Kennametal Inc. today reported fiscal 2008 first quarter EPS of $0.88, an increase of 13 percent from the prior year quarter reported EPS of $0.78. Adjusted EPS was $1.05 compared with prior year adjusted EPS of $0.82, an increase of 28 percent. The current quarter EPS included a non-cash special charge of $0.17 per share for the impact of a German tax reform bill enacted in July 2007. Prior year quarter EPS included special charges that totaled $0.04 per share related to previous divestitures.

Kennametal's President and Chief Executive Officer Carlos Cardoso said, "During the first quarter, we met or exceeded our guidance for sales growth and EPS while again generating strong cash flow and also increasing return on invested capital (ROIC). We are proud of our reputation as a high-performance enterprise that delivers on its commitments. The track record that we have established over the past several years continued in the first quarter of fiscal 2008. Our team made improvements that collectively resulted in a first quarter record for sales and earnings per share."

Cardoso added, "All of these achievements were made in spite of a challenging market environment in the North American economy. Our global strategies and initiatives as well as our ability to outperform industrial production provide Kennametal with multiple opportunities to grow sales and expand our margin. We attribute our success to the dedication of our global team, the strength of our operations, and our proven customer-focused growth strategy, which we continue to reinforce and execute in a highly disciplined and effective manner. We will continue to expand on our existing initiatives to deliver exceptional value to customers and shareowners."

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

  Highlights of Fiscal 2008 First Quarter
  -- Sales for the quarter were $615 million, compared with $543 million in
     the same quarter last year.  Sales grew 13 percent over the same
     quarter last year and included 5 percent growth on an organic basis, 5
     percent from acquisitions and 3 percent from foreign currency effects.

  -- Income from continuing operations was $35 million, compared with $29
     million in the prior year quarter, an increase of 18 percent. Excluding
     special items in both periods, income from continuing operations grew
     35 percent over the prior year quarter.  This increase was driven by
     organic sales growth, controlled operating expenses, the net impact of
     acquisitions, favorable foreign currency effects and a lower effective
     tax rate.

  -- The effective tax rate for the current quarter was 37.7 percent, which
     was unfavorably impacted by a $6.6 million non-cash special charge for
     income taxes related to a German tax reform bill enacted in July 2007.
     Excluding the special charge, the effective tax rate for the current
     quarter was 26.3 percent compared to 31.7 percent in the prior year
     quarter and benefited from increased earnings from the company's pan-
     European business strategy.

  -- Reported EPS increased 13 percent to $0.88, compared with prior year
     quarter reported EPS of $0.78.  Adjusted EPS increased 28 percent to
     $1.05, compared with prior year quarter adjusted EPS of $0.82. A
     reconciliation follows:


                Earnings Per Diluted Share Reconciliation

  First Quarter FY 2008                 First Quarter FY 2007
  Reported EPS          $  0.88         Reported EPS               $  0.78

  Impact of German tax
   reform bill             0.17         Adjustment on J&L
                                         divestiture and
                                         transaction-related
                                         charges                      0.03
                                        Loss on divestiture
                                         of CPG and
                                         transaction-related
                                         charges                      0.01

   Adjusted EPS         $  1.05          Adjusted EPS              $  0.82


  -- Cash flow provided by operating activities was $57 million in the
     current quarter, compared with an outflow of $19 million in the prior
     year quarter.  Free operating cash flow (FOCF) was $16 million in the
     current quarter, compared with an outflow of $41 million in the prior
     year quarter. Included in the current quarter FOCF were income tax
     payments of $5 million compared to $86 million in the prior year
     quarter, primarily related to the gain on the divestiture of J&L and
     cash repatriated in 2006 under the American Jobs Creation Act.
     Adjusted FOCF, excluding the effects of these items, was $21 million
     compared with $45 million in the prior year quarter.

  -- Adjusted ROIC was 11.6 percent, compared with 11.5 percent in the prior
     year quarter.


