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COVID-19: How Kennametal is responding

Kennametal Inc. today reported fiscal 2002 second quarter earnings of $0.32 per diluted share, a decrease of 49 percent, compared with earnings of $0.63* per diluted share last year, excluding special items in each period. On the same basis through the first six months, diluted earnings per share were $0.75, 35 percent below last year's earnings of $1.15*.

                Earnings Per Share Excluding Special Items

  Company Guidance (10/31/01)            $0.30 to $0.40
  Analyst Estimate Range (01/29/02)      $0.31 to $0.35
  Earnings, Excluding Special Items          $0.32

On a reported basis, diluted loss per share was ($0.08) for the quarter against last year's earnings per share of $0.61*. For the first six months, reported diluted earnings per share were $0.32 against last year's earnings per share of $1.05*.

  * Fiscal 2001 earnings per share quoted in this release exclude goodwill
  amortization as defined by SFAS 142, "Goodwill and Other Intangible
  Assets" to allow equivalent comparisons.  A table reconciling the fiscal
  2001 impact of goodwill amortization is included later in this release.

Kennametal President and Chief Executive Officer, Markos I. Tambakeras, said, "By executing our business strategy with relentless focus on cost control, cash management and the Kennametal Lean Enterprise, we delivered second quarter earnings consistent with our estimates and a 68 percent year- over-year increase in free cash flow - despite weaker than expected end markets. Sales in the December quarter were significantly depressed by customer production slowdowns over the year-end holidays that were considerably more severe than usual. However, determined performance by our sales force, including a steady flow of new products, allowed us to still deliver targeted earnings. The sustained strength of our relative performance is a powerful testimony to the skills and passion of Kennametal employees worldwide."

Tambakeras noted that further slowing of industrial activity underscored the value of the company's early and decisive restructuring and cost reduction actions. As the manufacturing recession extended well into its second year in the United States, and spread to Europe, the company responded with several additional steps. These included a further $20 million restructuring program announced in November 2001, to reduce costs but preserve the infrastructure to sustain competitiveness in deteriorating global markets.

  Second Quarter Highlights

  --  Sales of $380.3 million declined 14 percent, versus $443.6 million
      last year.  Continued sales growth in Mining and Construction and Asia
      Pacific was more than offset by broad weakness in other North American
      served markets and the onset of decline in European economies.

  --  Gross profit margin, excluding special charges, of 30.9 percent
      declined 320 basis points compared with the second quarter of fiscal
      2001.  The realization of incremental manufacturing efficiencies from
      lean initiatives offset raw material increases and unfavorable
      customer and product mix, but could not absorb the under-utilization
      of capacity caused by volume declines.

  --  Operating expense for the quarter was reduced 11 percent, to $93.1
      million, excluding special charges. Ongoing cost-cutting and lean
      initiatives, combined with several short-term savings actions, reduced
      expenses in step with sales declines. Moreover, the reduction was
      achieved even as spending on growth programs and R&D was sustained.

  --  The current quarter included special charges of $18.3 million, or
      $0.40 per diluted share, associated with previously announced
      restructurings.  The charges were divided approximately evenly among
      the J&L/FSS business improvement plan, the closure of two IPG drill
      plants and the closure of the Chicago, IL Electronics plant.  Prior-
      year results included special charges of $1.1 million, or $0.03 per
      share, related primarily to the J&L business improvement plan.

  --  Interest expense of $8.3 million is 38 percent below the same quarter
      last year due to ongoing debt reduction and lower average borrowing
      rates.

  --  The effective tax rate for the December 2001 quarter was 32.0
      percent, compared with prior year of 32.5 percent.

  --  Excluding special items, net income was $10.0 million, a 48 percent
      decrease compared with net income of $19.3 million last year.  On a
      reported basis, the company had a loss of $2.5 million against net
      income of $18.5 million in the same quarter last year.

