Kennametal Inc. today reported fourth quarter EPS of $4.11, including special items of $2.86 per share. Fourth quarter adjusted EPS were $1.25 compared with prior year EPS of $0.98, an increase of 28 percent.

Fiscal 2006 reported EPS were $6.48, including special items of $2.53, compared with prior year reported EPS of $3.13, including special charges of $0.12 per share, an increase of 107 percent. Fiscal 2006 adjusted EPS were $3.95 compared to prior year adjusted EPS of $3.25, an increase of 22 percent.

Fiscal 2006 fourth quarter performance reflects continuing operational excellence as well as the impact of previously announced divestitures. These transactions are consistent with the company's strategy of exiting non-core businesses. Therefore, fourth quarter results included charges associated with the sale of UK-based high speed steel business (Presto), the sale of Kemmer Praezision electronics business (Electronics) and the previously announced sale of South Deerfield Industrial's consumer retail product line (CPG). These dispositions are expected to improve future overall EBIT margins.

In addition, fourth quarter results included a gain, net of transaction related costs, from the divestiture of J&L Industrial Supply (J&L). The divestiture of J&L is in line with Kennametal's strategy to focus on its core manufacturing businesses. This transaction completes the company's planned exit from owned distribution and Kennametal will continue building new distributor relationships while growing existing ones.

As previously disclosed, the company evaluated options for cash repatriation and the corresponding tax impact under the American Jobs Creation Act of 2004 (AJCA). The Act provides for a special one-time tax deduction on foreign earnings that are repatriated to the United States. The company repatriated $89 million, which resulted in an $11 million tax cost which was recorded during fourth quarter of fiscal 2006.

President and Chief Executive Officer Carlos M. Cardoso said, "We are very pleased with the results for fourth quarter and fiscal year 2006, which reflect all that we have accomplished. Through the Kennametal Value Business System (KVBS), our team is successfully executing on our strategy. The fourth quarter performance represents the 10th consecutive quarter of year over year growth. Kennametal's strong sales, EPS and return on invested capital validate our market leadership position as well the continuing global opportunity for our company. We are excited to be essentially done with the divestiture of non-core businesses. We now have created a stronger foundation, which positions our company for long-term growth and profitability. By continually enhancing our portfolio to ensure the appropriate mix of businesses, Kennametal is focused on serving customers' needs through innovative technology and solutions."

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

  Highlights of Fiscal 2006 Fourth Quarter

   -- Fourth quarter sales of $612 million increased 3 percent versus the
      same quarter last year, including 8 percent organic sales growth,
      offset by 5 percent from a prior year divestiture. Sales in the
      quarter included two months of J&L activity prior to its divestiture.

   -- Income from continuing operations was $176 million for the fourth
      quarter.  Income from continuing operations, excluding special items,
      was $48 million for the fourth quarter versus prior year of $36
      million, an increase of 33 percent.  This year over year improvement
      was driven by strong performance across all business units coupled
      with ongoing cost containment.

   -- Fourth quarter reported EPS were $4.11, including special items of
      $2.86 per share. Fourth quarter adjusted EPS were $1.25 compared with
      prior year EPS of $0.98, an increase of 28 percent. A reconciliation
      follows:



                Earnings Per Diluted Share Reconciliation

  Fourth Quarter FY 2006                   Fourth Quarter FY 2005
  Reported EPS               $4.11         Reported EPS              $0.98
  Gain on sale of J&L                      No special items.
   and transaction-
   related charges           (3.24)
  Loss on sale
   Electronics                0.39
  Tax impact of cash
   repatriation under
   AJCA                       0.28
  CPG goodwill
   impairment and
   transaction-related
   charges, net of tax
   benefit                   (0.06)
  Loss on sale of
   Presto                     0.04
  Favorable resolution
   of tax contingencies      (0.27)
  Adjusted EPS               $1.25                                   $0.98

   -- Special items related to ongoing portfolio shaping included the
      divestitures of J&L, Electronics and Presto.  The company also
      recorded pre-tax charges related to its previously announced
      divestiture of CPG including industrial saw blades, which is expected
      to close in the first quarter of fiscal 2007.

   -- Cash repatriation of $89 million under the AJCA.  The tax impact of
      this repatriation was a charge of $11 million, or $0.28 per diluted
      share.

   -- Record adjusted return on invested capital was up 180 basis points to
      11.4 percent from 9.6 percent in the prior year.

