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Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
Kennametal Chairman, President and CEO, Markos I. Tambakeras, said, ''We are pleased to deliver a credible performance in fiscal 2003, in the context of a manufacturing recession that persisted in North America, for the third year, and deepened in Europe. Our continuing disciplined management of the business strengthened the foundation that will enhance our operating leverage as global manufacturing economies improve.''
Tambakeras continued, ''We substantially improved our competitiveness across all fronts. The delivery of another strong year of free operating cash flow, in excess of $130 million despite $25 million spent on the Widia integration, was particularly gratifying. Product innovation was unabated, and we confirmed our technological leadership by attaining our target of 40 percent of sales from new products. At the same time, we delivered against very aggressive objectives for the Widia acquisition. In the face of a sustained manufacturing recession, I remain particularly impressed by the resilience and resourcefulness of our employees.''
Tambakeras further noted that Institutional Shareholder Services (ISS) recently reviewed and rated Kennametal's corporate governance profile and, according to ISS, Kennametal outperformed 96 percent of the companies in the S&P 400 and 98 percent of the companies in the Capital Goods group.
Fourth Quarter - FY03
-- Sales of $463.8 million were 15 percent above last year's $402.9 million. Sales growth was driven by a 13 percent positive benefit from acquisitions.
-- Reported net loss was $4.9 million against net income of $15.4 million in the same quarter last year. Excluding special items, net income was $15.9 million for the quarter; a 26 percent decrease compared to net income of $21.4 million last year including the impact of Widia dilution and reduced pension income.
-- The current quarter included net special charges of $20.8 million, or $0.59 per diluted share, primarily associated with the previously announced Widia integration efforts and Electronics' impairment charge. Prior-year results included net special charges of $6.1 million, or $0.19 per diluted share, associated with the completion of previously announced restructurings and the divestiture of Strong Tool.
-- Decreased pension income reduced earnings per diluted share by $0.05 for the quarter versus the prior year. Pretax income for the quarter was reduced by $2.6 million (non-cash) compared to the same period in fiscal 2002 due to the effect of a decrease in the expected rate of return on Kennametal's pension fund assets, coupled with lower discount rates related to pension liabilities.
-- At year-end, Kennametal's pension plan had an unfunded obligation of $3.7 million that resulted in a $35.2 million charge, net of tax, to equity under SFAS No. 87 'Employers Accounting for Pensions'. The pension plan is adequately funded from an ERISA perspective, and the company currently does not anticipate any cash funding requirements during fiscal 2004.
-- Free operating cash flow remained strong at $55.0 million, versus $43.5 million in the same period last year.
-- Total debt was $526 million, up $114 million from June 2002, but down $91 million from the closing of the Widia acquisition in the September quarter.
Fiscal 2003 versus 2002
-- Sales for the 12 months ending June 30, 2003 of $1,759 million grew 11 percent. Net acquisitions and divestitures contributed growth of 11 percent.
-- Reported net income was $18.1 million against a net loss of $211.9 million in the prior year. Excluding special items, net