8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 20, 2007

Kennametal Inc.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	1-5318	25-0900168
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

	World Headquarters
	1600 Technology Way
	P.O. Box 231
	Latrobe, Pennsylvania	15650-0231
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (724) 539-5000

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item 2.02	Results of Operations and Financial Condition
Item 5.02	Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers
Item 8.01	Other Events
Item 9.01	Financial Statements and Exhibits

Item 2.02 Results of Operations and Financial Condition

On July 25, 2007, Kennametal Inc. (the Company) issued a press release announcing financial results for its fourth quarter and year ended June 30, 2007.

The press release contains certain non-GAAP financial measures. The following GAAP financial measures have been presented excluding special items: gross profit, operating expense, operating income, income from continuing operations, net income and diluted earnings per share. These special items include: (1)(a) gain on sale of J&L, (b) J&L transaction-related charges, (c) loss on divestiture of Electronics, (d) tax impact of cash repatriation under AJCA, (e) CPG goodwill impairment and transaction-related charges, (f) loss on sale of Presto and (g) favorable resolution of tax contingencies for the three months and year ended June 30, 2006 and (2)(a) Electronics impairment and divestiture-related charges, (b) loss on divestiture of CPG and transaction-related charges and (c) adjustment on J&L divestiture and transaction-related charges for the year ended June 30, 2007. Management excludes these items in measuring and compensating internal performance to more easily compare the Company’s financial performance period-to-period. The press release also contains adjusted free operating cash flow and adjusted return on invested capital, which are also non-GAAP measures and are defined below.

Management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current period and past periods. Management believes that investors should have available the same information that management uses to assess operating performance, determine compensation and assess the capital structure of the Company. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

Adjusted Free Operating Cash Flow
Free operating cash flow is a non-GAAP financial measure and is defined by the Company as cash provided by operations (in accordance with GAAP) less capital expenditures plus proceeds from disposals of fixed assets. Management considers free operating cash flow to be an important indicator of Kennametal’s cash generating capability because it better represents cash generated from operations that can be used for strategic initiatives (such as acquisitions), dividends, debt repayment and other investing and financing activities. Management has further adjusted free operating cash flow for the following significant unusual cash items: income taxes paid (refunded), repayments of accounts receivable securitization program and pension funding. Management considers adjusted free operating cash flow to be an important indicator of Kennametal’s cash generating capability because it excludes significant unusual items.

Adjusted Return on Invested Capital
Adjusted Return on Invested Capital is a non-GAAP financial measure and is defined by the Company as the previous 12 months’ net income, adjusted for interest expense, securitization fees, minority interest expense and special items, divided by the sum of the previous 12 months’ average balances of debt, securitized accounts receivable, minority interest and shareowners’ equity. Management believes that this financial measure provides additional insight into the underlying capital structure and performance of the Company. Management utilizes this non-GAAP measure in determining compensation and assessing the operations of the Company. The most directly comparable GAAP measure is return on invested capital calculated utilizing GAAP net income.

A copy of the Company’s earnings announcement is furnished under Exhibit 99.1 attached hereto. Reconciliations of the above non-GAAP financial measures are included in the earnings announcement.

Additionally, during our quarterly teleconference we may use various non-GAAP financial measures to describe the underlying operating results. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies. Accordingly, we have compiled below certain reconciliations as required by Regulation G.

Adjusted EBIT
EBIT is an acronym for Earnings Before Interest and Taxes and is a non-GAAP financial measure. The most directly comparable GAAP measure is net income. However, we believe that EBIT is widely used as a measure of operating performance and we believe EBIT to be an important indicator of the Company’s operational strength and performance. Nevertheless, the measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining liquidity that is calculated in accordance with GAAP. Additionally, Kennametal will adjust EBIT for minority interest expense, interest income, securitization fees, pre-tax income from discontinued operations and special items. Management uses this information in reviewing operating performance and in determining compensation.

Primary Working Capital
Primary working capital is a non-GAAP financial measure and is defined as accounts receivable, net plus inventories, net minus accounts payable. The most directly comparable GAAP measure is working capital, which is defined as current assets less current liabilities. We believe primary working capital better represents Kennametal’s performance in managing certain assets and liabilities controllable at the business unit level and it is used as such for internal performance measurement.

Debt to Capital
Debt to equity in accordance with GAAP is defined as total debt divided by shareowners’ equity. Debt to capital is a non-GAAP financial measure and is defined by Kennametal as total debt divided by total shareowners’ equity plus minority interest plus total debt. Management believes that this financial measure provides additional insight into the underlying capital structure and performance of the Company.

