of a property associated with a previously owned business. In 2004, we received proceeds of $9.8 million primarily from the sale of a surplus building and the divestiture of our Haber Tool and Sterling Die businesses. In 2003, we used $20.5 million of cash to acquire the Pikotek business and a small specialty sealing product line.

      Financing Cash Flows

     Financing activities used $9.1 million and $3.9 million in 2005 and 2004, respectively, compared to net cash provided by financing activities of $0.7 million in 2003. 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, along with available cash, to redeem the $145 million of outstanding 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). For additional information about our convertible debentures, see “ – Capital Resources” below and Note 11, “Long Term Debt,” of the Notes to our Consolidated Financial Statements. Additionally, in 2005 we paid a promissory note for $6.9 million. Financing cash flows in 2004 were impacted primarily by the repayment of certain industrial revenue bonds. Financing cash flows in 2003 were limited mainly to a partial purchase of the TIDES for approximately $3.5 million in cash, and a $4.7 million borrowing against a promissory note to purchase life insurance policies in connection with certain pre-retirement death benefits for our executive officers. The borrowing did not involve any cash inflows because we recorded a corresponding increase in cash surrender value that is reflected in operating cash flows.

      Capital Resources

     Our primary U.S. operating subsidiaries have a senior secured revolving credit facility with a group of banks. Borrowings under the senior secured revolving credit facility would be collateralized by receivables, inventories, equipment, intellectual property, insurance receivables and all other personal property assets of EnPro and our U.S. subsidiaries, and by a pledge of 65% of the capital stock of our direct foreign subsidiaries. The facility contains covenants and restrictions that are customary for an asset-based loan, including limitations on dividends, limitations on incurrence of indebtedness and maintenance of a fixed charge coverage financial ratio. Certain of the covenants and restrictions apply only if borrowings under this facility reach a certain level. The maximum available amount under the facility is $60 million. We have not borrowed against this credit facility. This credit facility expires in May 2006, and we are currently negotiating with our lenders to amend and extend the facility.

     In 2005, we issued $172.5 million of our convertible debentures. The debentures bear interest at an annual rate of 3.9375%. We will pay interest on the debentures on April 15 and October 15 of each year, beginning April 15, 2006. The debentures will mature on October 15, 2015. The debentures are direct, unsecured and unsubordinated obligations and rank equal in priority with all of our unsecured and unsubordinated indebtedness and senior in right of payment to all of our subordinated indebtedness. They effectively rank junior to all of 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 will 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 only permitted under certain circumstances that had not occurred at December 31, 2005.

     We used a substantial portion of the net proceeds from the sale of the debentures, together with available cash, to redeem the TIDES. In addition, we applied 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 of increasing the conversion price of the debentures to $46.78 per share.

      Dividends

     If borrowings under our senior secured revolving credit facility reach a certain level, there would be some limitations on our ability to pay dividends. The indenture that governs the debentures does not restrict us from paying dividends.

Contingencies

      General

     Various claims, lawsuits and administrative proceedings, all arising in the ordinary course of business with respect to commercial, product liability, asbestos and environmental matters, are pending or threatened against us or our subsidiaries and seek monetary damages 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 conduct comprehensive compliance and management system 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 20 sites at each of which the costs to us are expected to exceed $100,000. Investigations have been completed for 15 sites and are in progress at the other five sites. The majority of these sites relate to remediation projects at former operating facilities that were sold or closed and primarily deal with remediation of soil and groundwater contamination. The laws governing investigation and remediation of these sites can impose joint and several liability for the associated costs. Liability for these costs can be imposed on present and former owners or operators of the properties or on parties that generated the wastes that contributed to the contamination.

     Our policy is to accrue environmental investigation and remediation costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. The measurement of the liability is based on an evaluation of currently available facts with respect to each individual situation and takes into consideration factors such as existing technology, presently enacted laws and regulations and prior experience in remediation of contaminated sites. Liabilities are established for all sites based on the factors discussed above. As assessments and remediation progress at individual sites, these liabilities are reviewed periodically and adjusted to reflect additional technical data and legal information. As of December 31, 2005 and 2004, EnPro had accrued liabilities of $34.1 million and $34.0 million, respectively, for estimated future expenditures relating to environmental contingencies. Of these amounts, $15.4 million represents our share of liability as a potentially responsible party at a former industrial property located in Farmingdale, New York. The amounts recorded in the Consolidated Financial Statements have been recorded on an undiscounted basis.