  --  Free operating cash flow was $47.1 million, versus $28.1 million in
      the same period last year, with working capital improvements as the
      strongest contributor.  Primary working capital remained tightly
      controlled with the primary working capital as a percent of sales
      ratio improving 10 basis points to 27.7 percent.  In addition, days in
      sales outstanding declined and inventory turns improved against the
      same period.  Primary working capital of $428.8 million was down 13
      percent from the same period last year.

  --  Total debt was $580.2 million, down $107.3 million from December 2000
      and down $26.9 million from the beginning of the fiscal year.  Three
      years of focused debt reduction has lowered total debt by more than
      40%.

  Outlook

Considering the remaining two fiscal quarters, Tambakeras said, "Although we remain optimistic that the economy will show signs of rebound by mid-year, our previous outlook has been dampened. External indicators that we track include forecasts for US GDP and industrial production, and European GDP. The forecasts for each of these indices for the March and June 2002 quarters have been reduced since October 2001. Further, there is no conclusive evidence that the March quarter will rebound from the prior quarter's lows, and the eventual return to growth in the industrial markets is broadly expected to be quite slow. Therefore, for the remainder of our fiscal year we will continue our successful focus on things we can control -- costs, cash flow, debt and gaining market share with new products and continuing investments in our sales force and marketing initiatives."

Looking forward, Tambakeras continued, "We have completed the repositioning of Kennametal that was begun over two years ago. Consequently, we are very confident in our ability to accelerate growth and shareowner value as the global economy improves."

Based on assumptions that the first half of calendar 2002 will be weaker than predicted earlier, sales for the third quarter of fiscal 2002 are expected to decline 10 to 15 percent, with diluted earnings per share between $0.50 and $0.55, excluding special charges. For the year ending in June 2002, diluted earnings per share are forecasted to range from $1.90 to $2.10, excluding special charges. Despite the reduction in earnings expectations, cash flow for the year should still attain the ongoing long-term range of $100 million to $150 million.

Second quarter results will be discussed in a live Internet broadcast at 10 a.m. today. Access the live or archived conference by visiting the Investor Relations section of Kennametal's corporate web site at http://www.kennametal.com/.

Dividend Declared

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable February 25, 2002, to shareowners of record as of the close of business February 8, 2002.

This release contains "forward-looking statements" as defined by Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the impact of the terrorist attacks on September 11, 2001 and their aftermath, the extent that global economic conditions deteriorate or do not improve materially in the second half of our fiscal 2002 year, risks associated with integrating and divesting businesses, demands on management resources, risks associated with international markets such as currency exchange rates and social and political environments, competition, commodity prices, demand for and market acceptance of new and existing products, risks associated with the implementation of restructuring plans and environmental remediation, as well as other risks and uncertainties including those detailed from time to time in the filings of the company with the Securities and Exchange Commission. The company undertakes no obligation to publicly release any revisions to forward-looking statements to reflect events or circumstances occurring after the date hereof.

Kennametal Inc. aspires to be the premier tooling solutions supplier in the world with operational excellence throughout the value chain and best-in- class manufacturing and technology. Kennametal strives to deliver superior shareowner value through top-tier financial performance. The company provides customers a broad range of technologically advanced tools, tooling systems and engineering services aimed at improving customers' manufacturing competitiveness. With approximately 12,000 employees worldwide, the company's fiscal 2001 annual sales were $1.8 billion, with a third coming from sales outside the United States. Kennametal is a five-time winner of the GM "Supplier of the Year" award and is represented in more than 60 countries. Kennametal operations in Europe are headquartered in Furth, Germany. Kennametal Asia Pacific operations are headquartered in Singapore. For more information, visit the company's web site at http://www.kennametal.com/

FINANCIAL HIGHLIGHTS

Consolidated financial highlights for Kennametal Inc. for the quarters and six-month periods ended December 31, 2001 and 2000 are shown in the following tables (in thousands, except per share amounts). All fiscal year 2002 data is subject to year-end (June 30) adjustment and audit by independent public accountants.

