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Kennametal Announces Fiscal 2022 First Quarter Results
"The continued execution of our Commercial and Operational Excellence initiatives in an improving market environment resulted in strong performance this quarter, with sales and free operating cash flow outpacing normal quarterly sequential patterns. The results show substantial year-over-year margin improvement, driven by strong operating leverage and timely, strategic pricing actions," said
"Looking ahead, despite existing market and supply chain uncertainties, we remain confident in our ability to drive strong operating leverage for the full year," Rossi added.
Fiscal 2022 First Quarter Key Developments
Sales of
Operating income was
The reported effective tax rate (ETR) for the quarter was 27.0 percent and the adjusted ETR was 26.9 percent, both provisions on income, compared to reported ETR of 12.1 percent (benefit on a loss) and adjusted ETR of 33.4 percent (provision on income) in the prior year quarter. The year-over-year change in both the reported ETR and the adjusted ETR is due primarily to higher pretax income in the current year.
Reported EPS in the current quarter includes restructuring and related charges of
Year-to-date net cash flow provided by operating activities was
During the quarter, the Company repurchased
Outlook
The Company's expectations for the second quarter of fiscal 2022 and the full year are as follows:
Quarterly Outlook:
- Sales expected to be up 9 - 14 percent compared to the prior year quarter
- Cost headwinds of approximately
$10 million from prior year temporary cost controls - Costs increasing approximately
$10 million from the first quarter due to price/raw materials, merit increases and higher depreciation expense
Annual Outlook:
- Strong operating leverage for the full year
- First half headwinds from prior year temporary cost controls of approximately
$25 million - Free operating cash flow at approximately 100 percent of adjusted net income
- Capital spending expected to be
$110 -$130 million - Primary working capital trending toward 30 percent of sales by year-end
- Adjusted ETR expected to be 25 - 28 percent
The Company will provide more details regarding its fiscal 2022 assumptions on its conference call.
Segment Results
Metal Cutting sales of
Infrastructure sales of
Dividend Declared
The Company will host a conference call to discuss its first quarter fiscal 2022 results on
This earnings release contains non-GAAP financial measures. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the tables that follow.
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
About
With over 80 years as an industrial technology leader,
FINANCIAL HIGHLIGHTS |
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
|||||||
Three Months Ended |
|||||||
(in thousands, except per share amounts) |
2021 |
2020 |
|||||
Sales |
$ |
483,509 |
$ |
400,305 |
|||
Cost of goods sold |
322,759 |
295,232 |
|||||
Gross profit |
160,750 |
105,073 |
|||||
Operating expense |
102,694 |
93,340 |
|||||
Restructuring and asset impairment charges |
190 |
25,577 |
|||||
Amortization of intangibles |
3,260 |
3,334 |
|||||
Operating income (loss) |
54,606 |
(17,178) |
|||||
Interest expense |
6,321 |
10,578 |
|||||
Other income, net |
(3,459) |
(4,019) |
|||||
Income (loss) before income taxes |
51,744 |
(23,737) |
|||||
Provision for (benefit from) income taxes |
13,992 |
(2,877) |
|||||
Net income (loss) |
37,752 |
(20,860) |
|||||
Less: Net income attributable to noncontrolling interests |
1,554 |
815 |
|||||
Net income (loss) attributable to |
$ |
36,198 |
$ |
(21,675) |
|||
