| Pages | ||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 | |
FINANCIAL STATEMENTS: |
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Statements of Net Assets Available for Benefits, as of
December 31, 2008 and 2007 |
2 | |
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2008 and 2007 |
3 | |
Notes to Financial Statements
for the Years Ended December 31, 2008 and 2007 |
4-11 | |
SUPPLEMENTAL SCHEDULE: |
||
Schedule H, line 4i — Schedule of Assets Held for
Investment Purposes, December 31, 2008 |
12 | |
Schedule H, line 4a — Schedule of
Delinquent Contributions |
13 |
| NOTE: | The accompanying financial statements have been prepared for the purpose of filing DOL Form 5500. Supplemental schedules required by Section 2520 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, other than the ones listed above, are omitted because of the absence of the conditions under which they are required. |
1
| 2008 | 2007 | |||||||
ASSETS: |
||||||||
Investments, at fair value |
$ | 33,609,841 | $ | 43,217,453 | ||||
Receivables: |
||||||||
Participant contributions receivable |
3,552 | |||||||
Employer contributions receivable |
1,651 | |||||||
Total receivables |
5,203 | |||||||
Accrued income and other |
21,422 | 18,843 | ||||||
NET ASSETS AVAILABLE
FOR BENEFITS AT FAIR VALUE |
33,636,466 | 43,236,296 | ||||||
Adjustment from fair value to contract value for
interest in collective trust relating to fully benefit
responsive investment contracts |
359,206 | (18,162 | ) | |||||
NET ASSETS AVAILABLE FOR BENEFITS |
$ | 33,995,672 | $ | 43,218,134 | ||||
2
| 2008 | 2007 | |||||||
ADDITIONS: |
||||||||
Additions to net assets attributed to: |
||||||||
Net appreciation (depreciation): |
||||||||
Net appreciation (depreciation) in investments |
$ | (11,086,484 | ) | $ | 198,118 | |||
Interest and dividend income |
1,148,829 | 1,945,001 | ||||||
Net appreciation (depreciation) in investments: |
(9,937,655 | ) | 2,143,119 | |||||
Contributions: |
||||||||
Participants |
2,857,948 | 2,752,494 | ||||||
Employer |
1,249,891 | 1,087,183 | ||||||
Rollovers |
88,848 | 311,682 | ||||||
Total contributions |
4,196,687 | 4,151,359 | ||||||
Total additions |
(5,740,968 | ) | 6,294,478 | |||||
DEDUCTIONS: |
||||||||
Deductions from net assets attributed to: |
||||||||
Benefits paid to participants |
3,684,752 | 3,206,369 | ||||||
Fees and commissions |
62,735 | 57,513 | ||||||
Total deductions |
3,747,487 | 3,263,882 | ||||||
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR BENEFITS |
(9,488,455 | ) | 3,030,596 | |||||
TRANSFER OF ASSETS |
265,993 | (99,736 | ) | |||||
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR |
43,218,134 | 40,287,274 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR |
$ | 33,995,672 | $ | 43,218,134 | ||||
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| 1. | DESCRIPTION OF PLAN | |
| The following description of the EnPro Industries, Inc. Retirement Savings Plan for Hourly Employees (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. | ||
| General — EnPro Industries, Inc. (the “Company”) established the Plan to provide employees with a systematic means of savings and investing for the future. Regular full-time, hourly employees of the Company, as defined by the Plan document, are eligible to enroll on their date of hire. Deferrals begin on the first day of the month subsequent to enrollment. The Plan is a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). | ||
| Hourly Trust — The Charles Schwab Trust Company (the “Trustee” or “Schwab”) serves as trustee for the Plan. The Plan’s assets are held in the Schwab Directed Employee Benefit Trust (the “Hourly Trust”). | ||
| Assets of the Plan are allocated to participant accounts based on specific contributions made by each participant and respective matches made by the Company. Investment income (loss) is credited to each account based on appreciation (depreciation) of specific assets held in each participant account and any earnings thereon. | ||
| Plan Contributions — Participants may contribute from 1% to 25% of their base pay by means of payroll deductions, subject to certain discrimination tests prescribed by the Internal Revenue Code and other limitations specified in the Plan. The Company matches either 50% or 100% of employee contributions of 3% to 6% of base pay payroll period. Effective June 1, 2007, the Company amended the Plan to add a Roth contribution feature. | ||
| Participants’ contributions are remitted by the Company to the Trustee at the end of each payroll cycle. Upon determination of participants’ contributions, the Company contributions are made to the Trustee in cash. The contributed cash is allocated to individual employee accounts and invested at the participants’ direction. | ||
| Participant Accounts — Each participant’s account is credited with the participant’s contributions, allocations of the Company’s matching contributions and investment gains or losses. Allocations of earnings and losses for each fund are based on the ratio of weighted average participant account balances to the total weighted average of all participant account balances. The benefit to which a participant is entitled is the vested benefit that can be provided from the participant’s accounts. |
