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Kennametal Announces Fiscal First Quarter 2015 Results
Fiscal 2015 First Quarter Key Developments
- Sales were
$695 million , compared with$620 million in the same quarter last year. Sales increased by 12 percent, reflecting increases of 10 percent from the TMB acquisition, 1 percent from organic growth and 1 percent due to favorable currency exchange. - Operating income was
$61 million , compared with$59 million in the same quarter last year. Operating income increased primarily due to the TMB acquisition and organic sales growth, partially offset by unfavorable mix in Infrastructure and higher employment costs overall. Operating income also included$7 million of restructuring and related charges, primarily due to equipment relocation and facility expenses. Prior year operating income included a non-recurring inventory charge of approximately$6 million and$1 million of acquisition-related expenses. Adjusted operating margin was 9.9 percent, compared with an adjusted operating margin of 9.7 percent in the prior year. - Restructuring and related charges amounted to
$7 million pre-tax, or$0.07 per share, and pre-tax benefits from these restructuring actions reached approximately$5 million in the current quarter. In fiscal 2015, the expected restructuring pre-tax benefits have been increased to$20 million to $25 million . Total restructuring pre-tax benefits are now estimated to be in the range of$50 million to $55 million , and total pre-tax charges are projected to be in the range of$55 million to $60 million through fiscal 2016, which is consistent with the previously stated period. - The effective tax rate was 26.5 percent, compared with 24.6 percent in the prior year. The increase was primarily driven by losses in certain jurisdictions that do not provide a tax benefit, as well as the effect of certain tax provisions that expired after fiscal 2014.
- EPS were
$0.49 , consistent with the prior year quarter EPS of$0.48 . The current year quarter included restructuring and related charges of$0.07 per share. The prior year quarter included acquisition-related charges of$0.01 per share. TMB contributed$0.07 per share in the quarter. - Adjusted return on invested capital (ROIC) was 7.6 percent as of
September 30, 2014 and reflects increased debt in the near term from recent acquisitions. - The company generated
$43 million in cash flow from operating activities, compared with$44 million in the prior year period. Net capital expenditures were$30 million and$25 million for the three months endedSeptember 30, 2014 and 2013, respectively. The company realized free operating cash flow of$12 million compared with$20 million for the same period last year.
Segment Developments for the Fiscal 2015 First Quarter
- Industrial segment sales of
$378 million increased 12 percent from$338 million in the prior year quarter due to increases of 6 percent from the TMB acquisition, 5 percent from organic growth and 1 percent due to favorable currency exchange. Sales increased by 9 percent in general engineering, 7 percent in transportation and decreased slightly by 1 percent in aerospace and defense. General engineering increased due to improvements in production and overall demand for machinery and the transportation market increased due to improvement in the light vehicle market. On a regional basis excluding TMB, sales increased approximately 8 percent inAsia , 7 percent in theAmericas and 1 percent inEurope . - Industrial segment operating income was
$44 million compared with$40 million in the prior year. Excluding restructuring and related charges, adjusted operating income of$49 million benefited primarily from the TMB acquisition and organic growth in the current period, partially offset by higher employment costs. Industrial adjusted operating margin was 13.1 percent compared with reported operating margin of 11.8 percent in the prior year. - Infrastructure segment sales of
$317 million increased 13 percent from$282 million in the prior year. The increase was driven by a 16 percent increase from the TMB acquisition partially offset by a 3 percent organic sales decline. Sales increased by 2 percent in energy, offset by decreased sales of 6 percent in earthworks. Energy sales improved modestly due to increased drilling activity in oil and gas in North America. Earthworks sales declined from persistently weak underground coal mining markets globally, as well as lower road construction activity. On a regional basis excluding TMB, sales decreased 10 percent inEurope and 7 percent inAsia , partially offset by a 2 percent increase in theAmericas . - Infrastructure segment operating income was
$19 million , compared with$22 million in the same quarter of the prior year. Operating income decreased due to lower organic sales as well as an unfavorable mix and higher employment costs, partly offset by the TMB acquisition. Prior year operating income included a non-recurring inventory charge of approximately$6 million . Infrastructure adjusted operating margin was 6.7 percent compared with reported operating margin of 7.7 percent in the prior 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 now expects fiscal 2015 total sales growth in the range of 2 to 4 percent, with organic sales growth of 1 to 3 percent. Previously, the company had forecast total sales growth in the range of 5 to 7 percent, with organic sales growth of 3 to 5 percent.
