Kennametal Inc. today reported a fiscal 2004 first quarter earnings of $0.24 per diluted share compared with earnings of $0.31 per diluted share last year. Excluding special items in each period, diluted earnings per share were $0.34 for the quarter, at the high end of guidance, against last year's earnings per share of $0.32. Sales of $445 million were 10 percent above prior year, driven by the Widia acquisition.

                Earnings Per Share Excluding Special Items
             Company Guidance (07/30/03)             $0.30 to $0.35
             Analyst Estimate Range (10/23/03)       $0.32 to $0.35
             Earnings, Excluding Special Items            $0.34

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "We were pleased to deliver earnings near the top of our guidance, with our global markets developing largely as we expected. Our results reflect a nascent recovery in our key North American markets, and continued strong growth in the developing regions of Asia-Pacific and South America. Our confidence in the sustainability of the North American recovery was encouraged by the return to growth of our Light and General Engineering end market. Historically, this market segment has been a good proxy for the health of the broad industrial markets. Persistent weakness in our European markets was somewhat worse than we expected. During the quarter, we were focused on the final phases of the Widia integration and on accelerating investments in our global sales and marketing activities."

  Highlights
  First Quarter - FY04
  -- Sales of $444.6 million were 10 percent above last year's
     $404.2 million.  Sales results include an 8 percent addition from the
     Widia acquisition, a 4 percent benefit from foreign currency exchange,
     and a 2 percent decline in organic sales volume.
  -- Reported net income was $8.8 million against net income of
     $10.8 million in the same quarter last year. Excluding special items,
     net income was $12.1 million for the quarter, an 8 percent increase
     compared to net income of $11.2 million last year reflecting the
     benefits of Widia synergies, cost reductions, and foreign currency
     exchange.
  -- The current quarter included net special charges of $3.4 million, or
     $0.10 per diluted share, primarily associated with the previously
     announced Widia integration efforts.  Prior-year quarter included net
     special charges of $0.4 million, or $0.01 per diluted share, also
     largely related to the Widia integration.
  -- As expected, net cash flow from operations was $12.2 million, versus
     $38.3 million for the prior year.  Free operating cash flow was
     $2.1 million, versus $28.4 million in the same period last year due to
     higher tax and restructuring payments this quarter.
  -- Total debt was $520 million, down $6 million from June 2003, and
     $96 million below September 2002.
  -- Debt to capital decreased to 40.5 percent, from 45.5 percent at the end
     of September in the prior year.

  Outlook

Performance in certain key North American markets toward the end of the September quarter corroborated positive macroeconomic indicators, and increased the probability of a sustained recovery in North American industrial markets. The strength of the North American recovery has yet to be established. While a North American recovery was expected to precede improvement in Europe, the weakness in Europe is greater than previously anticipated.

Tambakeras said, "On balance, we remain confident in our ability to deliver against our original earnings guidance for the year. While Europe is weaker than anticipated, North America is encouraging, and our earnings outlook was based on modest growth assumptions for the second half of our fiscal year. We will continue to manage costs and spending, as appropriate, for evolving market performance."

Sales for the second quarter of fiscal 2004 are expected to grow 4 to 5 percent year-over-year, including the impact of currency. Organic volume is anticipated to be flat to down 2 percent year-over-year, compared to a 2 percent decline in the first quarter. Reported diluted earnings per share are expected to be $0.19 to $0.26 per share. This includes an estimate for special charges associated with the completion of the Widia integration of approximately $0.06 to $0.08 per share, consistent with previously announced integration assumptions. Excluding these charges, diluted earnings per share are forecasted to range from $0.27 to $0.32 per share.

Guidance for the full year remains essentially unchanged. Sales are expected to grow 6 to 8 percent year-over-year. Reported diluted earnings per share are expected to be $1.72 to $2.04 per share. This includes an estimate for special charges associated with the completion of the Widia integration of approximately $0.16 to $0.18 per share. Excluding these charges, diluted earnings per share are forecasted to range from $1.90 to $2.20 per share. The earnings forecast includes $0.12 to $0.15 of accretion from Widia, slightly lower than prior guidance on reduced expectations for the performance of European markets.

