Kennametal Inc. today reported record first quarter fiscal 2007 EPS of $0.78, including charges from special items of $0.04 per share. This represents an increase of 8 percent over prior year. First quarter adjusted EPS were $0.82 compared with prior year quarter EPS of $0.72, an increase of 14 percent.

Kennametal's President and Chief Executive Officer Carlos Cardoso said, "The momentum we gained in fiscal 2006 is continuing in the first quarter of fiscal 2007. We saw improvements that collectively resulted in the 12th consecutive quarter of year-over-year earnings growth, coupled with strong cash flow from operations - an excellent performance by any measure.

We attribute this success to our ability to focus steadily on the execution of our strategy through adherence to the disciplined processes that comprise the Kennametal Value Business System. This strategy calls for us to leverage the continued strength of our core businesses, as well as to diversify our business mix, geographic presence and customer base. We believe that our proven strategic approach will deliver exceptional value to customers and shareowners as Kennametal transforms into an even more balanced enterprise with a solid foundation for future growth."

Reconciliation of all non-GAAP financial measures are set forth in the attached tables.

  Highlights of Fiscal 2007 First Quarter
   - First quarter sales of $543 million were in line with the same quarter
     last year.  Sales grew 6 percent on an organic basis offset by the net
     impact of acquisitions and divestitures, primarily the divestiture of
     J&L Industrial Supply (J&L). J&L outside sales were $65 million in the
     September quarter last year.
   - Income from continuing operations was $29 million for the first
     quarter, compared with $28 million in the prior year quarter, an
     increase of 5 percent despite the J&L divestiture.  J&L contributed $7
     million in operating income in the September quarter last year. Income
     from continuing operations, excluding special items, was $31 million
     for the first quarter, an increase of 9 percent over the prior year
     quarter.  The September 2007 quarter results benefited from lower
     securitization fees and higher interest income, as well as lower
     minority interest expense, reflecting the effective use of cash and
     consistent with the company's previously communicated strategies.
   - Income from discontinued operations reflects divested results of the
     Metalworking Solutions and Services Group's consumer-related products
     business, including industrial saw blades (CPG) and the Advanced
     Materials and Services Group's Kemmer Praezision electronics business
     (Electronics).
   - First quarter reported EPS were $0.78, including charges from special
     items of $0.04 per share, compared with prior year quarter reported EPS
     of $0.72, an increase of 8 percent. The September quarter also reflects
     a lower effective tax rate primarily due to the company's pan-European
     business model strategy implemented last year.  First quarter adjusted
     EPS were $0.82.  A reconciliation follows:



                Earnings Per Diluted Share Reconciliation
   First Quarter FY 2007                     First Quarter FY 2006
   Reported EPS                 $0.78        Reported EPS          $0.72
   Loss on divestiture of
    CPG and transaction-related
    charges                      0.01        No special items
   Adjustment on J&L
    divestiture and transaction-
    related charges              0.03
   Adjusted EPS                 $0.82                              $0.72


   - Adjusted return on invested capital (ROIC) was up 160 basis points to
     11.5 percent from 9.9 percent in the prior year.
   - Cash flow from operations for the current quarter was an outflow of $19
     million, compared with an inflow of $21 million in the prior year.
     Income tax payments were $86 million for the current quarter, primarily
     due to tax payments related to the gain on the sale of J&L and cash
     repatriated last quarter under the American Jobs Creation Act, compared
     with a refund of $1 million in the prior year quarter.  Adjusted free
     operating cash flow for the September quarter, excluding the effects of
     income tax payments and refunds, was $45 million versus $6 million in
     the prior year quarter.

  Business Segment Highlights of Fiscal 2007 First Quarter

Metalworking Solutions & Services Group (MSSG) continued to deliver top- line growth led by year-over-year expansion in the aerospace, distribution and energy markets. The North American market remained stable; Europe has begun to show a modest recovery and Asia Pacific and India delivered strong double- digit growth.

In the September quarter, MSSG sales were up 3 percent on an organic basis. North American sales increased 1 percent. Asia Pacific and India sales grew 12 percent and 15 percent, respectively. Europe sales increased 2 percent.

MSSG operating income was unchanged at $46 million and the operating margin of 13 percent was lower than the same period last year, primarily due to higher realized raw material costs in the current quarter, partially offset by ongoing cost containment and price realization, particularly in Europe and Asia Pacific.

Advanced Materials Solutions Group (AMSG) delivered significant top-line growth in the September quarter, driven by favorable market conditions and the effect of acquisitions. Strong growth in the energy and mining markets continued to contribute to AMSG's results.

