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Kennametal Announces Fiscal Third Quarter 2013 Results

            Kennametal Announces Fiscal Third Quarter 2013 Results

- Reported EPS of $0.67; Stellite accretive $0.02 per share

- Delivered double-digit operating margin

- Strong operating cash flow of $150 million year-to-date

- Guidance modestly revised for weaker macro-economic environment

PR Newswire

LATROBE, Pa., April 25, 2013

LATROBE, Pa., April 25, 2013 /PRNewswire/ --Kennametal Inc. (NYSE: KMT) today
reported results for the fiscal third-quarter 2013, with earnings per diluted
share (EPS) of $0.67 compared with the prior year quarter EPS of $0.93.

"In the March quarter, we again delivered double-digit margin performance and
generated strong cash flows, despite another difficult period for industrial
and infrastructure activity globally" said Kennametal Chairman, President and
Chief Executive Officer Carlos Cardoso.

"We're navigating well in a challenging economic environment, while
strengthening our business to be ready to serve our customers as growth
returns. In addition, our Stellite acquisition – which completed its first
year with Kennametal on March 1 – expands our growth prospects in the energy
and power generation sectors. Our company-specific initiatives will continue
to provide opportunities for maximizing revenues, earnings and cash flows."

Fiscal 2013 Third Quarter Key Developments

  oSales were $655 million, compared with $696 million in the same quarter
    last year. Sales decreased by 6 percent, reflecting a 6 percent organic
    decline, a 5 percent unfavorable impact from fewer business days and a 1
    percent unfavorable effect from currency exchange, partially offset by a 6
    percent increase due to two months of revenues from Stellite.
  oOperating income was $75 million, compared with $103 million in the same
    quarter last year. Stellite contributed $2.9 million of operating income
    in the current year quarter, compared with a net operating loss of $4.6
    million in the prior year period. Operating income declined due to lower
    absorption of manufacturing costs related to reduced sales volume, as well
    as an ongoing inventory reduction initiative. Partially offsetting these
    effects, the company reduced operating expense with its continued cost
    discipline. Excluding the impact of Stellite, operating margin was 12.1
    percent, compared with an operating margin of 16.0 percent in the prior
    year.
  oThe effective tax rate was 18.5 percent in the period, compared with 20.4
    percent in the prior year. The decrease was primarily driven by the
    extension of the credit for increasing research activities contained in
    the American Taxpayer Relief Act of 2012 that was enacted during the
    current quarter, partially offset by higher relative U.S. earnings in the
    current year relative to the rest of the world.
  oIn accordance with the Securities and Exchange Board of India (SEBI)
    rules, which require a minimum 25 percent public float, Kennametal was
    required to sell shares of the company's subsidiary in India by June 2013.
    The company sold 13 percent of the subsidiary's shares and received net
    proceeds of approximately $27 million. The company now owns 75 percent of
    the Indian subsidiary.
  oEPS were $0.67, compared with the prior year quarter EPS of $0.93. The
    current year includes $0.02 per share accretion from Stellite. The prior
    year quarter included net loss of $0.05 per share from Stellite.
  oAdjusted return on invested capital (ROIC) was 10.8 percent as of March
    31, 2013.
  oYear to date, the company generated $150 million in cash flow from
    operating activities, compared with $164 million in the prior year period.
    Cash flow benefited from the company's ongoing inventory reduction
    initiative which reduced inventory approximately $40 million year to date,
    excluding raw materials. Net capital expenditures were $52 million and $56
    million for the nine months ended March 31, 2013 and 2012, respectively.
    For the current nine-month period, the company realized free operating
    cash flow of $98 million compared with $108 million for the same period
    last year.
  oCapital stock repurchased during the quarter were 786,000 shares.
    Year-to-date purchases total approximately 2.1 million shares, under the
    amended, multi-year share repurchase program announced in July.
    Approximately 6.5 million shares remain available for purchase under the
    program.