Kennametal anticipates net cash flow provided by operating activities of approximately $165 to $185 million in fiscal 2004. Purchases of property, plant and equipment and proceeds from disposals of property, plant and equipment are expected to be $60 to $70 million, net. Adjusting net cash flow provided by operating activities for the above items, Kennametal expects to generate between $100 and $125 million of free operating cash flow.

Kennametal advises shareholders 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 .

Dividend Declared

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable November 25, 2003, to shareowners of record as of the close of business November 10, 2003.

First quarter results will be discussed in a live Internet broadcast at 10:00 a.m. today. Access the live or archived conference by visiting the Investor Relations section of Kennametal's corporate web site at www.kennametal.com .

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. You can identify these forward-looking statements by the fact they use words such as "should," "anticipate," "estimate," "approximate," "expect," "may," "will," "project," "intend," "plan," "believe," and others words of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements are likely to relate to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position and product development, which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in the next several years. Although it is not possible to predict or identify all factors, they may include the following: global economic conditions; future terrorist attacks; epidemics; risks associated with integrating and divesting businesses and achieving the expected savings and synergies; demands on management resources; risks associated with international markets such as currency exchange rates, and social and political environments; competition; labor relations; commodity prices; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans and environmental remediation matters. 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.

Kennametal Inc. aspires to be the premier tooling solutions supplier in the world with operational excellence throughout the value chain and best-in- class manufacturing and technology. Kennametal strives to deliver superior shareowner value through top-tier financial performance. The company provides customers a broad range of technologically advanced tools, tooling systems and engineering services aimed at improving customers' manufacturing competitiveness. With about 14,000 employees worldwide, the company's annual sales approximate $1.8 billion, with nearly half coming from sales outside the United States. Kennametal is a five-time winner of the GM "Supplier of the Year" award and is represented in more than 60 countries. Kennametal operations in Europe are headquartered in Furth, Germany. Kennametal Asia Pacific operations are headquartered in Singapore. For more information, visit the company's web site at www.kennametal.com .

FINANCIAL HIGHLIGHTS

Consolidated financial highlights for Kennametal Inc. for the quarter ended September 30, 2003 and 2002 are shown in the following tables (in thousands, except per share amounts).

   Consolidated Statements of Income (Unaudited)

                                                       Quarter Ended
                                                        September 30,
                                                   2003              2002

  Sales                                          $444,575          $404,218
        Cost of goods sold (A)                    300,468           273,249

  Gross profit                                    144,107           130,969
        Operating expense (B)                     121,239           104,835
        Restructuring and asset impairment
         charges                                      550              (181)
        Amortization of intangibles                   470               814
  Operating income                                 21,848            25,501
        Interest expense                            6,600             8,485
        Other expense, net                          1,337               594
  Income before provision for income
   taxes and minority interest                     13,911            16,422
  Provision for income taxes                        4,452             5,255
  Minority interest                                   695               338
  Net income                                       $8,764           $10,829
  Basic earnings per share                          $0.25             $0.31
  Diluted earnings per share                        $0.24             $0.31
  Dividends per share                               $0.17             $0.17
  Basic weighted average share outstanding         35,336            35,045
  Diluted weighted average shares outstanding      35,989            35,344

  (A) For the quarter ended September 30, 2003, these amounts include
      charges of $0.1 million for integration activities related to the
      Widia acquisition and $2.8 million related to restructuring programs.

  (B) For the quarters ended September 30, 2003 and 2002, these amounts
      include charges of $1.4 million and $0.7 million, respectively, for
      integration activities related to the Widia acquisition.


                     FINANCIAL HIGHLIGHTS (Continued)

In addition to reported results under U.S. GAAP for the fiscal periods, the following financial highlight tables also include, where appropriate, a reconciliation of results excluding special items, free operating cash flow and debt to capital (which are non-GAAP measures), to the most directly comparable GAAP measures. Management believes that each of these non-GAAP financial measures is useful to investors to more easily compare the Company's financial performance period to period.