As a result, the company has reduced its EPS guidance for fiscal 2015 in the range of
The company expects to generate cash flow from operations between
Dividend Declared
The company will discuss its fiscal 2015 first-quarter results 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
Celebrating more than 75 years as an industrial technology leader,
FINANCIAL HIGHLIGHTS |
||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
||||||||||||
Three Months Ended September 30, |
||||||||||||
(in thousands, except per share amounts) |
2014 |
2013 |
||||||||||
Sales |
$ |
694,941 |
$ |
619,808 |
||||||||
Cost of goods sold |
476,842 |
421,571 |
||||||||||
Gross profit |
218,099 |
198,237 |
||||||||||
Operating expense |
148,488 |
134,264 |
||||||||||
Restructuring charges |
1,563 |
— |
||||||||||
Amortization of intangibles |
7,027 |
5,143 |
||||||||||
Operating income |
61,021 |
58,830 |
||||||||||
Interest expense |
8,210 |
7,081 |
||||||||||
Other (income) expense, net |
(1,813) |
611 |
||||||||||
Income from continuing operations before income taxes |
54,624 |
51,138 |
||||||||||
Provision for income taxes |
14,497 |
12,580 |
||||||||||
Net income |
40,127 |
38,558 |
||||||||||
Less: Net income attributable to noncontrolling interests |
639 |
721 |
||||||||||
Net income attributable to Kennametal |
$ |
39,488 |
$ |
37,837 |
||||||||
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS |
||||||||||||
Basic earnings per share |
$ |
0.50 |
$ |
0.48 |
||||||||
Diluted earnings per share |
$ |
0.49 |
$ |
0.48 |
||||||||
Dividends per share |
$ |
0.18 |
$ |
0.18 |
||||||||
Basic weighted average shares outstanding |
79,114 |
78,439 |
||||||||||
Diluted weighted average shares outstanding |
79,933 |
79,470 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||
(in thousands) |
September 30, 2014 |
June 30, 2014 |
||||
ASSETS |
||||||
Cash and cash equivalents |
$ |
156,194 |
$ |
177,929 |
||
Accounts receivable, net |
488,423 |
531,515 |
||||
Inventories |
709,925 |
703,766 |
||||
Other current assets |
109,811 |
111,986 |
||||
Total current assets |
1,464,353 |
1,525,196 |
||||
Property, plant and equipment, net |
858,683 |
884,458 |
||||
Goodwill and other intangible assets, net |
1,288,564 |
1,318,752 |
||||
Other assets |
140,213 |
139,680 |
||||
Total assets |
$ |
3,751,813 |
$ |
3,868,086 |
||
LIABILITIES |
||||||
Current maturities of long-term debt and capital leases, including notes payable |
$ |
107,258 |
$ |
80,117 |
||
Accounts payable |
188,999 |
206,891 |
||||
Other current liabilities |
242,114 |
275,748 |
||||
Total current liabilities |
538,371 |
562,756 |
||||
Long-term debt and capital leases |
908,605 |
981,666 |
||||
Other liabilities |
350,583 |
362,056 |
||||
Total liabilities |
1,797,559 |
1,906,478 |
||||
KENNAMETAL SHAREOWNERS' EQUITY |
1,922,755 |
1,929,256 |
||||
NONCONTROLLING INTERESTS |
31,499 |
32,352 |
||||
Total liabilities and equity |
$ |
3,751,813 |
$ |
3,868,086 |
||
SEGMENT DATA (UNAUDITED) |
Three Months Ended September 30, |
|||||
(in thousands) |
2014 |
2013 |
||||
Outside Sales: |
||||||
Industrial |
$ |
377,858 |
$ |
338,230 |
||
Infrastructure |
317,083 |
281,578 |
||||
Total outside sales |
$ |
694,941 |
$ |
619,808 |
||
Sales By Geographic Region: |
||||||
North America |
$ |
334,570 |
$ |
269,535 |
||
Western Europe |
190,854 |
187,601 |
||||
Rest of World |
169,517 |
162,672 |
||||
Total sales by geographic region |
$ |
694,941 |
$ |
619,808 |
||
Operating Income: |
||||||
Industrial |
$ |
44,017 |
$ |
39,820 |
||
Infrastructure |
19,221 |
21,689 |
||||
Corporate (1) |
(2,217) |
(2,679) |
||||
Total operating income |
$ |
61,021 |
$ |
58,830 |
||
(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 SEPTEMBER 30, 2014 - (UNAUDITED) |
||||||||||||
(in thousands, except percents) |
Sales |
Operating Income |
Net Income (2) |
Diluted EPS |
||||||||
2015 Reported Results |
$ |
694,941 |
$ |
61,021 |
$ |
39,488 |
$ |
0.49 |
||||
2015 Reported Operating Margin |
8.8% |
|||||||||||
Restructuring and related charges |
— |
7,446 |
5,557 |
0.07 |
||||||||
2015 Adjusted Results |