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| Investment Options — Upon enrollment in the Plan, participants direct the investment of their contributions and Company contributions into various investment options offered by the Plan. | ||
| Vesting — Participants are immediately vested in their voluntary contributions, Company matching contributions, and actual earnings thereon. However, vesting in an additional 2% Company contribution for employees who do not participate in the plan is based on years of service. Prior to normal retirement age, a participant’s interest in the additional 2% Company contribution becomes 100% vested after three years of service. | ||
| Distributions — Upon retirement, disability or death, a participant or beneficiary receives the entire amount credited to the participant’s account in either a lump sum or, at the participant’s election, in annual installments. Upon termination, other than by retirement, disability or death, a participant becomes eligible to receive the current value of the participants’ vested account in a lump-sum. Distributions made from the EnPro Company Stock Fund are made, at the option of the participant, in either cash or shares. | ||
| Participant Loans — Participants may borrow from their account balances with interest charged at a rate equal to the “prime rate” plus 1%, which remains in effect for the duration of the loan. Loan terms range from 1 to 5 years or up to 25 years for the purchase of a primary residence. The minimum loan is $1,000 and the maximum loan is the lesser of $50,000 less the highest outstanding loan balance during the one year period prior to the new loan application date, or 50% of the participant’s account balance less any current outstanding loan balance. The loans are secured by the balance in the participants’ account. Principal and interest are paid ratably through payroll deductions. Participants may only take out one loan during any 12 month period and may only have two loans outstanding at any time. As of December 31, 2008 and 2007, the Plan had loans receivable from participants with principal balances totaling $2,777,300 and $2,721,875, respectively, which are included with investments in the accompanying Statements of Net Assets Available for Benefits. | ||
| Participant Investment Rollovers — Participants are allowed to transfer or rollover funds into the Plan from other qualified plans. | ||
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Accounting — The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America, except that accumulated benefits paid to the Plan participants are recorded on the cash basis. | ||
| Investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis. |
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| Use of Accounting Estimates — The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities and disclosures. Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the year in which such adjustments are determined. | ||
| Investment Valuation and Income Recognition — At December 31, 2008 and 2007, the Plan’s investments were held in the Hourly Trust, which is part of a collective trust administered by Schwab. Investments in common/collective trusts and mutual funds held in the Hourly Trust are stated at fair value. The asset value of the EnPro Company Stock Fund is derived from the value of the Company’s common stock. The net appreciation (depreciation) in investments includes realized and unrealized gains and losses on investments held by the Plan. Loans to participants are valued at their outstanding balance, which approximates fair value. Purchases and sales of investments are recorded on a settlement date basis. Interest income is accrued as it is earned and dividends are recorded as of the ex-dividend date. The Plan’s interest in the collective trust is valued based on information reported by Schwab using the audited financial statements of the collective trust as of year end. | ||
| Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 4 for disclosure of fair value measurements. | ||
| As described in Financial Accounting Standards Board Staff Position FSP, AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of net assets available for benefits for a defined contribution plan attributable to fully benefit responsive investment contacts because contract value is the amount that participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through a collective trust. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment in the collective trust as well as the adjustment of the investment in the collective trust from fair value to contract value relating to the investment contracts. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis. | ||
| Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year. | ||
| Management fees and operating expenses charged to the Plan for investments in mutual funds are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of net appreciation (depreciation) in investments. |
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| The change in net unrealized appreciation/depreciation of investments held from the beginning of the plan year to the end of the plan year is included with realized gains/losses as net investment income/loss reported in the accompanying Statements of Changes in Net Assets Available for Benefits. | ||