Segment Developments for the Fiscal 2013 Third Quarter

  oIndustrial segment sales of $374 million declined 11 percent from $419
    million in the prior year quarter. The results reflect a 5 percent organic
    decline, a 5 percent unfavorable impact from fewer business days and a 1
    percent unfavorable effect from currency exchange. On an organic basis,
    sales declined 12 percent in general engineering and 2 percent in
    transportation, while aerospace and defense sales grew 14 percent.
    Customer inventory levels remained low, impacting sales in general
    engineering. The decline in transportation reflected lower vehicle
    production rates in most geographic regions, while aerospace and defense
    sales grew with increased production of commercial aircraft. On a regional
    basis, sales declined approximately 12 percent in the Americas, 10 percent
    in Asia and 9 percent in Europe.
  oIndustrial segment operating income was $45 million compared with $71
    million in the prior year. Industrial operating income decreased due to
    lower absorption of manufacturing costs related to reduced sales volume
    and an ongoing inventory reduction initiative. Industrial operating margin
    was 12.0 percent compared with 17.0 percent in the prior year.
  oInfrastructure segment sales of $282 million, up 1 percent from $278
    million in the prior year. The increase was driven by 15 percent growth
    related to two months of revenues from Stellite, partially offset by an 8
    percent organic decline and a 6 percent decline from fewer business days.
    On an organic basis, sales declined by 15 percent in the energy and 6
    percent in the earthworks markets. Energy sales decreased globally due to
    lower drilling activity in oil and gas. Earthworks sales declined from
    persistently weak underground coal mining activity in North America, where
    a number of additional mine closures further depressed sales, as well as a
    delayed start to the road construction season due to the colder March
    weather. On a regional basis including the organic growth of Stellite,
    sales decreased approximately 18 percent in the Americas, 6 percent in
    Europe and remained relatively flat in Asia.
  oInfrastructure segment operating income was $32 million, compared with $34
    million in the same quarter of the prior year. Stellite contributed $2.9
    million of operating income in the current year quarter, compared with a
    net operating loss of $4.6 million in the prior year period. Operating
    income decreased due to the effects of the organic sales decline, as well
    as lower absorption of manufacturing costs. Infrastructure adjusted
    operating margin was 13.4 percent compared with 15.1 percent in the prior
    year.

Fiscal 2013 Year-to-Date Key Developments

  oSales were $1,918 million, compared with $1,997 million in the same period
    last year. Sales decreased by 4 percent, driven by a 7 percent organic
    decline, a 3 percent unfavorable effect from currency exchange and a 2
    percent decline due to fewer business days, partially offset by an 8
    percent increase from Stellite.
  oOperating income was $206 million, compared with $299 million in the same
    period last year. Stellite contributed $11.1 million of operating income
    year to date, compared with a net operating loss of $4.6 million in the
    prior year period. Operating income decreased primarily due to lower sales
    volume, lower absorption of manufacturing costs, related to reduced sales
    volume and an ongoing inventory reduction initiative, as well as
    unfavorable currency exchange. This decrease was partially offset by
    reduced operating expense achieved with cost control. Excluding Stellite,
    year to date adjusted operating margin was 11.2 percent, compared with an
    operating margin of 15.4 percent in the prior year.
  oEPS were $1.76, compared with the prior year period EPS of $2.72. The
    current year includes $0.04 per share accretion from Stellite. Prior year
    included net loss of $0.05 per share from Stellite.

Reconciliations of all non-GAAP financial measures are set forth in the tables
attached, and corresponding descriptions are contained in the company's report
on Form 8-K, to which this news release is attached.

Recent Actions to Enhance Liquidity and Further Strengthen Financial Position

In April 2013, Kennametal further enhanced liquidity and strengthened its
financial position by amending the company's existing revolving bank credit
facility, capitalizing upon current market conditions to extend the company's
debt maturity profile. The amendment extends the maturity of the existing $600
million credit facility to April 2018.

Outlook

Kennametal adjusted its full-year outlook due to a slower than anticipated
recovery in the company's served industrial end markets globally, as well as
continued softness in road construction, underground mining, and oil and gas
markets in the U.S. However, the company notes that its order rates have
reflected a sequential increase over the prior quarter and expects continued
modest improvement, primarily in its industrial end markets.

The company now expects fiscal 2013 sales decline in the range of 5 to 6
percent, with organic sales decline ranging from 8 to 9 percent. Previously,
the company had forecast total sales decline ranging from 2 to 4 percent with
organic sales decline of 7 to 9 percent.

