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Kennametal Reports Strong Finish to Fiscal 2004 -- Continued Growth Expected in Fiscal 2005
-- Q4 sales up 17 percent -- 12 percent organic
-- EPS up 80 percent, and above previous guidance
-- Continuing good cash flow and debt reduction
-- Strong outlook for FY05, EPS up 25-35 percent
LATROBE, Pa., July 28 /PRNewswire-FirstCall/ -- Kennametal Inc. (NYSE: KMT) today reported fiscal 2004 fourth-quarter EPS of $0.81 compared with adjusted earnings of $0.45 in 2003. There were no special items reported in the fiscal 2004 fourth quarter results. Reported results in last year's fourth quarter were a loss of $0.14 per diluted share due to special items totaling $0.59 per share.
Earnings Per Share
Company Guidance: $0.70 to $0.80
Analyst Estimate Range: $0.76 to $0.81
Diluted Earnings Per Share ("EPS"): $0.81
Total Year 2004
For fiscal 2004, reported EPS of $2.02 compared with earnings of $0.51 last year. Excluding special items in each period, EPS of $2.15 were 52 percent above the prior year's comparable EPS of $1.41.
"We were delighted to deliver excellent sales growth and operating leverage in 2004," said Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras. "Of particular note, Q4 included the highest quarterly sales, and the lowest primary working capital to sales ratio in the company's history. These results were driven by broad-based strong performances by all business units, and across most end markets."
Tambakeras further noted, "In addition to our strong earnings performance, we continue to generate good cash flow and strengthen our balance sheet. Free operating cash flow of $125 million contributed to an 870 basis point reduction in debt to capital, which ended the year at 33 percent."
Highlights of the Fiscal 2004 Fourth Quarter
-- Record sales of $542 million were up 17 percent, primarily on
12 percent organic growth.
-- Net income was $29.9 million versus a net loss of $4.9 million in Q4
last year. Net income grew 88 percent compared to last year, excluding
special items, reflecting the benefits of increased volume, mix, and a
leaner cost structure.
-- Net cash flow from operations was $68 million, versus $67 million for
the prior year. Free operating cash flow totaled $49 million for the
quarter, $5 million lower than Q4 of 2003 due to increased capital
expenditures.
-- As of June 30, 2004, total debt was $440 million, down $85 million
from June 2003.
-- Debt to capital decreased to 33 percent versus 42 percent at the end
of the prior year.
Highlights of Fiscal 2004
-- Sales of $2.0 billion were up 12 percent on a 5 percent improvement
from organic sales, 2 percent incremental sales from acquisitions and
a 5 percent benefit from foreign currency exchange rates.
-- Reported net income totaled $73.6 million versus $18.1 million last
year. Excluding special items in both periods, net income improved
57 percent to $78.3 million versus $49.9 million last year.
Outlook
Global industrial economic indicators support expectations of additional growth through fiscal 2005 in North America and rest-of-world markets, and a return to modest growth in the first quarter for our European markets.
Tambakeras said, "We were very pleased with our performance in fiscal 2004, and the outlook for our end markets remains good. In 2005, we will leverage further the 6 processes of the Kennametal Value Business System (KVBS), our strong geographic and end-market balance and superior technology, to continue to outperform our markets. We will remain focused on growing market share and offsetting challenges such as high raw material costs by consistently finding new ways to add value for our customers and to continue to benefit from the skills and commitment of our employees."
Sales for the first quarter of fiscal 2005 are expected to grow 9 to 11 percent. Reported EPS is expected to be $0.50 to $0.60.
For the full year, sales are expected to grow 7 to 9 percent. Reported EPS are expected to be $2.65 to $2.85, up 25 to 35 percent.
Kennametal anticipates net cash flow provided by operating activities of approximately $180 to $220 million in fiscal 2005. Purchases of property, plant and equipment, net of proceeds from disposals of property, plant and equipment are expected to be approximately $70 to $80 million. Adjusting net cash flow provided by operating activities for the above items, Kennametal expects to generate between $110 and $140 million of free operating cash flow for fiscal 2005.
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 http://www.kennametal.com .
Dividend Declared
Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable August 25, 2004, to shareowners of record as of the close of business August 10, 2004.
Fourth 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 http://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 others 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 related to 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 $2.0 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 http://www.kennametal.com .
FINANCIAL HIGHLIGHTS
Consolidated financial highlights for Kennametal Inc. (NYSE: KMT) for the quarter and twelve months ended June 30, 2004 and 2003 are shown in the following tables (in thousands, except per share amounts).
