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Kennametal Announces Fiscal First Quarter 2016 Results And Sale Of Non-Core Businesses
"We remain focused on what we can control and continue to execute our strategy to concentrate on our core businesses and deliver benefits from realigning our cost structure, adjusting our footprint and simplifying our portfolio," said Don Nolan Kennametal President and CEO. "We are on track to achieve our restructuring goals and made a significant step in our portfolio alignment announcing that we have entered into an agreement to sell several non-core businesses representing approximately
Fiscal 2016 First Quarter Key Developments
- Sales were
$555 million , compared with$695 million in the same quarter last year. Sales decreased by 20 percent, reflecting a 13 percent organic decline due to weakening in our served end markets and a 7 percent unfavorable currency exchange impact. - On a combined basis, pre-tax restructuring and related charges were
$15 million , or$0.14 per share, and pre-tax benefits were approximately$21 million , or$0.20 per share in the quarter. In the same quarter last year, pre-tax restructuring and related charges were$7 million , or$0.07 per share, and pre-tax benefits were approximately$5 million , or$0.04 per share. - Operating income was
$7 million , compared with operating income of$61 million in the same quarter last year. Adjusted operating income was$22 million , compared with$68 million a year ago. The decrease in adjusted operating results in the current period was primarily driven by organic sales decline, lower fixed cost absorption, unfavorable mix, and unfavorable currency exchange, offset partially by restructuring benefits and lower raw material costs. Adjusted operating margin was 3.9 percent in the current period and 9.9 percent in the prior period. - The reported effective tax rate (ETR) was negative 292.8 percent (provision on a loss) and the adjusted ETR was 26.2 percent (provision on income). The difference between the reported and adjusted ETR was primarily due to a discrete tax charge taken in the quarter related to the divestiture of non-core assets. For the first quarter of fiscal 2015, the reported ETR was 26.5 percent (provision on income) and the adjusted ETR was 26.4 percent (provision on income).
- LPS was
$0.08 , compared with the prior year quarter EPS of$0.49 . Adjusted EPS were$0.14 in the current quarter and$0.56 in the prior year quarter.
(Loss) Earnings Per Diluted Share and Effective Tax Rate Reconciliation |
|||||||
First Quarter |
FY2016 |
FY2015 |
|||||
Diluted (LPS) |
Effective Tax |
Diluted EPS |
Effective Tax |
||||
Reported Results |
$ |
(0.08) |
(292.8)% |
$ |
0.49 |
26.5% |
|
Restructuring and related charges |
0.14 |
42.8 |
0.07 |
(0.1) |
|||
Divestiture-related charges |
0.08 |
276.2 |
— |
— |
|||
Adjusted Results |
$ |
0.14 |
26.2% |
$ |
0.56 |
26.4% |
- The company realized free operating cash flow of
$3 million compared with $21 million in the same period last year. The decrease in free operating cash flow was primarily attributable to lower cash earnings, net of tax, higher cash payments for other liabilities and higher capital expenditures, partially offset by improved working capital management.
Segment Developments for the Fiscal 2016 First Quarter
- Industrial segment sales of
$313 million decreased 17 percent from$378 million in the prior year quarter due to unfavorable currency exchange of 9 percent and organic decline of 8 percent. Excluding the impact of currency exchange, sales decreased approximately 32 percent in energy, approximately 9 percent in general engineering, approximately 5 percent in transportation and approximately 2 percent in aerospace and defense. Energy end market activity continued to be weak, impacting the general engineering end market where the company believes there was destocking in the indirect channel, particularly in theAmericas . Lower sales activity in the transportation end market was driven by lower light vehicle production levels inChina . On a segment regional basis, sales decreased 15 percent in theAmericas , 6 percent inAsia and 1 percent inEurope . - Industrial segment operating income was
$20 million compared with$44 million in the prior year. Adjusted operating income was$26 million compared to$49 million in the prior year quarter, driven by organic sales decline, lower fixed cost absorption and unfavorable business mix, partially offset by restructuring program benefits and lower raw material costs. Industrial adjusted operating margin was 8.4 percent compared with 13.1 percent in the prior year. - Infrastructure segment sales of
$242 million decreased 24 percent from$317 million in the prior year. The decrease was driven by 19 percent organic sales decline and 5 percent unfavorable currency exchange. Excluding the impact of currency exchange, sales decreased by approximately 31 percent in energy, approximately 24 percent in general engineering and approximately 8 percent in earthworks. Sales were lower year-over-year due to persistent weak demand in oil and gas, underground mining and general engineering. On a segment regional basis, sales decreased 27 percent in theAmericas , 11 percent inAsia and 1 percent inEurope . - Infrastructure segment operating loss was
$9 million , compared with operating income of$19 million in the same quarter of the prior year. Adjusted operating loss was$3 million compared to adjusted operating income of$21 million in the prior year quarter. The change in adjusted operating results was primarily due to lower organic sales, lower fixed cost absorption and unfavorable business mix, partially offset by the benefits of the restructuring savings and lower raw material costs.
