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Kennametal Announces Record Second Quarter 2012 Results
Cardoso added, "As we announced last week, the pending acquisition of Deloro Stellite reinforces our strategy of acquiring technologies that strengthen our core business. The acquisition is consistent with our strategy of growth by further diversifying our customer base, products, end markets and geographic regions. Also, it reflects our mission to provide customers with innovative solutions to improve their productivity. As always, we are highly disciplined in executing strategies to grow our business and remain committed to continuing to deliver shareowner value."
Fiscal 2012 Second Quarter Key Developments
- Sales were
$642 million , compared with$566 million in the same quarter last year. Sales increased primarily as a result of organic growth of 14 percent. - Operating income was
$94 million compared with$62 million in the same quarter last year. The prior year operating income included restructuring and related charges of$5 million . Operating margin of 14.7 percent was a December quarter record and 290 basis points higher than the prior year quarter adjusted operating margin of 11.8 percent. The improved margin was driven by higher sales volume and price realization and incremental restructuring benefits, partially offset in part by higher raw material costs. - The reported effective tax rate was 17.3 percent compared to 21.3 percent for the prior year quarter. The current year rate benefitted from a
$4 million valuation allowance adjustment and the impact of stronger earnings in our pan-European operations. - Second quarter record reported EPS were
$0.91 compared with prior year quarter reported EPS of$0.52 . The prior year EPS included restructuring and related charges of$0.05 . - Adjusted ROIC was 17.3 percent as of
December 31, 2011 and was an all-time company record. The previous all-time record for adjusted ROIC was 16.2 percent as ofSeptember 30, 2011 . - Cash flow from operating activities was
$71 million for the six months endedDecember 31, 2011 , compared with$67 million in the prior year period. Net capital expenditures were$33 million and$14 million for the six months endedDecember 31, 2011 and 2010, respectively. The company generated year to date free operating cash flow of$38 million compared with$54 million in the same period last year.
Segment Developments for the Fiscal 2012 Second Quarter
- Industrial segment sales of
$410 million increased by 11 percent from$369 million in the prior year quarter, driven by organic growth. On an organic basis, sales increased in all served market sectors led by growth in aerospace and defense of 16 percent, general engineering of 12 percent and a 7 percent increase in transportation. On a regional basis, sales increased by approximately 15 percent in theAmericas , 13 percent inEurope and 1 percent inAsia . - Industrial segment operating income was
$63 million compared with$42 million for the same quarter of the prior year. Industrial operating income was$46 million in the prior year quarter, absent restructuring and related charges. The primary drivers of the increase in operating income were higher sales volume and price realization, partially offset by an increase in raw material costs. Industrial operating margin increased to 15.3 percent from an adjusted operating margin of 12.4 percent in the prior year quarter. - Infrastructure segment sales of
$232 million increased 18 percent from$197 million in the prior year quarter, driven by 19 percent organic growth. The organic increase was driven by 25 percent higher sales of energy and related products, as well as a 15 percent increase in demand for earthworks products. On a regional basis, sales increased by approximately 34 percent inAsia , 16 percent in theAmericas and 10 percent inEurope . - Infrastructure segment operating income was
$33 million , compared with$22 million in the same quarter of the prior year. Infrastructure operating income was$23 million in the prior year quarter, absent restructuring and related charges. Operating income grew primarily due to higher sales volume and price realization, despite significantly higher raw material costs. Infrastructure operating margin increased to 14.4 percent compared to an adjusted operating margin of 11.8 percent in the prior year quarter.
Fiscal 2012 First Half Key Developments
- Sales were
$1,301 million , compared with$1,095 million in the same period last year. Sales increased as a result of organic growth of 16 percent and a 3 percent favorable impact from foreign currency effects. - Operating income was
$196 million compared with$119 million in the same period last year. Operating income was$129 million , absent restructuring and related charges in the prior year period. Operating margin was 15.0 percent for the six months endedDecember 31, 2011 , compared with an adjusted operating margin of 11.7 percent for the same period last year. - Reported EPS were
$1.79 compared with$0.94 in the prior year period. The prior year EPS included restructuring and related charges of$0.10 .
Reconciliations of all non-GAAP financial measures are set forth in the attached tables, and the corresponding descriptions are contained in our report on Form 8-K to which this release is attached.