AMSG sales grew 11 percent on an organic basis. Energy product sales were up 35 percent, mining and construction product sales were higher by 8 percent and engineered product sales increased 2 percent.

AMSG operating income grew 15 percent over last year, while operating margin of 15 percent was lower than prior year due primarily to higher realized raw material costs in the current quarter and a less favorable business mix.

Outlook

Worldwide market conditions support Kennametal's expectations of continued top-line growth during the balance of fiscal year 2007. Based on global economic indicators, the company believes that the North American market will remain solid. The company also believes that the market will improve and grow modestly in Europe, and that it will continue to be strong in developing economies. While there remain some uncertainties and risks related to the macro-economic environment, fundamental drivers for global demand appear to be stable.

"Virtually every move we have made at Kennametal has been oriented toward implementing our strategy and advancing our transformation," said Carlos Cardoso. "As we strive to achieve our fiscal 2007 goals, we will continue to maintain our commitment to our proven strategy, driving organic growth and leveraging a favorable global industry environment to maximize the growth opportunities ahead."

Kennametal expects organic revenue growth in the 7 to 10 percent range for fiscal 2007, which would extend its track record of consistently outpacing worldwide industrial production rates by two to three times. The company anticipates the majority of its end markets will continue to operate at favorable levels throughout the year, with moderating growth rates for some sectors.

For the second quarter of fiscal 2007, ongoing expansion around the globe supports the company's projection of 6 to 9 percent organic sales growth, on top of strong performance in the prior year quarter.

The company has increased reported EPS guidance for the year to a range of $4.30 to $4.50, due to benefits associated with its pan-European business model strategy, which will drive a better than originally forecasted tax rate for fiscal year 2007. This range represents an increase in spite of some dilution from recent divestitures of non-core businesses. This revised earnings outlook reflects management's confidence in the ability to maintain the strength of Kennametal's performance. This forecasted range includes costs related to ongoing operating expense initiatives that will result in increased long-term profitability. On a comparable basis, the fiscal 2007 guidance midpoint represents a 29 percent growth rate, a substantial increase over prior year adjusted EPS from continuing operations of $3.41.

The company expects second quarter 2007 EPS to be $0.70 to $0.75. As previously announced, second quarter 2007 guidance includes approximately $0.10 per share of costs related to manufacturing streamlining initiated during this quarter, which is expected to have a payback within this fiscal year.

Kennametal expects to achieve its goal of 12 percent EBIT margin, and ROIC is on track for the projected 11 to 12 percent range for fiscal year 2007.

Kennametal anticipates reported cash flow from operations of approximately $190 million to $200 million for fiscal 2007. Included in this amount are income tax payments of $86 million, as mentioned above. Adjusted cash from operations is expected to be approximately $275 million to $285 million.

Based on anticipated capital expenditures of $90 million, the company expects to generate between $185 million to $195 million of adjusted free operating cash flow for fiscal 2007.

Share Repurchase Program and Dividend Increase

Kennametal announced today that its Board of Directors has authorized a repurchase program of up to 3.3 million shares of its outstanding common stock. The purchases would be made from time to time, on the open market or in private transactions, with consideration given to the market price of the stock, the nature of other investment opportunities, cash flows from operations and general economic conditions.

Kennametal also announced that its Board of Directors declared a quarterly cash dividend of $0.21 per share, which represents an increase of 11 percent, or $0.02, per share. The dividend is payable November 20, 2006 to shareowners of record as of the close of business on November 8, 2006.

Kennametal advises shareowners to note monthly order trends, for which the company makes a disclosure ten business days after the conclusion of each month. This information is available on the Investor Relations section of Kennametal's corporate web site at www.kennametal.com.

First quarter results for fiscal 2007 will be discussed in a live Internet broadcast at 10:00 a.m. Eastern time today. This event will be broadcast live on the company's website, www.kennametal.com. Once on the homepage, click "Corporate," and then "Investor Relations." Also, the replay of this event will be available on the company's website through November 8, 2006.

