Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 23, 2008
Kennametal Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Pennsylvania | 1-5318 | 25-0900168 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| World Headquarters | ||
| 1600 Technology Way | ||
| P.O. Box 231 | ||
| Latrobe, Pennsylvania | 15650-0231 | |
| (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
On October 23, 2008, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement
for its fiscal first quarter ended September 30, 2008.
The press release contains certain non-generally accepted accounting principles (GAAP) financial
measures. The following GAAP financial measures have been presented on an adjusted basis: gross
profit, operating expense, operating income, Metalworking Sales and Services Group (MSSG) operating
income and margin, Advanced Materials Solutions Group (AMSG) operating income and margin, effective
tax rate, net income and diluted earnings per share. Adjustments include: (1) restructuring and
related charges for the three months ended September 30, 2008 and (2) impact of a German tax law
change for the three months ended September 30, 2007. Management adjusts for these items in
measuring and compensating internal performance and to more easily compare the Company’s financial
performance period-to-period. The press release also contains free operating cash flow and adjusted
return on invested capital, which are also non-GAAP measures and are defined below.
Management believes that presentation of these non-GAAP financial measures provides useful
information about the results of operations of the Company for the current period and past periods.
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.
Free Operating Cash Flow
Free operating cash flow is a non-GAAP financial measure and is defined by the Company as cash
provided by operations (which is the most directly comparable GAAP measure) less capital
expenditures plus proceeds from disposals of fixed assets. Management considers free operating cash
flow to be an important indicator of Kennametal’s cash generating capability because it better
represents cash generated from operations that can be used for strategic initiatives (such as
acquisitions), dividends, debt repayment and other investing and financing activities.
Adjusted Return on Invested Capital
Adjusted Return on Invested Capital is a non-GAAP financial measure and is defined by the Company
as the previous 12 months’ net income, adjusted for interest expense, securitization fees, minority
interest expense and special items, divided by the sum of the previous five quarters’ average
balances of debt, minority interest and shareowners’ equity. The most directly comparable GAAP
measure is return on invested capital calculated utilizing GAAP net income. Management believes
that this financial measure provides additional insight into the underlying capital structure and
performance of the Company. Management utilizes this non-GAAP measure in determining compensation
and assessing the operations of the Company.
A copy of the Company’s earnings announcement is furnished under Exhibit 99.1 attached hereto.
Reconciliations of the above non-GAAP financial measures are included in the earnings announcement.
Additionally, during our quarterly earnings teleconference we may use various non-GAAP financial
measures to describe the underlying operating results. Accordingly, we have compiled below certain
reconciliations as required by Regulation G. 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.
Adjusted EBIT
EBIT is an acronym for Earnings Before Interest and Taxes and is a non-GAAP financial measure. 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 operating performance or cash generation that is calculated in
accordance with GAAP. Additionally, Kennametal will adjust EBIT for minority interest expense,
interest income, securitization fees, pre-tax income from discontinued operations and special
items. Management uses this information in reviewing operating performance and in determining
compensation.
Table of Contents
Primary Working Capital
Primary working capital is a non-GAAP financial measure 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 it is used as such for internal performance
measurement.
Debt to Capital
Debt to capital is a non-GAAP financial measure and is defined by Kennametal as total debt divided
by total shareowners’ equity plus minority interest plus total debt. The most directly comparable
GAAP measure is debt to equity, which is defined as total debt divided by shareowners’ equity.
Management believes that debt to capital provides additional insight into the underlying capital
structuring and performance of the Company.