   -- Repayments of the company's Accounts Receivable Securitization
      Program totaled $107 million.

   -- Repurchased 1.3 million shares totaling $79 million.

   -- Funded $40 million related to one of the company's U.S. pension
      plans.

  Highlights of Fiscal 2006

   -- Sales of $2.3 billion were up 6 percent versus prior year, including 9
      percent organic growth, partially offset by a 2 percent net impact of
      acquisitions and divestitures and 1 percent of unfavorable foreign
      currency exchange. Sales for the year included 11 months of J&L
      activity prior to its divestiture.

   -- Income from continuing operations was $272 million compared to prior
      year of $114 million. Income from continuing operations, excluding
      special items, was $154 million versus prior year of $118 million, an
      increase of 30 percent.

   -- Fiscal 2006 reported EPS were $6.48, including special items of $2.53,
      compared with prior year reported EPS of $3.13, including special
      charges of $0.12 per share, an increase of 107 percent.  Fiscal 2006
      adjusted EPS were $3.95 compared to prior year adjusted EPS of $3.25,
      an increase of 22 percent.  A reconciliation follows:



                Earnings Per Diluted Share Reconciliation

  Year ended June 30, 2006                Year ended June 30, 2005
  Reported EPS               $6.48        Reported EPS             $3.13
  Gain on sale of J&L                     Loss on sale of Full
   and transaction-                       Service Supply and
   related charges           (3.24)        transaction-related
                                           charges                 0.12
  Loss on sale of
  Electronics                 0.39
  Tax impact of cash
   repatriation under
   AJCA                       0.28
  CPG goodwill
   impairment and
   transaction-related
   charges, net of tax
   benefit                    0.07
  Loss on sale of
   Presto                     0.24
  Favorable resolution
   of tax contingencies      (0.27)
  Adjusted EPS               $3.95         Adjusted EPS              $3.25

   -- Adjusted free operating cash flow for fiscal 2006 and 2005 was $125
      million in each period.  Current year adjustments include $110 million
      of repayments related to the company's Accounts Receivable
      Securitization Program and $73 million of pension funding.  Capital
      expenditures for fiscal 2006 totaled $80 million.

   -- Repurchased 1.6 million shares totaling $93 million.

  Business Segment Highlights of Fiscal 2006 Fourth Quarter

Metalworking Solutions & Services Group (MSSG) growth continues to outpace the growth in its major markets, demonstrating the effects of further market penetration through the company's channel saturation and branding strategy, as well as price realization. North American sales growth was leveraged with the divestiture of J&L that spurred opportunities with new distributors. General engineering, distribution and energy market segments each exhibited strong year over year growth. The divestiture of Presto and the previously announced divestiture of CPG support the company's long-term strategy of continued focus on its core businesses.

In the June quarter, MSSG adjusted sales were up 6 percent on volume and price. North American cemented carbide and high-speed steel grew 10 percent and 8 percent, respectively. Europe sales were increased 4 percent. Rest of the world grew 3 percent.

MSSG operating income was up 18 percent on reported sales growth of 6 percent and the operating margin of 16 percent was up 200 basis points over the same period last year due to ongoing cost containment and price realization.

Advanced Materials Solutions Group (AMSG) delivered significant top line growth in the current quarter. The underlying markets in mining and energy remain strong for Kennametal. The overall AMSG segment continues to report considerable growth. Overall market conditions, price realization and market share penetration are primary factors contributing to favorable results.

In the June quarter, AMSG adjusted sales grew 14 percent on volume and price. Energy product sales were up 37 percent, Conforma Clad sales increased 24 percent, engineered products grew 12 percent and mining and construction product sales increased 9 percent.

AMSG operating income grew 11 percent versus last year, on 18 percent reported sales growth. Operating margin of 18 percent was down 100 basis points over the same period last year due primarily to the impact of raw material price increases period over period, particularly tungsten.

Outlook

Worldwide market conditions support the company's expectations of continued top line growth in fiscal year 2007. Global economic indicators show that North America is expected to remain strong, modest growth is expected in Europe, and emerging markets are forecasted to be robust. While there remain some uncertainties and risks related to the macro-economic environment, fundamental drivers for global demand appear to be stable.

