Friday, July 10, 2009

Notable financing (KMT)

AlphaNinja - Kennametal (KMT) priced an equity offering this morning, continuing its effort to "clean up" the balance sheet. The proceeds will be used to pay down bank debt.

A few days ago the company amended its revolving credit agreement, loosening up terms.

Also from a few days ago, the company pointed to some signs of stabilization in its markets. However, it still expects to post a "LPS" (loss-per-share -->> they really needed to come up with a moniker for that?).

Despite the current global recession, recently, a number of traditional industry indicators point to potential market stabilization. The U.S. Purchasing Managers’ Index reached a low of 32.9 in December 2008 and has increased each month for six consecutive months to 44.8 as of June 2009. Historically, an index rating at or below 50 indicates a contraction in industrial activity. Another key index, the Industrial Production Index, is forecasted to grow beginning in September 2009 by Global Insight, a respected economic research organization, indicating that a recovery in general industrial manufacturing may start in the first quarter of calendar year 2010.

Although there have been recent indications of some stabilization in industrial activity, and certain signals point toward possible economic recovery, Kennametal believes that it will continue to experience the adverse effects of the global recession during the first part of the Company’s new fiscal year 2010 which began on July 1, 2009. As such, for the quarter ending September 30, 2009, Kennametal presently expects to record a loss per diluted share (LPS), excluding restructuring and divestiture related charges, that will be greater than the LPS for the quarter ended June 30, 2009, excluding restructuring and divestiture related charges. The principal reason for the expected change in LPS from the previous quarter is due to the difference in temporary cost savings from employee furloughs made in the June 2009 quarter and salary reductions placed into effect at the beginning of the September 2009 quarter. While there can be no assurance, Kennametal currently expects to see the effects of an economic recovery reflected in the Company’s results for the second half of its fiscal year 2010.

When does a company scramble to re-do its credit agreements and sell equity near 52week lows to shore up the balance sheet? When its recent quarter looks like this(below)...At least they're being proactive. The market is responding positively, sending shares up 7% this morning.

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