Kennametal Inc. today reported fiscal 2009 fourth quarter earnings (loss) per diluted share (EPS) of ($0.45), compared with prior year quarter reported EPS of $0.77. The current quarter reported EPS included restructuring and divestiture related charges amounting to $0.32 per share. The prior year quarter reported EPS included restructuring related charges of $0.08 per share. Absent these charges, adjusted EPS for the current quarter was ($0.13), compared with the prior year quarter adjusted EPS of $0.85.
Chairman, President and Chief Executive Officer Carlos Cardoso said, "Fiscal 2009 was the most challenging year in our company's 70-year history. We responded aggressively to the severe and rapid global economic downturn by taking a number of measures. We reduced our costs, optimized cash flow and liquidity, and preserved our competitive strengths. As a result, we offset a considerable portion of the impact of the decline in sales volume, achieved a modest profit for the fiscal year on an adjusted basis, generated strong cash flow, and further enhanced our financial position. With our high-performance consumable products, we expect to benefit relatively early and have higher operating leverage in the industrial upturn. We have a worldwide infrastructure, well-balanced business and a highly talented global workforce dedicated to serving customers."
Reconciliations of all non-GAAP financial measures are set forth in the attached tables and descriptions of certain non-GAAP financial measures are contained in our report on Form 8-K to which this release is attached.
Fiscal 2009 Fourth Quarter Key Developments
-- Sales for the quarter were $386 million, compared with $724 million in
the same quarter last year. The 47 percent decrease in sales was due
to a 43 percent organic decline and a 4 percent decrease from
unfavorable foreign currency effects. A net favorable impact from
acquisitions and divestitures was offset by the effect of one less
workday.
-- The company continued to implement certain restructuring plans to
reduce costs and improve operating efficiencies. During the June
quarter, the company recognized pre-tax charges related to these
initiatives of $21 million, or $0.08 per share. Pre-tax charges
recorded to date for these initiatives were $82 million. Including
these charges, the company expects to recognize approximately $115
million of pre-tax charges related to its restructuring plans. The
majority of the remaining charges are expected to be incurred by
December 31, 2009, most of which are expected to be cash expenditures.
The company realized pre-tax benefits of approximately $50 million
from these actions in fiscal 2009 and expects to realize approximately
$75 million of additional pre-tax benefits in fiscal 2010. This would
bring the total annual ongoing pre-tax benefits from these actions to
approximately $125 million.
-- Operating loss was $25 million for the current quarter compared to
operating income of $80 million for the prior year quarter. Absent
restructuring related charges recorded in both periods, operating loss
for the current quarter was $3 million compared to operating income of
$88 million in the prior year quarter. The adjusted operating loss for
the current quarter improved sequentially from the March 2009 quarter
despite a sequential decline in sales. This improvement was driven by
a higher run rate of restructuring benefits as well as the impact of
additional cost reduction actions such as employee furloughs and the
suspension of contributions to certain employee benefit plans.
-- The reported effective tax rate was 39.1 percent. On an adjusted
basis, the effective tax rate was (116.4) percent compared to 19.9
percent in the prior year quarter. The change in the adjusted rate
was driven by different jurisdictional mix of pre-tax results.
-- On June 30, 2009, Kennametal completed the sale of its high speed
steel drills, related product lines and assets as the company
continued to focus on shaping its business portfolio and rationalizing
its manufacturing footprint. Cash proceeds from this divestiture
amount to $29 million, of which $26 million was received through July
2009, with the balance expected to be received in the December 2009
quarter. The pre-tax loss on the sale and related charges of $26
million, as well as the related tax effects, were recorded in
discontinued operations. The company expects to incur additional
pre-tax charges related to this divestiture of $4 million to $7
million over the next six months.
-- Net loss was $33 million for the current year quarter, compared to net
income of $60 million in the prior year quarter. Absent the charges
related to restructuring and divestiture, net loss for the current
quarter was $10 million, compared to net income of $66 million in the
prior year quarter.