Cardoso said, "We are optimistic about the outlook for our end markets. The global manufacturing forecast is in line with our belief that the industrial sector will continue to show strength. We will continue to balance and diversify our end markets and world geographic mix. We again expect to outperform the market by effectively delivering volume growth, gaining market share and realizing price through innovative customer solutions that provide value and performance."

Kennametal expects organic revenue growth in the 7 to 10 percent range for fiscal year 2007, continuing the trend of consistently outpacing worldwide industrial production rates by two to three times. The company anticipates the majority of its end markets to continue operating at high levels throughout the year, with moderating growth rates for some sectors.

The expectation of ongoing expansion around the globe supports Kennametal's projection of 6 to 9 percent organic sales growth in the first quarter of fiscal 2007, relative to very strong performance from the prior year quarter.

Reported EPS are expected to be in the $4.20 to $4.40 range for fiscal year 2007, despite some dilution from recent divestitures of non-core businesses, reflecting confidence in the company's ability to maintain its strong performance. This forecasted range also includes costs related to the company's ongoing SG&A initiatives that will result in increased profitability for the long term. The fiscal year 2007 guidance midpoint represents a 9 percent year over year growth. On a comparable basis, fiscal year 2007 guidance midpoint represents approximately 25 percent growth, a substantial increase over prior year. Approximately 65 percent of the forecasted EPS will be realized in the second half of fiscal year 2007, consistent with historical seasonal patterns. First quarter 2007 EPS are expected to be $0.60 to $0.70.

Improvements in operating margins are expected to continue and return on invested capital is solidly on track for the projected 11 to 12 percent range for fiscal year 2007.

Kennametal anticipates net cash flow provided by operating activities of approximately $275 million to $285 million for fiscal 2007. Based on anticipated capital expenditures of $90 million, Kennametal expects to generate between $185 million to $195 million of free operating cash flow for fiscal 2007. However, approximately $100 million to $110 million will be used for tax payments, due to recent divestitures and cash repatriation related to the AJCA.

Dividend Declared

Kennametal also announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share. The dividend is payable August 23, 2006 to shareowners of record as of the close of business on August 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.

Fourth quarter and full year results 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 August 9, 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, 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 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 billion annually of Kennametal products and services - delivered by our approximately 13,000 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):

  (in thousands, except per       Quarter Ended          Year Ended
  share amounts)                     June 30,              June 30,
                                  2006    2005(1)    2006(1)     2005(1)

  Sales                         $612,167 $593,599   $2,329,628  $2,202,832
  Cost of goods sold             388,133  373,492    1,497,462   1,431,716

     Gross profit                224,034  220,107      832,166     771,116

  Operating expense              146,316  153,171      579,907     559,293
  Goodwill impairment
   charge                              -        -            -       4,707
  (Gain) loss on assets
   held for sale                (230,578)       -     (229,886)      1,546
  Amortization of
   intangibles                     1,428    1,566        5,626       3,460

    Operating income             306,868   65,370      476,519     202,110

  Interest expense                 7,478    7,897       31,019      27,277
  Other income, net                 (307)    (851)      (2,219)     (3,645)

  Income from continuing
   operations before income
   taxes and minority interest   299,697   58,324      447,719     178,478
  Provision for income
   taxes                         123,536   21,842      172,902      60,967

  Minority interest                  525      238        2,566       3,592

  Income from continuing
   operations                    175,636   36,244      272,251     113,919

  (Loss) income from
   discontinued operations,
   net of income taxes           (11,440)   1,496      (15,968)      5,372

  Net income                    $164,196  $37,740     $256,283    $119,291

  Basic earnings per share
   - continuing operations         $4.52    $0.97        $7.08       $3.09
  Basic (loss) earnings per
   share - discontinued
   operations                      (0.30)    0.04        (0.41)       0.14
  Basic earnings per share         $4.22    $1.01        $6.67       $3.23

  Diluted earnings per
   share - continuing
   operations                      $4.40    $0.94        $6.88       $2.99
  Diluted (loss) earnings
   per share - discontinued
   operations                      (0.29)    0.04        (0.40)       0.14
  Diluted earnings per
   share                           $4.11    $0.98        $6.48       $3.13

  Dividends per share              $0.19    $0.17        $0.76       $0.68
  Basic weighted average
   shares outstanding             38,888   37,510       38,432      36,924
  Diluted weighted average
   shares outstanding             39,923   38,477       39,551      38,056

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



            CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited):