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS |
|||||||
Basic earnings (loss) per share |
$ |
0.43 |
$ |
(0.26) |
|||
Diluted earnings (loss) per share |
$ |
0.43 |
$ |
(0.26) |
|||
Basic weighted average shares outstanding |
83,880 |
83,318 |
|||||
Diluted weighted average shares outstanding |
84,751 |
83,318 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||
(in thousands) |
|
|
|||||
ASSETS |
|||||||
Cash and cash equivalents |
$ |
107,316 |
$ |
154,047 |
|||
Accounts receivable, net |
279,726 |
302,945 |
|||||
Inventories |
505,000 |
476,345 |
|||||
Other current assets |
74,906 |
71,470 |
|||||
Total current assets |
966,948 |
1,004,807 |
|||||
Property, plant and equipment, net |
1,036,430 |
1,055,135 |
|||||
|
391,372 |
397,656 |
|||||
Other assets |
212,818 |
208,163 |
|||||
Total assets |
$ |
2,607,568 |
$ |
2,665,761 |
|||
LIABILITIES |
|||||||
Revolving and other lines of credit and notes payable |
$ |
368 |
$ |
8,365 |
|||
Accounts payable |
177,077 |
177,659 |
|||||
Other current liabilities |
211,778 |
251,370 |
|||||
Total current liabilities |
389,223 |
437,394 |
|||||
Long-term debt |
592,510 |
592,108 |
|||||
Other liabilities |
261,188 |
268,054 |
|||||
Total liabilities |
1,242,921 |
1,297,556 |
|||||
KENNAMETAL SHAREHOLDERS' EQUITY |
1,324,951 |
1,329,608 |
|||||
NONCONTROLLING INTERESTS |
39,696 |
38,597 |
|||||
Total liabilities and equity |
$ |
2,607,568 |
$ |
2,665,761 |
|||
SEGMENT DATA (UNAUDITED) |
Three Months Ended |
||||||
(in thousands) |
2021 |
2020 |
|||||
Outside Sales: |
|||||||
Metal Cutting |
$ |
298,430 |
$ |
247,876 |
|||
Infrastructure |
185,079 |
152,429 |
|||||
Total sales |
$ |
483,509 |
$ |
400,305 |
|||
|
|||||||
|
$ |
225,736 |
$ |
179,633 |
|||
EMEA |
148,330 |
122,764 |
|||||
|
109,443 |
97,908 |
|||||
Total sales |
$ |
483,509 |
$ |
400,305 |
|||
Operating income (loss): |
|||||||
Metal Cutting |
$ |
29,164 |
$ |
(23,626) |
|||
Infrastructure |
26,036 |
7,268 |
|||||
Corporate (1) |
(594) |
(820) |
|||||
Total operating income (loss) |
$ |
54,606 |
$ |
(17,178) |
|||
(1) Represents unallocated corporate expenses. |
NON-GAAP RECONCILIATIONS (UNAUDITED)
In addition to reported results under generally accepted accounting principles in
Management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. 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 financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures used by management may not be comparable to non-GAAP financial measures used by other companies. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the disclosures below.
Reconciliations to the most directly comparable GAAP financial measures for the following forward-looking non-GAAP financial measures for the full fiscal year of 2022 have not been provided, including but not limited to: FOCF, adjusted net income, adjusted ETR and primary working capital. The most comparable GAAP financial measures are net cash flow from operating activities, net income attributable to
THREE MONTHS ENDED |
|||||||||||||||
(in thousands, except percents and |
Sales |
Operating |
ETR |
Net |
Diluted EPS |
||||||||||
Reported results |
$ |
483,509 |
$ |
54,606 |
27.0 |
% |
$ |
36,198 |
$ |
0.43 |
|||||
Reported operating margin |
11.3 |
% |
|||||||||||||
Restructuring and related charges |
— |
1,244 |
21.0 |
983 |
0.01 |
||||||||||
Differences in projected annual tax |
— |
— |
(21.1) |
10 |
— |
||||||||||
Adjusted results |
$ |
483,509 |
$ |
55,850 |
26.9 |
% |
$ |
37,191 |
$ |
0.44 |
|||||
Adjusted operating margin |
11.6 |
% |
|||||||||||||
(2) Attributable to |
THREE MONTHS ENDED |
||||||||||||
Metal Cutting |
Infrastructure |
|||||||||||
(in thousands, except percents) |