     We believe that our reserves are adequate based on currently available information. Actual costs to be incurred for identified situations in future periods may vary from estimates because of the inherent uncertainties in evaluating environmental exposures due to unknown conditions, changing government regulations and legal standards regarding liability. Subject to the imprecision in estimating future environmental costs, we believe that maintaining compliance with current environmental laws and government regulations will not require significant capital expenditures or have a material adverse effect on our financial condition, but could be material to our results of operations or cash flows in a given period.

      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 material product liability claims are currently pending against Coltec related to Colt Firearms or Central Moloney. Colt Firearms was named as a defendant in 37 cases filed by municipalities seeking to recover costs arising from gun-related injuries. The current owner of Colt Firearms filed an action seeking indemnification from Coltec for these claims to the extent they involve firearms manufactured prior to March 1990. This action was dismissed with prejudice in December 2005. 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 high technology specialty metal products, was a wholly owned subsidiary of Coltec until 1985 when a majority of the outstanding shares were sold. Through Coltec, we retained a minority interest and owned approximately 45% of the outstanding common stock of Crucible until the sale of our remaining interest to Crucible in October 2004. Coltec no longer has any ownership interest in Crucible.

     In conjunction with the closure of a Crucible plant in the early 1980s, Coltec was required to fund two trusts for retiree medical benefits for union employees at the plant. The first trust (the “Benefits Trust”) pays for these retiree medical benefits on an ongoing basis. Coltec has no ownership interest in the Benefits Trust, and thus the assets and liabilities of this trust are not included in our Consolidated Balance Sheets. Under the terms of the Benefits Trust agreement, the trustees retained an actuary to

assess the adequacy of the assets in the Benefits Trust in 1995, another actuarial report was completed in 2005 and a third report will be required in 2015. The actuarial reports in 1995 and 2005 determined that there were adequate assets to fund the payment of future benefits. If it is determined in 2015 that the trust assets are not adequate to fund the payment of future medical benefits, Coltec will be required to contribute additional amounts to the Benefits Trust. In the event there are ever excess assets in the Benefits Trust, those excess assets will not revert to Coltec.

     Because of the possibility that Coltec could be required to make additional contributions to the Benefits Trust to cover potential shortfalls, Coltec was required to establish a second trust (the “Back-Up Trust”). The trust assets and a corresponding liability of the Back-Up Trust are reflected on our Consolidated Balance Sheets in other non-current assets and in retained liabilities of previously owned businesses, respectively, and amounted to $18.6 million each at December 31, 2005. As noted above, based on the valuation completed in early 2005, the actuary determined that there were adequate assets in the Benefits Trust to fund the estimated payments by the trust until the next valuation date. As a result, $11.0 million held in the Back-Up Trust was released to Coltec during the second quarter of 2005. This amount was based on a distribution formula described in the Benefits Trust agreement and was recorded in income upon receipt. Until such time as a payment is required or the remaining excess trust assets revert to Coltec, the trust assets and liabilities will be kept equal to each other on our Consolidated Balance Sheets.

     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, in addition to those mentioned previously, that relate to its period of ownership of this operation.

      Debt and Capital Lease Guarantees

     As of December 31, 2005, we had contingent liabilities for potential payments on guarantees of certain debt and lease obligations totaling $11.1 million. These guarantees arose from the divestiture 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 the Company’s 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, predominantly gaskets and packing products. The damages claimed vary from action to action, and in some cases plaintiffs seek both compensatory and punitive damages. To date, neither Garlock nor Anchor has been required to pay any punitive damage awards, although there can be no assurance that they will not be required to do so in the future. Liability for compensatory damages has historically been allocated among all responsible defendants. Since the first asbestos-related lawsuits were filed against Garlock in 1975, Garlock and Anchor have processed more than 700,000 asbestos claims to conclusion (including judgments, settlements and dismissals) and, together with their insurers, have paid more than $1 billion in settlements and judgments and over $300 million in fees and expenses.

