kmt-20221025
0000055242falsetrue00000552422022-10-252022-10-250000055242exch:XNYSkmt:CapitalStockParValue1.25PerShareMember2022-10-252022-10-250000055242kmt:PreferredStockPurchaseRightsMemberexch:XNYS2022-10-252022-10-25

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): October 25, 2022
 
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.)        
525 William Penn Place   
Suite 3300
Pittsburgh,Pennsylvania15219
(Address of Principal Executive Offices)   (Zip Code)
Registrant’s telephone number, including area code: (412248-8000

(Former name, former address and former fiscal year, 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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Capital Stock, par value $1.25 per shareKMTNew York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange







Item 2.02 Results of Operations and Financial Condition.
On October 31, 2022, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement for its fiscal 2023 first quarter ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 2.02.
The earnings announcement issued on October 31, 2022 is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section unless the Company specifically incorporates it by reference in a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 5.07 Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareowners of Kennametal Inc. on October 25, 2022, the Company's Shareowners voted on the election of nine directors with terms to expire in 2023, the ratification of the selection of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2023 and an advisory vote on executive compensation. The 76,721,759 shares present in person or represented by proxy at the meeting were voted as described below.
I.    The nine directors listed below were elected to serve as directors until the next annual meeting of Shareowners in 2023 and until their successors are duly elected and qualified by the following vote:
ForWithheldBroker Non-Votes
Joseph Alvarado71,228,157 3,005,905 2,487,697 
Cindy L. Davis71,782,488 2,451,574 2,487,697 
William J. Harvey71,232,325 3,001,737 2,487,697 
William M. Lambert73,742,162 491,900 2,487,697 
Lorraine M. Martin73,754,082 479,980 2,487,697 
Sagar A. Patel73,635,473 598,589 2,487,697 
Christopher Rossi73,282,879 951,183 2,487,697 
Lawrence W. Stranghoener71,665,608 2,568,454 2,487,697 
Steven H. Wunning71,265,466 2,968,596 2,487,697 
II.    The ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2023 was approved by the following vote:
ForAgainstAbstained
PricewaterhouseCoopers LLP75,609,942 1,013,758 98,059 
III.    The advisory vote on executive compensation paid to the Company's named executive officers, as disclosed in the Company's proxy statement, was approved on an advisory basis by the following vote:
ForAgainstAbstainedBroker Non-Votes
Executive compensation73,324,848 767,425 141,789 2,487,697 
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Fiscal 2023 First Quarter Earnings Announcement
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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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 31, 2022By: /s/ John W. Witt 
 John W. Witt 
 Vice President Finance and Corporate Controller 

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Document

Exhibit 99.1
https://cdn.kscope.io/c2fdb71638184060118b61eb55ead471-new2022prheadera.jpg
FOR IMMEDIATE RELEASE:
DATE: October 31, 2022
Investor RelationsMedia Relations
CONTACT: Kelly BoyerCONTACT: Lori Lecker
PHONE: 412-248-8287PHONE: 412-248-8224
kelly.boyer@kennametal.comlori.lecker@kennametal.com
Kennametal Announces Fiscal 2023 First Quarter Results
Sales of $495 million increased 2 percent year-over-year
9 percent organic sales growth offset by negative 7 percent foreign currency effect
Strong pricing actions continued to cover inflationary pressures
Earnings per diluted share (EPS) of $0.34
Returned approximately $36 million to shareholders; $19 million in share repurchases and $16 million in dividends
PITTSBURGH, (October 31, 2022) – Kennametal Inc. (NYSE: KMT) (the "Company") today reported results for its fiscal 2023 first quarter ended September 30, 2022, with earnings per diluted share (EPS) of $0.34, compared with $0.43 in the prior year quarter. EPS was not adjusted in the current quarter, whereas adjusted EPS was $0.44 in the prior year quarter.
“Our first quarter fiscal 2023 results were in line with expectations, delivering constant currency sales growth in all our end markets and regions from continued execution on our Commercial Excellence initiatives and improvement in customer demand,” said Christopher Rossi, President and CEO.
Rossi continued, “Looking ahead, despite macroeconomic uncertainties, we see demand in line with normal seasonal patterns through this fiscal year. Regardless of the exact path the economy takes, however, we remain confident in our proven ability to advance our strategic initiatives and secure market leading positions.”