Based on the revision, the company has reduced its EPS guidance for fiscal
2013 to range from $2.45 to $2.55, versus its previous expectation of $2.60 to
$2.80. Included in this outlook is the accretive contribution of the Stellite
acquisition, net of integration costs, which is now expected to range between
$0.05 and $0.10 per share as compared to the previous range of $0.10 and $0.15
per share.

The company now expects to generate cash flow from operations between $260
million and $280 million for fiscal 2013, compared with the previous range of
$290 million to $325 million. Based on anticipated capital expenditures of
approximately $90 million to $100 million, the company expects to generate
between $170 million and $180 million of free operating cash flow for the full
fiscal year, as compared to the previous range of $200 million to $225
million.

Dividend Declared

Kennametal also announced that its board of directors declared a quarterly
cash dividend of $0.16 per share. The dividend is payable May 22, 2013 to
shareowners of record as of the close of business on May 7, 2013.

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 via the Investor Relations section
of Kennametal's corporate website at www.kennametal.com.

The company will discuss its fiscal 2013 third-quarter results in a live
webcast at 9:00 a.m. ET today. This event will be broadcast live on the
company's website, www.kennametal.com. To access the webcast, select "Investor
Relations" and then "Events." A recorded replay of this event also will be
available on the company's website through May 24, 2013.

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 earnings, sales volumes, and cash flow for fiscal year 2013 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: economic recession; availability and cost of the raw materials we use
to manufacture our products; our foreign operations and international markets,
such as currency exchange rates, different regulatory environments, trade
barriers, exchange controls, and social and political instability; changes in
the regulatory environment in which we operate, including environmental,
health and safety regulations; our ability to protect and defend our
intellectual property; competition; our ability to retain our management and
employees; demands on management resources; demand for and market acceptance
of our products; integrating acquisitions and achieving the expected savings
and synergies; business divestitures; 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 undertake no
obligation to release publicly any revisions to forward-looking statements as
a result of future events or developments.

Celebrating its 75th year as an industrial technology leader, Kennametal Inc.
delivers productivity to customers seeking peak performance in demanding
environments. The company provides innovative wear-resistant products and
application engineering backed by advanced material science, serving customers
in 60 countries across diverse sectors of aerospace, earthworks, energy,
industrial production, transportation and infrastructure. With approximately
13,000 employees and nearly $3 billion in sales, the company realizes half of
its revenue from outside North America, and 40% globally from innovations
introduced in the past five years. Recognized among the "World's Most Ethical
Companies" (Ethisphere); "Outstanding Corporate Innovator" (Product
Development Management Association); and "America's Safest Companies" (EHS
Today) with a focus on 100% safety, Kennametal and its foundation invest in
technical education, industrial technologies and material science to deliver
the promise of progress and economic prosperity to people everywhere. For more
information, visit the company's website at www.kennametal.com.

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FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                             Three Months Ended      Nine Months Ended
                             March 31,               March 31,
(in thousands, except per    2013        2012        2013          2012
share amounts)
Sales                        $ 655,360   $ 696,411   $ 1,917,963   $ 1,997,030
Cost of goods sold           446,865     449,965     1,301,673     1,267,638
Gross profit                 208,495     246,446     616,290       729,392
Operating expense            128,328     138,904     394,967       419,459
Amortization of intangibles  5,194       4,250       15,501        10,982
Operating income             74,973      103,292     205,822       298,951
Interest expense             7,504       8,003       20,430        18,746
Other expense (income), net  749         (486)       502           (1,169)
Income from continuing
operations before income     66,720      95,775      184,890       281,374
taxes
Provision for income taxes   12,344      19,538      40,158        57,093
Net income                   54,376      76,237      144,732       224,281
Less: Net income
attributable to              460         738         2,285         3,099
noncontrolling interests
Net income attributable to   $ 53,916    $ 75,499    $ 142,447     $ 221,182
Kennametal
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL
SHAREOWNERS
Basic earnings per share     $ 0.68      $ 0.94      $ 1.79        $ 2.76
Diluted earnings per share   $ 0.67      $ 0.93      $ 1.76        $ 2.72
Dividends per share          $ 0.16      $ 0.14      $ 0.48        $ 0.40
Basic weighted average       79,294      80,110      79,744        80,179
shares outstanding
Diluted weighted average     80,619      81,535      80,912        81,434
shares outstanding