  RECONCILIATION TO GAAP - QUARTER ENDED SEPTEMBER 30 (Unaudited)

                                                                     Diluted
                                                                    Earnings
                                 Gross   Operating Operating   Net     Per
                                 Profit   Expense   Income   Income   Share

  2003 Reported Results         $144,107  $121,239  $21,848   $8,764  $0.24
    MSSG Restructuring             2,843       -      3,393    2,307   0.07
    Widia Integration Costs -
     MSSG                             63    (1,448)   1,511    1,027   0.03
    Widia Integration Costs -
     AMSG                             48       -         48       33    -
  2003 Results Excluding
   Special Items                $147,061  $119,791  $26,800  $12,131  $0.34


  2002 Reported Results         $130,969  $104,835  $25,501  $10,829  $0.31
    AMSG Restructuring               -         -       (181)    (123)   -
    Widia Integration Costs -
     MSSG                            -        (711)     711      483   0.01
  2002 Results Excluding
   Special Items                $130,969  $104,124  $26,031  $11,189  $0.32


                     FINANCIAL HIGHLIGHTS (Continued)

  SEGMENT DATA (Unaudited):
                                                       Quarter Ended
                                                        September 30,
                                                   2003             2002*
  Sales:
  Metalworking Solutions and Services Group     $271,129          $240,422
  Advanced Materials Solutions Group              93,631            83,409
  J&L Industrial Supply                           48,139            48,606
  Full Service Supply                             31,676            31,781
  Total Sales                                   $444,575          $404,218

  Sales By Geographic Region:
  Within the United States                      $232,614          $239,124
  International                                  211,961           165,094
  Total Sales                                   $444,575          $404,218

  Operating Income (Loss), as reported:
  Metalworking Solutions and Services Group      $23,502           $23,473
  Advanced Materials Solutions Group              11,822            11,385
  J&L Industrial Supply                            2,685             2,301
  Full Service Supply                               (281)              (19)
  Corporate and Eliminations                     (15,880)          (11,639)
  Total Operating Income                         $21,848           $25,501

  Operating Income (Loss), excluding
   special charges:
  Metalworking Solutions and Services
   Group                                         $28,406           $24,184
  Advanced Materials Solutions Group              11,870            11,204
  J&L Industrial Supply                            2,685             2,301
  Full Service Supply                               (281)              (19)
  Corporate and Eliminations                     (15,880)          (11,639)
  Total Operating Income                         $26,800           $26,031

  *Prior year segment data has been restated for organizational changes


                     FINANCIAL HIGHLIGHTS (Continued)

  OPERATING INCOME (LOSS) RECONCILIATION (Unaudited):

  QUARTER ENDED SEPTEMBER 30,

                                                           Corp &
                          MSSG     AMSG     J&L     FSS    Elim.     Total
  2003 Reported
   Operating Income
   (Loss)                $23,502  $11,822  $2,685  $(281) $(15,880) $21,848
     Restructuring         3,393      -       -      -         -      3,393
     Widia Integration
      Costs                1,511       48     -      -         -      1,559
  2003 Operating Income
   (Loss) Excluding
   Special Charges       $28,406  $11,870  $2,685  $(281) $(15,880) $26,800


  2002 Reported
   Operating Income
   (Loss)                $23,473  $11,385  $2,301   $(19) $(11,639) $25,501
     Restructuring           -       (181)    -      -         -       (181)
     Widia Integration
      Costs                  711      -       -      -         -        711
  2002 Operating Income
   (Loss) Excluding
   Special Charges       $24,184  $11,204  $2,301   $(19) $(11,639) $26,031


                     FINANCIAL HIGHLIGHTS (Continued)

  RECONCILIATION TO OPERATING CASH FLOW INFORMATION (Unaudited)

                                                       Quarter Ended
                                                        September 30,
                                                   2003              2002

  Net income                                      $8,764           $10,829
  Other non-cash items                             6,473             2,005
  Depreciation and amortization                   15,351            19,066
  Change in inventory                              3,728            10,121
  Change in accounts receivable                    5,054             5,938
  Change in accounts payable                     (12,512)          (14,099)
  Change in other assets and
   liabilities                                   (14,673)            4,454
  Net cash flow provided by operating
   activities                                     12,185            38,314