   Consolidated Statements of Income

                                       Quarter Ended      Six Months Ended
                                        December 31,        December 31,
                                       2001      2000      2001      2000

  Net sales                          $380,338  $443,565  $786,992  $897,200

          Cost of goods sold          263,873   292,149   540,688   593,168

  Gross profit                        116,465   151,416   246,304   304,032

          Operating expense(1)         93,139   105,166   193,016   216,452

          Restructuring and asset
           impairment charges          17,128       812    18,706     2,347

          Amortization of
           intangibles                    689     6,147     1,379    12,470

  Operating income                      5,509    39,291    33,203    72,763

          Interest expense              8,290    13,400    17,655    26,595

          Other expense (income),
           net(2)                         105     2,335      (165)    4,893

  Income (loss) before provision for
   income taxes and minority
   interest                            (2,886)   23,556    15,713    41,275

  Provision for income taxes             (923)    9,128     5,029    16,304

  Minority interest                       497       904       701     1,506

  Income (loss) before cumulative
   effect of change in accounting
   principle                           (2,460)   13,524     9,983    23,465

  Cumulative effect of change in
   accounting principle, net of tax         -         -         -      (599)

  Net income (loss)                   $(2,460)  $13,524    $9,983   $22,866

  Diluted earnings (loss) per share    $(0.08)    $0.44     $0.32     $0.75

  Dividends per share                   $0.17     $0.17     $0.34     $0.34

  Diluted weighted average shares
   outstanding                         31,380    30,548    31,405    30,639

  (1) For the quarter and six-months ended December 31, 2000, this
     includes a charge of $0.3 million and $2.0 million, respectively,
     primarily related to the tender offer to acquire the outstanding
     shares of JLK.

  (2) For the quarters ended December 31, 2001 and 2000, these amounts
     include charges of $0.6 million and $1.6 million, respectively, for
     fees incurred in connection with the company's accounts receivable
     securitization program.  For the six-months ended December 31, 2001
     and 2000, these amounts include similar charges of $1.5 million and
     $3.2 million, respectively.


   Pro forma Fiscal 2001 Operating Results Excluding Goodwill Amortization:

                                           Period Ended
                                        December 31, 2000
                                    Quarter          Six Months
  Operating income                  $44,668           $83,540

  Interest expense                   13,400            26,595

  Other expense, net                  2,335             4,893

  Income before provision for income
   taxes and minority interest       28,933            52,052

  Provision for income taxes          9,432            17,639

  Minority interest                     967             1,727

  Income before cumulative
   effect of change in
   accounting principle              18,534            32,686

  Cumulative effect of change in
   accounting principle,
   net of tax                             -              (599)

  Pro forma net income              $18,534           $32,087

  Pro forma diluted
   earnings per share                 $0.61             $1.05

The following tables provide a comparison of the company's reported results, and the results excluding special items, for fiscal 2002 and fiscal 2001.

   Quarter Ended December 31,
                                                                    Diluted
                                                                    Earnings
                                                               Net    (Loss)
                                          Gross   Operating  Income    Per
                                          Profit   Income    (Loss)   Share
  2001 Reported Results                  $116,465   $5,509  $(2,460) $(0.08)
       MSSG Restructuring (IPG)                 -    6,247    4,248    0.14
       AMSG Restructuring (Electronics)       750    5,954    4,049    0.13
       Corporate Restructuring                  -      157      107     -
            Total Core Business               750   12,358    8,404    0.27
       J&L Restructuring                      399    5,853    3,980    0.13
       FSS Restructuring                        -       66       44     -
            Total Non-Core Business           399    5,919    4,024    0.13
  2001 Results Excluding Special Items   $117,614  $23,786   $9,968   $0.32

  2000 Reported Results                  $151,416  $39,291  $13,524   $0.44
       MSSG Restructuring                       -       37       23     -
       AMSG Restructuring                       -       26       17     -
            Total Core Business                 -       63       40     -
       J&L Restructuring & Other                -    1,012      643    0.03
            Total Non-Core Business             -    1,012      643    0.03
  2000 Results Excluding Special Items   $151,416  $40,366  $14,207   $0.47

