Kennametal Inc: Form 10-Q for the period ended Mar 31, 2026

Gross profit for the nine months ended March 31, 2026 was $536.4 million, an increase of $84.0 million from $452.4 million in the prior year period. The increase was driven by the favorable timing of pricing compared to raw material costs within the Infrastructure segment of approximately $64 million, pricing and tariff surcharges within the Metal Cutting segment, favorable foreign currency exchange, incremental year-over-year restructuring savings and higher sales and production volumes. These factors were partially offset by tariffs and general inflation and higher compensation costs. Gross profit margin for the nine months ended March 31, 2026 was 33.1 percent, as compared to 31.2 percent in the prior year period.

OPERATING EXPENSE Operating expense for the three months ended March 31, 2026 was $124.0 million compared to $104.0 million for the three months ended March 31, 2025. Operating expense for the nine months ended March 31, 2026 was $353.4 million compared to $325.0 million for the nine months ended March 31, 2025. The increase in operating expense was primarily due to higher compensation costs, partially offset by year-over-year restructuring savings.

Research and development expenses included in operating expense totaled $11.0 million and $11.1 million for the three months ended March 31, 2026 and 2025, respectively, and $31.9 million and $33.2 million for the nine months ended March 31, 2026 and 2025, respectively.

RESTRUCTURING AND OTHER CHARGES, NET In January 2025, we announced several actions to support the long-term competitiveness of the Company and to mitigate softer market conditions. Total restructuring and related charges for this program of $22.0 million, compared to a target of approximately $20 million, were recorded through March 31, 2026, consisting of $16.6 million in Metal Cutting and $5.5 million in Infrastructure. The Company substantially completed the closure of a facility in Greenfield, MA and the consolidation of facilities in Barcelona, Spain during 2025 as a part of these actions.

We recorded restructuring and related charges of $2.4 million for the three months ended March 31, 2026, which consisted of $1.9 million in Metal Cutting and $0.4 million in Infrastructure. Included in this amount were restructuring related charges of $0.3 million included in cost of goods sold. We recorded restructuring and related charges of $8.6 million for the nine months ended March 31, 2026, which consisted of $7.4 million in Metal Cutting and $1.3 million in Infrastructure. Included in this amount were restructuring related charges of $2.4 million included in cost of goods sold.

We recorded restructuring and related charges of $5.8 million for the three months ended March 31, 2025, which consisted of $4.3 million in Metal Cutting and $1.5 million in Infrastructure. Of this amount, restructuring-related charges of $0.2 million were included in cost of goods sold. We recorded restructuring and related charges of $7.9 million for the nine months ended March 31, 2025, which consisted of $6.2 million in Metal Cutting and $1.7 million in Infrastructure. Of this amount, restructuring-related charges of $0.4 million were included in cost of goods sold.

INTEREST EXPENSE Interest expense for the three months ended March 31, 2026 increased to $6.3 million compared to $6.2 million for the three months ended March 31, 2025. Interest expense for the nine months ended March 31, 2026 decreased to $18.5 million compared to $18.7 million for the nine months ended March 31, 2025.

OTHER INCOME, NET Other income, net for the three months ended March 31, 2026 was $6.5 million compared to $5.5 million during the three months ended March 31, 2025. Other income, net for the nine months ended March 31, 2026 was $11.0 million compared to $8.6 million during the nine months ended March 31, 2025. The increase in other income, net was primarily due to foreign currency transaction gains including preferential exchange rates in Bolivia, partially offset by higher net periodic pension expense in the current year.

PROVISION FOR INCOME TAXES The effective income tax rates for the three months ended March 31, 2026 and 2025 were 23.3 percent and 23.6 percent, respectively. The year-over-year change is primarily due to favorable geographical mix, partially offset by a larger net benefit from the advanced manufacturing production credit under the Inflation Reduction Act in the prior year quarter.

The effective income tax rates for the nine months ended March 31, 2026 and 2025 were 25.4 percent and 25.6 percent, respectively. The year-over-year change is primarily due to favorable geographical mix and current year adjustments that include a tax rate change enacted in Germany and an income tax audit settlement in China, partially offset by a larger net benefit from the advanced manufacturing production credit under the Inflation Reduction Act in the prior year and the benefit recorded in the prior year for interest received to resolve an income tax dispute in India.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA), which includes a broad range of tax reform provisions, was signed into law in the United States. We do not expect the OBBBA to have a material impact on our consolidated financial statements.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's management evaluated, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). The Company's disclosure controls were designed to provide a reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide reasonable assurance of achieving the controls' stated goals. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance at March 31, 2026 that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.