Kennametal Delivers on Fiscal Year 2000 Commitments
LATROBE, Pa., July 26 /PRNewswire/ -- Kennametal Inc. reported net income for the fourth quarter ended June 30, 2000, of $20.7 million or $0.68 per share, excluding special charges, an increase of 34 percent, compared to $15.5 million or $0.52 per share last year. The company's success in improving operating leverage drove strong earnings performance in its core operations where earnings per share, excluding special charges, rose 58 percent on four percent sales growth. Earnings per share, excluding amortization expense and special charges, were $0.89 per share compared to $0.74 per share in the prior year's quarter.
Kennametal Inc. President and Chief Executive Officer Markos I. Tambakeras said, "We achieved our fiscal year 2000 financial commitment, despite erratic end markets, an unfavorable currency exchange environment and rising interest rates. This reflects a new sense of resolve throughout the company to deliver on our financial commitments regardless of challenging market conditions. We have exceeded our expectations on cash flow and debt reduction and are quickly regaining our balance sheet flexibility. Fiscal year 2000 was a year of refocus and stabilization. We are earning the right to grow."
The company made excellent progress in cash generation, resulting in another strong quarter of debt reduction. During the quarter, the company generated free cash flow of $25.6 million, bringing the total free cash flow for the year to $183.8 million. Last year, the company generated free cash flow of $120.6 million, which included $82 million from the accounts receivable securitization program. Total debt at quarter-end was $699.2 million, a reduction of $162.0 million from June 30, 1999. The total debt-to-capital ratio was 45.6 percent, a reduction of 630 basis points from 51.9 percent at June 30, 1999. Primary working capital as a percent of sales declined by 550 basis points from fiscal 1999 and 60 basis points from the March quarter.
Consolidated sales for the June 2000 quarter of $473.8 million grew five percent over the year-ago quarter, excluding unfavorable currency translation effects of two percent. Sales for core operations grew seven percent over last year's quarter, excluding unfavorable currency translation effects of three percent.
Gross profit margin in the fourth quarter was 39.2 percent, an improvement of twenty basis points from the March quarter and an improvement of 200 basis points from last year's quarter due to continuing benefits from lean manufacturing initiatives and strong pricing discipline. Operating expenses for the quarter, excluding special charges, were $126.6 million, up from $120.2 million in the same quarter last year, primarily due to increased volume, spending on research and development and other strategic initiatives and the reinstatement of the salary reduction instituted in 1999.
The company remains on track to reap the benefits from its previously announced restructuring plan. Special charges of $2.0 million, or $0.04 per share were included in the quarter's results, bringing the total special charges for the year to $22.9 million, or $0.43 per share. Including special charges, net income for the quarter was $19.5 million or $0.64 per share compared to $15.5 million or $0.52 per share last year.
In commenting on the quarter, Mr. Tambakeras said, "The results of the current quarter clearly demonstrate that the company is executing on its initiatives. We are seeing strong market acceptance of our new products, an acceleration of product development and improved performance from a reinvigorated sales force. Our continuously improving manufacturing performance is giving us more operating leverage as the new products accelerate our growth, enhancing the impact of improving market conditions. We are gaining more confidence in our ability to be the customer's first choice in tooling solutions as well as a top-tier financial performer."
For fiscal 2000, sales were $1,853.7 million, flat compared to last year, excluding unfavorable foreign currency translation effects and the impact of the divestiture of the Strong Tool Company steel mill business, which affected the year by two and one percent, respectively. Net income for the full year, excluding special items, was $64.7 million, an increase of 19 percent from $54.3 million last year. Earnings per share for the year, excluding special items, were $2.13 per share compared to $1.82 per share last year, an increase of 17 percent. Including special items, net income was $51.7 million or $1.70 per share compared to $39.1 million or $1.31 per share for the same period last year.
During fiscal year 2000, the company experienced negative foreign currency translation effects and interest rate increases of 175 basis points, which had a negative impact on earnings per share of $0.16 and $0.07, respectively.
Mr. Tambakeras concluded, "Despite the satisfactory results of the total company, we were very disappointed with the underperformance at JLK. As stated previously, we are committed to getting JLK back on track as soon as possible. Our offer to bring in JLK reflects our conclusion that this will accelerate the process of improvement. We expect to discuss our outlook for JLK at the conclusion of the negotiations with the JLK special committee. Regardless of the JLK negotiations, we will continue to move the company forward to achieve our aspirations consistent with our established strategy."
Kennametal recently announced a proposal to JLK to acquire the outstanding shares of JLK that it does not already own. Kennametal currently owns approximately 83 percent of JLK.
