Kennametal Inc. (NYSE:KMT) Files An 8-K Results of Operations and Financial Condition
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 April 25, 2017, Kennametal Inc. (Kennametal or the Company)
issued an earnings announcement for its fiscal 2017
third>quarter ended March 31, 2017.
issued an earnings announcement for its fiscal 2017
third>quarter ended March 31, 2017.
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:
sales; gross profit and margin; operating expense; operating
expense as a percentage of sales; operating income (loss) and
margin; net income (loss) attributable to Kennametal
Shareholders; earnings per diluted share (EPS) and loss per
diluted share (LPS); effective tax rate; Industrial operating
income and margin; Widia operating income (loss) and margin; and
Infrastructure operating income and margin. Adjustments for the
three>months ended March 31, 2017>include restructuring and
related charges. Adjustments for the nine>months ended March
31, 2017>include (1) restructuring and related charges and (2)
Australia deferred tax valuation allowance. Adjustments for the
three months ended March 31, 2016 include: (1) restructuring and
related charges, (2) tax effect of prior asset impairment charges
and (3) loss on divestiture. Adjustments for the nine months
ended March 31, 2016 include: (1) restructuring and related
charges, (2) goodwill and other intangible asset impairment
charges, (3) loss on divestiture and related charges and (4)
operations of divested businesses. Management adjusts for these
items in measuring and compensating internal performance and to
more readily compare the Companys financial performance
period-to-period. The press release also contains free operating
cash flow and earnings (loss) before interest, taxes,
depreciation and amortization (E(L)BITDA) and margin which are
non-GAAP measures and are defined below.
accounting principles (GAAP) financial measures. The following
GAAP financial measures have been presented on an adjusted basis:
sales; gross profit and margin; operating expense; operating
expense as a percentage of sales; operating income (loss) and
margin; net income (loss) attributable to Kennametal
Shareholders; earnings per diluted share (EPS) and loss per
diluted share (LPS); effective tax rate; Industrial operating
income and margin; Widia operating income (loss) and margin; and
Infrastructure operating income and margin. Adjustments for the
three>months ended March 31, 2017>include restructuring and
related charges. Adjustments for the nine>months ended March
31, 2017>include (1) restructuring and related charges and (2)
Australia deferred tax valuation allowance. Adjustments for the
three months ended March 31, 2016 include: (1) restructuring and
related charges, (2) tax effect of prior asset impairment charges
and (3) loss on divestiture. Adjustments for the nine months
ended March 31, 2016 include: (1) restructuring and related
charges, (2) goodwill and other intangible asset impairment
charges, (3) loss on divestiture and related charges and (4)
operations of divested businesses. Management adjusts for these
items in measuring and compensating internal performance and to
more readily compare the Companys financial performance
period-to-period. The press release also contains free operating
cash flow and earnings (loss) before interest, taxes,
depreciation and amortization (E(L)BITDA) and margin which are
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.
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 Kennametals cash generating capability because it
better represents cash generated from operations that can be used
for dividends, debt repayment, strategic initiatives, and other
investing and financing activities.
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 Kennametals cash generating capability because it
better represents cash generated from operations that can be used
for dividends, debt repayment, strategic initiatives, and other
investing and financing activities.
E(L)BITDA
E(L)BITDA are a non-GAAP financial measure and are defined as net
income attributable to Kennametal, with interest expense,
interest income, provision for income taxes, depreciation and
amortization added back. The most directly comparable GAAP
measure is net income attributable to Kennametal. However, we
believe that E(L)BITDA are widely used as a measure of operating
performance and are an important indicator of the Companys
operational strength and performance. Nevertheless, the measure
should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities or any
other measure for determining liquidity that is calculated in
accordance with GAAP. Additionally, Kennametal will adjust
E(L)BITDA. Management uses this information in reviewing
operating performance.
income attributable to Kennametal, with interest expense,
interest income, provision for income taxes, depreciation and
amortization added back. The most directly comparable GAAP
measure is net income attributable to Kennametal. However, we
believe that E(L)BITDA are widely used as a measure of operating
performance and are an important indicator of the Companys
operational strength and performance. Nevertheless, the measure
should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities or any
other measure for determining liquidity that is calculated in
accordance with GAAP. Additionally, Kennametal will adjust
E(L)BITDA. Management uses this information in reviewing
operating performance.
