Good morning. I would like to welcome everyone to Kennametal's First Quarter Fiscal Year 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Please note this event is being recorded. I would like – now like to turn the conference over to Beth Riley, Interim Investor Relations. Please go ahead.

Thank you, Laura. Welcome, everyone. Thank you for joining us to review Kennametal's First Quarter Fiscal 2016 Results. We issued our quarterly earnings release earlier this morning and it is available on our website www.kennametal.com. Consistent with our practice in prior quarterly calls, we have invited various members of the media to listen to this call and it is also being broadcast live on our website and a recording of the call will be available there for replay through December 3. As Laura mentioned, I'm Beth Riley and I'm providing Interim Investor Relations for Kennametal. Joining me for the call today are President and Chief Executive Officer, Don Nolan; our new Chief Financial Officer, Jan Kees van Gaalen; and Vice President, Finance and Corporate Controller, Marty Fusco. Don and Jan Kees will discuss the company's performance in the September quarter. After the remarks, we'll be happy to answer your questions. At this time, I would like to direct your attention to our forward-looking disclosure statement. The discussion we will 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 has 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 the call in accordance with SEC Regulation G. This 8-K presents GAAP financial measures that we believe are most directly comparable to those non-GAAP financial measures and provides…

Thank you And our first question will come from Julian Mitchell of Credit Suisse. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hi, thank you and welcome, Jan Kees. Jan Kees van Gaalen - Chief Financial Officer & Vice President: Thank you, Julian. Donald A. Nolan - President, Chief Executive Officer & Director: Hi, Julian. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hi. I guess my first question was just on the clean operating margins, just to check, am I right in thinking that the full year guidance on EPS embeds sort of flattish clean margins for the year as a whole? Because they fell by about 600 points in Q1 year-on-year. So, I just wondered, at what point do you think we start to see them stabilize year-on-year this year? Martha A. Fusco - Vice President-Finance & Controller: Julian, it's Marty, I'll take that one. And consistent with what we said in July, from an earnings perspective, our historical splits were about 40%-60%. As we talked about in July, we're expecting something much less than that first half, we're looking at about 25%-75% split in earnings. And then sequentially, as we move through the year, you're going to see improvements in both sales, as well as the margins and EPS sequentially. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Got it. Thank you. And then just my follow-up would be around the – any extra color on the $0.20 to $0.25 of additional cost cutting. Are there restructuring charges of a similar proportion this year? And are those extra measures structural or are they more sort of short-term items that the costs come back in whenever the top line starts to improve? Jan Kees van Gaalen - Chief Financial Officer & Vice President: No, these would be structural. There are limited severance cost relating to these savings actions that we have undertaken. We're basically reducing the number of people in the organization. We're also, how do you say, eliminating a certain number of positions for which we were recruiting, and then we're eliminating a certain number of processes and actions that are providing cost savings going forward. So, these will be structural.

And the next question comes from Ann Duignan of JPMorgan.

Hi. Good morning. This is Mike Conlon, on for Ann. Donald A. Nolan - President, Chief Executive Officer & Director: Hi, Mike.

Hey, Mike. Jan Kees van Gaalen - Chief Financial Officer & Vice President: Hello.

I wanted to ask quickly if you could just provide some color on your Europe markets, in particular, which of those are going to be down for this year? Donald A. Nolan - President, Chief Executive Officer & Director: Well, I think just first I'll back-up for – just for a second. I think if you think about what – I wouldn't say surprised us, but things that weren't as expected, Europe is a little better than we expected and the U.S. ended up quite a bit worse than we expected. Europe, we are seeing across the board, it's just a little better than what we would have expected given the economic conditions that were forecast just three months ago or certainly six months ago. I think we're holding our own on the share side too, so that's helped us significantly. The areas, we believe, are doing a little better are Eastern Europe. Eastern Europe's doing a little better than we thought, but the rest is pretty much as expected. Does that answer your question, Mike?