-- Reported EPS was ($0.45), compared with prior year quarter reported
EPS of $0.77. Adjusted EPS was ($0.13) compared to prior year quarter
adjusted EPS of $0.85. A reconciliation follows:
Earnings (Loss) Per Diluted Share Reconciliation
Fourth Quarter FY 2009 Fourth Quarter FY 2008
Reported EPS ($0.45) Reported EPS $0.77
Restructuring and Restructuring and related
related charges 0.08 charges 0.08
Loss on divestiture and
related charges 0.24
-----------------------------------------------------------------------
Adjusted EPS ($0.13) Adjusted EPS $0.85
=======================================================================
Fiscal Year 2009 Key Developments
-- Cash flow from operating activities was $192 million for fiscal year
2009, compared with $280 million for the prior fiscal year. Capital
expenditures for fiscal year 2009 were $105 million, a reduction of
$59 million or 36 percent from fiscal year 2008. Free operating cash
flow for the current fiscal year was $90 million, compared with $119
million in the prior fiscal year. The generation of free operating
cash flow was bolstered through strong focus on receivable collection,
inventory reduction from close management of production levels and
reduced capital expenditures.
-- Sales of $2.0 billion decreased 23 percent from $2.6 billion in the
previous fiscal year. Sales decreased 21 percent organically and 3
percent from unfavorable foreign currency effects. This was partially
offset by the net favorable impact of acquisitions and divestitures of
1 percent.
-- In the March quarter, the company recorded a non-cash pre-tax charge
of $111 million for impairment of goodwill and an indefinite lived
trademark.
-- Operating loss was $100 million, compared with operating income of
$259 million for the prior fiscal year. Absent charges related to
restructuring and impairment recorded in both periods, operating
income for fiscal year 2009 was $85 million compared to $302 million
for the prior fiscal year. This decrease was principally the result of
reduced sales volumes and the related lower manufacturing cost
absorption as well as higher raw material costs. A considerable
portion of the impact of these factors was offset by a combination of
restructuring benefits, other cost reduction actions, higher price
realization and lower provisions for employee incentive compensation
plans.
-- The reported effective tax rate was 10.0 percent. On an adjusted
basis, the effective tax rate was 16.6 percent compared with 21.2
percent in the prior fiscal year. The decrease in the adjusted rate
was driven by the release of a deferred tax valuation allowance and a
benefit from the completion of a routine income tax examination.
-- Reported EPS was ($1.64) compared to the prior year reported EPS of
$2.15. Adjusted EPS of $0.80 decreased 71 percent, compared with
prior year adjusted EPS of $2.76. A reconciliation follows:
Earnings (Loss) Per Diluted Share Reconciliation
FY 2009 FY 2008
Reported EPS ($1.64) Reported EPS $2.15
Restructuring and Impact of German tax reform
related charges 0.82 bill 0.08
Asset impairment charges 1.38 Goodwill impairment charge 0.45
Loss on divestiture and Restructuring and related
related charges 0.24 charges 0.08
---------------------------------------------------------------------
Adjusted EPS $0.80 Adjusted EPS $2.76
=====================================================================
-- Adjusted return on invested capital (ROIC) was 4.4 percent compared to
12.3 percent for the prior fiscal year.
Segment Highlights of Fiscal 2009 Fourth Quarter
Metalworking Solutions & Services Group (MSSG) sales decreased by 52 percent from the prior year quarter, driven by an organic sales decline of 45 percent, unfavorable foreign currency effects of 5 percent and a 2 percent decrease from the combined impact of divestitures and one less workday. Global industrial production remained extremely weak and substantially below the prior year continuing the further downturn in industrial activity experienced in the March quarter. Consequently, demand in most market sectors remained at very low levels. On a regional basis, Europe and North America reported organic sales declines of 47 percent and 46 percent, respectively, for the June quarter. Latin America, India and Asia Pacific also experienced organic sales declines of 44 percent, 43 percent and 37 percent, respectively.
MSSG operating loss was $29 million for the June quarter compared to operating income of $66 million for the same quarter of the prior year. Excluding restructuring related charges recorded in both periods, MSSG operating loss was $16 million compared with operating income of $71 million in the prior year quarter. The primary drivers of the decline in operating income were reduced sales volumes and the related lower manufacturing cost absorption. This was offset in part by restructuring benefits and other cost reduction actions, including employee furloughs, as well as higher price realization.
