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Kennametal Continues Strong Growth Trend in Third Quarter
- Sales up 14 percent over last year
Reported earnings per diluted share of $0.66, up 144 percent over last year
- Strong cash flow
LATROBE, Pa., April 28 /PRNewswire-FirstCall/ -- Kennametal Inc. (NYSE: KMT) today reported fiscal 2004 third-quarter earnings of $0.66 per diluted share compared with reported earnings of $0.27 per diluted share last year and exceeding previous guidance provided for the quarter. There were no special items to report in the fiscal 2004 third quarter, which was 74 percent above last year's comparable earnings per diluted share of $0.38, excluding special items.
Earnings Per Share
Original Company Guidance (1/28/04) $0.50 to $0.60
(Updated to $0.65 on 4/19/04)
Analyst Estimate Range (4/16/04) $0.52 to $0.60
Earnings Per Share $0.66
For the first nine months of fiscal 2004, reported earnings of $1.20 per diluted share compared with earnings of $0.65 per diluted share last year. Excluding special items in each period, diluted earnings of $1.34 per share were 40 percent above the prior year's comparable earnings of $0.96 per share.
Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "We were pleased to deliver a quarter of strong earnings growth, as improving markets combined with the implementation of the Kennametal Value Business System (KVBS) by Kennametal employees allowed us to leverage the many improvements we have made to our business. Investments in product innovation, marketing initiatives, and acquisitions allowed us to outperform several of our end markets. This improvement was broad-based, and included Metalworking North America and Rest-of-World, Mining and Construction and Energy, and the J&L distribution business. In addition to the top-line growth, our earnings benefited from our streamlined cost structure."
Highlights of the Fiscal 2004 Third Quarter
-- Sales of $524 million were 14 percent above the prior year comparable
quarter primarily on 6 percent organic sales growth, 2 percent from
additional workdays, and 6 percent benefit from foreign currency
exchange rates.
-- Reported net income was $24.1 million versus net income of $9.7
million in the same quarter last year. Reported net income grew 80
percent compared to net income excluding special items of $13.3
million last year, reflecting the benefits of increased volume, mix,
and a leaner cost structure.
-- Net cash flow from operations was $54 million, versus $40 million for
the prior year. Free operating cash flow totaled $41 million for the
quarter, versus $26 million in last year's comparable quarter due
largely to the improved operating performance.
-- As of March 31, 2004, total debt was $494 million, down $31 million
from June 2003, and $86 million below March 2003.
-- Debt to capital decreased to 37 percent, from 43 percent at the end of
March in the prior year.
-- Concluded the acquisition of Conforma Clad Inc.
Highlights of First Nine Months of Fiscal 2004
-- Sales of $1.4 billion were 10 percent above the prior year comparable
period on a 2 percent improvement from organic sales growth, 3 percent
incremental sales from acquisitions, and a 5 percent improvement from
foreign currency exchange rates.
-- Reported net income totaled $43.7 million versus $23.0 million in last
year's comparable period, a 90 percent increase. Excluding special
items in both periods, net income improved 43% to $48.5 million in the
current nine-month period.
Outlook
Tambakeras said, "Entering the final quarter of our year, we are optimistic that the momentum we built through the March quarter will continue, with strong sequential earnings growth in the June quarter. We anticipate that improvement in North American markets will increase, Europe will remain fairly stable and the developing markets will sustain recent high growth rates. Further, we expect that the Kennametal Value Business System (KVBS) will support additional outperformance."
Sales for the fourth quarter of fiscal 2004 are expected to grow 10 to 12 percent year-over-year, including the impact of currency. Organic growth is anticipated to be 6 to 8 percent year-over-year. Reported diluted earnings per share are expected to be $0.70 to $0.80 per share, up 56 to 78 percent compared to the prior year.