Oh yeah. I think that helps. And then could you just give us a – help us understand where you are in the strategic review? Is it now completed with this divestiture or where are we? Donald A. Nolan - President, Chief Executive Officer & Director: Yes. I believe that we've completed our major review of the businesses. This divestiture will bring us back to offset say business as usual, we're going to continue to review as any company would. But we have nothing right now that's planned.

And the next question comes from Stephen Volkmann of Jefferies.

Hi, good morning, guys and welcome back Beth, it's been a while.

Thank you, Steve, great to hear you.

So, my question actually was sort of along those same lines, Don. But I'm curious where we are with respect to sort of the restructuring of the footprint. I think, you had given guidance on the past that the overall footprint would decline manufacturing footprint, I think it was, please correct me, but would decline 20% or 25%. Is the current – are the current programs that you've announced plus the 20% to 25% from today, does that get you to the 20% to 25% footprint reduction or is there more that we can still do here? Donald A. Nolan - President, Chief Executive Officer & Director: There is still more, we're continuing to review. As I mentioned, we just brought on board a new leader in manufacturing who is putting together his plans. And we expect to have some discussion on this topic at our Analyst Day on December 15.

Okay, great. That's helpful. And then maybe just as my follow-up. I think you both mentioned the destocking at the distributors several times in your prepared comments and I'm just curious how much visibility you think you have there? Where are these distributor stocks and inventories and how much longer would the destocking go on in your view? Thank you. Donald A. Nolan - President, Chief Executive Officer & Director: That's a great question. Visibility is not great on this topic. It's hard to see. We've got a lot of color on the topic. And we know that is happening. But the degree and the timing is very difficult to put a number or a date on. And that's one of the reasons why we mentioned in our prepared remarks, visibility is limited. So I can't – I actually don't have – I can't give you any guidance on that as far as timing or degree even going forward.

And the next question is from Andy Casey of Wells Fargo Securities.

Thank you, good morning and welcome. First question relates to the non-core revenue divestiture announcement. Does the operating earnings neutral comment include the impact of debt reduction or is that just the impact from the divestiture, meaning the revenue is basically at breakeven? Jan Kees van Gaalen - Chief Financial Officer & Vice President: That does not include the impact of the debt reduction.

Okay. Thank you. And then, could you bring us through the thought process behind the use of the $70 million proceeds, and your reference to the debt reduction as opposed to allocating capital, maybe the share repurchase, just kind of how you are thinking about it? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Look, I think in terms of the overall debt to debt to cap at a 25% level, I think we're well positioned. We do want to make sure that, through the cycle we remain in the investment grade bracket of – with our EBITDA to debt ratio. So, we'll work at it and reduce the outstanding debt to basically get firmly back into the investment grade target.

And the next question is from Michael Feniger of Bank of America.

Hey, guys Mike Feniger here filling in for Ross Gilardi. Just a question, first up we discussed inventories on distribution sides – on the distributor side. How are you feeling comfortable with your own inventories relative to the new lowered end-user demand environment? Donald A. Nolan - President, Chief Executive Officer & Director: So we've been working on our working capital for the last three quarters. And we will continue to drive that to more efficient levels. So I would say that we're very comfortable. In fact, our on-time performance, our service levels to customers actually improved over the last quarter. So we're having no impact, in fact the impact is positive as we drop our inventory. So we are getting much better at managing what we have. And we see opportunities to continue down that path for the foreseeable future.

But your own, your own inventory destocking, did it impact your margin this quarter? Do you see that being a headwind going forward or do you feel comfortable with your inventory position currently? Martha A. Fusco - Vice President-Finance & Controller: It did Mike. This is Marty. Within the quarter, it had about a 190 basis-point unfavorable impact year-over-year on margin. We do expect the full year to come down year-over-year as we experience some of that second half of last year as well. So overall for the full year, we actually expect it to be neutral year-over-year.