On
This acquisition is in alignment with
Outlook
Global economic conditions and worldwide industrial production are expected to continue to reflect moderate expansion. As such,
Pending the closing of the acquisition of Deloro Stellite, we would expect the impact to EPS for fiscal 2012 to be
Cash flow from operations is expected to be in the range of
Dividend Declared
Second quarter results for fiscal 2012 will be discussed in a live Internet broadcast 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 |
Six Months Ended |
||||
December 31, |
December 31, |
||||
(in thousands, except per share amounts) |
2011 |
2010 |
2011 |
2010 |
|
Sales |
$ 641,741 |
$ 565,768 |
$ 1,300,618 |
$ 1,094,926 |
|
Cost of goods sold |
409,855 |
365,743 |
817,672 |
706,161 |
|
Gross profit |
231,886 |
200,025 |
482,946 |
388,765 |
|
Operating expense |
134,566 |
132,105 |
280,555 |
257,125 |
|
Restructuring charges |
- |
3,391 |
- |
6,651 |
|
Amortization of intangibles |
3,272 |
2,912 |
6,733 |
5,860 |
|
Operating income |
94,048 |
61,617 |
195,658 |
119,129 |
|
Interest expense |
5,256 |
5,564 |
10,743 |
11,527 |
|
Other (income) expense, net |
(1,258) |
(253) |
(684) |
1,658 |
|
Income before income taxes |
90,050 |
56,306 |
185,599 |
105,944 |
|
Provision for income taxes |
15,579 |
12,016 |
37,555 |
25,698 |
|
Net income |
74,471 |
44,290 |
148,044 |
80,246 |
|
Less: Net income attributable to noncontrolling interests |
774 |
821 |
2,361 |
1,856 |
|
Net income attributable to Kennametal |
$ 73,697 |
$ 43,469 |
$ 145,683 |
$ 78,390 |
|
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS |
|||||
Basic earnings per share |
$ 0.92 |
$ 0.53 |
$ 1.82 |
$ 0.95 |
|
Diluted earnings per share |
$ 0.91 |
$ 0.52 |
$ 1.79 |
$ 0.94 |
|
Dividends per share |
$ 0.14 |
$ 0.12 |
$ 0.26 |
$ 0.24 |
|
Basic weighted average shares outstanding |
79,765 |
82,186 |
80,212 |
82,146 |
|
Diluted weighted average shares outstanding |
80,936 |
83,337 |
81,357 |
83,012 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||
December 31, |
June 30, |
||
(in thousands) |
2011 |
2011 |
|
ASSETS |
|||
Cash and cash equivalents |
$ 128,537 |
$ 204,565 |
|
Accounts receivable, net |
404,945 |
447,835 |
|
Inventories |
571,063 |
519,973 |
|
Other current assets |
115,268 |
115,212 |
|
Total current assets |
1,219,813 |
1,287,585 |
|
Property, plant and equipment, net |
657,297 |
697,062 |
|
Goodwill and other intangible assets, net |
650,328 |
663,607 |
|
Other assets |
117,300 |
106,215 |
|
Total assets |
$ 2,644,738 |
$ 2,754,469 |
|
LIABILITIES |
|||
Current maturities of long-term debt and capital leases, including notes payable |
$ 306,339 |
$ 310,963 |
|
Accounts payable |
196,086 |
222,678 |
|
Other current liabilities |
243,414 |
307,880 |
|
Total current liabilities |
745,839 |
841,521 |
|
Long-term debt and capital leases |
1,599 |
1,919 |
|
Other liabilities |
267,126 |
252,388 |
|
Total liabilities |
1,014,564 |
1,095,828 |
|
KENNAMETAL SHAREOWNERS' EQUITY |
1,610,245 |
1,638,072 |
|
NONCONTROLLING INTERESTS |
19,929 |
20,569 |
|
Total liabilities and equity |
$ 2,644,738 |
$ 2,754,469 |
|
SEGMENT DATA (UNAUDITED) |
Three Months Ended |
Six Months Ended |
|||
December 31, |
December 31, |
||||
(in thousands) |
2011 |
2010 |
2011 |
2010 |
|
Outside Sales: |
|||||
Industrial |
$ 409,887 |
$ 369,139 |
$ 827,706 |
$ 699,797 |
|
Infrastructure |
231,854 |
196,629 |
472,912 |
395,129 |
|
Total outside sales |
$ 641,741 |
$ 565,768 |
$ 1,300,618 |
$ 1,094,926 |
|
Sales By Geographic Region: |
|||||
United States |
$ 272,587 |
$ 232,164 |
$ 559,323 |
$ 474,600 |
|
International |
369,154 |
333,604 |
741,295 |
620,326 |
|
Total sales by geographic region |
$ 641,741 |
$ 565,768 |
$ 1,300,618 |
$ 1,094,926 |
|
Operating Income: |
|||||
Industrial |
$ 62,898 |
$ 42,157 |
$ 135,583 |
$ 78,265 |
|
Infrastructure |
33,312 |
21,566 |
65,866 |
48,069 |
|
Corporate (1) |
(2,162) |
(2,106) |
(5,791) |
(7,205) |
|
Total operating income |
$ 94,048 |
$ 61,617 |
$ 195,658 |
$ 119,129 |
|
(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.
