Kennametal (KMT) 8-K Kennametal Continues Strong Growth Trend In Third Quarter

Exhibit 99.1 Fiscal 2004 3^rd Quarter Earnings Announcement

	FROM:	KENNAMETAL INC. P.O. Box 231 Latrobe, PA 15650 724-539-6141
		Investor Relations
		Contact: Beth A. Riley
		Media Relations
		Contact: Joy Chandler
	DATE:	April 28, 2004
	FOR RELEASE:	Immediate

KENNAMETAL CONTINUES STRONG GROWTH TREND IN THIRD QUARTER

– Sales up 14 percent over last year

– Reported earnings per diluted share of $0.66, up 144 percent over last year

– Strong cash flow

LATROBE, Pa., April 28, 2004 - Kennametal Inc. (NYSE: KMT) today reported fiscal 2004 third-quarter earnings of $0.66 per diluted share compared with reported earnings of $0.27 per diluted share last year and exceeding previous guidance provided for the quarter. There were no special items to report in the fiscal 2004 third quarter, which was 74 percent above last year’s comparable earnings per diluted share of $0.38, excluding special items.

Earnings Per Share

Original Company Guidance (1/28/04)	$0.50 to $0.60
(Updated to $0.65 on 4/19/04)
Analyst Estimate Range (4/16/04)	$0.52 to $0.60
Earnings Per Share	$0.66

For the first nine months of fiscal 2004, reported earnings of $1.20 per diluted share compared with earnings of $0.65 per diluted share last year. Excluding special items in each period, diluted earnings of $1.34 per share were 40 percent above the prior year’s comparable earnings of $0.96 per share.

Kennametal Chairman, President and Chief Executive Officer, Markos I. Tambakeras, said, “We were pleased to deliver a quarter of strong earnings growth, as improving markets combined with the implementation of the Kennametal Value Business System (KVBS) by Kennametal employees allowed us to leverage the many improvements we have made to our business. Investments in product innovation, marketing

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initiatives, and acquisitions allowed us to outperform several of our end markets. This improvement was broad-based, and included Metalworking North America and Rest-of-World, Mining and Construction and Energy, and the J&L distribution business. In addition to the top-line growth, our earnings benefited from our streamlined cost structure.”

Highlights of the Fiscal 2004 Third Quarter

• Sales of $524 million were 14 percent above the prior year comparable quarter primarily on 6 percent organic sales growth, 2 percent from additional workdays, and 6 percent benefit from foreign currency exchange rates.

• Reported net income was $24.1 million versus net income of $9.7 million in the same quarter last year. Reported net income grew 80 percent compared to net income excluding special items of $13.3 million last year, reflecting the benefits of increased volume, mix, and a leaner cost structure.

• Net cash flow from operations was $54 million, versus $40 million for the prior year. Free operating cash flow totaled $41 million for the quarter, versus $26 million in last year’s comparable quarter due largely to the improved operating performance.

• As of March 31, 2004, total debt was $494 million, down $31 million from June 2003, and $86 million below March 2003.

• Debt to capital decreased to 37 percent, from 43 percent at the end of March in the prior year.

• Concluded the acquisition of Conforma Clad Inc.

Highlights of First Nine Months of Fiscal 2004

• Sales of $1.4 billion were 10 percent above the prior year comparable period on a 2 percent improvement from organic sales growth, 3 percent incremental sales from acquisitions, and a 5 percent improvement from foreign currency exchange rates.

• Reported net income totaled $43.7 million versus $23.0 million in last year’s comparable period, a 90 percent increase. Excluding special items in both periods, net income improved 43% to $48.5 million in the current nine-month period.

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Outlook

Tambakeras said, “Entering the final quarter of our year, we are optimistic that the momentum we built through the March quarter will continue, with strong sequential earnings growth in the June quarter. We anticipate that improvement in North American markets will increase, Europe will remain fairly stable and the developing markets will sustain recent high growth rates. Further, we expect that the Kennametal Value Business System (KVBS) will support additional outperformance.”

Sales for the fourth quarter of fiscal 2004 are expected to grow 10 to 12 percent year-over-year, including the impact of currency. Organic growth is anticipated to be 6 to 8 percent year-over-year. Reported diluted earnings per share are expected to be $0.70 to $0.80 per share, up 56 to 78 percent compared to the prior year.