This release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not relate strictly to historical or current facts. You can identify forward- looking statements by the fact they use words such as "should," "anticipate," "estimate," "approximate," "expect," "may," "will," "project," "intend," "plan," "believe" and other words of similar meaning and expression in connection with any discussion of future operating or financial performance. These statements are likely to relate to, among other things, our strategy, goals, plans and projections regarding our financial position, results of operations, market position, and product development, all of which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in the next several years. It is not possible to predict or identify all factors; however, they may include the following: global and regional economic conditions; energy costs; risks associated with the availability and costs of raw materials; commodity prices; risks associated with integrating recent acquisitions, as well as any future acquisitions, and achieving the expected savings and synergies; risks relating to business divestitures; competition; demands on management resources; risks associated with international markets, such as currency exchange rates and social and political environments or instability; future terrorist attacks or acts of war; labor relations; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans, cost-reduction initiatives and environmental remediation matters. We can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

Kennametal Inc. is a leading global supplier of tooling, engineered components and advanced materials consumed in production processes. The company improves customers' competitiveness by providing superior economic returns through the delivery of application knowledge and advanced technology to master the toughest of materials application demands. Companies producing everything from airframes to coal, from medical implants to oil wells and from turbochargers to motorcycle parts recognize Kennametal for extraordinary contributions to their value chains. Customers buy over $2.3 billion annually of Kennametal products and services - delivered by our approximately 13,500 talented employees in over 60 countries - with almost 50 percent of these revenues coming from outside the United States. Visit us at www.kennametal.com [KMT-E]

                           FINANCIAL HIGHLIGHTS

              Consolidated Statements of Income (Unaudited):

                                                       Three Months Ended
  (in thousands, except per share amounts)                September 30,
                                                        2006       2005(a)

  Sales                                                $542,811   $545,766
  Cost of goods sold                                    355,780    348,438

     Gross profit                                       187,031    197,328

  Operating expense                                     135,044    144,901
  Loss on divestiture                                     1,686         --
  Amortization of intangibles                             1,940      1,351

    Operating income                                     48,361     51,076

  Interest expense                                        7,427      7,829
  Other income, net                                      (3,006)      (879)

     Income from continuing operations before income
      taxes and minority interest                        43,940     44,126

  Provision for income taxes                             13,929     15,300

  Minority interest expense                                 557        748

  Income from continuing operations                      29,454     28,078

  Income from discontinued operations, net of income
   taxes                                                    907         19

  Net income                                            $30,361    $28,097

  Basic earnings per share - continuing operations        $0.77      $0.74
  Basic earnings per share - discontinued operations       0.02       0.00
  Basic earnings per share                                $0.79      $0.74

  Diluted earnings per share - continuing operations      $0.76      $0.72
  Diluted earnings per share - discontinued operations     0.02       0.00
  Diluted earnings per share                              $0.78      $0.72

  Dividends per share                                     $0.19      $0.19
  Basic weighted average shares outstanding              38,226     37,949
  Diluted weighted average shares outstanding            39,058     38,915

  (a) Amounts have been reclassified to reflect discontinued operations
      related to the divestitures of Electronics - AMSG and CPG - MSSG.



            CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited):

                                                    September 30, June 30,
  (in thousands)                                        2006        2006

  ASSETS
  Cash and equivalents                                 $118,224   $233,976
  Accounts receivable, net                              366,837    386,714
  Inventories                                           354,876    334,949
  Current assets of discontinued operations held
   for sale                                                  --     24,280
  Other current assets                                  109,337    106,938
      Total current assets                              949,274  1,086,857
  Property, plant and equipment, net                    546,408    530,379
  Goodwill and intangible assets, net                   674,834    618,423
  Assets of discontinued operations held for sale            --     11,285
  Other assets                                          189,362    188,328
      Total                                          $2,359,878 $2,435,272

  LIABILITIES
  Current maturities of long-term debt and capital
   leases, including notes payable                       $2,106     $2,214
  Accounts payable                                      113,120    124,907
  Current liabilities of discontinued operations
   held for sale                                             --      3,065
  Other current liabilities                             242,427    332,013
      Total current liabilities                         357,653    462,199
  Long-term debt and capital leases                     407,486    409,508
  Other liabilities                                     259,963    253,574
      Total liabilities                               1,025,102  1,125,281

  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES         15,177     14,626
  SHAREOWNERS' EQUITY                                 1,319,599  1,295,365
      Total                                          $2,359,878 $2,435,272



                        SEGMENT DATA (Unaudited):

                                                       Three Months Ended
  (in thousands)                                          September 30,
                                                        2006       2005(a)
  Outside Sales:
  Metalworking Solutions and Services Group            $357,084   $331,580
  Advanced Materials Solutions Group                    185,727    149,184
  J&L Industrial Supply                                      --     65,002
     Total outside sales                               $542,811   $545,766

  Sales By Geographic Region:
  United States                                        $266,863   $290,069
  International                                         275,948    255,697
     Total sales by geographic region                  $542,811   $545,766

  Operating Income (Loss):
  Metalworking Solutions and Services Group             $45,666    $45,941
  Advanced Materials Solutions Group                     27,386     23,852
  J&L Industrial Supply                                      --      6,844
  Corporate and eliminations(b)                         (24,691)   (25,561)
     Total operating income                             $48,361    $51,076

  (a) Amounts have been reclassified to reflect discontinued operations
      related to the divestiture of Electronics (AMSG) and CPG including
      industrial saw blades (MSSG).