EBIT RECONCILIATION (Unaudited)

	Three Months Ended						Year Ended
	June 30,						June 30,
(in thousands, except percents)	2007			2006			2007			2006
Net income, as reported	$	62,093		$	164,196		$	174,243		$	256,283
Net income as a percent of sales		9.4	%		26.8	%		7.3	%		11.0	%
Add back:
Interest expense		7,513			7,478			29,141			31,019
Tax expense		23,014			123,536			70,469			172,902
Tax (benefit) expense on discontinued operations		—			(20,110	)		135			(19,743	)
EBIT		92,620			275,100			273,988			440,461
Additional adjustments:
Minority interest expense		229			525			2,185			2,566
Interest income		(1,101	)		(1,821	)		(5,676	)		(4,838	)
Securitization fees		5			1,288			38			4,764
Pre-tax income from discontinued operations		—			(1,896	)		(1,178	)		(2,765	)
Special Items:
Gain on sale of J&L		—			(233,949	)		—			(233,949	)
J&L transaction-related charges		—			4,510			—			6,381
Loss on divestiture of Electronics		—			21,965			—			21,965
CPG goodwill impairment and transaction-related charges		—			11,481			—			16,511
Loss on sale of Presto		—			1,410			—			9,457
Electronics impairment and divestiture-related charges		—			—			3,072			—
Loss on sale of CPG and transaction-related charges		—			—			570			—
Adjustment on J&L divestiture and transaction-related charges		—			—			2,019			—
Adjusted EBIT	$	91,753		$	78,613		$	275,018		$	260,553
Adjusted EBIT as a percent of sales		14.0	%		12.8	%		11.5	%		11.2	%

3

PRIMARY WORKING CAPITAL RECONCILIATION (Unaudited):

	June 30,			June 30,
(in thousands)	2007			2006
Current assets	$	1,016,502		$	1,086,857
Current liabilities		484,932			462,199
Working capital in accordance with GAAP	$	531,570		$	624,658
Excluding items:
Cash and cash equivalents		(50,433	)		(233,976	)
Other current assets		(95,766	)		(131,218	)
Total excluded current assets		(146,199	)		(365,194	)
Adjusted current assets		870,303			721,663
Current maturities of long-term debt and capital leases, including notes payable		(5,430	)		(2,214	)
Other current liabilities		(290,201	)		(335,078	)
Total excluded current liabilities		(295,631	)		(337,292	)
Adjusted current liabilities		189,301			124,907
Primary working capital	$	681,002		$	596,756
As a percent of sales		28.5	%		25.6	%

DEBT TO CAPITAL RECONCILIATION (Unaudited):

	June 30,			June 30,
(in thousands)	2007			2006
Total debt	$	366,829		$	411,722
Total Shareowners’ equity		1,484,467			1,295,365
Debt to equity, GAAP		24.7	%		31.8	%
Total debt	$	366,829		$	411,722
Minority interest		17,624			14,626
Total shareowners’ equity		1,484,467			1,295,365
Total capital	$	1,868,920		$	1,721,713
Debt to capital		19.6	%		23.9	%

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers

(b) On July 20, 2007, Ronald C. Keating, Vice President and President, Metalworking Solutions and Services Group (MSSG) notified the Company of his intention to resign from the Company effective as of August 17, 2007. Mr. Keating is leaving the Company to join a privately held company. The Company intends to engage an executive search firm to assist with a search for a new President, MSSG. The search will include both internal and external candidates.

Item 8.01 Other Events

On July 24, 2007, the Company announced that the Board has elected Gary W. Weismann to serve as Vice President and President, Advanced Materials Solutions Group (AMSG) effective as of August 1, 2007. Mr. Weismann has been with Kennametal for approximately 19 years and most recently served as the Vice President, General Manager of Energy, Mining & Construction Solutions Group (EMCSG), which is part of AMSG. In his new role, Mr. Weismann will assume direct responsibility for the oversight of AMSG operations and will continue to report directly to Mr. Cardoso.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1    Fiscal 2007 Fourth Quarter Earnings Announcement

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		KENNAMETAL INC.
Date: July 25, 2007	By:	/s/ Wayne D. Moser
		Wayne D. Moser Vice President Finance and Corporate Controller

