UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 27, 2011
Kennametal Inc.
(Exact Name of Registrant as Specified in Its Charter)
| |
|
|
|
|
|
| Pennsylvania
|
|
1-5318
|
|
25-0900168 |
| |
|
|
|
|
| (State or Other Jurisdiction of Incorporation)
|
|
(Commission File Number)
|
|
(IRS Employer Identification No.) |
| |
|
|
|
|
|
|
|
World Headquarters |
|
|
|
|
1600 Technology Way |
|
|
|
|
P.O. Box 231 |
|
|
|
|
Latrobe, Pennsylvania
|
|
15650-0231 |
|
|
|
|
|
| (Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (724) 539-5000
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
Item 2.02 Results of Operations and Financial Condition
On January 27, 2011, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement
for its fiscal second quarter ended December 31, 2010.
The press release contains certain non-generally accepted accounting principles (GAAP) financial
measures. The following GAAP financial measures have been presented on an adjusted basis: gross
profit, operating expense, operating income, Industrial operating income and margin, Infrastructure
operating income and margin, net income (loss) and diluted earnings per share. Adjustments include:
(1) restructuring and related charges for the three and six months ended December 31, 2010 and
2009, respectively, and (2) divestiture related charges for the three and six months ended December
31, 2009. Management adjusts for these items in measuring and compensating internal performance and
to more readily compare the Company’s financial performance period-to-period. The press release
also contains free operating cash flow and adjusted return on invested capital (ROIC), which are
both non-GAAP measures and are defined below.
Management believes that presentation of these non-GAAP financial measures provides useful
information about the results of operations of the Company for the current and past periods.
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.
Free Operating Cash Flow
Free operating cash flow is a non-GAAP financial measure and is defined by the Company as cash
provided by operations (which is the most directly comparable GAAP measure) less capital
expenditures plus proceeds from disposals of fixed assets. Management considers free operating cash
flow to be an important indicator of Kennametal’s cash generating capability because it better
represents cash generated from operations that can be used for dividends, debt repayment, strategic
initiatives (such as acquisitions), and other investing and financing activities.
Adjusted Return on Invested Capital
Adjusted Return on Invested Capital is a non-GAAP financial measure and is defined by the Company
as the previous 12 months’ net income, adjusted for interest expense, noncontrolling interest
expense and special items, divided by the sum of the previous five quarters average balances of
debt and total equity. The most directly comparable GAAP measure is return on invested capital
calculated utilizing GAAP net income. Management believes that this financial measure provides
additional insight into the underlying capital structure and performance of the Company. Management
utilizes this non-GAAP measure in determining compensation and assessing the operations of the
Company.
A copy of the Company’s earnings announcement is furnished under Exhibit 99.1 attached hereto.
Reconciliations of the above
non-GAAP financial measures are included in the earnings announcement.
Additionally, during our quarterly earnings teleconference we may use various non-GAAP financial
measures to describe the underlying operating results. Accordingly, we have compiled below certain
reconciliations as required by Regulation G. 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.
Debt to Capital
Debt to capital is a non-GAAP financial measure and is defined by Kennametal as total debt divided
by the sum of total shareowners’ equity plus total debt. The most directly comparable GAAP measure
is debt to equity, which is defined as total debt divided by shareowners’ equity. Management
believes that debt to capital provides additional insight into the underlying capital structuring
and performance of the Company.
| |
|
|
|
|
|
|
|
|
| DEBT TO CAPITAL (UNAUDITED) |
|
December 31, |
|
|
June 30, |
|
| (in thousands, except percents) |
|
2010 |
|
|
2010 |
|
| |
Total debt |
|
$ |
316,379 |
|
|
$ |
337,668 |
|
Total shareowners’ equity |
|
|
1,476,427 |
|
|
|
1,333,443 |
|
| |
Debt to equity, GAAP |
|
|
21.4 |
% |
|
|
25.3 |
% |
| |
Total debt |
|
$ |
316,379 |
|
|
$ |
337,668 |
|
Total shareowners’ equity |
|
|
1,476,427 |
|
|
|
1,333,443 |
|
| |
Total capital |
|
$ |
1,792,806 |
|
|
$ |
1,671,111 |
|
| |
Debt to capital |
|
|
17.6 |
% |
|
|
20.2 |
% |
| |
RETURN ON INVESTED CAPITAL (UNAUDITED)
September 30, 2010 (in thousands, except percents)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Invested Capital |
|
9/30/2010 |
|
|
6/30/2010 |
|
|
3/31/2010 |
|
|
12/31/2009 |
|
|
9/30/2009 |
|
|
Average |
|
| |
Debt |
|
$ |
318,819 |
|
|
$ |
337,668 |
|
|
$ |
336,175 |
|
|
$ |
338,781 |
|
|
$ |
367,359 |
|
|
$ |
339,760 |
|
Total equity |
|
|
1,437,616 |
|
|
|
1,333,443 |
|
|
|
1,374,321 |
|
|
|
1,400,245 |
|
|
|
1,400,759 |
|
|
|
1,389,277 |
|
| |
Total |
|
$ |
1,756,435 |
|
|
$ |
1,671,111 |
|
|
$ |
1,710,496 |
|
|
$ |
1,739,026 |
|
|
$ |
1,768,118 |
|
|
$ |
1,729,037 |
|
| |
| |
|
|
|
|
|
Three Months Ended
|
Interest Expense |
|
|
|
|
|
|
9/30/2010 |
|
|
|
6/30/2010 |
|
|
|
3/31/2010 |
|
|
|
12/31/2009 |
|
|
Total |
| |
Interest expense |
|
|
|
|
|
$ |
5,963 |
|
|
$ |
6,347 |
|
|
$ |
6,531 |
|
|
$ |
5,954 |
|
|
$ |
24,795 |
|
| |
|
|
|
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income |
|
|
|
|
|
|
9/30/2010 |
|
|
|
6/30/2010 |
|
|
|
3/31/2010 |
|
|
|
12/31/2009 |
|
|
Total |
| |
Net income attributable to
Kennametal, as reported |
|
|
|
|
|
$ |
34,921 |
|
|
$ |
40,584 |
|
|
$ |
9,685 |
|
|
$ |
5,967 |
|
|
$ |
91,157 |
|
Restructuring and related charges |
|
|
|
|
|
|
4,253 |
|
|
|
9,681 |
|
|
|
22,329 |
|
|
|
5,143 |
|
|
|
41,406 |
|
Loss on divestiture and related charges |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
56 |
|
|
|
56 |
|
Noncontrolling interest expense |
|
|
|
|
|
|
1,035 |
|
|
|
366 |
|
|
|
518 |
|
|
|
270 |
|
|
|
2,189 |
|
| |
Total income, adjusted |
|
|
|
|
|
$ |
40,209 |
|
|
$ |
50,631 |
|
|
$ |
32,532 |
|
|
$ |
11,436 |
|
|
$ |
134,808 |
|
| |
|
|
|
|
Total interest expense, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
152,933 |
|
Average invested capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,729,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Return on Invested Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Return on invested capital calculated utilizing net income, as reported is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Kennametal, as reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
91,157 |
|
Total interest expense, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,125 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
109,282 |
|
Average invested capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,729,037 |
|
| |
Return on Invested Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.3 |
% |
| |
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Fiscal 2011 Second Quarter Earnings Announcement