  (b) Includes corporate functional shared services and intercompany
      eliminations.

In addition to reported results under generally accepted accounting principles in the United States of America (GAAP), the following financial highlight tables also include, where appropriate, a reconciliation of gross profit, operating expense, operating income, income from continuing operations, net income and diluted earnings per share, in each case excluding special items, adjusted free operating cash flow, adjusted segment sales, and adjusted return on invested capital (which are non-GAAP financial measures), to the most directly comparable GAAP measures. Management believes that the investor should have available the same information that management uses to assess operating performance, determine compensation, and assess the capital structure of the Company. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Investors are cautioned that non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

  RECONCILIATION TO GAAP - THREE MONTHS ENDED SEPTEMBER 30, 2006 (Unaudited)

  (in thousands,                                   Income from
   except per share   Gross    Operating Operating Continuing   Net  Diluted
   amounts)           Profit    Expense    Income  Operations Income   EPS

  2006 Reported
   Results           $187,031  $135,044   $48,361    $29,454  $30,361  $0.78
     Loss on
      divestiture
      of CPG and
      transaction-
      related charges      --        --        --         --      368   0.01
     Adjustment on
      J&L divestiture
      and transaction-
      related charges      --      (333)    2,019      1,252    1,252   0.03
  2006 Results, excl.
   special items     $187,031  $134,711   $50,380    $30,706  $31,981  $0.82

For the three months ended September 30, 2005, there were no special items.

  RECONCILIATION TO GAAP - YEAR ENDED JUNE 30, 2006 (Unaudited)

                                                                   Diluted
                                                     Income from   EPS from
                                                     Continuing   Continuing
  (in thousands, except per share amounts)           Operations   Operations

  2006 Reported Results                                $272,251      $6.88
    Gain on divestiture of J&L recorded at corporate
     level                                               (1,091)     (0.03)
    J&L transaction-related charges recorded at
     corporate level                                      3,956       0.10
    Tax impact of cash repatriation under AJCA           11,176       0.28
    Loss on sale of Presto                                9,457       0.24
    Favorable resolution of tax contingencies           (10,873)     (0.27)
    Divestiture impact of J&L(1)                       (149,971)     (3.79)
  2006 Adjusted Results                                $134,905      $3.41

  (1)  Excludes the impact of commercial relationships entered into in
       connection with the divestiture transaction.



  RECONCILIATION OF ADJUSTED FREE OPERATING CASH FLOW INFORMATION
  (Unaudited):

                                                       Three Months Ended
                                                          September 30,
  (in thousands)                                         2006       2005

  Net cash flow (used for) provided by operating
   activities                                          $(18,800)   $20,526
  Purchases of property, plant and equipment            (22,661)   (14,875)
  Proceeds from disposals of property, plant and
   equipment                                                483        835
     Free operating cash flow                           (40,978)     6,486
  Income taxes paid (refunded)                           86,236       (572)
     Adjusted free operating cash flow                  $45,258     $5,914



  MSSG SEGMENT (Unaudited)

                                                       Three Months Ended
                                                          September 30,
  (in thousands)                                         2006       2005

  Sales, as reported                                   $357,084   $331,580
  Foreign currency exchange                              (7,372)        --
  Divestiture-related adjustments                            --      8,408
     Adjusted sales                                    $349,712   $339,988



  AMSG SEGMENT (Unaudited)

                                                       Three Months Ended
                                                          September 30,
  (in thousands)                                         2006       2005

  Sales, as reported                                   $185,727   $149,184
  Foreign currency exchange                              (1,880)        --
  Acquisition-related adjustments                       (14,375)     3,612
     Adjusted sales                                    $169,472   $152,796



  RETURN ON INVESTED CAPITAL (Unaudited):

  September 30, 2006 (in thousands, except percents)

  Invested Capital                       9/30/2006  6/30/2006   3/31/2006

  Debt                                    $409,592   $411,722    $365,906
  Accounts receivable securitized               --         --     106,106
  Minority interest                         15,177     14,626      18,054
  Shareowners' equity                    1,319,599  1,295,365   1,115,110
  Total                                 $1,744,368 $1,721,713  $1,605,176