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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                           March 31,         June 30,
(in thousands)
                                           2013              2012
ASSETS
Cash and cash equivalents                  $  322,089        $  116,466
Accounts receivable, net                   442,486           478,989
Inventories                                575,889           585,856
Other current assets                       101,966           101,651
Total current assets                       1,442,430         1,282,962
Property, plant and equipment, net         728,112           742,201
Goodwill and other intangible assets, net  945,407           962,837
Other assets                               42,982            46,188
Total assets                               $  3,158,931      $  3,034,188
LIABILITIES
Current maturities of long-term debt and
capital leases, including notes            $  47,135         $  75,137

payable
Accounts payable                           153,048           219,475
Other current liabilities                  204,130           284,010
Total current liabilities                  404,313           578,622
Long-term debt and capital leases          703,895           490,608
Other liabilities                          296,889           296,737
Total liabilities                          1,405,097         1,365,967
KENNAMETAL SHAREOWNERS' EQUITY             1,721,508         1,643,850
NONCONTROLLING INTERESTS                   32,326            24,371
Total liabilities and equity               $  3,158,931      $  3,034,188
SEGMENT DATA         Three Months Ended            Nine Months Ended
(UNAUDITED)          March 31,                     March 31,
(in thousands)       2013            2012          2013          2012
Outside Sales:
Industrial           $  373,807      $  418,554    $ 1,088,155   $ 1,246,261
Infrastructure       281,553         277,857       829,808       750,769
Total outside sales  $  655,360      $  696,411    $ 1,917,963   $ 1,997,030
Sales By Geographic
Region:
North America        $  289,508      $  326,750    $ 852,675     $ 917,917
Western Europe       199,225         193,111       559,812       556,085
Rest of World        166,627         176,550       505,476       523,028
Total sales by       $  655,360      $  696,411    $ 1,917,963   $ 1,997,030
geographic region
Operating Income:
Industrial           $  44,961       $  71,195     $ 117,552     $ 206,778
Infrastructure       32,332          34,060        95,248        99,927
Corporate ^(1)       (2,320)         (1,963)       (6,978)       (7,754)
Total operating      $  74,973       $  103,292    $ 205,822     $ 298,951
income
^(1)  Represents unallocated corporate expenses



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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, sales, operating income and margin, Infrastructure sales, operating
income and margin, free operating cash flow and return on invested capital
(which are non-GAAP financial measures), to the most directly comparable GAAP
measures. 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 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 measures
should not be considered in isolation or as a substitute for the most
comparable GAAP measures. Investors are cautioned that non-GAAP financial
measures utilized by the company may not be comparable to non-GAAP financial
measures used by other companies. Reconciliations of all non-GAAP financial
measures are set forth in the attached tables and descriptions of certain
non-GAAP financial measures are contained in our report on Form 8-K to which
this release is attached.

THREE MONTHS ENDED MARCH 31, 2013 - (UNAUDITED)
(in thousands, except percents) Infrastructure Sales  Infrastructure
                                                      Operating Income
2013 Reported Results           $         281,553     $    32,332
2013 Reported Operating Margin                        11.5%
Stellite ^(2)                  (61,209)              (2,865)
2013 Adjusted Results           $         220,344     $    29,467
2013 Adjusted Operating Margin                        13.4%

^(2)  Includes three months of Stellite operations (Stellite was acquired
March 1, 2012). The two months of acquisition
impact included sales of $40.7 million and operating income of $2.4 million.



THREE MONTHS ENDED MARCH 31, 2013 - (UNAUDITED)
(in thousands, except percents) Sales      Operating Income
2013 Reported Results           $ 655,360  $    74,973
2013 Reported Operating Margin             11.4%
Stellite ^(2)                  (61,209)   (2,865)
2013 Adjusted Results           $ 594,151  $    72,108
2013 Adjusted Operating Margin             12.1%



