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Kennametal Taking Further Actions in Response to Declining Global Markets; Announces Third Quarter Fiscal 2009 Results
- 3Q EPS of
- Continuing to execute restructuring and other cost reduction actions
- Cash flow from operations of
LATROBE, Pa.,
"We have a world-class global team that remains focused on effectively managing through the current downturn, serving our customers and preserving our competitive strengths," Cardoso added.
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.
Fiscal 2009 Third Quarter Key Developments
-- Sales for the quarter were $441 million , compared with $690 million in
the same quarter last year. The 36 percent decrease in sales was due
to a 32 percent organic decline and a 5 percent decrease from
unfavorable foreign currency effects, partially offset by the net
favorable impact of acquisitions and divestitures of 1 percent.
-- During the March quarter, the company performed an impairment test of
goodwill and long-lived assets for its engineered products business as
well as for its surface finishing machines and services business. This
test was undertaken in view of the decline in sales, and the impact
and persistence of the global economic downturn. The test resulted in
non-cash pre-tax impairment charges of $111 million , or $1.40 per
share.
-- As previously announced, the company continued to implement certain
restructuring plans to reduce costs and improve operating
efficiencies. During the March quarter, the company recognized pre-tax
charges related to these initiatives of $34 million , or $0.51 per
share. Pre-tax charges recorded to date for these initiatives were
$61 million . Including these charges, the company expects to recognize
approximately $115 million of pre-tax charges related to its
restructuring plans. The remaining charges are expected to be
incurred over the next six to nine months. The majority of these
charges are expected to be cash expenditures. Annual ongoing benefits
from these actions, once fully implemented, are expected to be
approximately $125 million .
-- Operating loss was $151 million for the quarter. Absent the impact of
charges related to impairment and restructuring, operating loss for
the quarter was $6 million compared to operating income of $84 million
in the prior year quarter. The current performance was impacted by the
significant decline in sales volumes and the related lower
manufacturing cost absorption. The company continues to adjust its
manufacturing costs and operating expenses in response to the rapid
and steep downturn in business levels.
-- Results for the current year quarter included $5 million of other
income driven by favorable foreign currency transactions as well as an
income tax benefit of $15 million .
-- Net loss was $138 million for the current year quarter, compared to
net income of $23 million in the prior year quarter. Absent the
charges related to impairment and restructuring, net income for the
current quarter decreased to $0.5 million from net income of $58
million in the prior year quarter.
-- Reported LPS was ($1.90 ), compared with prior year quarter reported
EPS of $0.30 . Adjusted EPS were $0.01 compared to prior year quarter
adjusted EPS of $0.75 . A reconciliation follows:
(Loss) Earnings Per Diluted Share Reconciliation
Third Quarter FY 2009 Third Quarter FY 2008
Reported LPS ($1.90) Reported EPS $0.30
Restructuring and Goodwill impairment
related charges 0.51 charge 0.45
Asset impairment charges 1.40
------- -------
Adjusted EPS $0.01 Adjusted EPS $0.75
======= =======
Fiscal 2009 Year to Date Key Developments
-- Cash flow from operating activities was $164 million in the first nine
months of fiscal 2009, compared with $159 million in the prior year
period. Free operating cash flow for the current year period was $73
million , compared with $30 million in the prior year period. The
increased generation of free operating cash flow was driven by a
strong focus on receivable collection, inventory reduction resulting
from active management of production levels and lower capital
expenditures.
-- Sales of $1.7 billion decreased 14 percent from $2.0 billion in the
same period last year. Sales decreased 13 percent organically and 2
percent from unfavorable foreign currency effects. This was partially
offset by the net favorable impact of acquisitions and divestitures of
1 percent.
-- Operating loss was $74 million , compared with operating income of $182
million in the same period last year, a decrease of $256 million .
Absent charges related to restructuring and asset impairment,
operating income was $90 million compared to $217 million in the prior
year period. This decrease was principally the result of reduced sales
volumes and the related lower manufacturing cost absorption. A
considerable portion of the impact of lower business levels was offset
by a combination of cost reduction actions, lower provisions for
employee incentive compensation plans and higher price realization.