      Claims Mix . Of those claims resolved, approximately 3% have been claims of plaintiffs alleging the disease mesothelioma, approximately 6% have been claims of plaintiffs with lung or other cancers,

and more than 90% have been claims of plaintiffs alleging asbestosis, pleural plaques or other non-malignant impairment of the respiratory system. Out of the 120,500 open cases at December 31, 2005, we are aware of approximately 7,900 (6.6%) that involve a claimant with mesothelioma, lung cancer or some other cancer.

      Product Defenses . The asbestos-containing products formerly sold by Garlock and Anchor were encapsulated, which means the asbestos fibers were incorporated into the product during the manufacturing process and sealed in a binder. They were also nonfriable, which means they could not be crumbled by hand pressure. The U.S. Occupational Safety and Health Administration, which began generally requiring warnings on asbestos-containing products in 1972, has never required that a warning be placed on products such as Garlock’s gaskets. Even though no warning label was required, Garlock included one on all of its asbestos-containing products beginning in 1978. Further, gaskets such as those previously manufactured and sold by Garlock are one of the few asbestos-containing products still permitted to be manufactured under regulations of the Environmental Protection Agency. Garlock discontinued all manufacture and distribution of asbestos-containing products in the U.S. during 2000 and worldwide in mid-2001. From the mid-1980s until 2000, U.S. sales of asbestos-containing industrial sealing products were not a material part of Garlock’s sales, and its sales of asbestos-containing products were predominantly to sophisticated purchasers such as the U.S. Navy and large petrochemical facilities.

     Garlock’s product defenses have enabled it to be successful at trial, winning defense verdicts in four of five cases tried to verdict in 2003, five of eleven cases decided in 2004, and three of eight cases decided in 2005. In the successful jury trials, the juries determined that Garlock’s products were not defective and that Garlock was not negligent. In the cases decided by judges, the judges determined that the claimant failed to make a sufficient showing of exposure to Garlock’s products.

      Recent Trial Results . During 2005, Garlock began thirteen trials. Six of these lawsuits – three in Philadelphia involving six plaintiffs, one in Buffalo, New York, one in New Jersey and one in Texas – all settled during the course of the trials. A Los Angeles trial involving a living mesothelioma patient resulted in an adverse verdict, but the claim was settled as part of a larger group settlement prior to the entry of judgment. A Baltimore jury returned a verdict of $10.4 million against Garlock and two other defendants in a mesothelioma case. Garlock’s one-third share is approximately $3.5 million. A Dallas jury returned a verdict of $260,000 in another mesothelioma case. Garlock’s share is approximately $10,000, 4% of the total verdict. A Kentucky jury returned a verdict of $5.0 million in compensatory damages in a lung cancer case in the second quarter of 2005, but this verdict was overturned by the judge in the third quarter of 2005 and a new trial was granted. A new Kentucky jury awarded compensatory damages of $275,000 and punitive damages of $600,000 against Garlock early in 2006. Garlock plans to appeal this verdict. In the Texas lawsuit that settled during trial, which involved a plaintiff with mesothelioma, the jury returned with a defense verdict in Garlock’s favor just after the settlement was reached. An Illinois jury in an asbestosis case returned a verdict against Garlock of $225,000, all of which was offset by settlements with other defendants. Another Illinois jury and a Washington jury each returned defense verdicts for Garlock in December 2005.

     During 2004, Garlock began seventeen trials involving twenty plaintiffs. Verdicts were rendered against Garlock in six cases. Garlock won defense verdicts with respect to three plaintiffs (in two trials) and the judge directed verdicts in favor of Garlock in two cases. There were two trials started in another case, both of which resulted in mistrials. Seven cases were settled during trial, and another case resulted in a hung jury.