Okay. Perfect. And I was hoping you guys give us just some more help on sequential ramp we should see in the margin? How should we really think about how that plays out through the next three quarters? Martha A. Fusco - Vice President-Finance & Controller: So, Mike, I think overall, as I said, we're going to experience sequentially improving margins as we move through the fiscal year. I think for the entire fiscal year, we're going to expect maybe a little bit below double-digit EBIT margins there. But you can take Q1 and sequentially improve that throughout.

And the next question is from Eli Lustgarten of Longbow Securities.

Good morning, everyone. Let me add my welcome. Donald A. Nolan - President, Chief Executive Officer & Director: Thanks, Eli.

Just one quick clarification. Thank you. Does your revenue guidance – the $125 million divestiture, is the revenue guidance include that number or exclude it? And is it all coming out of infrastructure? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Excluded. Excludes it. And ...

Okay. Starting in the second quarter – starting in the third quarter, I assume? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Correct, yes. The transaction is expected to close in the second quarter.

And does it all come out of infrastructure? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Primarily, yes. A vast majority of that.

And can we talk about the two sectors, I mean you said that oil and gas is the biggest factor. Can you give us the percentage of oil and gas to revenues in both, separate in industrial and separate for infrastructure, because I don't think oil and gas was that big in infrastructure. And two, what gives you the confidence to the second half ramp, I mean, you're talking about $0.24, $0.26, I guess in the second quarter, and then $0.60 a quarter in the third and fourth. Why would things step up that much, particularly when oil and gas spending isn't going to change at least until the middle of next year? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Yeah. I would say what we said the last quarters. What we can account for directly in oil and gas is about 8% to 9% of total company sales. However, our indirect sales that gets captured via general engineering, and they have a more of a secondary impact. In terms of the coal, we actually report that under the earthworks and the numbers I would say is still around 20% of total company sales, and that is sort of half-half for mining and half-half for construction. So, coming back to oil and gas more specifically, we have very, very low a base to start from, starting in Q1 calendar year 2016, and into Q2, we had already the rig count coming down significantly. So, in terms of our comparatives, our oil and gas how do you say, influence business if that's the right term. We'll start to show some better comparatives, that's where we are.

And our next question is from Steven Fisher of UBS.

Great, thanks. Good morning. I know you gave us the 25-75 and you said Q1 will be the lowest quarter for margins and things have grown sequentially. But just how quickly do you anticipate getting back to actual profitability in the infrastructure segment and what are the keys to that, is that just entirely cost savings? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Yeah. We expect to get back to profitability in Q2.

Okay. And is that – that's just all just from cost savings? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Portfolio reallocation and cost savings, yes. Martha A. Fusco - Vice President-Finance & Controller: Top line is also going to be increasing there too so... Jan Kees van Gaalen - Chief Financial Officer & Vice President: And top line.

Okay. That's helpful. And then if some combination of the house and senate highway bills were passed in the next few weeks, what do you think that would do for your organic growth in fiscal 2016 and 2017 and have you had any discussions with customers about that? Donald A. Nolan - President, Chief Executive Officer & Director: I think at this point, we would probably say limited, given the timing and our fiscal year.

Now we have a question from Adam Uhlman of Cleveland Research.

Hi, guys. Good morning, and welcome Jan Kees and Beth. First question, I had was on the tax currency and other savings of $.20 or $0.25 that's forecast for the year. You gave us the tax piece but help me understand a little bit better about the – why currency earnings are going to be a little bit better, and what the other savings piece is? Martha A. Fusco - Vice President-Finance & Controller: Yeah. Adam, I'll take that one. From a currency perspective, as you'll recall in July, we were expecting a $0.30, $0.35 unfavorable impact year-over-year from currency. Our assumptions on the euro, I would say compared to where we are forecasting now, we're forecasting a better euro. So, it's actually improving as you compare to the prior guidance, so that's the majority of it.

