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Kennametal Announces First Quarter 2013 Results
- Reported EPS of $0.57
- Delivered double digit operating margin
- Stellite acquisition accretive $0.01 per share
- Revised guidance due to slowing macro environment
Fiscal 2013 First Quarter Key Developments
- Sales were
$629 million , compared with$659 million in the same quarter last year. Sales decreased by 4 percent driven by a 7 percent organic decline, 5 percent unfavorable effect from currency exchange and 1 percent from fewer business days, partially offset by a 9 percent increase from the Stellite acquisition. - Operating income was
$64 million , compared with$102 million in the same quarter last year. The Stellite acquisition contributed$3 million of operating income in the current year quarter. Operating income decreased primarily due to lower sales volume, lower absorption of manufacturing costs and unfavorable currency impacts. This decrease was partially offset by reduced operating expense due to cost control. Excluding Stellite, adjusted operating margin was 10.8 percent, compared with an operating margin of 15.4 percent in the prior year. - The effective tax rate for the quarter was 20.7 percent compared with 23.0 percent in the prior year period. The current quarter rate reflects a benefit from the effective settlement of an income tax audit in
Europe , partially offset by the impacts of stronger earnings inthe United States and the reduction in the tax rate in theUnited Kingdom . - EPS were
$0.57 , compared with the prior year quarter EPS of$0.88 . The current year EPS includes$0.01 per share accretion from the Stellite acquisition. - Adjusted ROIC was 14.6 percent as of
September 30, 2012 . - The company purchased 706,098 shares of its capital stock under a previously announced amended share repurchase program.
Segment Developments for the Fiscal 2013 First Quarter
- Industrial segment sales of
$353 million declined 15 percent from$418 million in the prior year quarter, which reflected a 9 percent organic decline and a 6 percent unfavorable effect from currency exchange. On an organic basis, sales declined 15 percent in general engineering and 1 percent in transportation, while aerospace and defense sales grew 7 percent. General engineering was unfavorably affected by lower sales to the indirect channel due to inventory destocking as a result of the slowing macro environment. On a regional basis, sales declined approximately 13 percent in theAmericas , 7 percent inEurope and 1 percent inAsia . - Industrial segment operating income was
$35 million compared with$73 million in the prior year. Industrial operating income decreased primarily due to lower sales volume and lower absorption of manufacturing costs, and unfavorable foreign currency impacts. Industrial operating margin was 10.0 percent compared with 17.4 percent in the prior year. - Infrastructure segment sales of
$276 million increased 15 percent from$241 million in the prior year, driven by 25 percent growth from the Stellite acquisition, partially offset by a 5 percent organic decline, 4 percent unfavorable effect from currency exchange and 1 percent from fewer business days. On an organic basis, sales declined by 6 percent in both the energy and earthworks markets. Earthworks continues to be affected by weak demand for underground coal inNorth America , while energy is being affected by lower global demand. On a regional basis excluding the impact of the Stellite acquisition, sales decreased approximately 11 percent in theAmericas and 7 percent inEurope , while sales were 5 percent higher inAsia . - Infrastructure segment operating income was
$32 million , compared with$33 million in the same quarter of the prior year. Operating income benefited from Stellite operating income of$3 million , which was more than offset by the effects of the organic sales decline and lower absorption of manufacturing costs. Infrastructure adjusted operating margin was 13.2 percent compared with 13.5 percent in the prior year.
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.