     Garlock is appealing each of the significant adverse verdicts against it. In some cases, appeals require the provision of security in the form of an appeal bond, potentially in amounts greater than the verdicts. We are required to provide cash collateral to secure the full amount of the bonds, which can restrict the usage of a significant amount of our cash for the periods of such appeals. As of December 31,

2005, we had $41.1 million of cash collateral relating to appeal bonds recorded as restricted cash in the Consolidated Balance Sheets. The length of time for appeals varies, and can be as long as two or three years. Garlock has a track record of success in a majority of its previous appeals, and we believe that Garlock will continue to be successful in the appellate process. However, there can be no assurance that any or all of Garlock’s appeals will be successful.

      Settlements . Garlock settles and disposes of actions on a regular basis. Garlock’s historical settlement strategy has been to try to match the timing of payments with recoveries received from insurance. In 1999 and 2000, Garlock employed a more aggressive settlement strategy. The purpose of this strategy was to achieve a permanent reduction in the number of overall asbestos claims through the settlement of a large number of claims, including some claims not yet filed as lawsuits. Due to this short-term aggressive settlement strategy and a significant overall increase in claims filings, the settlement amounts paid in each of the years 1999 through 2005 were greater than the amounts paid in any year prior to 1999. In 2001, Garlock resumed its historical settlement strategy. Garlock reduced new settlement commitments from $180 million in 2000 to $94 million in 2001, $86 million in 2002, $86 million in 2003, $84 million in 2004, and $79 million in 2005. Because many of the commitments made in 1999, 2000 and early 2001 were to be paid over a number of years, the settlement amounts that Garlock paid in 2005 included some amounts for those settlements.

     Settlements are made without any admission of liability. Settlement amounts vary depending upon a number of factors, including the jurisdiction where the action was brought, the nature and extent of the disease alleged and the associated medical evidence, the age and occupation of the plaintiff, the presence or absence of other possible causes of the plaintiff’s alleged illness, the availability of legal defenses, and whether the action is an individual one or part of a group.

     Before any payment on a settled claim is made, the claimant is required to submit a medical report acceptable to Garlock substantiating the asbestos-related illness and meeting specific criteria of disability. In addition, sworn testimony or other evidence that the claimant worked with or around Garlock asbestos-containing products is required. The claimant is also required to sign a full and unconditional release of Garlock, its subsidiaries, parent, officers, directors, affiliates and related parties from any liability for asbestos-related injuries or claims.

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

      Insurance Coverage . As of December 31, 2005, Garlock had available $570 million of insurance and trust coverage that we believe will be available to cover future asbestos claim and expense payments. In addition, Garlock classifies $61 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 $23 million from insolvent carriers during 2005 ($10 million of which related to insurance receivables), bringing total insolvent collections from 2002 through 2005 to $33 million.

     Of the $570 million of collectible insurance and trust assets, we consider $498 million (87%) to be high quality because it is (a) written or guaranteed by U.S.-based carriers whose credit rating by S&P is investment grade (BBB) or better, and whose AM Best rating is excellent (B++) or better, or (b) in insurance trusts resulting from commutation agreements. We consider $72 million (13%) to be of moderate quality because it is with (a) other solvent U.S. carriers who are unrated or below investment grade ($60 million) or (b) with various London market carriers ($12 million). Of the $570 million, $232 million is allocated to claims that have been paid by Garlock and submitted to its insurance companies for reimbursement.

     Arrangements with Garlock’s insurance carriers limit the amount of insurance proceeds that it is entitled to receive in any one year. Amounts paid by Garlock in excess of insurance recoveries in any year that would be recoverable from insurance if there was no annual limit may be collected from the insurance companies in subsequent years so long as insurance is available, subject to the annual limits available in subsequent years. To the extent that Garlock pays such amounts in a given year, these payments are recorded as a receivable.

     In the second quarter of 2004, we reached agreement with Equitas, the London-based entity responsible for the pre-1993 Lloyds’ of London policies in our insurance block, concerning the settlement of its exposure to our subsidiaries’ asbestos claims. As a result of the settlement, Garlock received $30 million in payment of receivables in the third quarter of 2004, and another $88 million was placed in an independent trust. The funds in the trust are available to pay future claims and the trust is billed monthly. At December 31, 2005, the market value of the funds remaining in the trust was approximately $69.7 million.