                                                    June 30,      June 30,
  (in thousands)                                      2006          2005

  ASSETS
  Cash and equivalents                               $233,976      $43,220
  Trade receivables, net of allowance                 386,714      403,097
  Receivables securitized                                   -     (109,786)
  Accounts receivable, net                            386,714      293,311
  Inventories                                         334,949      386,674
  Deferred income taxes                                55,328       70,391
  Current assets held for sale                         24,280            -
  Other current assets                                 51,610       37,466
      Total current assets                          1,086,857      831,062
  Property, plant and equipment, net                  530,379      519,301
  Goodwill and intangible assets, net                 618,423      652,791
  Long term assets held for sale                      11,285            -
  Other assets                                        136,562       89,183
      Total                                        $2,383,506   $2,092,337

  LIABILITIES
  Short-term debt, including notes payable             $2,214      $50,889
  Accounts payable                                    124,907      154,839
  Current liabilities held for sale                     3,065            -
  Accrued liabilities                                 331,405      222,930
      Total current liabilities                       461,591      428,658
  Long-term debt                                      409,508      386,485
  Deferred income taxes                                73,338       59,551
  Other liabilities                                   129,078      227,321
      Total liabilities                             1,073,515    1,102,015

  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES       14,626       17,460
  SHAREOWNERS' EQUITY                               1,295,365      972,862
      Total                                        $2,383,506   $2,092,337



                        SEGMENT DATA (Unaudited):

                                   Quarter Ended          Year Ended
  (in thousands)                     June 30,              June 30,
                                  2006     2005(1)    2006(1)     2005(1)
  Outside Sales:
  Metalworking Solutions and
   Services Group               $373,839  $352,591   $1,401,777 $1,313,525
  Advanced Materials Solutions
   Group                         191,758   162,312      676,556    510,572
  J&L Industrial Supply           46,570    66,031      251,295    255,840
  Full Service Supply                  -    12,665            -    122,895
  Total Outside Sales           $612,167  $593,599   $2,329,628 $2,202,832

  Sales By Geographic Region:
  United States                 $322,903  $315,167   $1,239,449 $1,185,146
  International                  289,264   278,432    1,090,179  1,017,686
  Total Sales by Geographic
   Region                       $612,167  $593,599   $2,329,628 $2,202,832

  Operating Income (Loss):
  Metalworking Solutions and
   Services Group                $59,390   $50,487     $197,525   $178,313
  Advanced Materials Solutions
   Group                          34,061    30,630      121,058     84,268
  J&L Industrial Supply          238,284     7,592      260,894     27,094
  Full Service Supply                  -       265            -     (4,105)
  Corporate and eliminations(2)  (24,867)  (23,604)    (102,958)   (83,460)

  Total Operating Income, as
   reported                     $306,868   $65,370     $476,519   $202,110

  (1) Amounts have been reclassified to reflect discontinued operations
      related to the divestiture of Electronics (AMSG) and CPG including
      industrial saw blades (MSSG).
  (2) 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. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

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

                 (in thousands, except per share amounts)

                                                  Income
                                                   from
                 Gross    Operating  Operating  Continuing    Net    Diluted
                 Profit    Expense    Income    Operations  Income     EPS

  2006 Reported
   Results      $224,034   $146,316  $306,868   $175,636   $164,196   $4.11
    Gain on
     sale of J&L  (1,935)         -  (233,949)  (132,009)  (132,009)  (3.31)
    J&L trans-
     action
     related
     charges           -     (4,510)    4,510      2,796      2,796    0.07
    Loss on
     sale of
     Electronics       -          -         -          -     15,366    0.39
    Tax impact
     of cash
     repatriation
     under AJCA        -          -         -     11,176     11,176    0.28
    CPG goodwill
     impairment
     and
     transaction-
     related
     charges           -          -         -          -     (2,192)  (0.06)
    Loss on
     sale of
     Presto          (26)         -     1,410      1,410      1,410    0.04
    Favorable
     resolution of
     tax
     contingencies     -          -         -    (10,873)   (10,873)  (0.27)
  2006 Results,
   excluding
   special items $222,073   $141,806  $78,839    $48,136    $49,870   $1.25

  For the quarter ended June 30, 2005, there were no special items.