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, and 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 quarter and year ended June 30, 2000 and 1999 are shown in the following tables (in thousands, except per share amounts). Consolidated Statements of Income Quarter Ended Year Ended June 30, June 30, Operations: 2000 1999 2000 1999 Net sales $ 473,773 $ 458,625 $1,853,663 $1,902,916 Cost of goods sold (a) 288,045 287,835 1,147,287 1,198,651 Gross profit 185,728 170,790 706,376 704,265 Operating expenses (b) 127,382 120,204 502,401 517,044 Restructuring and asset impairment chgs. 1,222 -- 18,526 13,937 Amortization of intangibles 6,335 6,637 26,452 25,788 Operating income 50,789 43,949 158,997 147,496 Interest expense 13,131 15,346 55,079 68,594 Other (income) expense (c) 1,986 (369) 3,507 492 Income before provision for income taxes and minority interest 35,672 28,972 100,411 78,410 Provision for income taxes 15,215 11,900 43,700 32,900 Minority interest 1,001 1,566 4,734 6,394 Income before extraordinary item 19,456 15,506 51,977 39,116 Loss on early extinguishments of debt, net of taxes (d) -- -- (267) -- Net income $ 19,456 $ 15,506 $ 51,710 $ 39,116 Per Share Data: Diluted earnings per share $ 0.64 $ 0.52 $ 1.70 $ 1.31 Dividends per share $ 0.17 $ 0.17 $ 0.68 $ 0.68 Diluted average shares outstanding 30,535 30,096 30,364 29,960 (a) For the year ended June 30, 1999, these amounts include a charge of $6.9 million related to a program to streamline and optimize the global metalworking product offering. (b) For the quarter and year ended June 30, 2000, these amounts include a charge of $0.8 million related to the evaluation of strategic alternatives. For the year ended June 30, 2000, these amounts include a charge of $3.0 million for environmental remediation. For the year ended June 30, 1999, these amounts include a charge of $3.8 million related to the purchase of 4.9 percent of Toshiba Tungaloy stock. (c) For the quarter and year ended June 30, 2000, these amounts include charges of $1.4 million and $5.2 million, respectively, for fees incurred in connection with the company's accounts receivable securitization program. (d) For the year ended June 30, 2000, this amount represents a non-cash charge for the accelerated write-off of deferred financing fees due to the early extinguishment of the company's term loan. Supplemental Data Sheet Quarter Ended Year Ended June 30, June 30, 2000 1999(a) 2000 1999(a) Sales: Americas $ 170,897 $ 161,658 $ 671,627 $ 662,113 Europe 73,311 76,190 292,967 330,665 Asia Pacific 15,214 12,276 56,320 45,427 Global Metalworking 259,422 250,124 1,020,914 1,038,205 Engineered Products 47,102 39,594 176,469 173,171 Mining & Construction 41,716 43,849 165,899 173,028 JLK/Industrial Supply(b) 125,533 125,058 490,381 518,512 Total $ 473,773 $ 458,625 $1,853,663 $1,902,916 By Geographic Area: Within the United States $ 319,070 $ 305,815 $1,233,797 $1,276,408 International 154,703 152,810 619,866 626,508 Operating Income (Loss), including special charges: Global Metalworking $ 38,319 $ 27,953 $ 128,283 $ 116,306 Engineered Products 8,488 5,923 23,711 24,473 Mining & Construction 6,141 5,976 17,483 14,203 JLK/Industrial Supply 3,743 8,497 28,174 34,532 Corporate and Eliminations (5,902) (4,400) (38,654) (42,018) Total $ 50,789 $ 43,949 $ 158,997 $ 147,496 Operating Income (Loss), excluding special charges: Global Metalworking $ 38,189 $ 27,953 $ 139,266 $ 131,186 Engineered Products 8,614 5,923 25,160 24,473 Mining & Construction 6,088 5,976 20,853 20,003 JLK/Industrial Supply 4,498 8,497 28,929 34,532 Corporate and Eliminations (4,592) (4,400) (32,799) (38,081) Total $ 52,797 $ 43,949 $ 181,409 $ 172,113 EPS excluding special charges and amortization expense $ 0.89 $ 0.74 $ 3.00 $ 2.68 Free Cash Flow: Net Income $ 19,456 $ 15,506 $ 51,710 $ 39,116 Non-cash Items 4,574 275 18,117 23,702 Depreciation & Amortization 25,196 24,094 101,646 95,991 Change in Working Capital (7,116) 88,119 62,977 56,748 Capital Expenditures (16,540) (11,767) (50,663) (94,993) Free Cash Flow $ 25,570 $ 116,227 $ 183,787 $ 120,564 Supplemental Data Sheet (Continued) SELECTED BALANCE SHEET DATA: Quarter Ended 6/30/00 3/31/00 12/31/99 6/30/99 Accounts Receivable $ 231,917 $ 245,002 $ 224,022 $ 231,287 Inventory 410,885 417,333 417,473 434,462 Accounts Payable (118,908) (122,166) (111,056) (89,339) Total Primary Working Capital (PWC) $ 523,894 $ 540,169 $ 530,439 $ 576,410 PWC % Sales(c) 29.4% 30.0% 30.9% 34.9% Debt $ 699,242 $ 737,003 $ 771,417 $ 861,291 Debt/Total Capital 45.6% 47.6% 48.9% 51.9% (a) Certain amounts in prior year sales have been reclassified to conform to the current year presentation. (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. (c) Calculated by averaging beginning of the year and quarter balances divided by annualized sales.
SOURCE: Kennametal Inc.
Contact: Mary C. Stanutz, Manager, Investor Relations of Kennametal,