ADJUSTED EBIT (UNAUDITED)
| Three Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands, except percents) | 2008 | 2007 | ||||||
Net income, as reported |
$ | 35,467 | $ | 34,879 | ||||
Net income as a percent of sales |
5.3 | % | 5.7 | % | ||||
Add back: |
||||||||
Interest expense |
7,116 | 7,799 | ||||||
Tax expense |
8,504 | 21,667 | ||||||
EBIT |
51,087 | 64,345 | ||||||
Additional adjustments: |
||||||||
Minority interest expense |
785 | 872 | ||||||
Interest income |
(2,003 | ) | (905 | ) | ||||
Securitization fees |
— | 8 | ||||||
Special Items: |
||||||||
Restructuring and related charges |
9,145 | — | ||||||
Adjusted EBIT |
$ | 59,014 | $ | 64,320 | ||||
Adjusted EBIT as a percent of sales |
8.8 | % | 10.5 | % | ||||
PRIMARY WORKING CAPITAL (UNAUDITED)
| September 30, | June 30, | |||||||
| (in thousands) | 2008 | 2008 | ||||||
Current assets |
$ | 1,092,065 | $ | 1,151,986 | ||||
Current liabilities |
465,159 | 521,311 | ||||||
Working capital in accordance with GAAP |
$ | 626,906 | $ | 630,675 | ||||
Excluding items: |
||||||||
Cash and cash equivalents |
(68,855 | ) | (86,478 | ) | ||||
Other current assets |
(101,915 | ) | (91,914 | ) | ||||
Total excluded current assets |
(170,770 | ) | (178,392 | ) | ||||
Adjusted current assets |
921,295 | 973,594 | ||||||
Current maturities of long-term debt and capital leases, including notes payable |
(33,479 | ) | (33,600 | ) | ||||
Other current liabilities |
(274,676 | ) | (298,661 | ) | ||||
Total excluded current liabilities |
(308,155 | ) | (332,261 | ) | ||||
Adjusted current liabilities |
157,004 | 189,050 | ||||||
Primary working capital |
$ | 764,291 | $ | 784,544 | ||||
Table of Contents
DEBT TO CAPITAL (UNAUDITED)
| September 30, | June 30, | |||||||
| (in thousands) | 2008 | 2008 | ||||||
Total debt, except percents |
$ | 481,723 | $ | 346,652 | ||||
Total shareowners’ equity |
1,465,757 | 1,647,907 | ||||||
Debt to equity, GAAP |
32.9 | % | 21.0 | % | ||||
Total debt |
$ | 481,723 | $ | 346,652 | ||||
Minority interest |
20,412 | 21,527 | ||||||
Total shareowners’ equity |
1,465,757 | 1,647,907 | ||||||
Total capital |
$ | 1,967,892 | $ | 2,016,086 | ||||
Debt to capital |
24.5 | % | 17.2 | % | ||||
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
(e) Amendment and Restatement of Kennametal Stock and Incentive Plan of 2002
On October 21, 2008, at its Annual Meeting of Shareowners (the “2008 Annual Meeting”), the
Company’s shareowners approved the Amended and Restated Kennametal Stock and Incentive Plan of 2002
(the “Plan”). The Plan was amended primarily to (i) increase the aggregate number of shares of the
Company’s Common Stock available for issuance under the Plan from 7,500,000 to 9,000,000, (ii)
place a limit on the number of full share awards that may be made under the Plan, and (iii) provide
that shares delivered to or withheld by the Company to pay withholding taxes under the Plan or any
of the Company’s prior stock plans and shares not issued upon the net settlement or net exercise of
SARs, in each case, will no longer be available for future grants under the Plan.