  Business Segment Highlights of Fiscal 2008 First Quarter

Metalworking Solutions & Services Group (MSSG) continued to deliver top- line growth in the September quarter, led by year-over-year expansion in the aerospace, machine tools and distribution sectors, as well as the effects of acquisitions. The European and Asia Pacific markets remained strong. The North American market declined slightly and the Indian market had positive growth compared to the prior year quarter.

In the September quarter, MSSG sales were higher by 14 percent as a result of 6 percent organic growth, 4 percent from acquisitions and 4 percent favorable foreign currency effects. Europe and Asia Pacific organic sales increased 11 percent and 18 percent, respectively. North America organic sales were at the prior year level. India organic sales increased 2 percent.

MSSG operating income increased by 21 percent, and the operating margin increased from the same quarter last year. The current quarter results benefited from organic growth, the net impact of acquisitions and favorable foreign currency effects.

Advanced Materials Solutions Group (AMSG) also continued to deliver top- line growth in the September quarter, driven by sales gains in certain markets, the effects of acquisitions and favorable foreign currency effects. Strong sales gains were made in the construction market while more moderate sales gains were achieved in the engineered product and energy markets. Sales of mining products were somewhat lower due to soft market conditions.

AMSG sales grew 12 percent as a result of 3 percent organic growth, 7 percent impact of acquisitions and 2 percent favorable foreign currency effects. AMSG again delivered organic growth in the current quarter on top of the double-digit growth achieved in the prior year quarter. Mining and construction products organic sales increased by 6 percent driven by strong construction sales. Engineered products and energy products organic sales increased by 4 percent and 2 percent, respectively.

AMSG operating income was up 9 percent driven by top-line growth while the operating margin was lower than the prior year quarter due primarily to higher raw material costs and sales mix in the current quarter.

Outlook

Worldwide market conditions support Kennametal's expectations of continued top-line growth during the balance of fiscal 2008. Based on global economic indicators, the company believes that the softness in the North American market will persist. The company also believes that the European market will remain favorable, and that business conditions will continue to be strong in developing economies. While there remain some uncertainties and risks related to the macro-economic environment, fundamental drivers for global demand appear to be stable.

The company anticipates that many of its end markets will continue to operate at favorable levels for the balance of the fiscal year, with moderating growth rates for some regions and some market sectors.

Kennametal expects sales growth in the range of 9 to 11 percent for fiscal 2008, including organic sales growth of 4 to 6 percent, continuing the trend of consistently outpacing worldwide industrial production rates by two to three times.

The company has increased adjusted EPS guidance for fiscal 2008 to a range of $5.60 to $5.70 (from $5.30 to $5.50) due to stronger international-based sales and higher benefits expected from its pan-European business strategy. This represents 23 percent to 25 percent growth in adjusted EPS, compared with fiscal 2007 adjusted EPS of $4.56. In the second quarter of fiscal 2008, Kennametal expects sales growth to be in the range of 11 to 12 percent, including organic sales growth of 4 to 5 percent, and EPS to be in the range of $1.10 to $1.15.

Kennametal anticipates cash flow from operating activities of approximately $280 million to $290 million for fiscal 2008. Based on anticipated capital expenditures of $140 million to $145 million, the company expects to generate between $140 million to $145 million of FOCF for fiscal 2008.

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 for fiscal 2008 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." The replay of this event will also be available on the company's website through November 23, 2007.

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 event. Forward looking statements in this release concern, among other things, Kennametal's expectations regarding future growth, end markets, and financial performance for future periods, all of which are based on current expectations that involve inherent risks and uncertainties. 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: global and regional economic conditions; availability and cost of the raw materials we use to manufacture our products; our ability to protect our intellectual property in foreign jurisdictions; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; energy costs; commodity prices; competition; integrating recent acquisitions, as well as any future acquisitions, and achieving the expected savings and synergies; business divestitures; demands on management resources; future terrorist attacks or acts of war; labor relations; demand for and market acceptance of new and existing products; and implementation of restructuring plans and environmental remediation matters. 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. 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.