FREE OPERATING CASH FLOW (UNAUDITED) |
Six Months Ended |
||
December 31, |
|||
(in thousands) |
2011 |
2010 |
|
Net cash flow provided by operating activities |
$ 71,099 |
$ 67,401 |
|
Purchases of property, plant and equipment |
(35,593) |
(21,150) |
|
Proceeds from disposals of property, plant and equipment |
2,557 |
7,451 |
|
Free operating cash flow |
$ 38,063 |
$ 53,702 |
|
THREE MONTHS ENDED DECEMBER 31, 2010 (UNAUDITED) |
||||||
(in thousands, except per share amounts) |
Gross |
Operating |
Operating |
Net |
Diluted EPS |
|
2011 Reported Results |
$ 200,025 |
$ 132,105 |
$ 61,617 |
$ 43,469 |
$ 0.52 |
|
2011 Reported Operating Margin |
10.9% |
|||||
Restructuring and related charges |
993 |
(758) |
5,142 |
4,366 |
0.05 |
|
2011 Adjusted Results |
$ 201,018 |
$ 131,347 |
$ 66,759 |
$ 47,835 |
$ 0.57 |
|
2011 Adjusted Operating Margin |
11.8% |
|||||
(in thousands, except percents) |
Industrial |
Infrastructure |
||||
2011 Reported Results |
$ 42,157 |
$ 21,566 |
||||
2011 Reported Operating Margin |
11.4% |
11.0% |
||||
Restructuring and related charges |
3,562 |
1,580 |
||||
2011 Adjusted Results |
$ 45,719 |
$ 23,146 |
||||
2011 Adjusted Operating Margin |
12.4% |
11.8% |
||||
(2) Represents amounts attributable to Kennametal shareowners |
||||||
SIX MONTHS ENDED DECEMBER 31, 2010 (UNAUDITED) |
||||||
(in thousands, except per share amounts) |
Gross |
Operating |
Operating |
Net |
Diluted EPS |
|
2011 Reported Results |
$ 388,765 |
$ 257,125 |
$ 119,129 |
$ 78,390 |
$ 0.94 |
|
2011 Reported Operating Margin |
10.9% |
|||||
Restructuring and related charges |
1,964 |
(780) |
9,395 |
8,117 |
0.10 |
|
2011 Adjusted Results |
$ 390,729 |
$ 256,345 |
$ 128,524 |
$ 86,507 |
$ 1.04 |
|
2011 Adjusted Operating Margin |
11.7% |
|||||
(2) Represents amounts attributable to Kennametal shareowners |
||||||
RETURN ON INVESTED CAPITAL (UNAUDITED) |
|||||||
December 31, 2011 (in thousands, except percents) |
|||||||
Invested Capital |
12/31/2011 |
9/30/2011 |
6/30/2011 |
3/31/2011 |
12/31/2010 |
Average |
|
Debt |
$ 307,938 |
$ 312,721 |
$ 312,882 |
$ 316,843 |
$ 316,379 |
$ 313,353 |
|
Total equity |
1,630,174 |
1,588,745 |
1,658,641 |
1,562,387 |
1,476,427 |
1,583,275 |
|
Total |
$ 1,938,112 |
$ 1,901,466 |
$ 1,971,523 |
$ 1,879,230 |
$ 1,792,806 |
$ 1,896,628 |
|
Three Months Ended |
|||||||
Interest Expense |
12/31/2011 |
9/30/2011 |
6/30/2011 |
3/31/2011 |
Total |
||
Interest expense |
$ 5,256 |
$ 5,487 |
$ 5,466 |
$ 5,767 |
$ 21,976 |
||
Income tax benefit |
4,417 |
||||||
Total interest expense, net of tax |
$ 17,559 |
||||||
Total Income |
12/31/2011 |
