Good morning. I would like to welcome everyone to Kennametal's Third Quarter Fiscal Year 2015 Earnings Call. After the speakers' remarks there will be a question-and-answer session. Please note that this event is being recorded. I would now like to turn the conference over to Quynh McGuire, Director of Investor Relations.

Thank you Denise. Welcome, everyone. Thank you for joining us to review Kennametal's third quarter fiscal 2015 results. We issued our quarterly earnings press release earlier today. You may access this announcement via our website at www.kennametal.com. Consistent with our practice in prior quarterly conference calls, we've invited various members of the media to listen to this call. It's also being broadcast live on our website and a recording of this call will be available on our site for reply through June 5, 2015. I'm Quynh McGuire, Director of Investor Relations for Kennametal. Joining me for our call today are President and Chief Executive Officer Don Nolan and Interim CFO, Vice President Finance and Corporate Controller Marty Fusco. Don and Marty will discuss the March quarter's financial performance. After their remarks we'll be happy to answer your questions. In addition, fiscal 2015 third quarter presentation slides are available on our website as well as in our Form 8-K filing. At this time, I'd like to direct your attention to our forward-looking disclosure statement. The discussion we'll have today contains comments that may constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of assumptions, risks and uncertainties that could cause the company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such forward-looking statements. Additional information regarding these risk factors and uncertainties is detailed in Kennametal's filings with the Securities and Exchange Commission. In addition, Kennametal provided the SEC with a Form 8-K, a copy of which is currently available on our website. This enables us to discuss non-GAAP financial measures during this call in accordance with SEC Regulation G. This 8-K presents GAAP financial measures that we believe are most directly comparable to…

Our first question will come from Ann Duignan of JPMorgan. Please go ahead.

Hi. Good morning, everyone. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning, Ann. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Ann.

Don, I don't know if I harped on this the last quarter also, but I'm curious, why do we have to wait till December or the Analyst Meeting given the size of this restructuring and given the importance of this restructuring, and I think it's important that investors have confidence in the team's ability to pull it off, and I think we would like to see more details sooner rather than later? Donald A. Nolan - President, Chief Executive Officer & Director: Well. I think, Ann, it's really important right now, we have a focus on the initiatives as we've described. Our focus is on optimizing our portfolio, making sure that we're really clear on what's core and what isn't, and that – and our focus on working capital clearly needs to be the center of our attention. And what attention we have left after those initiatives is focused on making sure that we have a successful and we're aligned on a long-term strategy. So this is purely prioritization.

And is it your expectation that you will be out meeting with investors before December? Donald A. Nolan - President, Chief Executive Officer & Director: Yes, absolutely.

Okay, that's helpful. Thank you. And then turning back to the businesses, I don't think you gave guidance in the release by segment. Could you provide revenue guidance by segment? Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Hi Ann. This is Marty. We don't provide guidance on our top-line by segment. I could talk a little bit about sort of end market outlook. As far as Industrial goes, I would say in total we expect similar levels as we did in Q3. And from an Infrastructure standpoint, we are continuing to experience the current trends within oil and gas and energy as well as a little bit softer construction season than we were expecting at this point, as our customers are waiting to see what might happen with funding for the highway bill. Donald A. Nolan - President, Chief Executive Officer & Director: I will say – just to build on that, through April we're on track to achieve our forecast for the quarter.

Okay. That's helpful. I'll get back in line. I appreciate it.