Consolidated Statements of Income (Unaudited)
Quarter Ended Twelve Months Ended
June 30, June 30,
2004 2003 2004 2003
Sales $541,858 $463,765 $1,971,441 $1,758,957
Cost of goods sold (A) 356,084 314,974 1,318,074 1,190,053
Gross profit 185,774 148,791 653,367 568,904
Operating expense (B) 134,441 121,757 512,621 464,861
Restructuring and asset
impairment charges (C) - 20,305 3,670 31,954
Amortization of intangibles 664 854 2,234 4,164
Operating income 50,669 5,875 134,842 67,925
Interest expense 6,405 9,108 25,884 36,166
Other (income) expense, net (D) 294 (2,117) (1,716) (2,531)
Income before provision for
income taxes and minority
interest 43,970 (1,116) 110,674 34,290
Provision for income taxes (E) 14,154 3,678 35,500 14,300
Minority interest (36) 74 1,596 1,860
Net income $29,852 $(4,868) $73,578 $18,130
Basic earnings per share $0.83 $(0.14) $2.06 $0.52
Diluted earnings per share $0.81 $(0.14) $2.02 $0.51
Dividends per share $0.17 $0.17 $0.68 $0.68
Basic weighted average shares
outstanding 36,051 35,396 35,704 35,202
Diluted weighted average
shares outstanding 36,952 35,682 36,473 35,479
(A) For the twelve months ended June 30, 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 twelve
months ended June 30, 2003, these amounts include charges of $2.0
million and $2.2 million, respectively, for integration activities
related to the Widia acquisition.
(B) For the twelve months ended June 30, 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 twelve months
ended June 30, 2003, these amounts include charges of $1.7 million and
$5.5 million, respectively, for integration activities related to the
Widia acquisition.
(C) For the quarter and twelve months ended June 30, 2003, these amounts
include a non-cash charge of $16.1 million for impairment of long-
lived assets within the Electronics business.
(D) For the twelve months ended June 30, 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.
(E) For the quarter and twelve months ended June 30, 2003, the effective
tax rate was (329.6%) and 41.7%, respectively. These amounts reflect
that a portion of the Electronics impairment could not be tax
effected, otherwise, the tax rate for the quarter and twelve month
period would have been 30%.
FINANCIAL HIGHLIGHTS (Continued)
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.
For the quarter ended June 30, 2004, there were no special items.
RECONCILIATION TO GAAP - QUARTER ENDED JUNE 30, 2003 (Unaudited)
Diluted
Earnings
Gross Operating Operating Net Per
Profit Expenses Income Income Share
2003 Reported Results $148,791 $121,757 $5,875 $(4,868) $(0.14)
MSSG Restructuring - - 3,134 2,194 0.06
AMSG Restructuring - - 1,224 857 0.02
AMSG Electronics
Impairment - - 16,110 15,269 0.43
Corporate Restructuring - - (99) (69) -
J&L Restructuring - - (64) (45) -
Widia Integration Costs -
MSSG 1,146 (1,365) 2,511 1,758 0.06
Widia Integration Costs -
AMSG 865 (305) 1,170 818 0.02
2003 Results Excluding
Special Items $150,802 $120,087 $29,861 $15,914 $0.45
FINANCIAL HIGHLIGHTS (Continued)
RECONCILIATION TO GAAP - TWELVE MONTHS ENDED JUNE 30 (Unaudited)
Operating Operating
Gross Profit Expenses Income
2004 Reported Results $653,367 $512,621 $134,842
MSSG Restructuring 2,850 - 5,023
AMSG Restructuring - - 1,497
