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 LATROBE, Pa., Nov. 2 /PRNewswire/ -- Kennametal Inc. (NYSE: KMT) reported a first quarter 1994 net loss of $33.1 million, or $3.01 per share, compared with net income of $3.0 million, or $0.28 per share in the same quarter last year. The net loss for the quarter includes the unfavorable cumulative noncash effect of adopting Statement of Financial Accounting Standards (SFAS) 106 "Employers' Accounting for Postretirement Benefits Other than Pensions" ($20.1 million net of income tax effect) and the favorable cumulative noncash effect of adopting SFAS 109 "Accounting for Income Taxes" ($5.1 million).
 In addition to the cumulative effect of changes in accounting principles, first quarter results included a restructuring charge ($20.4 million after taxes) and the impact of additional operating costs resulting from the adoption of SFAS 106 ($.3 million after taxes).
 Sales for the September 1993 quarter totaled $176 million, up 18 percent from the $149 million of sales in the same quarter a year ago. The increase in sales during the September 1993 quarter resulted primarily from the acquisition of an 81 percent interest in Hertel AG (Hertel), a German toolmaker acquired by Kennametal in August 1993. Excluding Hertel, sales were up two percent from the prior year.
 In the September 1993 quarter, excluding the effects of the acquisition, sales of metalcutting inserts and toolholding devices in the United States increased six percent from last year. Total sales of industrial supply products increased 20 percent as a result of increased sales through full service supply programs and mail order catalogs. Excluding foreign currency translation effects, international metalworking sales decreased five percent primarily because of lower sales volume in Europe. Sales in Canada increased 16 percent while sales in Asia-Pacific markets were flat with those of the prior year.
 Sales of mining and construction tools for the September 1993 quarter decreased five percent from last year as a result of unfavorable foreign currency translation effects and weak domestic and international demand for mining tools.
 Robert L. McGeehan, president and chief executive officer, said that earnings for the September 1993 quarter were unfavorably affected by the adoption of the new accounting standards, the one-time restructuring charge and the Hertel acquisition. In commenting on the one-time restructuring charge, McGeehan stated that Kennametal is in the process of integrating its business with that of Hertel. As part of this integration, Kennametal intends to close its German manufacturing facility and consolidate other operations. As a result of these actions, Kennametal believes that it should gain substantial efficiencies and cost savings through rationalizing the combined Kennametal/Hertel European and Asia-Pacific operations. In commenting on Hertel, McGeehan stated that Kennametal has developed a plan of restructuring for Hertel which is designed to improve Hertel's profitability by lowering working capital requirements, reducing overall expenses and improving capacity utilization. McGeehan noted that the Hertel acquisition lowered consolidated earnings per share by approximately $0.16 in the September 1993 quarter. Hertel's operating results were as expected given the timing of the acquisition and the status of the integration activities. McGeehan also commented that all Kennametal and Hertel integration/restructuring activities were proceeding as planned.
 In reviewing the financial results for the September 1993 quarter, McGeehan noted that the gross profit margin was 39 percent compared with 40 percent last year. Excluding the effects of the acquisition, the gross profit margin was about the same as last year.
 In looking to the second quarter of fiscal 1994, McGeehan stated that he expects Kennametal's traditional U.S. metalworking sales and sales of industrial supply products to continue to improve. In addition, he expects the financial performance of Hertel to begin to improve as the benefits of the restructuring and integration related activities start to take effect.
 Consolidated financial highlights for Kennametal Inc. for the quarter ended Sept. 30, 1993 are shown in the following tables (in thousands, except per share amounts). All fiscal year 1994 data are subject to year-end (June 30) adjustment and audit by independent public accountants.
 Quarter Ended Sept. 30,
 1993 1992
 Net sales $175,665 $148,830
 Cost of goods sold 106,719 89,854
 Research & development expense 3,632 3,733
 Selling & marketing expense 42,830 36,108
 General & administrative expense 14,057 10,967
 Interest expense 4,084 2,411
 Amortization of intangibles 948 828
 Restructuring charge 24,749 --
 Other income 1,449 96
 Provision (benefit) for income taxes (1,500) 2,000
 Minority interest in losses of
 Hertel AG 349 --
 Cumulative effect of accounting changes,
 net of income taxes:
 Postretirement benefits (20,060) --
 Income taxes 5,057 --
 Net income $(33,059) $ 3,025
 Average shares outstanding 10,977 10,815
 Earnings per share:
 Earnings before cumulative
 effect of accounting changes $(1.64) $0.28
 Cumulative effect of accounting
 Postretirement benefits $(1.83) --
 Income Taxes $.46 --
 Net Income $(3.01) $.28
 Dividends per share $0.29 $0.29
 Quarter Ended Sept. 30,
 1993 1992
 Sales by Product Class:
 Metalworking $144,991 $116,867
 Mining and construction 25,278 26,668
 Metallurgical 5,396 5,295
 Sales by Geographic Area:
 Within the U.S. $119,247 $105,845
 Export & foreign 56,418 42,985
 Sept. 30, June 30,
 1993 1993
 Cash & equivalents $ 23,249 $ 4,149
 Accounts receivable, net of
 allowances 129,662 89,496
 Inventories 160,932 115,230
 Other current assets 12,067 -
 Total current assets 325,910 208,875
 Net property, plant & equipment 263,864 192,305
 Other assets 90,763 47,083
 Total assets $680,537 $448,263
 Liabilities & Shareholders' Equity:
 Short-term debt $108,670 $ 22,737
 Accounts payable 40,973 32,492
 Other current liabilities 126,815 32,769
 Total current liabilities 276,458 87,998
 Term debt, less current portion 120,831 87,891
 Deferred income taxes & other 57,510 17,233
 Total liabilities 454,799 193,122
 Minority interest 5,061 -
 Shareholders' equity 220,677 255,141
 Total liabilities &
 shareholders' equity $680,537 $448,263
 -0- 11/2/93
 /CONTACT: Michael J. Mussog of Kennametal, 412-539-4617/

CO: Kennametal Inc. ST: Pennsylvania IN: MNG SU: ERN

KC -- PG003 -- 9493 11/02/93 08:45 EST
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Publication:PR Newswire
Date:Nov 2, 1993

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