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

Date of report (Date of earliest event reported): April 28, 2011

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):

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

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

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

[ ]		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

On April 28, 2011, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement for its fiscal third quarter ended March 31, 2011.

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, Industrial operating income and margin, Infrastructure operating income and margin, net income and diluted earnings per share. Adjustments include: (1) restructuring and related charges for the three and nine months ended March 31, 2011 and 2010, respectively and (2) divestiture related charges for the nine months ended March 31, 2010. Management adjusts for these items in measuring and compensating internal performance and to more readily compare the Company’s financial performance period-to-period. The press release also contains free operating cash flow and adjusted return on invested capital (ROIC), which are both 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 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 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 dividends, debt repayment, strategic initiatives (such as acquisitions), and other investing and financing activities.

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, noncontrolling interest expense and special items, divided by the sum of the previous five quarters average balances of debt and total 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. This includes diluted EPS for the year ended June 30, 2008 which has been adjusted for the impact of tax reform, goodwill impairment charges and restructuring and related charges. 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.

Debt to capital is a non-GAAP financial measure and is defined by Kennametal as total debt divided by the sum of total shareowners’ equity 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.

DEBT TO CAPITAL (UNAUDITED)		March 31,				June 30,
(in thousands, except percents)		2011				2010
Total debt		$	316,843			$	337,668
Total equity			1,562,387				1,333,443
Debt to equity, GAAP			20.3	%			25.3	%
Total debt		$	316,843			$	337,668
Total equity			1,562,387				1,333,443
Total capital		$	1,879,230			$	1,671,111
Debt to capital			16.9	%			20.2	%

YEAR ENDED JUNE 30, 2008 (UNAUDITED)		Diluted EPS
2008 Reported Results		$	2.15
Impact of German tax reform bill			0.08
Goodwill impairment charge			0.45
Restructuring and related charges			0.08
2008 Adjusted Results		$	2.76

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Fiscal 2011Third Quarter Earnings Announcement

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: April 28, 2011		By:	/s/ Martha A. Bailey
			Martha A. Bailey
			Vice President Finance and Corporate Controller

Exhibit 99.1

FOR IMMEDIATE RELEASE:
DATE: April 28, 2011

Investor Relations
CONTACT: Quynh McGuire
PHONE: 724-539-6559

Media Relations
CONTACT: Joy Chandler
PHONE: 724-539-4618

KENNAMETAL ANNOUNCES RECORD THIRD QUARTER RESULTS;
INCREASES GUIDANCE FOR FISCAL YEAR 2011

	–		Third quarter reported EPS $0.77, adjusted EPS $0.83
	–		Organic sales growth of 25 percent
	–		Sets all-time records for adjusted operating margin of 15.2 percent and ROIC of 12.9 percent
	–		Increases adjusted EPS guidance to $2.75 to $2.85 from $2.50 to $2.65

LATROBE, Pa., (April 28, 2011) – Kennametal Inc. (NYSE: KMT) today reported fiscal 2011 third quarter earnings per diluted share (EPS) of $0.77 compared with prior year quarter reported EPS of $0.12. Absent restructuring and related charges, adjusted EPS for the current quarter increased 113% to $0.83 from the prior year quarter adjusted EPS of $0.39.

Carlos Cardoso, Kennametal’s Chairman, President and Chief Executive Officer said, “March quarter results continue to demonstrate that our global team is successfully executing our established strategies. We realized organic sales growth of 25 percent year-over-year, despite strong comparisons from the prior year. This growth reflected higher customer demand in both our served end markets as well as geographic regions. Even at a sales level that is lower than prior peak, we achieved a record operating margin for the March quarter. In addition, we again increased our guidance for sales and earnings per share for the current fiscal year. We continue to outperform the forecasted industrial production rate and expect to maintain our strong operating leverage.”

Cardoso added, “Our long-term strategies remain consistent—we continue to balance our served end markets, business mix and geographic presence. Kennametal is a ‘Breakaway’ company that has demonstrated its ability to be profitable throughout the economic cycle.”

Reconciliations of all non-GAAP financial measures are set forth in the attached tables, and the corresponding descriptions are contained in our report on Form 8-K to which this release is attached.

