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Kennametal Announces Fiscal 2023 First Quarter Results
- Sales of
$495 million increased 2 percent year-over-year - 9 percent organic sales growth offset by negative 7 percent foreign currency effect
- Strong pricing actions continued to cover inflationary pressures
- Earnings per diluted share (EPS) of
$0.34 - Returned approximately
$36 million to shareholders;$19 million in share repurchases and$16 million in dividends
"Our first quarter fiscal 2023 results were in line with expectations, delivering constant currency sales growth in all our end markets and regions from continued execution on our Commercial Excellence initiatives and improvement in customer demand," said
Rossi continued, "Looking ahead, despite macroeconomic uncertainties, we see demand in line with normal seasonal patterns through this fiscal year. Regardless of the exact path the economy takes, however, we remain confident in our proven ability to advance our strategic initiatives and secure market leading positions."
Sales of
Operating income was
The reported effective tax rate (ETR) for the quarter was 27.5 percent compared to 27.0 percent in the prior year quarter. The ETR was not adjusted in the current quarter whereas the adjusted ETR was 26.9 percent in the prior year quarter.
Year-to-date net cash flow from operating activities was negative
During the quarter, the Company repurchased 824 thousand shares of
The Company paid
The Company's expectations for the second quarter of fiscal 2023 and the full year are as follows:
Quarterly Outlook:
- Sales expected to be
$480 -$500 million ; includes a headwind of approximately$40 million from USD strength compared to the second quarter of fiscal 2022 and approximately 7 percent of price realization - Sequential Q1 to Q2 raw material headwind expected to be approximately
$15 million - Adjusted operating income expected to be at least
$30 million - Compared to adjusted operating income in the prior year quarter, pricing continues to cover approximately
$25 million of raw material costs and wage and general cost increases; other headwinds include approximately$7 million from USD strength and approximately$5 million from temporary supply chain disruptions
Annual Outlook:
- Sales expected to be
$2.0 -$2.08 billion , including a currency headwind of approximately$130 million - Adjusted EPS is expected to be
$1.30 -$1.70 - Pricing actions expected to offset raw material costs, wages and general inflation
- Free operating cash flow at approximately 100 percent of adjusted net income
- Primary working capital as a percent of sales maintained at 31 - 33 percent throughout the year
- Capital spending expected to be
$100 -$120 million - Adjusted ETR is expected to be 26 - 28 percent
$200 million three-year share repurchase program to continue
The Company will provide more details regarding its Outlook during its quarterly earnings conference call.
Metal Cutting sales of
Infrastructure sales of
The Company will host a conference call to discuss its first quarter fiscal 2023 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
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) |
2022 |
2021 |
|
Sales |
$ 494,792 |
$ 483,509 |
|
Cost of goods sold |
334,824 |
322,759 |
|
Gross profit |
159,968 |
160,750 |
|
Operating expense |
108,278 |
102,694 |
|
Restructuring and asset impairment charges |
— |
190 |
|
Amortization of intangibles |
3,164 |
3,260 |
|
Operating income |
48,526 |
54,606 |
|
Interest expense |
6,638 |
6,321 |
|
Other expense (income), net |
1,009 |
(3,459) |
|
Income before income taxes |
40,879 |
51,744 |
|
Provision for income taxes |
11,242 |
13,992 |
|
Net income |
29,637 |
37,752 |
|
Less: Net income attributable to noncontrolling interests |
1,441 |
1,554 |
|
Net income attributable to |
$ 28,196 |
$ 36,198 |
|
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS |
|||
Basic earnings per share |
$ 0.35 |
$ 0.43 |
|
Diluted earnings per share |
$ 0.34 |
$ 0.43 |
|
Basic weighted average shares outstanding |
81,544 |
83,880 |
|
Diluted weighted average shares outstanding |
82,165 |
84,751 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||
(in thousands) |
|
|
|
ASSETS |
|||
Cash and cash equivalents |
$ 64,568 |
$ 85,586 |
|
Accounts receivable, net |
278,716 |
295,346 |
|
Inventories |
591,470 |
570,836 |
|
Other current assets |
76,732 |
72,940 |
|
Total current assets |
1,011,486 |
1,024,708 |
|
Property, plant and equipment, net |
972,530 |
1,002,041 |
|
|
359,522 |
369,955 |
|
Other assets |
172,670 |
176,820 |
|
Total assets |
$ 2,516,208 |
$ 2,573,524 |
|
LIABILITIES |
|||
Revolving and other lines of credit and notes payable |
$ 85,239 |
$ 21,186 |
|
Accounts payable |
205,940 |
227,887 |
|
Other current liabilities |
206,309 |
236,576 |
|
Total current liabilities |
497,488 |
485,649 |
|
Long-term debt |
594,566 |
594,364 |
|
Other liabilities |
185,809 |
202,264 |
|
Total liabilities |
1,277,863 |
1,282,277 |
|
KENNAMETAL SHAREHOLDERS' EQUITY |
1,201,403 |
1,252,577 |
|
NONCONTROLLING INTERESTS |
36,942 |
38,670 |
|
Total liabilities and equity |
$ 2,516,208 |
$ 2,573,524 |
|
SEGMENT DATA (UNAUDITED) |
Three Months Ended |
||
(in thousands) |
2022 |
2021 |
|
Outside Sales: |
|||
Metal Cutting |
$ 299,936 |
$ 298,430 |
|
Infrastructure |
194,856 |
185,079 |
|
Total sales |
$ 494,792 |
$ 483,509 |
|
|
|||
|
$ 253,581 |
$ 225,736 |
|
EMEA |
131,308 |
148,330 |
|
|
109,903 |
109,443 |
|
Total sales |
$ 494,792 |
$ 483,509 |
|
Operating income: |
|||
Metal Cutting |
$ 28,605 |
$ 29,164 |
|
Infrastructure |
20,787 |
26,036 |
|
Corporate (1) |
(866) |
(594) |
|
Total operating income |
$ 48,526 |
$ 54,606 |
(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 second quarter or full fiscal year of 2023 have not been provided, including but not limited to: FOCF, adjusted operating income, adjusted net income, adjusted ETR and primary working capital. The most comparable GAAP financial measures are net cash flow from operating activities, operating income, 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 rates |
— |
— |
(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 % |
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) |
2022 |
2021 |
||
Net cash flow (used in) provided by operating activities |
$ (10,748) |
$ 15,803 |
||
Purchases of property, plant and equipment |
(29,484) |
(17,844) |
||
Disposals of property, plant and equipment |
202 |
393 |
||
Free operating cash flow |
$ (40,030) |
$ (1,648) |
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 |
9 % |
10 % |
9 % |
|||
Foreign currency exchange effect (3) |
(8) |
(5) |
(7) |
|||
Sales growth |
1 % |
5 % |
2 % |
(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. |
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SOURCE
Investor Relations Kelly Boyer 412-248-8287 kelly.boyer@kennametal.com; Media Relations, Lori Lecker, 412-248-8224, lori.lecker@kennametal.com