Advanced Materials Solutions Group (AMSG) sales decreased 37 percent during the June quarter, driven by a 38 percent organic decline, a 3 percent unfavorable impact from foreign currency effects and a 1 percent decrease from one less workday, partially offset by the favorable impact of acquisitions of 5 percent. The organic decline was primarily driven by lower sales in the engineered products business, as well as reduced demand for energy related products and surface finishing machines and services.
AMSG operating income was $14 million in the current quarter compared to operating income of $33 million in the same quarter of the prior year. Absent restructuring related charges recorded in both periods, AMSG operating income was $18 million in the current quarter compared to $36 million in the prior year quarter. The decline in operating income was primarily due to lower sales and production volumes in the engineered products and energy related businesses. A considerable portion of these impacts was offset by a combination of restructuring benefits and other cost reduction actions, including employee furloughs, as well as higher price realization and lower raw material costs.
Corporate operating loss decreased by 54 percent, or $10 million. This decrease was primarily driven by lower provisions for performance-based employee compensation programs, as well as the impact of cost reduction actions.
Recent Actions to Enhance Liquidity and Further Strengthen Financial Position
In July 2009, Kennametal completed two actions to further enhance liquidity and strengthen financial position. The first action involved an amendment to the company's existing $500 million revolving bank credit facility. This amendment provides additional flexibility with respect to financial covenants while maintaining the size and maturity of the facility. The second action involved the issuance of 8,050,000 shares of common stock generating net proceeds of approximately $120 million which were used to pay down outstanding indebtedness under the revolving credit facility.
Outlook
Given the magnitude of the current global economic downturn and the ongoing related uncertainty, visibility remains quite limited regarding global industrial activity and the corresponding demand for the company's products.
While recognizing the difficulty at this time of looking forward with any relative degree of certainty, management presently believes that global industrial activity may now be at or close to a bottom. Assuming that is the case, Kennametal would expect global demand for its products for the first half of fiscal year 2010 to remain around the levels experienced in the June quarter. The company would then expect to see the effects of an economic recovery reflected in its sales and financial results during the second half of the fiscal year.
Under these economic assumptions, Kennametal would expect EPS for fiscal 2010 to be in the range of $0.45 to $0.65 per share, excluding restructuring and divestiture related charges, on sales that would be 5 percent to 10 percent lower year-to-year on an organic basis. Cash flow from operations would be expected to be in the range of $65 million to $75 million for fiscal 2010, as a considerable portion of the cash generated is expected to be needed to fund higher working capital requirements as business improves. Based on capital expenditures of approximately $60 million, free operating cash flow would be in the range of $5 million to $15 million for fiscal 2010.
Should global economic conditions develop in line with management's assumptions, the company expects to continue to experience the adverse effects of the global recession during the first half of fiscal 2010 followed by year-over-year sales growth and positive earnings performance in the second half of fiscal 2010. As such, for the first quarter of fiscal 2010, Kennametal expects organic sales to be 35 percent to 40 percent lower than the same quarter of the previous fiscal year and expects to record a loss per diluted share, excluding restructuring and divestiture related charges, that will be greater than the loss per diluted share for the June 2009 quarter, excluding restructuring and divestiture related charges.
Dividend Declared
Kennametal also announced today that its Board of Directors declared a regular quarterly cash dividend of $0.12 per share. The dividend is payable August 21, 2009 to shareowners of record as of the close of business on August 6, 2009.
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 website at www.kennametal.com.
Fourth quarter and full year results for fiscal 2009 will be discussed in a live Internet broadcast at 9:00 a.m. Eastern time today. This event will be broadcast live on the company's website, www.kennametal.com. Once on the homepage, select "Investor Relations" and then "Events." The replay of this event will also be available on the company's website through August 30, 2009.