Fiscal 2011 Third Quarter Key Developments

•		Sales were $615 million, compared with $493 million in the same quarter last year. Sales increased as a result of strong organic growth of 25 percent despite stronger comparisons last year. Sales growth was strong across both business segments and all regions.
•		Pre-tax restructuring and related charges of $6 million, or $0.06 per diluted share, were recorded in the quarter. The company realized pre-tax benefits from restructuring programs of approximately $42 million.
•		Operating income was $88 million compared with operating income of $26 million in the same quarter last year. Absent restructuring and related charges in both periods, operating income was $93 million, compared with operating income of $49 million in the prior year quarter. The adjusted operating margin of 15.2 percent was an all time record for the company. The strong margin performance was driven by higher sales volume and price realization, improved capacity utilization and incremental restructuring benefits of $5 million. These benefits were partially offset by higher raw material costs, higher employment costs and the restoration of temporary cost reductions.
•		The effective tax rate was 19.1 percent compared to 21.3 percent for the December quarter. The sequential reduction in the tax rate was primarily driven by the strength of our pan-European operations.
•		Reported EPS were $0.77 compared with prior year quarter reported EPS of $0.12. Adjusted EPS were $0.83 compared with prior year quarter adjusted EPS of $0.39. A reconciliation follows:

Earnings Per Diluted Share Reconciliation
Third Quarter FY 2011						Third Quarter FY 2010
Reported EPS		$	0.77			Reported EPS				$	0.12
Restructuring and related charges			0.06			Restructuring and related charges					0.27
Adjusted EPS		$	0.83			Adjusted EPS				$	0.39

•		Cash flow from operating activities was $125 million for the nine months ended March 31, 2011, compared with $93 million in the prior year period. Net capital expenditures were $25 million for the nine months ended March 31, 2011. The company generated year-to-date free operating cash flow of $100 million compared with $66 million in the same period last year.
•		Adjusted ROIC was 12.9 percent as of March 31, 2011 and was also an all-time company record.

Segment Developments for the Fiscal 2011 Third Quarter

•		Industrial segment sales of $392 million grew 28 percent from $306 million in the prior year quarter, driven by organic growth of 29 percent and a 1 percent favorable foreign currency impact, partially offset by an unfavorable impact due to fewer business days. On an organic basis, sales increased in all served market sectors led by strong growth in general engineering and transportation sales of 34 percent and 29 percent, respectively. On a regional basis, sales increased by approximately 32 percent in Asia, 29 percent in Europe and 23 percent in the Americas.
•		Industrial segment operating income was $54 million compared with $11 million for the same quarter of the prior year. Absent restructuring and related charges recorded in both periods, Industrial operating income was $56 million compared with $26 million in the prior year quarter. The primary drivers of the increase in operating income were higher sales volume and price realization, improved capacity utilization and incremental restructuring benefits. These benefits were partially offset by higher raw material costs and the restoration of temporary cost reductions. Industrial adjusted operating margin increased to 14.3 percent from 8.6 percent in the prior year.
•		Infrastructure segment sales of $223 million increased 19 percent from $187 million in the prior year quarter due to organic growth. The organic increase was driven by higher sales in the energy and earthworks markets of 21 percent and 17 percent, respectively. On a regional basis, organic sales increased by approximately 20 percent in the Americas, 15 percent in Asia and 11 percent in Europe.
•		Infrastructure segment operating income was $36 million, compared with $19 million in the same quarter of the prior year. Absent restructuring and related charges recorded in both periods, Infrastructure operating income was $37 million in the current quarter compared with $26 million in the prior year quarter. Operating income improved primarily due to higher sales volume and price realization, increased capacity utilization and incremental restructuring benefits, partially offset by higher raw material costs and the restoration of temporary cost reductions. Infrastructure adjusted operating margin increased from the prior year quarter to 16.5 percent from 13.8 percent.

Fiscal 2011 Year-to-Date Key Developments

•		Sales were $1.7 billion, compared with $1.3 billion in the same period last year. Sales increased as a result of strong organic growth of 29 percent, partially offset by a 1 percent unfavorable impact from foreign currency effects and an unfavorable impact from fewer business days.
•		Operating income was $207 million compared with operating income of $32 million in the same period last year. Absent restructuring and related charges in both periods, operating income was $222 million, compared with operating income of $68 million in the same period of the prior year. The corresponding adjusted operating margins were 13.0 percent and 5.0 percent for nine months ended March 31, 2011 and 2010, respectively.

