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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______
Commission File Number 1-5318
KENNAMETAL INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0900168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 981 at Westmoreland County Airport
P. O. Box 231
Latrobe, Pennsylvania 15650
(Address of principal executive offices)
Registrant's telephone number, including area code: (412) 539-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Capital Stock, par value $1.25 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of August 31, 1994, the aggregate market value of the
registrant's Capital Stock held by non-affiliates of the
registrant, estimated solely for the purposes of this Form 10-K,
was approximately $616,425,050. For purposes of the foregoing
calculation only, all directors and executive officers of the
registrant and each person who may be deemed to own beneficially
more than 5% of the registrant's Capital Stock, have been deemed
affiliates.
As of August 31, 1994, there were 26,377,648 shares of Capital
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1994 Annual Report to Shareholders are
incorporated by reference into Parts I, II, and IV.
Portions of the Proxy Statement for the 1994 Annual Meeting of
Shareholders are incorporated by reference into Parts III and IV.
TABLE OF CONTENTS
Item No.
- - - --------
PART I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
Officers of the Registrant
PART II
5. Market for the Registrant's Capital Stock and Related Stockholder
Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements on Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
PART I
ITEM 1. BUSINESS
Overview
- - - --------
Kennametal Inc. was incorporated in Pennsylvania in 1943.
Kennametal Inc. and subsidiaries ("Kennametal" or the "company")
manufacture, purchase and distribute a broad range of tools,
tooling systems, supplies and services for the metalworking,
mining and highway construction industries. Kennametal
specializes in developing and manufacturing metalcutting tools
and wear-resistant parts using a specialized type of powder
metallurgy. Kennametal's metalcutting tools are made of cemented
carbides, ceramics, cermets and other hard materials. The
company manufactures a complete line of toolholders and
toolholding systems by machining and fabricating steel bars and
other metal alloys. Kennametal's mining and construction cutting
tools are tipped with cemented carbide and are used for
underground coal mining and highway construction, repair and
maintenance. Metallurgical products consist of powders made from
ore concentrates, compounds and secondary materials.
Business Segment and Product Classes
- - - ------------------------------------
The company operates predominantly as a tooling supplier
specializing in powder metallurgy, which represents a single
business segment. While many of the company's products are
similar in composition, sales are classified into three major
categories: metalworking products, mining and construction
products and metallurgical products. The company's sales by
product class are presented on page 17 of the 1994 Annual Report
to Shareholders and such information is incorporated herein by
reference. Information about the company's operations by
geographic area is presented on page 31 of the 1994 Annual Report
to Shareholders and such information is incorporated herein by
reference.
Metalworking Products
- - - ---------------------
Kennametal manufactures, markets and distributes a full-line of
products and services for the metalworking industry. The company
provides metalcutting tools, abrasives, precision measuring
devices, power tools, hand tools and machine tool accessories to
manufacturing companies in a wide range of industries.
A Kennametal tooling system usually consists of a steel
toolholder and an indexable cutting tool called an insert.
During a metalworking operation, the toolholder is positioned in
a machine tool which provides the turning power. While the
workpiece or toolholder is rapidly rotating, the cutting tool
insert contacts the workpiece and cuts or shapes the workpiece.
The cutting tool insert is consumed during use and must be
replaced periodically. Metalcutting operations include turning,
boring, threading, grooving, milling and drilling. The company
also makes wear-resistant parts for use in abrasive environments
and specialty applications.
Mining and Construction Products
- - - --------------------------------
Mining and construction cutting tools are fabricated from steel
parts and tipped with cemented carbide. Mining tools, used
primarily in the coal industry, include longwall shearer and
continuous miner drums, blocks, bits, pinning rods, augers and a
wide range of mining tool accessories. The company also supplies
compacts for mining, quarrying, water well drilling and oil and
gas exploration.
Construction cutting tools include carbide-tipped bits for
ditching, trenching and road planing; grader blades for site
preparation and routine roadbed control and snowplow blades and
shoes for winter road plowing.
Metallurgical Products
- - - ----------------------
The company makes proprietary metallurgical powders for use as a
basic material in many of its metalworking, mining and
construction products. In addition, the company produces a
variety of metallurgical powders and related materials for
specialized markets. These products include intermediate carbide
powders, hardfacing materials and matrix powders which are sold
to manufacturers of cemented carbide products, oil and gas
drilling equipment and diamond drill bits.
Recent Acquisition
- - - -------------------
In August 1993, the company acquired an 81 percent interest in
Hertel AG ("Hertel") for $43 million in cash and $55 million of
assumed debt. Hertel, based in Furth, Germany, is a manufacturer
and marketer of cemented carbide tools and tooling systems which
are similar to the metalcutting tools and tooling systems
produced by the company. The acquisition of Hertel has not
materially changed the product lines offered by the company.
While the company's primary market is the United States, however,
Hertel's primary market is Germany and Western Europe. The
acquisition of Hertel significantly increased the company's
market share in these markets. Hertel had consolidated sales of
approximately $201 million for the year ended December 31, 1992.