Based on forecasted results for the fourth quarter, reported diluted earnings per share are expected to be $1.90 to $2.00 per share for fiscal 2004. This includes net special charges to date of approximately $0.14 per share. Excluding these charges, diluted earnings per share are forecasted to range from $2.05 to $2.15 per share. As previously stated, the earnings outlook for the full year includes approximately $0.12 per share of accretion from the Widia acquisition.

Kennametal anticipates net cash flow provided by operating activities of approximately $155 to $175 million in fiscal 2004. Purchases of property, plant and equipment, net of proceeds from disposals of property, plant and equipment are expected to be approximately $50 to $55 million. Adjusting net cash flow provided by operating activities for the above items, Kennametal expects to generate between $100 and $125 million of free operating cash flow for fiscal 2004.

Kennametal advises shareholders to note monthly order trends, for which the company makes a disclosure ten business days after the conclusion of each month. This information is available on the Investor Relations section of Kennametal’s corporate web site at www.kennametal.com.

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Dividend Declared

Kennametal also announced its Board of Directors declared a quarterly cash dividend of $0.17 cents per share, payable May 25, 2004, to shareowners of record as of the close of business May 10, 2004.

Third quarter results will be discussed in a live Internet broadcast at 10:00 a.m. today. Access the live or archived conference by visiting the Investor Relations section of Kennametal’s corporate web site at www.kennametal.com.

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This release contains “forward-looking’’ statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should,” “anticipate,” “estimate,” “approximate,” “expect,” “may,” “will,” “project,” “intend,” “plan,” “believe,” and other words of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements are likely to relate to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position and product development, which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in the next several years. Although it is not possible to predict or identify all factors, they may include the following: global economic conditions; future terrorist attacks; epidemics; risks associated with integrating and divesting businesses and achieving the expected savings and synergies; demands on management resources; risks associated with international markets such as currency exchange rates, and social and political environments; competition; labor relations; commodity prices; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans and environmental remediation matters. We can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

Kennametal Inc. aspires to be the premier tooling solutions supplier in the world with operational excellence throughout the value chain and best-in-class manufacturing and technology. Kennametal strives to deliver superior shareowner value through top-tier financial performance. The company provides customers a broad range of technologically advanced tools, tooling systems and engineering services aimed at improving customers’ manufacturing competitiveness. With about 13,500 employees worldwide, the company’s annual sales approximate $1.9 billion, with nearly half coming from sales outside the United States. Kennametal is a five-time winner of the GM “Supplier of the Year” award and is represented in more than 60 countries. Kennametal operations in Europe are headquartered in Fürth, Germany. Kennametal Asia Pacific operations are headquartered in Singapore. For more information, visit the company’s web site at www.kennametal.com.

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FINANCIAL HIGHLIGHTS

Consolidated financial highlights for Kennametal Inc. (NYSE: KMT) for the quarter and nine months ended March 31, 2004 and 2003 are shown in the following tables (in thousands, except per share amounts).

Consolidated Statements of Income (Unaudited)

	Quarter Ended				Nine Months Ended
	March 31,				March 31,
	2004		2003		2004			2003
Sales	$	524,230	$	459,243	$	1,429,583		$	1,295,192
Cost of goods sold(A)		348,376		307,582		961,990			875,079
Gross profit		175,854		151,661		467,593			420,113
Operating expense(B)		132,218		122,592		378,180			343,104
Restructuring and asset impairment charges		—		3,269		3,670			11,649
Amortization of intangibles		614		1,196		1,570			3,310
Operating income		43,022		24,604		84,173			62,050
Interest expense		6,332		8,979		19,479			27,058
Other (income) expense, net(C)		508		713		(2,010	)		(414	)
Income before provision for income taxes and minority interest		36,182		14,912		66,704			35,406
Provision for income taxes		11,579		4,474		21,345			10,622
Minority interest		533		739		1,632			1,786
Net income	$	24,070	$	9,699	$	43,727		$	22,998
Basic earnings per share	$	0.67	$	0.28	$	1.23		$	0.65
Diluted earnings per share	$	0.66	$	0.27	$	1.20		$	0.65
Dividends per share	$	0.17	$	0.17	$	0.51		$	0.51
Basic weighted average shares outstanding		35,828		35,243		35,589			35,137
Diluted weighted average shares outstanding		36,662		35,480		36,307			35,412