Based on forecasted results for the fourth quarter, reported diluted earnings per share are expected to be $1.90 to $2.00 per share for fiscal 2004. This includes net special charges to date of approximately $0.14 per share. Excluding these charges, diluted earnings per share are forecasted to range from $2.05 to $2.15 per share. As previously stated, the earnings outlook for the full year includes approximately $0.12 per share of accretion from the Widia acquisition.
Kennametal anticipates net cash flow provided by operating activities of approximately $155 to $175 million in fiscal 2004. Purchases of property, plant and equipment, net of proceeds from disposals of property, plant and equipment are expected to be approximately $50 to $55 million. Adjusting net cash flow provided by operating activities for the above items, Kennametal expects to generate between $100 and $125 million of free operating cash flow for fiscal 2004.
Kennametal advises shareholders to note monthly order trends, for which the company makes a disclosure ten business days after the conclusion of each month. This information is available on the Investor Relations section of Kennametal's corporate web site at www.kennametal.com .
Dividend Declared
Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable May 25, 2004, to shareowners of record as of the close of business May 10, 2004.
Third quarter results will be discussed in a live Internet broadcast at 10:00 a.m. today. Access the live or archived conference by visiting the Investor Relations section of Kennametal's corporate web site at www.kennametal.com .
This release contains "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. You can identify these forward-looking statements by the fact they use words such as "should," "anticipate," "estimate," "approximate," "expect," "may," "will," "project," "intend," "plan," "believe," and other words of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements are likely to relate to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position and product development, which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in the next several years. Although it is not possible to predict or identify all factors, they may include the following: global economic conditions; future terrorist attacks; epidemics; risks associated with integrating and divesting businesses and achieving the expected savings and synergies; demands on management resources; risks associated with international markets such as currency exchange rates, and social and political environments; competition; labor relations; commodity prices; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans and environmental remediation matters. We can give no assurance that any goal or plan set forth in forward- looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.
Kennametal Inc. aspires to be the premier tooling solutions supplier in
the world with operational excellence throughout the value chain and best-in-
class manufacturing and technology. Kennametal strives to deliver superior
shareowner value through top-tier financial performance. The company provides
customers a broad range of technologically advanced tools, tooling systems and
engineering services aimed at improving customers' manufacturing
competitiveness. With about 13,500 employees worldwide, the company's annual
sales approximate $1.9 billion, with nearly half coming from sales outside the
United States. Kennametal is a five-time winner of the GM "Supplier of the
Year" award and is represented in more than 60 countries. Kennametal
operations in Europe are headquartered in Furth, Germany. Kennametal Asia
Pacific operations are headquartered in Singapore. For more information,
visit the company's web site at www.kennametal.com .
FINANCIAL HIGHLIGHTS
Consolidated financial highlights for Kennametal Inc. (NYSE: KMT) for the
quarter and nine months ended March 31, 2004 and 2003 are shown in the
following tables (in thousands, except per share amounts).
Consolidated Statements of Income (Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
2004 2003 2004 2003
Sales $524,230 $459,243 $1,429,583 $1,295,192
Cost of goods sold (A) 348,376 307,582 961,990 875,079
Gross profit 175,854 151,661 467,593 420,113
Operating expense (B) 132,218 122,592 378,180 343,104
Restructuring and asset
impairment charges - 3,269 3,670 11,649
Amortization of intangibles 614 1,196 1,570 3,310
Operating income 43,022 24,604 84,173 62,050
Interest expense 6,332 8,979 19,479 27,058
Other (income) expense,
net (C) 508 713 (2,010) (414)
Income before provision for
income taxes and minority
interest 36,182 14,912 66,704 35,406
Provision for income taxes 11,579 4,474 21,345 10,622
Minority interest 533 739 1,632 1,786
Net income $24,070 $9,699 $43,727 $22,998
Basic earnings per share $0.67 $0.28 $1.23 $0.65
Diluted earnings per share $0.66 $0.27 $1.20 $0.65
Dividends per share $0.17 $0.17 $0.51 $0.51
Basic weighted average shares
outstanding 35,828 35,243 35,589 35,137
Diluted weighted average
shares outstanding 36,662 35,480 36,307 35,412
(A) For the nine months ended March 31, 2004, these amounts include
charges of $0.1 million for integration activities related to the
Widia acquisition, $2.9 million related to restructuring programs, and
$0.8 million for a pension curtailment. For the quarter and nine
months ended March 31, 2003, these amounts include charges of $0.1
million and $0.2 million, respectively, for integration activities
related to the Widia acquisition.
