Kennametal Inc. today reported fiscal 2006 first quarter EPS of $0.72, including expenses related to the adoption of SFAS 123® of $0.05 per share and increased domestic pension expense of $0.04 per share, compared with prior year first quarter EPS of $0.61.

Sales of $569 million were up 7 percent compared to prior year first quarter sales of $531 million.

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "First quarter results exceeded our expectations due to favorable sales mix, raw material costs up appreciably over last year but lower than anticipated and better than expected price realization. Each of our three business groups, Metalworking Solutions and Services, Advanced Materials Solutions, and J&L Industrial Supply, is winning in the marketplace and continues to provide superior value to customers through our leadership position in technology and innovation focused on helping customers improve their competitiveness."

  Highlights of the Fiscal 2006 First Quarter
  -- Sales of $569 million were up 7 percent versus the same quarter last
     year, including 9 percent organic sales growth, 1 percent benefit from
     foreign currency exchange and partially offset by net impact of
     acquisitions and divestitures.

  -- Net income was $28 million compared to $23 million in the prior year,
     up 24 percent.

  -- Net cash flow from operations was $27 million versus $32 million in the
     same quarter last year.

  -- ROIC was up 230 basis points to 9.9 percent -- a new high.

  Outlook

Economic indicators project continued growth through fiscal 2006 in North America and the rest-of-the-world markets, and flat to modest growth in European markets. Kennametal continues to expect organic revenue growth in the 7 to 10 percent range, at two to three times the underlying growth rates in industrial production of its addressed end markets.

Tambakeras said, "We were very pleased with our performance for the first quarter of fiscal 2006, and the outlook for our end markets for the remainder of the year remains positive. The major challenge in fiscal year 2006 continues to revolve around raw material costs, especially tungsten. We have demonstrated the ability to meet this challenge and expect to continue doing so for the remainder of the year."

Reported EPS for fiscal year 2006 is now expected to be $3.50 to $3.90, including an approximately $0.25 negative impact from the combination of expensing stock options due to SFAS 123® and the effects of the reduction in the discount rate applied to the company's pension plans. This revised earnings outlook represents an increase from previous 2006 EPS guidance of $3.30 to $3.80. In addition to narrowing the earnings guidance range, the revised outlook establishes a lower range that reflects a 12 percent increase, and a higher range that reflects a 25 percent increase from prior year EPS of $3.13.

Organic sales for the second quarter of fiscal year 2006 are expected to grow 6 to 9 percent, despite tougher comparisons. The company is expecting its top line growth to moderate slightly in the second quarter due to the collective impact of a rising interest rate environment, sustained higher energy costs and the effect of recent hurricanes. In addition, the company anticipates continuing pressure on raw material costs. Reported EPS is forecasted to be in the range of $0.68 to $0.73, consistent with a seasonal pattern and reflects confidence in the company's ability to maintain the momentum of the first quarter. Furthermore, this earnings guidance is based on an effective tax rate of 35 percent compared with 20 percent effective tax rate in the second quarter of last year.

Operating margins and ROIC are expected to reflect continued improvement for the remainder of fiscal year 2006.

As previously discussed, Kennametal anticipates net cash flow provided by operating activities of approximately $200 million to $220 million for fiscal 2006. Adjusting net cash flow provided by operating activities for the impact of purchases of property, plant and equipment ($80 million), Kennametal expects to generate between $120 million to $140 million of free operating cash flow for fiscal 2006.

Dividend Declared

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.19 per share, reflecting a 12% increase recently implemented. The dividend is payable November 21, 2005, to shareowners of record as of the close of business on November 9, 2005.

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 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, just click on the link to "Corporate," and then click "Investor Relations." This event also will be available on the company's website through November 9, 2005.

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. You can identify these 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. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements are likely to relate to, among other things, our 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. Although it is not possible to predict or identify all factors, they may include the following: global and regional economic conditions; risks associated with the availability and costs of raw materials; commodity prices; risks associated with integrating and divesting businesses and achieving the expected savings and synergies; competition; demands on management resources; risks associated with international markets, such as currency exchange rates and social and political environments; future terrorist attacks; 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 14,000 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 share amounts)             Quarter Ended
                                                       September 30,
                                                    2005           2004

  Sales                                           $569,218       $531,436
    Cost of goods sold                             369,348        358,041

  Gross profit                                     199,870        173,395
    Operating expense                              147,662        130,949
    Amortization of intangibles                      1,351            537

  Operating income                                  50,857         41,909
    Interest expense                                 7,829          6,456
    Other income, net                                 (876)        (1,574)

  Income before provision for income taxes
   and minority interest                            43,904         37,027
  Provision for income taxes                        15,059         13,330
  Minority interest                                    748            977

  Net income                                       $28,097        $22,720

  Basic earnings per share                           $0.74          $0.62

  Diluted earnings per share                         $0.72          $0.61

  Dividends per share                                $0.19          $0.17

  Basic weighted average shares outstanding         37,949         36,373

  Diluted weighted average shares outstanding       38,915         37,363



  SEGMENT DATA (Unaudited):

                                                      Quarter Ended
                                                       September 30,
                                                    2005           2004
  Outside Sales:
  Metalworking Solutions and Services Group       $346,538       $315,870
  Advanced Materials Solutions Group               157,678        117,886
  J&L Industrial Supply                             65,002         61,417
  Full Service Supply                                    -         36,263
  Total Outside Sales                             $569,218       $531,436