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 or events. Forward looking statements in this release concern, among other things, Kennametal's outlook for earnings for its fiscal year 2010, and its expectations regarding restructuring initiatives, future growth and financial performance, all of which are based on current expectations that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: the recent downturn in our industry; global and regional economic conditions; compliance with debt arrangements; availability and cost of the raw materials we use to manufacture our products; our ability to protect and defend our intellectual property; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; our ability to implement restructuring plans and other cost savings initiatives, fluctuations in energy costs and commodity prices; competition; integrating acquisitions, and achieving the expected savings and synergies; business divestitures; demands on management resources; environmental remediation matters; demand for and market acceptance of new and existing products; future terrorist attacks or acts of war; and labor relations. These and other risks are more fully described in Kennametal's latest annual report on Form 10-K and its other periodic filings with the Securities and Exchange Commission. 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. In fiscal year 2009, customers bought approximately $2.0 billion of Kennametal products and services - delivered by our 12,000 talented employees in over 60 countries - with more than 50 percent of these revenues coming from outside North America. Visit us at www.kennametal.com. [KMT-E]
FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Year Ended
(in thousands, except per June 30, June 30,
share amounts) 2009 2008 (1) 2009 2008 (1)
-------------------------------------------------------------------------
Sales $386,037 $723,951 $1,999,859 $2,589,786
Cost of goods sold 287,208 476,189 1,423,320 1,682,715
-------------------------------------------------------------------------
Gross profit 98,829 247,762 576,539 907,071
Operating expense 104,024 158,748 489,567 594,187
Restructuring and asset
impairment charges 16,214 4,891 173,656 39,891
Loss on divestitures - 582 - 582
Amortization of intangibles 3,260 3,806 13,134 13,864
-------------------------------------------------------------------------
Operating (loss) income (24,669) 79,735 (99,818) 258,547
Interest expense 5,503 7,351 27,244 31,586
Other (income) expense, net (4,617) (754) (14,566) (2,439)
-------------------------------------------------------------------------
(Loss) income before
income taxes and
minority interest (25,555) 73,138 (112,496) 229,400
(Benefit) provision for
income taxes (10,002) 14,581 (11,205) 62,754
Minority interest expense 266 329 1,111 2,980
-------------------------------------------------------------------------
(Loss) income from
continuing operations (15,819) 58,228 (102,402) 163,666
(Loss) income from
discontinued operations (17,174) 1,352 (17,340) 4,109
-------------------------------------------------------------------------
Net (loss) income $(32,993) $59,580 $(119,742) $167,775
=========================================================================
Basic (loss) earnings
per share:
Continuing operations $(0.21) $0.76 $(1.40) $2.13
Discontinued operations (0.24) 0.02 (0.24) 0.05
-------------------------------------------------------------------------
$(0.45) $0.78 $(1.64) $2.18
=========================================================================
Diluted (loss) earnings
per share:
Continuing operations $(0.21) $0.75 $(1.40) $2.10
Discontinued operations (0.24) 0.02 (0.24) 0.05
-------------------------------------------------------------------------
$(0.45) $0.77 $(1.64) $2.15
=========================================================================
Dividends per share $0.12 $0.12 $0.48 $0.47
=========================================================================
Basic weighted average
shares outstanding 72,772 76,346 73,122 76,811
=========================================================================
Diluted weighted average
shares outstanding 72,772 77,614 73,122 78,201
=========================================================================
(1) Amounts have been reclassified to reflect discontinued operations
related to the divestiture of the high speed steel drills and related
products business.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, June 30,
(in thousands) 2009 2008
-----------------------------------------------------------------------
ASSETS
Cash and cash equivalents $69,823 $86,478
Accounts receivable, net 278,977 512,794
Inventories 381,306 460,800
Other current assets 145,798 91,914
-----------------------------------------------------------------------
Total current assets 875,904 1,151,986
Property, plant and equipment, net 720,326 749,755