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.
Restructuring Programs
The previously announced restructuring programs are expected to produce combined annual ongoing pre-tax permanent savings of
RESTRUCTURING AND RELATED CHARGES AND SAVINGS (PRE-TAX) |
|||||||
Estimated |
Current |
Charges |
Estimated |
Approximate |
Approximate |
Expected |
|
Phase 1 |
$55M-$60M |
$5M |
$57M |
$50M-$55M |
$12M |
$42M |
6/30/2016 |
Phase 2 |
$90M-$100M |
$8M |
$32M |
$40M-$50M |
$9M |
$16M |
12/31/2018 |
Phase 3 |
$40M-$45M |
$2M |
$3M |
$25M-$30M |
— |
— |
3/31/2017 |
Total |
$185M-$205M |
$15M |
$92M |
$115M-$135M |
$21M |
$58M |
Outlook
The depth and duration of the downturn in the company's served end markets coupled with recent macroeconomic concerns has weakened the company's fiscal 2016 outlook. The company now expects fiscal 2016 total sales to decline in the range of 10 to 14 percent and organic sales to decline in the range of 6 to 10 percent. Previously, the decline in total sales was projected to be in the range of 7 to 9 percent, with a decline in organic sales of 1 to 3 percent.
The company still expects to generate cash flow from operations between
The company expects the divestiture impact to be approximately
Dividend Declared
The company will discuss its fiscal 2016 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
About
At the forefront of advanced materials innovation for more than 75 years,
FINANCIAL HIGHLIGHTS |
|||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
|||||
Three Months Ended |
|||||
(in thousands, except per share amounts) |
2015 |
2014 |
|||
Sales |
$ |
555,354 |
$ |
694,941 |
|
Cost of goods sold |
404,130 |
476,842 |
|||
Gross profit |
151,224 |
218,099 |
|||
Operating expense |
129,243 |
148,488 |
|||
Restructuring charges |
9,120 |
1,563 |
|||
Amortization of intangibles |
6,247 |
7,027 |
|||
Operating income |
6,614 |
61,021 |
|||
Interest expense |
6,979 |
8,210 |
|||
Other expense (income), net |
1,087 |
(1,813) |
|||
(Loss) income from continuing operations before income taxes |
(1,452) |
54,624 |
|||
Provision for income taxes |
4,252 |
14,497 |
|||
Net (loss) income |
(5,704) |
40,127 |
|||
Less: Net income attributable to noncontrolling interests |
522 |
639 |
|||
Net (loss) income attributable to Kennametal |
$ |
(6,226) |
$ |
39,488 |
|
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS |
|||||
Basic (loss) earnings per share |
$ |
(0.08) |
$ |
0.50 |
|
Diluted (loss) earnings per share |
$ |
(0.08) |
$ |
0.49 |
|
Dividends per share |
$ |
0.20 |
$ |
0.18 |
|
Basic weighted average shares outstanding |
79,728 |
79,114 |
|||
Diluted weighted average shares outstanding |
79,728 |
79,933 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||
(in thousands) |
September 30, |
June 30, 2015 |
|||||
ASSETS |
|||||||
Cash and cash equivalents |
$ |
97,199 |
$ |
105,494 |
|||
Accounts receivable, net |
401,121 |
445,373 |
|||||
Inventories |
549,608 |
575,531 |
|||||
Other current assets |
120,583 |
132,148 |
|||||
Total current assets |
1,168,511 |
1,258,546 |
|||||
Property, plant and equipment, net |
800,574 |
815,825 |
|||||
Goodwill and other intangible assets, net |
693,268 |
704,058 |
|||||
Other assets |
89,687 |
71,100 |
|||||
Total assets |
$ |
2,752,040 |
$ |
2,849,529 |
|||
LIABILITIES |
|||||||
Current maturities of long-term debt and capital leases, including notes payable |
$ |
25,285 |
$ |
15,702 |
|||
Accounts payable |
177,736 |
187,381 |
|||||
Other current liabilities |
235,385 |
279,661 |
|||||
Total current liabilities |
438,406 |
482,744 |
|||||
Long-term debt and capital leases |
725,548 |
735,885 |
|||||
Other liabilities |
248,997 |
255,465 |
|||||
Total liabilities |
1,412,951 |
1,474,094 |
|||||
KENNAMETAL SHAREHOLDERS' EQUITY |
1,309,478 |
1,345,807 |
|||||
NONCONTROLLING INTERESTS |
29,611 |
29,628 |
|||||
Total liabilities and equity |
$ |
2,752,040 |
$ |
2,849,529 |
|||
SEGMENT DATA (UNAUDITED) |