  Sales By Geographic Region:
  Within the United States                        $307,399       $301,783
  International                                    261,819        229,653
  Total Sales by Geographic Region                $569,218       $531,436

  Operating Income (Loss):
  Metalworking Solutions and Services Group        $46,246        $38,872
  Advanced Materials Solutions Group                23,328         14,533
  J&L Industrial Supply                              6,844          5,721
  Full Service Supply                                    -            120
  Corporate and eliminations (1)                   (25,561)       (17,337)
  Total Operating Income, as reported              $50,857        $41,909

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



                     FINANCIAL HIGHLIGHTS (Continued)

  CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited):

                                                September 30,     June 30,
                                                    2005            2005
  ASSETS
  Cash and equivalents                             $37,916        $43,220
  Trade receivables, net of allowance              389,964        403,097
  Receivables securitized                         (100,445)      (109,786)
  Accounts receivable, net                         289,519        293,311
  Inventories                                      420,285        386,674
  Deferred income taxes                             70,912         70,391
  Other current assets                              34,004         37,466
     Total current assets                          852,636        831,062
  Property, plant and equipment, net               517,127        519,301
  Goodwill and intangible assets, net              644,730        652,791
  Other assets                                      86,633         89,183
    Total                                       $2,101,126     $2,092,337

  LIABILITIES
  Short-term debt, including notes payable          $6,770        $50,889
  Accounts payable                                 150,269        154,839
  Accrued liabilities                              221,445        222,930
    Total current liabilities                      378,484        428,658
  Long-term debt                                   408,480        386,485
  Deferred income taxes                             54,307         59,551
  Other liabilities                                232,344        227,321
    Total liabilities                            1,073,615      1,102,015

  MINORITY INTEREST                                 18,117         17,460

  SHAREOWNERS' EQUITY                            1,009,394        972,862

    Total                                       $2,101,126     $2,092,337




                     FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited):
  For the Period Ended September 30, 2005

  Invested Capital                       09/30/2005  06/30/2005  03/31/2005

    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  09/30/2004   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
                               09/30/05  06/30/05  03/31/05 12/31/04  Total
  Interest Expense
  Interest expense              $7,829    $7,897    $6,803   $6,121  $28,650
  Securitization interest        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




                                          Quarter Ended
                         09/30/05  06/30/05  03/31/05  12/31/04    Total
  Total Income
    Net Income, as
     reported             $28,097   $37,740   $30,650   $28,181  $124,668

    Restructuring and
     asset impairment
     charges                    -         -     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 Income,
     excluding special                                           $132,423
     items
    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%



                     FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited):
  For the Period Ended September 30, 2004

  Invested Capital                       09/30/2004  06/30/2004  03/31/2004
          Debt                             $435,435    $440,207    $494,312
          Accounts receivable
           securitized                      115,309     117,480     108,916
          Minority interest                  17,377      16,232      16,598
          Equity                            924,432     887,152     809,904

          Total                          $1,492,553  $1,461,071  $1,429,730


  Invested Capital                       12/31/2003  09/30/2003     Average
          Debt                             $481,327    $520,138    $474,284
          Accounts receivable
           securitized                      101,422      95,318     107,689
          Minority interest                  16,286      16,089      16,516
          Equity                            791,442     746,562     831,899

          Total                          $1,390,477  $1,378,107  $1,430,388


                                                 Quarter Ended
                               09/30/04 06/30/04  03/31/04  12/31/03   Total
  Interest Expense
         Interest expense        $6,456   $6,405    $6,332   $6,547  $25,740
         Securitization interest    580      443       356      483    1,862

         Total interest expense  $7,036   $6,848    $6,688   $7,030  $27,602

         Income tax benefit                                            9,109

         Total Interest Expense,
          net of tax                                                 $18,493



                                               Quarter Ended
                            09/30/04  06/30/04  03/31/04  12/31/03    Total
  Total Income
        Net Income, as
         reported            $22,720   $29,852   $24,070   $10,892  $87,534

        Minority Interest
         Expense                 977       (36)      533       404    1,878
        MSSG Restructuring         -         -         -     1,109    1,109
        AMSG Restructuring         -         -         -     1,018    1,018
        Pension Curtailment        -         -         -       883      883
        Gain on Toshiba
         Investment                -         -         -    (2,990)  (2,990)
        Strong Tool Note
         Receivable                -         -         -     1,360    1,360

        Total Income,
         excluding special
         items               $23,697   $29,816    $24,603  $12,676  $90,792

        Total Income, excluding
         special items                                              $90,792
        Total Interest Expense,
         net of tax                                                  18,493
                                                                   $109,285
        Average Invested
         Capital                                                 $1,430,388

  Adjusted Return on Invested
   Capital                                                              7.6%

        Return on Invested
         Capital calculated
         utilizing Net Income,
         as reported is as
         follows:
          Net Income, as
           reported                                                 $87,534
          Total Interest
           Expense, net of tax                                       18,493
                                                                   $106,027
          Average invested
           capital                                               $1,430,388
  Return on Invested Capital                                            7.4%

SOURCE: Kennametal Inc.