| Contributions — Contributions from employees and the Company are recorded in the period in which the Company makes the payroll deductions from participant earnings. | ||
| Benefits — Benefits are recorded when paid. | ||
| Expenses — Certain of the Plan’s administrative expenses are paid by the Company. Other expenses such as legal and accounting are paid from plan assets and deducted from participant accounts in accordance with the plan document. | ||
| Reclassifications — Certain amounts from the 2007 financial statements have been reclassified to conform with the current year presentation. Such changes had no effect on the total net assets available for benefits or the changes in net assets available for benefits. | ||
| 3. | INVESTMENTS | |
| The Plan’s investment assets are held in trust and administered by Schwab. All investment information disclosed in the accompanying financial statements and supplemental schedules, including investments held, and net investment income and interest and dividends, was obtained or derived from information supplied to the plan administrator by Schwab for the years ended December 31, 2008 and 2007. | ||
| The fair values of investments that represented 5% or more of the Plan’s net assets available for benefits as of December 31, 2008 and 2007, are as follows: |
| 2008 | 2007 | |||||||
Schwab Stable Value Fund |
$ | 6,744,891 | $ | 6,744,891 | ||||
Laudus International Market Masters Select |
* | $ | 2,804,609 | |||||
Oppenheimer Main St A |
* | $ | 3,480,901 | |||||
PIMCO Total Return |
$ | 4,688,049 | $ | 4,405,752 | ||||
Schwab
Institutional Select S&P 500 |
$ | 6,665,788 | $ | 11,384,904 | ||||
Schwab Managed Retirement 2020 Class III |
$ | 1,751,931 | * | |||||
Hartford Capital Appreciation A |
$ | 2,064,703 | * | |||||
Participant Loans |
$ | 2,777,300 | $ | 2,721,875 | ||||
| * | Does not represent 5% or more of the Plan’s net assets available in each investment for respective year. |
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| Net appreciation (depreciation) in investments for the years ended December 31, 2008 and 2007, for the Hourly Trust, is as follows: |
| 2008 | 2007 | |||||||
Interest and dividends |
$ | 1,148,829 | $ | 1,945,001 | ||||
Net appreciation (depreciation) of common stock |
(246,009 | ) | (77,010 | ) | ||||
Net appreciation (depreciation) of common/collective trusts |
(978,593 | ) | 445,904 | |||||
Net appreciation (depreciation) of PCRA accounts |
(108,252 | ) | (39,124 | ) | ||||
Net appreciation (depreciation) of registered investment co’s |
(9,753,630 | ) | (131,652 | ) | ||||
Net appreciation (depreciation) in investments |
$ | (9,937,655 | ) | $ | 2,143,119 | |||
| 4. | FAIR VALUE MEASUREMENTS | |
| FASB Statement No. 157, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB Statement No. 157 are described as follows: |
Level 1
|
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access. | |
Level 2
|
Inputs to the valuation methodology include: | |
Quoted prices for similar assets or liabilities in
active markets; |
||
Quoted prices for identical or similar assets or
liabilities in inactive markets; |
||
Inputs other than quoted prices that are observable
for the asset or liability; |
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Inputs that are derived principally from or
corroborated by observable market data by
correlation or other means. |
||
| If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. | ||
Level 3
|
Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
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| Assets at Fair Value as of December 31, 2008 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Mutual funds |
$ | 19,013,133 | $ | 19,013,133 | ||||||||||||
Money market funds |
673 | 673 | ||||||||||||||
Common stock |
607,894 | 607,894 | ||||||||||||||
Self-directed accts |
144,361 | 144,361 | ||||||||||||||
Collective trust |
$ | 11,066,480 | 11,066,480 | |||||||||||||
Participant loans |
$ | 2,777,300 | 2,777,300 | |||||||||||||
Total assets fair value |
$ | 19,766,061 | $ | 11,066,480 | $ | 2,777,300 | $ | 33,609,841 | ||||||||
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| Participant | ||||
| Loans | ||||
Balance, beginning of year |
$ | 2,721,875 | ||
Purchases, sales, issuances and
settlements (net) |
55,425 | |||
Balance, end of year |
$ | 2,777,300 | ||
| 5. | TRANSACTIONS WITH PARTIES-IN-INTEREST | |
| Certain Plan investments are shares of mutual funds managed by Schwab. Schwab is the “Trustee” as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. | ||
| The Plan also invests in shares of the Company. The Company is the plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. | ||
| Fees paid by the Plan for investment management services were included as a reduction of the return earned on each fund. Certain administrative fees related to the administration of the Plan were paid by the Plan. Certain other third party administrator fees were paid by the Company on behalf of the Plan. These transactions also qualify as party-in-interest transactions. | ||
| 6. | TAX STATUS | |
| The Plan has received a determination letter from the Internal Revenue Service dated August 28, 2003 stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan was amended since receiving the determination letter. Plan management believes the Plan is currently designed and operated in compliance with the applicable requirements of the Code. Therefore, no provision for income tax has been included in the Plan’s financial statements. | ||