The Company’s board of directors previously approved the amendment to the Plan on July 22, 2008,
subject to shareowner approval at the 2008 Annual Meeting. The Plan, as amended, is included in the
Proxy Statement for the 2008 Annual Meeting that the Company filed with the Securities and Exchange
Commission on September 8, 2008.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Fiscal 2009 First Quarter Earnings Announcement
Table of Contents
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 23, 2008 | By: | /s/ Wayne D. Moser | |||
| Wayne D. Moser | |||||
| Vice President Finance and Corporate Controller | |||||
Exhibit 99.1
FOR IMMEDIATE RELEASE:
DATE: October 23, 2008
Investor Relations
CONTACT: Quynh McGuire
PHONE: 724-539-6559
CONTACT: Quynh McGuire
PHONE: 724-539-6559
Media Relations
CONTACT: Joy Chandler
PHONE: 724-539-4618
CONTACT: Joy Chandler
PHONE: 724-539-4618
KENNAMETAL ANNOUNCES RECORD FIRST QUARTER
FISCAL 2009 RESULTS
FISCAL 2009 RESULTS
| – | Records set for sales, adjusted EPS and adjusted ROIC for the September quarter | ||
| – | Organic sales growth of 3 percent | ||
| – | Reported EPS of $0.47; adjusted EPS of $0.57 |
LATROBE,
Pa., (October 23, 2008) — Kennametal Inc. (NYSE: KMT) today reported record sales,
adjusted EPS and adjusted ROIC for its first fiscal quarter ended September 30, 2008. Sales
increased over the prior year by 9 percent, including organic sales growth of 3 percent. This
marked the company’s 19th consecutive quarter of year-over-year organic sales growth.
Reported fiscal 2009 first quarter earnings per diluted share (EPS) were $0.47, compared with the
prior year quarter reported EPS of $0.44, an increase of 7 percent. The current quarter reported
EPS included charges of $0.10 per share related to the company’s previously announced restructuring
actions. Prior year quarter reported EPS included a non-cash charge of $0.08 per share for the
impact of a German tax law change. Absent these charges, adjusted EPS for the current quarter of
$0.57 increased 10 percent compared with prior year quarter adjusted EPS of $0.52. Adjusted ROIC
was 12.3 percent, up 70 basis points from the prior year quarter.
1600 Technology Way | Latrobe, PA 15650-5274 USA | Tel: 724.539.5000 | www. kennametal.com
“Our September quarter performance again demonstrates the effectiveness of our strategies to
further balance Kennametal across geographies and end markets,” said Chairman, President and CEO
Carlos Cardoso. “Our improved geographic balance—with 54% of our revenues coming from outside North
America—helped us set new records for sales, adjusted EPS and adjusted ROIC. We also considerably
improved and gained momentum with price realization. Furthermore, our strong balance sheet allows
us to weather economic downturns while continuing to invest in our business,” 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.
Highlights of Fiscal 2009 First Quarter
| • | Sales for the quarter were $669 million, compared with $615 million in the same quarter last year. Sales grew 9 percent and included 3 percent organic growth, 5 percent from favorable foreign currency effects and 2 percent from more workdays partially offset by the impact of divestitures of 1 percent. | |
| • | As previously announced, the company continued to implement certain restructuring actions to reduce costs and improve efficiencies in its operations. During the September quarter, the company recognized pre-tax charges related to these initiatives of $9 million, or $0.10 per share. Pre-tax charges recorded to date for these initiatives were $17 million. Including these charges, the company expects to recognize a total of $40 million to $50 million of pre-tax charges related to the restructuring actions. The remaining charges are expected to be incurred over the next six to twelve months. Approximately 90 percent of these charges are expected to be cash expenditures. Annual ongoing benefits from these actions, once fully implemented, are expected to be in the range of $20 million to $25 million. | |
| • | The effective tax rate for the current quarter was 19.0 percent compared with 37.7 percent in the prior year quarter. The prior year was unfavorably impacted by a charge related to a German tax law change. Absent that charge, the prior year rate was 26.3 percent. The reduction from the prior year rate was due to the release of a deferred tax benefit valuation allowance and increased benefits from the company’s pan-European business strategy. | |
| • | Net income was $35 million for both the current and prior year quarters. Absent the charges related to restructuring actions and the German tax law change, net income for the current quarter increased 3 percent to $43 million from $41 million in the prior year quarter. This increase was driven primarily by organic sales growth, including higher price realization, and a lower effective tax rate. |