(B) For the nine months ended March 31, 2004, these amounts include
charges of $1.8 million related to a note receivable from a
divestiture of a business by Kennametal in 2002, $0.5 million related
to a pension curtailment, and $1.4 million for integration activities
related to the Widia acquisition. For the quarter and nine months
ended March 31, 2003, these amounts include charges of $1.8 million
and $3.8 million, respectively, for integration activities related to
the Widia acquisition.
(C) For the nine months ended March 31, 2004, these amounts include income
of $4.4 million related to a gain on the sale of Toshiba Tungaloy
investment and a charge of $0.2 million on a note receivable from a
divestiture of a business by Kennametal in 2002.
In addition to reported results under U.S. GAAP, the following financial
highlight tables also include, where appropriate, a reconciliation of results
excluding special items and free operating cash flow (which are non-GAAP
measures), to the most directly comparable GAAP measures. Management believes
that each of these non-GAAP financial measures is useful to investors to more
easily compare the Company's financial performance period to period.
RECONCILIATION TO GAAP - QUARTER ENDED MARCH 31, 2003 (Unaudited)
Diluted
Earnings
Gross Operating Operating Net Per
Profit Expenses Income Income Share
2003 Reported Results $151,661 $122,592 $24,604 $9,699 $0.27
MSSG Restructuring - - 1,077 754 0.02
AMSG Restructuring - - 1,104 773 0.02
Corporate Restructuring - - 278 195 0.01
J&L Restructuring - - 801 561 0.02
FSS Restructuring - - 9 6 -
Widia Integration Costs -
MSSG 144 (1,767) 1,911 1,337 0.04
Widia Integration Costs -
AMSG - (18) 18 13 -
2003 Results Excluding
Special Items $151,805 $120,807 $29,802 $13,338 $0.38
RECONCILIATION TO GAAP - NINE MONTHS ENDED MARCH 31 (Unaudited)
Diluted
Other Earnings
Gross Operating Operating (Income)/ Net Per
Profit Expenses Income Expense Income Share
2004 Reported
Results $467,593 $378,180 $84,173 $(2,010) $43,727 $1.20
MSSG Restructuring 2,850 - 5,023 - 3,416 0.10
AMSG Restructuring - - 1,497 - 1,018 0.03
Widia Integration
Costs - MSSG 63 (1,448) 1,511 - 1,027 0.03
Widia Integration
Costs - AMSG 48 - 48 - 33 -
Pension
Curtailment 779 (520) 1,299 - 883 0.02
Gain on Toshiba
Investment - - - 4,397 (2,990) (0.08)
Note Receivable - (1,817) 1,817 (183) 1,360 0.04
2004 Results
Excluding Special
Items $471,333 $374,395 $95,368 $2,204 $48,474 $1.34
2003 Reported
Results $420,113 $343,104 $62,050 $(414) $22,998 $0.65
MSSG Restructuring - - 5,926 - 4,148 0.12
AMSG Restructuring - - 3,182 - 2,227 0.06
Corporate
Restructuring - - 1,236 - 865 0.02
J&L Restructuring - - 1,267 - 888 0.03
FSS Restructuring - - 38 - 26 -
Widia Integration
Costs - MSSG 198 (3,784) 3,982 - 2,787 0.08
Widia Integration
Costs - AMSG - (22) 22 - 16 -
2003 Results
Excluding Special
Items $420,311 $339,298 $77,703 $(414) $33,955 $0.96
SEGMENT DATA (Unaudited):
Quarter Ended Nine Months Ended
March 31, March 31,
2004 2003* 2004 2003*
Outside Sales:
Metalworking Solutions and
