UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Kennametal Inc.

(Exact Name of Registrant as Specified in Its Charter)

(State or Other Jurisdiction of Incorporation)

1-5318		25-0900168
(Commission File Number)		(IRS Employer Identification No.)

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (724) 539-5000

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition

Item 9.01. Financial Statements and Exhibits

Item 2.02 Results of Operations and Financial Condition

Attached hereto as Exhibit 99.1 and incorporated by reference herein is the text of a presentation delivered on October [19], 2005 by Markos I. Tambakeras, Chairman, President and Chief Executive Officer of Kennametal Inc. to Financial Executives International. This information is furnished pursuant to Item 2.02 of Form 8-K. The information in this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended. The information presented by the Company contains certain non-GAAP financial measures including adjusted return on invested capital (“ROIC”), earnings before interest and taxes (“EBIT”), primary working capital (“PWC”), and debt to capital.

Kennametal management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current, past and future periods. Management believes that investors should have available the same information that management uses to assess operational performance, determine compensation, and assess the capital structure of the Company. Non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

Reconciliations to the most comparable GAAP measure for the following forecasted non-GAAP financial measures are not available: EBIT and ROIC. The comparable GAAP measures are Net Income and ROIC calculated utilizing net income, respectively. As these measures are dependent on many factors and not derived from a specific calculation, reconciliation to comparable GAAP measures is not available. For the purposes of this presentation, the Company does not consider the lack of these reconciliations to be significant.

Accordingly, we have compiled below certain definitions and reconciliations as required by Regulation G.

ROIC

Adjusted Return on Invested Capital is a non-GAAP financial measure and is defined as the previous 12 months’ net income, adjusted for interest expense and special items, divided by the sum of the previous 12 months’ average balances of debt, securitized accounts receivable, minority interest and shareowners’ equity. Management believes that this financial measure provides additional insight into the underlying capital structuring and performance of the Company. Management utilizes this non-GAAP measure in determining compensation and assessing the operations of the Company.

EBIT

EBIT is an acronym for Earnings Before Interest and Taxes and is not a calculation in accordance with GAAP. The most directly comparable GAAP measure is net income. However, we believe that EBIT is widely used as a measure of operating performance and we believe EBIT to be an important indicator of the Company’s operational strength and performance. Nevertheless, the measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining liquidity that is calculated in accordance with GAAP. Additionally, Kennametal will adjust EBIT for restructuring charges, interest income and other items. Management uses this information in reviewing operating performance and in the determination of compensation.

Primary Working Capital

Primary working capital is a non-GAAP presentation and is defined as accounts receivable, net plus inventories, net minus accounts payable. The most directly comparable GAAP measure is working capital, which is defined as current assets less current liabilities. We believe primary working capital better represents Kennametal’s performance in managing certain assets and liabilities controllable at the business unit level and is used as such for internal performance measurement.

Debt-to-Capital

Debt-to-equity in accordance with GAAP is defined as total debt divided by Shareowners’ equity and total debt. Debt-to-capital is defined by Kennametal as total current and long term debt divided by total Shareowner’s equity plus minority interest plus total debt. Management believes that these financial measures provide additional insight into the underlying capital structuring and performance of the Company.

RECONCILIATIONS

DEBT TO CAPITAL RECONCILIATION (Unaudited):

(in thousands)						June 30,
		2005				2004				2003
Total debt		$	437,374			$	440,207			$	525,687
Total shareowners’ equity			972,862				887,152				721,577
Debt to equity, GAAP			45.0	%			49.6	%			72.9	%
Total debt		$	437,374			$	440,207			$	525,687
Minority interest			17,460				16,232				18,880
Total shareowners’ equity			972,862				887,152				721,577
Total capital		$	1,427,696			$	1,343,591			$	1,266,144
Debt to Capital			30.6	%			32.8	%			41.5	%

EBIT RECONCILIATION (Unaudited):

		Twelve Months Ended June 30,
		2005				2004				2003
Net income, as reported		$	119,291			$	73,578			$	18,130
As % of sales			5.2	%			3.7	%			1.0	%
Add back:
Interest			27,277				25,884				36,166
Taxes			61,394				35,500				14,300
EBIT			207,962				134,962				68,596
Additional adjustments:
Minority interest			3,592				1,596				1,860
Interest income			(3,462	)			(1,437	)			(2,815	)
Securitization fees			3,186				1,679				1,892
Adjusted EBIT		$	211,278			$	136,800			$	69,533