Okay. And then could you talk to pricing that you are seeing in the market right now, how much of a revenue headwind, if at all – overall for the company that you're seeing? And then maybe you can talk separately about raw material cost savings, if any, that you're seeing now, what your assumptions are for the remainder of the year? Donald A. Nolan - President, Chief Executive Officer & Director: So, our assumptions remain that we will – it will be a net positive for us going forward, that we will outperform pricing versus raw material declines. As far as the impact on revenue, it will continue to be a factor, but not a driver compared to the other things that we've mentioned.

And our next question is from Cliff Ransom of Ransom Research.

Good morning. Thank you very much. Donald A. Nolan - President, Chief Executive Officer & Director: Hi, Cliff.

Hi. Jan Kees van Gaalen - Chief Financial Officer & Vice President: Hi, Cliff. Good morning.

When destocking cycles occur, they are often violent. But when they come back, and they come back for two reasons, they come back one, because at some point inventories stabilizes to actual production, even if at a lower base. But when it comes back, it tends to come back, particularly in oil and gas, equally violently, meaning upward. How confident are you – I'm not asking for a time table, I'm asking for when this business turns that with this restructuring and this focus on inventory, you will be able to maintain your service standards? Donald A. Nolan - President, Chief Executive Officer & Director: Cliff, this is a hot topic for us internally. I will let you know that some of the investment that we have slated, our capital expenditures are up this year, and some of it is in raising the productivity of the plants we have left, so that we can handle that surge in demand when it happens. So our intention is to be ready, we're well within our planning sights right now, so when that turn comes, we're going to be ready for it. Jan Kees van Gaalen - Chief Financial Officer & Vice President: And Cliff, we're reinvesting in the core, and oil and gas is clearly part of our core.

Okay. Thank you. And the second question is – look, I've been following your company for too long to even talk about it anymore. But you guys are both new there. My impression has always been that the culture at Kennametal did not have a high sense of urgency, that restructuring, reformulation, strategic plan seems to take a very long time. In your – I guess Don, in your short tenure, would you care to comment on that topic? Donald A. Nolan - President, Chief Executive Officer & Director: Well, I will. I will point you towards the dramatic changes that we made in working capital. I think, if I may draw your attention to our ability to drop working capital over the past three quarters, has been dramatic. We've taken action when we needed to. It was difficult to do. I mean there are major companies out there that struggle with this. Working capital is definitely a team sport, and it's something that requires a whole lot of sense of urgency throughout the organization. And I think we've united the team in understanding how important that factor is. Second is, we continue to execute extremely well on our restructuring. We were exactly where we thought we would be just eight months ago. Driving that program and making sure that we deliver on that item. So, I think, when you look at the key initiatives that we have in place, we are executing, and we are delivering the results that we expected. The headwinds that we're running into the markets are unfortunate, but we're reacting to those also. We announced another $20 million to $25 million in cost out, and you will see us execute well against that objective and deliver that in this fiscal year. So, not sure about the past, but I can tell you about the future. We execute with a sense of urgency, and we deliver on our promises. The last one, that I'll bring to your attention, Cliff, we announced just six months ago that we would do a portfolio simplification. We executed on that. So, we're moving forward are taking steps, starting to improve the long-term performance of the company. And I think, you will continue to see excellent execution going forward. Thanks for the question.

And the next question ... Jan Kees van Gaalen - Chief Financial Officer & Vice President: Definitely a shift from the past.

I'm sorry. Our next question will come from Rudy Hokanson of Barrington Research.

