Kennametal Announces Record Third Quarter 2012 Results
o March quarter EPS of $0.93; includes $0.05 per share for acquisition related costs
o EPS and ROIC are March quarter records
o Deloro Stellite acquisition closed on March 1, 2012
LATROBE, Pa., April 26, 2012 - Kennametal Inc. (NYSE: KMT) today reported fiscal 2012 third quarter earnings per diluted share (EPS) of $0.93 compared with prior year quarter reported EPS of $0.77. The current year EPS included acquisition related costs of $0.05 per share and the prior year EPS included restructuring and related charges of $0.06 per share.
Carlos Cardoso, Kennametal's Chairman, President and Chief Executive Officer said, "The March quarter reflected ongoing global expansion which benefited many of our served end markets and geographies. Organic sales grew by 8 percent year over year, demonstrating the effectiveness of our strategies to continue to outperform industrial production and further gain market share. We achieved March quarter records in earnings per share and return on invested capital. Our profitability and returns remain at a high level; we are on track to achieve our milestone targets of 15 percent EBIT margin and 15 percent ROIC for fiscal year 2012, one year earlier than planned."
Cardoso added, "During the March quarter, we also completed the closing of our recently announced acquisition of Deloro Stellite. This transaction reinforces our strategy of acquiring technologies that strengthen our core business and further diversify our mix of served end markets. As always, we remain committed to continuing to deliver shareowner value."
Fiscal 2012 Third Quarter Key Developments
o Sales were $696 million, compared with $615 million in the same quarter last year. Sales increased as a result of organic growth of 8 percent and the impacts of acquisition of 4 percent and more business days of 3 percent, partially offset by unfavorable foreign currency impacts of 2 percent.
o Operating income was $103 million compared with $88 million in the same quarter last year. Operating income included acquisition related costs of $6 million. The prior year operating income included restructuring and related charges of $6 million. Operating income increased as a result of higher sales volume and price, partially offset by higher raw material costs.
o Issued $300 million 10-year notes to refinance existing term notes maturing in June 2012.
o Third quarter reported EPS were $0.93, compared with prior year quarter reported EPS of $0.77. The current year EPS included the impact of acquisition related charges of $0.05 per share and the prior year EPS included restructuring and related charges of $0.06 per share.
o Adjusted ROIC was 16.9 percent as of March 31, 2012 and represented a March quarter record.
o Cash flow from operating activities was $164 million for the nine months ended March 31, 2012, compared with $125 million in the prior year period. Net capital expenditures were $56 million and $25 million for the nine months ended March 31, 2012 and 2011, respectively. The company generated year to date free operating cash flow of $108 million compared with $100 million in the same period last year.
Segment Developments for the Fiscal 2012 Third Quarter
o Industrial segment sales of $419 million increased by 7 percent from $392 million in the prior year quarter, driven by organic growth of 5 percent and the impact of more business days of 4 percent, partially offset by unfavorable foreign currency effects of 2 percent. On an organic basis, sales growth was led by aerospace and defense growth of 14 percent and general engineering growth of 7 percent while transportation end market sales remained at a relatively similar level as the prior year. On a regional basis, sales increased by approximately 12 percent in the Americas, 11 percent in Europe and were relatively flat in Asia due to strong comparisons from the prior year quarter.
o Industrial segment operating income was $71 million compared with $54 million for the same quarter of the prior year. Industrial operating income included $2 million of restructuring and related charges in the prior year quarter. The primary drivers of the increase in operating income were higher sales volume and price, partially offset by higher raw material costs. Industrial adjusted operating margin increased to 17.0 percent from 14.3 percent in the prior year quarter.
o Infrastructure segment sales of $278 million increased 25 percent from $223 million in the prior year quarter, driven by 13 percent organic growth, 10 percent growth from acquisition, and business days also favorably impacted sales by 3 percent, partially offset by unfavorable foreign currency effects of 1 percent. The organic increase was driven by 12 percent higher sales of energy and related products, as well as a 12 percent increase in demand for earthworks products. On a regional basis, sales increased by approximately 24 percent in Asia, 16 percent in Europe and 13 percent in the Americas.
o Infrastructure segment operating income was $34 million, compared with $36 million in the same quarter of the prior year. Infrastructure operating income included $6 million of acquisition related costs in the current quarter and $1 million of restructuring and related charges in the prior year quarter. Operating income benefited from higher sales volume and price offset in part by higher raw material costs and acquisition related costs. Infrastructure adjusted operating margin was 15.1 percent compared to 16.5 percent in the prior year quarter.
Fiscal 2012 Year-to-Date Key Developments
o Sales were $2.0 billion, compared with $1.7 billion in the same period last year. Sales increased as a result of organic growth of 13 percent, the impacts of more business days of 2 percent and acquisition of 1 percent, and a slightly favorable impact from foreign currency effects.
o Operating income was $299 million compared with $207 million in the same period last year. Operating income was $222 million, absent restructuring and related charges, in the prior year period. Operating margin was 15.0 percent for the nine months ended March 31, 2012 and included $6 million of acquisition related costs, compared with operating margin of 12.1 percent for the same period last year, which included $15 million of restructuring and related charges.
o Reported EPS were $2.72 compared with $1.72 in the prior year period. The current year EPS included acquisition related charges of $0.05 per share and the prior year EPS included restructuring and related charges of $0.15 per share.
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.
Outlook
Kennametal updated its fiscal 2012 organic sales growth guidance to a range of 10 percent to 11 percent from a range of 10 percent to 12 percent. Increased total sales growth guidance to a range of 16 percent to 17 percent from its previous estimate of 10 percent to 12 percent due to the acquisition of Deloro Stellite (Stellite). Foreign currency impacts are expected to be negligible in fiscal 2012. The company also updated its EPS guidance for fiscal 2012 to the range $3.80 to $3.90 per share from its previous range of $3.70 to $3.90 per share. The company continues to expect global economic conditions and worldwide industrial production to reflect moderate expansion, with the manufacturing sector leading the recovery.
The acquisition of Stellite is expected to impact EPS by approximately ($0.10) in fiscal 2012, including acquisition related costs. This impact from Stellite has not been reflected in Kennametal's current EPS guidance.
Cash flow from operations is now expected to be in the range of $300 million to $310 million for fiscal 2012. Based on capital expenditures of approximately $100 million, the company expects to generate between $200 million to $210 million of free operating cash flow for the full fiscal year.
Dividend Declared
Kennametal also announced that its Board of Directors declared a regular quarterly cash dividend of $0.14 per share. The dividend is payable May 23, 2012 to shareowners of record as of the close of business on May 8, 2012.
Kennametal advises shareowners to note monthly order trends, for which the company generally 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 2012 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 25, 2012.
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 2011, customers bought approximately $2.4 billion of Kennametal products and services - delivered by our approximately 12,000 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.
SOURCE Kennametal Inc.