The next question will be from Julian Mitchell of Credit Suisse. Please go ahead. Julian C. H. Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hi. Thank you. Donald A. Nolan - President, Chief Executive Officer & Director: Hello, Julian. Julian C. H. Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hey. Just wanted to follow-up on the Industrial business and the demand trends within that. I guess a lot of companies seem to see demand particularly soften in sort of February and then maybe get a little bit better in the last month or two. Just wondered if you saw that within Industrial, and maybe what's happening in Europe in that business, is there any sign at all recently of a pickup there? Donald A. Nolan - President, Chief Executive Officer & Director: I would say, Julian, we were pretty much on track with our forecast for the quarter. I would say no particularly significant surprises. And I would say, on the Industrial side, certainly, we're on track to achieve our forecast this quarter. So, my take is, over the six months, pretty much as expected. So we're not seeing any significant changes. I would say the only area where we are continually watching, was Infrastructure as Marty mentioned, we fell a little bit short of what we expected in the last quarter, and this quarter we're pretty much on track with what we expected. Julian C. H. Mitchell - Credit Suisse Securities (USA) LLC (Broker): Thanks. And then just a follow-up question around pricing dynamics. I think one of your main cutting tool competitors talked about how the currency moves would not really affect pricing strategies as they saw it. Have you seen any shift in pricing, either through currency moves or demand driven in oil and gas?…

The next question will come from Stephen Volkmann of Jefferies. Please go ahead. Donald A. Nolan - President, Chief Executive Officer & Director: Hi, Stephen.

Good morning. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning, Stephen.

Just a couple of follow-ons if I could. I mean you're starting to sketch out what this turnaround is going to look like and I'm curious the divestiture of $150 million to $400 million in annual sales sort of a wide range? And I guess I'm curious, what those businesses look like now? I mean do you think they're divestible in their current condition, do you have to do some work on them first? And is that just sort of a waypoint towards something bigger? I think you mentioned a footprint reduction ultimately of 20% to 25% but I can't do the math that fast, does that mean the numbers will be bigger as we go down the road? Donald A. Nolan - President, Chief Executive Officer & Director: No, at this point I think $150 million to $400 million is the right range. And as I said in the last call, this is not a fire sale. We have – I would say, some businesses that may have better natural owners, people who would value, organizations that would value these businesses. And we think – we're not in a hurry, but on the other hand, these are businesses that we don't think are good for the long-term success of the company. So...

Sorry, would you expect to have these sort of in other hands by the time you do this Analyst Day in December, is that part of the idea? Donald A. Nolan - President, Chief Executive Officer & Director: I don't think I can really specify timing right now. As you know, when you think about divesting a business, it's a balance on timing and costs – or timing and price. And I would say that this is something I'd rather do sooner than later, but not a fire sale. How's that?

Okay. Yeah, fair enough. Thanks. And then, since you opened the door a crack on 2016, I'm just going to take a shot at a couple of things here. Restructuring benefits in 2016, you should probably have a decent idea assuming the end markets are kind of flattish, what does that look like? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. We're just not prepared at this point. At our next earnings call, we'll be giving a little more definition around what we're thinking about 2016. Just as you've mentioned, I just wanted to crack the door a bit. We're thinking hard about it and we'll be prepared to talk more in our next earnings call. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: And Steven, I would add to that, that Phase 1, the range of $50 million to $55 million in benefits, estimating about half of that in 2016. Phase 2's benefits, I would say, you're going to get a majority of them within 2016. And Phase 3 likely near the end, we'll start to realize a chunk of those benefits from Phase 3.

Okay. Great. That's helpful. And then, just finally, I couldn't tell from the tone, but is there a potentially a Phase 4 as well? Donald A. Nolan - President, Chief Executive Officer & Director: Well, I think what we've said is that we're going to continuously look carefully at where it is, what we need to accomplish in our – as part of our strategic plan. Most assuredly, there is more to come as we divest portions of the business. As we mentioned the $150 million to $400 million, there will be opportunities to realign around that. So, I'm not sure I want to announce Phase 4, but there has to be more to come. Yeah.

Great. Thank you so much.

The next question will come from Adam Uhlman of Cleveland Research. Please go ahead.

Hi, guys. Good morning. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Adam. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning, Adam.

If I could follow-up on the businesses that are being evaluated for sale, you had mentioned that the margin profile of that business was lower than the average. I am wondering if you could put some meat on the bone on that? Are they profitable, are they like 1% to 2%, just a little extra color there would be helpful? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. At this point, we just can't provide much color on that one. As we make progress down that path, we'll certainly give you some illumination. But right now, we just can't comment.

