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

Forward-Looking Statements

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

Overview and Outlook

Overview. We design, develop, manufacture, service and market proprietary engineered industrial products. We have 61 primary manufacturing facilities located in 12 countries, including the United States.

We manage our business as three segments: a Sealing Products segment, an Engineered Products segment, and an Engine Products and Services segment.

Our Sealing Products segment designs, manufactures and sells sealing products, including: metallic, non-metallic and composite material gaskets; dynamic seals; compression packing; resilient metal seals; elastomeric seals; hydraulic components; expansion joints; heavy-duty truck wheel-end component systems, including brake products; flange sealing and isolation products; pipeline casing spacers/isolators; casing end seals; modular sealing systems for sealing pipeline penetrations; hole forming products; manhole infiltration sealing systems; safety-related signage for pipelines; bellows and bellows assemblies; pedestals for semiconductor manufacturing; PTFE products; conveyor belting; and sheeted rubber products. These products are used in a variety of industries, including chemical and petrochemical processing, petroleum extraction and refining, pulp and paper processing, heavy-duty trucking, power generation, food and pharmaceutical processing, primary metal manufacturing, mining, water and waste treatment, aerospace, medical, filtration and semiconductor fabrication. In many of these industries, performance and durability are vital for safety and environmental protection. Many of our products are used in applications that are highly demanding, e.g., where extreme temperatures, extreme pressures, corrosive environments, strict tolerances, and/or worn equipment make product performance difficult.

Our Engineered Products segment includes operations that design, manufacture and sell self-lubricating, non-rolling, metal-polymer, solid polymer and filament wound bearing products, aluminum blocks for hydraulic applications and precision engineered components and lubrication systems for reciprocating compressors. These products are used in a wide range of applications, including the automotive, pharmaceutical, pulp and paper, natural gas, health, power generation, machine tools, air treatment, refining, 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 United States government and the general markets for marine propulsion, power generation, and pump and compressor applications use these products and services.

The historical business operations of certain subsidiaries of our subsidiary, Coltec Industries Inc ("Coltec"), principally Garlock Sealing Technologies LLC ("GST LLC") and The Anchor Packing Company ("Anchor"), 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. Information about GST LLC's asbestos litigation is contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Asbestos" subsection of the "Contingencies" section.

On June 5, 2010 (the "Petition Date"), GST LLC, Anchor and Garrison Litigation Management Group, Ltd. ("Garrison") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of North Carolina in Charlotte (the "Bankruptcy Court"). GST LLC, Anchor and Garrison are sometimes referred to collectively as "GST" in this report. The filings were the initial step in a claims resolution process. GST LLC is one of the businesses in our broader Garlock group. GST LLC and its subsidiaries operate five significant manufacturing facilities, including operations in Palmyra, New York and Houston, Texas. The filings did not include EnPro Industries, Inc., or any other EnPro Industries, Inc. operating subsidiary.

GST LLC now operates in the ordinary course under court protection from asbestos claims. All pending litigation against GST is stayed during the process. We address our actions to permanently resolve GST LLC's asbestos litigation in this Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Garlock Sealing Technologies LLC and Garrison Litigation Management Group, Ltd." section.

The financial results of GST and subsidiaries are included in our consolidated results through June 4, 2010, the day prior to the Petition Date. However, U.S. generally accepted accounting principles require an entity that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, whose financial statements were previously consolidated with those of its parent, as GST's and its subsidiaries' were with ours, generally must be prospectively deconsolidated from the parent and the investment accounted for using the cost method. At deconsolidation, our investment was recorded at its estimated fair value as of June 4, 2010, resulting in a gain for reporting purposes. The cost method requires us to present our ownership interests in the net assets of GST at the Petition Date as an investment and not recognize any income or loss from GST and subsidiaries in our results of operations during the reorganization period. Our investment of $236.9 million as of December 31, 2012 and 2011, was subject to periodic reviews for impairment. When GST emerges from the jurisdiction of the Bankruptcy Court, the subsequent accounting will be determined based upon the applicable facts and circumstances at such time, including the terms of any plan of reorganization. See Note 18 to the Consolidated Financial Statements in this Form 10-K for condensed financial information of GST and subsidiaries.

During 2012, 2011, and 2010, we completed a number of acquisitions and a disposition of a business. Please refer to "Acquisitions and Dispositions" in Item 1 - Business for additional discussion regarding these transactions.