Widia Integration Costs - MSSG 63 (1,448) 1,511
Widia Integration Costs - AMSG 48 - 48
Pension Curtailment 779 (520) 1,299
Gain on Toshiba Investment - - -
Note Receivable - (1,817) 1,817
2004 Results Excluding Special Items $657,107 $508,836 $146,037
2003 Reported Results $568,904 $464,861 $67,925
MSSG Restructuring - - 9,060
AMSG Restructuring - - 4,406
AMSG Electronics Impairment - - 16,110
Corporate Restructuring - - 1,137
J&L Restructuring - - 1,203
FSS Restructuring - - 38
Widia Integration Costs - MSSG 1,344 (5,149) 6,493
Widia Integration Costs - AMSG 865 (327) 1,192
2003 Results Excluding Special Items $571,113 $459,385 $107,564
RECONCILIATION TO GAAP - TWELVE MONTHS ENDED JUNE 30 (Unaudited)
Other Diluted
(Income) / Net Earnings
Expense, net Income Per Share
2004 Reported Results $(1,716) $73,578 $2.02
MSSG Restructuring - 3,416 0.09
AMSG Restructuring - 1,018 0.03
Widia Integration Costs - MSSG - 1,027 0.03
Widia Integration Costs - AMSG - 33 -
Pension Curtailment - 883 0.02
Gain on Toshiba Investment 4,397 (2,990) (0.08)
Note Receivable (183) 1,360 0.04
2004 Results Excluding Special Items $2,498 $78,325 $2.15
2003 Reported Results $(2,531) $18,130 $0.51
MSSG Restructuring - 6,342 0.18
AMSG Restructuring - 3,084 0.09
AMSG Electronics Impairment - 15,269 0.43
Corporate Restructuring - 796 0.02
J&L Restructuring - 843 0.02
FSS Restructuring - 26 -
Widia Integration Costs - MSSG - 4,545 0.14
Widia Integration Costs - AMSG - 834 0.02
2003 Results Excluding Special Items $(2,531) $49,869 $1.41
FINANCIAL HIGHLIGHTS (Continued)
SEGMENT DATA (Unaudited):
Quarter Ended Twelve Months Ended
June 30, June 30,
2004 2003 * 2004 2003 *
Outside Sales:
Metalworking Solutions and
Services Group $326,377 $289,996 $1,198,505 $1,086,831
Advanced Materials Solutions
Group 119,227 96,699 419,073 353,262
J&L Industrial Supply 59,741 48,158 218,295 196,170
Full Service Supply 36,513 28,912 135,568 122,694
Total Outside Sales $541,858 $463,765 $1,971,441 $1,758,957
Sales By Geographic Region:
Within the United States $283,453 $238,323 $1,020,629 $946,518
International 258,405 225,442 950,812 812,439
Total Outside Sales $541,858 $463,765 $1,971,441 $1,758,957
Operating Income (Loss), as
reported:
Metalworking Solutions and
Services Group $43,720 $23,616 $126,657 $88,213
Advanced Materials Solutions
Group 16,793 (7,282) 53,168 19,762
J&L Industrial Supply 6,137 931 19,547 6,140
Full Service Supply 882 264 818 (56)
Corporate and Eliminations (1) (16,863) (11,654) (65,348) (46,134)
Total Operating Income $50,669 $5,875 $134,842 $67,925
Operating Income (Loss),
excluding special charges:
Metalworking Solutions and
Services Group $43,720 $29,261 $133,191 $103,766
Advanced Materials Solutions
Group 16,793 11,222 54,713 41,470
J&L Industrial Supply 6,137 867 19,547 7,343
Full Service Supply 882 264 818 (18)
Corporate and Eliminations (1) (16,863) (11,753) (62,232) (44,997)
Total Operating Income $50,669 $29,861 $146,037 $107,564
* Prior year segment data has been restated for organizational changes.
(1) Includes corporate functional shared services and intercompany
eliminations.
FINANCIAL HIGHLIGHTS (Continued)
OPERATING INCOME / (LOSS) RECONCILIATION (Unaudited):
For the quarter ended June 30, 2004, there were no special items.