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 approximately $2.4 billion annually of Kennametal products and services - delivered by our 14,000 talented employees in over 60 countries - with approximately 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)

                                                        Three Months Ended
                                                           September 30,
  (in thousands, except per share amounts)               2007        2006

  Sales                                              $  615,076   $  542,811
  Cost of goods sold                                    402,985      355,780

    Gross profit                                        212,091      187,031

  Operating expense                                     145,032      135,044
  Loss on divestiture                                         -        1,686
  Amortization of intangibles                             2,945        1,940

    Operating income                                     64,114       48,361

  Interest expense                                        7,799        7,427
  Other income, net                                      (1,103)     (3,006)

    Income from continuing operations before
     income taxes and minority interest                  57,418       43,940
  Provision for income taxes                             21,667       13,929

  Minority interest expense                                 872          557

  Income from continuing operations                      34,879       29,454

  Income from discontinued operations (a)                     -          907

  Net income                                          $  34,879    $  30,361

  Basic earnings per share:
   Continuing operations                              $    0.90    $    0.77
   Discontinued operations (a)                                -         0.02
                                                      $    0.90    $    0.79

  Diluted earnings per share:
    Continuing operations                             $    0.88    $    0.76
    Discontinued operations (a)                               -         0.02
                                                      $    0.88    $    0.78

  Dividends per share                                 $    0.21    $    0.19
  Basic weighted average shares outstanding              38,699       38,226
  Diluted weighted average shares outstanding            39,534       39,058

  (a) Income from discontinued operations reflects divested results of the
      Kemmer Praezision Electronics business (Electronics) - AMSG and the
      consumer retail product line, including industrial saw blades (CPG) -
      MSSG.



                     FINANCIAL HIGHLIGHTS (Continued)

  CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

  (in thousands)                                  September 30,     June 30,
                                                      2007            2007

  ASSETS
  Cash and cash equivalents                      $    66,541     $    50,433
  Accounts receivable, net                           447,192         466,690
  Inventories                                        443,305         403,613
  Other current assets                                93,851          95,766
    Total current assets                           1,050,889       1,016,502
  Property, plant and equipment, net                 648,888         614,019
  Goodwill and intangible assets, net                831,446         834,290
  Other assets                                       122,701         141,416
    Total                                        $ 2,653,924     $ 2,606,227

  LIABILITIES
  Current maturities of long-term debt and
   capital leases, including notes payable       $     8,124     $     5,430
  Accounts payable                                   173,398         189,301
  Other current liabilities                          280,318         292,506
    Total current liabilities                        461,840         487,237
  Long-term debt and capital leases                  368,927         361,399
  Other liabilities                                  272,984         255,500
    Total liabilities                              1,103,751       1,104,136

  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES      19,122          17,624
  SHAREOWNERS' EQUITY                              1,531,051       1,484,467
    Total                                        $ 2,653,924     $ 2,606,227


  SEGMENT DATA (Unaudited)

                                                     Three Months Ended
                                                        September 30,
  (in thousands)                                       2007      2006

  Outside Sales:
  Metalworking Solutions and Services Group        $  407,697  $  357,084
  Advanced Materials Solutions Group                  207,379     185,727
    Total outside sales                            $  615,076  $  542,811

  Sales By Geographic Region:
  United States                                    $  283,080  $  266,863
  International                                       331,996     275,948
    Total sales by geographic region               $  615,076  $  542,811

  Operating Income (Loss):
  Metalworking Solutions and Services Group        $  55,352   $   45,666
  Advanced Materials Solutions Group                  29,980       27,386
  Corporate and eliminations (b)                     (21,218)     (24,691)
    Total operating income                         $  64,114   $   48,361

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



                     FINANCIAL HIGHLIGHTS (Continued)

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, effective tax rate, income from continuing operations, net income and diluted earnings per share (which are GAAP financial measures), in each case excluding special items, as well as adjusted 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 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. 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.