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

                 (in thousands, except per share amounts)

                                                 Income
                                                  from
                 Gross    Operating  Operating  Continuing    Net    Diluted
                 Profit    Expense    Income    Operations  Income     EPS
  2006 Reported
   Results      $832,166   $579,907  $476,519   $272,251  $256,283   $6.48
    Gain on
     sale of J&L  (1,935)         -  (233,949)  (132,001) (132,001)  (3.34)
    J&L
     trans-
     action-
     related
     charges           -     (6,381)    6,381      3,956     3,956    0.10
    Loss on
     sale of
     Electronics       -          -         -          -    15,366    0.39
    Tax impact
     of cash
     repatriation
     under AJCA        -          -         -     11,176    11,176    0.28
    CPG goodwill
     impairment
     and trans-
     action-related
     charges           -          -         -          -     2,838    0.07
    Loss on sale of
     Presto        7,329          -     9,457      9,457     9,457    0.24
    Favorable
     resolution
     of tax
     contingencies     -          -         -    (10,873)  (10,873)  (0.27)
  2006 Results,
   excluding special
   items        $837,560   $573,526  $258,408   $153,966  $156,202   $3.95





  RECONCILIATION TO GAAP - YEAR ENDED JUNE 30, 2005 (Unaudited)

                                            Income from
                                Operating   Continuing    Net       Diluted
                                 Income     Operations  Income        EPS
  2005 Reported                 $202,110     $113,919  $119,291      $3.13
      FSS goodwill
       impairment charge           4,707        3,277     3,277       0.09
      FSS loss on sale             1,546        1,076     1,076       0.03
       2005 Results, excluding
       special items            $208,363     $118,272  $123,644      $3.25

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

                                                   Year Ended
                                                    June 30,
                                         2006                      2005
  Net cash flow provided
  by operating activities                 $19,053                  $202,327

  Purchase of property,
   plant and equipment                    (79,593)                  (88,552)
  Proceeds from disposals
   of property, plant and
   equipment                                2,961                     3,912
     Free operating cash flow            $(57,579)                 $117,687
  Adjustments:
         Repayments of accounts
          receivable securitization
          program                         109,786                     7,694
         Pension funding                   72,956                         -
  Adjusted free operating
   cash flow                             $125,163                  $125,381


  MSSG SEGMENT

                                 Quarter Ended            Year Ended
                                    June 30,                June 30,
  (in thousands)                 2006     2005          2006        2005

  Sales, as reported           $373,839 $352,591    $1,401,777  $1,313,525
  Foreign currency exchange         440        -        12,859           -
  Divestiture-related and
   inter-segment reclasses            -     (290)            -      17,332
  Adjusted sales               $374,279 $352,301    $1,414,636  $1,330,857


  AMSG SEGMENT
                                      Quarter Ended         Year Ended
                                         June 30,             June 30,
  (in thousands)                     2006       2005      2006      2005

  Sales, as reported               $191,758   $162,312  $676,556  $510,572
  Foreign currency exchange             553          -     7,261         -
  Acquisition-related and
   inter-segment reclasses           (1,910)     4,963   (54,003)   12,711
  Adjusted sales                   $190,401   $167,275   629,814  $523,283




  RETURN ON INVESTED CAPITAL (Unaudited):

  For the Year Ended June 30, 2006 (in thousands, except percents)

  Invested
   Capital   6/30/2006  3/31/2006 12/31/2005 9/30/2005  6/30/2005    Average
  Debt       $411,722   $365,906   $410,045   $415,250   $437,374   $408,060
  Accounts
   receivable
   securitized      0    106,106    100,295    100,445    109,786     83,326
  Minority
   interest    14,626     18,054     16,918     18,117     17,460     17,035
  Shareowners'
   equity   1,295,365  1,115,110  1,045,974  1,009,394    972,862  1,087,741
  Total    $1,721,713 $1,605,176 $1,573,232 $1,543,206 $1,537,482 $1,596,162

                               Quarter Ended
  Interest
   Expense   6/30/2006    3/31/2006   12/31/2005   9/30/2005    Total

  Interest
   expense    $7,478       $7,728       $7,984       $7,829    $31,019
  Securitiza-
   tion
   fees        1,288        1,241        1,170        1,065      4,764
  Total
   interest
   expense    $8,766       $8,969       $9,154       $8,894    $35,783
  Income
   tax
   benefit                                                      13,311
  Total
   interest
   expense,
   net of
   tax                                                         $22,472

