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COVID-19: How Kennametal is responding

Kennametal Inc. today reported fiscal 2005 first-quarter EPS of $0.61 compared with prior year adjusted EPS of $0.34. First quarter EPS exceeded previous guidance and there were no special items. Reported EPS in last year's 1st quarter were $0.24 and included special items totaling $0.10. The effective tax rate in first quarter was 36 percent compared to prior year's rate of 32 percent.

                               EPS Summary

               Company Guidance (9/15/04):  $0.55 to $0.60

            Analyst Estimate Range (10/18/04):  $0.50 to $0.60

                           Reported EPS:  $0.61

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, "We are very pleased to build on our successes of last year with a strong start to Fiscal 2005. We are particularly encouraged by the performance across all our North American businesses, including J&L Industrial Supply. For our Metalworking business, growth in the North American and developing markets was augmented by a return to modest growth in Europe. The investments we have made in the Kennametal Value Business System (KVBS) over the past several years are translating into strong results as the markets we serve continue to perform well."

  Highlights of the Fiscal 2005 First Quarter
   -- Record sales up 20 percent on 15 percent organic sales growth, 3
      percent benefit from foreign currency exchange and 2 percent from
      acquisitions.
   -- Reported net income was $22.7 million versus $8.8 million in the same
      quarter last year, as improved sales volume was leveraged against a
      more productive operating structure in the current quarter.
   -- Net cash flow from operations was $32 million versus $12 million last
      year. Free operating cash flow totaled $17 million for the quarter
      versus $2 million in last year's comparable quarter, due to improved
      earnings and lower tax payments, partially offset by increased capital
      investment.
   -- As of September 30, 2004, total debt was $435 million, down $5 million
      from June 2004 and down $85 million from September 30, 2003.
   -- Debt to capital decreased to 31.6 percent versus 40.5 percent at the
      end of September in the prior year.
   -- Adjusted Return on Invested Capital improved 210 basis points to 7.6
      percent.

  Outlook

Demand levels experienced in the fiscal first quarter continue to support expectations of economic strength in the manufacturing sector throughout the remainder of fiscal 2005 in North America and rest-of-world markets. European markets are expected to continue a modest recovery in industrial activity.

Tambakeras said, "We are confident that the talent and drive of our employees, coupled with sound execution of the KVBS processes, will deliver substantial top and bottom line growth throughout 2005. We expect to offset significantly higher raw material prices through pricing and operational efficiencies, and are closely monitoring the potential for a negative impact from capacity constraints. Despite these challenges, we are determined to continue to deliver superior financial performance in the coming quarters. We are focused on continuing to build on our successful start to fiscal 2005 by taking advantage of our broad geographic footprint, lean operating structure and world-class product and service technology to deliver competitive advantage to our customers and value for our shareholders."

Organic sales for the second quarter of fiscal 2005 are expected to grow 13 to 15 percent. Reported EPS is expected to be $0.60 to $0.65. The assumed effective tax rate for the second quarter is approximately 20%. The expected tax rate for the full year remains approximately 32%, consistent with original guidance. As the Company indicated previously, it plans to execute a business strategy that will lower its tax rate in one quarter during the fiscal year.

For the full year, organic sales are expected to grow 8 to 10 percent. Reported EPS are expected to be 2.80 to $3.00, up 30 to 40 percent.

Kennametal anticipates net cash flow provided by operating activities of approximately $180 to $220 million in fiscal 2005. Purchases of property, plant and equipment, net of proceeds from disposals of property, plant and equipment are expected to be approximately $70 to $80 million. Adjusting net cash flow provided by operating activities for the above items, Kennametal expects to generate between $110 and $140 million of free operating cash flow for fiscal 2005.

Kennametal advises shareholders 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 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 November 22, 2004, to shareowners of record as of the close of business on November 10, 2004.

First quarter results will be discussed in a live Internet broadcast at 10:00 a.m. EST today. Access the live or archived conference by visiting the Investor Relations section of Kennametal's corporate web site at http://www.kennametal.com/ .

