The company now expects to generate cash flow from operations between $280 million and $310 million for fiscal 2014, based on anticipated capital expenditures of approximately $130 million to $140 million, the company expects to generate between $150 million and $170 million of free operating cash flow for the full fiscal year.

Dividend Declared

Kennametal also announced that its board of directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable February 26, 2014 to shareowners of record as of the close of business on February 11, 2014.

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

The company will discuss its fiscal 2014 second-quarter results in a live webcast at 10:00 a.m. Eastern Time today. This event will be broadcast live on the company's website, www.kennametal.com. To access the webcast, select "Investor Relations" and then "Events." A recorded replay of this event also will be available on the company's website through March 3, 2014.

Certain statements in this release may be forward-looking in nature, or "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. For example, statements about Kennametal's outlook for earnings, sales volumes, and cash flow for fiscal year 2014 and our expectations regarding future growth and financial performance are forward-looking statements. Any forward looking statements are based on current knowledge, expectations and estimates 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, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: economic recession; availability and cost of the raw materials we use to manufacture our products; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; our ability to protect and defend our intellectual property; competition; our ability to retain our management and employees; demands on management resources; demand for and market acceptance of our products; integrating acquisitions and achieving the expected savings and synergies; business divestitures; global or regional catastrophic events; energy costs; commodity prices; labor relations; demand for and market acceptance of new and existing products; and implementation of environmental remediation matters. Many of these risks 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 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.

Celebrating its 75th year as an industrial technology leader, Kennametal Inc. delivers productivity to customers seeking peak performance in demanding environments. The company provides innovative wear-resistant products, application engineering and services backed by advanced material science, serving customers in 60 countries across diverse sectors of aerospace, earthworks, energy, industrial production, transportation and infrastructure. With approximately 14,000 employees and nearly $3 billion in sales, the company realizes half of its revenue from outside North America, and 40% globally from innovations introduced in the past five years. Recognized among the "World's Most Ethical Companies" (Ethisphere); "Outstanding Corporate Innovator" (Product Development Management Association); and "America's Safest Companies" (EHS Today) with a focus on 100% safety, Kennametal and its foundation invest in technical education, industrial technologies and material science to deliver the promise of progress and economic prosperity to people everywhere. For more information, visit the company's website at www.kennametal.com.

FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
	Three Months Ended December 31,							Six Months Ended December 31,
(in thousands, except per share amounts)	2013				2012			2013				2012
Sales	$	689,936			$	633,144		$	1,309,743			$	1,262,603
Cost of goods sold	482,965				433,697			904,536				854,808
Gross profit	206,971				199,447			405,207				407,795
Operating expense	148,421				127,778			282,685				266,638
Restructuring charges	2,310				—			2,310				—
Amortization of intangibles	6,524				5,200			11,667				10,307
Operating income	49,716				66,469			108,545				130,850
Interest expense	8,037				6,970			15,118				12,926
Other expense (income), net	856				655			1,466				(246)
Income from continuing operations before income taxes	40,823				58,844			91,961				118,170
Provision for income taxes	16,656				15,535			29,236				27,815
Net income	24,167				43,309			62,725				90,355
Less: Net income attributable to noncontrolling interests	(42)				1,167			679				1,823
Net income attributable to Kennametal	$	24,209			$	42,142		$	62,046			$	88,532
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS
Basic earnings per share	$	0.31			$	0.53		$	0.79			$	1.11
Diluted earnings per share	$	0.30			$	0.52		$	0.78			$	1.09
Dividends per share	$	0.18			$	0.16		$	0.36			$	0.32
Basic weighted average shares outstanding	78,729				79,713			78,587				79,980
Diluted weighted average shares outstanding	79,776				80,986			79,597				81,164

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)	December 31, 2013				June 30, 2013
ASSETS
Cash and cash equivalents	$	163,289			$	377,316
Accounts receivable, net	467,759				445,322
Inventories	730,678				578,795
Other current assets	117,112				98,040
Total current assets	1,478,838				1,499,473
Property, plant and equipment, net	874,378				741,482
Goodwill and other intangible assets, net	1,333,225				944,520
Other assets	121,759				115,564
Total assets	$	3,808,200			$	3,301,039
LIABILITIES
Current maturities of long-term debt and capital leases, including notes payable	$	110,096			$	44,319
Accounts payable	188,614				190,623
Other current liabilities	240,599				232,651
Total current liabilities	539,309				467,593
Long-term debt and capital leases	1,035,633				703,626
Other liabilities	329,954				317,527
Total liabilities	1,904,896				1,488,746
KENNAMETAL SHAREOWNERS' EQUITY	1,871,997				1,781,826
NONCONTROLLING INTERESTS	31,307				30,467
Total liabilities and equity	$	3,808,200			$	3,301,039

 

SEGMENT DATA (UNAUDITED)	Three Months Ended December 31,							Six Months Ended December 31,
(in thousands)	2013				2012			2013				2012
Outside Sales:
Industrial	$	370,647			$	336,007		$	708,876			$	671,201
Infrastructure	319,289				297,137			600,867				591,402
Total outside sales	$	689,936			$	633,144		$	1,309,743			$	1,262,603
Sales By Geographic Region:
North America	$	302,032			$	279,943		$	571,566			$	563,167
Western Europe	215,688				184,433			403,289				360,587
Rest of World	172,216				168,768			334,888				338,849
Total sales by geographic region	$	689,936			$	633,144		$	1,309,743			$	1,262,603
Operating Income:
Industrial	$	33,218			$	40,677		$	73,038			$	80,004
Infrastructure	18,604				27,906			40,294				55,503
Corporate (1)	(2,106)				(2,114)			(4,787)				(4,657)
Total operating income	$	49,716			$	66,469		$	108,545			$	130,850

⁽¹⁾ Represents unallocated corporate expenses.