Non-U.S. Operations
- - - -------------------
The company's principal non-U.S. operations are conducted in
Western Europe and Canada. In addition, the company has joint
ventures in Japan, India and Italy, sales offices and sales
agents in Asia-Pacific and sales agents in eastern Europe and
other areas of the world. The company's non-U.S. operations are
subject to the usual risks of doing business in those countries,
including currency fluctuations and changes in social, political
and economic environments. In management's opinion, the
company's business is not materially dependent upon any one non-
U.S. location involving significant risk.
The company's foreign and export sales are presented on page 17
of the 1994 Annual Report to Shareholders, and such information
is incorporated herein by reference. Information pertaining to
the effects of foreign currency fluctuations is contained under
the caption "Foreign Currency Translation" in the notes to the
consolidated financial statements on page 24 of the 1994 Annual
Report to Shareholders, and such information is incorporated
herein by reference.
Marketing and Distribution
- - - --------------------------
The company's products are sold through three distinct channels:
direct sales, full-service supply and mail order catalogs. The
company's manufactured products are sold to end-users primarily
through a direct sales force. Service engineers and technicians
directly assist customers with product design, selection and
application. In addition, Kennametal-manufactured products,
together with a broad range of purchased products, are sold
through full-service supply programs and mail order catalogs.
The company also uses independent distributors and sales agents
in foreign markets and in selected manufacturing regions of the
United States.
The company's products are marketed under various trademarks and
tradenames, such as Kennametal*, the letter K combined with other
identifying letters and/or numbers, Block Style K*, Kendex*,
Kenloc*, Top Notch*, Erickson*, Kyon* and KM*. Purchased
products are sold under the manufacturer's name or a private
label.
Competition
- - - -----------
Kennametal is one of the world's leading producers of cemented
carbide tools and maintains a strong competitive position,
especially in the United States and Canada. There is active
competition in the sale of all products made by the company, with
approximately 30 companies engaged in the cemented carbide
business in the United States and many more outside the U.S.
Several competitors are divisions of larger corporations. In
addition, several hundred fabricators and toolmakers in the
United States, many of whom operate out of relatively small
shops, produce tools similar to those made by the company and buy
the cemented carbide components for such tools from cemented
carbide producers, including the company. Major domestic
competition exists from both U.S.-based and foreign-based
concerns. In addition, the company competes with thousands of
industrial supply companies in the United States.
The principal methods of competition in the company's business
are service, product innovation, technical product performance,
quality, availability and price. The company believes that its
competitive strength rests on its customer service capabilities
including its multiple distribution channels, its ability to
develop new and improved tools responsive to the needs of its
customers and the consistent high quality of its products. These
factors frequently permit the company to sell such products based
on the value added for the customer rather than strictly on
price.
Seasonality
- - - -----------
Seasonal variations do not have a major effect on the company's
business. However, to varying degrees, traditional summer
vacation shutdowns of metalworking customers' plants and holiday
shutdowns often affect the company's sales levels during the
first and second quarters of its fiscal year.
Backlog
- - - -------
The company's backlog of orders is generally not significant to
its operations. Approximately 80 percent of all orders are
filled from stock and the balance is generally filled within
short lead-times.
Research and Development
- - - ------------------------
The company is involved in research and development of new
products and processes. Research and development expenses
totaled $15.2 million, $14.7 million and $13.7 million in 1994,
1993 and 1992, respectively. Additionally, certain costs
associated with improving manufacturing processes are included in
cost of goods sold. The company holds a number of patents and
licenses which, in the aggregate, are not material to the
operation of the business.
The company has brought a number of new or improved products to
market during the past few years. These include metalcutting
inserts that incorporate innovative tool geometries for improved
chip control and productivity; improved stationary toolholders
and quick-change tooling systems including KM* tooling; KC9010*
and KC9025* multi-coated metalcutting inserts for turning
applications; and KCD25* diamond-coated metalcutting inserts.
Raw Materials and Supplies
- - - --------------------------
Major metallurgical raw materials consist of ore concentrates,
compounds and secondary materials containing tungsten, tantalum,
titanium, niobium and cobalt. Although these raw materials are
in relatively adequate supply, major sources are located abroad
and prices at times have been volatile. For these reasons, the
company exercises great care in the selection, purchase and
inventory availability of these materials. The company also
purchases substantial quantities of steel bars and forgings for
making toolholders and other tool parts and accessories.
Products purchased for resale are obtained from hundreds of
suppliers located in the U.S. and abroad.
Employees
- - - ---------
The company employed approximately 6,600 persons at June 30,
1994, of which 4,000 were located in the United States and 2,600
in other parts of the world, principally Europe and Canada.
Approximately 1,200 employees were represented by labor unions,
of which 130 were hourly-rated employees located at plants in the
Latrobe, Pennsylvania area. The remaining 1,070 employees
represented by labor unions were employed at eight plants located
outside of the United States. The company considers its labor
relations to be generally good.
Regulation
- - - ----------
Compliance with government laws and regulations pertaining to the
discharge of materials or pollutants into the environment or
otherwise relating to the protection of the environment, did not
have a material effect on the company's capital expenditures,
earnings or competitive position for the year covered by this
report, nor is such compliance expected to have a material effect
in the future.
- - - -------------------------------------
* Trademark owned by Kennametal Inc.