•

Reported EPS were $1.72 compared with reported EPS of $0.07 in the prior year period. Absent restructuring and divestiture related charges, adjusted EPS for the current year were $1.87, compared with the prior year period adjusted EPS of $0.49.

Outlook

Global economic conditions and worldwide industrial production continues to remain positive. As such, Kennametal expects its fiscal 2011 organic sales growth to be 24 percent to 25 percent. This is in line with our goal of growing at least two times the rate of increase in global industrial production.

The company expects EPS for fiscal 2011 to be in the range of $2.75 to $2.85 per share, excluding charges related to previously announced restructuring programs, increased from the previous range of $2.50 to $2.65 per share, excluding charges related to restructuring.

Cash flow from operations is expected to be in the range of $255 million to $265 million for fiscal 2011 as compared to the previous range of $260 million to $280 million. Capital expenditures are expected to be approximately $80 million which is unchanged from the previous guidance. The range of free operating cash flow is expected to be $175 million to $185 million verses the previous guidance of $180 million to $200 million.

Dividend Declared

Kennametal also announced that its Board of Directors declared a regular quarterly cash dividend of $0.12 per share. The dividend is payable May 25, 2011 to shareowners of record as of the close of business on May 10, 2011.

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 website at www.kennametal.com.

Third quarter results for fiscal 2011 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 May 27, 2011.

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 Kennametal’s outlook for earnings, sales volumes, and cash flow for fiscal year 2011 and our expectations regarding future growth and financial performance are forward-looking statements. These statements are based on current estimates that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: prolonged economic recession; restructuring and related actions (including associated costs and anticipated benefits); availability and cost of the raw materials we use to manufacture our products; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; our ability to protect and defend our intellectual property; competition; our ability to retain our management and employees; demands on management resources; demand for and market acceptance of our products; integrating acquisitions and achieving the expected savings and synergies; business divestitures; implementation of environmental remediation matters; and successful completion of information systems upgrades, including our enterprise system software. Many of these 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) delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions. This proven productivity is enabled through our advanced materials sciences and application knowledge. Our commitment to a sustainable environment provides additional value to our customers. Companies operating in everything from airframes to coal mining, from engines to oil wells and from turbochargers to construction recognize Kennametal for extraordinary contributions to their value chains. In fiscal year 2010, customers bought approximately $1.9 billion of Kennametal products and services – delivered by our approximately 11,000 talented employees doing business in more than 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								Nine Months Ended
		March 31,								March 31,
(in thousands, except per share amounts)		2011				2010				2011				2010
Sales		$	614,830			$	493,165			$	1,709,756			$	1,345,425
Cost of goods sold			384,849				322,841				1,091,010				917,212
Gross profit			229,981				170,324				618,746				428,213
Operating expense			138,322				120,062				395,447				354,126
Restructuring charges			1,046				20,720				7,697				31,898
Amortization of intangibles			2,836				3,239				8,696				9,946
Operating income			87,777				26,303				206,906				32,243
Interest expense			5,767				6,531				17,294				18,856
Other expense (income), net			1,413				(1,496	)			3,071				(6,314	)
Income from continuing operations before income taxes
			80,597				21,268				186,541				19,701
Provision for income taxes			15,394				11,065				41,092				11,026
Income from continuing operations			65,203				10,203				145,449				8,675
Loss from discontinued operations			-				-				-				(1,423	)
Net income			65,203				10,203				145,449				7,252
Less: Net income attributable to non controlling interests			520				518				2,376				1,417
Net income attributable to Kennametal		$	64,683			$	9,685			$	143,073			$	5,835
Amounts attributable to Kennametal Shareowners:
Income from continuing operations		$	64,683			$	9,685			$	143,073			$	7,258
Loss from discontinued operations			-				-				-				(1,423	)
Net income attributable to Kennametal		$	64,683			$	9,685			$	143,073			$	5,835
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL
Basic earnings (loss) per share:
Continuing operations		$	0.79			$	0.12			$	1.74			$	0.09
Discontinued operations			-				-				-				(0.02	)
		$	0.79			$	0.12			$	1.74			$	0.07
Diluted earnings (loss) per share:
Continuing operations		$	0.77			$	0.12			$	1.72			$	0.09
Discontinued operations			-				-				-				(0.02	)
		$	0.77			$	0.12			$	1.72			$	0.07
Dividends per share		$	0.12			$	0.12			$	0.36			$	0.36
Basic weighted average shares outstanding			82,138				81,358				82,144				80,756
Diluted weighted average shares outstanding			83,495				82,189				83,164				81,397

