Kennametal Inc. today reported fiscal 2005 fourth quarter EPS at a record level of $0.98 compared with prior year EPS of $0.81 and original guidance of $0.90 to $0.95. There were no special items in either quarter.

For fiscal 2005, adjusted EPS were $3.25, also a record, compared with prior year adjusted EPS of $2.15. Reported EPS for the year were $3.13 and included special items totaling $0.12 related to the FSS divestiture in the third quarter. Prior year reported EPS were $2.02 and included special items totaling $0.13.

Sales for the fourth quarter were $619 million compared with prior year sales of $542 million. Full year sales were $2.3 billion compared with $2.0 billion last year. Both the quarter and full year sales figures were record levels for the Company.

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "Each of our three business groups, Metalworking Solutions and Services, Advanced Materials Solutions, and J&L Industrial Supply performed at record levels in both sales and earnings. Market penetration, pricing and the underlying strength of our served end markets all contributed to our performance."

"Kennametal's results in FY05 are a function of the successful implementation of our transformation strategy that is rapidly expanding our advanced materials and engineered components portfolio, balancing the mix of our end market sales and further enhancing our value-based selling proposition with our customers. Despite difficult headwinds from rising raw material prices, Kennametal's team worked hard to generate EPS growth of over 50% for the year; on top of 52% growth in the previous fiscal year."

  Highlights of the Fiscal 2005 Fourth Quarter
   -- Sales of $619 million were up 14 percent versus the same quarter last
      year, including 11 percent organic sales growth, 2 percent benefit
      from foreign currency exchange and 4 percent from acquisitions offset
      by 3 percent from the FSS divestiture.
   -- Net income was $38 million versus $30 million, up 26 percent.
   -- Adjusted Return on Invested Capital improved 260 basis points to 9.6
      percent versus 7.0 percent in the prior year.
   -- Completed the divestiture of FSS, a distribution business that
      primarily addressed the North American Automotive market, for a
      selling price of $39 million, subject to customary post-closing
      adjustments.

  Highlights of Fiscal 2005
   -- Sales of $2.3 billion were up 17 percent on 13 percent organic sales
      growth, 3 percent benefit from foreign currency exchange and 2 percent
      from acquisitions offset by 1 percent from the FSS divestiture.
   -- Net income was $119 million versus $74 million last year, up 62
      percent.
   -- Acquired Extrude Hone, for approximately $134 million, net of acquired
      cash and direct acquisition costs, adding to our AMSG segment.
   -- Cash flow from operations was $202 million, free operating cash flow
      for the year was $118 million.
   -- Debt to capital decreased to 31 percent versus 33 percent at the end
      of the prior year.

  Outlook

Economic indicators project continued growth through fiscal 2006 in North America and the rest-of-the world markets, and flat to modest growth in European markets. Kennametal expects to see organic revenue growth in the 7% to 10% range, two to three times the underlying growth rates of its addressed markets.

Tambakeras said, "We were delighted with our performance in fiscal 2005, and the outlook for our end markets in 2006 remains good. The major challenge in FY 2006 revolves around raw material costs, especially tungsten; but we remain confident in our ability to continue to realize pricing. Although there is near term uncertainty from these raw material cost increases, over the long-term, the industry should be establishing new higher overall levels of pricing commensurate with the underlying economic benefits of its products."

Reported EPS are expected to be in the $3.30 to $3.80 range for FY 2006; including an approximately $0.25 negative impact from expensing options due to SFAS 123R and the effects of the reduction in the discount rates applied to our pension plans. About 65% of the 06 EPS will be realized in the second half of the fiscal year, consistent with the Company's historical seasonal pattern. First quarter EPS are forecasted to be $0.40 to $0.50, also consistent with our seasonal pattern and additionally reflects the impact of raw material cost increases which will be highest in the first quarter.

Operating margins and ROIC should again improve this year as we stay on track to reach our stated goal of 12% for each by fiscal 2007.