ITEM 2. PROPERTIES
Presented below is a summary of principal plants and other
significant real property used by the company and its majority-
owned subsidiaries as of June 30, 1994. Further information
pertaining to the company's corporate headquarters and principal
plants is presented under the caption "Locations, Subsidiaries
and Affiliates" on page 38 of the company's 1994 Annual Report to
Shareholders, and such information is incorporated herein by
reference.
United States
- - - -------------
The company owns and operates nine principal manufacturing
locations within the United States, including two each in North
Carolina, Ohio and Pennsylvania, and one each in Virginia,
Tennessee and Nevada. Refining and other metallurgical
operations occur at three of these locations (Fallon, Nevada;
Latrobe (Kingston), Pennsylvania and Henderson, North Carolina).
Marketing activities are supported by a network of warehouses and
customer service centers strategically located throughout the
United States. A significant portion of this space is leased.
The majority of the company's research and development efforts
are conducted in a corporate technology center located adjacent
to corporate headquarters in Latrobe, Pennsylvania. The new
facility, completed in fiscal 1992, consolidated the research and
development activities previously performed at six locations in
the Latrobe area.
Hertel Cutting Technologies Inc. leases office facilities in
Knoxville, Tennessee.
Canada
- - - ------
The company owns and operates two manufacturing plants in British
Columbia, including a metallurgical plant in Port Coquitlam,
British Columbia. Canadian marketing activities are supported by
a network of leased warehouses and customer service centers.
Europe
- - - ------
Kennametal Hertel G.m.b.H. owns office property in
Friedrichsdorf, Germany and warehousing facilities in
Neunkirchen, Germany.
Kennametal Hertel U.K., a branch of Kennametal Inc. (U.S.),
leases a facility in Kingswinford (Birmingham), England, which is
used for manufacturing, warehousing and offices.
Kennametal Hertel Belgium S.A. leases a facility in Herstal
(Liege), Belgium, which is used for offices and warehousing.
Kennametal Hertel France S.A. leases a facility in Ris Orangis
(Paris), France, which is used for warehousing, offices and a
limited amount of manufacturing.
Kennametal Hertel AG ("Hertel") owns manufacturing facilities in
Ebermannstadt, Mistelgau and Nabburg, Germany. In addition,
Hertel leases a manufacturing facility in Vohenstrauss, Germany
and warehousing and office facilities in Furth, Germany.
Nederlandse Hardmetaal Fabrieken B.V., a wholly-owned subsidiary
of Hertel owns property in Arnhem, Netherlands which is used for
manufacturing and offices.
Other Non-U.S. Locations
- - - ------------------------
Kennametal Australia Pty. Ltd. owns property in Sydney,
Australia, which is used for offices and warehousing.
Office and warehouse facilities are leased in Korea and
Singapore.
Present Condition of Properties
- - - -------------------------------
All significant properties are used in the company's dominant
business of powder metallurgy, tools, tooling systems and
supplies. The company's production capacity is adequate for its
present needs. The company believes that its properties have
been adequately maintained, are generally in good condition and
are suitable for the company's business as presently conducted.
ITEM 3. LEGAL PROCEEDINGS
(a) On August 13, 1993, the company was served with a
Notice of Violation dated August 9, 1993, issued by the United
States Environmental Protection Agency ("EPA"). The EPA alleges
violations concerning visible emissions from the company's
Fallon, Nevada facility. On October 6, 1993, the EPA issued an
interim compliance order with respect to this matter. On April
26, 1994, the company was served with a second Notice of
Violation dated April 19, 1994, which relates to the first Notice
of Violation. The EPA alleges in the second but related notice
the violation of a regulation concerning the allowable
particulate emission rate. The company anticipates that the EPA
will impose a penalty in excess of $100,000 with respect to these
violations; however, it is management's opinion, based on its
evaluation and discussions with outside counsel, that the
ultimate resolution of this matter will not have a material
adverse effect on the results of operations or financial position
of the company.
(b) At the annual meeting of shareholders of Hertel held on
December 6, 1993, two minority shareholders of Hertel (Dr.
Bernard Appel and Christa Gotz), one of whom purported to own or
control 2,500 shares and the other of whom purported to own 5
shares, filed protests with respect to the resolution adopted by
the Hertel shareholders which authorized and approved Hertel
entering into the Domination Contract with the company which
permits the company to direct Hertel's operations. The filing of
a protest is a prerequisite to a shareholder's filing a formal
complaint which must be filed within an applicable time period.
Only Mrs. Gotz filed a formal complaint within the applicable
time period. Her complaint was filed in the District Court at
Nuremberg, Bavaria, Germany, and sought to declare null and void
the shareholder resolution by arguing that it should not have
been considered at the annual meeting because the requisite prior
notice period for presenting a resolution to approve a domination
contract (30 days) had not expired, even though Hertel had
published notice of the proposed Domination Contract more than 30
days prior to the date of the annual meeting, due to Hertel's
having also subsequently published, within 30 days prior to the
date of the annual meeting, a clarification of certain terms of
the Domination Contract relating to payment of German taxes on
future minimum dividend payments to minority shareholders. The
complaint also asserted that the tax treatment specified in the
clarifications is improper under German law which renders the
resolution void. On July 14, 1994, the Court in Nuremberg issued
its decision. The Court ruled that the tax treatment of payments
to Hertel minority shareholders was not correct and voided the
clarification regarding the tax treatment of future dividends.