Services Group $317,506 $286,601 $872,128 $796,835
Advanced Materials Solutions
Group 111,464 89,849 299,846 256,563
J&L Industrial Supply 60,074 51,729 158,554 148,012
Full Service Supply 35,186 31,064 99,055 93,782
Total Outside Sales $524,230 $459,243 $1,429,583 $1,295,192
Sales By Geographic Region:
Within the United States $268,359 $239,565 $737,176 $708,195
International 255,871 219,678 692,407 586,997
Total Outside Sales $524,230 $459,243 $1,429,583 $1,295,192
Operating Income (Loss), as
reported:
Metalworking Solutions and
Services Group $36,751 $23,593 $82,937 $64,597
Advanced Materials Solutions
Group 15,146 9,320 36,375 27,044
J&L Industrial Supply 6,419 1,323 13,410 5,209
Full Service Supply 376 31 (64) (320)
Corporate and Eliminations (15,670) (9,663) (48,485) (34,480)
Total Operating Income $43,022 $24,604 $84,173 $62,050
Operating Income (Loss),
excluding special charges:
Metalworking Solutions and
Services Group $36,751 $26,581 $89,471 $74,505
Advanced Materials Solutions
Group 15,146 10,442 37,920 30,248
J&L Industrial Supply 6,419 2,124 13,410 6,476
Full Service Supply 376 40 (64) (282)
Corporate and Eliminations (15,670) (9,385) (45,369) (33,244)
Total Operating Income $43,022 $29,802 $95,368 $77,703
* Prior year segment data has been restated for organizational changes.
OPERATING INCOME / (LOSS) RECONCILIATION (Unaudited):
QUARTER ENDED MARCH 31,
Corp &
MSSG AMSG J&L FSS Elim Total
2003 Reported Operating
Income (Loss) $23,593 $9,320 $1,323 $31 $(9,663) $24,604
Restructuring 1,077 1,104 801 9 278 3,269
Widia Integration
Costs 1,911 18 - - - 1,929
2003 Operating Income
(Loss) Excluding
Special Charges $26,581 $10,442 $2,124 $40 $(9,385) $29,802
NINE MONTHS ENDED MARCH 31,
Corp &
MSSG AMSG J&L FSS Elim Total
2004 Reported
Operating Income
(Loss) $82,937 $36,375 $13,410 $(64) $(48,485) $84,173
Restructuring 5,023 1,497 - - - 6,520
Widia Integration
Costs 1,511 48 - - - 1,559
Pension Curtailment - - - - 1,299 1,299
Note Receivable - - - - 1,817 1,817
2004 Operating Income
(Loss) Excluding
Special Charges $89,471 $37,920 $13,410 $(64) $(45,369) $95,368
2003 Reported
Operating Income
(Loss) $64,597 $27,044 $5,209 $(320) $(34,480) $62,050
Restructuring 5,926 3,182 1,267 38 1,236 11,649
Widia Integration
Costs 3,982 22 - - - 4,004
2003 Operating Income
(Loss) Excluding
Special Charges $74,505 $30,248 $6,476 $(282) $(33,244) $77,703
RECONCILIATION TO FREE OPERATING CASH FLOW INFORMATION (Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
2004 2003 2004 2003
Net income $24,070 $9,699 $43,726 $22,998
Other non-cash items 4,238 2,593 15,457 8,082
Depreciation and amortization 16,913 21,839 48,753 61,819
Change in inventory (1,969) 1,144 13,468 14,644
Change in accounts receivable (26,610) (30,063) (3,213) 848
Change in accounts payable 18,260 28,172 9,080 2,436
Change in other assets and liabilities 19,222 6,215 (17,805) 3,359
Net cash flow provided by operating
activities 54,124 39,599 109,466 114,186
Purchase of property, plant and
equipment (14,207) (13,955) (36,060) (35,966)
Proceeds from disposals of property,