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RETURN ON INVESTED CAPITAL RECONCILIATION (Unaudited):

For the Period Ended June 30, 2005

Invested Capital		6/30/2005				3/31/2005				12/31/2004				9/30/2004				6/30/2004				Average
Debt		$	437,374			$	485,168			$	405,156			$	435,435			$	440,207			$	440,668
Accounts receivable securitized			109,786				120,749				115,253				115,309				117,480				115,715
Minority interest			17,460				19,664				19,249				17,377				16,232				17,996
Shareowners’ equity			972,862				1,021,186				1,003,507				924,432				887,152				961,828
Total		$	1,537,482			$	1,646,767			$	1,543,165			$	1,492,553			$	1,461,071			$	1,536,207

		Quarter Ended
Interest Expense		6/30/2005				3/31/2005				12/31/2004				9/30/2004				Total
Interest expense		$	7,897			$	6,803			$	6,121			$	6,456			$	27,277
Securitization interest			981				868				757				580				3,186
Total interest expense		$	8,878			$	7,671			$	6,878			$	7,036			$	30,463
Income tax benefit																			10,175
Total Interest Expense, net of tax																		$	20,288

		Quarter Ended
Total Income		6/30/2005				3/31/2005				12/31/2004				9/30/2004				Total
Net Income, as reported		$	37,740			$	30,650			$	28,181			$	22,720			$	119,291
Restructuring and asset impairment charges			—				3,306				—				—				3,306
Loss on assets held for sale			—				1,086				—				—				1,086
Minority interest expense			238				1,449				928				977				3,592
Total Income, excluding special items		$	37,978			$	36,491			$	29,109			$	23,697			$	127,275
Total Income, excluding special items																		$	127,275
Total Interest Expense, net of tax																			20,288
																		$	147,563
Average invested capital																		$	1,536,207
Adjusted Return on Invested Capital																			9.6	%
Return on Invested Capital calculated utilizing Net Income, as reported is as follows:
Net Income, as reported																		$	119,291
Total Interest Expense, net of tax																			20,288
																		$	139,579
Average invested capital																		$	1,536,207
Return on Invested Capital																			9.1	%

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RETURN ON INVESTED CAPITAL RECONCILIATION (Unaudited):

For the Period Ended June 30, 2004

Invested Capital		6/30/2004				3/31/2004				12/31/2003				9/30/2003				6/30/2003				Average
Debt		$	440,207			$	494,312			$	481,327			$	520,138			$	525,687			$	492,334
Accounts receivable securitized			117,480				108,916				101,422				95,318				99,316				104,490
Minority interest			16,232				16,598				16,286				16,089				18,880				16,817
Shareowners’ equity			887,152				809,904				791,442				746,562				721,577				791,327
Total		$	1,461,071			$	1,429,730			$	1,390,477			$	1,378,107			$	1,365,460			$	1,404,968

		Quarter Ended
Interest Expense		6/30/2004				3/31/2004				12/31/2003				9/30/2003				Total
Interest expense		$	6,405			$	6,332			$	6,547			$	6,600			$	25,884
Securitization interest			443				356				483				397				1,679
Total interest expense		$	6,848			$	6,688			$	7,030			$	6,997			$	27,563
Income tax benefit																			8,820
Total interest expense, net of tax																		$	18,743

		Quarter Ended
Total Income		6/30/2004				3/31/2004				12/31/2003				9/30/2003				Total
Net income, as reported		$	29,852			$	24,070			$	10,892			$	8,764			$	73,578
Minority interest expense			(36	)			533				404				695				1,596
MSSG restructuring			—				—				1,109				2,307				3,416
AMSG restructuring			—				—				1,018				—				1,018
Widia integration costs — MSSG			—				—				—				1,027				1,027
Widia integration costs — AMSG			—				—				—				33				33
Pension curtailment			—				—				883				—				883
Gain on Toshiba investment			—				—				(2,990	)			—				(2,990	)
Note receivable			—				—				1,360				—				1,360
Total Income, excluding special items		$	29,816			$	24,603			$	12,676			$	12,826			$	79,921
Total Income, excluding special items																		$	79,921
Total Interest Expense, net of tax																			18,743
																		$	98,664
Average invested capital																		$	1,404,968
Adjusted Return on Invested Capital																			7.0	%
Return on Invested Capital calculated utilizing Net Income, as reported is as follows:
Net Income, as reported																		$	73,578
Total Interest Expense, net of tax																			18,743
																		$	92,321
Average invested capital																		$	1,404,968
Return on Invested Capital																			6.6	%