Okay. And then related to the restructuring savings that were being mentioned earlier in your prepared remarks. Don, you had mentioned that you thought that fiscal 2016 you were seeing some volume headwinds. And I think you managed that you'd be positioning for EBIT and margin expansion in 2017. I am wondering if that means that the volume environment is going to offset some of these restructuring savings that we're looking at for 2016 and therefore the margins would not expected to grow next year, is that what you're trying to telegraph? Donald A. Nolan - President, Chief Executive Officer & Director: Well I think we'll certainly have more to talk about when we meet after next quarter in July, but I will comment on the significant headwinds. We have currency headwinds, which many companies are facing right now. And certainly the impact of the energy sector, which as I mentioned is 20%, 25% of our revenues, and we just don't see that trend changing. So as we prepare and head into our next fiscal year, making sure that we have the right cost structure in place for that size is important. And then quite frankly positioning ourselves for the upturn, we're confident that eventually these markets will come back and we want to be very well positioned for that upturn. But more to come when we talk in July.

Okay. I guess, just to round it out, I guess, your expectations for currency impact to earnings for this year, Martha could you update us on that please? Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Sure. We have some significant headwinds from a euro perspective. I will tell that I would say, within the guidance and the forecast that we've provided we're expecting a similar euro exchange rate as you would see today. For the full year, it's pretty consistent where we have it in the guidance, it's not that significantly different from the guidance that we had provided on currency last quarter.

Our next question will come from Walter Liptak of Global Hunter. Please go ahead.

Hi, thanks. Good morning, everyone. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Walt.

I wanted to ask, I'll take a shot at 2016 too and understanding currencies, the headwind and the energy too. I wonder if you would comment on if there's anything about Europe or some of the other geographic regions that worry you about 2016? Or is it anything in North America that's a major concern as you look into 2016? Donald A. Nolan - President, Chief Executive Officer & Director: You know, I think, I'll take the obvious path here, Walt. Industrial certainly looks better than Infrastructure heading into 2016. And I think that right now, we're thinking about similar trends as far as China. We're quite happy with our Industrial business in Asia, overall right now. We think we're growing faster than the marketplace. And that's important, because that marketplace is not growing as fast as it had in the past. And, we'll probably – we'll see the same trend next year. In Europe, certainly it continues to be challenging, continues – but the good news is, we're very well-positioned in Germany, which is one of the strongest economies in Europe. So, that has certainly benefited us. And, right now, we don't see significant upturn in Europe as we head into next year. Is that helpful, Walt?

Yeah, it is. Thank you for that. And then, kind of another question just on the manufacturing footprint, I wonder if you could clarify for us how much of the footprint has been kind of either reduced – plants taken out so far that 20% to 25% that's in Phase 1 or Phase 2, or in Phase 3. And, how much – and, is any of that 20% to 25% footprint reduction related to the divestitures? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. So, the 20% to 25% will include the portfolio realignment, but it's going forward. It's plants that haven't been closed yet. So, much of Phase 1, we've already done. So, this would include portions of Phase 2, Phase 3, and unannounced changes and closures.

Okay. So, it's going to be a fair amount of I guess heavy lifting on changes to the factory floor. How does that impact the outlook for volumes? Donald A. Nolan - President, Chief Executive Officer & Director: I think one of the things that we do very well quite frankly, are these transitions. We've been at it for a few years now. We've got an accomplished team that's very good at doing the things that you need to execute well in order to manage these transitions. We're committed to making sure that we continue to deliver to our customers and not have an impact on their service levels.

Okay, great. Okay. Thank you.