-- Reported LPS was ($1.18 ) compared to the prior year reported EPS of
$1.38 . Adjusted EPS of $0.94 decreased 51 percent, compared with
prior year adjusted EPS of $1.91 . A reconciliation follows:
(Loss) Earnings Per Diluted Share Reconciliation
First Nine Months of FY 2009 First Nine Months of FY 2008
Reported LPS ($1.18) Reported EPS $1.38
Restructuring and related Impact of German tax
charges 0.74 law change 0.08
Asset impairment Goodwill impairment
charges 1.38 charge 0.45
----- -----
Adjusted EPS $0.94 Adjusted EPS $1.91
===== =====
Segment Highlights of Fiscal 2009 Third Quarter
MSSG operating loss was
AMSG operating loss was
Corporate operating loss decreased by 59 percent, or
Outlook
Due to the present high level of uncertainty in the global economy,
visibility is very limited regarding the demand in
Based on management's best judgment in this uncertain environment,
Dividend Declared
Third quarter results for fiscal 2009 will be discussed in a live Internet
broadcast at
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. Forward-looking statements are statements that do not
relate strictly to historical or current facts. You can identify
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
or events. Forward looking statements in this release concern, among other
things,
FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
(in thousands, except per March 31, March 31,
share amounts) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $441,311 $689,669 $1,679,260 $1,952,168
Cost of goods sold 337,529 451,803 1,193,385 1,281,273
-------------------------------------------------------------------------
Gross profit 103,782 237,866 485,875 670,895
Operating expense 108,054 150,461 392,084 443,414
Restructuring and asset
impairment charges 143,476 35,000 158,092 35,000
Amortization of intangibles 3,196 3,487 9,874 10,058
-------------------------------------------------------------------------
Operating (loss) income (150,944) 48,918 (74,175) 182,423
Interest expense 6,672 8,005 21,814 24,335
Other (income) expense, net (5,243) 385 (8,630) (1,711)
-------------------------------------------------------------------------
(Loss) income before
income taxes and
minority interest (152,373) 40,528 (87,359) 159,799
(Benefit) provision for
income taxes (14,660) 16,616 (1,456) 48,953
Minority interest expense 161 742 845 2,651
-------------------------------------------------------------------------
Net (loss) income $(137,874) $23,170 $(86,748) $108,195
=========================================================================
Basic (loss) earnings per
share $(1.90) $0.30 $(1.18) $1.41
=========================================================================
Diluted (loss) earnings per
share $(1.90) $0.30 $(1.18) $1.38
=========================================================================
Dividends per share $0.12 $0.12 $0.36 $0.35
=========================================================================
Basic weighted average
shares outstanding 72,673 76,463 73,238 76,984
=========================================================================
Diluted weighted average
shares outstanding 72,673 77,503 73,238 78,374
=========================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, June 30,
(in thousands) 2009 2008
-----------------------------------------------------------------------
ASSETS
Cash and cash equivalents $98,190 $86,478
Accounts receivable, net 295,322 512,794
Inventories 426,455 460,800
Other current assets 100,845 91,914
-----------------------------------------------------------------------
Total current assets 920,812 1,151,986
Property, plant and equipment, net 729,783 749,755
Goodwill and intangible assets, net 670,127 802,722
Other assets 76,649 79,886
-----------------------------------------------------------------------
Total assets $2,397,371 $2,784,349
=======================================================================
LIABILITIES
Current maturities of long-term debt
and capital leases, including
notes payable $42,647 $33,600
Accounts payable 110,873 189,050
Other current liabilities 256,074 298,661
-----------------------------------------------------------------------
Total current liabilities 409,594 521,311
Long-term debt and capital leases 459,446 313,052
Other liabilities 260,325 280,552
-----------------------------------------------------------------------
Total liabilities 1,129,365 1,114,915
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 18,678 21,527
SHAREOWNERS' EQUITY 1,249,328 1,647,907
-----------------------------------------------------------------------
Total liabilities and shareowners' equity $2,397,371 $2,784,349
=======================================================================
SEGMENT DATA (UNAUDITED) Three Months Ended Nine Months Ended
March 31, March 31,
(in thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Outside Sales:
Metalworking Solutions
and Services Group $262,454 $459,407 $1,038,370 $1,301,837
Advanced Materials
Solutions Group 178,857 230,262 640,890 650,331
-------------------------------------------------------------------------
Total outside sales $441,311 $689,669 $1,679,260 $1,952,168
=========================================================================
Sales By Geographic Region:
United States $219,815 $294,281 $783,018 $855,599
International 221,496 395,388 896,242 1,096,569
-------------------------------------------------------------------------
Total sales by geographic
region $441,311 $689,669 $1,679,260 $1,952,168
=========================================================================
Operating (Loss) Income:
Metalworking Solutions
and Services Group $(39,943) $75,679 $11,196 $193,017
Advanced Materials
Solutions Group (102,502) (6,110) (53,072) 51,067
Corporate and eliminations(a) (8,499) (20,651) (32,299) (61,661)
-------------------------------------------------------------------------
Total operating (loss)
income $(150,944) $48,918 $(74,175) $182,423
=========================================================================
(a) Includes corporate functional shared services and intercompany
eliminations.
