Kennametal Inc. today reported fiscal 2003 first quarter earnings of $0.32 per diluted share compared with earnings of $0.43 per diluted share last year, excluding special items in each period.

                Earnings Per Share Excluding Special Items

      Company Guidance (07/24/02)              $0.28 to $0.33

      Analyst Estimate Range (10/21/02)        $0.29 to $0.31

      Earnings, Excluding Special Items             $0.32

On a reported basis, diluted earnings per share were $0.31 for the quarter, above last year's loss per share of $7.57. The prior year included a non-cash SFAS 142 impairment charge associated with the adoption of SFAS No. 142 "Goodwill and Other Intangible Assets".

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "We were pleased to deliver such solid results in what continues to be a more difficult economic environment than anticipated. Increased industrial economic activity earlier in the year stalled in both Europe and the U.S. at the beginning of the summer with the exception of automotive and heavy truck sectors in North America. Subsequently, both markets have realized only very modest sequential improvement, and remain below prior year levels. In response to the environment we have maintained tight control on expenditures, while continuing our focus on aggressive sales and marketing campaigns. For the quarter, we again delivered strong cash flow and efficiency improvements from the acceleration of the Kennametal Lean Enterprise. We were also very pleased to close on our acquisition of the Widia business, and have aggressively begun our planned integration efforts."

  First Quarter Highlights

  -- Sales of $404.2 million were 1 percent below last year's
     $406.7 million.  Excluding the positive benefit from net acquisitions
     and divestitures (4 percent), foreign currency exchange (2 percent),
     and incremental workdays (1 percent), sales were 8 percent below the
     prior year.

  -- Gross profit margin, excluding special charges in both periods, of
     32.4 percent increased 50 basis points compared with the first quarter
     of fiscal 2002.  Manufacturing efficiencies from the Kennametal Lean
     Enterprise and a benefit from foreign currency exchange offset the
     combined negative pressure of underutilized capacity due to volume
     declines, unfavorable customer and product mix and $1.1 million in
     decreased pension income.

  -- Operating expense for the quarter increased 4 percent, to
     $104.1 million, excluding special charges.  Excluding $5.2 million in
     Widia operating expense, $2.2 million unfavorable foreign currency
     exchange and $0.7 million in decreased pension income, operating
     expense was 4 percent below prior year.

  -- The current quarter included net special charges of $0.5 million, or
     $0.01 per diluted share, primarily associated with the Widia
     integration.  Prior-year results included special charges of
     $1.6 million, or $0.03 per diluted share, for the J&L business
     improvement plan and a non-cash goodwill impairment charge of
     $250.4 million, net of tax, associated with the adoption of SFAS No.
     142 "Goodwill and Other Intangible Assets".

  -- Interest expense of $8.5 million was 9 percent below the same quarter
     last year on a lower average debt level for the quarter.

  -- The effective tax rate for the September 2002 quarter, and for the
     same quarter last year, was 32.0 percent.

  -- Excluding special items, net income was $11.2 million, a 17 percent
     decrease compared with net income of $13.5 million last year.
     Reported net income was $10.8 million against net loss of
     $238.0 million in the same quarter last year.

  -- Decreased pension income reduced earnings per diluted share by $0.04
     for the quarter versus the prior year.  Pretax income for the quarter
     was reduced by $1.8 million (non-cash) compared to the same period in
     fiscal 2002 due to the effect of a decrease in the expected rate of
     return on Kennametal's pension fund assets, coupled with lower
     discount rates associated with pension and other postretirement
     benefit liabilities.  The pension plan remains overfunded.

  -- The Widia business performed at a break-even level for the quarter,
     and the additional equity used to fund the acquisition was $0.03

  -- Free operating cash flow was $28.0 million, versus $1.4 million in the
     same period last year.  Primary working capital continues to be
     tightly controlled with its ratio to sales at 27.9 percent, up
     slightly versus last year.  Primary working capital of $523.1 million
     was up 10 percent, or $48 million, from the same period last year
     including the impact of the Widia acquisition.

  -- Total debt was $616.6 million, up $205.2 million from June 2002,
     primarily due to the closing of the Widia acquisition.


Looking forward, Tambakeras said, "We have become more cautious regarding the pace and strength of the economic recovery during the second half of our fiscal year (i.e., first six months of CY2003). This view is based on the continuing uncertainty caused by the confluence of weakened economic indicators in North America and Europe, concern over consumer confidence, ambivalence in the financial markets and international geo-political tension. However, while the short-term economic outlook is tougher than we planned, Kennametal's fundamentals continue in excellent shape due to the durable systems we have put in place to sustain competitiveness, generate strong clash flow and continue strictly controlling costs."

Economic data considered includes, the September ISM reading of 49.5 percent, which fell below the 50 percent line of no growth for the first time since January of this year. The European purchasing manager's index was 48.9 percent in September versus a reading of 50.8 in August and 51.6 in July. The MAPI capital investment index, which increased from 36 percent in June to 45 percent in September, but remains below 50 percent. In addition, the Euro Zone Purchasing Managers Index slipped to 48.9 percent in September from 50.8 percent the prior month. The Euro Zone production and new orders index each also dropped below 50 percent and manufacturing employment contracted for the 16th month.