The next question will come from Schon Williams of BB&T Capital Markets. Please go ahead. C. Schon Williams - BB&T Capital Markets: Hi. Good morning. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Schon. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning, Schon. C. Schon Williams - BB&T Capital Markets: I wonder if we could maybe still – maybe dive in a little bit more on the European commentary. I am a little surprised to see Europe take another leg down, maybe especially on the Industrial side. Could you just talk about – do you think your down 6%, do you think that's in line with the market or is there some pricing effect that's taking effect there, maybe if you could just give a little bit more color on what specific end markets within Europe are maybe the biggest headwinds? And then I know it's a smaller piece of the business, but could you just comment on the aerospace and defense trends down against a pretty soft comp? I am just trying to get some color on maybe what's happening there? Thanks. Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. So I'll pick up the aerospace. I think in aerospace, we actually we had one particular customer that we decided to let go. We decided that the margins weren't attractive enough and that's impacting our top line in aerospace certainly. I think overall on Europe, we have – I think we're holding our own. I am happy with our Industrial business overall. I think we're holding share or maybe even slightly gaining share in Europe, so I feel pretty comfortable there. I think we will continue to be challenged. I think Europe, that the market in general, I don't see anything on the horizon that would say it's getting better. So, we're going to have to continue to do all the things we do even better to earn new business as we head down the road here. C. Schon Williams - BB&T Capital Markets: What about maybe European auto specifically – you had talked about that being a headwind in the past. But I mean European sales starting to accelerate here. I mean, is that – could that be a modest tailwind for you going forward? Donald A. Nolan - President, Chief Executive Officer & Director: More cars, definitely better. But I think, I don't see it – I certainly don't see it in Q4. C. Schon Williams - BB&T Capital Markets: Okay. That's helpful. And maybe one more if I could just sneak it in. Any update on the CFO hunt at this point? Donald A. Nolan - President, Chief Executive Officer & Director: We've continued a very disciplined approach and we'll be keeping you updated as we make progress, but nothing to report right now. C. Schon Williams - BB&T Capital Markets: Okay. Thanks, guys.

The next question will come from Michael Feniger of Bank of America. Please go ahead.

Hey, guys. I know there's been a lot of questions on 2016. And I appreciate that you don't provide guidance, but could you help us understand the seasonal pattern of the business now? Historically it's always been more second half weighted. Should we be looking at 2016 – is the first half going to be much lower than second half, how should we be thinking about the seasonal pattern of the business now? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah, Michael. We'll be in a much better position to comment on that in July. I think, to be frank, on that particular question, we'll especially be watching this quarter. So, I'll defer that question to July.

Okay. Fair enough. Fair enough. And we talked about – we heard you guys talk about inventories, how much more inventory destocking do you guys have to do internally? Is that going to be weighing on the margins at all? And how do you feel the inventory is with the distribution and distribution channel right now? Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Yeah, Michael from an inventory perspective, and I won't put numbers around quantifying the amount of inventory reduction because we do have a lot of moving parts, but I will say we're focused on not just WIP and finished goods inventory which will impact the margins, but also from a raw materials perspective, some inventory reductions there in Q4. And I would think similar margin impacts in the quarter for Q4 as we experienced in Q3, so roughly 50 basis points was in Q3.

50 basis points. Thanks. And then I guess just my last question, guys. I mean, you did take down your organic growth guidance on the back of oil and gas. But I think you made a comment that you're not seeing any pricing pressure. How's the conversation going with customers right now in that market, since it seems like demand continues to trend lower and below expectations? Donald A. Nolan - President, Chief Executive Officer & Director: Well, I think, what I said was that we're going to continue to focus on the high end of the market. We continue to focus on customers who really value the expertise and the solutions that we provide. And in that end of the market quite frankly, demand is high and we find opportunities.

Great. Thanks, guys. Donald A. Nolan - President, Chief Executive Officer & Director: Yeah, Thanks.