| • | During the quarter, the company repurchased 4.0 million of its shares completing the share repurchase program that was announced in October 2006. | |
| • | Reported EPS were $0.47, compared with prior year quarter reported EPS of $0.44. Adjusted EPS of $0.57 increased 10 percent, compared with prior year quarter adjusted EPS of $0.52. A reconciliation follows: |
Earnings Per Diluted Share Reconciliation
First Quarter FY 2009 |
First Quarter FY 2008 |
|||||||||||
Reported EPS |
$ | 0.47 | Reported EPS |
$ | 0.44 | |||||||
Restructuring and related charges |
0.10 | Impact of German tax law change |
0.08 | |||||||||
Adjusted EPS |
$ | 0.57 | $ | 0.52 | ||||||||
| • | Adjusted ROIC was 12.3 percent, up 70 basis points from 11.6 percent in the prior year quarter. | |
| • | Cash flow from operating activities was $38 million in the current quarter, compared with $57 million in the prior year quarter. Free operating cash flow for the current quarter was an outflow of $5 million compared with an inflow of $16 million in the prior year quarter. The change in free operating cash flow was primarily driven by a reduction in accounts payable and changes in other assets and liabilities. |
Business Segment Highlights of Fiscal 2009 First Quarter
Metalworking Solutions & Services Group (MSSG) sales increased by 6 percent during the September
quarter, driven primarily by favorable foreign currency effects which increased sales by 6 percent.
Increased workdays added a further 2 percent which was offset by the impact of divestitures. On a
global basis, industrial activity was mixed. Activity in certain industry and market sectors, such
as aerospace, defense and energy, remained positive while others, such as automotive and other
durable goods, were somewhat weaker. Regionally, organic sales growth was led by Asia Pacific at
22 percent followed by Latin America, India and Europe at 7 percent, 6 percent and 2 percent,
respectively. This offset a reduction in North American organic sales of 8 percent.
MSSG operating income decreased by 22 percent and the operating margin decreased 360 basis points
from the same quarter last year. During the September quarter, MSSG recognized restructuring and
related charges of $7 million. Absent these charges, MSSG operating income decreased 9 percent and
operating margin decreased 190 basis points. The primary drivers of the decline in operating
margin were temporary disruption effects related to restructuring initiatives and higher raw
material costs offset somewhat by current quarter benefits from price increases and favorable
foreign currency effects.
Advanced Materials Solutions Group (AMSG) sales increased 15 percent during the September quarter,
driven by 10 percent organic growth, 3 percent from favorable foreign currency effects and 2
percent from more workdays. Organic sales increased on stronger mining and construction sales and
higher energy-related sales, slightly offset by lower sales of engineered products and surface
finishing machines and services.
AMSG operating income was level with the prior year quarter while operating margin was 190 basis
points lower. During the September quarter, AMSG recognized restructuring and related charges of
$1 million. Absent these charges, AMSG operating income increased 5 percent and the operating margin decreased 130 basis points. The decline in operating margin was due to unfavorable business mix and lower performance in the engineered products and surface finishing machines and services businesses. Improved price realization more than offset the impact of higher raw material costs.
$1 million. Absent these charges, AMSG operating income increased 5 percent and the operating margin decreased 130 basis points. The decline in operating margin was due to unfavorable business mix and lower performance in the engineered products and surface finishing machines and services businesses. Improved price realization more than offset the impact of higher raw material costs.
In furtherance of its growth strategy for AMSG, Kennametal acquired Tricon Metal and Services, Inc.
(Tricon) on October 1, 2008. Tricon is a leading provider of custom wear solutions specializing in
consumable proprietary steels for the surface and underground mining markets, including hard rock
and coal.
Outlook
Kennametal has revised its earnings outlook for fiscal 2009 to a range of $2.75 to $2.90, excluding
charges that occur relating to the previously announced restructuring actions. Organic sales growth
is expected to be f to 2 percent for fiscal 2009.