Thank you. I believe when you first came Don, you were talking about, looking at opportunities to maybe reposition some of the capabilities of Kennametal, looking at maybe new markets or applications. And I was wondering, where you would say you are right now in terms of that part of a strategy? Donald A. Nolan - President, Chief Executive Officer & Director: Rudy (43:34), I'm sure we'll have more to talk about in our strategy when we get together on December 15. But what I do see is the tremendous investment that we've made in innovation in the core markets, whether it be innovation on unique and different powder formulations, unique and different processes or unique and different design of products has – clearly creates the opportunity for us to grow. And focus on that core – focus on the core business that we have left after divestiture will definitely create opportunities for us. We've also invested in NOVO, a very unique and different way of thinking about how to help our customers to drive productivity and increase their success with their customers. So, I think, quite frankly, we have an awful lot to build on here and to grow in our core. So, we'll be talking more about that in December. Okay?

Okay. So, I mean – it's – this might be the obvious, but you've been paying attention to that as well as issues of cutting costs and downsizing? Donald A. Nolan - President, Chief Executive Officer & Director: Yes. Absolutely. We look at – we're looking for opportunities to expand our margin by reducing our costs long term and driving growth in the core, absolutely.

Okay. Thank you, I'll look forward to December. Donald A. Nolan - President, Chief Executive Officer & Director: Thank you.

And the next question is from Steve Barger of KeyBanc Capital Markets.

Hi, good morning. I'm going to have a follow-up on that last question a little more specifically. You've been clear about how you've reacted to weaker end markets from the cost side, but as you think about the decline in organic sales, can you talk about how your view on direct versus indirect sales efforts has been evolving, how you're engaging the sales force? Donald A. Nolan - President, Chief Executive Officer & Director: Well, we've definitely implemented – as I mentioned in a couple of calls ago, we've implemented a new customer relationship management system, CRM system that is world class and has been rolled out now to two regions around the world. We're starting to see the benefits of that with a clear view of our pipeline and the ability to better identify our targets and opportunities. So, there's one example of investment. We're also in a very strategic way adjusting our commercial force in the way that we go to market. In some markets where we have longer cycles, like mining, we are adjusting our commercial work force appropriately. In other cases where you have in our mind a much faster cycle like oil and gas, we're actually investing for success there because we think that when that comes back it's going to come back fast and furious and we want to make sure that we're very well positioned there. We have high share and we intend to grow that share. Did that answer your question?

I guess what does investing for success really entail, what does that mean? Donald A. Nolan - President, Chief Executive Officer & Director: Well, it means making sure that you have the right commercial force in place for the right customers and I think CRM speaks for itself.

Okay. Last question. You made several mentions of being well positioned for end market recovery given the rightsizing, but also the visibility remains low. Internal forecasting has always been a challenge for Kennametal, can you talk about how the company has changed its approach to forecasting so you can have that correct capacity response? Jan Kees van Gaalen - Chief Financial Officer & Vice President: Yeah. I think forecasting is difficult in this short cycle business. CRM will improve with regards to the funnel it provides in terms of opportunities. And as our sales teams start working with that, it will get better. However, we have a better aligned S&OP process between the sales teams and the manufacturing facilities. And so, some of these historical, how do you say, differences that we have between manufacturing and the sales teams, we've done a lot of work on improving those. Donald A. Nolan - President, Chief Executive Officer & Director: I think the other thing I would say is that, crisper execution has been the mission here for the past eight months and certainly gain a better handle on forecasting as part of that. I might draw your attention, we did hit back in the last two quarters of our fiscal year 2015, we did put together an adjusted range and we hit that range, right on the money. So, we demonstrated that we've improved versus the 10 prior quarters and we're going to continue to get better.

And finally, we have a follow-up from Cliff Ransom.

I'll tell you what, I will wait. Thank you, sorry, I forgot how to unload it. We'll talk when we talk. Thanks. Donald A. Nolan - President, Chief Executive Officer & Director: Thanks, Cliff. Jan Kees van Gaalen - Chief Financial Officer & Vice President: Thanks, Cliff.

At this time, we will conclude the question-and-answer session. I would like to turn the call back over to Beth Riley for any closing remarks.

Thank you, everybody. We really appreciate your time and your interest and I look forward to speaking with all of you in the near future. Have a great day.

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