RECONCILIATION TO GAAP - THREE MONTHS ENDED SEPTEMBER 30, 2007 (Unaudited)
  (in thousands, except percents
    and per share amounts)
                                          Income from
                              Effective    Continuing     Net    Diluted
                              Tax Rate     Operations   Income     EPS


  2008 Reported Results         37.7%       $ 34,879    $ 34,879   $ 0.88
    Impact of German tax
     reform bill               (11.4)          6,594       6,594     0.17
  2008 Adjusted Results         26.3%       $ 41,473    $ 41,473   $ 1.05


RECONCILIATION TO GAAP - THREE MONTHS ENDED SEPTEMBER 30, 2006 (Unaudited)
  (in thousands, except per share
    amounts)
                                                 Income from
                   Gross   Operating  Operating   Continuing   Net   Diluted
                   Profit   Expense    Income     Operations  Income   EPS


  2007 Reported
   Results        $187,031   $135,044   $48,361   $29,454   $30,361    $0.78
    Loss on
     divestiture
     of CPG and
     transaction-
     related charges     -          -         -         -       368     0.01
    Adjustment on J&L
     divestiture and
     transaction-
     related charges     -       (333)    2,019     1,252     1,252     0.03

  2007 Adjusted
   Results        $187,031   $134,711   $50,380   $30,706   $31,981    $0.82


  RECONCILIATION TO GAAP - YEAR ENDED JUNE 30, 2007 (Unaudited)
  (in thousands, except per share
   amounts)
                                                 Income from
                    Gross  Operating  Operating  Continuing    Net   Diluted
                    Profit  Expense     Income    Operations   Income   EPS

  2007 Reported
   Results        $841,562  $554,634   $269,420  $176,842   $174,243   $4.44
    Electronics
     impairment and
     divestiture-
     related charges     -         -          -         -      3,213    0.08
    Loss on sale of
     CPG and
     transaction-
     related charges     -         -          -         -        368    0.01
    Adjustment on
     J&L divestiture
     and transaction-
     related charges     -      (333)     2,019      1,252    1,252     0.03
  2007 Adjusted
   Results        $841,562  $554,301   $271,439   $178,094  $179,076   $4.56



                     FINANCIAL HIGHLIGHTS (Continued)

     RECONCILIATION OF ADJUSTED FREE OPERATING CASH FLOW (Unaudited)

                                                         Three Months Ended
                                                            September 30,
  (in thousands)                                          2007         2006

  Net cash flow provided by (used for) operating
   activities                                           $ 56,905  $ (18,800)
  Purchases of property, plant and equipment             (42,686)   (22,661)
  Proceeds from disposals of property, plant and
   equipment                                               2,200        483
    Free operating cash flow                              16,419    (40,978)
  Adjustments:
    Income taxes paid during first quarter                 4,659     86,236
  Adjusted free operating cash flow                     $ 21,078   $ 45,258



                     FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited)

  September 30, 2007 (in thousands, except percents)

  Invested
   Capital  9/30/2007  6/30/2007  3/31/2007  12/31/2006  9/30/2006   Average
  Debt       $377,051   $366,829   $371,521   $376,472   $409,592   $380,293
  Minority
   interest    19,122     17,624     16,896     15,807     15,177     16,925
  Shareowners'
   equity   1,531,051  1,484,467  1,431,235  1,369,748  1,319,599  1,427,220
  Total    $1,927,224 $1,868,920 $1,819,652 $1,762,027 $1,744,368 $1,824,438

                            Three Months Ended
  Interest
   Expense   9/30/2007 6/30/2007  3/31/2007   12/31/2006    Total
  Interest
   expense     $7,799     $7,513     $6,915     $7,286    $29,513
  Securitiz-
   ation fees       8          5          5          6         24
  Total interest
   expense     $7,807     $7,518     $6,920     $7,292    $29,537
  Income tax
   benefit                                                  8,772
  Total interest
   expense, net
   of tax                                                 $20,765