     In the fourth quarter of 2004, we reached agreement with a group of London market carriers (other than Equitas) and one of our U.S. carriers that has some policies reinsured through the London market. As a result of the settlement, which resolved a pending arbitration among the parties, in early 2005 Garlock received $22 million in payment of receivables and another $55.5 million was placed in an independent trust. The funds in the trust are available to pay future claims and the trust is billed monthly. At December 31, 2005, the market value of the funds remaining in the trust was approximately $49.6 million.

     During the first quarter of 2005, we reached agreement with the parent of two of Garlock’s U.S. insurers. As a result of the agreement, Garlock will receive a total of $21 million of insurance payments in satisfaction of $26 million of total nominal coverage in three equal bi-annual payments of $7 million. The $5 million difference reflects discounting for present value and solvency and litigation risks. The first payment was received in May 2005, the second is due in May 2007 and the third is due in May 2009. The payments are guaranteed by the parent company of the settling insurers.

     Garlock is in discussions with a significant group of related U.S. insurers about the terms of the annual payment limit and the proper interpretation of provisions in the insurers’ policies relating to legal fees and expenses. These insurers have withheld payments pending resolution of the matter. This payment delay accounts for $35.4 million of the insurance receivables at December 31, 2005. The insurers do not dispute the amount of available insurance coverage, and we anticipate that we will reach agreement on a reasonable payment schedule in 2006.

     In November 2003, Coltec received a letter and arbitration demand from one of its U.S.-based investment grade insurers claiming that the insurer was relieved of liability on a $40 million Coltec policy in connection with a 1998 settlement and payment in full by a related insurer of a $2 million Anchor policy. That insurer filed suit against Coltec in state court in New York in November 2004, making the same and other claims, and Coltec filed coverage litigation against the insurer in federal court in Pennsylvania in December 2004. The parties have agreed that the release question is required to be determined in the arbitration, which is ongoing. Coltec intends to vigorously pursue the insurance coverage. The $40 million policy is included in Garlock’s $570 million remaining collectible coverage.

     Insurance coverage for asbestos claims is not available to cover exposures initially occurring on and after July 1, 1984. Although Garlock and Anchor continue to be named as defendants in new actions, only a few allege initial exposure after July 1, 1984. To date, no payments have been made with respect to these few claims, pursuant to a settlement or otherwise. Garlock and Anchor believe that they have substantial defenses to these claims and therefore automatically reject them for settlement. However, there can be no assurance that any or all of these defenses will be successful in the future.

      Quantitative Claims Information . Due to its uncertain nature, management’s estimate of the liability for early-stage and unasserted claims covers a range of possible values, and we believe that no single amount in the range is a better estimate than any other amount in the range. Therefore, in accordance with applicable accounting rules, we recorded a liability at December 31, 2005, of $271 million, which includes $105 million for advanced-stage cases and settled claims (inclusive of $10.7 million of accrued legal and other fees already incurred), and $166 million for early-stage and unasserted claims. The recorded amount for early-stage and unasserted claims is at the low end of the range of what we believe to be reasonably possible and does not include legal fees and expenses to be incurred in the future.

     Our outside counsel retained the expert claims valuation firm Bates White, LLC, to review Garlock’s product history, historical claims information and settlement experience and to assist and advise in connection with the management of Garlock asbestos claims and its estimation of Garlock’s liability for pending and reasonably estimable unasserted future asbestos claims. We received an initial opinion from Bates White dated February 17, 2005, which is updated quarterly. The most recent update is dated January 4, 2006. The updated report states that, “[b]ased on the range of events likely to transpire in the future, which are reasonably predicted for Garlock’s economically-driven non-malignant claims over the next two to four years and for Garlock’s cancer claims and medically- driven non-malignant claims over the next ten years, the reasonable and probable estimate of Garlock’s obligation for asbestos personal injury claims ranges from $260.6 million to $377.4 million.”