Goodwill and intangible assets, net 677,436 802,722
Other assets 73,308 79,886
-----------------------------------------------------------------------
Total assets $2,346,974 $2,784,349
=======================================================================
LIABILITIES
Current maturities of long-term debt and
capital leases, including notes payable $49,365 $33,600
Accounts payable 87,176 189,050
Other current liabilities 242,428 298,661
-----------------------------------------------------------------------
Total current liabilities 378,969 521,311
Long-term debt and capital leases 436,592 313,052
Other liabilities 263,958 280,552
-----------------------------------------------------------------------
Total liabilities 1,079,519 1,114,915
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 20,012 21,527
SHAREOWNERS' EQUITY 1,247,443 1,647,907
-----------------------------------------------------------------------
Total liabilities and shareowners' equity $2,346,974 $2,784,349
=======================================================================
SEGMENT DATA (UNAUDITED) Three Months Ended Year Ended
June 30, June 30,
(in thousands) 2009 2008(1) 2009 2008(1)
---------------------------------------------------------------------
Outside Sales:
Metalworking Solutions and
Services Group $218,827 $459,012 $1,191,759 $1,674,516
Advanced Materials
Solutions Group 167,210 264,939 808,100 915,270
---------------------------------------------------------------------
Total outside sales $386,037 $723,951 $1,999,859 $2,589,786
=====================================================================
Sales By
Geographic Region:
United States $176,751 $298,762 $907,967 $1,092,102
International 209,286 425,189 1,091,892 1,497,684
---------------------------------------------------------------------
Total sales by
geographic region $386,037 $723,951 $1,999,859 $2,589,786
=====================================================================
Operating (Loss) Income:
Metalworking Solutions and
Services Group $(29,401) $65,987 $(19,180) $255,391
Advanced Materials
Solutions Group 13,536 32,858 (39,539) 83,925
Corporate and
eliminations (2) (8,804) (19,110) (41,099) (80,769)
---------------------------------------------------------------------
Total operating
(loss) income $(24,669) $79,735 $(99,818) $258,547
=====================================================================
(1) Amounts have been reclassified to reflect discontinued operations
related to the divestiture of the high speed steel drills and
related products business.
(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 include, where appropriate, a reconciliation of adjusted
results including gross profit, operating expense, operating income, MSSG
operating income and margin, AMSG operating income and margin, income from
continuing operations, income before income taxes and minority interest,
provision for income taxes, effective tax rate, net income and diluted
(loss) earnings per share as well as free operating cash flow and adjusted
return on invested capital (which are non-GAAP financial measures), to the
most directly comparable GAAP measures. Management believes that investors
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. Reconciliations of all non-GAAP financial measures are set
forth in the attached tables and descriptions of certain non-GAAP
financial measures are contained in our report of Form 8-K to which this
release is attached.
THREE MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
Loss
(in thousands, from
except per Gross Operating Operating Continuing Net Diluted
share amounts) Profit Expense Loss Operations Loss EPS
-------------------------------------------------------------------------
2009 Reported
Results $98,829 $104,024 $(24,669) $(15,819) $(32,993) $(0.45)
Restructuring
and
related
charges 3,961 (996) 21,171 6,065 6,065 0.08
Loss on
divestiture
and related
charges - - - - 17,258 0.24
-------------------------------------------------------------------------
2009 Adjusted
Results $102,790 $103,028 $(3,498) $(9,754) $(9,670) $(0.13)
=========================================================================
MSSG AMSG
(in thousands, Operating Operating
except percents) Loss Income
--------------------------------------------------------------------------
2009 Reported
Results $(29,401) $13,536
2009 Reported
Operating Margin (13.4%) 8.1%
Restructuring and
related charges 13,614 4,612
2009 Adjusted
Results $(15,787) $18,148
==========================================================================
2009 Adjusted
Operating Margin (7.2%) 10.9%
==========================================================================
Loss before
Income (Benefit)
Taxes and Provision
(in thousands, Minority for Income Effective
except percents) Interest Taxes Tax Rate
--------------------------------------------------------------------------
2009 Reported
