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Kennametal Achieves Record 2012 Results; Increases Dividend By 14%
For the fiscal fourth quarter, the company reported EPS of
"Fiscal 2012 was an excellent year for
Cardoso added, "The June quarter represented our 10th consecutive quarter of organic growth, reflecting successful execution of our strategies across the diverse markets and geographies we serve. In addition, we further increased sales and strengthened our core business as a result of the recent Stellite acquisition. Our company-specific initiatives continue to position
Fiscal 2012 Fourth Quarter Key Developments
- Sales were
$739 million , compared with$694 million in the same quarter last year. The sales increase reflected a 10 percent acquisition contribution, 1 percent organic growth and 1 percent from more business days in the 2012 quarter, partially offset by a 5 percent unfavorable effect from currency exchange. - Operating income was
$117 million compared with$115 million in the same quarter last year. Operating income included$1 million of net acquisition-related loss, while the prior year's operating income included restructuring and related charges of$7 million . Operating income increased as a result of higher sales volume, pricing and lower employment and restructuring costs, all of which offset higher raw material costs. Operating margin excluding the impact of the acquisition of Stellite was 17.6 percent, compared to an adjusted operating margin of 17.5 percent in the prior year. - Reported EPS were
$1.06 , compared with the prior year's reported EPS of$1.04 . The current year EPS included the acquisition-related dilution of$0.02 per share, while the prior year's EPS included$0.07 per share in restructuring and related charges. - Adjusted ROIC was 16.3 percent at fiscal year-end, reflecting a new record for the company's June quarter.
Segment Developments for the Fiscal 2012 Fourth Quarter
- Industrial segment sales of
$421 million declined 4 percent from$437 million in the prior year, reflecting 2 percent organic growth offset by 6 percent in unfavorable currency effects. On an organic basis, sales growth was led by aerospace and defense with growth of 14 percent and transportation growth of 6 percent, while general engineering sales were down 4 percent. On a regional basis, sales increased approximately 7 percent inEurope and 3 percent in theAmericas , while sales inAsia declined 9 percent from the prior year's strong comparison. - Industrial segment operating income was essentially flat year over year, at
$76 million . Industrial operating income in the fiscal fourth quarter of 2012 benefited from higher sales volume, pricing and lower employment and restructuring costs, offset by higher raw material costs. Operating income in the prior-year comparison included$5 million in restructuring and related charges. Industrial operating margin was 18.2 percent, compared with adjusted operating margin of 18.7 percent in the prior year. - Infrastructure segment sales of
$318 million increased 24 percent from$257 million in the prior year, driven by 26 percent growth from the Stellite acquisition, partially offset by unfavorable currency effects of 2 percent. In earthworks, sales modestly increased, reflecting somewhat lower production rates in North American underground mining and a slow start in construction activity. Sales were slightly lower in energy, due to a decline in natural gas prices, high storage levels, and reduced drilling activity resulting from these influences. On a regional basis, sales increased approximately 11 percent inAsia and 3 percent inEurope while sales in theAmericas were 5 percent lower, off strong prior-year comparisons. - Infrastructure segment operating income was
$42 million , compared with$38 million in the same quarter of the prior year. Infrastructure operating income included$1 million of net acquisition-related loss, versus$2 million in restructuring and related charges in the prior year. Operating income benefited from higher sales volume, pricing and lower employment and restructuring costs, partially offset by higher raw material costs and acquisition-related costs. Infrastructure adjusted operating margin was 17.0 percent compared with adjusted operating margin of 15.6 percent in the prior year.
Fiscal 2012 Key Developments
- Sales were
$2.7 billion , up 14 percent from$2.4 billion last year. The sales increase reflects 9 percent organic growth, a 4 percent acquisition contribution and 1 percent from more business days in 2012. - Operating income was
$416 million compared with$322 million last year. Before net acquisition-related costs in the current year of$5 million and costs associated with restructuring in fiscal 2011 of$21 million , operating income was$422 million and$343 million , respectively. Adjusted operating margin was 15.9 percent for fiscal 2012, compared with adjusted operating margin of 14.3 percent last year. Kennametal reported EPS of$3.77 in 2012, compared with$2.76 in the prior year. The current-year EPS included acquisition-related dilution of$0.09 per share, while the prior year's EPS included$0.22 per share in restructuring and related charges.- Cash flow from operating activities was
$290 million in fiscal 2012, compared with$231 million in the prior year. Net capital expenditures were$96 million and$74 million , respectively for fiscal years 2012 and 2011, and the company generated full-year free operating cash flow of$193 million in the current year, compared with$157 million last year.
Reconciliations of all non-GAAP financial measures are set forth in the tables attached, and corresponding descriptions are contained in the company's report on Form 8-K, to which this news release is attached.