Tambakeras continued, "As we have demonstrated in the past, while we remain focused on diligently executing our strategy, we also take cost actions as necessary to maintain competitiveness and retain the resources to grow when our end-markets recover. In response to the uncertainty of the strength of the economic recovery, we are reducing our global salaried workforce by 5 percent, tempering our original robust growth assumptions for the second half of fiscal 2003, and moderating our full year earnings guidance to growth of 5 percent to 15 percent, before Widia. We continue to be pleased with the performance of the company in a tough environment, and remain focused on completing the successful integration of Widia."

The salaried workforce reduction will primarily result from the efficient realignment of certain support functions. The reduction is expected to cost between $9 million to $10 million, and is expected to generate in excess of $10 million in cash savings during the remainder of fiscal 2003. The annualized level of savings associated with the actions is anticipated to range between $18 and $20 million.

  Fiscal 2003 Full Year Outlook
  $ in millions, except EPS; Excludes special charges

                                     Pre-Widia          Including Widia

  Sales Growth                     Plus 1% to 3%        Plus 14% to 16%

  EBITDA                            $190 to $210         $210 to $230

  Diluted EPS                      $2.05 to $2.25       $1.90 to $2.10

  EPS Growth                       Plus 5% to 15%        - 3% to + 8%

  Free Operating Cash Flow          $125 to $150         $100 to $125

  EBITDA = Income before income taxes and minority interest plus interest
  expense, depreciation and amortization

Consistent with previous expectations, sales for the second quarter of fiscal 2003 are estimated to grow mid-double digit, with diluted earnings per share between $0.31 and $0.36 without Widia, or $0.24 and $0.29 including dilution from Widia.

Dividend Declared

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 per share, payable November 25, 2002, to shareowners of record as of the close of business November 8, 2002.

Board of Directors Elections

At the October 22, 2002 Kennametal Annual Meeting of Shareowners, the following nominees were elected for a term of three years in the First Class of Directors: Peter B. Bartlett, Kathleen J. Hempel and Markos I. Tambakeras who have served as directors since 1975, 2000 and 1999, respectively.

Stock and Incentive Plan

At the same meeting, shareowners also approved the Kennametal Inc. Stock and Incentive Plan of 2002.

Ratification of Auditors

Shareowners ratified the selection of PricewaterhouseCoopers as the Company's independent auditors.

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

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; 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 14,500 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


Consolidated financial highlights for Kennametal Inc. for the quarters ended September 30, 2002 and 2001 are shown in the following tables (in thousands, except per share amounts).

  Consolidated Statements of Income

                                                       Quarter Ended
                                                       September 30,
                                                  2002              2001

  Net sales                                     $404,218           $406,654

          Cost of goods sold                     273,249            276,815

  Gross profit                                   130,969            129,839

          Operating expense(1)                   104,835             99,877

          Restructuring and asset
           impairment charges /
           (credits)                                (181)             1,578

          Amortization of intangibles                814                690

  Operating income                                25,501             27,694

          Interest expense                         8,485              9,365

          Other expense (income),
           net(2)                                    594               (270)

  Income before provision for income
   taxes and minority interest                    16,422             18,599

  Provision for income taxes                       5,255              5,951

  Minority interest                                  338                204

  Income before cumulative effect of
   change in accting. principle                   10,829             12,444

  Cumulative effect of change in
   accounting principle, net of tax(3)                 -           (250,406)

  Net income/(loss)                              $10,829          $(237,962)

  Diluted earnings/(loss) per share                $0.31             $(7.57)

  Dividends per share                              $0.17              $0.17

  Diluted weighted average shares
   outstanding                                    35,344             31,435

  (1) For the quarter ended September 30, 2002, this amount includes charges
      of $0.7 million for integration activities related to the Widia
  (2) For the quarters ended September 30, 2002 and 2001, these amounts
      include charges of $0.5 million and $0.9 million, respectively, for
      fees incurred in connection with the company's accounts receivable
      securitization program.
  (3) For the quarter ended September 30, 2001, this amount represents a
      non-cash charge for the adoption of Statement of Financial Accounting
      Standards No. 142, "Goodwill and Other Intangible Assets."

                     FINANCIAL HIGHLIGHTS (Continued)

The following tables provide a comparison of the company's reported results, and the results excluding special items, for fiscal 2003 and fiscal 2002


                                     Gross  Operating  Net Income (Loss) Per
                                     Profit   Income      / (Loss)   Share
  2002 Reported Results               $130,969  $25,501    $10,829   $0.31
      AMSG Restructuring                     -     (181)      (123)    -
      Widia Integration Costs                -      711        483    0.01
           Total Core Business               -      530        360    0.01
  2002 Results Excluding Special
   Items                              $130,969  $26,031    $11,189   $0.32

