Kennametal Inc. today reported strong first-quarter earnings driven by higher sales and continued improvements in operations. Kennametal's earnings per share (EPS) increased by 15.2 percent to $0.38 per share, excluding special items, compared to $0.33 per share last year. EPS from the company's core operations, which exclude JLK Direct Distribution Inc. , rose 45.4 percent, excluding special items.

Kennametal President and Chief Executive Officer Markos I. Tambakeras said, "We continue to deliver on our commitments despite challenging market conditions and a continuing unfavorable foreign exchange environment. We are building a new performance-based culture focused on providing advanced technical solutions for customers and on delivering value to our shareowners. Our efforts to reposition Kennametal for growth are starting to take hold. We continue to exceed expectations on cash flow and debt reduction and are regaining balance sheet flexibility as planned. We are working hard to become a top-tier financial performer."

  First Quarter Highlights
  -- Sales rose to $450.7 million, an increase of 1.8 percent compared to
     last year, or 6.0 percent excluding the unfavorable impact of foreign
     currency
     (2.0 percent) and fewer business days (2.2 percent).  Sales
     performance generally was favorable across the company's businesses,
     with particular strength from international markets.  Soft end markets
     contributed to the weak results for the North American construction
     business.  Overall, the introduction of more than 7,500 new products
     in the last year and several initiatives to revitalize sales are
     supporting Kennametal's sales growth target of 3-5 percent for the
     current fiscal year.

  -- The gross profit margin was 37.4 percent, an improvement of 50 basis
     points from the first quarter of fiscal 2000.  The increase in the
     gross margin was principally due to higher productivity derived from
     lean manufacturing programs and price discipline, offset by weakness
     in the high-margin construction business.

  -- Operating expenses for the quarter, excluding special charges, were up
     3.4 percent to $126.7 million. Despite the planned increase in
     spending on research and development, and strategic initiatives aimed
     at accelerating sales growth, operating income margin still improved
     30 basis points.

  -- The effective tax rate for the first quarter was 40.5 percent compared
     to 44.5 percent last year, as successful tax planning initiatives in
     Europe more than offset the repeal of the Foreign Sales Corporation
     tax benefits in the United States.

  -- Excluding special items, net income was $11.5 million, an increase of
     16.2 percent compared to $9.9 million last year.

  -- Special charges of $3.2 million, or $0.06 per share, were included in
     the quarter's results related to the JLK business improvement plan and
     costs associated with the tender offer, and $0.6 million, net of tax,
     or $0.02 per share related to the adoption of Financial Accounting
     Standard No. 133, "Accounting for Derivative Instruments and Hedging
     Activities."

  -- The prior year's results for the first quarter included one-time gains
     of $1.4 million from the sale of under-utilized assets.

  -- Kennametal continued to generate strong cash flow and exceed its
     targets.  Free operating cash flow of $43 million was driven by a
     $24 million reduction in primary working capital.  Total debt declined
     by $26 million from $699 million to $673 million.

Tambakeras added, "Our first-quarter results clearly demonstrate that Kennametal is continuing the disciplined execution of its seven initiatives. Our reinvigorated sales force and the introduction of new products, both leveraged by outstanding response at the recent IMTS trade show, are having a positive impact on sales even in lackluster market conditions. Cost discipline and manufacturing performance continue to improve across all areas of the company, providing further operating leverage. As planned, we have raised our investment in research and development and in support of growth initiatives. We are making steady progress toward our aspiration of being the world's premier tooling solutions supplier and are earning the right to grow."

Kennametal also announced the continuation of a program to purchase from time to time up to a total of 2,000,000 additional shares of its outstanding capital stock for investment or other general corporate purposes. The original repurchase program was announced on January 31, 1997. Repurchases may be made from time to time in the open market, in negotiated or other permissible transactions. Under the authority of this program, the company previously purchased approximately 1.4 million shares and currently has approximately 30.2 million shares outstanding.

Kennametal also announced its Board of Directors declared a quarterly cash dividend of 17 cents per share, payable November 24, 2000, to holders of record as of November 10, 2000.

Kennametal is a global leader in providing tools, tooling systems and solutions to the metalworking, mining, highway construction, oil and energy industries, and wear-resistant parts for a wide range of industries. Headquartered in Latrobe, Pa., Kennametal has approximately 13,000 employees worldwide and annual sales of approximately $1.9 billion.

This release contains "forward-looking statements" as defined by Section 21E of the Securities Exchange Act of 1934. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the extent that global economic conditions do not change materially, risks associated with integrating businesses and restructuring programs, demands on management resources, risks associated with international markets such as currency exchange rates, and competition. The company undertakes no obligation to publicly release any revisions to forward-looking statements to reflect events or circumstances occurring after the date hereof.

FINANCIAL HIGHLIGHTS

Consolidated financial highlights for Kennametal Inc. for the quarters ended September 30, 2000 and 1999 are shown in the following tables (in thousands, except per share amounts). All fiscal year 2001 data is subject to year-end (June 30) adjustment and audit by independent public accountants.