This release contains "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. You can identify these forward-looking statements by the fact they use words such as "should," "anticipate," "estimate," "approximate," "expect," "may," "will," "project," "intend," "plan," "believe," and others words of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements are likely to relate to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position and product development, which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in the next several years. Although it is not possible to predict or identify all factors, they may include the following: global economic conditions; future terrorist attacks; epidemics; risks associated with integrating and divesting businesses and achieving the expected savings and synergies; demands on management resources; risks associated with international markets such as currency exchange rates, and social and political environments; competition; labor relations; commodity prices; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans and environmental remediation matters. 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.

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 about 13,500 employees worldwide, the company's annual sales approximate $2.0 billion, with nearly half 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 quarter ended September 30, 2004 and 2003 are shown in the following tables (in thousands, except per share amounts).

  Consolidated Statements of Income (Unaudited)

                                                       Quarter Ended
                                                        September 30,
                                                  2004               2003

  Sales                                         $531,436           $444,575

     Cost of goods sold (1)                      358,041            300,468

  Gross profit                                   173,395            144,107

     Operating expense (2)                       130,949            121,239

     Restructuring and asset
      impairment charges                             -                  550

     Amortization of
      intangibles                                    537                470

  Operating income                                41,909             21,848

     Interest expense                              6,456              6,600

     Other (income) expense,
      net                                         (1,574)             1,337

  Income before provision for income
   taxes and minority interest                    37,027             13,911

  Provision for income taxes                      13,330              4,452

  Minority interest                                  977                695

  Net income                                     $22,720             $8,764

  Basic earnings per share                         $0.62              $0.25

  Diluted earnings per share                       $0.61              $0.24

  Dividends per share                              $0.17              $0.17

  Basic weighted average shares
   outstanding                                    36,373             35,336

  Diluted weighted average shares
   outstanding                                    37,363             35,989


   (1) For the quarter ended September 30, 2003, these amounts include
       charges of $0.1 million for integration activities related to the
       Widia acquisition and $2.8 million related to restructuring programs.

   (2) For the quarter ended September 30, 2003, these amounts include
       charges of $1.4 million for integration activities related to the
       Widia acquisition.


                     FINANCIAL HIGHLIGHTS (Continued)

In addition to reported results under U.S. GAAP, the following financial highlight tables also include, where appropriate, a reconciliation of results excluding special items and free operating cash flow (which are non-GAAP measures), to the most directly comparable GAAP measures. Management believes that each of these non-GAAP financial measures is useful to investors to more easily compare the Company's financial performance period to period.

  For the quarter ended September 30, 2004, there were no special items.


  RECONCILIATION TO GAAP - QUARTER ENDED SEPTEMBER 30, 2003 (Unaudited)

                                                                     Diluted
                                                                    Earnings
                                 Gross   Operating Operating   Net     Per
                                 Profit   Expense   Income   Income   Share

  2003 Reported Results         $144,107  $121,239  $21,848   $8,764  $0.24
    MSSG Restructuring             2,843       -      3,393    2,307   0.07
    Widia Integration Costs -
     MSSG                             63    (1,448)   1,511    1,027   0.03
    Widia Integration Costs -
     AMSG                             48       -         48       33    -
  2003 Results Excluding
   Special Items                $147,061  $119,791  $26,800  $12,131  $0.34

EPS for the quarter ended September 30, 2004 of $0.61 is up 79 percent from EPS, excluding special charges, of $0.34 and 154 percent from EPS, as reported, of $0.24 for the quarter ended September 30, 2003.

