- Records set for sales, adjusted EPS and adjusted ROIC for June quarter and fiscal year
- Quarter and fiscal year organic sales growth of 4 percent
- Quarter reported EPS of $0.77; adjusted EPS of $0.85
- Fiscal year reported EPS of $2.15; adjusted EPS of $2.76
LATROBE, Pa., July 24 /PRNewswire-FirstCall/ -- Kennametal Inc.
(NYSE: KMT) reported today that it achieved new records for sales, adjusted
EPS and adjusted ROIC for both the quarter and fiscal year ended
June 30, 2008. Sales increased over the prior year by 15 percent for the June
quarter and by 13 percent for the fiscal year, including organic sales growth
of 4 percent for both periods. This marked the company's 18th consecutive
quarter of year-over-year organic sales growth.
Reported fiscal 2008 fourth quarter diluted earnings per share (EPS) were
$0.77, compared with the prior year quarter EPS of $0.79, a decrease of 3
percent. Reported EPS included charges of $0.08 per share related to its
previously announced restructuring actions. Absent these charges, adjusted
EPS of $0.85 increased 8 percent compared with prior year quarter EPS.
Fiscal 2008 reported EPS decreased 3 percent to $2.15, compared with prior
year reported EPS of $2.22. Fiscal 2008 adjusted EPS were $2.76, compared
with prior year adjusted EPS of $2.28, an increase of 21 percent. Adjusted
ROIC was 12.3 percent, up 100 basis points from 11.3 percent in the prior
year.
Carlos Cardoso, Kennametal's Chairman, President and Chief Executive
Officer said, 'We are pleased with our results for the quarter as well as for
fiscal year 2008. For both periods, we delivered record sales and achieved
new milestones for adjusted EPS and ROIC despite weaker market conditions in
North America and higher raw material costs. During fiscal 2008, we again
generated strong cash flow supported by initiatives in the June quarter aimed
at reducing inventory and further shaping our business portfolio by divesting
two non-core businesses. We continued to invest in our business and began to
implement our previously announced restructuring actions to reduce costs and
improve operating efficiencies. Our strong performance in the fourth quarter
and throughout fiscal 2008 validates both our strategies and our ability to
execute them, while showcasing the resilience and balance of our business.'
Reconciliations of all non-GAAP financial measures are set forth in the
attached tables.
Highlights of Fiscal 2008 Fourth Quarter
-- Sales for the quarter were $753 million, compared with $657 million in
the same quarter last year. Sales grew 15 percent year-over-year and included
4 percent organic growth, 1 percent from acquisitions and 7 percent from
foreign currency effects. The current quarter had more workdays than the
prior year quarter which increased the overall sales growth by 3 percent.
-- As previously announced, the company began implementing certain
restructuring actions to reduce costs and improve efficiencies in its
operations. During the June quarter, the company recognized pre-tax charges
related to these initiatives of $8 million, or $0.08 per share. Including
these charges, the company expects to recognize a total of $40 million to $50
million of pre-tax charges related to these restructuring actions. The
remaining charges are expected to be incurred over the next nine to fifteen
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 company divested two non-core businesses within its metalworking
segment during the June quarter and recognized a combined pre-tax loss on
divestitures of $0.6 million. Cash proceeds received were $20 million.
-- Income from continuing operations was $60 million, compared with $62
million in the prior year quarter. Absent the charges related to restructuring
actions, income from continuing operations increased 7 percent to $66 million
from $62 million in the prior year quarter. This increase was driven by
organic sales growth, favorable foreign currency effects and a lower effective
tax rate.
-- The effective tax rate for the current quarter was 20.1 percent
compared with 27.0 percent in the prior year quarter. The prior year rate
included a provision for a tax uncertainty. In addition, the current quarter
rate benefited from the effect of divestitures and a tax benefit associated
with a dividend reinvestment plan in China.
-- Reported EPS were $0.77, compared with prior year quarter EPS of $0.79.