  Purchase of property, plant and equipment      (10,594)          (10,475)
  Proceeds from disposals of property,
   plant and equipment                               534               605
  Free operating cash flow                        $2,125           $28,444


  CONDENSED BALANCE SHEETS (Unaudited)

                                                    Quarter Ended
                                           09/30/03    06/30/03    03/31/03
  ASSETS
  Cash and equivalents                      $14,720     $15,093     $17,250
  Accounts receivable, net of allowance     232,146     235,648     235,908
  Inventories                               387,877     392,255     408,996
  Deferred income taxes                     114,619      79,564      81,651
  Other current assets                       47,003      42,119      44,286
      Total current assets                  796,365     764,679     788,091
  Property, plant and equipment, net        489,242     493,373     476,208
  Goodwill and Intangible assets, net       483,165     473,932     491,987
  Other assets                               39,736      47,108     107,159
      Total                              $1,808,508  $1,779,092  $1,863,445

  LIABILITIES
  Short-term debt, including notes
   payable                                  $11,375     $10,845     $15,068
  Accounts payable                          107,653     119,853     120,981
  Accrued liabilities                       195,761     205,649     208,816
      Total current liabilities             314,789     336,347     344,865
  Long-term debt                            508,763     514,842     565,067
  Deferred income taxes                      42,047       8,748      38,382
  Other liabilities                         180,258     178,698     140,550
      Total liabilities                   1,045,857   1,038,635   1,088,864

  MINORITY INTEREST                          16,089      18,880      18,070

  SHAREOWNERS' EQUITY                       746,562     721,577     756,511

      Total                              $1,808,508  $1,779,092  $1,863,445


                                                       Quarter Ended
                                                 12/31/02          09/30/02
  ASSETS
  Cash and equivalents                           $18,155           $14,300
  Accounts receivable, net of allowance          199,261           221,313
  Inventories                                    403,530           403,590
  Deferred income taxes                           80,204            71,084
  Other current assets                            53,868            40,110
      Total current assets                       755,018           750,397
  Property, plant and equipment, net             480,066           480,696
  Goodwill and Intangible assets, net            478,060           467,140
  Other assets                                   104,937           109,225
      Total                                   $1,818,081        $1,807,458

  LIABILITIES
  Short-term debt, including notes
   payable                                       $17,591           $16,992
  Accounts payable                                92,114           101,823
  Accrued liabilities                            171,726           171,045
      Total current liabilities                  281,431           289,860
  Long-term debt                                 599,425           599,615
  Deferred income taxes                           46,801            53,475
  Other liabilities                              135,101           125,816
      Total liabilities                        1,062,758         1,068,766

  MINORITY INTEREST                               17,594            17,685

  SHAREOWNERS' EQUITY                            737,729           721,007

      Total                                   $1,818,081        $1,807,458


                DEBT TO EQUITY RECONCILIATION (Unaudited)

                                                                    Quarter
                             Forecasted      Quarter Ended           Ended
                              June 30,        September 30,         June 30,
                                2004        2003         2002         2003

  Total Debt                 $431,920     $520,138     $616,607     $525,687
  Total Shareowners' Equity   799,500      746,562      721,007      721,577

  Debt to Equity, GAAP          35.1%        41.1%        46.1%        42.1%

  Total Debt                 $431,900     $520,138     $616,607     $525,687
  Minority Interest            18,800       16,089       17,685       18,880
  Total Shareowners' Equity   799,500      746,562      721,007      721,577

  Total Capital            $1,250,200   $1,282,789   $1,355,299   $1,266,144

  Debt to Capital               34.5%        40.5%        45.5%        41.5%


  RECONCILIATION OF FORECASTED GAAP CASH FLOW INFORMATION (Unaudited)


                                                 Twelve Months Ended
                                                    June 30, 2004
  Forecasted net cash flow provided by
   operating activities                          $165,000 - 185,000

  Forecasted purchases and disposals of
   property, plant and equipment                 (60,000) - (70,000)

  Forecasted free operating cash flow            $100,000 - 125,000

SOURCE: Kennametal Inc.