Kennametal Inc. reported unaudited consolidated earnings results for the third quarter and nine months ended March 31, 2013. For the quarter, the company reported sales of $655,360,000 compared to sales of $696,411,000 for the same period a year ago. Operating income was $74,973,000 compared to $103,292,000 last year. Income from continuing operations before income taxes was $66,720,000 compared to $95,775,000 last year. Net income was $54,376,000 compared to $76,237,000 last year. Net income attributable to the company $53,916,000 or $0.67 per diluted share compared to $75,499,000 or $0.93 per diluted share last year. Operating income declined due to lower absorption of manufacturing costs related to reduced sales volume, as well as an ongoing inventory reduction initiative. Partially offsetting these effects, the company reduced operating expense with its continued cost discipline. Sales decreased by 6%, reflecting a 6% organic decline, a 5% unfavorable impact from fewer business days and a 1% unfavorable effect from currency exchange, partially offset by a 6% increase due to two months of revenues from Stellite. Adjusted sales were $594,151,000 compared to $673,853,000 last year. Adjusted operating income was $72,108,000 compared to $107,900,000 last year. Adjusted net income was $54,376,000 for the quarter period. For the nine months, the company reported sales of $1,917,963,000 compared to sales of $1,997,030,000 for the same period a year ago. Operating income was $205,822,000 compared to $298,951,000 last year. Income from continuing operations before income taxes was $184,890,000 compared to $281,374,000 last year. Net income was $144,732,000 compared to $224,281,000 last year. Net income attributable to the company $142,447,000 or $1.76 per diluted share compared to $221,182,000 or $2.72 per diluted share last year. Sales decreased by 4%, driven by a 7% organic decline, a 3% unfavorable effect from currency exchange and a 2% decline due to fewer business days, partially offset by an 8% increase from Stellite. Operating income decreased primarily due to lower sales volume, lower absorption of manufacturing costs, related to reduced sales volume and an ongoing inventory reduction initiative, as well as unfavorable currency exchange. This decrease was partially offset by reduced operating expense achieved with cost control. Net cash flow from operating activities was $150,358,000 compared to $164,236,000 last year. Purchases of property, plant and equipment was $53,808,000 compared to $60,657,000 last year. Free operating cash flow was $98,313,000 compared to $107,976,000 last year. Adjusted return on invested capital (ROIC) was 10.8% as of March 31, 2013. Adjusted sales were $1,737,099,000 compared to $1,974,472,000 last year. Adjusted operating income was $194,679,000 compared to $303,559,000 last year. The company also announced that its board of directors declared a quarterly cash dividend of $0.16 per share. The dividend is payable May 22, 2013 to shareowners of record as of the close of business on May 7, 2013. The company adjusted its full-year outlook due to a slower than anticipated recovery in the company's served industrial end markets globally, as well as continued softness in road construction, underground mining, and oil and gas markets in the U.S. However, the company notes that its order rates have reflected a sequential increase over the prior quarter and expects continued modest improvement, primarily in its industrial end markets. The company now expects fiscal 2013 sales decline in the range of 5% to 6%, with organic sales decline ranging from 8% to 9%. Previously, the company had forecast total sales decline ranging from 2% to 4% with organic sales decline of 7% to 9%. Based on the revision, the company has reduced its EPS guidance for fiscal 2013 to range from $2.45 to $2.55, versus its previous expectation of $2.60 to $2.80. Included in this outlook is the accretive contribution of the Stellite acquisition, net of integration costs, which is now expected to range between $0.05 and $0.10 per share as compared to the previous range of $0.10 and $0.15 per share. The company now expects to generate cash flow from operations between $260 million and $280 million for fiscal 2013, compared with the previous range of $290 million to $325 million. Based on anticipated capital expenditures of approximately $90 million to $100 million, the company expects to generate between $170 million and $180 million of free operating cash flow for the full fiscal year, as compared to the previous range of $200 million to $225 million.

On April 5, 2013, Kennametal Inc. and Kennametal Europe GmbH entered into that certain amendment no. 2 to the third amended and restated credit agreement with Bank of America N.A., London Branch, Bank of America, N.A. and the lenders from time to time. The amendment amends the company’s third amended and restated credit agreement dated as of June 25, 2010, among the company, Kennametal Europe, Bank of America, N.A., London Branch, PNC Bank, National Association and JPMorgan Chase Bank, N.A., Citizens Bank of Pennsylvania and Bank of Tokyo-Mitsubishi UFJ Trust Company, Bank of America, N.A., and the other lenders identified therein, as amended by that certain amendment no. 1 to the third amended and restated credit agreement, dated as of October 21, 2011, among the company, Kennametal Europe, Bank of America, N.A., London Branch, Bank of America, N.A. and the several banks and other financial institutions or entities from time party. The credit agreement was set to terminate on October 21, 2016.

Kennametal Inc., Q3 2013 Earnings Call, Apr 25, 2013