Sales |
Operating |
Sales |
Operating |
||||||||
Reported results |
$ |
298,430 |
$ |
29,164 |
$ |
185,079 |
$ |
26,036 |
||||
Reported operating margin |
9.8 |
% |
14.1 |
% |
||||||||
Restructuring and related charges |
— |
1,225 |
— |
19 |
||||||||
Adjusted results |
$ |
298,430 |
$ |
30,389 |
$ |
185,079 |
$ |
26,055 |
||||
Adjusted operating margin |
10.2 |
% |
14.1 |
% |
THREE MONTHS ENDED |
|||||||||||||||
(in thousands, except percents and |
Sales |
Operating |
ETR |
Net (loss) |
Diluted |
||||||||||
Reported results |
$ |
400,305 |
$ |
(17,178) |
12.1 |
% |
$ |
(21,675) |
$ |
(0.26) |
|||||
Reported operating margin |
(4.3) |
% |
|||||||||||||
Restructuring and related charges |
— |
28,623 |
12.3 |
24,951 |
0.30 |
||||||||||
Differences in projected annual tax |
— |
— |
9.0 |
(979) |
(0.01) |
||||||||||
Adjusted results |
$ |
400,305 |
$ |
11,445 |
33.4 |
% |
$ |
2,297 |
$ |
0.03 |
|||||
Adjusted operating margin |
2.9 |
% |
|||||||||||||
(2) Attributable to |
THREE MONTHS ENDED |
||||||||||||
Metal Cutting |
Infrastructure |
|||||||||||
(in thousands, except percents) |
Sales |
Operating |
Sales |
Operating |
||||||||
Reported results |
$ |
247,876 |
$ |
(23,626) |
$ |
152,429 |
$ |
7,268 |
||||
Reported operating margin |
(9.5) |
% |
4.8 |
% |
||||||||
Restructuring and related charges |
— |
26,000 |
— |
2,627 |
||||||||
Adjusted results |
$ |
247,876 |
$ |
2,374 |
$ |
152,429 |
$ |
9,895 |
||||
Adjusted operating margin |
1.0 |
% |
6.5 |
% |
Free Operating Cash Flow (FOCF)
FOCF is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities (which is the most directly comparable GAAP financial measure) less capital expenditures plus proceeds from disposals of fixed assets. Management considers FOCF to be an important indicator of the Company's cash generating capability because it better represents cash generated from operations that can be used for dividends, debt repayment, strategic initiatives (such as acquisitions) and other investing and financing activities.
FREE OPERATING CASH FLOW (UNAUDITED) |
Three Months Ended |
|||||||
(in thousands) |
2021 |
2020 |
||||||
Net cash flow provided by operating activities |
$ |
15,803 |
$ |
9,622 |
||||
Purchases of property, plant and equipment |
(17,844) |
(39,345) |
||||||
Disposals of property, plant and equipment |
393 |
334 |
||||||
Free operating cash flow |
$ |
(1,648) |
$ |
(29,389) |
Organic Sales Growth
Organic sales growth is a non-GAAP financial measure of sales growth (which is the most directly comparable GAAP measure) excluding the effects of acquisitions, divestitures, business days and foreign currency exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Management reports organic sales growth at the consolidated and segment levels.
ORGANIC SALES GROWTH (UNAUDITED) |
||||||
Three Months Ended |
Metal Cutting |
Infrastructure |
Total |
|||
Organic sales growth |
19% |
19% |
19% |
|||
Foreign currency exchange effect (3) |
2 |
3 |
2 |
|||
Business days effect (4) |
(1) |
(1) |
— |
|||
Sales growth |
20% |
21% |
21% |
(3) Foreign currency exchange effect is calculated by dividing the difference between current period sales and current period sales at prior period foreign exchange rates by prior period sales. |
(4) Business days effect is calculated by dividing the year-over-year change in weighted average working days (based on mix of sales by country) by prior period weighted average working days. |
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SOURCE
Investor Relations CONTACT: Kelly Boyer PHONE: 412-248-8287 kelly.boyer@kennametal.com; Media Relations CONTACT: Lori Lecker PHONE: 412-248-8224 lori.lecker@kennametal.com