(A)	For the nine months ended March 31, 2004, these amounts include charges of $0.1 million for integration activities related to the Widia acquisition, $2.9 million related to restructuring programs, and $0.8 million for a pension curtailment. For the quarter and nine months ended March 31, 2003, these amounts include charges of $0.1 million and $0.2 million, respectively, for integration activities related to the Widia acquisition.
(B)	For the nine months ended March 31, 2004, these amounts include charges of $1.8 million related to a note receivable from a divestiture of a business by Kennametal in 2002, $0.5 million related to a pension curtailment, and $1.4 million for integration activities related to the Widia acquisition. For the quarter and nine months ended March 31, 2003, these amounts include charges of $1.8 million and $3.8 million, respectively, for integration activities related to the Widia acquisition.
(C)	For the nine months ended March 31, 2004, these amounts include income of $4.4 million related to a gain on the sale of Toshiba Tungaloy investment and a charge of $0.2 million on a note receivable from a divestiture of a business by Kennametal in 2002.

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FINANCIAL HIGHLIGHTS (Continued)

In addition to reported results under U.S. GAAP, the following financial highlight tables also include, where appropriate, a reconciliation of results excluding special items and free operating cash flow (which are non-GAAP measures), to the most directly comparable GAAP measures. Management believes that each of these non-GAAP financial measures is useful to investors to more easily compare the Company’s financial performance period to period.

RECONCILIATION TO GAAP - QUARTER ENDED MARCH 31, 2003 (Unaudited)

										Diluted
			Operating			Operating		Net		Earnings
	Gross Profit		Expenses			Income		Income		Per Share
2003Reported Results	$	151,661	$	122,592		$	24,604	$	9,699	$	0.27
MSSG Restructuring		—		—			1,077		754		0.02
AMSG Restructuring		—		—			1,104		773		0.02
Corporate Restructuring		—		—			278		195		0.01
J&L Restructuring		—		—			801		561		0.02
FSS Restructuring		—		—			9		6		—
Widia Integration Costs-MSSG		144		(1,767	)		1,911		1,337		0.04
Widia Integration Costs-AMSG		—		(18	)		18		13		—
2003Results Excluding Special Items	$	151,805	$	120,807		$	29,802	$	13,338	$	0.38

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FINANCIAL HIGHLIGHTS (Continued)

RECONCILIATION TO GAAP - NINE MONTHS ENDED MARCH 31 (Unaudited)

								Other						Diluted
			Operating			Operating		(Income) /			Net			Earnings
	Gross Profit		Expenses			Income		Expense			Income			Per Share
2004Reported Results	$	467,593	$	378,180		$	84,173	$	(2,010	)	$	43,727		$	1.20
MSSG Restructuring		2,850		—			5,023		—			3,416			0.10
AMSG Restructuring		—		—			1,497		—			1,018			0.03
Widia Integration Costs - MSSG		63		(1,448	)		1,511		—			1,027			0.03
Widia Integration Costs - AMSG		48		—			48		—			33			—
Pension Curtailment		779		(520	)		1,299		—			883			0.02
Gain on Toshiba Investment		—		—			—		4,397			(2,990	)		(0.08	)
Note Receivable		—		(1,817	)		1,817		(183	)		1,360			0.04
2004Results Excluding Special Items	$	471,333	$	374,395		$	95,368	$	2,204		$	48,474		$	1.34
2003Reported Results	$	420,113	$	343,104		$	62,050	$	(414	)	$	22,998		$	0.65
MSSG Restructuring		—		—			5,926		—			4,148			0.12
AMSG Restructuring		—		—			3,182		—			2,227			0.06
Corporate Restructuring		—		—			1,236		—			865			0.02
J&L Restructuring		—		—			1,267		—			888			0.03
FSS Restructuring		—		—			38		—			26			—
Widia Integration Costs - MSSG		198		(3,784	)		3,982		—			2,787			0.08
Widia Integration Costs - AMSG		—		(22	)		22		—			16			—
2003Results Excluding Special Items	$	420,311	$	339,298		$	77,703	$	(414	)	$	33,955		$	0.96