  Total
   Income   6/30/2006    3/31/2006   12/31/2005   9/30/2005    Total
  Net Income,
   as
   reported $164,196      $32,903      $31,087      $28,097   $256,283
  Gain on
   sale of
   J&L      (132,001)           -            -            -   (132,001)
  J&L
   trans-
   action-
   related
   charges     2,796        1,160            -            -      3,956
  Loss on
   sale of
   Electron-
   ics        15,366            -            -            -     15,366
  Tax
   impact of
   cash
   repatriat-
   ion under
   AJCA       11,176            -            -            -     11,176
  CPG
   goodwill
   impairment
   and trans-
   action-
   related
   charges    (2,192)       5,030            -            -      2,838
  Loss on
   sale of
   Presto      1,410        8,047            -            -      9,457
  Favorable
   resolution
   of tax
   contingen-
   cies      (10,873)           -            -            -    (10,873)
  Minority
   interest
   expense       525          782          511          748      2,566
  Total
   Income,
   excluding
   special
   items     $50,403      $47,922      $31,598      $28,845   $158,768
  Total
   Income,
   excluding
   special
   items                                                      $158,768
  Total
   interest
   expense,
   net of
   tax                                                          22,472
                                                              $181,240
  Average
   invested
   capital                                                  $1,596,162

  Adjusted
   Return on
   Invested
   Capital                                                       11.4%
  Return on invested capital calculated utilizing net
   income, as reported is as follows:
  Net Income,
   as reported                                                $256,283
  Total
   Interest
   Expense, net of tax
                                                                22,472
                                                              $278,755
  Average
   invested
   capital                                                  $1,596,162
  Return on
   Invested
   Capital                                                       17.5%




  RETURN ON INVESTED CAPITAL (Unaudited):

  For the Year Ended June 30, 2005 (in thousands, except percents)

  Invested Capital           6/30/2005       3/31/2005       12/31/2004
    Debt                      $437,374        $485,168        $405,156
    Accounts
     receivable
     securitized               109,786         120,749         115,253
    Minority interest           17,460          19,664          19,249
    Shareowners' equity        972,862       1,021,186       1,003,507
      Total                 $1,537,482      $1,646,767      $1,543,165



  RETURN ON INVESTED CAPITAL (Unaudited):

  For the Year Ended June 30, 2005 (in thousands, except percents)

  Invested Capital           9/30/2004       6/30/2004         Average
    Debt                      $435,435        $440,207        $440,668
    Accounts
     receivable
     securitized               115,309         117,480         115,715
    Minority interest           17,377          16,232          17,996
    Shareowners' equity        924,432         887,152         961,828
      Total                 $1,492,553      $1,461,071      $1,536,207



                                  Quarter Ended
  Interest
   Expense    6/30/2005  3/31/2005  12/31/2004  9/30/2004   Total
    Interest
     expense   $7,897     $6,803     $6,121      $6,456    $27,277
    Securitiza-
     tion fees    981        868        757         580      3,186
    Total
     interest
     expense   $8,878     $7,671     $6,878      $7,036    $30,463
    Income tax
     benefit                                                10,175
    Total
     Interest
     Expense,
     net of
     tax                                                   $20,288

                                 Quarter Ended
  Total
   Income       6/30/2005  3/31/2005  12/31/2004  9/30/2004   Total
   Net Income,
    as reported  $37,740    $30,650    $28,181     $22,720   $119,291
   Restructuring
    and asset
    impairment
    charges            -      3,306          -           -      3,306
   Loss on
    assets
    held for
    sale               -      1,086          -           -      1,086
   Minority
    interest
    expense          238      1,449        928         977      3,592
   Total Income,
    excluding
    special
    items        $37,978    $36,491    $29,109     $23,697   $127,275

   Total Income,
    excluding
    special items                                            $127,275

   Total
    Interest
    Expense,
     net of
     tax                                                       20,288
                                                             $147,563
    Average
     invested
     capital                                               $1,536,207

  Adjusted Return
   on Invested
   Capital                                                       9.6%

  Return on Invested Capital calculated utilizing Net
   Income, as reported is as follows:
     Net Income,
      as reported                                            $119,291
     Total Interest
      Expense,
      net of tax                                               20,288
                                                             $139,579
      Average
       invested
       capital                                             $1,536,207
  Return on
   Invested
   Capital                                                       9.1%

SOURCE: Kennametal Inc.