Fiscal 2023 First Quarter Key Developments
Sales of $495 million increased 2 percent from $484 million in the prior year quarter, reflecting organic growth of 9 percent, partially offset by an unfavorable currency exchange effect of 7 percent.
Operating income was $49 million, or 9.8 percent of sales, compared to $55 million, or 11.3 percent of sales, in the prior year quarter. The decrease in operating income was due primarily to favorable pricing, higher sales volumes and favorable product mix which were more than offset by higher raw material costs of approximately $17 million, higher costs, foreign currency exchange headwinds of approximately $6 million and approximately $5 million from temporary supply chain disruptions. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $56 million, or 11.6 percent margin, in the prior year quarter.
The reported effective tax rate (ETR) for the quarter was 27.5 percent compared to 27.0 percent in the prior year quarter. The ETR was not adjusted in the current quarter whereas the adjusted ETR was 26.9 percent in the prior year quarter.
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Year-to-date net cash flow from operating activities was negative $11 million compared to positive $16 million in the prior year period. The change in net cash flow from operating activities was driven primarily by lower net income and working capital adjustments in part due to increased safety stock for potential supply chain disruptions. Year-to-date free operating cash flow (FOCF) was negative $40 million compared to negative $2 million in the prior year period. The decrease in FOCF was driven primarily by higher capital expenditures, lower net income and working capital adjustments in part due to increased safety stock for potential supply chain disruptions.
During the quarter, the Company repurchased 824 thousand shares of Kennametal common stock for $19 million under its share repurchase program. Inception-to-date the Company has repurchased 3.5 million shares of common stock for $105 million under the $200 million three-year program.
The Company paid $16 million in cash dividends to Kennametal shareholders during the quarter. The Company has a long history of consistently paying dividends to shareholders since its listing on the New York Stock Exchange in 1967.

Outlook
The Company’s expectations for the second quarter of fiscal 2023 and the full year are as follows:
Quarterly Outlook:
Sales expected to be $480 - $500 million; includes a headwind of approximately $40 million from USD strength compared to the second quarter of fiscal 2022 and approximately 7 percent of price realization
Sequential Q1 to Q2 raw material headwind expected to be approximately $15 million
Adjusted operating income expected to be at least $30 million
Compared to adjusted operating income in the prior year quarter, pricing continues to cover approximately $25 million of raw material costs and wage and general cost increases; other headwinds include approximately $7 million from USD strength and approximately $5 million from temporary supply chain disruptions
Annual Outlook:
Sales expected to be $2.0 - $2.08 billion, including a currency headwind of approximately $130 million
Adjusted EPS is expected to be $1.30 - $1.70
Pricing actions expected to offset raw material costs, wages and general inflation
Free operating cash flow at approximately 100 percent of adjusted net income
Primary working capital as a percent of sales maintained at 31 - 33 percent throughout the year
Capital spending expected to be $100 - $120 million
Adjusted ETR is expected to be 26 - 28 percent
$200 million three-year share repurchase program to continue
The Company will provide more details regarding its Outlook during its quarterly earnings conference call.
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Segment Results
Metal Cutting sales of $300 million increased 1 percent from $298 million in the prior year quarter, driven by organic growth of 9 percent, partially offset by an unfavorable currency exchange effect of 8 percent. Operating income was $29 million, or 9.5 percent of sales, compared to $29 million, or 9.8 percent of sales, in the prior year quarter. The decrease in operating income was due primarily to favorable pricing, higher sales volumes and favorable product mix which were more than offset by higher raw material costs of approximately $5 million, foreign currency exchange headwinds of approximately $5 million, higher costs and temporary supply chain disruptions. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $30 million, or 10.2 percent margin, in the prior year quarter.
Infrastructure sales of $195 million increased 5 percent from $185 million in the prior year quarter, driven by organic growth of 10 percent, partially offset by an unfavorable currency exchange effect of 5 percent. Operating income was $21 million, or 10.7 percent of sales, compared to $26 million, or 14.1 percent of sales, in the prior year quarter. The decrease in operating income was due primarily to favorable pricing, higher sales volumes and favorable product mix which were more than offset by higher raw material costs of approximately $13 million, higher costs, temporary supply chain disruptions and foreign currency exchange headwinds of approximately $1 million. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $26 million, or 14.1 percent margin, in the prior year quarter.