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FINANCIAL HIGHLIGHTS (Continued)

SEGMENT DATA (Unaudited):

	Quarter Ended March 31,						Nine Months Ended March 31,
	2004			2003 *			2004			2003 *
Outside Sales:
Metalworking Solutions and Services Group	$	317,506		$	286,601		$	872,128		$	796,835
Advanced Materials Solutions Group		111,464			89,849			299,846			256,563
J&L Industrial Supply		60,074			51,729			158,554			148,012
Full Service Supply		35,186			31,064			99,055			93,782
Total Outside Sales	$	524,230		$	459,243		$	1,429,583		$	1,295,192
Sales By Geographic Region:
Within the United States	$	268,359		$	239,565		$	737,176		$	708,195
International		255,871			219,678			692,407			586,997
Total Outside Sales	$	524,230		$	459,243		$	1,429,583		$	1,295,192
Operating Income (Loss), as reported:
Metalworking Solutions and Services Group	$	36,751		$	23,593		$	82,937		$	64,597
Advanced Materials Solutions Group		15,146			9,320			36,375			27,044
J&L Industrial Supply		6,419			1,323			13,410			5,209
Full Service Supply		376			31			(64	)		(320	)
Corporate and Eliminations		(15,670	)		(9,663	)		(48,485	)		(34,480	)
Total Operating Income	$	43,022		$	24,604		$	84,173		$	62,050
Operating Income (Loss), excluding special charges:
Metalworking Solutions and Services Group	$	36,751		$	26,581		$	89,471		$	74,505
Advanced Materials Solutions Group		15,146			10,442			37,920			30,248
J&L Industrial Supply		6,419			2,124			13,410			6,476
Full Service Supply		376			40			(64	)		(282	)
Corporate and Eliminations		(15,670	)		(9,385	)		(45,369	)		(33,244	)
Total Operating Income	$	43,022		$	29,802		$	95,368		$	77,703

* Prior year segment data has been restated for organizational changes.

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FINANCIAL HIGHLIGHTS (Continued)

OPERATING INCOME / (LOSS) RECONCILIATION (Unaudited):

QUARTER ENDED MARCH 31,

	MSSG		AMSG		J&L		FSS		Corp & Elim			Total
2003 Reported Operating Income (Loss)	$	23,593	$	9,320	$	1,323	$	31	$	(9,663	)	$	24,604
Restructuring		1,077		1,104		801		9		278			3,269
Widia Integration Costs		1,911		18		—		—		—			1,929
2003 Operating Income (Loss) Excluding Special Charges	$	26,581	$	10,442	$	2,124	$	40	$	(9,385	)	$	29,802

NINE MONTHS ENDED MARCH 31,

	MSSG		AMSG		J&L		FSS			Corp & Elim			Total
2004 Reported Operating Income (Loss)	$	82,937	$	36,375	$	13,410	$	(64	)	$	(48,485	)	$	84,173
Restructuring		5,023		1,497		—		—			—			6,520
Widia Integration Costs		1,511		48		—		—			—			1,559
Pension Curtailment		—		—		—		—			1,299			1,299
Note Receivable		—		—		—		—			1,817			1,817
2004 Operating Income (Loss) Excluding Special Charges	$	89,471	$	37,920	$	13,410	$	(64	)	$	(45,369	)	$	95,368
2003 Reported Operating Income (Loss)	$	64,597	$	27,044	$	5,209	$	(320	)	$	(34,480	)	$	62,050
Restructuring		5,926		3,182		1,267		38			1,236			11,649
Widia Integration Costs		3,982		22		—		—			—			4,004
2003 Operating Income (Loss) Excluding Special Charges	$	74,505	$	30,248	$	6,476	$	(282	)	$	(33,244	)	$	77,703

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FINANCIAL HIGHLIGHTS (Continued)

RECONCILIATION TO FREE OPERATING CASH FLOW INFORMATION (Unaudited)