“Our proven strategies will continue to make us more resilient and serve us well as we move through
the current period of turbulence in global markets,” said Frank Simpkins, Kennametal Vice President
and Chief Financial Officer. “Our customer base is broad, our end markets are diverse, our
geographic balance has never been better and our balance sheet is strong. Nevertheless, we believe
that it is appropriate at this time to reduce our earnings outlook given the existing level of
uncertainty in the global economy. Throughout the period, we will continue to manage our cost
structure commensurate with prevailing business levels.”
In the second quarter of fiscal 2009, Kennametal expects organic sales growth to be in the range of
f to 2 percent and EPS to be in the range of $0.51 and $0.56, excluding charges that occur
relating to the previously announced restructuring actions.
Kennametal anticipates cash flow from operating activities of approximately $290 million to
$310 million for fiscal 2009. Based on anticipated capital expenditures of $145 million, the
company expects to generate between $145 million and $165 million of free operating cash flow for
fiscal 2009.
Dividend Declared
Kennametal also announced today that its Board of Directors declared a regular quarterly cash
dividend of $0.12 per share. The dividend is payable November 17, 2008 to shareowners of record as
of the close of business on November 5, 2008.
Kennametal advises shareowners 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.
First quarter results for fiscal 2009 will be discussed in a live Internet broadcast at 10:00 a.m.
Eastern time today. This event will be broadcast live on the company’s website,
www.kennametal.com. Once on the homepage, select “Investor Relations and then “Events.” The
replay of this event will also be available on the company’s website through November 23, 2008.
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 event. Forward looking statements in this release concern, among other
things, Kennametal’s expectations regarding future growth, end markets, financial performance for
future periods, its intended restructuring activities and the execution of its share repurchase
program, all of which are based on current expectations that involve inherent risks and
uncertainties. Among the factors that could cause the actual results to differ materially from
those indicated in the forward-looking statements are risks and uncertainties related to: global
and regional economic conditions; availability and cost of the raw materials we use to manufacture
our products; our ability to protect our intellectual property in foreign jurisdictions; our
foreign operations and international markets, such as currency exchange rates, different regulatory
environments, trade barriers, exchange controls, and social and political instability; energy
costs; commodity prices; competition; integrating recent acquisitions, as well as any future
acquisitions, and achieving the expected savings and synergies; business divestitures; demands on
management resources; implementation of restructuring plans and environmental remediation matters;
demand for and market acceptance of new and existing products; future terrorist attacks or acts of
war; and labor relations. Should one or more of these risks or uncertainties materialize, or should
the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could
vary materially from those indicated. These and other risks are more fully described in
Kennametal’s latest annual report on Form 10-K and its other periodic filings with the Securities
and Exchange Commission. We undertake no obligation to release publicly any revisions to
forward-looking statements as a result of future events or developments.
Kennametal Inc. (NYSE: KMT) is a leading global supplier of tooling, engineered components and
advanced materials consumed in production processes. The company improves customers’
competitiveness by providing superior economic returns through the delivery of application
knowledge and advanced technology to master the toughest of materials application demands.