However, the Court refused to void the shareholder approval of
the Domination Contract which therefore remains in effect.
Neither party appealed this decision which has become final. It
is management's opinion that the change in tax treatment will not
have a material adverse effect on the results of operations or
financial position of the company.
Under German law, the company is required to offer to minority
shareholders to purchase their shares for a reasonable
compensation and to guarantee dividends during the term of the
Domination Contract (ending June 30, 1996, subject to annual
renewals) and to pay to Hertel any net cumulative losses it
sustains during the term and has liability to Hertel creditors as
if Hertel merged with the company. Apart from the complaint
challenging the validity of the resolution approving and
authorizing the Domination Contract, minority shareholders are
contesting the reasonableness of the purchase price for minority
shares and the minimum dividend on minority shares offered by the
company in connection with the Domination Contract. It is
management's opinion that Hertel has viable defenses to the
contest of the reasonableness of the minority share purchase
price and minimum dividend and, in any event, that the ultimate
outcome of this matter will not have a material adverse effect on
the results of operations or financial position of the company.
(c) There are no other material pending legal proceedings,
other than litigation incidental to the ordinary course of
business, to which the company or any of its subsidiaries is a
party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1994, there were no
matters submitted to a vote of security holders through the
solicitation of proxies or otherwise.
OFFICERS OF THE REGISTRANT
Name, Age, and Position Experience During Past Five Years (2)
- - - ----------------------- -------------------------------------
Robert L. McGeehan, 57 (1) President and Director since 1989. Chief
President Executive Officer since October 1, 1991.
Chief Executive Officer Vice President from 1984 to 1989. Director
Director of Metalworking Systems Division from 1988
to 1989.
David B. Arnold, 55 (1) Vice President since 1979. Director of
Vice President Kennametal International from 1983 to 1988.
Chief Technical Officer
James R. Breisinger, 44 Vice President since 1990. Named
Vice President Controller in 1994. Managing Director of
Controller Europe from 1991 to 1994. Controller from
1983 to 1991.
David T. Cofer, 49 (1) Vice President since 1986. Secretary and
Vice President General Counsel since 1982.
Secretary and General Counsel
Richard P. Gibson, 59 Assistant Treasurer since 1985. Director
Assistant Treasurer of Taxes since 1980.
Director of Taxes
Michael E. Godfrey, 61 Named Director of Financial Projects in
Director of Financial Projects 1994. Controller from 1991 to 1994.
Manager of Division Accounting from 1985
to 1991.
James W. Heaton, 62 Senior Vice President since 1990. Director
Senior Vice President Engineering for the Metalworking Systems
Director of Customer Satisfaction Division from 1978 to 1990.
Richard C. Hendricks, 55 (1) Vice President since 1982. General
Vice President Manager of the Mining and Metallurgical
Director of Corporate Business Division from 1990 to 1992 and General
Development Manager of Advanced Materials Division
from 1986 to 1990.
Timothy D. Hudson, 48 Elected Vice President in 1994. Director
Vice President of Human Resources since 1992. Corporate
Director of Human Resources Manager of Human Resources from 1978 to
1992.
H. Patrick Mahanes, Jr., 51 (1) Vice President since 1987. Director of
Vice President Metalworking Manufacturing from 1988 to
Director of Operations 1991. Director of Corporate Technology
from 1987 to 1988.
Richard V. Minns, 56 Vice President since 1990. Director of
Vice President Sales for the Metalworking Systems Division
Director of Metalworking Sales, since 1985.
North America
James E. Morrison, 43 Elected Vice President in 1994. Treasurer
Vice President since 1987.
Treasurer
Kevin G. Nowe, 42 Joined the company as Assistant General
Assistant Secretary Counsel in 1992 and was elected Assistant
Assistant General Counsel Secretary in 1993. Previously was Senior
Counsel and Corporate Secretary of Emro
Marketing Company in Enon, Ohio.
Richard J. Orwig, 53 (1) Vice President since 1987. Named Chief
Vice President Financial and Administrative Officer in
Chief Financial and Administrative 1994. Director of Administration from
Officer 1991 to 1994. Director of Human Resources
from 1989 to 1991.
Alan G. Ringler, 44 (1) Vice President since 1989. Director of
Vice President Metalworking, North America, from 1991 to
Director of Metalworking Systems 1992, Managing Director, Europe from 1990
Division to 1991 and Director of Marketing and
Customer Service for the Metalworking
Systems Division from 1989 to 1990.
Michael W. Ruprich, 38 (1) Elected Vice President and named President
Vice President, Kennametal Inc. of J&L America Inc. in 1994. General
President, J&L America Inc. Manager of J&L from 1993 to 1994. National
Sales and Marketing Manager from 1992 to
1993. General Manager-East Coast Region
from 1990 to 1992.
P. Mark Schiller, 46 Elected Vice President in 1992. Joined
Vice President the company in 1988 as Project Manager,
Director of Kennametal Distribution Logistics. Director of Materials
Services Management from 1988 to 1990. Prior to
1988, he held various systems development
and distribution positions at Fisher
Scientific Company.