Outlook
Although the company expects near-term challenges in the macro environment fueled by global uncertainty, the underlying fundamentals suggest a resumption of growth in the industrial sector during the second half of fiscal 2013, especially in
In response to the slowing macro environment,
As a result of lower than expected sales, the company has revised its EPS guidance for fiscal 2013 to range from
The company expects cash flow from operations in the range of
Dividend Declared
The company will discuss its fiscal 2013 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
FINANCIAL HIGHLIGHTS
|
||||||||
Three Months Ended |
||||||||
(in thousands, except per share amounts) |
2012 |
2011 |
||||||
Sales |
$ |
629,459 |
$ |
658,877 |
||||
Cost of goods sold |
421,111 |
407,817 |
||||||
Gross profit |
208,348 |
251,060 |
||||||
Operating expense |
138,860 |
145,989 |
||||||
Amortization of intangibles |
5,107 |
3,461 |
||||||
Operating income |
64,381 |
101,610 |
||||||
Interest expense |
5,956 |
5,487 |
||||||
Other (income) expense, net |
(902) |
574 |
||||||
Income from continuing operations before income taxes |
59,327 |
95,549 |
||||||
Provision for income taxes |
12,280 |
21,976 |
||||||
Net income |
47,047 |
73,573 |
||||||
Less: Net income attributable to noncontrolling interests |
657 |
1,587 |
||||||
Net income attributable to Kennametal |
$ |
46,390 |
$ |
71,986 |
||||
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS |
||||||||
Basic earnings per share |
$ |
0.58 |
$ |
0.89 |
||||
Diluted earnings per share |
$ |
0.57 |
$ |
0.88 |
||||
Dividends per share |
$ |
0.16 |
$ |
0.12 |
||||
Basic weighted average shares outstanding |
80,245 |
80,659 |
||||||
Diluted weighted average shares outstanding |
81,405 |
81,808 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||
(in thousands) |
September 30, 2012 |
June 30, 2012 |
||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
110,528 |
$ |
116,466 |
||||
Accounts receivable, net |
437,700 |
478,989 |
||||||
Inventories |
624,265 |
585,856 |
||||||
Other current assets |
99,586 |
101,651 |
||||||
Total current assets |
1,272,079 |
1,282,962 |
||||||
Property, plant and equipment, net |
740,706 |
742,201 |
||||||
Goodwill and other intangible assets, net |
959,637 |
962,837 |
||||||
Other assets |
43,778 |
46,188 |
||||||
Total assets |
$ |
3,016,200 |
$ |
3,034,188 |
||||
LIABILITIES |
||||||||
Current maturities of long-term debt and capital leases, including notes payable |
$ |
70,803 |
$ |
75,137 |
||||
Accounts payable |
183,605 |
219,475 |
||||||
Other current liabilities |
225,880 |
284,010 |
||||||
Total current liabilities |
480,288 |
578,622 |
||||||
Long-term debt and capital leases |
530,321 |
490,608 |
||||||
Other liabilities |
293,059 |
296,737 |
||||||
Total liabilities |
1,303,668 |
1,365,967 |
||||||
KENNAMETAL SHAREOWNERS' EQUITY |
1,687,353 |
1,643,850 |
||||||
NONCONTROLLING INTERESTS |
25,179 |
24,371 |
||||||
Total liabilities and equity |
$ |
3,016,200 |
$ |
3,034,188 |
||||
SEGMENT DATA (UNAUDITED) |
Three Months Ended |
|||||||
(in thousands) |
2012 |
2011 |
||||||
Outside Sales: |
||||||||
Industrial |
$ |
353,177 |
$ |
417,819 |
||||
Infrastructure |
276,282 |
241,058 |
||||||
Total outside sales |
$ |
629,459 |
$ |
658,877 |
||||
Sales By Geographic Region: |
||||||||
North America |
$ |
283,223 |
$ |
302,545 |
||||
Western Europe |
$ |
176,154 |
$ |
187,727 |
||||
Rest of World |
170,082 |
168,605 |
||||||
Total sales by geographic region |
$ |
629,459 |
$ |
658,877 |
||||
Operating Income: |
||||||||
Industrial |
$ |
35,189 |
$ |
72,685 |
||||
Infrastructure |
31,735 |
32,554 |
||||||
Corporate (1) |
(2,543) |
(3,629) |
||||||
Total operating income |
$ |
64,381 |
$ |