  Six Months Ended December 31,

                                                                     Diluted
                                                                    Earnings
                                                                     (Loss)
                                           Gross   Operating   Net     Per
                                           Profit   Income   Income   Share
  2001 Reported Results                   $246,304  $33,203   $9,983  $0.32
       MSSG Restructuring (IPG)                  -    6,237    4,241   0.14
       AMSG Restructuring (Electronics)        750    5,954    4,049   0.13
       Corporate Restructuring                   -      157      107    -
            Total Core Business                750   12,348    8,397   0.27
       J&L Restructuring                       399    7,471    5,079   0.16
       FSS Restructuring                         -       36       25    -
            Total Non-Core Business            399    7,507    5,104   0.16
  2001 Results Excluding Special Items    $247,453  $53,058  $23,484  $0.75

  2000 Reported Results                   $304,032  $72,763  $22,866  $0.75
       MSSG Restructuring                        -        5        3    -
       AMSG Restructuring                        -       26       14    -
       Corporate Restructuring                   -      (20)     (11)   -
            Total Core Business                  -       11        6    -
       J&L Restructuring & Other                 -    4,179    2,187   0.09
       FSS Restructuring                         -      150       81    -
            Total Non-Core Business              -    4,329    2,268   0.09
       Adoption of SFAS 133                      -        -      599   0.02
  2000 Results Excluding Special Items    $304,032  $77,103  $25,739  $0.86


  SEGMENT DATA:

                                        Quarter Ended      Six Months Ended
                                          December 31,        December 31,
                                        2001    2000(1)     2001    2000(1)
  Sales:(2)
  Metalworking Solutions and
   Services Group                    $218,078  $245,984  $441,035  $494,661
  Advanced Materials Solutions Group   71,614    84,377   154,619   171,888
  J&L Industrial Supply                56,003    73,581   115,124   150,204
  Full Service Supply                  34,643    39,623    76,214    80,447
  Total Sales                        $380,338  $443,565  $786,992  $897,200

  Sales By Geographic Region:(2)
  Within the United States           $242,509  $295,736  $508,235  $600,763
  International                       137,829   147,829   278,757   296,437
  Total Sales                        $380,338  $443,565  $786,992  $897,200

  Operating Income (Loss), as
   reported:(2)
  Metalworking Solutions and
   Services Group                     $17,410   $31,853   $42,081   $60,612
  Advanced Materials Solutions Group     (652)    8,739     9,711    19,930
  J&L Industrial Supply                (3,665)    2,832    (2,933)    1,637
  Full Service Supply                     247     1,812     1,419     3,819
  Corporate and Eliminations           (7,831)   (5,945)  (17,075)  (13,235)
  Total Operating Income               $5,509   $39,291   $33,203   $72,763

  Operating Income, excluding
   special charges:(2)
  Metalworking Solutions and
   Services Group                     $23,657   $31,890   $48,318   $60,617
  Advanced Materials Solutions Group    5,302     8,765    15,665    19,956
  J&L Industrial Supply                 2,188     3,844     4,538     5,816
  Full Service Supply                     313     1,812     1,455     3,969
  Corporate and Eliminations           (7,674)   (5,945)  (16,918)  (13,255)
  Total Operating Income              $23,786   $40,366   $53,058   $77,103

  Operating Income, excluding
   special charges and
   goodwill amortization:(2)(3)
  Metalworking Solutions and
   Services Group                               $34,229             $65,306
  Advanced Materials Solutions Group             10,994              24,417
  J&L Industrial Supply                           4,561               7,220
  Full Service Supply                             1,827               3,999
  Corporate and Eliminations                     (5,868)            (13,062)
  Total Operating Income                        $45,743             $87,880

  (1) Kennametal reports global business units consisting of Metalworking
      Solutions and Services Group, Advanced Materials Solutions Group,
      J&L Industrial Supply, Full Service Supply and corporate functional
      shared services.  Certain amounts in prior year sales and operating
      income (loss) have been restated to conform to this reporting
      structure.