NOTE: Previously disclosed segment results were restated for certain sales reclassifications based on products and technologies.

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 sales, operating income and margin, net income, diluted EPS, Industrial sales, Industrial operating income and margin, Infrastructure sales, Infrastructure operating income and margin, free operating cash flow and return on invested capital (which are non-GAAP financial measures), to the most directly comparable GAAP measures. For those adjustments that are presented 'net of tax', the tax effect of the adjustment can be derived by calculating the difference between the pre-tax and the post-tax adjustments presented. The tax effect on adjustments is calculated by preparing an overall tax calculation including the adjustments and then a tax calculation excluding the adjustments. The difference between these calculations results in the tax impact of the adjustments.

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 on Form 8-K to which this release is attached.

THREE MONTHS ENDED DECEMBER 31, 2013 - (UNAUDITED)
(in thousands, except percents)	Sales			Operating Income			Net Income (3)			Diluted EPS
2014 Reported Results	$	689,936		49,716			$	24,209		$	0.30
2014 Reported Operating Margin				7.2%
TMB operating results:
TMB base operating results	(44,825)			(1,888)			90			—
TMB purchase accounting	—			9,772			7,077			0.09
Acquisition-related charges (2)	—			1,738			1,258			0.02
Restructuring and related charges	—			2,310			1,733			0.02
Tax repatriation expense	—			—			7,170			0.09
2014 Adjusted Results	$	645,111		$	61,648		$	41,537		$	0.52
2014 Adjusted Operating Margin				9.6%

⁽²⁾ TMB acquisition-related charges.

⁽³⁾ Represents amounts attributable to Kennametal Shareowners.

THREE MONTHS ENDED DECEMBER 31, 2013 - (UNAUDITED)
(in thousands, except percents)	Industrial Sales			Infrastructure Sales			Industrial Operating Income			Infrastructure Operating Income
2014 Reported Results	$	370,647		$	319,289		$	33,218		$	18,604
2014 Reported Operating Margin							9.0%			5.8%
TMB operating results:
TMB base operating results	(15,723)			(29,102)			(9)			(1,879)
TMB purchase accounting	—			—			6,147			3,625
Acquisition-related charges (2)	—			—			609			1,129
Restructuring and related charges	—			—			1,085			1,225
2014 Adjusted Results	$	354,924		$	290,187		$	41,050		$	22,704
2014 Adjusted Operating Margin							11.6%			7.8%

 

SIX MONTHS ENDED DECEMBER 31, 2013 - (UNAUDITED)
(in thousands, except percents)	Sales			Operating Income			Net Income (3)			Diluted EPS
2014 Reported Results	$	1,309,743		$	108,545		$	62,046		$	0.78
2014 Reported Operating Margin				8.3%
TMB operating results:
TMB base operating results	(44,825)			(1,888)			90			—
TMB purchase accounting	—			9,772			7,077			0.09
Acquisition-related charges (2)	—			2,836			2,065			0.03
Restructuring and related charges	—			2,310			1,700			0.02
Tax repatriation expense	—			—			7,170			0.09
2014 Adjusted Results	$	1,264,918		$	121,575		$	80,148		$	1.01
2014 Adjusted Operating Margin				9.6%

 

FREE OPERATING CASH FLOW (UNAUDITED)		Six Months Ended
		December 31,
(in thousands)		2013				2012
Net cash flow from operating activities		$	84,617			$	54,235
Purchases of property, plant and equipment		(48,804)				(34,372)
Proceeds from disposals of property, plant and equipment		444				704
Free operating cash flow		$	36,257			$	20,567

 

RETURN ON INVESTED CAPITAL (UNAUDITED) December 31, 2013 (in thousands, except percents)
Invested Capital		12/31/2013				9/30/2013					6/30/2013					3/31/2013					12/31/2012				Average
Debt		$	1,145,729			$	706,331				$	747,945				$	751,030				$	706,859			$	811,579
Total equity		1,903,304				1,873,194					1,812,293					1,753,834					1,744,443				1,817,414
Total		$	3,049,033			$	2,579,525				$	2,560,238				$	2,504,864				$	2,451,302			$	2,628,993
						Three Months Ended
Interest Expense						12/31/2013					9/30/2013					6/30/2013					3/31/2013				Total
Interest expense						$	8,037				$	7,081				$	7,042				$	7,504			$	29,664
Income tax benefit																									7,594
Total interest expense, net of tax																									$	22,070
Net Income						12/31/2013					9/30/2013					6/30/2013					3/31/2013				Total
Net income attributable to Kennametal, as reported						$	24,209				$	37,837				$	60,818				$	53,916			$	176,780
Acquisition-related charges						1,258					775					—					—				2,033
Restructuring and related charges						1,733					—					—					—				1,733
Tax repatriation expense						7,170					—					—					—				7,170
Noncontrolling interest						(42)					721					1,366					460				2,505
Net income, adjusted						$	34,328				$	39,333				$	62,184				$	54,376			$	190,221
Total interest expense, net of tax																									22,070
																									$	212,291
Average invested capital																									$	2,628,993
Adjusted Return on Invested Capital																									8.1%
Return on invested capital calculated utilizing net income, as reported is as follows:
Net income attributable to Kennametal, as reported																									$	176,780
Total interest expense, net of tax																									22,070
																									$	198,850
Average invested capital																									$	2,628,993
Return on Invested Capital																									7.6%

 

SOURCE Kennametal Inc.

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