Results $(25,555) $(10,002) 39.1%
Restructuring and
related charges 21,171 15,108 (155.5)
--------------------------------------------------------------------------
2009 Adjusted
Results $(4,384) $5,106 (116.4%)
==========================================================================
THREE MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
Income
(in thousands, from
except per Gross Operating Operating Continuing Net Diluted
share amounts) Profit Expense Income Operations Income EPS
--------------------------------------------------------------------------
2008 Reported
Results $247,762 $158,748 $79,735 $58,228 $59,580 $0.77
Restructuring
and
related
charges 1,441 (1,916) 8,248 6,635 6,635 0.08
--------------------------------------------------------------------------
2008 Adjusted
Results $249,203 $156,832 $87,983 $64,863 $66,215 $0.85
==========================================================================
MSSG AMSG
(in thousands, Operating Operating
except percents) Income Income
--------------------------------------------------------------------------
2008 Reported
Results $65,987 $32,858
2008 Reported
Operating Margin 14.4% 12.4%
Restructuring and
related charges 4,855 3,012
--------------------------------------------------------------------------
2008 Adjusted
Results $70,842 $35,870
==========================================================================
2008 Adjusted
Operating Margin 15.4% 13.5%
==========================================================================
Income
before
Income
Taxes and Provision
(in thousands, Minority for Income Effective
except percents) Interest Taxes Tax Rate
--------------------------------------------------------------------------
2008 Reported
Results $73,138 $14,581 19.9%
Restructuring and
related charges 8,248 1,613 -
--------------------------------------------------------------------------
2008 Adjusted
Results $81,386 $16,194 19.9%
==========================================================================
YEAR ENDED JUNE 30, 2009 (UNAUDITED) (Loss)
Income
(in thousands, Operating from
except per Gross Operating (Loss) Continuing Net (Loss) Diluted
share amounts) Profit Expense Income Operations Income EPS
--------------------------------------------------------------------------
2009 Reported
Results $576,539 $489,567 $(99,818) $(102,402) $(119,742) $(1.64)
Restructuring
and
related
charges 10,860 182 73,292 60,020 60,020 0.82
Asset
impairment
charges - - 111,042 101,200 101,200 1.38
Loss on
divestiture
and related
charges - - - - 17,657 0.24
--------------------------------------------------------------------------
2009 Adjusted
Results $587,399 $489,749 $84,516 $58,818 $59,135 $0.80
==========================================================================
Effective
Tax Rate
--------------------------------------------------------------------------
2009 Reported Results 10.0%
Restructuring and
related charges (1.5)
Asset impairment charges 8.1
--------------------------------------------------------------------------
2009 Adjusted Results 16.6%
==========================================================================
YEAR ENDED JUNE 30, 2008 (UNAUDITED)
Income
(in thousands, from
except per Gross Operating Operating Continuing Net Diluted
share amounts) Profit Expense Income Operations Income EPS
--------------------------------------------------------------------------
2008 Reported
Results $907,071 $594,187 $258,547 $163,666 $167,775 $2.15
German
tax law
change - - - 6,594 6,594 0.08
Goodwill
impairment
charge - - 35,000 35,000 35,000 0.45
Restructuring
and
related
charges 1,441 (1,916) 8,248 6,635 6,635 0.08
--------------------------------------------------------------------------
2008 Adjusted
Results $908,512 $592,271 $301,795 $211,895 $216,004 $2.76
==========================================================================
Effective
Tax Rate
--------------------------------------------------------------------------
2008 Reported Results 27.4%
German tax law change (2.4)
Goodwill impairment charge (3.6)
Restructuring and related charges (0.2)
--------------------------------------------------------------------------
2008 Adjusted Results 21.2%
==========================================================================
FREE OPERATING CASH FLOW (UNAUDITED)
Three Months Ended Year Ended
June 30, June 30,
(in thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net cash flow provided by
operating activities $28,524 $121,228 $192,263 $279,786
Purchases of property,
plant and equipment (12,130) (32,902) (104,842) (163,489)
Proceeds from disposals of
property, plant and equipment 528 469 2,914 2,839
-------------------------------------------------------------------------
Free operating cash flow $16,922 $88,795 $90,335 $119,136
=========================================================================
RETURN ON INVESTED CAPITAL (UNAUDITED)