Kennametal anticipates net cash flow provided by operating activities of approximately $200 to $220 million for fiscal 2006. Purchases of property, plant and equipment, net of proceeds from disposals of property, plant and equipment are expected to be approximately $80 million. Adjusting net cash flow provided by operating activities for the above item, Kennametal expects to generate between $120 and $140 million of free operating cash flow for fiscal 2006.

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.

Share Repurchase Program

Kennametal announced today that its Board of Directors reaffirmed its previously authorized share repurchase program of up to 1.8 million shares of the Company's common stock. The program will be used principally to dampen the impact of share dilution from equity issued under employee benefit programs. The Company intends to repurchase shares from time to time in open market transactions or in privately negotiated transactions at the Company's discretion, in accordance with the Board of Director's authorization and subject to applicable SEC regulations, market conditions and other factors.

Dividend Declared

Kennametal also announced its Board of Directors approved an increase of $.02 in the quarterly cash dividend to $0.19 per share, payable August 24, 2005, to shareowners of record as of the close of business on August 9, 2005. This increase of nearly 12% reflects management's confidence in continued strong cash generation and is consistent with Kennametal's stated cash deployment priorities.

Fourth quarter and full year results will be discussed in a live Internet broadcast at 10:00 a.m. (Eastern) 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. 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 over $2 billion annually of Kennametal products and services-delivered by our 14,000 talented employees in over 60 countries-with almost 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)

  (in thousands, except
   per share amounts)       Quarter Ended         Twelve Months Ended
                               June 30,                 June 30,
                           2005       2004         2005          2004

  Sales                 $619,158     $541,858   $2,304,167   $1,971,441

    Cost of goods
     sold (1)            394,695      356,084    1,513,634    1,318,074

  Gross profit           224,463      185,774      790,533      653,367

    Operating
     expense (2)         156,065      134,441      574,495      512,621

    Restructuring and
     asset impairment
     charges (3)               -            -        4,707        3,670

    Amortization of
     intangibles           1,566          664        3,460        2,234

  Operating income        66,832       50,669      207,871      134,842

    Interest expense       7,897        6,405       27,277       25,884

    Other expense (income),
     net (4)                (897)         294       (3,683)      (1,716)

  Income before provision
   for income taxes
   and minority interest  59,832       43,970      184,277      110,674

  Provision for income
   taxes                  21,854       14,154       61,394       35,500

  Minority interest          238          (36)       3,592        1,596

  Net income             $37,740      $29,852     $119,291      $73,578

  Basic earnings per share $1.01        $0.83        $3.23        $2.06

  Diluted earnings per
   share                   $0.98        $0.81        $3.13        $2.02

  Dividends per share      $0.17        $0.17        $0.68        $0.68

  Basic weighted average
   shares outstanding     37,510       36,051       36,924       35,704

  Diluted weighted average
   shares outstanding     38,477       36,952       38,056       36,473

   1) For the twelve months ended June 30, 2004, these amounts include
      charges of $0.1 million for integration activities related to the
      Widia acquisition, $2.9 million related to restructuring programs,
      and $0.8 million for a pension curtailment.

   2) For the twelve months ended June 30, 2005, these amounts include a
      loss on assets held for sale of $1.5 million.  For the twelve months
      ended June 30, 2004, these amounts include charges of $1.4 million for
      integration activities related to the Widia acquisition, $1.8 million
      related to a reserve for a note receivable from a divestiture of a
      business by Kennametal in 2002, and $0.5 million related to a pension
      curtailment.

   3) For the twelve months ended June 30, 2005, these amounts include $4.7
      million related to a FSS goodwill impairment charge.  For the twelve
      months ended June 30, 2004, these amounts include $3.7 million related
      to restructuring programs.

   4) For the twelve months ended June 30, 2004, these amounts include
      income of $4.4 million related to a gain on the sale of Toshiba
      Tungaloy investment and a charge of $0.2 million on a reserve for a
      note receivable from a divestiture of a business by Kennametal in
      2002.