                     FINANCIAL HIGHLIGHTS (Continued)

  SEGMENT DATA (Unaudited):
                                                       Quarter Ended
                                                       September 30,
                                                  2004              2003

  Outside Sales:
  Metalworking Solutions and Services
   Group                                        $315,870          $271,129
  Advanced Materials Solutions Group             117,886            93,631
  J&L Industrial Supply                           61,417            48,139
  Full Service Supply                             36,263            31,676
  Total Outside Sales                           $531,436          $444,575

  Sales By Geographic Region:
  Within the United States                      $277,147          $232,614
  International                                  254,289           211,961
  Total Outside Sales                           $531,436          $444,575

  Operating Income (Loss), as reported:
  Metalworking Solutions and Services
   Group                                         $38,872           $23,502
  Advanced Materials Solutions Group              14,533            11,822
  J&L Industrial Supply                            5,721             2,685
  Full Service Supply                                120              (281)
  Corporate and Eliminations (1)                 (17,337)          (15,880)
  Total Operating Income                         $41,909           $21,848

  Operating Income (Loss), excluding
   special charges:
  Metalworking Solutions and Services
   Group                                         $38,872           $28,406
  Advanced Materials Solutions Group              14,533            11,870
  J&L Industrial Supply                            5,721             2,685
  Full Service Supply                                120              (281)
  Corporate and Eliminations (1)                 (17,337)          (15,880)
  Total Operating Income                         $41,909           $26,800

  (1) Includes corporate functional shared services and intercompany
      eliminations.


                     FINANCIAL HIGHLIGHTS (Continued)


  OPERATING INCOME / (LOSS) RECONCILIATION (Unaudited):

  For the quarter ended September 30, 2004, there were no special items.

  QUARTER ENDED SEPTEMBER 30,
                                                           Corp. &
                          MSSG     AMSG     J&L     FSS     Elim.    Total
  2003 Reported
   Operating Income
   (Loss)                $23,502  $11,822  $2,685  $(281) $(15,880) $21,848
    Restructuring          3,393      -       -      -         -      3,393
    Widia Integration
     Costs                 1,511       48     -      -         -      1,559
  2003 Operating Income
   (Loss) Excluding
   Special Items         $28,406  $11,870  $2,685  $(281) $(15,880) $26,800


  RECONCILIATION TO FREE OPERATING CASH FLOW INFORMATION (Unaudited)

                                              Quarter Ended
                                              September 30,
                                            2004         2003

  Net income                              $22,720       $8,764
  Other non-cash items                      5,282        6,473
  Depreciation and amortization            15,468       15,351
  Change in inventory                     (13,022)       3,728
  Change in accounts receivable            (3,058)       5,054
  Change in accounts payable               (3,178)     (12,512)
  Change in other assets and
   liabilities                              7,595      (14,673)
  Net cash flow provided by operating
   activities                              31,807       12,185

  Purchase of property, plant and
   equipment                              (15,219)     (10,594)
  Proceeds from disposals of property,
   plant and equipment                        506          534
  Free operating cash flow                $17,094       $2,125


                     FINANCIAL HIGHLIGHTS (Continued)

  CONDENSED BALANCE SHEETS (Unaudited)

                                           09/30/04    06/30/04    03/31/04
  ASSETS
  Cash and equivalents                      $28,688     $25,940     $27,528
  Trade receivables, net of allowance       369,008     364,725     357,795
  Receivables securitized                  (115,309)   (117,480)   (108,916)
  Accounts receivable, net                  253,699     247,245     248,879
  Inventories                               404,478     388,077     387,202
  Deferred income taxes                      96,144      95,240      87,651
  Other current assets                       37,178      40,443      38,803
      Total current assets                  820,187     796,945     790,063
  Property, plant and equipment, net        487,616     484,475     481,793
  Goodwill and Intangible assets, net       545,901     542,014     554,614
  Other assets                              116,319     115,229      59,641
      Total                              $1,970,023  $1,938,663  $1,886,111

  LIABILITIES
  Short-term debt, including notes
   payable                                 $116,446    $126,807      $8,193
  Accounts payable                          146,543     148,216     132,246
  Accrued liabilities                       220,496     214,359     202,460
      Total current liabilities             483,485     489,382     342,899
  Long-term debt                            318,989     313,400     486,119
  Deferred income taxes                      63,113      64,571      38,045
  Other liabilities                         162,627     167,926     192,546
      Total liabilities                   1,028,214   1,035,279   1,059,609