9/30/2011 |
6/30/2011 |
3/31/2011 |
Total |
||
Net income attributable to |
$ 73,697 |
$ 71,986 |
$ 86,655 |
$ 64,683 |
$ 297,021 |
||
Restructuring and related charges |
- |
- |
5,588 |
4,379 |
9,967 |
||
Noncontrolling interest |
774 |
1,587 |
174 |
520 |
3,055 |
||
Total income, adjusted |
$ 74,471 |
$ 73,573 |
$ 92,417 |
$ 69,582 |
$ 310,043 |
||
Total interest expense, net of tax |
17,559 |
||||||
$ 327,602 |
|||||||
Average invested capital |
$ 1,896,628 |
||||||
Adjusted Return on Invested Capital |
17.3% |
||||||
Return on invested capital calculated utilizing net income, as reported is as follows: |
|||||||
Net income attributable to Kennametal, as reported |
$ 297,021 |
||||||
Total interest expense, net of tax |
17,559 |
||||||
$ 314,580 |
|||||||
Average invested capital |
$ 1,896,628 |
||||||
Return on Invested Capital |
16.6% |
||||||
RETURN ON INVESTED CAPITAL (UNAUDITED) |
|||||||
September 30, 2011 (in thousands, except percents) |
|||||||
Invested Capital |
9/30/2011 |
6/30/2011 |
3/31/2011 |
12/31/2010 |
9/30/2010 |
Average |
|
Debt |
$ 312,721 |
$ 312,882 |
$ 316,843 |
$ 316,379 |
$ 318,819 |
$ 315,529 |
|
Total equity |
1,588,745 |
1,658,641 |
1,562,387 |
1,476,427 |
1,437,616 |
1,544,763 |
|
Total |
$ 1,901,466 |
$ 1,971,523 |
$ 1,879,230 |
$ 1,792,806 |
$ 1,756,435 |
$ 1,860,292 |
|
Three Months Ended |
|||||||
Interest Expense |
9/30/2011 |
6/30/2011 |
3/31/2011 |
12/31/2010 |
Total |
||
Interest expense |
$ 5,487 |
$ 5,466 |
$ 5,767 |
$ 5,564 |
$ 22,284 |
||
Income tax benefit |
5,125 |
||||||
Total interest expense, net of tax |
$ 17,159 |
||||||
Total Income |
9/30/2011 |
6/30/2011 |
3/31/2011 |
12/31/2010 |
Total |
||
Net income attributable to |
$ 71,986 |
$ 86,655 |
$ 64,683 |
$ 43,469 |
$ 266,793 |
||
Restructuring and related charges |
- |
5,588 |
4,379 |
4,366 |
14,333 |
||
Noncontrolling interest |
1,587 |
174 |
520 |
821 |
3,102 |
||
Total income, adjusted |
$ 73,573 |
$ 92,417 |
$ 69,582 |
$ 48,656 |
$ 284,228 |
||
Total interest expense, net of tax |
17,159 |
||||||
$ 301,387 |
|||||||
Average invested capital |
$ 1,860,292 |
||||||
Adjusted Return on Invested Capital |
16.2% |
||||||
Return on invested capital calculated utilizing net income, as reported is as follows: |
|||||||
Net income attributable to Kennametal, as reported |
$ 266,793 |
||||||
Total interest expense, net of tax |
17,159 |
||||||
$ 283,952 |
|||||||
Average invested capital |
$ 1,860,292 |
||||||
Return on Invested Capital |
15.3% |
||||||
SOURCE
Investor Relations, Quynh McGuire, +1-724-539-6559; Media Relations, Christina Reitano, +1-724-539-5708