Kennametal Inc. today reported solid third-quarter earnings, despite significant weakness across North American industrial markets. Kennametal's diluted earnings per share increased by 3 percent to $0.73 per share compared to $0.71 per share last year, excluding special items in each period. On a reported basis, diluted earnings per share were $0.66 per share against $0.46 per share last year.

Kennametal President and Chief Executive Officer Markos I. Tambakeras said, "We were very pleased to deliver even modest growth in the current economic environment. We demonstrated that our unyielding focus on results delivers tangible benefits. Cost-cutting programs were accelerated as we scaled the business for reduced demand, and gross margins were maintained despite top-line pressure. More importantly, short-term responses to reduced demand did not compromise our continued investment in programs that will improve our efficiency and effectiveness in the marketplace in the future. The programs that we have previously detailed continue to be funded."

  Third-Quarter Highlights

  --   Excluding the unfavorable impact of foreign currency (2 percent) and
       fewer business days (2 percent), sales were flat compared to the
       prior year.  Actual sales were $464.7 million, a decrease of
       4 percent.  Relative strength in organic sales was sustained on
       significant growth in Europe and Asia, despite weakening in several
       key North American markets.

  --   Gross profit margin of 38.9 percent, excluding special charges, was
       essentially flat to the third quarter of fiscal 2000 despite the
       weak top-line performance.  Foreign currency reduced gross profit by
       60 basis points.  The pressure of reduced sales volume was offset by
       incremental efficiencies from lean manufacturing techniques and the
       Inventory Turns Initiative.

  --   Operating expense for the quarter, excluding special charges, was
       reduced 2 percent to $123.7 million.  Continuing cost reduction and
       productivity programs were augmented by early actions from the
       resizing program as detailed in the company's recent release.
       Funding of key growth initiatives continued in the quarter.

  --   As anticipated, the effective tax rate for the third quarter was
       39.5 percent compared to 43.3 percent last year.  The expected
       full-year tax rate remains 39.5 percent.

  --   Interest expense declined 9 percent during the quarter compared to
       last year due primarily to lower average borrowings.

  --   Excluding special items, net income was $22.3 million, an increase
       of 3 percent compared to $21.6 million last year.

  --   Special charges of $3.2 million, or $0.07 per share, were included
       in the quarter's results related to the J&L and FSS business
       improvement plans and the core business resize program.  Prior-year
       results included special charges of $13.3 million, or $0.25 per
       share related to operational improvement programs in the core

  --   Cash flow and balance sheet management continued to generate
       incremental benefits ahead of expectations.  Free operating cash
       flow of $34.5 million benefited from a 210-basis-point reduction in
       primary working capital versus prior year.  This reduction yielded
       primary working capital as a percent of sales of 27.9 percent.
       Total debt was $654.9 million, down from $699.2 million at the
       beginning of the year despite the unforecasted investment in a share
       repurchase program ($16.5 million), and the acquisition of JLK
       ($41.7 million).

  --   Sales of $1,355.9 million for the first nine months of the year were
       up 3 percent compared to last year, excluding unfavorable foreign
       currency translation effects and the impact of fewer business days,
       which affected the year by 3 and 2 percent, respectively.  Net
       income for the first nine months was $48.1 million or $1.57 per
       share compared to $43.9 million or $1.45 per share for the same
       period last year, excluding special items in each period.  Including
       special items, reported net income for the first nine months was
       $43.3 million or $1.41 per share compared to $32.3 million or
       $1.06 per share for the first nine months of last year.


As previously announced, the company expects sales for the full year to be slightly down (2-3 percent), with modest earnings growth (1-3 percent) due to pervasive weakening in the North American industrial economy. Diluted earnings per share, excluding special charges, are anticipated to be $2.15-$2.20 for the full year versus $2.13 in fiscal 2000.

Tambakeras concluded, "I continue to be impressed by the organization's ability to rapidly adapt to shifting market conditions, as demonstrated by our third-quarter performance. In response to a reduced and uncertain market outlook for the remainder of our fiscal year, we remain focused on mitigating short-term earnings impacts while still executing our long-term strategies."

Dividend Announcement

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable May 25, 2001, to holders of record as of May 10, 2001.

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 13,000 employees worldwide, the company's annual sales are approximately $1.8 billion, with a third coming from sales outside the United States. Kennametal has been named one of the Best Places to Work in Pennsylvania 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.

This release contains "forward-looking statements" as defined by Section 21E of the Securities Exchange Act of 1934 as amended. 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, 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.


Consolidated financial highlights for Kennametal Inc. for the quarter and nine months ended March 31, 2001 and 2000 are shown in the following tables (in thousands, except per share amounts). All fiscal year 2001 data is subject to year-end (June 30) adjustment and audit by independent public accountants.