| 7. | PLAN TERMINATION | |
| Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. However, no such action may deprive any participant or beneficiary under the Plan of any vested right. |
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| 8. | RISKS AND UNCERTAINTIES | |
| The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits. | ||
| 9. | RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 | |
| The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 as of December 31, 2008 and 2007: |
| 2008 | 2007 | |||||||
Net assets available for benefits per the
accompanying financial statements at contract value |
$ | 33,995,672 | $ | 43,218,134 | ||||
Timing difference in cash balance |
(330 | ) | ||||||
Adjustment from fair value to contract value
for fully benefit responsive investment contracts |
(359,206 | ) | 18,162 | |||||
Net assets available for benefits per the
Form 5500 |
$ | 33,636,136 | $ | 43,236,296 | ||||
| The following is a reconciliation of the changes in net assets available for benefits per the financial statements to the Form 5500 for the years ended December 31, 2008 and 2007: |
| 2008 | 2007 | |||||||
Change in net assets available for benefits
per the accompanying financial statements
including transfers |
$ | (9,488,455 | ) | $ | 3,030,596 | |||
Timing difference in cash balance |
(330 | ) | ||||||
Plus adjustment from fair value to contract value
for fully benefit responsive investment contracts |
(18,162 | ) | 18,162 | |||||
Plus adjustment from fair value to contract value
for fully benefit responsive investment contracts |
(359,206 | ) | ||||||
Rounding |
3 | |||||||
Change in net assets available for benefits per the
Form 5500 |
$ | (9,866,153 | ) | $ | 3,048,761 | |||
| 10. | DELINQUENT CONTRIBUTIONS | |
| During 2008, the Company failed to remit certain employee deferrals to the Plan aggregating $2,208. These deferrals are included in the Plan’s receivables at December 31, 2008. The Company remitted the delinquent contributions subsequent to the Plan’s year end. The Company is computing the lost earnings on these 2008 deposits and will make a contribution for lost earnings to the Plan. |
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| (a) | (b) | (c) | (d) | |||||
| Party-in- | Identity of issuer, borrower, | Description of investment including maturity date, | Current | |||||
| Interest | lessor or similar party | rate of interest, collateral, par or maturity value | Value | |||||
| * | Schwab U.S. Treasury Money Fund |
Money Market | $ | 673 | ||||
| * | EnPro Company Stock Fund |
Common stock | 607,894 | |||||
| * | Schwab Stable Value Fund |
Common/collective trust | 7,399,052 | |||||
| * | Schwab Managed Retirement 2020 CL III |
Common/collective trust | 1,751,931 | |||||
| * | Schwab Managed Retirement 2030 CL III |
Common/collective trust | 814,130 | |||||
| * | Schwab Managed Retirement 2010 CL III |
Common/collective trust | 605,450 | |||||
| * | Schwab Managed Retirement 2040 CL III |
Common/collective trust | 409,250 | |||||
| * | Schwab Managed Retirement 2050 CL III |
Common/collective trust | 63,091 | |||||
| * | Schwab Managed Retirement 2050 Class
III |
Common/collective trust | 17,480 | |||||
Wells Fargo Stable Value C |
Common/collective trust | 6,096 | ||||||
Personal Choice Retirement Account |
Self directed brokerage account | 144,361 | ||||||
Schwab
Institutional Select S&P 500 |
Registered investment company | 6,665,788 | ||||||
PIMCO Total Return |
Registered investment company | 4,688,049 | ||||||
Hartford Capital Appreciation A |
Registered investment company | 2,064,703 | ||||||
Europacific Growth R4 |
Registered investment company | 1,361,299 | ||||||
Dodge & Cox Stock Fund |
Registered investment company | 906,643 | ||||||
Van Kampen Equity and Income |
Registered investment company | 788,030 | ||||||
Columbia Small Cap Value II Z |
Registered investment company | 720,253 | ||||||
| * | Growth Fund of America A |
Registered investment company | 671,713 | |||||
T Rowe Price Mid-Cap Growth |
Registered investment company | 576,270 | ||||||
Riversource Midcap Val R5 |
Registered investment company | 470,927 | ||||||
Royce Value Plus Institutional |
Registered investment company | 87,403 | ||||||
Blackrock Global Allocation I |
Registered investment company | 12,055 | ||||||
Participant loans |
Interest rates ranging from 5.50% to 10.50% | 2,777,300 | ||||||
| $ | 33,609,841 | |||||||
| * | Party-in-interest transaction, not a prohibited transaction. |
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| Participant | Total That Constitute Nonexempt Prohibited Transactions | Total Fully | ||||||
| Contributions | Contributions | Contributions | Contributions | Corrected | ||||
| Transferred Late | Not | Collected Outside of | Pending Correction | Under VFCP and | ||||
| To The Plan | Corrected | VFCP | In VFCP | PTFE 2002-51 | ||||
| $2,208 | $2,208 | |||||||
13
| ENPRO INDUSTRIES, INC. RETIREMENT SAVINGS PLAN FOR HOURLY EMPLOYEES |
||||
| By: | ENPRO INDUSTRIES, INC., Plan Administrator | |||
| By: | /s/ Robert McKinney | |||
| Robert McKinney | ||||
| Vice President, Human Resources | ||||
14
| Exhibit No. | Document | |
23.1
|
Consent of Greer & Walker, LLP |