Dividend Declared
Kennametal also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share. The dividend is payable on November 22, 2022 to shareholders of record as of the close of business on November 8, 2022.
The Company will host a conference call to discuss its first quarter fiscal 2023 results on Tuesday, November 1, 2022 at 8:00 a.m. Eastern Time. The conference call will be broadcast via real-time audio on Kennametal’s investor relations website at https://investors.kennametal.com/ - click “Event” (located in the blue Quarterly Earnings block).
This earnings release contains non-GAAP financial measures. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the tables that follow.

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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 sales, adjusted operating income, FOCF, primary working capital, capital expenditures and adjusted effective tax rate for the second quarter and full year of fiscal 2023 and our expectations regarding future growth and financial performance are forward-looking statements. Any forward-looking statements are based on current knowledge, expectations and 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: uncertainties related to changes in macroeconomic and/or global conditions, including as a result of increased inflation and Russia's invasion of Ukraine and the resulting sanctions on Russia; uncertainties related to the effects of the ongoing COVID-19 pandemic, including the emergence of more contagious or virulent strains of the virus, its impacts on our business operations, financial results and financial position and on the industries in which we operate and the global economy generally, including as a result of travel restrictions, business and workforce disruptions associated with the pandemic; other economic recession; our ability to achieve all anticipated benefits of restructuring, simplification and modernization initiatives; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability, including the conflict in Ukraine; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; potential for future goodwill and other intangible asset impairment charges; our ability to protect and defend our intellectual property; continuity of information technology infrastructure; competition; our ability to retain our management and employees; demands on management resources; availability and cost of the raw materials we use to manufacture our products; product liability claims; integrating acquisitions and achieving the expected savings and synergies; global or regional catastrophic events; demand for and market acceptance of our products; business divestitures; energy costs; commodity prices; labor relations; and implementation of environmental remediation matters. Many of these risks 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 can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

About Kennametal
With over 80 years as an industrial technology leader, Kennametal Inc. delivers productivity to customers through materials science, tooling and wear-resistant solutions. Customers across aerospace, earthworks, energy, general engineering and transportation turn to Kennametal to help them manufacture with precision and efficiency. Every day approximately 8,700 employees are helping customers in more than 60 countries stay competitive. Kennametal generated $2 billion in revenues in fiscal 2022. Learn more at www.kennametal.com. Follow @Kennametal: Twitter, Instagram, Facebook, LinkedIn and YouTube.
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FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 Three Months Ended September 30,
(in thousands, except per share amounts)20222021
Sales$494,792 $483,509 
Cost of goods sold334,824 322,759 
     Gross profit
159,968 160,750 
Operating expense108,278 102,694 
Restructuring and asset impairment charges — 190 
Amortization of intangibles3,164 3,260 
     Operating income
48,526 54,606 
Interest expense6,638 6,321 
Other expense (income), net1,009 (3,459)
Income before income taxes40,879 51,744 
Provision for income taxes11,242 13,992 
Net income29,637 37,752 
Less: Net income attributable to noncontrolling interests1,441 1,554 
Net income attributable to Kennametal$28,196 $36,198 
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS
Basic earnings per share$0.35 $0.43 
Diluted earnings per share$0.34 $0.43 
Basic weighted average shares outstanding81,544 83,880 
Diluted weighted average shares outstanding82,165 84,751 

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)September 30, 2022
June 30, 2022
 
 ASSETS
Cash and cash equivalents$64,568 $85,586 
Accounts receivable, net278,716 295,346 
Inventories591,470 570,836 
Other current assets76,732 72,940 
Total current assets1,011,486 1,024,708 
Property, plant and equipment, net972,530 1,002,041 
Goodwill and other intangible assets, net359,522 369,955 
Other assets172,670 176,820 
Total assets$2,516,208 $2,573,524 
 