EX-99.1

Exhibit 99.1

Investor Relations

Contact: Quynh McGuire

724-539-6559

Media Relations

Contact: Joy Chandler

724-539-4618

DATE: July 25, 2007

FOR RELEASE: Immediate

KENNAMETAL ANNOUNCES FOURTH QUARTER AND
FULL YEAR RESULTS FOR FISCAL 2007

- Quarter earnings per diluted share (EPS) of $1.57

- Second consecutive quarter of record adjusted EPS

- Record quarter sales

- Fiscal 2007 reported EPS of $4.44; adjusted EPS of $4.56

- Record fiscal year sales and adjusted EPS

LATROBE, Pa., July 25, 2007 — Kennametal Inc. (NYSE: KMT) today reported fiscal 2007 fourth quarter EPS of $1.57. This represents a decrease of 62 percent from the prior year quarter reported EPS of $4.11, and a 26 percent increase compared with prior year adjusted EPS of $1.25. Prior year quarter EPS special items totaled $2.86 per share and related primarily to the gain on the sale of J&L Industrial Supply (J&L) of $3.31 per share.

Fiscal 2007 reported EPS decreased 31 percent to $4.44, compared with prior year reported EPS of $6.48. Fiscal 2007 adjusted EPS were $4.56, compared with prior year adjusted EPS of $3.95, an increase of 15 percent.

Carlos M. Cardoso, Kennametal’s President and Chief Executive Officer said, “Once again, we demonstrated our ability to deliver solid sales growth and strong performance in EBIT margin, EPS and ROIC. During fiscal year 2007, we completed five acquisitions: Sintec, Camco, Federal Signal’s cutting tool business, International Specialty Alloys and Kenci. We have strategically redeployed our cash to acquire businesses that both complement our existing portfolio and offer additional opportunities for sales growth and margin expansion.”

Cardoso added, “We attribute our successes to the strength of our operations, as well as to our proven strategy of balancing our business mix, geographic presence and end markets. As always, we continue to implement our strategy under the disciplines of the Kennametal Value Business System, our management operating system that serves as the foundation of our company. As we move forward, we will further capitalize on our strengths and opportunities to drive our operating and financial performance to even higher levels.”

Reconciliation of all non-GAAP financial measures is set forth in the attached tables.

Highlights of Fiscal 2007 Fourth Quarter

• Sales for the quarter were $657 million, compared with $612 million in the same quarter last year. Sales grew 6 percent on an organic basis and also benefited 3 percent from favorable foreign currency effects. This growth was partially offset by the net impact of acquisitions and divestitures of 2 percent, primarily the divestiture of J&L, which was completed on May 31, 2006. J&L contributed sales of $47 million in the June quarter last year.

• Income from continuing operations was $62 million, compared with $176 million in the prior year quarter, a decrease of 65 percent due primarily to the prior year gain on the sale of J&L. Excluding special items from the previous year, income from continuing operations grew 29 percent over the prior year quarter. The current year quarter results benefited from organic sales growth, a reduction in operating expenses and lower securitization fees. Amortization expense increased primarily as a result of recent acquisitions.

• The effective tax rate for the June quarter was 27 percent, compared with 41 percent in the prior year quarter. The current year rate benefited from increased earnings from the company’s pan-European business strategy, while certain special items unfavorably impacted the prior year rate.

• Reported EPS decreased 62 percent to $1.57, compared with prior year quarter reported EPS of $4.11. Reported EPS increased 26 percent, compared with prior year quarter adjusted EPS of $1.25. A reconciliation follows:

Earnings Per Diluted Share Reconciliation

Fourth Quarter FY 2007			Fourth Quarter FY 2006
Reported EPS	$	1.57	Reported EPS	$	4.11
No special items			Gain on sale of J&L and transaction-related charges		(3.24	)
			Loss on sale of Electronics		0.39
			Tax impact of cash repatriation under AJCA		0.28
			CPG goodwill impairment and transaction-related charges, net of tax benefit		(0.06	)
			Loss on sale of Presto		0.04
			Favorable resolution of tax contingencies		(0.27	)
	$	1.57	Adjusted EPS	$	1.25

• Cash flow from operating activities grew to $199 million in fiscal 2007, compared with $19 million in the prior year. Free operating cash flow (FOCF) was an inflow of $110 million for fiscal 2007, compared with an outflow of $58 million in the prior year. Included in the current year FOCF were first quarter income tax payments of $86 million, primarily related to the gain on the sale of J&L and cash repatriated in 2006 under the American Jobs Creation Act. FOCF in the prior year included $110 million of repayments related to the company’s accounts receivable securitization program and $73 million of pension funding. Adjusted FOCF, excluding the effects of these items, increased 58 percent to $197 million, compared with $125 million in fiscal 2006.