     We have adopted the range predicted by our expert; however, we note that Bates White also indicated a broader range of potential estimates of Garlock’s future obligation for the period of the estimation from $213 million to $649 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 economically-driven non-malignant claims and beyond ten years for Garlock 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. 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.” We also note, as previously mentioned, that the predicted range does not include legal fees and expenses, which add considerably to the costs. Plausible scenarios exist that could result in a total remaining asbestos liability for Garlock in excess of $1 billion, consistent with the high end of previous management estimates.

     The recording of a liability for early-stage and unasserted claims does not alter our strategy for managing our potential asbestos liabilities and insurance assets and has no impact on the ultimate amount paid for asbestos-related claims against our subsidiaries. However, the recording of that liability could, at some time in the future, accelerate the timing of the recognition of charges to income for future asbestos claims. That would happen in the event the amount of the low end of our estimate of the liability for pending and unasserted claims increases to the point where the liability, when combined with the amount of insurance receivables that we have recorded, exceeds the total remaining amount of insurance available for the payment of such claims.

     As of the end of 2005, we had remaining solvent insurance coverage of $570 million that we believe will be available for the payment of asbestos-related claims. At that time, we had paid out $232 million in insured claims and expenses in excess of amounts recovered from insurance. These amounts are recoverable under our insurance policies, have been billed to the insurance carriers, and will be recovered in the future from the $570 million of remaining insurance under agreements and arrangements in place with the carriers. We also have accrued a liability of $105 million for all settled but unpaid claims and advanced stage pending cases, and we have accrued an additional liability of $166 million for

pending claims in early stages and unasserted future claims reasonably likely to be incurred and paid over the next ten years. That leaves approximately $77 million of available insurance coverage that is uncommitted as of the end of 2005.

     We anticipate that the uncommitted $77 million of remaining insurance coverage will be committed over the next nine to 18 months for the following reasons:

	•		We accrue for legal fees and expenses as incurred and as services have been rendered. We do not accrue for services that have not been rendered. Therefore, the above described accruals do not include any accruals for legal fees and expenses to be incurred in the future. Some of the uncommitted insurance coverage will be committed each quarter as we incur legal fees that are reimbursable from insurance. Over the last eight quarters, insured legal fees have averaged approximately $5 million per quarter.
	•		Under generally accepted accounting principles, the accruals for current and future claims described above are at the low end of a broad range of potential liabilities. Payments in any period that are above the low end of the range for that period will cause some of the uncommitted insurance coverage to be committed. For 2005, actual claims payments fell within the previously estimated range, but they exceeded the low end of the range by $33 million, an average of over $8 million per quarter.
	•		The above described accrual for liabilities related to unasserted future claims is based on an estimate of claims likely to be received and paid over a ten-year period, as our expert believes that it is a reasonable possibility that claims beyond that ten-year period will be de minimus. As our expert has reviewed and updated the estimate each quarter, additional amounts have been added to the estimate for future periods. Similarly, additional amounts may be accrued for additional periods in the future, further eroding the amount of uncommitted insurance coverage. Recent amounts accrued in this manner for additional periods have averaged approximately $2 million per quarter.
	•		Our accrual related to unasserted future claims is derived based on an analysis of recent average settlement payments. Any increases in average settlement payments would cause some of the uncommitted insurance coverage to be committed.
	•		We are involved in litigation involving approximately $40 million of our remaining coverage. A loss in that dispute, or a compromise of the coverage amount, would deplete some of the uncommitted insurance coverage.
	•		While a large majority of our remaining coverage is with U.S. investment grade carriers or in insurance trusts, we could lose some of the coverage as a result of additional insurer insolvencies or unanticipated disputes.
	•		While we have done well in a majority of asbestos-related trials against our subsidiaries, we have experienced some unfavorable judgments from time to time. The amounts of those judgments tend to be above the normal settlement range for similar claims. The payment or accrual of an adverse judgment above normal settlement values would cause some of the uncommitted insurance coverage to be committed.

     Once the balance of the uncommitted insurance coverage has been committed, we will begin to incur charges to income for each of the preceding events as they occur. As a result, we anticipate that

charges to earnings for asbestos will increase considerably beginning in 2007. Those charges will not impact our future cash outflows for asbestos-related claims above what they otherwise would have been.