                      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 results excluding special items, free operating cash flow, debt to capital, and adjusted return on invested capital (which are non-GAAP 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. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

For the quarters ended June 30, 2005 and 2004, there were no special items.

    RECONCILIATION TO GAAP - TWELVE MONTHS ENDED JUNE 30 (Unaudited)

                                                      Net
                                                     Income           EPS

   2005 Reported                                   $119,291          $3.13
     FSS goodwill
      impairment charge                               3,277           0.09
     Loss on assets held
      for sale                                        1,076           0.03
   2005 Adjusted, excluding special items          $123,644          $3.25

Reported EPS of $3.13 is up 55 percent from reported EPS of $2.02 for prior year. Adjusted EPS of $3.25 is up 51 percent from adjusted EPS of $2.15 for prior year.

                                                      Net
                                                    Income           EPS

  2004 Reported                                    $73,578          $2.02
    MSSG restructuring                               3,416           0.09
    AMSG restructuring                               1,018           0.03
    Widia integration costs - MSSG                   1,027           0.03
    Widia integration costs - AMSG                      33              -
    Pension curtailment                                883           0.02
    Gain on Toshiba investment                      (2,990)         (0.08)
    Note receivable                                  1,360           0.04
  2004 Adjusted, excluding special items           $78,325         $ 2.15



                        FINANCIAL HIGHLIGHTS (Continued)

  SEGMENT DATA (Unaudited):

                            Quarter Ended        Twelve Months Ended
                               June 30,                June 30,
                          2005         2004       2005          2004

  Outside Sales:
  Metalworking Solutions
   and Services Group   $369,297     $326,377   $1,378,594   $1,198,505
  Advanced Materials
   Solutions Group       171,165      119,227      546,838      419,073
  J&L Industrial Supply   66,031       59,741      255,840      218,295
  Full Service Supply     12,665       36,513      122,895      135,568
  Total Outside Sales   $619,158     $541,858   $2,304,167   $1,971,441

  Sales By Geographic
   Region:
  Within the United
   States               $334,524     $307,319   $1,261,315   $1,098,470
  International          284,634      234,539    1,042,852      872,971
  Total Sales by
   Geographic Region    $619,158     $541,858   $2,304,167   $1,971,441

  Operating Income
   (Loss):
  Metalworking Solutions
   and Services Group    $52,260      $43,720     $187,410     $126,657
  Advanced Materials
   Solutions Group        30,319       16,793       80,932       53,168
  J&L Industrial Supply    7,592        6,137       27,094       19,547
  Full Service Supply        265          882       (4,105)         818
  Corporate and
   eliminations (1)      (23,604)     (16,863)     (83,460)     (65,348)
  Total Operating
   Income, as reported   $66,832      $50,669    $ 207,871     $134,842

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



  RECONCILIATION TO FREE OPERATING CASH FLOW INFORMATION (Unaudited):

                               Quarter Ended          Twelve Months Ended
                                  June 30,                  June 30,
                             2005         2004         2005         2004

  Net income               $37,740      $29,852     $119,291      $73,578
  Other non-cash items      22,483       (1,498)      39,048       13,959
  Depreciation and
   amortization             18,344       17,236       66,884       65,989
  Change in inventory       13,035       (3,213)      (8,446)      10,255
  Change in accounts
   receivable              (38,994)        (986)     (53,768)      (4,199)
  Change in accounts
   payable                  12,006       16,696       12,997       25,776
  Change in other
   assets and
   liabilities             (12,018)      10,305       26,321       (7,500)
  Net cash flow provided
   by operating activities  52,596       68,392      202,327      177,858

  Purchase of property,
   plant and equipment     (31,260)     (20,902)     (88,552)     (56,962)
  Proceeds from disposals
   of property, plant and
   equipment                     -        1,227        3,912        4,225
  Free operating cash flow $21,336      $48,717     $117,687     $125,121