101,610 |
||||
(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, 2012 - EXCLUDING STELLITE (UNAUDITED) |
||||||||||||||||
(in thousands, except percents) |
Infrastructure Sales |
Infrastructure |
||||||||||||||
2013 Reported Results |
$ |
276,282 |
$ |
31,735 |
||||||||||||
2013 Reported Operating Margin |
11.5% |
|||||||||||||||
Acquisition impact (2) |
(59,505) |
(3,091) |
||||||||||||||
2013 Adjusted Results |
$ |
216,777 |
$ |
28,644 |
||||||||||||
2013 Adjusted Operating Margin |
13.2% |
|||||||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2012 - EXCLUDING STELLITE (UNAUDITED) |
||||||||||||||||
(in thousands, except |
Sales |
Operating Income |
Net Income (3) |
Diluted EPS |
||||||||||||
2013 Reported Results |
$ |
629,459 |
$ |
64,381 |
$ |
46,390 |
$ |
0.57 |
||||||||
2013 Reported Operating Margin |
10.2% |
|||||||||||||||
Acquisition impact (2) |
(59,505) |
(3,091) |
(374) |
(0.01) |
||||||||||||
2013 Adjusted Results |
$ |
569,954 |
$ |
61,290 |
$ |
46,016 |
$ |
0.56 |
||||||||
2013 Adjusted Operating Margin |
10.8% |
|||||||||||||||
(2) Includes the impact of Stellite operations (3) Represents amounts attributable to Kennametal Shareowners |
FREE OPERATING CASH FLOW (UNAUDITED) |
Three Months Ended |
|||||||
September 30, |
||||||||
(in thousands) |
2012 |
2011 |
||||||
Net cash flow from operating activities |
$ |
3,138 |
$ |
(7,238) |
||||
Purchases of property, plant and equipment |
(15,803) |
(11,607) |
||||||
Proceeds from disposals of property, plant and equipment |
423 |
545 |
||||||
Free operating cash flow |
$ |
(12,242) |
$ |
(18,300) |
RETURN ON INVESTED CAPITAL (UNAUDITED) |
||||||||||||||||||||||||
Invested Capital |
9/30/2012 |
6/30/2012 |
3/31/2012 |
12/31/2011 |
9/30/2011 |
Average |
||||||||||||||||||
Debt |
$ |
601,124 |
$ |
565,745 |
$ |
640,871 |
$ |
307,938 |
$ |
312,721 |
$ |
485,680 |
||||||||||||
Total equity |
1,712,532 |
1,668,221 |
1,745,699 |
1,630,174 |
1,588,745 |
1,669,074 |
||||||||||||||||||
Total |
$ |
2,313,656 |
$ |
2,233,966 |
$ |
2,386,570 |
$ |
1,938,112 |
$ |
1,901,466 |
$ |
2,154,754 |
||||||||||||
Three Months Ended |
||||||||||||||||||||||||
Interest Expense |
9/30/2012 |
6/30/2012 |
3/31/2012 |
12/31/2011 |
Total |
|||||||||||||||||||
Interest expense |
$ |
5,956 |
$ |
8,469 |
$ |
8,003 |
$ |
5,256 |
$ |
27,684 |
||||||||||||||
Income tax benefit |
5,277 |
|||||||||||||||||||||||
Total interest expense, net of tax |
$ |
22,407 |
||||||||||||||||||||||
Total Income |
9/30/2012 |
6/30/2012 |
3/31/2012 |
12/31/2011 |
Total |
|||||||||||||||||||
Net income attributable to Kennametal, as reported |
$ |
46,390 |
$ |
86,048 |
$ |
75,499 |
$ |
73,697 |
$ |
281,634 |
||||||||||||||
Stellite acquisition charges |
— |
2,267 |
4,738 |
— |
7,005 |
|||||||||||||||||||
Noncontrolling interest |
657 |
504 |
738 |
774 |
2,673 |
|||||||||||||||||||
Total income, adjusted |
$ |
47,047 |
$ |
88,819 |
$ |
80,975 |
$ |
74,471 |
$ |
291,312 |
||||||||||||||
Total interest expense, net of tax |
22,407 |
|||||||||||||||||||||||
$ |
313,719 |
|||||||||||||||||||||||
Average invested capital |
$ |
2,154,754 |
||||||||||||||||||||||
Adjusted Return on Invested Capital |
14.6% |
|||||||||||||||||||||||
Return on invested capital calculated utilizing net income, as reported is as follows: |
||||||||||||||||||||||||
Net income attributable to Kennametal, as reported |
$ |
281,634 |
||||||||||||||||||||||
Total interest expense, net of tax |
22,407 |
|||||||||||||||||||||||
$ |
304,041 |
|||||||||||||||||||||||
Average invested capital |
$ |
2,154,754 |
||||||||||||||||||||||
Return on Invested Capital |
14.1% |
SOURCE
Investor Relations: Quynh McGuire, +1-724-539-6559, Corporate Relations-Media: Lorrie Paul Crum, +1-724-539-6792