Our next question will come from Samuel Eisner of Goldman Sachs. Please go ahead. Samuel H. Eisner - Goldman Sachs & Co.: Yeah, good morning, everyone. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning, Sam. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Sam. Samuel H. Eisner - Goldman Sachs & Co.: I'm going to try one more time on fiscal 2016. Based on your current views of end markets and the cost restructuring programs that you have already in place, do you feel as though you can grow earnings next year? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah, I'm sorry, Sam. I just have to defer that question to July. We've still some homework to do and we'll be ready to talk about that when we get together for our earnings call after this quarter is complete. Samuel H. Eisner - Goldman Sachs & Co.: On the Phase 3 initiatives, can you talk specifically about what you are actually targeting for cost savings? Are you closing facilities in Europe or is it more head count reductions? I just want to understand what specifically those are. Donald A. Nolan - President, Chief Executive Officer & Director: Yeah, I mean we're going to have, similar to what we said on Phase 2, the Phase 3 will be a mix of administrative reductions, and I want to emphasize that this is a structured program, where we're changing processes. We've brought in an outside consultant to help us through this change process, and so it's structured and disciplined with milestones. And so that is certainly a significant portion of what we're going to go through with Phase 3. The second key driver here will be continued footprint restructuring, so it will be a mix similar to Phase 2. Samuel H. Eisner - Goldman Sachs & Co.: The $160 million charge that was taken, the asset impairment or the intangible asset impairment, what specifically was that for? Can you talk about which transactions historically that was for? Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Yeah, Sam. This is Marty. I'll put it this way. The ending balance of goodwill in the Infrastructure segment of $112 million is lower than the goodwill that we added through the Tungsten Materials acquisition, so you can read into it that way.

Our next question will come from Steve Barger of KeyBanc Capital Markets.

Hi, good morning. Donald A. Nolan - President, Chief Executive Officer & Director: Good morning, Steve. Martha A. Fusco - Interim CFO, Vice President-Finance & Corporate Controller: Good morning.

I am just trying to think about mix from a high level. As you've gone through your product and segment reviews, can you tell us what percentage of your revenue is coming in below say a 10% operating margin and what percent might actually be losing money right now? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah, Steve that isn't usually something that – well I don't think we've ever shared that kind of detail on our product line. I can tell you that, the one thing we have shared is that, the portion of the business that we're looking at divesting, we certainly – that's well below the average profitability that we have in the business, so there will be a net improvement going forward.

That's on the entire $400 million, at the high end of the range of divestible revenue? Donald A. Nolan - President, Chief Executive Officer & Director: Yes.

Okay. Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. But look, we're very competitive in many markets and there is a range. But we've never talked about what that range is and where.

Yeah. I guess, I am just trying to get a sense for if you can divest that $400 million, how much of a jump that gives you in terms of getting back to, just call it a double-digit operating margin? Would that put you there or would there still be additional work to do? Donald A. Nolan - President, Chief Executive Officer & Director: Yeah. That would be something that we would cover as we divest. So we'll give you some indication as we head down that path. As you can imagine, it just depends on the pieces, right?

Okay. Thanks. That's all I have. Donald A. Nolan - President, Chief Executive Officer & Director: Thank you.

The next question will come from Stanley Elliott of Stifel. Please go ahead. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Hey. Good morning. Thank you for taking my question. A quick question, when we think about kind of the growth rate on a go-forward basis. Industrial production used to be kind of two times plus a bit, but with a smaller footprint, I am assuming you guys are going to be divesting some of the slower growth products as well as deemphasizing slower growth products. Is it possible that we could actually see that multiple expense to 2.5 times Industrial production or something of that magnitude with a little bit of market tailwind behind you? Donald A. Nolan - President, Chief Executive Officer & Director: Well I think first Stanley it depends on where in the world, so certainly in some areas in the emerging markets, you can get a multiple on Industrial growth. But in areas Infrastructure is certainly not and certainly in I would call it the mature markets, where we have – where you have continuous productivity gains. You're probably not going to see that kind of factors – those kind of factors, because people get more and more productivity out of the tools that they use. So, I just don't see that. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: And then as thinking about working capital as a percent of sales, historically has run pretty high for the company, but with the divestures and fewer SKUs out there, where kind of should we be able to bracket that as a percentage of sales, kind of once some of these restructurings take hold? Donald A. Nolan - President, Chief Executive Officer & Director: Can you rephrase that Stanley? I'm not sure I understood…

At this time, we will conclude the question-and-answer session. I would like to turn the call back over to Quynh McGuire for closing comments.

This concludes our discussion. Please contact me, Quynh McGuire at 724-539-6559 for any follow-up questions. Thank you for joining us.

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