  (2) Amounts reflect reclassification of shipping fees charged customers
      to sales, and freight and handling costs to costs of goods sold, as
      required by Emerging Issues Task Force 00-10, "Accounting for
      Shipping and Handling Fees and Costs."

  (3) As reported amounts for fiscal 2002 are reflective of the non-
      amortization provision of SFAS 142, "Goodwill and Other Intangible
      Assets."


   CASH FLOW INFORMATION

                                          Quarter Ended    Six Months Ended
                                            December 31,      December 31,
                                           2001   2000(1)    2001   2000(1)
  Net income (loss)                      $(2,460) $13,524   $9,983  $22,866
  Non-cash items                          13,472     (997)  12,319    1,992
  Depreciation and amortization           18,591   24,499   37,303   49,065
  Change in primary working capital       43,645   15,364   38,216   29,425
  Change in other working capital        (16,996) (13,548) (32,742) (16,172)
  Cash flow from operations               56,252   38,842   65,079   87,176
  Capital expenditures                   (10,087) (11,509) (20,114) (22,980)
  Proceeds from asset disposals              920      760    3,525      844
  Free operating cash flows              $47,085  $28,093  $48,490  $65,040

  (1)  Certain amounts have been reclassified to be consistent with the
       current year presentation.


   CONDENSED BALANCE SHEETS

                                                   Quarter Ended
                                          12/31/01    9/30/01     6/30/01
  ASSETS
  Cash and equivalents                      $10,414     $10,722     $12,940
  Accounts receivables, net of allowance    162,916     196,003     206,175
  Inventories                               367,724     382,701     373,221
  Deferred income taxes                      67,215      64,673      57,452
  Other current assets                       24,728      25,036      31,408
    Total current assets                    632,997     679,135     681,196
  Property, plant and equipment, net        448,263     467,268     472,874
  Goodwill, net                             616,113     616,527     615,263
  Intangible assets, net                      7,945       8,716       9,497
  Other assets                               60,797      50,943      46,612
    Total                                $1,766,115  $1,822,589  $1,825,442

  LIABILITIES
  Short-term debt                          $406,677    $418,448     $24,530
  Accounts payable                          101,817     103,993     118,073
  Accrued liabilities                       131,656     137,055     151,882
     Total current liabilities              640,150     659,496     294,485
  Long-term debt                            173,514     209,613     582,585
  Deferred income taxes                      54,204      50,945      53,844
  Other liabilities                          89,880      90,716      87,898
     Total liabilities                      957,748   1,010,770   1,018,812

  MINORITY INTEREST                           9,271      10,187       9,861

  SHAREOWNERS' EQUITY                       799,096     801,632     796,769

     Total                               $1,766,115  $1,822,589  $1,825,442

                                                     Quarter Ended
                                                3/31/01           12/31/00
  ASSETS
  Cash and equivalents                           $19,987           $18,293
  Accounts receivables, net of allowance         214,332           203,344
  Inventories                                    387,520           389,460
  Deferred income taxes                           52,610            52,552
  Other current assets                            31,899            34,374
    Total current assets                         706,348           698,023
  Property, plant and equipment, net             474,015           482,493
  Goodwill, net                                  628,104           634,247
  Intangible assets, net                           9,529            10,682
  Other assets                                    39,177            36,107
    Total                                     $1,857,173        $1,861,552

  LIABILITIES
  Short-term debt                                 $8,786           $10,210
  Accounts payable                               108,371           102,217
  Accrued liabilities                            174,378           171,036
     Total current liabilities                   291,535           283,463
  Long-term debt                                 646,144           677,277
  Deferred income taxes                           37,531            31,261
  Other liabilities                               84,312            85,773
     Total liabilities                         1,059,522         1,077,774

  MINORITY INTEREST                               10,708            10,514

  SHAREOWNERS' EQUITY                            786,943           773,264

     Total                                    $1,857,173        $1,861,552

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SOURCE: Kennametal Inc.

Contact: Beth A. Riley, Investor Relations, +1-724-539-6141, or Steve
Halvonik, Media Relations, +1-724-539-4618, both of Kennametal