Companies producing everything from airframes to coal, from medical implants to oil wells and from
turbochargers to motorcycle parts recognize Kennametal for extraordinary contributions to their
value chains. Customers buy approximately $2.7 billion annually of Kennametal products and services
— delivered by our 14,000 talented employees in over 60
countries — with more than 50 percent of
these revenues coming from outside North America. Visit us at www.kennametal.com. [KMT-E]
FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| Three Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands, except per share amounts) | 2008 | 2007a | ||||||
Sales |
$ | 669,265 | $ | 615,076 | ||||
Cost of goods sold |
450,487 | 402,985 | ||||||
Gross profit |
218,778 | 212,091 | ||||||
Operating expense |
153,682 | 145,032 | ||||||
Restructuring charges |
8,412 | — | ||||||
Amortization of intangibles |
3,409 | 2,945 | ||||||
Operating income |
53,275 | 64,114 | ||||||
Interest expense |
7,116 | 7,799 | ||||||
Other expense (income), net |
1,403 | (1,103 | ) | |||||
Income before income taxes and minority interest |
44,756 | 57,418 | ||||||
Provision for income taxes |
8,504 | 21,667 | ||||||
Minority interest expense |
785 | 872 | ||||||
Net income |
35,467 | 34,879 | ||||||
Basic earnings per share |
$ | 0.48 | $ | 0.45 | ||||
Diluted earnings per share |
$ | 0.47 | $ | 0.44 | ||||
Dividends per share |
$ | 0.12 | $ | 0.11 | ||||
Basic weighted average shares outstanding |
74,399 | 77,399 | ||||||
Diluted weighted average shares outstanding |
75,526 | 79,068 | ||||||
| a | Share and per share amounts have been restated to reflect the company’s 2-for-1 stock split completed in December 2007. |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| September 30, | June 30, | |||||||
| (in thousands) | 2008 | 2008 | ||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 68,855 | $ | 86,478 | ||||
Accounts receivable, net |
457,160 | 512,794 | ||||||
Inventories |
464,135 | 460,800 | ||||||
Other current assets |
101,915 | 91,914 | ||||||
Total current assets |
1,092,065 | 1,151,986 | ||||||
Property, plant and equipment, net |
729,056 | 749,755 | ||||||
Goodwill and intangible assets, net |
776,141 | 802,722 | ||||||
Other assets |
80,956 | 79,886 | ||||||
Total assets |
$ | 2,678,218 | $ | 2,784,349 | ||||
LIABILITIES |
||||||||
Current maturities of long-term debt and capital leases, including notes payable |
$ | 33,479 | $ | 33,600 | ||||
Accounts payable |
157,004 | 189,050 | ||||||
Other current liabilities |
274,676 | 298,661 | ||||||
Total current liabilities |
465,159 | 521,311 | ||||||
Long-term debt and capital leases |
448,244 | 313,052 | ||||||
Other liabilities |
278,646 | 280,552 | ||||||
Total liabilities |
1,192,049 | 1,114,915 | ||||||
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES |
20,412 | 21,527 | ||||||
SHAREOWNERS’ EQUITY |
1,465,757 | 1,647,907 | ||||||
Total liabilities and shareowners’ equity |
$ | 2,678,218 | $ | 2,784,349 | ||||
SEGMENT DATA (UNAUDITED)
| Three Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands) | 2008 | 2007 | ||||||
Outside Sales: |
||||||||
Metalworking Solutions and Services Group |
$ | 431,286 | $ | 407,697 | ||||
Advanced Materials Solutions Group |
237,979 | 207,379 | ||||||
Total outside sales |
$ | 669,265 | $ | 615,076 | ||||
Sales By Geographic Region: |
||||||||
United States |
$ | 288,806 | $ | 283,080 | ||||
International |