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RETURN ON INVESTED CAPITAL RECONCILIATION (Unaudited):

For the Period Ended June 30, 2003

Invested Capital		6/30/2003				3/31/2003				12/31/2002				9/30/2002				6/30/2002				Average
Debt		$	525,687			$	580,135			$	617,016			$	616,607			$	411,367			$	550,162
Accounts receivable securitized			99,316				93,614				100,000				95,117				95,900				96,789
Minority interest			18,880				18,070				17,594				17,685				10,671				16,580
Shareowners’ equity			721,577				756,511				737,729				721,007				713,962				730,157
Total		$	1,365,460			$	1,448,330			$	1,472,339			$	1,450,416			$	1,231,900			$	1,393,688

										Quarter Ended
Interest Expense		6/30/2003				3/31/2003				12/31/2002				9/30/2002				Total
Interest expense		$	9,108			$	8,979			$	9,594			$	8,485			$	36,166
Securitization interest			413				406				536				537				1,892
Total interest expense		$	9,521			$	9,385			$	10,130			$	9,022			$	38,058
Income tax benefit																			11,417
Total interest expense, net of tax																		$	26,641

		Quarter Ended
Total Income		6/30/2003				3/31/2003				12/31/2002				9/30/2002				Total
Net income, as reported		$	(4,868	)		$	9,699			$	2,470			$	10,829			$	18,130
Minority interest expense			74				739				709				338				1,860
MSSG restructuring			2,194				754				3,394				—				6,342
AMSG restructuring			857				773				1,577				(123	)			3,084
AMSG Electronics impairment			15,269				—				—				—				15,269
Corporate restructuring			(69	)			195				670				—				796
Widia integration costs — MSSG			1,758				1,337				967				483				4,545
Widia integration costs — AMSG			818				13				3				—				834
J&L restructuring			(45	)			561				327				—				843
FSS restructuring			—				6				20				—				26
Total Income, excluding special items		$	15,988			$	14,077			$	10,137			$	11,527			$	51,729
Total Income, excluding special items																		$	51,729
Total Interest Expense, net of tax																			26,641
																		$	78,370
Average invested capital																		$	1,393,688
Adjusted Return on Invested Capital																			5.6	%
Return on Invested Capital calculated utilizing Net Income, as reported is as follows:
Net Income, as reported																		$	18,130
Total Interest Expense, net of tax																			26,641
																		$	44,771
Average invested capital																		$	1,393,688
Return on Invested Capital																			3.2	%

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PRIMARY WORKING CAPITAL RECONCILIATON (Unaudited):

For the Period Ended June 30, 2005

		FISCAL 2005
		6/30/05				3/31/05				12/31/04				9/30/04				6/30/04				Average
Current assets		$	831,062			$	885,829			$	845,374			$	820,187			$	796,945			$	835,879
Current liabilities			428,658				458,464				397,921				483,485				486,527				451,011
Working capital in accordance with GAAP		$	402,404			$	427,365			$	447,453			$	336,702			$	310,418			$	384,868
Excluding items:
Cash and cash equivalents			(43,220	)			(34,792	)			(32,168	)			(28,688	)			(25,940	)			(32,961	)
Deferred income taxes			(70,391	)			(98,063	)			(99,731	)			(96,144	)			(95,240	)			(91,914	)
Other current assets			(37,466	)			(82,822	)			(39,605	)			(37,178	)			(40,443	)			(47,503	)
Total excluded current assets		$	(151,077	)		$	(215,677	)		$	(171,504	)		$	(162,010	)		$	(161,623	)		$	(172,378	)
Adjusted current assets			679,985				670,152				673,870				658,177				635,322				663,501
Short-term debt, including notes payable			(50,889	)			(56,225	)			(28,888	)			(116,446	)			(126,807	)			(75,851	)
Accrued liabilities			(222,930	)			(259,971	)			(226,568	)			(220,496	)			(211,504	)			(228,294	)
Total excluded current liabilities		$	(273,819	)		$	(316,196	)		$	(255,456	)		$	(336,942	)		$	(338,311	)		$	(304,145	)
Adjusted current liabilities			154,839				142,268				142,465				146,543				148,216				146,866
Primary working capital		$	525,146			$	527,884			$	531,405			$	511,634			$	487,106			$	516,635
Five quarter average PWC																						$	516,635
Sales, for the twelve months ended June 30, 2005																							2,304,167
PWC as a percentage of sales																							22.4	%