  MINORITY INTEREST                          17,377      16,232      16,598

  SHAREOWNERS' EQUITY                       924,432     887,152     809,904

      Total                              $1,970,023  $1,938,663  $1,886,111


  CONDENSED BALANCE SHEETS (Unaudited)

                                                12/31/03          09/30/03
  ASSETS
  Cash and equivalents                           $15,086           $14,720
  Trade receivables, net of allowance            324,509           327,464
  Receivables securitized                       (101,422)          (95,318)
  Accounts receivable, net                       223,087           232,146
  Inventories                                    386,250           387,877
  Deferred income taxes                           88,020            86,888
  Other current assets                            39,460            47,003
      Total current assets                       751,903           768,634
  Property, plant and equipment, net             487,530           489,242
  Goodwill and Intangible assets, net            500,890           484,662
  Other assets                                    72,802            67,108
      Total                                   $1,813,125        $1,809,646

  LIABILITIES
  Short-term debt, including notes
   payable                                       $12,872           $11,375
  Accounts payable                               112,563           107,653
  Accrued liabilities                            183,835           197,578
      Total current liabilities                  309,270           316,606
  Long-term debt                                 468,455           508,763
  Deferred income taxes                           36,087            41,368
  Other liabilities                              191,585           180,258
      Total liabilities                        1,005,397         1,046,995

  MINORITY INTEREST                               16,286            16,089

  SHAREOWNERS' EQUITY                            791,442           746,562

      Total                                   $1,813,125        $1,809,646


  Debt to Capital Reconciliation (Unaudited)

                                                       September 30,
                                                  2004              2003

  Total Debt                                    $435,435          $520,138
  Total Shareowners' Equity                      924,432           746,562

  Debt to Equity, GAAP                             47.1%             69.7%

  Total Debt                                    $435,435          $520,138
  Minority Interest                               17,377            16,089
  Total Shareowners' Equity                      924,432           746,562

  Total Capital                               $1,377,244        $1,282,789

  Debt to Capital                                  31.6%             40.5%


                     FINANCIAL HIGHLIGHTS (Continued)

  RETURN ON INVESTED CAPITAL (Unaudited)

  For the Period Ended September 30, 2004

    Invested Capital                      9/30/2004   6/30/2004   3/31/2004
       Debt                                $435,435    $440,207    $494,312
       Acct. Rec. Securitized               115,309     117,480     108,916
       Minority Interest                     17,377      16,232      16,598
       Equity                               924,432     887,152     809,904
       Total                             $1,492,553  $1,461,071  $1,429,730


  RETURN ON INVESTED CAPITAL (Unaudited)

  For the Period Ended September 30, 2004

    Invested Capital                     12/31/2003   9/30/2003     Average
       Debt                                $481,327    $520,138    $474,284
       Acct. Rec. Securitized               101,422      95,318     107,689
       Minority Interest                     16,286      16,089      16,516
       Equity                               791,442     746,562     831,899
       Total                             $1,390,477  $1,378,107  $1,430,388


                                                 Quarter Ended
                                     9/30/   6/30/   3/31/  12/31/
    Interest Expense                 2004    2004    2004    2003     Total
      Interest Expense              $6,456  $6,405  $6,332  $6,547  $25,740
      Securitization Interest          580     443     356     483    1,862
      Total Interest Expense        $7,036  $6,848  $6,688  $7,030   27,602
      Income Tax Benefit                                              9,109
      Total Interest Expense, net
       of tax                                                       $18,493


                                             Quarter Ended
                               9/30/    6/30/    3/31/   12/31/
    Total Income               2004     2004     2004     2003       Total
      Net Income, as
       reported              $22,720  $29,852  $24,070  $10,892     $87,534

      Minority Interest
       Expense                   977      (36)     533      404       1,878
      MSSG Restructuring         -        -        -      1,109       1,109
      AMSG Restructuring         -        -        -      1,018       1,018
      Pension Curtailment        -        -        -        883         883
      Gain on Toshiba
       Investment                -        -        -     (2,990)     (2,990)
      Strong Tool Note
       Receivable                -        -        -      1,360       1,360