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.
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.
Primary Working Capital
Primary working capital is a non-GAAP financial measure and is
defined as accounts receivable, net plus inventories, net minus
accounts payable. The most directly comparable GAAP measure is
working capital, which is defined as current assets less current
liabilities. We believe primary working capital better represents
Kennametals performance in managing certain assets and
liabilities controllable at the segment level and is used as such
for internal performance measurement.
defined as accounts receivable, net plus inventories, net minus
accounts payable. The most directly comparable GAAP measure is
working capital, which is defined as current assets less current
liabilities. We believe primary working capital better represents
Kennametals performance in managing certain assets and
liabilities controllable at the segment level and is used as such
for internal performance measurement.
|
PRIMARY WORKING CAPITAL (UNAUDITED)
|
||||||||||||||||||
|
(in thousands, except percents)
|
3/31/17
|
12/31/16
|
9/30/16
|
6/30/16
|
3/31/16
|
Average
|
||||||||||||
|
Current assets
|
$
|
1,043,046
|
$
|
971,745
|
$
|
991,837
|
$
|
1,075,341
|
$
|
1,099,260
|
$
|
1,036,246
|
||||||
|
Current liabilities
|
426,799
|
390,151
|
402,574
|
427,275
|
421,415
|
413,643
|
||||||||||||
|
Working capital, GAAP
|
$
|
616,247
|
$
|
581,594
|
$
|
589,263
|
$
|
648,066
|
$
|
677,845
|
$
|
622,603
|
||||||
|
Excluding items:
|
||||||||||||||||||
|
Cash and cash equivalents
|
(100,817
|
)
|
(102,001
|
)
|
(119,411
|
)
|
(161,579
|
)
|
(136,564
|
)
|
(124,074
|
)
|
||||||
|
Other current assets
|
(75,061
|
)
|
(80,375
|
)
|
(64,660
|
)
|
(84,016
|
)
|
(111,479
|
)
|
(83,118
|
)
|
||||||
|
Total excluded current assets
|
(175,878
|
)
|
(182,376
|
)
|
(184,071
|
)
|
(245,595
|
)
|
(248,043
|
)
|
(207,193
|
)
|
||||||
|
Adjusted current assets
|
867,168
|
789,369
|
807,766
|
829,746
|
851,217
|
829,053
|
||||||||||||
|
Current maturities of long-term debt and capital
leases, including notes payable |
(1,591
|
)
|
(2,263
|
)
|
(1,381
|
)
|
(1,895
|
)
|
(4,140
|
)
|
(2,254
|
)
|
||||||
|
Other current liabilities
|
(234,367
|
)
|
(219,008
|
)
|
(225,189
|
)
|
(243,341
|
)
|
(247,943
|
)
|
(233,970
|
)
|
||||||
|
Total excluded current liabilities
|
(235,958
|
)
|
(221,271
|
)
|
(226,570
|
)
|
(245,236
|
)
|
(252,083
|
)
|
(236,224
|
)
|
||||||
|
Adjusted current liabilities
|
190,841
|
168,880
|
176,004
|
182,039
|
169,332
|
177,419
|
||||||||||||
|
Primary working capital
|
$
|
676,327
|
$
|
620,489
|
$
|
631,762
|
$
|
647,707
|
$
|
681,885
|
$
|
651,634
|
||||||
|
Three Months Ended
|
||||||||||||||||||