plant and equipment 610 661 2,998 1,504
Free operating cash flow $40,527 $26,305 $76,404 $79,724
CONDENSED BALANCE SHEETS (Unaudited)
Quarter Ended
03/31/04 12/31/03 09/30/03
ASSETS
Cash and equivalents $27,528 $15,086 $14,720
Accounts receivable, net of allowance 248,879 223,087 232,146
Inventories 387,202 386,250 387,877
Deferred income taxes 87,651 88,020 86,888
Other current assets 38,803 39,460 47,003
Total current assets 790,063 751,903 768,634
Property, plant and equipment, net 481,793 487,530 489,242
Goodwill and Intangible assets, net 554,614 500,890 484,662
Other assets 59,641 72,802 67,108
Total $1,886,111 $1,813,125 $1,809,646
LIABILITIES
Short-term debt, including notes
payable $8,193 $12,872 $11,375
Accounts payable 132,246 112,563 107,653
Accrued liabilities 202,460 183,835 197,578
Total current liabilities 342,899 309,270 316,606
Long-term debt 486,119 468,455 508,763
Deferred income taxes 38,045 36,087 41,368
Other liabilities 192,546 191,585 180,258
Total liabilities 1,059,609 1,005,397 1,046,995
MINORITY INTEREST 16,598 16,286 16,089
SHAREOWNERS' EQUITY 809,904 791,442 746,562
Total $1,886,111 $1,813,125 $1,809,646
CONDENSED BALANCE SHEETS (Unaudited)
Quarter Ended
06/30/03 03/31/03
ASSETS
Cash and equivalents $15,093 $17,250
Accounts receivable, net of allowance 231,803 235,908
Inventories 389,613 408,996
Deferred income taxes 97,237 81,651
Other current assets 48,606 44,286
Total current assets 782,352 788,091
Property, plant and equipment, net 489,828 476,208
Goodwill and Intangible assets, net 473,173 491,987
Other assets 68,534 107,159
Total $1,813,887 $1,863,445
LIABILITIES
Short-term debt, including notes
payable $10,845 $15,068
Accounts payable 118,509 120,981
Accrued liabilities 206,993 208,816
Total current liabilities 336,347 344,865
Long-term debt 514,842 565,067
Deferred income taxes 43,543 38,382
Other liabilities 178,698 140,550
Total liabilities 1,073,430 1,088,864
MINORITY INTEREST 18,880 18,070
SHAREOWNERS' EQUITY 721,577 756,511
Total $1,813,887 $1,863,445
Debt to Capital Reconciliation (Unaudited)
Quarter Ended March 31,
2004 2003
Total Debt 494,312 580,135
Total Shareowners' Equity 809,904 756,511
Debt to Equity, GAAP 37.9% 43.4%
Total Debt 494,312 580,135
Minority Interest 16,598 18,070
Total Shareowners' Equity 809,904 756,511
Total Capital 1,320,814 1,354,716
Debt to Capital 37.4% 42.8%
RECONCILIATION OF FORECASTED GAAP EPS (UNAUDITED)
FY03 4Q EPS - As Reported ($0.14)
MSSG Restructuring 0.06
AMSG Restructuring 0.02
AMSG Electronics Impairment 0.43
Widia Integration - MSSG 0.06
Widia Integration - AMSG 0.02
FY03 4Q EPS - Excluding Special Items $0.45
Forecasted Increase 56% - 78%
FY04 4Q Forecasted EPS - Excluding Special Items $0.70 - $0.80
RECONCILIATION OF FORECASTED GAAP CASH FLOW INFORMATION (Unaudited)
Twelve Months Ended
June 30, 2004
Forecasted net cash flow provided by operating
activity $155,000 - $175,000
Forecasted purchases and disposals of property,
plant and equipment 50,000 - 55,000
Forecasted free operating cash flow $100,000 - $125,000
SOURCE Kennametal Inc.