Notes:
- - - -----
(1) Executive officer of the Registrant.
(2) Each officer has been elected by the Board of Directors to serve
until removed or until a successor is elected and qualified, and
has served continuously as an officer since first elected.
PART II
The information required under Items 5 through 8 is included in
the 1994 Annual Report to Shareholders and such information is
incorporated herein by reference as indicated by the following
table.
Incorporated by Reference to Captions
and Pages of the 1994 Annual Report
-------------------------------------
Item 5. Market for the Registrant's Note 5 to the Consolidated Financial
Capital Stock and Related Statements, Term Debt and Capital Leases
Stockholder Matters (with respect to dividend restrictions)
on page 26.
Quarterly Financial Data (Unaudited)
on page 32.
Item 6. Selected Financial Data Eleven Year Summary (information with
respect to the years 1990 to 1994)
on pages 34 and 35.
Item 7. Management's Discussion and Management's Discussion & Analysis
Analysis of Financial Condition on pages 16 to 19.
and Results of Operations
Item 8. Financial Statements and Item 14(a)1. herein and Quarterly
Supplementary Data Financial Data (Unaudited) on page 32.
Item 9. Changes in and Disagreements Not applicable.
on Accounting and Financial
Disclosure
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference is the information set forth in
Part I under the caption "Officers of the Registrant," and the
information set forth under the caption "Election of Directors"
in the company's definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days after June 30,
1994 (1994 Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information set forth
under the caption "Compensation of Executive Officers" and
certain information regarding directors' fees under the caption
"Board of Directors and Board Committees" in the 1994 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information set forth
under the caption "Ownership of Capital Stock by Directors,
Nominees and Executive Officers" with respect to the directors'
and officers' shareholdings and under the caption "Principal
Holders of Voting Securities" with respect to other beneficial
owners in the 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is certain information set forth
in the notes to the table under the caption "Election of
Directors" and under the caption "Certain Transactions" in the
1994 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K report.
1. Financial Statements
The consolidated balance sheets as of June 30, 1994 and
1993, the consolidated statements of income,
shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1994,and the
notes to consolidated financial statements, together with
the report thereon of Arthur Andersen & Co. dated
August 1, 1994, presented in the company's 1994 Annual
Report to Shareholders, are incorporated herein by
reference.
2. Financial Statement Schedules
The financial statement schedules shown below should be
read in conjunction with the financial statements
contained in the 1994 Annual Report to Shareholders.
Other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
Separate financial statements of the company are omitted
because the company is primarily an operating company and
all subsidiaries included in the consolidated financial
statements are wholly-owned, with the exception of
Kennametal Hertel AG, in which the company has an 82
percent interest.
Financial Statement Schedules:
Report of Independent Public Accountants
V - Property, Plant and Equipment for the Three Years Ended
June 30, 1994
VI - Accumulated Depreciation and Amortization of Property, Plant
and Equipment for the Three Years Ended June 30, 1994
VIII - Valuation and Qualifying Accounts for the Three Years Ended
June 30, 1994
IX - Short-Term Borrowings for the Three Years Ended June 30, 1994
X - Supplementary Income Statement Information for the Three Years
Ended June 30, 1994
3. Exhibits
(3) Articles of Incorporation and
Bylaws
3(i) Articles of Incorporation Exhibit 3.1 of the company's
September 30, 1993 Form 10-Q
is incorporated herein by
reference.
3(ii) Bylaws Exhibit 3.1 of the company's
March 31, 1991 Form 10-Q is
incorporated herein by
reference.
(4) Instruments Defining the Rights
of Security Holders, Including
Indentures
(4.1) Rights Agreement dated Exhibit 4 of the company's
October 25, 1990 Form 8-K dated October 23,
1990 is incorporated herein
by reference.
(4.2) Form of Note Agreement Exhibit 4.3 of the company's
with various creditors 1990 Form 10-K is incorporated
dated as of May 1, 1990 herein by reference.
Note: Copies of instruments
with respect to long-term
debt or capitalized lease
obligations which do not
exceed 10% of consolidated
assets will be furnished
to the Securities and
Exchange Commission upon
request.
(10) Material Contracts
(10.1)* Management Performance The discussion regarding
Bonus Plan the Management Performance
Bonus Plan under the caption
"Report of the Board of
Directors Committee on
Executive Compensation"
contained in the company's
1994 Proxy Statement is
incorporated herein by
reference.
(10.2)* Stock Option Plan Exhibit 10.3 of the company's
of 1982, as amended December 31, 1985 Form 10-Q
is incorporated herein by
reference.
(10.3)* Stock Option and Exhibit 10.1 of the company's
Incentive Plan of 1988 December 31, 1988 Form 10-Q
is incorporated herein by
reference.
(10.4)* Form of Stock Option Exhibit 10.2 of the company's
Agreement with respect December 31, 1988 Form 10-Q
to the Plan set forth is incorporated herein by
as Exhibit 10.3 hereof reference.
(10.5)* Officer employment Exhibit 10.3 of the company's
agreements, as amended 1988 Form 10-K is incorporated
and restated herein by reference.