  Consolidated Statements of Income                Quarter Ended
                                                   September 30
  Operations:                                  2000           1999

  Net sales                                $  450,705    $  442,943

      Cost of goods sold                      282,052       279,614

  Gross profit                                168,653       163,329
      Operating expense (A)                   128,424       122,487
      Restructuring and asset
       impairment charges                       1,535            --
      Amortization of intangibles               6,323         7,003

  Operating income                             32,371        33,839
      Interest expense                         13,195        14,527
      Other (income) expense, net (B)           1,457          (258)

  Income before provision
   for income taxes and
   minority interest                           17,719        19,570

  Provision for income taxes                    7,176         8,709

  Minority interest                               602           948

  Income before cumulative
   effect of change in
   accounting principle                         9,941         9,913

  Cumulative effect of change in accounting
   principle, net of tax ©                     (599)           --

  Net income                                   $9,342       $ 9,913

  Per Share Data:
  Diluted earnings per share                    $0.30         $0.33

  Dividends per share                           $0.17         $0.17

  Diluted weighted average
   shares outstanding                          30,742        30,165

  (A)  For the quarter ended September 30, 2000, these amounts include a
       charge of $1.7 million, primarily related to the tender offer to
       acquire the outstanding shares of JLK.
  (B)  For the quarters ended September 30, 2000 and 1999, these amounts
       include charges of $1.6 million and $1.1 million, respectively, for
       fees incurred in connection with the company's accounts receivable
       securitization program.
  ©  For the quarter ended September 30, 2000, this amount represents a
       non-cash charge for the adoption of Statement of Financial
       Accounting Standards No. 133, "Accounting for Derivative Instruments
       and Hedging Activities."

                         Supplemental Data Sheet
                         SELECTED OPERATING DATA:

                                                  Quarter Ended
                                                  September 30
                                               2000          1999(A)
  Sales:
  Metalworking Services and Solutions Group $ 246,816     $ 242,164
  Advanced Materials Solutions Group           86,779        84,800
  JLK/Industrial Supply(B)                    117,110       115,979
  Total                                      $450,705      $442,943

  Sales By Geographic Area:
  Within the United States                  $ 302,433     $ 296,095
  International                               148,272       146,848
  Total                                      $450,705      $442,943

  Operating Income (Loss),
   including special charges:
  Metalworking Services and
   Solutions Group ©                        $27,922       $29,257
  Advanced Materials Solutions Group           11,187        10,623
  JLK/Industrial Supply                           552         6,979
  Corporate and Eliminations©                (7,290)      (13,020)
  Total                                       $32,371       $33,839

  Operating Income (Loss),
   excluding special charges:
  Metalworking Services and
   Solutions Group©                         $27,890       $29,257
  Advanced Materials Solutions Group           11,187        10,623
  JLK/Industrial Supply                         3,869         6,979
  Corporate and Eliminations©                (7,310)      (13,020)
  Total                                       $35,636       $33,839

  Diluted EPS excluding special charges and
   amortization expense                         $0.58         $0.56

  Free Cash Flow:
  Net Income                                   $9,342        $9,913
  Non-cash Items                                2,989            80
  Depreciation & Amortization                  24,566        26,064
  Change in Working Capital                    17,504        25,157
  Capital Expenditures                        (11,471)      (10,779)
  Free Cash Flow                              $42,930       $50,435

                   Supplemental Data Sheet  (Continued)

  SELECTED BALANCE SHEET DATA:
                                            Quarter Ended
                            9/30/00     6/30/00      3/31/00     9/30/99

  Accounts Receivable      $218,863    $ 231,917   $ 245,002   $ 233,867
  Inventory                 392,741      410,885     417,333     431,324
  Accounts Payable         (111,873)    (118,908)   (122,166)   (106,668)
  Total Primary
   Working Capital (PWC)   $499,731    $ 523,894   $ 540,169   $ 558,523
  PWC % Sales(D)               28.5%        29.4%       30.0%       32.0%
  Debt                     $672,593    $ 699,242   $ 737,003   $ 814,836
  Debt/Total Capital           44.7%        45.6%       47.6%       50.2%


  SPECIAL CHARGES IMPACT:

                                         Operating      Net         Per
                                           Income      Income      Share

  Reported Earnings                      $ 32,371    $ 9,342       $0.30
  JLK Special Charges
   (Tender Costs)                           1,678        815        0.03
  JLK Restructuring Charges                 1,587        776        0.03
  FAS 133                                     ---        599        0.02
  Results Excluding
   Special Charges                        $35,636    $11,532       $0.38


   (A)  Kennametal now reports three global business units consisting of
         Metalworking Services and Solutions Group, Advanced Materials
         Solutions Group and JLK/Industrial Supply, and a corporate
         functional shared services.  Certain amounts in prior year sales
         and operating income (loss) have been restated to conform with
         this new reporting structure.
   (B)  Compared to the amounts reported separately by JLK, these amounts
         have been adjusted to properly reflect the elimination of
         intercompany sales to Kennametal and its subsidiaries.
   ©  For the quarter ended September 30, 1999, results for the
         Metalworking Services and Solutions Group include a gain of
         $4.7 million on the sale of $12.7 million of inventory to JLK that
         is eliminated in Corporate and Eliminations.
   (D)  Calculated by averaging beginning of the year and quarter-end
         balances for PWC, divided by sales for the most recent 12-month
         period.

SOURCE: Kennametal Inc.