380,459 | 331,996 | ||||||
Total sales by geographic region |
$ | 669,265 | $ | 615,076 | ||||
Operating Income (Loss): |
||||||||
Metalworking Solutions and Services Group |
$ | 43,311 | $ | 55,352 | ||||
Advanced Materials Solutions Group |
29,990 | 29,980 | ||||||
Corporate and eliminations b |
(20,026 | ) | (21,218 | ) | ||||
Total operating income |
$ | 53,275 | $ | 64,114 | ||||
| b | 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 earnings per share (which are GAAP financial measures), 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 SEPTEMBER 30, 2008 (UNAUDITED)
| Gross | Operating | Operating | Net | Diluted | ||||||||||||||||
| (in thousands, except per share amounts) | Profit | Expense | Income | Income | EPS | |||||||||||||||
2009 Reported Results |
$ | 218,778 | $ | 153,682 | $ | 53,275 | $ | 35,467 | $ | 0.47 | ||||||||||
Restructuring and related charges |
723 | (10 | ) | 9,145 | 7,408 | 0.10 | ||||||||||||||
2009 Adjusted Results |
$ | 219,501 | $ | 153,672 | $ | 62,420 | $ | 42,875 | $ | 0.57 | ||||||||||
| MSSG | AMSG | |||||||
| Operating | Operating | |||||||
| (in thousands) | Income | Income | ||||||
2009 Reported Results |
$ | 43,311 | $ | 29,990 | ||||
2009 Reported Operating Margin |
10.0 | % | 12.6 | % | ||||
Restructuring and related charges |
7,234 | 1,405 | ||||||
2009 Adjusted Results |
$ | 50,545 | $ | 31,395 | ||||
2009 Adjusted Operating Margin |
11.7 | % | 13.2 | % | ||||
THREE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED)
| Effective Tax | Net | Diluted | ||||||||||
| (in thousands, except percents and per share amounts) | Rate | Income | EPSc | |||||||||
2008 Reported Results |
37.7 | % | $ | 34,879 | $ | 0.44 | ||||||
Impact of German tax law change |
(11.4 | ) | 6,594 | 0.08 | ||||||||
2008 Adjusted Results |
26.3 | % | $ | 41,473 | $ | 0.52 | ||||||
| c | Per share amounts have been restated to reflect the company’s 2-for-1 stock split completed in December 2007. |
FREE OPERATING CASH FLOW (UNAUDITED)
| Three Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands) | 2008 | 2007 | ||||||
Net cash flow provided by operating activities |
$ | 37,950 | $ | 56,905 | ||||
Purchases of property, plant and equipment |
(44,592 | ) | (42,686 | ) | ||||
Proceeds from disposals of property, plant and equipment |
1,309 | 2,200 | ||||||
Free operating cash flow |
$ | (5,333 | ) | $ | 16,419 | |||
RETURN
ON INVESTED CAPITAL (UNAUDITED)
September 30, 2008 (in thousands, except percents)
September 30, 2008 (in thousands, except percents)
| Invested Capital | 9/30/2008 | 6/30/2008 | 3/31/2008 | 12/31/2007 | 9/30/2007 | Average | ||||||||||||||||||
Debt |
$ | 481,723 | $ | 346,652 | $ | 428,456 | $ | 446,956 | $ | 377,051 | $ | 416,168 | ||||||||||||
Minority interest |
20,412 | 21,527 | 21,879 | 20,276 | 19,122 | 20,643 | ||||||||||||||||||
Shareowners’ equity |
1,465,757 | 1,647,907 | 1,615,568 | 1,563,297 | 1,531,378 | 1,564,781 | ||||||||||||||||||
Total |
$ | 1,967,892 | $ | 2,016,086 | $ | 2,065,903 | $ | 2,030,529 | $ | 1,927,551 | $ | 2,001,592 | ||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Interest Expense | 9/30/2008 | 6/30/2008 | 3/31/2008 | 12/31/2007 | Total | |||||||||||||||
Interest expense |
$ | 7,116 | $ | 7,393 | $ | 8,005 | $ | 8,531 | $ | 31,045 | ||||||||||
Securitization fees |
— | 4 | 5 | 5 | 14 | |||||||||||||||
Total interest expense |
$ | 7,116 | $ | 7,397 | $ | 8,010 | $ | 8,536 | $ | 31,059 | ||||||||||