QUARTER ENDED JUNE 30,
Corp &
MSSG AMSG J&L FSS Elim Total
2003 Reported Operating
Income (Loss) $23,616 $(7,282) $931 $264 $(11,654) $5,875
Restructuring 3,134 1,224 (64) - (99) 4,195
Electronics impairment - 16,110 - - - 16,110
Widia Integration Costs 2,511 1,170 - - - 3,681
2003 Operating Income
(Loss) Excluding Special
Items $29,261 $11,222 $867 $264 $(11,753) $29,861
TWELVE MONTHS ENDED JUNE 30,
Corp &
MSSG AMSG J&L FSS Elim Total
2004 Reported
Operating Income
(Loss) $126,657 $53,168 $19,547 $818 $(65,348) $134,842
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
Items $133,191 $54,713 $19,547 $818 $(62,232) $146,037
2003 Reported
Operating Income
(Loss) $88,213 $19,762 $6,140 $(56) $(46,134) $67,925
Restructuring 9,060 4,406 1,203 38 1,137 15,844
Electronics
impairment - 16,110 - - - 16,110
Widia Integration
Costs 6,493 1,192 - - - 7,685
2003 Operating
Income (Loss)
Excluding Special
Items $103,766 $41,470 $7,343 $(18) $(44,997) $107,564
FINANCIAL HIGHLIGHTS (Continued)
RECONCILIATION TO FREE OPERATING CASH FLOW INFORMATION (Unaudited)
Quarter Ended Twelve Months Ended
June 30, June 30,
2004 2003 2004 2003
Net income $29,852 $(4,868) $73,578 $18,130
Electronics impairment - 16,110 - 16,110
Other non-cash items (1,498) 11,264 13,959 19,346
Depreciation and amortization 17,236 22,224 65,989 84,043
Change in inventory (3,213) 23,527 10,255 38,171
Change in accounts receivable (986) 10,632 (4,199) 11,480
Change in accounts payable 16,696 (3,262) 25,776 (826)
Change in other assets and
liabilities 10,305 (8,269) (7,500) (4,910)
Net cash flow provided by operating
activities 68,392 67,358 177,858 181,544
Purchase of property, plant and
equipment (20,902) (13,447) (56,962) (49,413)
Proceeds from disposals of property,
plant and equipment 1,227 371 4,225 1,875
Free operating cash flow $48,717 $54,282 $125,121 $134,006
CONDENSED BALANCE SHEETS (Unaudited)
06/30/04 03/31/04
ASSETS
Cash and equivalents $25,940 $27,528
Accounts receivable, net of allowance 247,245 248,879
Inventories 388,077 387,202
Deferred income taxes 95,240 87,651
Other current assets 40,443 38,803
Total current assets 796,945 790,063
Property, plant and equipment, net 484,475 481,793
Goodwill and Intangible assets, net 542,014 554,614
Other assets 115,229 59,641
Total $1,938,663 $1,886,111
LIABILITIES
Short-term debt, including notes
payable $126,807 $8,193
Accounts payable 148,216 132,246
Accrued liabilities 214,359 202,460
Total current liabilities 489,382 342,899
Long-term debt 313,400 486,119
Deferred income taxes 64,571 38,045
Other liabilities 167,926 192,546
Total liabilities 1,035,279 1,059,609
MINORITY INTEREST 16,232 16,598
SHAREOWNERS' EQUITY 887,152 809,904
Total $1,938,663 $1,886,111
CONDENSED BALANCE SHEETS (Unaudited)
12/31/03 09/30/03 06/30/03
ASSETS
Cash and equivalents $15,086 $14,720 $15,093
Accounts receivable, net of allowance 223,087 232,146 231,803
Inventories 386,250 387,877 389,613
Deferred income taxes 88,020 86,888 97,237
Other current assets 39,460 47,003 48,606
Total current assets 751,903 768,634 782,352
Property, plant and equipment, net 487,530 489,242 489,828
Goodwill and Intangible assets, net 500,890 484,662 473,173
Other assets 72,802 67,108 68,534
Total $1,813,125 $1,809,646 $1,813,887
LIABILITIES
Short-term debt, including notes
payable $12,872 $11,375 $10,845
Accounts payable 112,563 107,653 118,509
Accrued liabilities 183,835 197,578 206,993
Total current liabilities 309,270 316,606 336,347
Long-term debt 468,455 508,763 514,842
Deferred income taxes 36,087 41,368 43,543
Other liabilities 191,585 180,258 178,698
Total liabilities 1,005,397 1,046,995 1,073,430
MINORITY INTEREST 16,286 16,089 18,880
SHAREOWNERS' EQUITY 791,442 746,562 721,577
Total $1,813,125 $1,809,646 $1,813,887
FINANCIAL HIGHLIGHTS (Continued)
Debt to Capital Reconciliation (Unaudited)
June 30,
2004 2003
Total Debt 440,207 525,687
Total Shareowners' Equity 887,152 721,577
Debt to Equity, GAAP 33.2% 42.1%
Total Debt 440,207 525,687
Minority Interest 16,232 18,880
Total Shareowners' Equity 887,152 721,577
Total Capital 1,343,591 1,266,144
Debt to Capital 32.8% 41.5%
SOURCE Kennametal Inc.
-0- 07/28/2004
/CONTACT: Investor Relations, Beth A. Riley, or Media Relations, Joy
Chandler of Kennametal Inc., +1-724-539-6141/
/Web site: http://www.kennametal.com /
(KMT)
CO: Kennametal Inc.
ST: Pennsylvania
IN: MNG
SU: ERN ERP DIV CCA MAV
JJ-JK
-- CLW009 --
4259 07/28/2004 08:30 EDT http://www.prnewswire.com