     The table below quantitatively depicts the number of pending cases, the liability described above, the amount that we expect Garlock to recover from insurance related to this liability, and asbestos-related cash flows.

million, respectively, of the net cash flows to the asbestos insurance receivable in our Consolidated Balance Sheets, and we recorded $11.7 million, $10.4 million and $9.8 million, respectively, as an expense in our Consolidated Statements of Operations. This expense relates primarily to uninsured legal fees and uninsured administrative costs, net of recoveries from insolvent insurance carriers.

      New Filings . As the chart shows, the downward trend in the number of new actions filed against our subsidiaries continued in 2005. The number of new actions filed in 2005 was the lowest for any year since the early 1990s. Possible factors in the decline include, but are not limited to, tort reform in some high profile states, especially Mississippi, Texas and Ohio, actions taken and rulings by some judges and court administrators that have the effect of limiting access to their courts for claimants without sufficient ties to the jurisdiction or claimants with no discernible disease, acceleration of current year claims into past years, uncertainty about the potential for national asbestos reform legislation, and declining incidence of asbestos-related disease.

      Strategy . Garlock’s current strategy is to focus on trial-listed cases and other cases in advanced stages of processing, to reduce new settlement commitments each year, to carefully manage and maximize insurance collections, and to proactively support legislative and other efforts aimed at asbestos reform. Garlock believes that this strategy should result in the reduction of the negative annual cash flow impact from asbestos claims, as previous settlements work their way through the payment process. However, recent trial results and the threat of large verdicts impact the implementation of the strategy, and therefore it is likely that Garlock will continue to enter into settlements that involve large numbers of cases from time to time when it believes that the risk of a large adverse verdict outweighs the benefits of the strategy. Garlock believes 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 the level of claims activity against Garlock will eventually decline to a level that can be paid from the cash flow expected from Garlock’s operations if 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, recent bankruptcies of other defendants, and legislative efforts, and given the amount of insurance coverage that Garlock expects to be available from its solvent carriers, we believe that pending asbestos actions 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 a given period. We anticipate that asbestos-related actions will continue to be filed against Garlock. Because of the uncertainty as to the number and timing of potential future actions, as well as the amount that will have to be paid to settle or satisfy any such actions in the future and the finite amount of insurance available for future payments, those future actions could have a material adverse effect on our financial condition, results of operations and cash flows.

      Reform Legislation . The outlook for federal legislation to provide national asbestos litigation reform continues to be uncertain. We are cautiously optimistic that reform legislation ultimately will be adopted by the U.S. Congress.

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, 2005, approximately $42.2 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, 2005, we have outstanding contingent liabilities for guaranteed debt and lease payments of $11.1 million related to previously divested businesses.

Contractual Obligations

     A summary of our contractual obligations and commitments at December 31, 2005 is as follows:

     Payment for long-term debt may be accelerated as the convertible debentures may be redeemed earlier under certain circumstances. Additional discussion regarding the convertible debentures is included 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, 2005. 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.

     The table does not include obligations under the Company’s pension and post-retirement benefit plans which are included in Note 13 to the Consolidated Financial Statements.

Outlook

     We continue to make progress in connection with our strategy to improve operating efficiency through our TCV initiative, to expand our product offerings and 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 leverage ratio provide us with a sound financial base upon which we can build a stronger EnPro.

     We expect sales to increase in 2006 compared to 2005, mainly due to improved volumes associated with market growth, price increases and increased market share as a result of new products.

Higher sales volumes, productivity improvements associated with our TCV lean manufacturing program, restructuring initiatives, the establishment of low cost manufacturing operations, and price increases are expected to result in improved operating margins and increased operating profits in 2006.

     We anticipate that cash flows in 2006 will benefit from improved operating income. Capital spending in 2006 is expected to be higher than 2005 levels as a result of the modernization project at our Garlock Sealing Technologies facilities in Palmyra and continued investments to improve operational efficiency.