In addition to reported results under generally accepted accounting
principles in the United States of America (GAAP), the following
financial highlight tables include, where appropriate, a reconciliation
of adjusted results including gross profit, operating expense, operating
income, MSSG operating income and margin, AMSG operating income and
margin, effective tax rate, net income and diluted (loss) earnings per
share as well as free operating cash flow and adjusted return on
invested capital (which are non-GAAP financial measures), to the most
directly comparable GAAP measures. 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 of Form 8-K to which this release is attached.
THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED)
(in thousands, Net Diluted
except per Gross Operating Operating (Loss) (LPS)
share amounts) Profit Expense Loss Income EPS
-------------------------------------------------------------------------
2009 Reported
Results $103,782 $108,054 $(150,944) $(137,874) $(1.90)
Restructuring
and related
charges 2,248 1,145 33,537 37,167 0.51
Asset
impairment
charges - - 111,042 101,200 1.40
-------------------------------------------------------------------------
2009 Adjusted
Results $106,030 $109,199 $(6,365) $493 $0.01
=========================================================================
MSSG AMSG
Operating Operating
(in thousands, (Loss) (Loss)
except percents) Income Income
-------------------------------------------------------------------------
2009 Reported
Results $(39,943) $(102,502)
Restructuring
and related
charges 25,428 9,464
Asset
impairment
charges - 111,042
-------------------------------------------------------------------------
2009 Adjusted
Results $(14,515) $18,004
=========================================================================
THREE MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
AMSG
(in thousands, Operating
except per Income Operating Net Diluted
share amounts) (Loss) Income Income EPS
-------------------------------------------------------------------------
2008 Reported
Results $(6,110) $48,918 $23,170 $0.30
Goodwill
impairment
charge 35,000 35,000 35,000 0.45
-------------------------------------------------------------------------
2008 Adjusted
Results $28,890 $83,918 $58,170 $0.75
=========================================================================
NINE MONTHS ENDED MARCH 31, 2009 (UNAUDITED)
(in thousands, Operating Net Diluted
except per Gross Operating (Loss) (Loss) (LPS)
share amounts) Profit Expense Income Income EPS
-------------------------------------------------------------------------
2009 Reported
Results $485,875 $392,084 $(74,175) $(86,748) $(1.18)
Restructuring
and related
charges 6,898 1,178 52,770 54,355 0.74
Asset
impairment
charges - - 111,042 101,200 1.38
-------------------------------------------------------------------------
2009 Adjusted
Results $492,773 $393,262 $89,637 $68,807 $0.94
=========================================================================
NINE MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
(in thousands,
except percents
and per share Operating Net Diluted
amounts) Income Income EPS
-------------------------------------------------------------------------
2008 Reported
Results $182,423 $108,195 $1.38
Impact of
German tax
law change - 6,594 0.08
Goodwill
impairment
charge 35,000 35,000 0.45
-------------------------------------------------------------------------
2008 Adjusted
Results $217,423 $149,789 $1.91
=========================================================================
FREE OPERATING CASH FLOW (UNAUDITED) Nine Months Ended
March 31,
(in thousands) 2009 2008
------------------------------------------------------------------------
Net cash flow provided by operating activities $163,739 $158,558
Purchases of property, plant and equipment (92,712) (130,587)
Proceeds from disposals of property, plant and
equipment 2,386 2,370
------------------------------------------------------------------------
Free operating cash flow $73,413 $30,341
========================================================================
SOURCEKennametal Inc. -0-04/24/2009 /CONTACT: Investor Relations, Quynh McGuire, +1-724-539-6559, or Media Relations,Joy Chandler , +1-724-539-4618, both ofKennametal Inc. / /Web Site: http://www.kennametal.com / (KMT) CO:Kennametal Inc. ST:Pennsylvania IN: MAC MIN MNG SU: ERN DIV ERP CCA PR -- NE03839 -- 893904/24/2009 08:00 EDT http://www.prnewswire.com