• Adjusted return on invested capital (ROIC) was 11.3 percent, compared with 11.4 percent in the prior year.

• Kennametal acquired Purity Metal Holdings, Inc. and its wholly owned subsidiary, International Specialty Alloys, Inc. (ISA). ISA manufactures high-purity specialty metal products for the aerospace, defense and specialty alloy industries, and enhances the company’s advanced materials segment.

• Kennametal also acquired the remaining ownership interest in its Spanish affiliate, Kenci, S.A., which is the company’s sales and service company operating in Spain and Portugal. This acquisition adds to Kennametal’s metalworking segment.

Highlights of Fiscal 2007

• Sales were $2.4 billion, compared with $2.3 billion in the prior year period. Sales grew 6 percent on an organic basis and 3 percent due to favorable foreign currency effects. This growth was partially offset by the net impact of acquisitions and divestitures of 7 percent, primarily the J&L divestiture. J&L contributed sales of $251 million in the prior year.

• Income from continuing operations was $177 million, compared with $272 million in the prior year, a decrease of 35 percent due primarily to the prior year gain on the sale of J&L. Excluding special items in both periods, income from continuing operations increased 16 percent compared with the prior year. The current year results benefited from organic sales growth and a reduction in operating expenses. Amortization expense increased due primarily to recent acquisitions. Additionally, the current year results benefited from lower interest expense and lower securitization fees.

• The effective tax rate was 28 percent, compared with the prior year rate of 39 percent. The current year rate benefited from increased earnings from the company’s pan-European business strategy, as well as the extension of the research, development and experimental tax credit. In addition, certain special items unfavorably impacted the prior year rate.

• Reported EPS of $4.44 decreased 31 percent compared with prior year reported EPS of $6.48. Adjusted EPS of $4.56 increased 15 percent compared with prior year adjusted EPS of $3.95. A reconciliation follows:

Earnings Per Diluted Share Reconciliation

Year ended June 30, 2007			Year ended June 30, 2006
Reported EPS	$	4.44	Reported EPS	$	6.48
Electronics impairment and divestiture-related charges		0.08	Gain on sale of J&L and transaction-related charges		(3.24	)
Loss on divestiture of CPG and transaction-related charges		0.01	Loss on sale of Electronics		0.39
Adjustment on J&L divestiture and transaction-related charges		0.03	Tax impact of cash repatriation under AJCA		0.28
			CPG goodwill impairment and transaction-related charges, net of tax benefit		0.07
			Loss on sale of Presto		0.24
			Favorable resolution of tax contingencies		(0.27	)
Adjusted EPS	$	4.56	Adjusted EPS	$	3.95

• Kennametal expanded its advanced materials segment with the acquisitions of the Sintec Group, which manufactures ceramic engineered components used in the aerospace, general engineering, metallizing and medical markets; the Camco Group, which manufactures specialized saw tips and supplies for the forestry and woodworking industry; and Purity Metal Holdings, Inc. and its wholly-owned subsidiary, ISA.

• Kennametal also added to its metalworking segment with the acquisitions of Federal Signal Corporation’s cutting tool business, which produces, markets and services super hard polycrystalline diamond and cubic boron nitride cutting tools, tool holding systems and certain specialized turning tools; and the remaining ownership interest in the company’s Spanish affiliate, Kenci, S.A.

Business Segment Highlights for the Fiscal 2007 Fourth Quarter

Metalworking Solutions & Services Group (MSSG) continued to deliver top-line growth in the June quarter, led by year-over-year expansion in the distribution, aerospace and machine tool markets, and the effects of acquisitions. The European market continued to be favorable. Asia Pacific and India delivered strong growth, while the North American market declined slightly.

In the June quarter, MSSG sales were higher by 15 percent as a result of 5 percent organic growth, 6 percent net impact of acquisitions and divestiture and 4 percent favorable foreign currency effects. Europe sales increased 9 percent. Asia Pacific and India sales grew by 31 percent and 8 percent, respectively. North America sales decreased by 2 percent.

MSSG operating income increased by 17 percent, and the operating margin increased over the same quarter last year. The current quarter results benefited from top-line growth and ongoing cost containment. The prior year quarter results included a loss on the sale of Presto of $1 million.

Advanced Materials Solutions Group (AMSG) also continued to deliver top-line growth in the June quarter, driven by favorable international market conditions and the effects of acquisitions. Strong growth in the energy and mining markets continued to contribute to AMSG’s results.

AMSG sales grew 18 percent as a result of 8 percent organic growth, 9 percent impact of acquisitions and 1 percent favorable foreign currency effects. Energy product sales were up 17 percent, mining and construction product sales were higher by 4 percent, and engineered product sales increased 1 percent.