|
3/31/17
|
12/31/16
|
9/30/16
|
6/30/16
|
Total
|
||||||||||||||
|
Sales
|
$
|
528,630
|
$
|
487,573
|
$
|
477,140
|
$
|
521,224
|
$
|
2,014,567
|
||||||||
|
Primary working capital as a percentage of sales
|
32.3
|
%
|
||||||||||||||||
|
PRIMARY WORKING CAPITAL (UNAUDITED)
|
||||||||||||||||||
|
(in thousands, except percents)
|
6/30/16
|
3/31/16
|
12/31/15
|
9/30/15
|
6/30/15
|
Average
|
||||||||||||
|
Current assets
|
$
|
1,075,341
|
$
|
1,099,260
|
$
|
1,062,992
|
$
|
1,168,511
|
$
|
1,258,546
|
$
|
1,132,930
|
||||||
|
Current liabilities
|
427,275
|
421,415
|
394,983
|
438,406
|
482,744
|
432,965
|
||||||||||||
|
Working capital, GAAP
|
$
|
648,066
|
$
|
677,845
|
$
|
668,009
|
$
|
730,105
|
$
|
775,802
|
$
|
699,965
|
||||||
|
Excluding items:
|
||||||||||||||||||
|
Cash and cash equivalents
|
(161,579
|
)
|
(136,564
|
)
|
(138,978
|
)
|
(97,199
|
)
|
(105,494
|
)
|
(127,963
|
)
|
||||||
|
Other current assets
|
(84,016
|
)
|
(111,479
|
)
|
(113,113
|
)
|
(120,583
|
)
|
(132,148
|
)
|
(112,268
|
)
|
||||||
|
Total excluded current assets
|
(245,595
|
)
|
(248,043
|
)
|
(252,091
|
)
|
(217,782
|
)
|
(237,642
|
)
|
(240,231
|
)
|
||||||
|
Adjusted current assets
|
829,746
|
851,217
|
810,901
|
950,729
|
1,020,904
|
892,699
|
||||||||||||
|
Current maturities of long-term debt and capital
leases, including notes payable |
(1,895
|
)
|
$
|
(4,140
|
)
|
(5,942
|
)
|
(25,285
|
)
|
(15,702
|
)
|
(10,593
|
)
|
|||||
|
Other current liabilities
|
(243,341
|
)
|
(247,943
|
)
|
(237,444
|
)
|
(235,385
|
)
|
(279,661
|
)
|
(248,755
|
)
|
||||||
|
Total excluded current liabilities
|
(245,236
|
)
|
(252,083
|
)
|
(243,386
|
)
|
(260,670
|
)
|
(295,363
|
)
|
(259,348
|
)
|
||||||
|
Adjusted current liabilities
|
182,039
|
169,332
|
151,597
|
177,736
|
187,381
|
173,617
|
||||||||||||
|
Primary working capital
|
$
|
647,707
|
$
|
681,885
|
$
|
659,304
|
$
|
772,993
|
$
|
833,523
|
$
|
719,082
|
||||||
|
Three Months Ended
|
||||||||||||||||||
|
6/30/16
|
3/31/16
|
12/31/15
|
9/30/15
|
Total
|
||||||||||||||
|
Sales
|
$
|
521,224
|
$
|
497,837
|
$
|
524,021
|
$
|
555,354
|
$
|
2,098,436
|
||||||||
|
Primary working capital as a percentage of sales
|
34.3
|
%
|
||||||||||||||||
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 equity plus
total debt. The most directly comparable GAAP measure is debt to
equity, which is defined as total debt divided by total equity.
Management believes that debt to capital provides additional
insight into the underlying capital structure and performance of
the Company.
Kennametal as total debt divided by the sum of total equity plus
total debt. The most directly comparable GAAP measure is debt to
equity, which is defined as total debt divided by total equity.