June 30, 2009 (in thousands, except percents)
Invested
Capital 6/30/2009 3/31/2009 12/31/2008 9/30/2008 6/30/2008 Average
--------------------------------------------------------------------------
Debt $485,957 $502,093 $522,722 $481,723 $346,652 $467,829
Minority
interest 20,012 18,678 19,235 20,412 21,527 19,973
Shareowners'
Equity 1,247,443 1,249,328 1,430,727 1,465,757 1,647,907 1,408,232
--------------------------------------------------------------------------
Total $1,753,412 $1,770,099 $1,972,684 $1,967,892 $2,016,086 $1,896,035
==========================================================================
Three Months Ended
Interest Expense 6/30/2009 3/31/2009 12/31/2008 9/30/2008 Total
--------------------------------------------------------------------------
Interest expense $5,503 $6,658 $8,000 $7,083 $27,244
------------------------------------------------------------------
Income tax benefit 4,523
-----
Total
interest
expense,
net of tax $22,721
========
Total Income 6/30/2009 3/31/2009 12/31/2008 9/30/2008 Total
--------------------------------------------------------------------------
Net (loss)
income,
as reported $(32,993) $(137,875) $15,659 $35,467 $(119,742)
Restructuring and
related charges 6,065 36,768 9,779 7,408 60,020
Asset impairment
charges - 101,200 - - 101,200
Loss on
divestiture
and related
charges 17,258 399 - - 17,657
Minority interest
expense (income) 266 161 (101) 785 1,111
--------------------------------------------------------------------------
Total income,
adjusted $(9,404) $653 $25,337 $43,660 $60,246
=================================================================
Total
interest
expense,
net of tax 22,721
--------
$82,967
Average invested
capital $1,896,035
-----------
Adjusted Return on
Invested Capital 4.4%
===========
Return on invested
capital calculated
utilizing net loss,
as reported is as
follows:
Net loss, as
reported $(119,742)
Total
interest
expense,
net of tax 22,721
--------------------------------------------------------------------------
$(97,021)
Average invested
capital $1,896,035
--------------------------------------------------------------------------
Return on
Invested Capital (5.1%)
==========================================================================
RETURN ON INVESTED CAPITAL (UNAUDITED)
June 30, 2008 (in thousands, except percents)
Invested
Capital 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007 Average
--------------------------------------------------------------------------
Debt $346,652 $428,456 $446,956 $377,051 $366,829 $393,189
Minority
interest 21,527 21,879 20,276 19,122 17,624 20,086
Shareowners'
equity 1,647,907 1,615,568 1,563,297 1,531,378 1,484,467 1,568,523
--------------------------------------------------------------------------
Total $2,016,086 $2,065,903 $2,030,529 $1,927,551 $1,868,920 $1,981,798
==========================================================================
Three Months Ended
Interest Expense 6/30/2008 3/31/2008 12/31/2007 9/30/2007 Total
--------------------------------------------------------------------------
Interest expense $7,351 $7,974 $8,494 $7,767 $31,586
Securitization fees 4 5 5 8 22
--------------------------------------------------------------------------
Total interest
expense $7,355 $7,979 $8,499 $7,775 $31,608
=================================================================
Income tax benefit 6,701
-------
Total interest
expense, net of tax $24,907
========
Total Income 6/30/2008 3/31/2008 12/31/2007 9/30/2007 Total
--------------------------------------------------------------------------
Net income, as
reported $59,580 $23,170 $50,146 $34,879 $167,775
Impact of German tax
law change - - - 6,594 6,594
Goodwill
impairment charge - 35,000 - - 35,000
Restructuring and
related charges 6,635 - - - 6,635
Minority
interest expense 329 742 1,037 872 2,980
--------------------------------------------------------------------------
Total income,
adjusted $66,544 $58,912 $51,183 $42,345 $218,984
================================================================
Total interest
expense, net of tax 24,907
--------
$243,891
Average invested
capital $1,981,798
------------
Adjusted Return on
Invested Capital 12.3%
============
Return on invested
capital calculated
utilizing net
income, as reported
is as follows:
Net income, as
reported $167,775
Total interest
expense, net of tax 24,907
--------------------------------------------------------------------------
$192,682
Average invested
capital $1,981,798
--------------------------------------------------------------------------
Return on
Invested Capital 9.7%
==========================================================================
First Call Analyst:
FCMN Contact: deborah.mullen@kennametal.com
SOURCE: Kennametal Inc.
CONTACT: Investor Relations, Quynh McGuire, +1-724-539-6559, or Media
Relations, Joy Chandler, +1-724-539-4618
Web Site: http://www.kennametal.com/