  2001 Reported Results               $129,839  $27,694  $(237,962) $(7.57)
      MSSG Restructuring                     -      (10)        (7)    -
      MSSG ( Adoption of SFAS 142)           -        -    168,314    5.36
      AMSG ( Adoption of SFAS 142)           -        -     82,092    2.61
           Total Core Business               -      (10)   250,399    7.97
      J&L Restructuring                      -    1,618      1,098    0.03
      FSS Restructuring                      -      (30)       (19)    -
           Total Non-Core Business           -    1,588      1,079    0.03
  2001 Results Excluding Special
   Items                              $129,839  $29,272    $13,516   $0.43

                     FINANCIAL HIGHLIGHTS (Continued)


                                                      Quarter Ended
                                                      September 30,
                                                  2002              2001
  Metalworking Solutions and Services
   Group                                        $245,502          $222,957
  Advanced Materials Solutions Group              79,317            83,005
  J&L Industrial Supply                           48,207            59,121
  Full Service Supply                             31,192            41,571
  Total Sales                                   $404,218          $406,654

  Sales By Geographic Region:
  Within the United States                      $239,124          $265,726
  International                                  165,094           140,928
  Total Sales                                   $404,218          $406,654

  Operating Income (Loss), as reported:
  Metalworking Solutions and Services
   Group                                         $24,315           $24,671
  Advanced Materials Solutions Group              10,680            10,363
  J&L Industrial Supply                            2,164               732
  Full Service Supply                                (19)            1,172
  Corporate and Eliminations                     (11,639)           (9,244)
  Total Operating Income                         $25,501           $27,694

  Operating Income (Loss), excluding
   special charges:
  Metalworking Solutions and Services
   Group                                         $25,026           $24,661
  Advanced Materials Solutions Group              10,499            10,363
  J&L Industrial Supply                            2,164             2,350
  Full Service Supply                                (19)            1,142
  Corporate and Eliminations                     (11,639)           (9,244)
  Total Operating Income                         $26,031           $29,272

                     FINANCIAL HIGHLIGHTS (Continued)


                                                      Quarter Ended
                                                       September 30,
                                                  2002              2001

  Net income                                    $10,829          $(237,962)
  Adoption of SFAS 142                                -            250,406
  Other Non-cash items                            1,717             (1,153)
  Depreciation and amortization                  19,066             18,712
  Change in primary working capital               1,960             (5,429)
  Change in other working capital                 4,259            (15,747)
  Cash flow from operations                      37,831              8,827
  Capital expenditures                          (10,475)           (10,027)
  Proceeds from asset disposals                     605              2,605
  Free operating cash flow                      $27,961             $1,405


                                                    Quarter Ended
                                            9/30/02     6/30/02     3/31/02
  Cash and equivalents                      $14,300     $10,385     $10,705
  Accounts receivables, net of allowance    221,313     179,101     168,094
  Inventories                               403,590     345,076     351,129
  Deferred income taxes                      71,084      71,375      82,949
  Other current assets                       40,110      31,447      28,064
    Total current assets                    750,397     637,384     640,941
  Property, plant and equipment, net        480,696     435,116     438,505
  Goodwill and Intangible assets, net       467,140     367,992     370,324
  Other assets                              109,225      83,119      60,458
    Total                                $1,807,458  $1,523,611  $1,510,228

  Short-term debt                           $16,992     $23,480    $383,639
  Accounts payable                          101,823     101,586      93,810
  Accrued liabilities                       171,045     137,034     152,867
     Total current liabilities              289,860     262,100     630,316
  Long-term debt                            599,615     387,887     164,257
  Deferred income taxes                      53,475      52,570      52,564
  Other liabilities                         125,816      96,421      88,720
     Total liabilities                    1,068,766     798,978     935,857

  MINORITY INTEREST                          17,685      10,671       8,907

  SHAREOWNERS' EQUITY                       721,007     713,962     565,464

     Total                               $1,807,458  $1,523,611  $1,510,228

                                                       Quarter Ended
                                                 12/31/01          9/30/01
  Cash and equivalents                           $10,414           $10,722
  Accounts receivables, net of
   allowance                                     162,916           196,003
  Inventories                                    367,724           382,701
  Deferred income taxes                           83,987            81,445
  Other current assets                            24,728            25,036
    Total current assets                         649,769           695,907
  Property, plant and equipment, net             448,263           467,268
  Goodwill and Intangible assets, net            371,263           372,448
  Other assets                                    60,797            50,943
    Total                                     $1,530,092        $1,586,566

  Short-term debt                               $406,677          $418,448
  Accounts payable                               101,817           103,993
  Accrued liabilities                            148,428           153,827
     Total current liabilities                   656,922           676,268
  Long-term debt                                 173,514           209,613
  Deferred income taxes                           51,815            48,556
  Other liabilities                               89,880            90,716
     Total liabilities                           972,131         1,025,153

  MINORITY INTEREST                                9,271            10,187

  SHAREOWNERS' EQUITY                            548,690           551,226

     Total                                    $1,530,092        $1,586,566

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SOURCE: Kennametal Inc.

CONTACT: Investor Relations: Beth A. Riley, +1-724-539-6141, or Media
Relations: Steve Halvonik, +1-724-539-4618, both of Kennametal

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