     As part of our operating strategy to strengthen our mix of businesses, we will continue to evaluate strategic acquisitions and divestitures in 2006; however, the impact of such acquisitions or divestitures cannot be predicted and therefore is not reflected in this outlook.

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, 2005 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. 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, 2005, our internal control over financial reporting was effective based on those criteria.

     Management’s assessment of the effectiveness of EnPro’s internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLC, an independent registered public accounting firm, as stated in their report which appears in this annual report.

     Ernest F. Schaub is currently President, Chief Executive Officer and Director and has held this position since May 2002. 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 this position 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 C. Driscoll is currently Senior Vice President – Human Resources and has held this position since May 2002. From 1990 until joining the Company, he was Vice President – Human Resources of Goodrich Corporation. Mr. Driscoll joined Goodrich in 1964 and held a number of human resources management positions in several different operations, at the corporate office and with the Aerospace Segment. Mr. Driscoll plans to retire from the Company in May 2006.

     Richard L. Magee is currently Senior Vice President, General Counsel and Secretary and has held this position 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.

     John R. Smith joined the EnPro corporate staff in December 2005. Mr. Smith was elected Senior Vice President – Human Resources and Administration in February 2006. He served as Senior Vice President – Human Resources at Integris Metals, Inc. from January 2002 through June 2005. Mr. Smith was General Manager of the industrial welding systems business unit of Illinois Tool Works from January 2000 through December 2001. Prior to that, Mr. Smith spent over 15 years in various management roles at GNB Technologies Inc., including Senior Vice President — Human Resources.

     Wayne T. Byrne is currently Vice President and Controller and has held this position since September 2004. He served as Vice President of Finance and Information Technology at our subsidiary, GGB LLC, from 2001 to 2004. Between 1998 and 2001, Mr. Byrne served as Vice President of Finance of Goodrich Corporation’s Quincy Compressor and AMI businesses. From 1996 until 1998, he was Vice President of Finance at Agri-Tech, Inc. Prior to 1996, Mr. Byrne held various management positions at BREED Technologies, Inc. and Harris Corporation.

     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.

     Robert D. Rehley is currently Vice President and Treasurer and has held this position 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.

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 7 ^th day of March, 2006.

     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		President and		March 7, 2006
Ernest F. Schaub		Chief Executive Officer
		(Principal Executive Officer) and Director
/s/ William Dries		Senior Vice President and Chief		March 7, 2006
William Dries		Financial Officer
		(Principal Accounting Officer)
/s/ William R. Holland		Chairman of the Board and Director		March 7, 2006
William R. Holland*
/s/ J. P. Bolduc		Director		March 7, 2006
J. P. Bolduc*
/s/ Peter C. Browning		Director		March 7, 2006
Peter C. Browning*
/s/ Joe T. Ford		Director		March 7, 2006
Joe T. Ford*
/s/ James H. Hance, Jr.		Director		March 7, 2006
James H. Hance, Jr.*
/s/ Gordon D. Harnett		Director		March 7, 2006
Gordon D. Harnett*
/s/ Wilbur J. Prezzano, Jr.		Director		March 7, 2006
Wilbur J. Prezzano, Jr.*

*By:		/s/ Richard L. Magee
		Richard L. Magee, Attorney-in-Fact

EXHIBIT INDEX

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have completed integrated audits of EnPro Industries, Inc.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedules

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, 2005 and December 31, 2004, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules 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. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes 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. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides 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
March 7, 2006

REPORT OF INDEPENDENT AUDITORS

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ENPRO INDUSTRIES, INC.

We have audited the accompanying consolidated statement of operations, shareholders’ equity and cash flows of EnPro Industries, Inc. and subsidiaries (the “Company”) (formerly Coltec Industries Inc) for the year ended December 31, 2003. Our audit also included the accompanying financial statement schedule of valuation and qualifying accounts. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of its operations, shareholders’ equity and its cash flows for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Charlotte, North Carolina
February 4, 2004

     See notes to Consolidated Financial Statements.

     See notes to Consolidated Financial Statements.

     See notes to Consolidated Financial Statements.