      Total Income,
       excluding special
       charges               $23,697  $29,816  $24,603  $12,676     $90,792

      Total Income,
       excluding special
       charges                                                      $90,792
      Total Interest
       Expense, net of tax                                           18,493
                                                                   $109,285
      Average Invested
       Capital                                                   $1,430,388
    Adjusted Return on
     Invested Capital                                                  7.6%

    Return on Invested
     Capital calculated
     utilizing Net Income,
     as reported is as
     follows:
      Net Income, as
       reported                                                     $87,534
      Total Interest
       Expense, net of tax                                           18,493
                                                                   $106,027
      Average Invested
       Capital                                                   $1,430,388
    Return on Invested
     Capital                                                           7.4%


                     FINANCIAL HIGHLIGHTS (Continued)

  For the Period Ended September 30, 2003

    Invested Capital                      9/30/2003   6/30/2003   3/31/2003
       Debt                                $520,138    $525,687    $580,135
       Acct. Rec. Securitized                95,318      99,316      93,614
       Minority Interest                     16,089      18,880      18,070
       Equity                               746,562     721,577     756,511

       Total                             $1,378,107  $1,365,460  $1,448,330


  For the Period Ended September 30, 2003

    Invested Capital                     12/31/2002   9/30/2002*    Average
       Debt                                $617,016    $596,715    $567,938
       Acct. Rec. Securitized               100,000      94,319      96,514
       Minority Interest                     17,594      13,001      16,727
       Equity                               737,729     713,427     735,161

       Total                             $1,472,339  $1,417,462  $1,416,340


                                               Quarter Ended
                                   9/30/   6/30/   3/31/  12/31/
    Interest Expense               2003    2003    2003    2002      Total
      Interest Expense           $6,600  $9,108  $8,979  $9,594    $34,281
      Securitization Interest       397     413     406     536      1,752

      Total Interest Expense     $6,997  $9,521  $9,385 $10,130     36,033

      Income Tax Benefit                                            11,531

      Total Interest Expense,
       net of tax                                                  $24,502


                                               Quarter Ended
    Total Income                   9/30/   6/30/  3/31/   12/31/
                                   2003    2003   2003     2002      Total
      Net Income, as reported    $8,764 $(4,868) $9,699  $2,470    $16,065

      Minority Interest Expense     695      74     739     709      2,217
      MSSG Restructuring          2,307   2,194     754   3,394      8,649
      AMSG Restructuring            -       857     773   1,577      3,207
      Corporate Restructuring       -       (69)    195     670        796
      J&L Restructuring             -       (45)    561     327        843
      FSS Restructuring             -       -         6      20         26
      Widia Integration Costs -
       MSSG                       1,027   1,758   1,337     967      5,089
      Widia Integration Costs -
       AMSG                          33     818      13       3        867
      AMSG Electronics
       Impairment                   -    15,269     -       -       15,269

      Total Income, excluding
       special charges          $12,826 $15,988 $14,077 $10,137    $53,028

      Total Income, excluding
       special charges                                             $53,028
      Total Interest Expense,
       net of tax                                                   24,502
                                                                   $77,530
      Average Invested Capital                                  $1,416,340

    Adjusted Return on Invested
     Capital                                                          5.5%

    Return on Invested
     Capital calculated
     utilizing Net Income,
     as reported is as
     follows:
      Net Income, as
       reported                                                    $16,065
      Total Interest
       Expense, net of tax                                          24,502
                                                                   $40,567
      Average Invested
       Capital                                                  $1,416,340
    Return on Invested
     Capital                                                          2.9%

  * The September 30, 2002 invested capital components utilized represent
    average balances for the three months ended September 30, 2002 due to
    the Widia acquisition in August 2002.

SOURCE: Kennametal Inc.

CONTACT: Investor Relations, Beth A. Riley, or Media Relations, Joy
Chandler, both of Kennametal Inc., +1-724-539-6141