Adjusted EPS of $0.85 increased 8 percent, compared with prior year quarter
EPS of $0.79. A reconciliation follows:
Earnings Per Diluted Share Reconciliation
Fourth Quarter FY 2008 Fourth Quarter FY 2007
Reported EPS $0.77 Reported EPS $0.79
Restructuring and
related charges 0.08
Adjusted EPS $0.85 $0.79
-- During the June quarter, the company reduced its inventory by $34
million or 7 percent from the March quarter, of which $10 million was related
to divestitures.
-- Adjusted ROIC was 12.3 percent, up 100 basis points from 11.3 percent
in the prior year.
-- Cash flow from operating activities was $280 million in fiscal 2008,
compared with $199 million in the prior year. Adjusted free operating cash
flow for the current year was $124 million compared with $197 million in the
prior year. The change in adjusted free operating cash flow was primarily
driven by a $71 million increase in capital expenditures for enhanced
manufacturing capabilities and geographic expansion, as well as changes in
working capital.
Highlights of Fiscal 2008
-- Sales of $2.7 billion increased 13 percent from $2.4 billion in the
prior year. Sales grew 4 percent on an organic basis, 3 percent from
acquisitions and 6 percent from foreign currency effects.
-- Income from continuing operations was $168 million, compared with $177
million in the prior year, a decrease of 5 percent. Adjusted income from
continuing operations was $216 million, an increase of 21 percent, compared
with $178 million in the prior year.
-- The reported effective tax rate was 27.3 percent. On an adjusted
basis, the effective tax rate was 21.2 percent, compared with 28.2 percent
reported in the prior year. The lower adjusted rate compared with the rate
for the prior year was driven by an increase in earnings under the company's
pan-European business strategy, the effects of other international operations
and benefits from a dividend reinvestment plan in China.
-- Reported EPS decreased 3 percent to $2.15, compared with prior year
reported EPS of $2.22. Adjusted EPS increased 21 percent to $2.76, compared
with prior year adjusted EPS of $2.28. A reconciliation follows:
Earnings Per Diluted Share Reconciliation
FY 2008 FY 2007
Reported EPS $2.15 Reported EPS $2.22
Impact of German tax Electronics impairment and
reform bill 0.08 transaction-related charges 0.04
Goodwill impairment charge 0.45 Adjustment on J&L divestiture
Restructuring and and transaction-related
related charges 0.08 charges 0.02
Adjusted EPS $2.76 Adjusted EPS $2.28
Business Segment Highlights of Fiscal 2008 Fourth Quarter
Metalworking Solutions & Services Group (MSSG) delivered further top-line
growth in the June quarter, driven primarily by organic sales gains and
favorable foreign currency effects. Industrial activity remained positive in
most industry and market sectors on a global basis. Areas of particular
strength included aerospace, machine tools and general engineering. On a
regional basis, continued growth in Europe, as well as ongoing strength in
developing economies, particularly Asia Pacific and India, more than offset
continued weakness in the North American market.
In the June quarter, MSSG sales grew by 13 percent as a result of 2
percent organic growth, 8 percent favorable foreign currency effects, 1
percent from acquisitions and 2 percent from more workdays. Asia Pacific and
India organic sales increased 13 percent and 18 percent, respectively. Europe
and Latin America organic sales increased 4 percent and 6 percent,
respectively. North American organic sales declined by 5 percent.
MSSG operating income decreased by 3 percent and the operating margin
decreased 230 basis points from the same quarter last year. During the June
quarter, MSSG recognized restructuring and related charges of $5 million.
Absent these charges, MSSG operating income increased 4 percent and operating
margin decreased 130 basis points. The primary drivers of the decline in
operating margin were lower manufacturing production to reduce inventory and
divestiture-related charges offset somewhat by current quarter benefits from
organic growth and favorable foreign currency effects.
Advanced Materials Solutions Group (AMSG) sales increased 17 percent
during the June quarter, driven by 8 percent organic growth, 5 percent from
favorable foreign currency effects, 2 percent from acquisitions and 2 percent
from more workdays.