Outlook
The company's outlook for fiscal year 2013 assumes that the global economy and worldwide industrial production will continue to reflect positive growth, with some moderation in industrial activity and short-term slowing related to natural gas drilling and underground coal mining in North America.
The company expects EPS to range from
Share Repurchase Program
Dividend Increase Declared
The company will discuss its fourth-quarter and full-year results for fiscal 2012 in a live webcast at
Certain statements in this release may be forward-looking in nature, or "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. Forward-looking statements are statements that do not relate strictly to historical or current facts. For example, statements about
FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
||||||||
Three Months Ended |
Twelve Months Ended |
|||||||
June 30, |
June 30, |
|||||||
(in thousands, except per share amounts) |
2012 |
2011 |
2012 |
2011 |
||||
Sales |
$ |
739,216 |
$ |
693,737 |
$ |
2,736,246 |
$ |
2,403,493 |
Cost of goods sold |
474,359 |
428,092 |
1,741,996 |
1,519,102 |
||||
Gross profit |
264,857 |
265,645 |
994,250 |
884,391 |
||||
Operating expense |
142,030 |
143,083 |
561,490 |
538,530 |
||||
Restructuring charges |
- |
4,889 |
- |
12,586 |
||||
Amortization of intangibles |
5,369 |
2,906 |
16,351 |
11,602 |
||||
Operating income |
117,458 |
114,767 |
416,409 |
321,673 |
||||
Interest expense |
8,469 |
5,466 |
27,215 |
22,760 |
||||
Other expense (income), net |
394 |
(292) |
(775) |
2,780 |
||||
Income before income taxes |
108,595 |
109,593 |
389,969 |
296,133 |
||||
Provision for income taxes |
22,043 |
22,764 |
79,136 |
63,856 |
||||
Net income |
86,552 |
86,829 |
310,833 |
232,277 |
||||
Less: Net income attributable to noncontrolling interests |
504 |
174 |
3,603 |
2,550 |
||||
Net income attributable to Kennametal |
$ |
86,048 |
$ |
86,655 |
$ |
307,230 |
$ |
229,727 |
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS |
||||||||
Basic earnings per share |
$ |
1.07 |
$ |
1.06 |
$ |
3.83 |
$ |
2.80 |
Diluted earnings per share |
$ |
1.06 |
$ |
1.04 |
$ |
3.77 |
$ |
2.76 |
Dividends per share |
$ |
0.14 |
$ |
0.12 |
$ |
0.54 |
$ |
0.48 |
Basic weighted average shares outstanding |
80,323 |
81,819 |
80,216 |
82,063 |
||||
Diluted weighted average shares outstanding |
81,554 |
83,219 |
81,439 |
83,173 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||
June 30, |
June 30, |
|||
(in thousands) |
2012 |
2011 |
||
ASSETS |
||||
Cash and cash equivalents |
$ |
116,466 |
$ |
204,565 |
Accounts receivable, net |
478,989 |
447,835 |
||
Inventories |
585,856 |
519,973 |
||
Other current assets |
101,651 |
115,212 |
||
Total current assets |
1,282,962 |
1,287,585 |
||
Property, plant and equipment, net |
742,201 |
697,062 |
||
Goodwill and other intangible assets, net |
962,838 |
663,607 |
||
Other assets |
46,187 |
106,215 |
||
Total assets |
$ |
3,034,188 |
$ |
2,754,469 |
LIABILITIES |
||||
Current maturities of long-term debt and capital leases, including notes payable |
$ |
75,137 |
$ |
310,963 |
Accounts payable |
219,475 |
222,678 |
||
Other current liabilities |
284,009 |
307,880 |
||
Total current liabilities |
578,621 |
841,521 |
||
Long-term debt and capital leases |
490,608 |
1,919 |
||
Other liabilities |
296,738 |
252,388 |
||
Total liabilities |
1,365,967 |
1,095,828 |
||
KENNAMETAL SHAREOWNERS' EQUITY |
1,643,850 |
1,638,072 |
||
NONCONTROLLING INTERESTS |
24,371 |
20,569 |
||
Total liabilities and equity |
$ |
3,034,188 |
$ |
2,754,469 |
SEGMENT DATA (UNAUDITED) |
Three Months Ended |
Twelve Months Ended |
||||||
June 30, |
June 30, |
|||||||
(in thousands) |
2012 |
2011 |
2012 |
2011 |
||||
Outside Sales: |
||||||||
Industrial |
$ |
421,173 |
$ |
437,112 |
$ |
1,667,434 |
$ |
1,528,672 |
Infrastructure |
318,043 |
256,625 |
1,068,812 |
874,821 |
||||
Total outside sales |
$ |
739,216 |
$ |
693,737 |
$ |
2,736,246 |
$ |
2,403,493 |
Sales By Geographic Region: |
||||||||
United States |
$ |
304,280 |
$ |
298,924 |
$ |
1,170,117 |
$ |
1,041,427 |
International |
434,936 |
394,813 |
1,566,129 |
1,362,066 |
||||
Total sales by geographic region |
$ |
739,216 |
$ |
693,737 |
$ |
2,736,246 |
$ |
2,403,493 |
Operating Income: |
||||||||
Industrial |
$ |
76,455 |
$ |
77,241 |
$ |
283,233 |
$ |
209,663 |
Infrastructure |
41,713 |
38,037 |
141,640 |
121,733 |
||||
Corporate (1) |
(710) |
(511) |
(8,464) |
(9,723) |
||||
Total operating income |
$ |
117,458 |
$ |
114,767 |
$ |
416,409 |
$ |
321,673 |
(1)Represents unallocated corporate expenses |
In addition to reported results under generally accepted accounting principles in
Management believes that investors 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. Investors are cautioned that non-GAAP financial measures utilized by the company may not be comparable to non-GAAP financial measures used by other companies. Reconciliations of all non-GAAP financial measures are set forth in the attached tables and descriptions of certain non-GAAP financial measures are contained in our report on Form 8-K to which this release is attached.