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		March 31,				June 30,
(in thousands)		2011				2010
ASSETS
Cash and cash equivalents		$	184,192			$	118,129
Accounts receivable, net			418,546				326,699
Inventories			466,125				364,268
Other current assets			123,934				106,835
Total current assets			1,192,797				915,931
Property, plant and equipment, net			664,856				664,535
Goodwill and other intangible assets, net			661,827				644,749
Other assets			49,742				42,608
Total assets		$	2,569,222			$	2,267,823
LIABILITIES
Current maturities of long-term debt and capital leases, including notes payable		$	6,176			$	22,993
Accounts payable			166,085				125,360
Other current liabilities			277,865				244,652
Total current liabilities			450,126				393,005
Long-term debt and capital leases			310,667				314,675
Other liabilities			246,042				226,700
Total liabilities			1,006,835				934,380
KENNAMETAL SHAREOWNERS’ EQUITY			1,540,170				1,315,500
NONCONTROLLING INTERESTS			22,217				17,943
Total liabilities and equity		$	2,569,222			$	2,267,823

SEGMENT DATA (UNAUDITED)		Three Months Ended								Nine Months Ended
		March 31,								March 31,
(in thousands)		2011				2010				2011				2010
Outside Sales (1) :
Industrial		$	391,763			$	305,802			$	1,091,560			$	831,939
Infrastructure			223,067				187,363				618,196				513,486
Total outside sales		$	614,830			$	493,165			$	1,709,756			$	1,345,425
Sales By Geographic Region:
United States		$	267,903			$	220,340			$	742,503			$	593,397
International			346,927				272,825				967,253				752,028
Total sales by geographic region		$	614,830			$	493,165			$	1,709,756			$	1,345,425
Operating Income (Loss) (1) :
Industrial		$	54,145			$	10,808			$	132,410			$	(1,140	)
Infrastructure			35,639				18,556				83,708				48,454
Corporate (2)			(2,007	)			(3,061	)			(9,212	)			(15,071	)
Total operating income		$	87,777			$	26,303			$	206,906			$	32,243

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, Industrial operating income and margin, Infrastructure operating income and margin, net income and diluted earnings per share, free operating cash flow and return on invested capital (which are non-GAAP financial measures), to the most directly comparable GAAP measures. For those adjustments that are presented ‘net of tax’, the tax effect of the adjustment can be derived by calculating the difference between the pre-tax and the post-tax adjustments presented. The tax effect on adjustments is calculated by preparing an overall tax calculation including the adjustments and then a tax calculation excluding the adjustments. The difference between these calculations results in the tax impact of the adjustments.

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 MARCH 31, 2011 (UNAUDITED)

(in thousands, except per		Gross				Operating				Operating				Net
share amounts)		Profit				Expense				Income				Income(3)				Diluted EPS
2011 Reported Results		$	229,981			$	138,322			$	87,777			$	64,683			$	0.77
2011 Reported Operating Margin											14.3	%
Restructuring and related charges			2,023				(2,450	)			5,519				4,379				0.06
2011 Adjusted Results		$	232,004			$	135,872			$	93,296			$	69,062			$	0.83
2011 Adjusted Operating Margin											15.2	%

		Industrial				Infrastructure
		Operating				Operating
(in thousands, except percents)		Income				Income
2011 Reported Results		$	54,145			$	35,639
2011 Reported Operating Margin			13.8	%			16.0	%
Restructuring and related charges			1,872				1,260
2011 Adjusted Results		$	56,017			$	36,899
2011 Adjusted Operating Margin			14.3	%			16.5	%

THREE MONTHS ENDED MARCH 31, 2010 (UNAUDITED)