AMSG operating income was up 11 percent driven by top-line growth while the operating margin was lower than the prior year due primarily to higher raw material costs in the current quarter.

Outlook

Worldwide market conditions support Kennametal’s expectations of continued top-line growth during fiscal 2008. Based on global economic indicators, the company believes that the moderation in the North American market will continue to persist in the near term. The company also believes that the European market will continue to be favorable, and that business conditions will continue to be robust in developing economies. While there remain some uncertainties and risks related to the macro-economic environment, fundamental drivers for global demand appear to be stable.

The company anticipates that many of its end markets will continue to operate at favorable levels for the fiscal year, with moderating growth rates for some regions and market sectors.

Kennametal expects sales growth in the range of 8 to 10 percent for fiscal 2008, continuing the trend of consistently outpacing worldwide industrial production rates by two to three times.

The company expects fiscal 2008 EPS to be in the range of $5.30 to $5.50, excluding the effect of a non-cash tax charge that will be recorded in the September quarter of fiscal 2008. This charge is estimated to be in the range of $5 million to $6 million, or $0.12 to $0.15 per share, to reflect the impact of a German tax reform bill enacted on July 6, 2007. The fiscal 2008 guidance midpoint represents 18 percent growth, compared with fiscal 2007 adjusted EPS. Consistent with historical seasonal patterns, the company expects approximately 65 percent of the forecasted EPS to be realized in the second half.

In the first quarter of fiscal 2008, Kennametal expects sales growth to be in the range of 9 to 10 percent, and EPS to be in the range of $0.95 to $1.00, excluding the effect of the non-cash tax charge related to the recently enacted German tax reform bill.

Kennametal anticipates cash flow from operating activities of approximately $275 million to $285 million for fiscal 2008. Based on anticipated capital expenditures of $140 million, the company expects to generate between $135 million to $145 million of FOCF for fiscal 2008.

Dividend Declared

Kennametal announced today that its Board of Directors declared a regular quarterly cash dividend of $0.21 per share. The dividend is payable August 22, 2007 to shareowners of record as of the close of business on August 7, 2007.

Kennametal advises shareowners 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.

Fourth quarter and full year results for fiscal 2007 will be discussed in a live Internet broadcast at 10:00 a.m. Eastern time today. This event will be broadcast live on the company’s website, www.kennametal.com. Once on the homepage, click “Corporate,” and then “Investor Relations.” The replay of this event will also be available on the company’s website through August 22, 2007.

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. Forward-looking statements are statements that do not relate strictly to historical or current facts. You can identify 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. These statements are likely to relate to, among other things, our strategy, goals, plans and projections regarding our financial position, results of operations, market position, and product development, all of which are based on current expectations that involve inherent risks and uncertainties, including factors that could delay, divert or change any of them in future periods. It is not possible to predict or identify all factors; however, they may include the following: global and regional economic conditions; energy costs; risks associated with the availability and costs of raw materials; commodity prices; risks associated with integrating recent acquisitions, as well as any future acquisitions, and achieving the expected savings and synergies; risks relating to business divestitures; competition; demands on management resources; risks associated with international markets, such as currency exchange rates and social and political environments or instability; future terrorist attacks or acts of war; labor relations; demand for and market acceptance of new and existing products; and risks associated with the implementation of restructuring plans, cost-reduction initiatives 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 provide additional information about many of the specific risks our Company faces in the “Risk Factors” Section of our Annual Report on Form 10-K, as well as in our other securities filings. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

Kennametal Inc. (NYSE:KMT) is a leading global supplier of tooling, engineered components and advanced materials consumed in production processes. The company improves customers’ competitiveness by providing superior economic returns through the delivery of application knowledge and advanced technology to master the toughest of materials application demands. Companies producing everything from airframes to coal, from medical implants to oil wells and from turbochargers to motorcycle parts recognize Kennametal for extraordinary contributions to their value chains. Customers buy approximately $2.4 billion annually of Kennametal products and services — delivered by our 13,500 talented employees in over 60 countries — with approximately 50 percent of these revenues coming from outside the United States. Visit us at www.kennametal.com [KMT-E]

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FINANCIAL HIGHLIGHTS

Consolidated Statements of Income (Unaudited):