THREE MONTHS ENDED JUNE 30, 2012 (UNAUDITED) |
|||||||
(in thousands, except percents) |
Infrastructure Sales |
Infrastructure |
|||||
2012 Reported Results |
$ |
318,043 |
$ |
41,713 |
|||
2012 Reported Operating Margin |
13.1% |
||||||
Acquisition impact(3) |
(67,537) |
857 |
|||||
2012 Adjusted Results |
$ |
250,506 |
$ |
42,570 |
|||
2012 Adjusted Operating Margin |
17.0% |
THREE MONTHS ENDED JUNE 30, 2012 - EXCLUDING STELLITE (UNAUDITED) |
|||||||||
(in thousands, except per share amounts) |
Sales |
Operating Income |
Net Income (2) |
Diluted EPS |
|||||
2012 Reported Results |
$ |
739,216 |
$ |
117,458 |
$ |
86,048 |
$ |
1.06 |
|
2012 Reported Operating Margin |
15.9% |
||||||||
Acquisition impact(3) |
(67,537) |
857 |
2,413 |
0.02 |
|||||
2012 Adjusted Results |
$ |
671,679 |
$ |
118,315 |
$ |
88,461 |
$ |
1.08 |
|
2012 Adjusted Operating Margin |
17.6% |
THREE MONTHS ENDED JUNE 30, 2011 (UNAUDITED) |
|||||||||
(in thousands, except percents) |
Industrial Sales |
Industrial |
Infrastructure Sales |
Infrastructure |
|||||
2011 Reported Results |
$ |
437,112 |
$ |
77,241 |
$ |
256,625 |
$ |
38,037 |
|
2011 Reported Operating Margin |
17.7% |
14.8% |
|||||||
Restructuring and related charges |
- |
4,535 |
- |
2,051 |
|||||
2011 Adjusted Results |
$ |
437,112 |
$ |
81,776 |
$ |
256,625 |
$ |
40,088 |
|
2011 Adjusted Operating Margin |
18.7% |
15.6% |
THREE MONTHS ENDED JUNE 30, 2011 (UNAUDITED) |
||||||||||
(in thousands, except percents) |
Gross Profit |
Operating Expense |
Operating Income |
Net Income(2) |
Diluted EPS |
|||||
2011 Reported Results |
265,645 |
$ |
143,083 |
$ |
114,767 |
$ |
86,655 |
$ |
1.04 |
|
2011 Reported Operating Margin |
16.5% |
|||||||||
Restructuring and related charges |
1,481 |
(216) |
6,586 |
5,588 |
0.07 |
|||||
2011 Adjusted Results |
$ |
267,126 |
$ |
142,867 |
$ |
121,353 |
$ |
92,243 |
$ |
1.11 |
2011 Adjusted Operating Margin |
17.5% |
YEAR ENDED JUNE 30, 2012 - EXCLUDING STELLITE (UNAUDITED) |
|||||||||
(in thousands, except per |
Sales |
Operating Income |
Net Income (2) |
Diluted EPS |
|||||
2012 Reported Results |
$ |
2,736,246 |
$ |
416,409 |
$ |
307,230 |
$ |
3.77 |
|
2012 Reported Operating Margin |
15.2% |
||||||||
Acquisition impact(3) |
(90,096) |
5,463 |
7,061 |
0.09 |
|||||
2012 Adjusted Results |
$ |
2,646,150 |
$ |
421,872 |
$ |
314,291 |
$ |
3.86 |
|
2012 Adjusted Operating Margin |
15.9% |
||||||||
(3)Adjusted for impact of Stellite operations and integration charges |
YEAR ENDED JUNE 30, 2011 (UNAUDITED) |
||||||||||
(in thousands, except per share amounts) |
Gross Profit |
Operating Expense |
Operating Income |
Net Income(2) |
Diluted EPS |
|||||
2011 Reported Results |
$ |
884,391 |
$ |
538,530 |
$ |
321,673 |
$ |
229,727 |
$ |
2.76 |
2011 Reported Operating Margin |
13.4% |
|||||||||