We completed our required annual impairment test of goodwill as of October 1, 2012. The estimated fair value of our CPI reporting unit, included in our Engineered Products segment, exceeded its book value by 10% and 37% in 2012 and 2011, respectively. There is $55.4 million of goodwill allocated to CPI. The fair value of the CPI reporting unit was calculated using both discounted cash flow and market valuation approaches. The key assumptions used for the discounted cash flow approach include business projections, growth rates, and a discount rate of 10.3%. The discount rate we use is based on our weighted average cost of capital. For the market approach, we chose a group of 14 companies we believe are representative of our diversified industrial peers. We used a 70% weighting for the discounted cash flow valuation approach and a 30% weighting for the market valuation approach, reflecting our belief that the discounted cash flow valuation approach provides a better indicator of value since it reflects the specific cash flows anticipated to be generated in the future by the business. For sensitivity purposes, a 100-basis-point increase in the discount rate would result in this reporting unit exceeding its 2012 book value by 2%. Conversely, a 100-basis-point decrease in the discount rate would result in this reporting unit exceeding its 2012 book value by 21%.

The future cash flows modeled for CPI are dependent on certain cost savings restructuring initiatives and a customer-focused organizational realignment, both launched in 2012. Non-recurring restructuring expenses in 2012 were $2.3 million. In addition, approximately $5.5 million of 2012 labor and facilities cost was removed from our future cost structure. The customer-focused organizational realignment during 2012 was critical to price and volume opportunities identified while developing the 2013 forecast. While there is uncertainty associated with the customer price and volume opportunities, only a portion of these opportunities were forecasted in the future cash flow model utilized for goodwill impairment testing.

Finally, we are dependent on the strength of our customers and their respective industries to achieve sales forecasted for 2013. Except for 2013, which is based on a detailed forecast, the remaining years in the cash flow model are based on the 2013 forecast, adjusted for assumed macro-economic forecasts for Industrial Production changes at each of our major geographic markets per the DuPont Economic outlook as of September 2012. Since our products serve a variety of industries, Industrial Production is a good indicator for demand changes for our products and services. The nominal growth rates for 2014 and beyond, are approximately 6%, 3%, and 15% for North America, Europe, and Asia, respectively.

Management believes that all assumptions used were reasonable based on historical operating results and expected future trends. However, if future operating results are unfavorable as compared with forecasts, the results of future goodwill impairment evaluations could be negatively affected.

We determined all other reporting units had fair values substantially in excess of carrying values and there were no subsequent indicators of impairment through December 31, 2012.

Outlook

Although there are indications our markets may improve in the second half of 2013, we expect conditions encountered in the second half of 2012 to persist into the first half of 2013. In the first quarter of 2013, we expect sales and segment profit to be less than they were in the first quarter of 2012, when activity in our markets and demand for our products were significantly above current levels. Sales will benefit from the inclusion of Motorwheel in the first quarter; however, we anticipate that benefit will be more than offset by soft demand from the markets served by the Sealing Products and Engineered Products segments and lower sales in the Engine Products and Services segment. Since we do not currently anticipate shipping any engines under the completed contract revenue recognition method in the first quarter of 2013, we expect Engine Products and Services sales to be 25% to 30% below the first quarter of 2012, when four engines were shipped under the completed contract revenue recognition method. We expect segment profit margins in the first quarter of 2013 will reflect lower volumes and a less profitable product mix in the Sealing Products segment.

We believe conditions may improve in our industrial markets by the second half of 2013. However, we anticipate any growth in sales to those markets will be offset by a decline in full year sales in the Engine Products and Services segment. Although we currently expect the segment to ship a higher number of engines in 2013 than was shipped in 2012, revenues for these engines will be recognized only under percentage of completion accounting. We expect the segment's full year 2013 sales to decline by about 15% in comparison to 2012.

Our effective tax rate is directly affected by the relative proportions of revenue and income before taxes in the jurisdictions in which we operate. Based on the expected mix of domestic and foreign earnings, we anticipate our effective tax rate to remain lower than the U.S. statutory rate primarily due to the earnings in lower rate foreign jurisdictions. In the U.S., we benefit from certain tax incentives such as the deduction for domestic production activities, and credits for research and development. Discrete tax events may cause our effective rate to fluctuate on a quarterly basis. Certain events, including, for example, acquisitions and other business changes, which are difficult to predict, may also cause our effective tax rate to fluctuate. We are subject to changing tax laws, regulations, and interpretations in multiple jurisdictions. Corporate tax reform continues to be a priority in the U.S. and other jurisdictions. Changes to the tax system in the U.S. could have significant effects, positive and negative, on our effective tax rate, and on our deferred tax assets and liabilities.

In January 2013, the United States Congress passed the American Taxpayer Relief Act of 2012 which retroactively extended various tax provisions applicable to the Company. As a result, we expect

that our income tax provision for the first quarter of 2013 will include a tax benefit which will significantly reduce our effective tax rate for the quarter and to a lesser extent the annual effective tax rate for 2013.