                        FINANCIAL HIGHLIGHTS (Continued)

  CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited):

                   06/30/05     03/31/05     12/31/04   09/30/04   06/30/04
  ASSETS
  Cash and
   equivalents      $43,220      $34,792      $32,168    $28,688    $25,940
  Trade
   receivables,
   net of
   allowance        403,097      382,188      367,940    369,008    364,725
  Receivables
   securitized     (109,786)    (120,749)    (115,253)  (115,309)  (117,480)
  Accounts
   receivable,
   net              293,311      261,439      252,687    253,699    247,245
  Inventories       386,674      408,713      421,183    404,478    388,077
  Deferred
   income taxes      70,391       98,063       99,731     96,144     95,240
  Current assets
   held for sale          -       50,469            -          -          -
  Other current
   assets            37,466       32,353       39,605     37,178     40,443
    Total
     current
     assets         831,062      885,829      845,374    820,187    796,945
  Property, plant
   and equipment,
   net              519,301      512,806      506,253    487,616    484,475
  Goodwill and
   intangible
   assets, net      652,791      661,908      543,062    546,487    542,014
  Assets held
   for sale               -        2,715            -          -          -
  Other assets      141,297      135,873      133,451    115,733    115,229
    Total        $2,144,451   $2,199,131   $2,028,140 $1,970,023 $1,938,663

  LIABILITIES
  Short-term debt,
   including
   notes
   payable          $50,889      $56,225      $28,888   $116,446   $126,807
  Accounts
   payable          154,839      142,268      142,465    146,543    148,216
  Current
   liabilities
   held for sale          -       14,437            -          -          -
  Accrued
   liabilities      222,930      245,534      226,568    217,636    211,504
    Total
     current
     liabilities    428,658      458,464      397,921    480,625    486,527
  Long-term
   debt             386,485      428,943      376,268    318,989    313,400
  Deferred
   income taxes      59,551       91,088       56,340     65,973     67,426
  Other
   liabilities      279,435      179,786      174,855    162,627    167,926
    Total
     liabilities  1,154,129    1,158,281    1,005,384  1,028,214  1,035,279

  MINORITY
   INTEREST          17,460       19,664       19,249     17,377     16,232

  SHAREOWNERS'
   EQUITY           972,862    1,021,186    1,003,507    924,432    887,152

    Total        $2,144,451   $2,199,131   $2,028,140 $1,970,023 $1,938,663



                      FINANCIAL HIGHLIGHTS (Continued)

   Debt to Capital Reconciliation (Unaudited):

                                                          June 30,
                                                    2005           2004

  Total debt                                      $437,374       $440,207
  Total shareowners' equity                        972,862        887,152

  Debt to equity, GAAP                               45.0%          49.6%

  Total debt                                      $437,374       $440,207
  Minority interest                                 17,460         16,232
  Total shareowners' equity                        972,862        887,152

  Total capital                                 $1,427,696     $1,343,591

  Debt to Capital                                    30.6%          32.8%



                      FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited):

  For the Period Ended June 30, 2005

  Invested
   Capital  6/30/2005  3/31/2005  12/31/2004 9/30/2004  6/30/2004    Average

  Debt       $437,374   $485,168   $405,156   $435,435   $440,207   $440,668
  Accounts
  receivable
  securitized 109,786    120,749    115,253    115,309    117,480    115,715
  Minority
   interest    17,460     19,664     19,249     17,377     16,232     17,996
  Shareowners'
   equity     972,862  1,021,186  1,003,507    924,432    887,152    961,828
  Total    $1,537,482 $1,646,767 $1,543,165 $1,492,553 $1,461,071 $1,536,207

                                     Quarter Ended
  Interest
   Expense    6/30/2005  3/31/2005 12/31/2004  9/30/2004     Total
    Interest
     expense     $7,897     $6,803     $6,121     $6,456    $27,277
    Securitization
     interest       981        868        757        580      3,186
    Total interest
     expense     $8,878     $7,671     $6,878     $7,036    $30,463
    Income tax
     benefit                                                 10,175
    Total Interest
     Expense, net
     of tax                                                 $20,288