Income tax benefit |
6,150 | |||||||||||||||||||
Total interest expense, net of tax |
$ | 24,909 | ||||||||||||||||||
| Total Income | 9/30/2008 | 6/30/2008 | 3/31/2008 | 12/31/2007 | Total | |||||||||||||||
Net income, as reported |
$ | 35,467 | $ | 59,580 | $ | 23,170 | $ | 50,146 | $ | 168,363 | ||||||||||
Goodwill impairment charge |
— | — | 35,000 | — | 35,000 | |||||||||||||||
Restructuring and related charges |
7,408 | 6,635 | — | — | 14,043 | |||||||||||||||
Minority interest expense |
785 | 329 | 742 | 1,037 | 2,893 | |||||||||||||||
Total income, adjusted |
$ | 43,660 | $ | 66,544 | $ | 58,912 | $ | 51,183 | $ | 220,299 | ||||||||||
Total interest expense, net of tax |
24,909 | |||||||||||||||||||
| $ | 245,208 | |||||||||||||||||||
Average invested capital |
$ | 2,001,592 | ||||||||||||||||||
Adjusted Return on Invested Capital |
12.3 | % | ||||||||||||||||||
Return on invested capital calculated utilizing net income, as reported is as follows:
Net income, as reported |
$ | 168,363 | ||
Total interest expense, net of tax |
24,909 | |||
| $ | 193,272 | |||
Average invested capital |
$ | 2,001,592 | ||
Return on Invested Capital |
9.7 | % | ||
RETURN ON INVESTED CAPITAL (UNAUDITED)
September 30, 2007 (in thousands, except percents)
September 30, 2007 (in thousands, except percents)
| Invested Capital | 9/30/2007 | 6/30/2007 | 3/31/2007 | 12/31/2006 | 9/30/2006 | Average | ||||||||||||||||||
Debt |
$ | 377,051 | $ | 366,829 | $ | 371,521 | $ | 376,472 | $ | 409,592 | $ | 380,293 | ||||||||||||
Minority interest |
19,122 | 17,624 | 16,896 | 15,807 | 15,177 | 16,925 | ||||||||||||||||||
Shareowners’ equity |
1,531,378 | 1,484,467 | 1,431,235 | 1,369,748 | 1,319,599 | 1,427,286 | ||||||||||||||||||
Total |
$ | 1,927,551 | $ | 1,868,920 | $ | 1,819,652 | $ | 1,762,027 | $ | 1,744,368 | $ | 1,824,504 | ||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Interest Expense | 9/30/2007 | 6/30/2007 | 3/31/2007 | 12/31/2006 | Total | |||||||||||||||
Interest expense |
$ | 7,799 | $ | 7,513 | $ | 6,915 | $ | 7,286 | $ | 29,513 | ||||||||||
Securitization fees |
8 | 5 | 5 | 6 | 24 | |||||||||||||||
Total interest expense |
$ | 7,807 | $ | 7,518 | $ | 6,920 | $ | 7,292 | $ | 29,537 | ||||||||||
Income tax benefit |
8,772 | |||||||||||||||||||
Total interest expense, net of tax |
$ | 20,765 | ||||||||||||||||||
| Total Income | 9/30/2007 | 6/30/2007 | 3/31/2007 | 12/31/2006 | Total | |||||||||||||||
Net income, as reported |
$ | 34,879 | $ | 62,093 | $ | 51,738 | $ | 30,051 | $ | 178,761 | ||||||||||
Impact of German tax law change |
6,594 | — | — | — | 6,594 | |||||||||||||||
Electronics impairment and
transaction-related charges |
— | — | — | 3,213 | 3,213 | |||||||||||||||
Minority interest expense |
872 | 229 | 757 | 642 | 2,500 | |||||||||||||||
Total income, adjusted |
$ | 42,345 | $ | 62,322 | $ | 52,495 | $ | 33,906 | $ | 191,068 | ||||||||||
Total interest expense, net of tax |
20,765 | |||||||||||||||||||
| $ | 211,833 | |||||||||||||||||||
Average invested capital |
$ | 1,824,504 | ||||||||||||||||||
Adjusted Return on Invested Capital |
11.6 | % | ||||||||||||||||||
Return on invested capital calculated utilizing net income, as reported is as follows:
Net income, as reported |
$ | 178,761 | ||
Total interest expense, net of tax |
20,765 | |||
| $ | 199,526 | |||
Average invested capital |
$1,824,504 | |||
Return on Invested Capital |
10.9 | % | ||
- end -