The IRS completed the field examination for our 2008, 2009, and 2010 U.S. federal income tax returns during the third quarter of 2012, which resulted in incremental taxes payable of $1.5 million and tax expense of $1.4 million. As a result of the IRS's conclusion of its field examination, we reduced our liability for uncertain tax positions by $2.4 million to reflect amounts determined to be effectively settled, which lowered income tax expense by $1.9 million. Finally, we recorded $1.2 million of additional income tax expense related to the 2011 tax return filed in the third quarter of 2012. Although the IRS fieldwork was completed with respect to the 2008, 2009, and 2010 tax returns, we disagreed with and protested certain adjustments included in the audit results. While these audit years remain open, the only items under appeal that are not considered to be effectively settled relate to our deconsolidated GST operations. No further recognition of income tax expense or benefit to the Company's results is expected, however, should there ultimately be an assessment against the combined tax group the Company would be responsible for payment and then seek a reimbursement from GST, which may be classified as a noncurrent receivable. The Company believes the position will be sustained, and the entire as-filed tax return amount has been recognized. Should the position be lost, additional taxes of approximately $39.5 million, plus potential interest and penalties, would become payable.

Our U.S. defined benefit plans continue to be underfunded. Based on currently available data, which is subject to change, we estimate we will be required to make contributions to the U.S. defined benefit plans in 2013 totaling approximately $19.1 million. We expect 2013 contributions to non-U.S. defined benefit plans to be insignificant. Additional significant cash contributions to the U.S. defined benefit plans are likely to be required in 2014 and beyond. Future contribution requirements depend on pension asset returns, pension valuation assumptions, plan design, and legislative actions. In July 2012, the President signed the Moving Ahead for Progress in the 21st Century Act (MAP-21). Although MAP-21 reduced short-term minimum pension contribution requirements in 2012 and 2013, we expect additional significant cash contributions to be required in 2014 and beyond. We estimate that annual GAAP pension expense in 2013 will be $11.1 million, which is $1.3 million less than in 2012. The decrease in pension expense is primarily due to the strong performance of the pension assets, partially offset by a decrease in the discount rate used in the actuarial computations.

In connection with our growth strategy, we will continue to evaluate acquisitions in 2013; however, the effect of such acquisitions cannot be predicted and therefore is not reflected in this outlook.

We address our outlook on our actions to permanently resolve GST LLC's asbestos litigation in this "Management's Discussion and Analysis of Financial Condition and Results of Operations - Garlock Sealing Technologies LLC and Garrison Litigation Management Group, Ltd." section.

Results of Operations

The following table does not include results for GST and subsidiaries after the day preceding the Petition Date. See Note 18 to our Consolidated Financial Statements in this Form 10-K for condensed financial information for GST and subsidiaries.

                                                                  Years Ended December 31,
                                                            2012             2011            2010
                                                                        (in millions)
Sales
Sealing Products                                          $   609.1        $   534.9        $ 397.6
Engineered Products                                           363.0            386.7          302.5
Engine Products and Services                                  214.6            185.8          166.0

                                                            1,186.7          1,107.4          866.1
Intersegment sales                                             (2.5 )           (1.9 )         (1.1 )

Total sales                                               $ 1,184.2        $ 1,105.5        $ 865.0


Segment Profit
Sealing Products                                          $    88.8        $    81.2        $  70.3
Engineered Products                                            20.5             29.2           16.3
Engine Products and Services                                   39.2             30.6           35.5

Total segment profit                                          148.5            141.0          122.1

Corporate expenses                                            (32.3 )          (32.6 )        (36.7 )
Interest expense, net                                         (42.8 )          (39.6 )        (25.9 )
Asbestos-related expenses                                        -                -           (23.3 )
Other income (expense), net                                    (9.9 )           (3.8 )         46.4


Income from continuing operations before income taxes     $    63.5        $    65.0        $  82.6

Segment profit is total segment revenue reduced by operating, restructuring and other expenses 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.