                                Quarter Ended
  Total
   Income   6/30/2005  3/31/2005 12/31/2004  9/30/2004     Total
    Net Income,
    as
    reported $37,740    $30,650    $28,181    $22,720    $119,291

    Restructuring
     and asset
     impairment
     charges       -      3,306          -          -       3,306
    Loss on assets
     held for sale -      1,086          -          -       1,086
    Minority
     interest
     expense     238      1,449        928        977       3,592
    Total Income,
     excluding
     special
     items   $37,978    $36,491    $29,109    $23,697    $127,275

    Total Income,
     excluding
     special items                                       $127,275
    Total Interest
     Expense,
     net of tax                                            20,288
                                                         $147,563
    Average
     invested
     capital                                           $1,536,207
  Adjusted Return on
   Invested Capital                                          9.6%

  Return on Invested Capital calculated utilizing
   Net Income, as reported is as follows:
    Net Income, as reported                              $119,291
    Total Interest Expense, net of tax                     20,288
                                                         $139,579
    Average invested capital                           $1,536,207
  Return on Invested Capital                                 9.1%



                     FINANCIAL HIGHLIGHTS (Continued)

   RETURN ON INVESTED CAPITAL (Unaudited):

   For the Period Ended June 30, 2004

  Invested
   Capital  6/30/2004  3/31/2004  12/31/2003 9/30/2003  6/30/2003    Average

  Debt       $440,207   $494,312   $481,327   $520,138   $525,687   $492,334
  Accounts
  receivable
  securitized 117,480    108,916    101,422     95,318     99,316    104,490
  Minority
  interest     16,232     16,598     16,286     16,089     18,880     16,817
  Shareowners'
  equity      887,152    809,904    791,442    746,562    721,577    791,327
  Total    $1,461,071 $1,429,730 $1,390,477 $1,378,107 $1,365,460 $1,404,968

                                  Quarter Ended
  Interest
   Expense  6/30/2004  3/31/2004  12/31/2003 9/30/2003    Total
    Interest
     expense   $6,405     $6,332     $6,547     $6,600    $25,884
    Securitization
     interest     443        356        483        397      1,679
    Total
     interest
     expense   $6,848     $6,688     $7,030     $6,997    $27,563
    Income tax
     benefit                                                8,820
    Total interest
     expense, net of tax                                  $18,743

                                   Quarter Ended
  Total
   Income   6/30/2004  3/31/2004  12/31/2003 9/30/2003    Total
    Net income, as
     reported $29,852    $24,070    $10,892     $8,764    $73,578

    Minority
     interest
     expense     (36)        533        404        695      1,596
    MSSG
     restructuring -           -      1,109      2,307      3,416
    AMSG
     restructuring -           -      1,018          -      1,018
    Widia
     integration
     costs
     - MSSG        -           -          -      1,027      1,027
    Widia
     integration
     costs
     - AMSG        -           -          -         33         33
   Pension
    curtailment    -           -        883          -        883
   Gain on
    Toshiba
    investment     -           -     (2,990)         -     (2,990)
   Note
    receivable     -           -      1,360          -      1,360
    Total Income,
     excluding
     special
     items   $29,816     $24,603    $12,676    $12,826    $79,921

    Total Income,
     excluding special
     items                                                $79,921
    Total Interest Expense,
     net of tax                                            18,743
                                                          $98,664
    Average invested capital                           $1,404,968
  Adjusted Return on Invested Capital                        7.0%

  Return on Invested Capital calculated utilizing
   Net Income, as reported is as follows:
    Net Income, as reported                               $73,578
    Total Interest Expense, net of tax                     18,743
                                                          $92,321
    Average invested capital                           $1,404,968
  Return on Invested Capital                                 6.6%

SOURCE: Kennametal Inc.