Three Months Ended September 30, |
||||||
(in thousands) |
2015 |
2014 |
|||||
Outside Sales: |
|||||||
Industrial |
$ |
313,333 |
$ |
377,858 |
|||
Infrastructure |
242,021 |
317,083 |
|||||
Total outside sales |
$ |
555,354 |
$ |
694,941 |
|||
Sales By Geographic Region: |
|||||||
North America |
$ |
253,149 |
$ |
334,570 |
|||
Western Europe |
155,721 |
190,854 |
|||||
Rest of World |
146,484 |
169,517 |
|||||
Total sales by geographic region |
$ |
555,354 |
$ |
694,941 |
|||
Operating Income (Loss): |
|||||||
Industrial |
$ |
20,175 |
$ |
44,017 |
|||
Infrastructure |
(8,853) |
19,221 |
|||||
Corporate (1) |
(4,708) |
(2,217) |
|||||
Total operating income |
$ |
6,614 |
$ |
61,021 |
|||
(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, 2015 - (UNAUDITED) |
||||||||||||||||||||
(in thousands, except |
Sales |
Gross |
Operating |
Operating |
Net (loss) |
Diluted |
Effective |
|||||||||||||
Reported Results |
$ |
555,354 |
$ |
151,224 |
$ |
129,243 |
$ |
6,614 |
$ |
(6,226) |
$ |
(0.08) |
(292.8)% |
|||||||
Reported Margins |
27.2% |
23.3% |
1.2% |
|||||||||||||||||
Restructuring and |
— |
1,627 |
(4,363) |
15,111 |
11,154 |
0.14 |
42.8 |
|||||||||||||
Divestiture-related |
— |
— |
— |
— |
6,368 |
0.08 |
276.2 |
|||||||||||||
Adjusted Results |
$ |
555,354 |
$ |
152,851 |
$ |
124,880 |
$ |
21,725 |
$ |
11,296 |
$ |
0.14 |
26.2% |
|||||||
Adjusted Margins |
27.5% |
22.5% |
3.9% |
(2) Represents amounts attributable to Kennametal Shareholders. |
(3) Includes pre-tax restructuring related charges recorded in corporate of $3,333. |
(4) Includes loss on sale of assets and a discrete tax charge due to divestiture of non-core businesses. |
(in thousands, except percents) |
Industrial |
Industrial |
Infrastructure |
Infrastructure |
||||||||
Reported Results |
$ |
313,333 |
$ |
20,175 |
$ |
242,021 |
$ |
(8,853) |
||||
Reported Operating Margin |
6.4% |
(3.7)% |
||||||||||
Restructuring and related charges (5) |
— |
6,184 |
— |
5,594 |
||||||||
Adjusted Results |
$ |
313,333 |
$ |
26,359 |
$ |
242,021 |
$ |
(3,259) |
||||
Adjusted Operating Margin |
8.4% |
(1.3)% |
(5) Excludes pre-tax restructuring related charges recorded in corporate of $3,333. |
THREE MONTHS ENDED SEPTEMBER 30, 2014 - (UNAUDITED) |
|||||||||||||||||
(in thousands, except |
Sales |
Gross |
Operating |
Operating |
Net |
Diluted EPS |
Effective |
||||||||||
Reported Results |
$ |
694,941 |
$ |
218,099 |
$ |
148,488 |
$ |
61,021 |
$ |
39,488 |
$ |
0.49 |
26.5% |
||||
Reported Margins |
31.4% |
21.4% |
8.8% |
||||||||||||||
Restructuring and |
— |
3,779 |
(2,104) |
7,446 |
5,557 |
0.07 |
(0.1) |
||||||||||
Adjusted Results |
$ |
694,941 |
$ |
221,878 |
$ |
146,384 |
$ |
68,467 |
$ |
45,045 |
$ |
0.56 |
26.4% |
||||
Adjusted Margins |
31.9% |
21.1% |
9.9% |
THREE MONTHS ENDED SEPTEMBER 30, 2014 - (UNAUDITED) |
|||||||||||
(in thousands, except percents) |
Industrial Sales |
Industrial |
Infrastructure Sales |
Infrastructure |
|||||||
Reported Results |
$ |
377,858 |
$ |
44,017 |
$ |
317,083 |
$ |
19,221 |
|||
Reported Operating Margin |
11.6% |
6.1% |
|||||||||
Restructuring and related charges |
— |
5,430 |
— |
2,016 |
|||||||
Adjusted Results |
$ |
377,858 |
$ |
49,447 |
$ |
317,083 |
$ |
21,237 |
|||
Adjusted Operating Margin |
13.1% |
6.7% |
FREE OPERATING CASH FLOW (UNAUDITED) |
Three Months Ended |
|||||||
September 30, |
||||||||
(in thousands) |
2015 |
2014 |
||||||
Net cash flow from operating activities |
$ |
38,707 |
$ |
50,952 |
||||
Purchases of property, plant and equipment |
(37,217) |
(30,802) |
||||||
Proceeds from disposals of property, plant and equipment |
1,933 |
619 |
||||||
Free operating cash flow |
$ |
3,423 |
$ |
20,769 |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kennametal-announces-fiscal-first-quarter-2016-results-and-sale-of-non-core-businesses-300170797.html
SOURCE
Interim Investor Relations: Beth Riley, 724-539-6129; or Corporate Relations - Media: Christina Sutter, 724-539-5708