	Three Months Ended						Year Ended
(in thousands, except per share amounts)	June 30,						June 30,
	2007			2006			2007			2006
Sales	$	657,477		$	612,167		$	2,385,493		$	2,329,628
Cost of goods sold a		421,934			388,133			1,543,931			1,497,462
Gross profit		235,543			224,034			841,562			832,166
Operating expense		142,328			146,316			554,634			579,907
Asset impairment charge		—			—			5,970			—
(Gain) loss on divestitures		—			(230,578	)		1,686			(229,886	)
Amortization of intangibles		4,149			1,428			9,852			5,626
Operating income		89,066			306,868			269,420			476,519
Interest expense		7,513			7,478			29,141			31,019
Other income, net		(3,783	)		(307	)		(9,217	)		(2,219	)
Income from continuing operations before income taxes and minority interest		85,336			299,697			249,496			447,719
Provision for income taxes		23,014			123,536			70,469			172,902
Minority interest expense		229			525			2,185			2,566
Income from continuing operations		62,093			175,636			176,842			272,251
Loss from discontinued operations b		—			(11,440	)		(2,599	)		(15,968	)
Net income	$	62,093		$	164,196		$	174,243		$	256,283
Basic earnings (loss) per share:
Continuing operations	$	1.61		$	4.52		$	4.61		$	7.08
Discontinued operations b		—			(0.30	)		(0.07	)		(0.41	)
	$	1.61		$	4.22		$	4.54		$	6.67
Diluted earnings (loss) per share:
Continuing operations	$	1.57		$	4.40		$	4.50		$	6.88
Discontinued operations b		—			(0.29	)		(0.06	)		(0.40	)
	$	1.57		$	4.11		$	4.44		$	6.48
Dividends per share	$	0.21		$	0.19		$	0.82		$	0.76
Basic weighted average shares outstanding		38,618			38,888			38,394			38,432
Diluted weighted average shares outstanding		39,489			39,923			39,273			39,551

a	For the three months ended June 30, 2006, cost of goods sold includes a benefit of $1,961 from the divestitures of J&L and Presto.
	For the year ended June 30, 2006, cost of goods sold includes a charge of $7,329 related to the divestiture of Presto.
b	Loss from discontinued operations reflects divested results of Electronics — AMSG and CPG — MSSG.

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FINANCIAL HIGHLIGHTS (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited):

	June 30,		June 30,
(in thousands)	2007		2006
ASSETS
Cash and cash equivalents	$	50,433	$	233,976
Accounts receivable, net		466,690		386,714
Inventories		403,613		334,949
Current assets of discontinued operations held for sale		—		24,280
Other current assets		95,766		106,938
Total current assets		1,016,502		1,086,857
Property, plant and equipment, net		614,019		530,379
Goodwill and intangible assets, net		834,290		618,423
Assets of discontinued operations held for sale		—		11,285
Other assets		139,111		188,328
Total	$	2,603,922	$	2,435,272
LIABILITIES
Current maturities of long-term debt and capital leases, including notes payable	$	5,430	$	2,214
Accounts payable		189,301		124,907
Current liabilities of discontinued operations held for sale		—		3,065
Other current liabilities		290,201		332,013
Total current liabilities		484,932		462,199
Long-term debt and capital leases		361,399		409,508
Other liabilities		255,500		253,574
Total liabilities		1,101,831		1,125,281
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES		17,624		14,626
SHAREOWNERS’ EQUITY		1,484,467		1,295,365
Total	$	2,603,922	$	2,435,272

SEGMENT DATA (Unaudited):

	Three Months Ended						Year Ended
(in thousands)	June 30,						June 30,
	2007			2006			2007			2006
Outside Sales:
Metalworking Solutions and Services Group	$	430,630		$	373,839		$	1,577,234		$	1,401,777
Advanced Materials Solutions Group		226,847			191,758			808,259			676,556
J&L Industrial Supply		—			46,570			—			251,295
Total outside sales	$	657,477		$	612,167		$	2,385,493		$	2,329,628
Sales By Geographic Region:
United States	$	306,848		$	322,903		$	1,134,752		$	1,239,449
International		350,629			289,264			1,250,741			1,090,179
Total sales by geographic region	$	657,477		$	612,167		$	2,385,493		$	2,329,628
Operating Income (Loss):
Metalworking Solutions and Services Group	$	69,729		$	59,390		$	221,387		$	197,525
Advanced Materials Solutions Group		37,974			34,061			131,323			121,058
J&L Industrial Supply		—			238,284			—			260,894
Corporate and eliminations c		(18,637	)		(24,867	)		(83,290	)		(102,958	)
Total operating income	$	89,066		$	306,868		$	269,420		$	476,519

^c   Includes corporate functional shared services and intercompany eliminations.