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PRIMARY WORKING CAPITAL RECONCILIATON (Unaudited):

For the Period Ended June 30, 2004

		FISCAL 2004
		6/30/04				3/31/04				12/31/03				9/30/03				6/30/03				Average
Current assets		$	796,945			$	790,892			$	752,703			$	768,634			$	782,352			$	778,305
Current liabilities			486,527				340,743				307,190				316,606				345,008				359,215
Working capital in accordance with GAAP		$	310,418			$	450,149			$	445,513			$	452,028			$	437,344			$	419,090
Excluding items:
Cash and cash equivalents			(25,940	)			(27,528	)			(15,086	)			(14,720	)			(15,093	)			(19,673	)
Deferred income taxes			(95,240	)			(88,480	)			(88,820	)			(86,888	)			(97,237	)			(91,333	)
Other current assets			(40,443	)			(38,803	)			(39,460	)			(47,003	)			(48,606	)			(42,863	)
Total excluded current assets		$	(161,623	)		$	(154,811	)		$	(143,366	)		$	(148,611	)		$	(160,936	)		$	(153,869	)
Adjusted current assets			635,322				636,081				609,337				620,023				621,416				624,436
Short-term debt, including notes payable			(126,807	)			(8,193	)			(12,872	)			(11,375	)			(10,845	)			(34,018	)
Accrued liabilities			(211,504	)			(200,304	)			(181,755	)			(197,578	)			(215,654	)			(201,359	)
Total excluded current liabilities		$	(338,311	)		$	(208,497	)		$	(194,627	)		$	(208,953	)		$	(226,499	)		$	(235,377	)
Adjusted current liabilities			148,216				132,246				112,563				107,653				118,509				123,837
Primary working capital		$	487,106			$	503,835			$	496,774			$	512,370			$	502,907			$	500,599
Five quarter average PWC																						$	500,599
Sales, for the twelve months ended June 30, 2004																							1,971,441
PWC as a percentage of sales																							25.4	%

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PRIMARY WORKING CAPITAL RECONCILIATON (Unaudited):

For the Period Ended June 30, 2003

		FISCAL 2003
		6/30/03				3/31/03				12/31/02				9/30/02				6/30/02				Average
Current assets		$	782,352			$	788,091			$	755,018			$	750,397			$	637,384			$	742,648
Current liabilities			345,008				344,865				281,431				289,860				262,100				304,653
Working capital in accordance with GAAP		$	437,344			$	443,226			$	473,587			$	460,537			$	375,284			$	437,995
Excluding items:
Cash and cash equivalents			(15,093	)			(17,250	)			(18,155	)			(14,300	)			(10,385	)			(15,037	)
Deferred income taxes			(97,237	)			(81,651	)			(80,204	)			(71,084	)			(71,375	)			(80,310	)
Other current assets			(48,606	)			(44,286	)			(53,868	)			(40,110	)			(31,447	)			(44,263	)
Total excluded current assets		$	(160,936	)		$	(143,187	)		$	(152,227	)		$	(125,494	)		$	(113,207	)		$	(139,010	)
Adjusted current assets			621,416				644,904				602,791				624,903				524,177				603,638
Short-term debt, including notes payable			(10,845	)			(15,068	)			(17,591	)			(16,992	)			(23,480	)			(16,795	)
Accrued liabilities			(215,654	)			(208,816	)			(171,726	)			(171,045	)			(137,034	)			(180,855	)
Total excluded current liabilities		$	(226,499	)		$	(223,884	)		$	(189,317	)		$	(188,037	)		$	(160,514	)		$	(197,650	)
Adjusted current liabilities			118,509				120,981				92,114				101,823				101,586				107,003
Primary working capital		$	502,907			$	523,923			$	510,677			$	523,080			$	422,591			$	496,635
Five quarter average PWC																						$	496,635
Sales, for the twelve months ended June 30, 2003																							1,758,957
PWC as a percentage of sales																							28.2	%

Item 9.01 Financial Statements and Exhibits

Exhibit 99.1

Presentation by Markos I. Tambakeras delivered to Financial Executives International on October 19, 2005.

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

						KENNAMETAL INC.
		Date: October 19, 2005		By:		/s/ Timothy A. Hibbard
						Timothy A. Hibbard
						Corporate Controller and Chief Accounting Officer