THREE MONTHS ENDED MARCH 31, 2012 - (UNAUDITED)
                                                     Infrastructure
(in thousands, except percents) Infrastructure Sales
                                                     Operating Income
2012 Reported Results           $     277,857        $    34,060
2012 Reported Operating Margin                       12.3%
Acquisition impact ^(3)        (22,558)             4,608
2012 Adjusted Results           $     255,299        $    38,668
2012 Adjusted Operating Margin                       15.1%
^(3)  Includes the impact of Stellite operations



THREE MONTHS ENDED MARCH 31, 2012 - (UNAUDITED)
(in thousands, except percents) Sales      Operating Income
2012 Reported Results           $ 696,411  $    103,292
2012 Reported Operating Margin             14.8%
Acquisition impact ^(3)        (22,558)   4,608
2012 Adjusted Results           $ 673,853  $    107,900
2012 Adjusted Operating Margin             16.0%



NINE MONTHS ENDED MARCH 31, 2013 - (UNAUDITED)
(in thousands, except percents) Sales        Operating Income
2013 Reported Results           $ 1,917,963  $    205,822
2013 Reported Operating Margin               10.7%
Stellite ^(4)                  (180,864)    (11,143)
2013 Adjusted Results           $ 1,737,099  $    194,679
2013 Adjusted Operating Margin               11.2%

^(4)  Includes nine months of Stellite operations (Stellite was acquired March
1, 2012). The eight
months of acquisition impact included sales of $160.4 million and operating
income of $10.7 million.



NINE MONTHS ENDED MARCH 31, 2012 - (UNAUDITED)
(in thousands, except percents) Sales        Operating Income
2012 Reported Results           $ 1,997,030  $    298,951
2012 Reported Operating Margin               15.0%
Acquisition impact ^(3)        (22,558)     4,608
2012 Adjusted Results           $ 1,974,472  $    303,559
2012 Adjusted Operating Margin               15.4%



FREE OPERATING CASH FLOW (UNAUDITED)                     Nine Months Ended
                                                         March 31,
(in thousands)                                           2013        2012
Net cash flow from operating activities                  $ 150,358   $ 164,236
Purchases of property, plant and equipment               (53,808)    (60,657)
Proceeds from disposals of property, plant and equipment 1,763       4,397
Free operating cash flow                                 $ 98,313    $ 107,976





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RETURN ON INVESTED CAPITAL (UNAUDITED)
March 31, 2013 (in thousands, except percents)
Invested       3/31/2013    12/31/2012   9/30/2012    6/30/2012    3/31/2012    Average
Capital
Debt           $ 751,030    $ 706,859    $ 601,124    $ 565,745    $ 640,871    $ 653,126
Total equity   1,753,834    1,744,443    1,712,532    1,668,221    1,745,699    1,724,946
Total          $ 2,504,864  $ 2,451,302  $ 2,313,656  $ 2,233,966  $ 2,386,570  $ 2,378,072
                            Three Months Ended
Interest                    3/31/2013    12/31/2012   9/30/2012    6/30/2012    Total
Expense
Interest                    $ 7,504      $ 6,970      $ 5,956      $ 8,469      $ 28,899
expense
Income tax                                                                      6,213
benefit
Total interest expense,                                                         $ 22,686
net of tax
Net Income                  3/31/2013    12/31/2012   9/30/2012    6/30/2012    Total
Net income
attributable                $ 53,916     $ 42,142     $ 46,390     $ 86,048     $ 228,496
to Kennametal,
as reported
Stellite
acquisition                 —            —            —            2,267        2,267
charges
Noncontrolling              460          1,167        657          504          2,788
interest
Net income,                 $ 54,376     $ 43,309     $ 47,047     $ 88,819     $ 233,551
adjusted
Total interest expense,                                                         22,686
net of tax
                                                                                $ 256,237
Average
invested                                                                        $ 2,378,072
capital
Adjusted Return on                                                              10.8%
Invested Capital
Return on invested capital calculated utilizing net income, as reported is as
follows:
Net income attributable to Kennametal, as reported                              $ 228,496
Total interest expense, net of tax                                              22,686
                                                                                $ 251,182
Average invested capital                                                        $ 2,378,072
Return on Invested Capital                                                      10.6%

SOURCE Kennametal Inc.

Website: http://www.kennametal.com
Contact: Investor Relations, Quynh McGuire, 724-539-6559, or Corporate
Relations - Media, Lorrie Paul Crum, 724-539-6792