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Latrobe, PA, United States, 2014/01/30 - Kennametal Inc. reported results for the fiscal second quarter 2014, with earnings per diluted share (EPS) of $0.30, compared with the prior year quarter EPS of $0.52 [NYSE: KMT] - Kennametal.com. NYSE: KMT
Kennametal Announces Fiscal Second Quarter 2014 Results
- Organic sales growth of 2 percent;
- Reported EPS of $0.30; adjusted EPS of $0.52;
- Year-to-date operating cash flow of $85 million;
- ATI's Tungsten Materials Business acquisition closed November 4, 2013.
Kennametal Inc. (kennametal.com) today reported results for the fiscal second quarter 2014, with earnings per diluted share (EPS) of $0.30, compared with the prior year quarter EPS of $0.52. The current quarter adjusted EPS were $0.52, absent operating results of the Tungsten Materials Business (TMB) acquired from ATI, acquisition-related charges, restructuring charges and tax repatriation expense.
“Kennametal reported solid profitability although margin expansion lagged top-line growth this quarter,” said Kennametal Chairman, President and Chief Executive Officer Carlos Cardoso. “With the resumption of growth in our industrial markets, we are dedicating greater resources to serving customers as demand increases. It remains our goal to ensure sustainable growth and expand our through-the-cycle margin levels, just as we demonstrated during the prior growth cycle.”
Cardoso added,"During the December quarter, we also completed our recently announced acquisition of the Tungsten Materials Business. This transaction represents a highly complementary fit with Kennametal in product portfolio, strategic assets and talent base. We will continue to focus on bringing productivity improvements and outstanding service to our customers, which now include those from the acquired business. As we move forward, we remain committed to executing our strategies and maximizing margin expansion opportunities to deliver shareholder value.”
Fiscal 2014 Second Quarter Key Developments
• Sales were $690 million, compared with $633 million in the same quarter last year. Sales increased by 9 percent, reflecting a 2 percent organic increase and a 7 percent increase from the TMB acquisition.
• Operating income was $50 million, compared with $66 million in the same quarter last year. Excluding TMB operating results, acquisition-related charges and restructuring charges, adjusted operating income was $62 million. The decrease in adjusted operating income primarily reflects higher employment and related costs, partially offset by favorable effects of organic growth and lower raw material costs. Operating margin was 7.2 percent and adjusted operating margin was 9.6 percent, compared with an operating margin of 10.5 percent in the prior year.
• The effective tax rate was 40.8 percent in the quarter, compared with 26.4 percent in the prior year. The increase was primarily driven by tax expense of $7 million related to the repatriation of certain overseas cash. The impact of this charge was partially offset by a lower relative U.S. current year earnings contribution compared with the rest of the world, where tax rates are lower.
• On November 4, 2013, the company acquired TMB for approximately $607 million. The acquired business brings industry-leading tungsten carbide production wear products and recycling capabilities, as well as a tooling and product portfolio with a strong position in the aerospace, energy and process industries.
• Related to the acquisition, Kennametal intends to undertake restructuring actions and expects to incur pre-tax charges of approximately $40 million to $50 million within the next three years. Pre-tax restructuring and related charges of $2 million were recorded in the current quarter. Kennametal expects to generate annual savings of approximately $35 million to $45 million once these initiatives are fully implemented.
• EPS were $0.30, compared with the prior year quarter EPS of $0.52. Adjusted EPS were $0.52. A reconciliation follows.