		Gross				Operating				Operating				Net
(in thousands, except per share amounts)		Profit				Expense				Income				Income(3)				Diluted EPS
2010 Reported Results		$	170,324			$	120,062			$	26,303			$	9,685			$	0.12
2010 Reported Operating Margin											5.3	%
Restructuring and related charges			1,595				(635	)			22,950				22,329				0.27
2010 Adjusted Results		$	171,919			$	119,427			$	49,253			$	32,014			$	0.39
2010 Adjusted Operating Margin											10.0	%

		Industrial				Infrastructure
		Operating				Operating
(in thousands, except percents)		Income				Income
2010 Reported Results		$	10,808			$	18,556
2010 Reported Operating Margin			3.5	%			9.9	%
Restructuring and related charges			15,620				7,330
2010 Adjusted Results		$	26,428			$	25,886
2010 Adjusted Operating Margin			8.6	%			13.8	%

NINE MONTHS ENDED MARCH 31, 2011 (UNAUDITED)

(in thousands, except per		Gross				Operating				Operating				Net
share amounts)		Profit				Expense				Income				Income(3)				Diluted EPS
2011 Reported Results		$	618,746			$	395,447			$	206,906			$	143,073			$	1.72
2011 Reported Operating Margin											12.1	%
Restructuring and related charges			3,987				(3,230	)			14,914				12,496				0.15
2011 Adjusted Results		$	622,733			$	392,217			$	221,820			$	155,569				1.87
2011 Adjusted Operating Margin											13.0	%

NINE MONTHS ENDED MARCH 31, 2010 (UNAUDITED)

(in thousands, except per		Gross				Operating				Operating				Net
share amounts)		Profit				Expense				Income				Income(3)				Diluted EPS
2010 Reported Results		$	428,213			$	354,126			$	32,243			$	5,835			$	0.07
2010 Reported Operating Margin											2.4	%
Restructuring and related charges			2,613				(1,099	)			35,610				32,732				0.40
Divestiture related charges			-				-				-				1,340				0.02
2010 Adjusted Results		$	430,826			$	353,027			$	67,853			$	39,907			$	0.49
2010 Adjusted Operating Margin											5.0	%

FREE OPERATING CASH FLOW (UNAUDITED)

		Nine Months Ended
		March 31,
(in thousands)		2011				2010
Net cash flow provided by operating activities		$	125,025			$	92,637
Purchases of property, plant and equipment			(33,348	)			(30,438	)
Proceeds from disposals of property, plant and equipment			8,063				4,087
Free operating cash flow		$	99,740			$	66,286

RETURN ON INVESTED CAPITAL (UNAUDITED)
March 31, 2011 (in thousands, except percents)

Invested Capital		3/31/2011				12/31/2010				9/30/2010				6/30/2010				3/31/2010				Average
Debt		$	316,843			$	316,379			$	318,819			$	337,668			$	336,175			$	325,177
Total equity			1,562,387				1,476,427				1,437,616				1,333,443				1,374,321				1,436,839
Total		$	1,879,230			$	1,792,806			$	1,756,435			$	1,671,111			$	1,710,496			$	1,762,016

		Three Months Ended
Interest Expense		3/31/2011				12/31/2010				9/30/2010				6/30/2010				Total
Interest expense		$	5,767			$	5,564			$	5,963			$	6,347			$	23,641
Income tax benefit																			5,485
Total interest expense, net of tax																		$	18,156
Total Income		3/31/2011				12/31/2010				9/30/2010				6/30/2010				Total
Net income attributable to
Kennametal, as reported		$	64,683			$	43,469			$	34,921			$	40,584			$	183,657
Restructuring and related charges			4,379				4,366				3,751				9,681				22,177
Noncontrolling interest			520				821				1,035				366				2,742
Total income, adjusted		$	69,582			$	48,656			$	39,707			$	50,631			$	208,576
Total interest expense, net of tax																			18,156
																		$	226,732
Average invested capital																		$	1,762,016
Adjusted Return on Invested Capital																			12.9	%

Return on invested capital calculated utilizing net income, as reported is as follows:

Net income attributable to Kennametal, as reported		$	183,657
Total interest expense, net of tax			18,156
		$	201,813
Average invested capital		$	1,762,016
Return on Invested Capital			11.5	%