Kennametal(US:KMT)2024-05-10 12:32PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the period Financial Statements Unaudited condensed consolidated financial statements show Q3 FY24 sales at $515.8 million and net income at $19.0 million Condensed Consolidated Statements of Income (Unaudited) | (in thousands, except per share) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales | $515,794 | $536,036 | $1,503,591 | $1,527,949 | | Gross profit | $153,262 | $167,914 | $455,757 | $470,772 | | Operating income | $35,227 | $52,471 | $108,824 | $136,487 | | Net income attributable to Kennametal | $18,976 | $31,937 | $72,141 | $82,032 | | Diluted earnings per share | $0.24 | $0.39 | $0.90 | $1.01 | Condensed Consolidated Balance Sheets (Unaudited) | (in thousands) | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total current assets | $999,937 | $1,026,789 | | Total assets | $2,518,645 | $2,547,234 | | Total current liabilities | $413,245 | $433,975 | | Total liabilities | $1,212,751 | $1,233,066 | | Total Kennametal Shareholders' Equity | $1,264,559 | $1,275,447 | Condensed Consolidated Statements of Cash Flow (Unaudited) | (in thousands) | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $163,460 | $126,182 | | Net cash flow used in investing activities | ($86,111) | ($66,214) | | Net cash flow used in financing activities | ($88,659) | ($50,013) | | Net (decrease) increase in cash and cash equivalents | ($13,902) | $7,888 | Notes to Condensed Consolidated Financial Statements Detailed notes disclose a restructuring program, segment sales performance, and $91.5 million returned to shareholders - A restructuring program initiated in June 2023 incurred $18.6 million in charges through March 31, 2024, with $6.5 million in Q3 FY243233 - The company paid $47.7 million in dividends and repurchased $43.8 million of capital stock during the nine months ended March 31, 202457 - An immaterial business combination in Q2 FY24 for $6.5 million resulted in $3.6 million goodwill in the Metal Cutting segment62 Segment Sales and Operating Income (Q3 FY24 vs Q3 FY23) | Segment (in thousands) | Q3 2024 Sales | Q3 2023 Sales | Q3 2024 Operating Income | Q3 2023 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Metal Cutting | $326,561 | $333,507 | $30,809 | $43,765 | | Infrastructure | $189,233 | $202,529 | $5,140 | $9,658 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A details Q3 FY24 sales decline, operating income pressure, and a restructuring program targeting $35 million in annualized savings - Q3 FY24 sales of $515.8 million decreased 4% year-over-year due to 2% organic decline, 1% fewer business days, and 1% unfavorable currency71 - Q3 FY24 operating income decreased to $35.2 million from $52.5 million due to lower volumes, ~$6 million restructuring charges, inflation, and ~$2 million unfavorable currency72 - A restructuring program targets ~$35 million in annualized pre-tax savings by end of FY2024, with $18.6 million in charges recorded through March 31, 202483 - The company returned $91.5 million to shareholders in the first nine months of FY2024, including $43.8 million in share repurchases and $47.7 million in dividends77 Results of Continuing Operations Q3 FY24 sales decreased 4% to $515.8 million, with gross profit margin contracting to 29.7% and the effective tax rate increasing to 27.4% - Gross profit margin for Q3 FY24 was 29.7%, down from 31.3% due to lower volumes, inflation, and unfavorable raw material cost timing in Infrastructure79 - The effective tax rate for Q3 FY24 was 27.4%, up from 24.4% YoY, while the nine-month rate was 15.5%, down from 23.9% YoY8788 End Market Sales Growth (Decline) - Q3 FY24 vs Q3 FY23 (Constant Currency) | End Market | Constant Currency Growth (Decline) | | :--- | :--- | | Aerospace & Defense | 10% | | Transportation | 0% | | General Engineering | (2)% | | Earthworks | (5)% | | Energy | (14)% | Business Segment Review This section reviews Metal Cutting and Infrastructure segments, detailing sales and operating margin declines for both in Q3 FY24 Metal Cutting Performance (Q3 FY24) | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Sales | $326.6M | -2% | | Organic Sales Growth | 0% | - | | Operating Income | $30.8M | -29.7% | | Operating Margin | 9.4% | from 13.1% | Infrastructure Performance (Q3 FY24) | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Sales | $189.2M | -7% | | Organic Sales Decline | (5)% | - | | Operating Income | $5.1M | -47.6% | | Operating Margin | 2.7% | from 4.8% | Liquidity and Capital Resources Strong liquidity with $163.5 million cash from operations, $92.1 million cash, and $692.5 million credit facility availability - Operating cash flow for the nine months ended March 31, 2024, was $163.5 million, up from $126.2 million, driven by favorable working capital changes108116 - As of March 31, 2024, the company held $92.1 million in cash, $608.1 million in total debt, and $692.5 million available under its $700 million credit facility111113 - A new $200 million, three-year share repurchase program was authorized on February 2, 2024, following $44 million in repurchases during the nine months to March 31, 2024114115 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposures since June 30, 2023 - The company reports no material changes to its market risk exposures since June 30, 2023139 Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded the company's disclosure controls and procedures were effective as of March 31, 2024140 - No material changes occurred to internal control over financial reporting during the most recent fiscal quarter141 Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter ended March 31, 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan in the quarter ended March 31, 2024142 PART II - OTHER INFORMATION This section covers legal proceedings, equity security transactions, and exhibits filed with the report Legal Proceedings The company is involved in ordinary course legal proceedings, none of which are deemed material to its financial condition - The company is not party to any legal proceedings deemed material to its financial condition144 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company repurchased 616,409 shares in Q3 FY24 and authorized a new $200 million share repurchase program - A new $200 million, three-year share repurchase program was authorized on February 2, 2024, with $221.9 million remaining available as of March 31, 2024145 Issuer Purchases of Equity Securities (Q3 FY2024) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2024 | 6,051 | $25.19 | — | | Feb 2024 | 366,779 | $24.34 | 365,000 | | Mar 2024 | 243,579 | $25.06 | 243,500 | | Total | 616,409 | $24.63 | 608,500 | Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL Interactive Data Files - The filing includes required CEO/CFO certifications and XBRL data files as exhibits147148