 LIABILITIES
Revolving and other lines of credit and notes payable$85,239 $21,186 
Accounts payable205,940 227,887 
Other current liabilities206,309 236,576 
Total current liabilities497,488 485,649 
Long-term debt594,566 594,364 
Other liabilities185,809 202,264 
Total liabilities1,277,863 1,282,277 
KENNAMETAL SHAREHOLDERS’ EQUITY1,201,403 1,252,577 
NONCONTROLLING INTERESTS36,942 38,670 
Total liabilities and equity$2,516,208 $2,573,524 
SEGMENT DATA (UNAUDITED)Three Months Ended September 30,
(in thousands)20222021
Outside Sales:
Metal Cutting$299,936 $298,430 
Infrastructure194,856 185,079 
Total sales$494,792 $483,509 
Sales By Geographic Region:
Americas$253,581 $225,736 
EMEA131,308 148,330 
Asia Pacific109,903 109,443 
Total sales$494,792 $483,509 
Operating income:
Metal Cutting$28,605 $29,164 
Infrastructure20,787 26,036 
Corporate (1)
(866)(594)
Total operating income$48,526 $54,606 
(1) Represents unallocated corporate expenses.
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NON-GAAP RECONCILIATIONS (UNAUDITED)

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: operating income and margin; ETR; net income attributable to Kennametal; diluted EPS; Metal Cutting operating income and margin; Infrastructure operating income and margin; FOCF; and consolidated and segment organic sales growth (all of which are non-GAAP financial measures), to the most directly comparable GAAP financial measures. There were no adjustments for the three months ended September 30, 2022. Adjustments for the three months ended September 30, 2021 include restructuring and related charges and differences in projected annual tax rates. 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 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 financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures used by management may not be comparable to non-GAAP financial measures used by other companies. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the disclosures below.
Reconciliations to the most directly comparable GAAP financial measures for the following forward-looking non-GAAP financial measures for the second quarter or full fiscal year of 2023 have not been provided, including but not limited to: FOCF, adjusted operating income, adjusted net income, adjusted ETR and primary working capital. The most comparable GAAP financial measures are net cash flow from operating activities, operating income, net income attributable to Kennametal, ETR and working capital (defined as current assets less current liabilities), respectively. Primary working capital is defined as accounts receivable, net plus inventories, net minus accounts payable. Because the non-GAAP financial measures on a forward-looking basis are subject to uncertainty and variability as they are dependent on many factors - including, but not limited to, the effect of foreign currency exchange fluctuations, impacts from potential acquisitions or divestitures, gains or losses on the potential sale of businesses or other assets, restructuring costs, asset impairment charges, gains or losses from early extinguishment of debt, the tax impact of the items above and the impact of tax law changes or other tax matters - reconciliations to the most directly comparable forward-looking GAAP financial measures are not available without unreasonable effort.

THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)
(in thousands, except percents and per share data)SalesOperating incomeETR
Net income(2)
Diluted EPS
Reported results$483,509 $54,606 27.0 %$36,198 $0.43 
Reported operating margin11.3 %
Restructuring and related charges— 1,244 21.0 983 0.01 
Differences in projected annual tax rates— — (21.1)10 — 
Adjusted results$483,509 $55,850 26.9 %$37,191 $0.44 
Adjusted operating margin11.6 %
(2) Attributable to Kennametal.
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THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)
Metal CuttingInfrastructure
(in thousands, except percents)SalesOperating incomeSalesOperating income
Reported results$298,430 $29,164 $185,079 $26,036 
Reported operating margin9.8 %14.1 %
Restructuring and related charges— 1,225 — 19 
Adjusted results$298,430 $30,389 $185,079 $26,055 
Adjusted operating margin10.2 %14.1 %

Free Operating Cash Flow (FOCF)
FOCF is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities (which is the most directly comparable GAAP financial measure) less capital expenditures plus proceeds from disposals of fixed assets. Management considers FOCF to be an important indicator of the Company'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.
FREE OPERATING CASH FLOW (UNAUDITED)Three Months Ended September 30,
(in thousands)20222021
Net cash flow (used in) provided by operating activities$(10,748)$15,803 
Purchases of property, plant and equipment(29,484)(17,844)
Disposals of property, plant and equipment202 393 
Free operating cash flow$(40,030)$(1,648)

Organic Sales Growth
Organic sales growth is a non-GAAP financial measure of sales growth (which is the most directly comparable GAAP measure) excluding the effects of acquisitions, divestitures, business days and foreign currency exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Management reports organic sales growth at the consolidated and segment levels.
ORGANIC SALES GROWTH (UNAUDITED)
Three Months Ended September 30, 2022Metal CuttingInfrastructureTotal
Organic sales growth9%10%9%
Foreign currency exchange effect (3)
(8)(5)(7)
Sales growth1%5%2%
(3) Foreign currency exchange effect is calculated by dividing the difference between current period sales and current period sales at prior period foreign exchange rates by prior period sales.



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