  Total
   Income    9/30/2007  6/30/2007  3/31/2007  12/31/2006    Total
  Net Income,
   as reported  $34,879   $62,093   $51,738    $30,051   $178,761
  Impact of
   German tax
   reform bill    6,594         -         -          -      6,594
  Electronics
   impairment
   and transaction-
   related
   charges            -         -         -      3,213      3,213
  Minority
   interest
   expense          872       229       757        642      2,500
  Total
   Income,
   adjusted     $42,345   $62,322   $52,495    $33,906   $191,068
  Total interest
   expense, net
   of tax                                                  20,765
                                                         $211,833
  Average
   invested
   capital                                             $1,824,438
  Adjusted
   Return on
   Invested
   Capital                                                   11.6%

  Return on invested capital calculated utilizing net income, as reported is
   as follows:
  Net income, as reported                                $178,761
  Total interest expense, net of tax                       20,765
                                                         $199,526
  Average invested capital                             $1,824,438
  Return on Invested Capital                                10.9%



                     FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited)

  September 30, 2006 (in thousands, except percents)

  Invested
   Capital   9/30/2006  6/30/2006  3/31/2006  12/31/2005  9/30/2005  Average
  Debt      $409,592   $411,722   $365,906   $410,045    $415,250   $402,503
  Accounts
   receivable
   securitized    -           -    106,106    100,295     100,445     61,369
  Minority
   interest   15,177     14,626     18,054     16,918      18,117     16,578
  Shareowners'
   equity  1,319,599  1,295,365  1,115,110  1,045,974   1,009,394  1,157,089
  Total   $1,744,368 $1,721,713 $1,605,176 $1,573,232  $1,543,206 $1,637,539

                            Three Months Ended
  Interest
   Expense   9/30/2006  6/30/2006  3/31/2006  12/31/2005   Total
  Interest
   expense    $7,427     $7,478     $7,728     $7,984     $30,617
  Securitiz-
   ation fees     22      1,288      1,241      1,170       3,721
  Total interest
   expense    $7,449     $8,766     $8,969     $9,154     $34,338
  Income tax
   benefit                                                  9,134
  Total interest
   expense, net
   of tax                                                 $25,204

  Total
   Income   9/30/2006   6/30/2006  3/31/2006  12/31/2005   Total
  Net
  Income, as
   reported  $30,361   $164,196    $32,903     $31,087   $258,547
  Gain on
   divestiture
   of J&L      1,045   (132,001)         -           -   (130,956)
  J&L trans-
   action-related
   charges       207      2,796      1,160           -      4,163
  Loss on
   divestiture of
   Electronics     -     15,366          -           -     15,366
  Tax impact of
   cash repatriation
   under AJCA      -     11,176          -           -     11,176
  Loss on divest-
   iture of CPG,
   goodwill impair-
   ment and
   transaction-
   related
   charges       368     (2,192)     5,030           -     3,206
  Loss on
   divestiture
   of Presto       -      1,410      8,047           -     9,457
  Favorable
   resolution of
   tax conting-
   encies          -    (10,873)         -           -   (10,873)
  Minority
  interest
  expense         557       525        782         511     2,375

  Total Income,
   adjusted    32,538   $50,403    $47,922     $31,598  $162,461
  Total
   interest
   expense, net
   of tax                                                 25,204

                                                        $187,665
   Average
    invested
    capital                                           $1,637,539

  Adjusted Return
   on Invested
   Capital                                                  11.5%

  Return on invested capital calculated utilizing net income, as reported is
   as follows:
  Net income, as reported                               $258,547
  Total interest expense, net of tax                      25,204
                                                        $283,751
  Average invested capital                            $1,637,539
  Return on Invested Capital                                17.3%

First Call Analyst:
FCMN Contact: barbara.haser@kennametal.com

SOURCE: Kennametal Inc.