(10.6)* Deferred Fee Plan for Exhibit 10.4 of the company's
Outside Directors 1988 Form 10-K is incorporated
herein by reference.
(10.7)* Executive Deferred Exhibit 10.5 of the company's
Compensation Trust 1988 Form 10-K is incorporated
Agreement herein by reference.
(10.8)* Form of Employment Exhibit 10.8 of the company's
Agreement with certain 1990 Form 10-K is incorporated
executive officers herein by reference.
(10.9)* Stock Option and Exhibit 10.1 of the company's
Incentive Plan of 1992 September 30, 1992 Form 10-Q
is incorporated herein by
reference.
(10.10)* Directors Stock Exhibit 10.2 of the company's
Incentive Plan September 30, 1992 Form 10-Q
is incorporated herein by
reference.
(10.11)* Severance Agreement Exhibit 10.11 of the company's
executed by and between 1993 Form 10-K is incorporated
Kennametal Inc. and herein by reference.
H. L. Dykema
(10.12) Credit Agreement dated Exhibit 10.12 of the company's
as of July 29, 1993 1993 Form 10-K is incorporated
by and among Kennametal herein by reference.
Inc. and Deutsche Bank
AG, Mellon Bank N.A. and
PNC Bank, National
Association
(10.13) Underwriting Agreement Exhibit 1.1 of the company's
(U.S. Version) March 31, 1994 Form 10-Q is
incorporated herein by
reference.
(10.14) Underwriting Agreement Exhibit 1.2 of the company's
(International Version) March 31, 1994 Form 10-Q is
incorporated herein by
reference.
(10.15) Amendment No. 1 dated Filed herewith.
as of October 26, 1993
to Credit Agreement
dated as of July 29,
1993 by and among
Kennametal Inc. and
Deutsche Bank AG, Mellon
Bank N.A. and PNC Bank,
National Association
(10.16) Amendment No. 2 dated Filed herewith.
as of June 15, 1994 to
Credit Agreement dated
as of July 29, 1993 by
and among Kennametal
Inc. and Deutsche Bank
AG, Mellon Bank N.A. and
PNC Bank, National
Association
(13) Annual Report to Shareholders The 1994 Annual Report is
included as an exhibit
hereto. With the exception
of the information
specifically incorporated by
reference in this Form 10-K,
the 1994 Annual Report is
not to be deemed filed as a
part hereof.
(21) Subsidiaries of the Registrant Filed herewith.
(23) Consent of Independent Public Filed herewith.
Accountants
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended June 30, 1994.
- - - ----------------
* Denotes management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
KENNAMETAL INC.
By RICHARD J. ORWIG
--------------------------
Richard J. Orwig
Vice President, Chief Financial
and Administrative Officer
Date: September 21, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
QUENTIN C. MCKENNA
- - - ------------------------
Quentin C. McKenna Chairman of the Board September 21, 1994
ROBERT L. MCGEEHAN
- - - ------------------------
Robert L. McGeehan President, Chief Executive September 21, 1994
Officer and Director
JAMES R. BREISINGER
- - - ------------------------
James R. Breisinger Vice President, Controller September 21, 1994
and Chief Accounting Officer
RICHARD J. ORWIG
- - - ------------------------
Richard J. Orwig Vice President, Chief September 21, 1994
Financial and Administrative
Officer
RICHARD C. ALBERDING
- - - ------------------------
Richard C. Alberding Director September 21, 1994
PETER B. BARTLETT
- - - ------------------------
Peter B. Bartlett Director September 21, 1994
ROBERT N. ESLYN
- - - ------------------------
Robert N. Eslyn Director September 21, 1994
WARREN H. HOLLINSHEAD
- - - -------------------------
Warren H. Hollinshead Director September 21, 1994
ALOYSIUS T. MCLAUGHLIN, JR.
- - - ----------------------------
Aloysius T. McLaughlin, Jr. Director September 21, 1994
WILLIAM R. NEWLIN
- - - ------------------------
William R. Newlin Director September 21, 1994
EUGENE R. YOST
- - - ------------------------
Eugene R. Yost Director September 21, 1994
LARRY YOST
- - - ------------------------
Larry Yost Director September 21, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of
Kennametal Inc.