2012 Compared to 2011

Sales of $1,184.2 million in 2012 increased 7% from $1,105.5 million in 2011.
The following table illustrates the effects of key factors resulting in the
change in sales by segment:



Sales                                                               Percent Change 2012 vs. 2011
                                                                    Foreign            Engine
increase/(decrease)                      Acquisitions (1)        Currency (2)          Revenue         Other          Total
EnPro Industries, Inc.                                   9 %                (3 %)             1 %           0 %            7 %

Sealing Products                                        15 %                (2 %)           n/a             1 %           14 %
Engineered Products                                      2 %                (4 %)           n/a            (4 %)          (6 %)
Engine Products & Services                               0 %                 0 %              8 %           7 %           15 %

Following are key points regarding changes in sales for 2012 compared to 2011:

(1) A discussion of the following acquisitions is included in the "Acquisitions and Dispositions" subsection of Item 1 "Business" of this report: Motorwheel Commercial Vehicle Systems, Inc. ("Motorwheel") - acquired in April 2012 and included in the Sealing Products segment; Tara Technologies Corporation ("Tara") - acquired in July 2011 and included in the Sealing Products segment; Pipeline Seal and Insulator, Inc. ("PSI") - acquired in February 2011 and included in the Sealing Products segment; PI Bearing Technologies ("PI Bearings") -

(2) The reported U.S. dollar value of sales was 3% lower than last year due to the unfavorable effect of foreign currency exchange rate fluctuations. This was primarily the result of a weakening euro, as compared to the US dollar. Garlock and Technetics in the Sealing Products segment and GGB and CPI in the Engineered Products segment have significant operations in Europe.

Segment profit, management's primary measure of how our operations perform, increased 5% to $148.5 million in 2012 from $141.0 million in 2011. Earnings from acquisitions contributed $9.0 million while selected price increases generated $13.4 million. These favorable changes were partially offset by unfavorable foreign exchange fluctuations of $3.2 million, an increase in restructuring costs of $3.6 million, volume reductions of $4.4 million and higher SG&A costs.

Corporate expenses for 2012 declined by $0.3 million compared to 2011. The decline was driven by a decrease in employee incentive compensation of $3.1 million, offset by higher consulting and management expenses of $1.9 million and higher directors' share-based compensation of $0.9 million.

Net interest expense in 2012 was $42.8 million compared to $39.6 million in 2011. The increase in net interest expense was caused primarily by higher borrowings on the senior secured revolving credit facility.

Other expense, net in 2012 was $9.9 million compared to $3.8 million in 2011. The increase was caused primarily by a $2.9 million gain recorded on the guaranteed investment contract ("GIC") in 2011 and a current year increase in environmental-related expenses of $1.2 million and in our expenses associated with GST's bankruptcy proceedings of $0.5 million as compared to 2011. Refer to Note 19, "Commitments and Contingencies - Crucible Steel Corporation a/k/a Crucible, Inc." in our Consolidated Financial Statements in this Form 10-K for additional information about the GIC and the Crucible Back-Up Trust.

Income tax expense in 2012 was $22.5 million compared to $20.8 million reported in 2011. The increase in tax expense reflects an increase in the effective tax rate to 35.3% in 2012 from 32.1% in 2011, when applied to comparable pre-tax income in both periods. In the U.S., we historically have benefited from federal income tax incentives such as the deduction for domestic production activities and credits for research and development. However, as of December 31, 2012, certain tax incentives expired and were not renewed before the end of 2012. These include the research and experimentation credit, certain employment credits, and an exclusion for passive income earned by controlled foreign corporations. In January 2013, the United States Congress passed the American Taxpayer Relief Act (ATRA) of 2012 which retroactively extended these tax provisions. The effective tax rate above reflects the tax law that was in place as of December 31, 2012. Had the ATRA been enacted prior to January 1, 2013, our overall tax expense would have been approximately $20.9 million, resulting in an overall effective tax rate of 32.7%. This $1.6 million difference will be reflected in tax expense during the first quarter of 2013.

Income from continuing operations was $41.0 million, or $1.90 per share, in 2012 compared to $44.2 million, or $2.06 per share, in 2011. Earnings per share are expressed on a diluted basis.

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

Sealing Products. Sales of $609.1 million in 2012 were 14% higher than the $534.9 million reported in 2011. The increase in sales includes 15 percentage points due to the acquisitions of Tara ($41.7 million), Motorwheel ($33.0 million), and PSI ($6.8 million) and one percentage point due to price

increases. These increases were partially offset by a two percentage point decline in sales due to unfavorable foreign currency exchange rates.

Segment profit increased to $88.8 million in 2012 from $81.2 million in 2011. Acquisitions contributed $9.0 million toward the increase in segment profit, primarily due to Tara ($4.4 million) and Motorwheel ($4.2 million) and selected net price increases contributed $8.4 million. These increases were partially offset by unfavorable foreign currency fluctuations of $1.7 million and an unfavorable change in volume and mix of $5.2 million. Selling, general, and administrative costs increased by $2.7 million, driven mainly by increased payroll costs and travel. Operating margins for the segment declined to 14.6% in 2012 from 15.2% in 2011.

. . .