  Invested Capital                      12/31/2005  9/30/2005     Average

  Debt                                    $410,045   $415,250    $402,503
  Accounts receivable securitized          100,295    100,445      61,369
  Minority interest                         16,918     18,117      16,578
  Shareowners' equity                    1,045,974  1,009,394   1,157,089
  Total                                 $1,573,232 $1,543,206  $1,637,539


                                            Quarter Ended
  Interest Expense        9/30/2006 6/30/2006 3/31/2006  12/31/2005  Total
  Interest expense          $7,427    $7,478    $7,728     $7,984   $30,617
  Securitization fees           22     1,288     1,241      1,170     3,721
  Total interest expense    $7,449    $8,766    $8,969     $9,154   $34,338
  Income tax benefit                                                  9,134
  Total interest expense,
   net of tax                                                       $25,204


  Total Income            9/30/2006 6/30/2006 3/31/2006  12/31/2005  Total
  Net Income, as reported  $30,361  $164,196   $32,903    $31,087  $258,547
  Gain on divestiture
   of J&L                    1,045  (132,001)       --         --  (130,956)
  J&L transaction-related
   charges                     207     2,796     1,160         --     4,163
  Loss on divestiture of
  Electronics                   --    15,366        --         --    15,366
  Tax impact of cash
   repatriation under AJCA      --    11,176        --         --    11,176
  Loss on divestiture of
   CPG, goodwill impairment
   and transaction-related
   charges                     368    (2,192)    5,030         --     3,206
  Loss on divestiture of        --     1,410     8,047         --     9,457
  Presto
  Favorable resolution of
   tax contingencies            --   (10,873)       --         --   (10,873)
  Minority interest expense    557       525       782        511     2,375
  Total Income, excluding
   special items           $32,538   $50,403   $47,922    $31,598  $162,461
  Total interest expense,
   net of tax                                                        25,204
                                                                   $187,665
  Average invested capital                                       $1,637,539
  Adjusted Return on Invested Capital                                 11.5%
  Return on invested capital calculated utilizing net income, as
   reported is as follows:
  Net income, as reported                                          $258,547
  Total interest expense, net of tax                                 25,204
                                                                   $283,751
  Average invested capital                                       $1,637,539
  Return on Invested Capital                                          17.3%



  RETURN ON INVESTED CAPITAL (Unaudited):

  September 30, 2005 (in thousands, except percents)

  Invested Capital                       9/30/2005    6/30/2005  3/31/2005

  Debt                                    $415,250     $437,374   $485,168
  Accounts receivable securitized          100,445      109,786    120,749
  Minority interest                         18,117       17,460     19,664
  Shareowners' equity                    1,009,394      972,862  1,021,186
  Total                                 $1,543,206   $1,537,482 $1,646,767

  Invested Capital                      12/31/2004    9/30/2004    Average

  Debt                                    $405,156     $435,435   $435,667
  Accounts receivable securitized          115,253      115,309    112,308
  Minority interest                         19,249       17,377     18,373
  Shareowners' equity                    1,003,507      924,432    986,276
  Total                                 $1,543,165   $1,492,553 $1,552,635



                                             Quarter Ended
  Interest Expense         9/30/2005 6/30/2005 3/31/2005  12/31/2004  Total
  Interest expense           $7,829    $7,897    $6,803     $6,121   $28,650
  Securitization fees         1,065       981       868        757     3,671
  Total interest expense     $8,894    $8,878    $7,671     $6,878   $32,321
  Income tax benefit                                                  11,086
  Total interest expense,
   net of tax                                                        $21,235


  Total Income             9/30/2005 6/30/2005 3/31/2005 12/31/2004  Total
  Net income, as reported   $28,097   $37,740   $30,650    $28,181  $124,668
  Goodwill impairment
   charge                        --        --     3,306         --     3,306
  Loss on assets held for
   sale                          --        --     1,086         --     1,086
  Minority interest expense     748       238     1,449        928     3,363
  Total income, excluding
   special items            $28,845   $37,978   $36,491    $29,109  $132,423
  Total interest expense, net of tax                                  21,235
                                                                    $153,658
  Average invested capital                                        $1,552,635
  Adjusted Return on
   Invested Capital                                                     9.9%


  Return on invested capital calculated utilizing net income,
   as reported is as follows:
  Net income, as reported                                           $124,668
  Total interest expense, net of tax                                  21,235
                                                                    $145,903
  Average invested capital                                        $1,552,635
  Return on Invested Capital                                            9.4%

First Call Analyst:
FCMN Contact: jan.tagliaferi@kennametal.com

SOURCE: Kennametal Inc.