$ |
694,941 |
$ |
68,467 |
$ |
45,045 |
$ |
0.56 |
||||
2015 Adjusted Operating Margin |
9.9% |
|||||||||||
(in thousands, except percents) |
Industrial Sales |
Industrial Operating Income |
Infrastructure Sales |
Infrastructure Operating Income |
||||||||
2015 Reported Results |
$ |
377,858 |
$ |
44,017 |
$ |
317,083 |
$ |
19,221 |
||||
2015 Reported Operating Margin |
11.6% |
6.1% |
||||||||||
Restructuring and related charges |
— |
5,430 |
— |
2,016 |
||||||||
2015 Adjusted Results |
$ |
377,858 |
$ |
49,447 |
$ |
317,083 |
$ |
21,237 |
||||
2015 Adjusted Operating Margin |
13.1% |
6.7% |
||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2013 - (UNAUDITED) |
||||||||||||
(in thousands, except percents) |
Sales |
Operating Income |
Net Income (2) |
Diluted EPS |
||||||||
2014 Reported Results |
$ |
619,808 |
58,830 |
$ |
37,837 |
$ |
0.48 |
|||||
2014 Reported Operating Margin |
9.5% |
|||||||||||
Acquisition charges (3) |
— |
1,098 |
775 |
0.01 |
||||||||
2014 Adjusted Results |
$ |
619,808 |
$ |
59,928 |
$ |
38,612 |
$ |
0.49 |
||||
2014 Adjusted Operating Margin |
9.7% |
|||||||||||
(2) Represents amounts attributable to Kennametal Shareowners. |
||||||||||||
(3) TMB acquisition charges. |
FREE OPERATING CASH FLOW (UNAUDITED) |
Three Months Ended |
|||||||
September 30, |
||||||||
(in thousands) |
2014 |
2013 |
||||||
Net cash flow from operating activities |
$ |
42,552 |
$ |
44,425 |
||||
Purchases of property, plant and equipment |
(30,802) |
(24,974) |
||||||
Proceeds from disposals of property, plant and equipment |
619 |
148 |
||||||
Free operating cash flow |
$ |
12,369 |
$ |
19,599 |
RETURN ON INVESTED CAPITAL (UNAUDITED) |
||||||||||||||||||||||||
September 30, 2014 (in thousands, except percents) |
||||||||||||||||||||||||
Invested Capital |
9/30/2014 |
6/30/2014 |
3/31/2014 |
12/31/2013 |
9/30/2013 |
Average |
||||||||||||||||||
Debt |
$ |
1,015,863 |
$ |
1,061,783 |
$ |
1,135,553 |
$ |
1,145,729 |
$ |
706,331 |
$ |
1,013,052 |
||||||||||||
Total equity |
1,954,254 |
1,961,608 |
1,934,558 |
1,903,304 |
1,873,194 |
1,925,384 |
||||||||||||||||||
Total |
$ |
2,970,117 |
$ |
3,023,391 |
$ |
3,070,111 |
$ |
3,049,033 |
$ |
2,579,525 |
$ |
2,938,436 |
||||||||||||
Three Months Ended |
||||||||||||||||||||||||
Interest Expense |
9/30/2014 |
6/30/2014 |
3/31/2014 |
12/31/2013 |
Total |
|||||||||||||||||||
Interest expense |
$ |
8,210 |
$ |
8,450 |
$ |
8,883 |
$ |
8,037 |
$ |
33,580 |
||||||||||||||
Income tax benefit |
9,611 |
|||||||||||||||||||||||
Total interest expense, net of tax |
$ |
23,969 |
||||||||||||||||||||||
Net Income |
9/30/2014 |
6/30/2014 |
3/31/2014 |
12/31/2013 |
Total |
|||||||||||||||||||
Net income attributable to Kennametal, as reported |
39,488 |
45,455 |
50,865 |
24,209 |
160,017 |
|||||||||||||||||||
Acquisition-related charges |
— |
1,914 |
1,703 |
1,258 |
4,875 |
|||||||||||||||||||
Restructuring and related charges |
5,557 |
13,874 |
1,747 |
1,733 |
22,911 |
|||||||||||||||||||
Tax repatriation |
— |
— |
— |
7,170 |
7,170 |
|||||||||||||||||||
Loss on divestiture |
— |
1,607 |
— |
— |
1,607 |
|||||||||||||||||||
Noncontrolling interest |
639 |
2,024 |
1,129 |
(42) |
3,750 |
|||||||||||||||||||
Net income, adjusted |
45,684 |
64,874 |
55,444 |
34,328 |
200,330 |
|||||||||||||||||||
Total interest expense, net of tax |
23,969 |
|||||||||||||||||||||||
$ |
224,299 |
|||||||||||||||||||||||
Average invested capital |
$ |
2,938,436 |
||||||||||||||||||||||
Adjusted Return on Invested Capital |
7.6% |
|||||||||||||||||||||||
Return on invested capital calculated utilizing net income, as reported is as follows: |
||||||||||||||||||||||||
Net income attributable to Kennametal, as reported |
$ |
160,017 |
||||||||||||||||||||||
Total interest expense, net of tax |
23,969 |
|||||||||||||||||||||||
$ |
183,986 |
|||||||||||||||||||||||
Average invested capital |
$ |
2,938,436 |
||||||||||||||||||||||
Return on Invested Capital |
6.3% |
SOURCE
Investor Relations CONTACT: Quynh McGuire, PHONE: 724-539-6559 or Corporate Relations - Media CONTACT: Lorrie Paul Crum, PHONE: 724-539-6792