Management believes that debt to capital provides additional
insight into the underlying capital structure and performance of
the Company.
|
DEBT TO CAPITAL (UNAUDITED)
|
March 31,
|
June 30,
|
||||||
|
(in thousands, except percents)
|
||||||||
|
Total debt
|
$
|
696,222
|
$
|
695,443
|
||||
|
Total equity
|
979,571
|
995,801
|
||||||
|
Debt to equity, GAAP
|
71.1
|
%
|
69.8
|
%
|
||||
|
Total debt
|
$
|
696,222
|
$
|
695,443
|
||||
|
Total equity
|
979,571
|
995,801
|
||||||
|
Total capital
|
$
|
1,675,793
|
$
|
1,691,244
|
||||
|
Debt to capital
|
41.5
|
%
|
41.1
|
%
|
||||
Debt to EBITDA
Debt to EBITDA is a non-GAAP financial measure and is defined by
Kennametal as total debt divided by the sum of the four trailing
quarters of EBITDA. The most directly comparable GAAP measure is
debt to net income attributable to Kennametal. Management
believes that debt to EBITDA provides additional insight into the
underlying capital structure, liquidity and performance of the
Company. Additionally, Kennametal will adjust debt to EBITDA.
Kennametal as total debt divided by the sum of the four trailing
quarters of EBITDA. The most directly comparable GAAP measure is
debt to net income attributable to Kennametal. Management
believes that debt to EBITDA provides additional insight into the
underlying capital structure, liquidity and performance of the
Company. Additionally, Kennametal will adjust debt to EBITDA.
|
DEBT TO ADJUSTED EBITDA (UNAUDITED)
|
||||||||||||
|
MARCH 31, 2017 (in thousands, except debt to adjusted
EBITDA) |
||||||||||||
|
Three Months Ended
|
||||||||||||
|
EBITDA
|
3/31/17
|
12/31/16
|
9/30/16
|
6/30/16
|
||||||||
|
Net income (loss) attributable to Kennametal, reported
|
$
|
38,890
|
$
|
7,262
|
$
|
(21,656
|
)
|
$
|
(66,515
|
)
|
||
|
Add back:
|
||||||||||||
|
Interest expense
|
7,331
|
7,151
|
6,993
|
6,857
|
||||||||
|
Interest income
|
(306
|
)
|
(206
|
)
|
(248
|
)
|
(568
|
)
|
||||
|
Provision for income taxes
|
9,301
|
8,221
|
4,879
|
86,812
|
||||||||
|
Depreciation
|
22,375
|
22,827
|
23,167
|
23,407
|
||||||||
|
Amortization
|
4,245
|
4,150
|
4,271
|
4,447
|
||||||||
|
EBITDA
|
$
|
81,836
|
$
|
49,405
|
$
|
17,406
|
$
|
54,440
|
||||
|
Adjustments:
|
||||||||||||
|
Restructuring and related charges
|
9,623
|
11,783
|
31,657
|
15,539
|
||||||||
|
Fixed asset disposal charges
|
5,381
|
|||||||||||
|
Loss on divestiture
|
||||||||||||
|
Adjusted EBITDA
|
$
|
91,459
|
$
|
61,188
|
$
|
49,063
|
$
|
76,072
|
||||
|
Total debt
|
$
|
696,222
|
||||||||||
|
Trailing four quarters adjusted EBITDA
|
$
|
277,782
|
||||||||||
|
Debt to adjusted EBITDA
|
2.5
|
|||||||||||
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Fiscal 2017>Third>Quarter Earnings Announcement
About Kennametal Inc. (NYSE:KMT)
Kennametal Inc. is a supplier of tooling, engineered components and materials consumed in production processes. The Company operates through two segments: Industrial and Infrastructure. The Industrial segment generally serves customers that operate in industrial end markets, such as transportation, general engineering, aerospace and defense. The Infrastructure segment generally serves customers that operate in the earthworks and energy sectors supporting primary industries, such as oil and gas, power generation, underground, surface and hard-rock mining, highway construction and road maintenance. It provides wear-resistant products, application engineering and services backed by material science serving customers across various sectors. The Company’s product offerings include a selection of standard and customized technologies for metalworking, such as metal cutting tools, tooling systems and services, as well as materials, such as cemented tungsten carbide products and super alloys. Kennametal Inc. (NYSE:KMT) Recent Trading Information
Kennametal Inc. (NYSE:KMT) closed its last trading session up +1.15 at 40.48 with 1,087,581 shares trading hands.