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FINANCIAL HIGHLIGHTS (Continued)

In addition to reported results under generally accepted accounting principles in the United States of America (GAAP), the following financial highlight tables also include, where appropriate, a reconciliation of gross profit, operating expense, operating income, income from continuing operations, net income and diluted earnings per share (which are GAAP financial measures), in each case excluding special items, as well as adjusted free operating cash flow and adjusted return on invested capital (which are non-GAAP financial measures), to the most directly comparable GAAP measures. Management believes that the investor should have available the same information that management uses to assess operating performance, determine compensation, and assess the capital structure of the Company. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Investors are cautioned that non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

There were no special items for the three months ended June 30, 2007.

RECONCILIATION TO GAAP — THREE MONTHS ENDED JUNE 30, 2006 (Unaudited)

										Income from
				Operating			Operating			Continuing			Net			Diluted
(in thousands, except per share amounts)	Gross Profit			Expense			Income			Operations			Income			EPS
2006 Reported Results	$	224,034		$	146,316		$	306,868		$	175,636		$	164,196		$	4.11
Gain on sale of J&L		(1,935	)		—			(233,949	)		(132,009	)		(132,009	)		(3.31	)
J&L transaction-related charges		—			(4,510	)		4,510			2,796			2,796			0.07
Loss on divestiture of Electronics		—			—			—			—			15,366			0.39
Tax impact of cash repatriation under AJCA		—			—			—			11,176			11,176			0.28
CPG goodwill impairment and transaction-related charges		—			—			—			—			(2,192	)		(0.06	)
Loss on sale of Presto		(26	)		—			1,410			1,410			1,410			0.04
Favorable resolution of tax contingencies		—			—			—			(10,873	)		(10,873	)		(0.27	)
2006 Results, excl. special items	$	222,073		$	141,806		$	78,839		$	48,136		$	49,870		$	1.25

RECONCILIATION TO GAAP — YEAR ENDED JUNE 30, 2007 (Unaudited)

								Income from
			Operating			Operating		Continuing		Net		Diluted
(in thousands, except per share amounts)	Gross Profit		Expense			Income		Operations		Income		EPS
2007 Reported Results	$	841,562	$	554,634		$	269,420	$	176,842	$	174,243	$	4.44
Electronics impairment and divestiture-related charges		—		—			—		—		3,213		0.08
Loss on sale of CPG and transaction-related charges		—		—			—		—		368		0.01
Adjustment on J&L divestiture and transaction-related charges		—		(333	)		2,019		1,252		1,252		0.03
2007 Results, excl. special items	$	841,562	$	554,301		$	271,439	$	178,094	$	179,076	$	4.56

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FINANCIAL HIGHLIGHTS (Continued)

RECONCILIATION TO GAAP — YEAR ENDED JUNE 30, 2006 (Unaudited)

										Income from
				Operating			Operating			Continuing			Net			Diluted
(in thousands, except per share amounts)	Gross Profit			Expense			Income			Operations			Income			EPS
2006 Reported Results	$	832,166		$	579,907		$	476,519		$	272,251		$	256,283		$	6.48
Gain on sale of J&L		(1,935	)		—			(233,949	)		(132,001	)		(132,001	)		(3.34	)
J&L transaction-related charges		—			(6,381	)		6,381			3,956			3,956			0.10
Loss on divestiture of Electronics		—			—			—			—			15,366			0.39
Tax impact of cash repatriation under AJCA		—			—			—			11,176			11,176			0.28
CPG goodwill impairment and transaction-related charges		—			—			—			—			2,838			0.07
Loss on sale of Presto		7,329			—			9,457			9,457			9,457			0.24
Favorable resolution of tax contingencies		—			—			—			(10,873	)		(10,873	)		(0.27	)
2006 Results, excl. special items	$	837,560		$	573,526		$	258,408		$	153,966		$	156,202		$	3.95

RECONCILIATION OF ADJUSTED FREE OPERATING CASH FLOW (Unaudited):

	Year Ended
	June 30,
(in thousands)	2007			2006
Net cash flow provided by operating activities	$	199,006		$	19,053
Purchases of property, plant and equipment		(92,001	)		(79,593	)
Proceeds from disposals of property, plant and equipment		3,455			2,961
Free operating cash flow		110,460			(57,579	)
Adjustments:
Repayments of accounts receivable securitization program		—			109,786
Pension funding		—			72,956
Income taxes paid (refunded) during first quarter		86,236			(572	)
Adjusted free operating cash flow	$	196,696		$	124,591

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FINANCIAL HIGHLIGHTS (Continued)