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Kennametal Inc.'s
annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated August 1,
1994. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The schedules listed in
the index in Item 14(a)2 of this Form 10-K are the responsibility
of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not a part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
August 1, 1994
KENNAMETAL INC. SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED JUNE 30, 1994
- - - ------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Foreign Business
Balance at Currency Combinations, Balance at
Beginning of Additions Translation Transfers and End of
Classification Year At Cost Retirements Adjustments Adjustments Year
- - - -------------- ------------ --------- ----------- ------------ -------------- ----------
1994
- - - ----
Land $ 10,069 $ 639 $ 117 $ 30 $ (228)(a)(b) $ 10,393
Buildings and
improvements 104,882 1,047 8,009 3,800 26,843 (a)(b) 128,563
-------- ------- ------- ------ ------- --------
$114,951 $ 1,686 $ 8,126 $3,830 $26,615 $138,956
======== ======= ======= ====== ======= ========
Machinery and
equipment $205,720 $17,388 $14,801 $2,648 $23,203 (a)(b) $234,158
Furniture and
fixtures 80,385 8,085 6,479 (449) 11,615 (a)(b) 93,157
Automotive
equipment 1,372 154 199 29 25 (b) 1,381
-------- ------- ------- ------ ------- --------
$287,477 $25,627 $21,479 $2,228 $34,843 $328,696
======== ======= ======= ====== ======= ========
1993
- - - ----
Land $ 10,200 $ - $ 32 $ (99) $ - $ 10,069
Buildings and
improvements 96,140 11,351 965 (1,644) - 104,882
-------- ------- ------- ------- -------- --------
$106,340 $11,351 $ 997 $(1,743) $ - $114,951
======== ======= ======= ======= ======== ========
Machinery and
equipment $208,672 $ 6,674 $ 4,634 $(4,992) $ - $205,720
Furniture and
fixtures 82,628 4,812 5,670 (1,385) - 80,385
Automotive
equipment 1,867 262 695 (62) - 1,372
-------- ------- ------- ------- -------- --------
$293,167 $11,748 $10,999 $(6,439) $ - $287,477
======== ======= ======= ======= ======== ========
1992
- - - ----
Land $ 10,226 $ - $ 170 $ 95 $ 49 $ 10,200
Buildings and
improvements 70,572 13,134 2,606 1,702 13,338 96,140
-------- ------- ------- ------- -------- --------
$ 80,798 $13,134 $ 2,776 $ 1,797 $ 13,387 $106,340
======== ======= ======= ======= ======== ========
Machinery and
equipment $215,891 $19,690 $11,768 $ 6,078 $(21,219)(c) $208,672
Furniture and
fixtures 74,423 3,389 3,540 1,259 7,097 82,628
Automotive
equipment 4,848 342 3,306 (17) - 1,867
-------- ------- ------- ------- -------- --------
$295,162 $23,421 $18,614 $ 7,320 $(14,122) $293,167
======== ======= ======= ======= ======== ========
(a) Includes the reclassification of assets relating to the
Neunkirchen manufacturing facility which are held for sale.
(b) Includes the fair value of property, plant and equipment
acquired in connection with the purchase of an 81 percent
interest in Hertel AG.
(c) Represents transfer of assets relating to the completion of
the Corporate Technology Center.
KENNAMETAL INC. SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED JUNE 30, 1994
- - - --------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Additions Foreign
Balance at Charged to Currency Balance at
Beginning of Costs and Translation Transfers and End of
Classification Year Expenses Retirements Adjustments Adjustments Year
- - - -------------- ------------ ---------- ----------- ----------- ------------- ----------
1994
- - - ----
Buildings and
improvements $ 26,235 $ 3,993 $ 2,122 $ 122 $(2,805)(a) $ 25,423
Machinery and
equipment 127,995 25,668 14,032 (283) (125)(a) 139,223
Furniture and
fixtures 55,086 9,209 4,944 239 (548)(a) 59,042
Automotive
equipment 807 190 117 5 (19) 866
-------- ------- ------- ------- ------- --------
$210,123 $39,060 $21,215 $ 83 $(3,497) $224,554
======== ======= ======= ======= ======= ========
1993
- - - ----
Buildings and
improvements $ 23,570 $ 3,649 $ 354 $ (630) $ - $ 26,235
Machinery and
equipment 122,692 13,730 4,390 (4,037) - 127,995
Furniture and
fixtures 51,711 9,855 5,428 (1,052) - 55,086
Automotive
equipment 1,032 268 474 (19) - 807
-------- ------- ------- ------- -------- --------
$199,005 $27,502 $10,646 $(5,738) $ - $210,123
======== ======= ======= ======= ======== ========
1992
- - - ----
Buildings and
improvements $ 21,084 $ 2,989 $ 1,149 $ 646 $ - $ 23,570
Machinery and
equipment 115,185 13,859 10,746 4,394 - 122,692
Furniture and
fixtures 43,723 10,333 3,247 902 - 51,711
Automotive
equipment 2,138 668 1,774 - - 1,032
-------- ------- ------- ------- -------- --------
$182,130 $27,849 $16,916 $ 5,942 $ - $199,005
======== ======= ======= ======= ======== ========
(a) Includes the reclassification of assets relating to the
Neunkirchen manufacturing facility which are held for sale.
KENNAMETAL INC. SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1994
- - - ----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Additions
--------------------------------------------
Balance at Charged to Deductions Balance at
Beginning of Costs and Business from End of
Description Year Expenses Recoveries Combinations (a) Reserves (b) Year
- - - ----------- ------------ ----------- ---------- ---------------- ------------- ----------
1994
- - - ----
Allowance for doubtful
accounts $2,062 $ 608 $334 $6,682 $358 $9,328
====== ===== ==== ====== ==== ======
1993
- - - ----
Allowance for doubtful
accounts $2,054 $754 $247 $ - $993 $2,062
====== ==== ==== ====== ==== ======
1992
- - - ----
Allowance for doubtful
accounts $2,142 $605 $237 $ - $930 $2,054
====== ==== ==== ====== ==== ======
(a) Represents the allowance recognized in connection with the
purchase of an 81 percent interest in Hertel AG.
(b) Represents uncollected accounts charged against the allowance.