Restructuring and related charges |
5,467 |
(3,446) |
21,499 |
18,083 |
0.22 |
|||||
2011 Adjusted Results |
$ |
889,858 |
$ |
535,084 |
$ |
343,172 |
$ |
247,810 |
$ |
2.98 |
2011 Adjusted Operating Margin |
14.3% |
|||||||||
(2)Represents amounts attributable to Kennametal shareowners |
FREE OPERATING CASH FLOW (UNAUDITED) |
Twelve Months Ended |
|||||||
June 30, |
||||||||
(in thousands) |
2012 |
2011 |
||||||
Net cash flow provided by operating activities |
$ |
289,580 |
$ |
230,797 |
||||
Purchases of property, plant and equipment |
(103,036) |
(83,442) |
||||||
Proceeds from disposals of property, plant and equipment |
6,886 |
9,755 |
||||||
Free operating cash flow |
$ |
193,430 |
$ |
157,110 |
RETURN ON INVESTED CAPITAL (UNAUDITED) |
||||||||||||
June 30, 2012 (in thousands, except percents) |
||||||||||||
Invested Capital |
6/30/2012 |
3/31/2012 |
12/31/2011 |
9/30/2011 |
6/30/2011 |
Average |
||||||
Debt |
$ |
565,745 |
$ |
640,871 |
$ |
307,938 |
$ |
312,721 |
$ |
312,882 |
$ |
428,031 |
Less acquisition debt |
(10,319) |
(7,924) |
- |
- |
- |
(3,649) |
||||||
Total equity |
1,668,221 |
1,745,699 |
1,630,174 |
1,588,745 |
1,658,641 |
1,658,296 |
||||||
Less acquisition equity |
(5,818) |
(5,308) |
- |
- |
- |
(2,225) |
||||||
Total |
$ |
2,217,829 |
$ |
2,373,338 |
$ |
1,938,112 |
$ |
1,901,466 |
$ |
1,971,523 |
$ |
2,080,454 |
Three Months Ended |
||||||||||||
Interest Expense |
6/30/2012 |
3/31/2012 |
12/31/2011 |
9/30/2011 |
Total |
|||||||
Interest expense |
$ |
8,469 |
$ |
8,003 |
$ |
5,256 |
$ |
5,487 |
$ |
27,215 |
||
Income tax benefit |
5,525 |
|||||||||||
Total interest expense, net of tax |
$ |
21,690 |
||||||||||
Total Income |
6/30/2012 |
3/31/2012 |
12/31/2011 |
9/30/2011 |
Total |
|||||||
Net income attributable to |
$ |
86,048 |
$ |
75,499 |
$ |
73,697 |
$ |
71,986 |
$ |
307,230 |
||
Acquisition impact (3) |
2,413 |
4,648 |
- |
- |
7,061 |
|||||||
Noncontrolling interest |
(100) |
538 |
774 |
1,587 |
2,799 |
|||||||
Total income, adjusted |
$ |
88,361 |
$ |
80,685 |
$ |
74,471 |
$ |
73,573 |
$ |
317,090 |
||
Total interest expense, net of tax |
21,690 |
|||||||||||
$ |
338,780 |
|||||||||||
Average invested capital |
$ |
2,080,454 |
||||||||||
Adjusted Return on Invested Capital |
16.3% |
|||||||||||
Return on invested capital calculated utilizing net income, as reported is as follows: |
||||||||||||
Net income attributable to Kennametal, as reported |
$ |
307,230 |
||||||||||
Total interest expense, net of tax |
21,690 |
|||||||||||
$ |
328,920 |
|||||||||||
Average unadjusted invested capital |
$ |
2,086,327 |
||||||||||
Return on Invested Capital |
15.8% |
|||||||||||
(3)Adjusted for impact of Stellite operations and integration charges |
SOURCE
Investor Relations: Quynh McGuire, +1-724-539-6559; Media Relations: Lorrie Paul Crum, +1-724-539-6792