RETURN ON INVESTED CAPITAL (Unaudited):

June 30, 2007 (in thousands, except percents)

Invested Capital	6/30/2007		3/31/2007		12/31/2006		9/30/2006		6/30/2006		Average
Debt	$	366,829	$	371,521	$	376,472	$	409,592	$	411,722	$	387,227
Minority interest		17,624		16,896		15,807		15,177		14,626		16,026
Shareowners’ equity		1,484,467		1,431,235		1,369,748		1,319,599		1,295,365		1,380,083
Total	$	1,868,920	$	1,819,652	$	1,762,027	$	1,744,368	$	1,721,713	$	1,783,336

	Three Months Ended
Interest Expense	6/30/2007		3/31/2007		12/31/2006		9/30/2006		Total
Interest expense	$	7,513	$	6,915	$	7,286	$	7,427	$	29,141
Securitization fees		5		5		6		22		38
Total interest expense	$	7,518	$	6,920	$	7,292	$	7,449	$	29,179
Income tax benefit										8,258
Total interest expense, net of tax									$	20,921

Total Income	6/30/2007		3/31/2007		12/31/2006		9/30/2006		Total
Net Income, as reported	$	62,093	$	51,738	$	30,051	$	30,361	$	174,243
Adjustment on J&L divestiture and transaction- related charges		—		—		—		1,252		1,252
Electronics impairment and transaction-related charges		—		—		3,213		—		3,213
Loss on sale of CPG and transaction-related charges		—		—		—		368		368
Minority interest expense		229		757		642		557		2,185
Total Income, excluding special items	$	62,322	$	52,495	$	33,906	$	32,538	$	181,261
Total interest expense, net of tax										20,921
									$	202,182
Average invested capital									$	1,783,336
Adjusted Return on Invested Capital										11.3	%

Return on invested capital calculated utilizing net income, as reported is as follows:

Net income, as reported	$	174,243
Total interest expense, net of tax		20,921
	$	195,164
Average invested capital	$	1,783,336
Return on Invested Capital		10.9	%

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FINANCIAL HIGHLIGHTS (Continued)

RETURN ON INVESTED CAPITAL (Unaudited):

June 30, 2006 (in thousands, except percents)

Invested Capital	6/30/2006		3/31/2006		12/31/2005		9/30/2005		6/30/2005		Average
Debt	$	411,722	$	365,906	$	410,045	$	415,250	$	437,374	$	408,060
Accounts receivable securitized		—		106,106		100,295		100,445		109,786		83,326
Minority interest		14,626		18,054		16,918		18,117		17,460		17,035
Shareowners’ equity		1,295,365		1,115,110		1,045,974		1,009,394		972,862		1,087,741
	$	1,721,713	$	1,605,176	$	1,573,232	$	1,543,206	$	1,537,482	$	1,596,162

	Three Months Ended
Interest Expense	6/30/2006		3/31/2006		12/31/2005		9/30/2005		Total
Interest expense	$	7,478	$	7,728	$	7,984	$	7,829	$	31,019
Securitization fees		1,288		1,241		1,170		1,065		4,764
Total interest expense	$	8,766	$	8,969	$	9,154	$	8,894	$	35,783
Income tax benefit										13,311
Total interest expense, net of tax									$	22,472

Total Income	6/30/2006			3/31/2006		12/31/2005		9/30/2005		Total
Net income, as reported	$	164,196		$	32,903	$	31,087	$	28,097	$	256,283
Gain on sale of J&L		(132,001	)		—		—		—		(132,001	)
J&L transaction-related charges		2,796			1,160		—		—		3,956
Loss on divestiture of Electronics		15,366			—		—		—		15,366
Tax impact of cash repatriation under AJCA		11,176			—		—		—		11,176
CPG goodwill impairment and transaction-related charges		(2,192	)		5,030		—		—		2,838
Loss on sale of Presto		1,410			8,047		—		—		9,457
Favorable resolution of tax contingencies		(10,873	)		—		—		—		(10,873	)
Minority interest expense		525			782		511		748		2,566
Total income, excluding special items	$	50,403		$	47,922	$	31,598	$	28,845	$	158,768
Total interest expense, net of tax											22,472
										$	181,240
Average invested capital										$	1,596,162
Adjusted Return on Invested Capital											11.4	%

Return on invested capital calculated utilizing net income, as reported is as follows:

Net income, as reported	$	256,283
Total interest expense, net of tax		22,472
	$	278,755
Average invested capital	$	1,596,162
Return on Invested Capital		17.5	%

-end-