KENNAMETAL INC. SCHEDULE IX
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED JUNE 30, 1994
- - - ------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Maximum Average Weighted
Amount Amount Average
Category of Balance at Weighted Outstanding Outstanding Interest Rate
Short-Term End of Average During the During the During the
Borrowings Period Interest Rate Period Period (a) Period (a)
- - - ----------- ----------- ------------- ----------- ----------- -------------
1994
- - - ----
Amounts payable
to banks $52,753 6.0% $89,880 $51,231 5.9%
======= ==== ======= ======= ====
1993
- - - ----
Amounts payable
to banks $20,553 7.0% $39,327 $28,626 5.6%
======= ==== ======= ======= ====
1992
- - - ----
Amounts payable
to banks $28,490 5.5% $48,608 $35,512 6.0%
======= ==== ======= ======= ====
(a) Average borrowings are based on month-end balances.
The average interest rate is based on the month-end balances
and the month-end interest rates.
KENNAMETAL INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED JUNE 30, 1994
- - - -----------------------------------------------------------------------------
(Dollars in thousands)
Charged to Costs and Expenses
-----------------------------
1994 1993 1992
------- ------- -------
Maintenance and repairs $34,630 $25,161 $25,917
======= ======= =======
Rent expense $11,522 $ 8,545 $ 9,666
======= ======= =======
Advertising costs $ 7,671 $ 6,752 $ 6,127
======= ======= =======
EXHIBIT INDEX
Exhibit
No. Reference
- - - ------- ------------------------------------
3.1 Articles of Incorporation Exhibit 3.1 of the company's
September 30, 1993 Form 10-Q is
incorporated herein by reference.
3.2 Bylaws Exhibit 3.1 of the company's
March 31, 1991 Form 10-Q is
incorporated herein by reference.
4.1 Rights Agreement dated Exhibit 4 of the company's
October 25, 1990 Form 8-K dated October 23,
1990 is incorporated herein
by reference.
4.2 Form of Note Agreement with Exhibit 4.3 of the company's 1990
various creditors dated as Form 10-K is incorporated herein
of May 1, 1990 by reference.
10.1 Management Performance The discussion regarding the
Bonus Plan Management Performance Bonus Plan
under the caption "Report of the
Board of Directors Committee on
Executive Compensation" contained in
the company's 1994 Proxy Statement is
incorporated herein by reference.
10.2 Stock Option Plan of 1982, Exhibit 10.3 of the company's
as amended December 31, 1985 Form 10-Q is
incorporated herein by reference.
10.3 Stock Option and Exhibit 10.1 of the company's
Incentive Plan of 1988 December 31, 1988 Form 10-Q is
incorporated herein by reference.
10.4 Form of Stock Option Exhibit 10.2 of the company's
Agreement with respect to December 31, 1988 Form 10-Q is
the Plan set forth as incorporated herein by reference.
Exhibit 10.3 hereof
10.5 Officer employment agreements, Exhibit 10.3 of the company's 1988
as amended and restated Form 10-K is incorporated herein by
reference.
10.6 Deferred Fee Plan for Exhibit 10.4 of the company's 1988
Outside Directors Form 10-K is incorporated herein by
reference.
10.7 Executive Deferred Exhibit 10.5 of the company's 1988
Compensation Trust Form 10-K is incorporated herein by
Agreement reference.
10.8 Form of Employment Agreement Exhibit 10.8 of the company's 1990
with certain executive officers Form 10-K is incorporated herein by
reference.
10.9 Stock Option and Exhibit 10.1 of the company's
Incentive Plan of 1992 September 30, 1992 Form 10-Q is
incorporated herein by reference.
10.10 Directors Stock Incentive Plan Exhibit 10.2 of the company's
September 30, 1992 Form 10-Q is
incorporated herein by reference.
10.11 Severance Agreement executed Exhibit 10.11 of the company's 1993
by and between Kennametal Inc. Form 10-K is incorporated herein by
and H.L. Dykema reference.
10.12 Credit Agreement dated as of Exhibit 10.12 of the company's 1993
July 29, 1993 by and among Form 10-K is incorporated herein by
Kennametal Inc. and Deutsche reference.
Bank AG, Mellon Bank N.A. and
PNC Bank, National Association
10.13 Underwriting Agreement Exhibit 1.1 of the company's
(U.S. Version) March 31, 1994 Form 10-Q is
incorporated herein by reference.
10.14 Underwriting Agreement Exhibit 1.2 of the company's
(International Version) March 31, 1994 Form 10-Q is
incorporated herein by reference.
10.15 Amendment No. 1 dated as of Filed herewith.
October 26, 1993 to Credit
Agreement dated as of
July 29, 1993 by and among
Kennametal Inc. and Deutsche
Bank AG, Mellon Bank N.A. and
PNC Bank, National Association
10.16 Amendment No. 2 dated as of Filed herewith.
June 15, 1994 to Credit
Agreement dated as of
July 29, 1993 by and among
Kennametal Inc. and Deutsche
Bank AG, Mellon Bank N.A. and
PNC Bank, National Association
13 Annual Report to Shareholders Filed herewith.
21 Subsidiaries of the Registrant Filed herewith.
23 Consent of Independent Public Filed herewith.
Accountants