  Consolidated Statements of Income

                                   Quarter Ended       Nine Months Ended
                                     March 31,             March 31,
                                   2001      2000       2001        2000

  Net sales                      $464,650  $483,019  $1,355,876  $1,379,890

          Cost of goods sold      284,416   294,567     840,051     859,242

  Gross profit                    180,234   188,452     515,825     520,648

          Operating expense(A)    123,807   125,830     374,054     375,019

          Restructuring and
           asset impairment
           charge                   2,286    13,323       4,633      17,304

          Amortization of
           intangibles              6,063     6,517      18,533      20,117

  Operating income                 48,078    42,782     118,605     108,208

          Interest expense(B)      12,496    13,668      39,091      41,948

          Other expense, net©       579     1,269       3,236       1,521

  Income before provision for
   income taxes and
          minority interest        35,003    27,845      76,278      64,739

  Provision for income taxes       13,824    12,067      30,128      28,485

  Minority interest                   785     1,681       2,291       3,733

  Income before extraordinary
   loss and cumulative
   effect of change in
   accounting principle            20,394    14,097      43,859      32,521

  Extraordinary loss on early
   extinguishments of debt,
   net of tax                         --        --          --         (267)

  Cumulative effect of change in
   accounting principle,
   net of tax                         --        --         (599)        --

  Net income                      $20,394   $14,097     $43,260     $32,254

  Per Share Data:
  Diluted earnings per share        $0.66     $0.46       $1.41       $1.06

  Dividends per share               $0.17     $0.17       $0.51       $0.51

  Diluted weighted average
   shares outstanding              30,692    30,418      30,656      30,307

  (A)  For the quarter and nine months ended March 31, 2001, these amounts
       include charges of $0.1 million and $2.1 million, respectively,
       primarily related to the tender offer to acquire the outstanding
       shares of JLK.  For the nine months ended March 31, 2000, this amount
       includes a charge of $3.0 million for environmental remediation.

  (B)  Includes $0.3 million charges related to the  recognition of a
       portion of deferred financing fees as a result of the reduction in
       the availability under the company's U.S. credit facility.

  ©  For the quarters ended March 31, 2001 and 2000, these amounts include
       charges of $1.5 million and $1.3 million, respectively, for fees
       incurred in connection with the company's accounts receivable
       securitization program.  For the nine months ended March 31, 2001 and
       2000, these amounts include similar charges of $4.7 million and $3.7
       million, respectively.  For the nine months ended March 31, 2000,
       this amount includes one-time gains of $1.4 million from the sales of
       underutilized assets.

                             Supplemental Data Sheet


                                   Quarter Ended       Nine Months Ended
                                     March 31,             March 31,
                                   2001    2000(A)      2001      2000(A)
  Metalworking Services and
   Solutions Group               $257,747  $265,878    $748,628    $761,492
  Advanced Materials Solutions
   Group                           91,095    85,814     261,487     253,550
  J&L Industrial Supply            77,646    96,215     242,457     270,958
  Full Service Supply              38,162    35,112     103,304      93,890
  Total                          $464,650  $483,019  $1,355,876  $1,379,890

  Sales By Geographic Region:
  Within the United States       $299,545  $321,945    $895,015    $914,727
  International                   165,105   161,074     460,861     465,163
  Total                          $464,650  $483,019  $1,355,876  $1,379,890

  Operating Income (Loss),
   including special charges:
  Metalworking Services and
   Solutions Group                $37,369   $34,658     $96,305     $89,964
  Advanced Materials Solutions
   Group                           12,184     8,001      32,106      26,565
  J&L Industrial Supply             2,663     7,060       4,488      16,479
  Full Service Supply               2,017     3,303       5,096       7,952
  Corporate and Eliminations       (6,155)  (10,240)    (19,390)    (32,752)
  Total                           $48,078   $42,782    $118,605    $108,208

  Operating Income (Loss),
   excluding special charges:
  Metalworking Services and
   Solutions Group                $38,380   $42,373     $97,320    $101,198
  Advanced Materials Solutions
   Group                           11,920    12,376      31,868      31,311
  J&L Industrial Supply             4,576     7,060      10,580      16,479
  Full Service Supply               2,187     3,303       5,416       7,952
  Corporate and Eliminations       (6,155)   (9,007)    (19,409)    (28,328)
  Total                           $50,908   $56,105    $125,775    $128,612

  Diluted EPS excluding special
   charges and
     amortization expense           $0.92     $0.92       $2.17       $2.11

  Diluted EPS excluding special
   charges                          $0.73     $0.71       $1.57       $1.45

  Free Operating Cash Flow:
  Net Income                      $20,394   $14,097     $43,260     $32,254
  Non-cash Items                    4,774     7,062       6,766      13,543
  Depreciation & Amortization      24,375    25,165      73,440      76,450
  Change in Working Capital         2,118    22,376      32,277      70,093
  Capital Expenditures            (17,141)  (12,447)    (40,121)    (34,123)
  Free Operating Cash Flow        $34,520   $56,253    $115,622    $158,217

                        Supplemental Data Sheet (Continued)

                                                 Quarter Ended
                                     3/31/01   12/31/00  9/30/00   6/30/00

  Accounts Receivable                $214,332  $203,344  $218,863  $231,917
  Inventory                           387,520   389,460   392,741   410,885
  Accounts Payable                   (108,371) (102,217) (111,873) (118,908)
  Total Primary Working Capital
   (PWC)                             $493,481  $490,587  $499,731  $523,894
  PWC % Sales(B)                        27.9%     28.0%     28.5%     29.4%
  Debt                               $654,930  $687,487  $672,593  $699,242
  Debt/Total Capital                    45.1%     46.7%     44.7%     45.6%

  (A) Kennametal reports global business units consisting of Metalworking
      Services and Solutions Group, Advanced Materials Solutions Group, Full
      Service Supply and J&L Industrial Supply, and corporate functional
      shared services.  Certain amounts in prior year sales and operating
      income (loss) have been restated to conform to this reporting

  (B) Calculated by averaging the current and the previous four quarter-end
      balances for PWC, divided by sales for the most recent 12-month


SOURCE: Kennametal Inc.

Contact: Beth A. Riley, Director, Investor Relations of Kennametal,

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