	Quarter Ended March 31,						Nine Months Ended March 31,
	2004			2003			2004			2003
Net income	$	24,070		$	9,699		$	43,726		$	22,998
Other non-cash items		4,238			2,593			15,457			8,082
Depreciation and amortization		16,913			21,839			48,753			61,819
Change in inventory		(1,969	)		1,144			13,468			14,644
Change in accounts receivable		(26,610	)		(30,063	)		(3,213	)		848
Change in accounts payable		18,260			28,172			9,080			2,436
Change in other assets and liabilities		19,222			6,215			(17,805	)		3,359
Net cash flow provided by operating activities		54,124			39,599			109,466			114,186
Purchase of property, plant and equipment		(14,207	)		(13,955	)		(36,060	)		(35,966	)
Proceeds from disposals of property, plant and equipment		610			661			2,998			1,504
Free operating cash flow	$	40,527		$	26,305		$	76,404		$	79,724

CONDENSED BALANCE SHEETS (Unaudited)

	Quarter Ended
	03/31/04		12/31/03		09/30/03		06/30/03		03/31/03
ASSETS
Cash and equivalents	$	27,528	$	15,086	$	14,720	$	15,093	$	17,250
Accounts receivable, net of allowance		248,879		223,087		232,146		231,803		235,908
Inventories		387,202		386,250		387,877		389,613		408,996
Deferred income taxes		87,651		88,020		86,888		97,237		81,651
Other current assets		38,803		39,460		47,003		48,606		44,286
			��
Total current assets		790,063		751,903		768,634		782,352		788,091
Property, plant and equipment, net		481,793		487,530		489,242		489,828		476,208
Goodwill and Intangible assets, net		554,614		500,890		484,662		473,173		491,987
Other assets		59,641		72,802		67,108		68,534		107,159
Total	$	1,886,111	$	1,813,125	$	1,809,646	$	1,813,887	$	1,863,445
LIABILITIES
Short-term debt, including notes payable	$	8,193	$	12,872	$	11,375	$	10,845	$	15,068
Accounts payable		132,246		112,563		107,653		118,509		120,981
Accrued liabilities		202,460		183,835		197,578		206,993		208,816
Total current liabilities		342,899		309,270		316,606		336,347		344,865
Long-term debt		486,119		468,455		508,763		514,842		565,067
Deferred income taxes		38,045		36,087		41,368		43,543		38,382
Other liabilities		192,546		191,585		180,258		178,698		140,550
Total liabilities		1,059,609		1,005,397		1,046,995		1,073,430		1,088,864
MINORITY INTEREST		16,598		16,286		16,089		18,880		18,070
SHAREOWNERS’ EQUITY		809,904		791,442		746,562		721,577		756,511
Total	$	1,886,111	$	1,813,125	$	1,809,646	$	1,813,887	$	1,863,445

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FINANCIAL HIGHLIGHTS (Continued)

Debt to Capital Reconciliation (Unaudited)

	Quarter Ended March 31,
	2004			2003
Total Debt		494,312			580,135
Total Shareowners’ Equity		809,904			756,511
Debt to Equity, GAAP		37.9	%		43.4	%
Total Debt		494,312			580,135
Minority Interest		16,598			18,070
Total Shareowners’ Equity		809,904			756,511
Total Capital		1,320,814			1,354,716
Debt to Capital		37.4	%		42.8	%

RECONCILIATION OF FORECASTED GAAP EPS (Unaudited)

FY03 4Q EPS - As Reported	($	0.14	)
MSSG Restructuring		0.06
AMSG Restructuring		0.02
AMSG Electronics Impairment		0.43
Widia Integration - MSSG		0.06
Widia Integration - AMSG		0.02
FY03 4Q EPS - Excluding Special Items	$	0.45
Forecasted Increase		56% - 78	%
FY04 4Q Forecasted EPS - Excluding Special Items	$	0.70 - $0.80

RECONCILIATION OF FORECASTED GAAP CASH FLOW INFORMATION (Unaudited)

	Twelve Months Ended
	June 30, 2004
Forecasted net cash flow provided by operating activity	$	155,000 - $175,000
Forecasted purchases and disposals of property, plant and equipment		50,000 - 55,000
Forecasted free operating cash flow	$	100,000 - $125,000

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