<PAGE> 1
================================================================================
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number: 1-5318
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
THE KENNAMETAL THRIFT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Kennametal Inc.
1600 Technology Way
P.O. Box 231
Latrobe, Pennsylvania 15650
================================================================================
<PAGE> 2
THE KENNAMETAL THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants...................................................................... 2
Financial Statements:
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997............................................................................... 3
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1998............................................................................. 4
Statement of Changes in Net Assets Available for Plan Benefits
Six months ended December 31, 1997....................................................................... 5
Statement of Changes in Net Assets Available for Plan Benefits
Year ended June 30, 1997................................................................................. 6
Notes to Financial Statements............................................................................ 7
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998........................................................................................ 12
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1998............................................................................. 14
Signatures.................................................................................................... 15
Exhibit 23 - Consent of Independent Public Accountants........................................................ 16
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Kennametal Inc.
and to the Kennametal Inc. ERISA Compliance Committee:
We have audited the accompanying statements of net assets available for plan
benefits of The Kennametal Thrift Plan (the Plan) as of December 31, 1998 and
1997, and the related statements of changes in net assets available for plan
benefits for the year ended December 31, 1998, the six months ended December 31,
1997 and the year ended June 30, 1997. These financial statements and the
schedules referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1998 and 1997, and the changes in net assets available for plan
benefits for the year ended December 31, 1998, the six months ended December 31,
1997 and the year ended June 30, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
and fund information have been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
June 22, 1999
2
<PAGE> 4
THE KENNAMETAL THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Receivables:
Participant Contributions $ 198,305 $ 203,191
Employer Contributions 76,217 71,690
------------ ------------
Total Receivables 274,522 274,881
------------ ------------
General Investments:
Putnam Mutual Funds 123,156,740 100,753,013
Common/Collective Trusts-Fixed Income Fund 58,786,939 62,641,682
Kennametal Inc. Common Stock 11,877,634 1,994,428
Participant Loans 3,913,407 2,489,562
------------ ------------
Total General Investments 197,734,720 167,878,685
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $198,009,242 $168,153,566
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
THE KENNAMETAL THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Putnam Mutual Funds
-----------------------------------------------------------
Asset
Primco Allocation Growth & New
Totals Fund Voyager Balanced Income Opportunities
------ ---- ------- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets at
December 31, 1997 $168,153,566 $62,641,682 $62,197,271 $12,409,934 $ 8,604,371 $ 9,432,393
Additions:
Participant
Contributions 16,114,687 1,314,120 4,104,167 1,132,183 2,274,363 3,719,560
Employer Contributions 5,261,948 431,937 1,356,318 360,326 699,193 1,218,910
Earnings on Investments
(includes interest
on loans) 11,075,033 3,733,483 4,599,925 444,946 1,092,510 622,937
Net Realized
Gains (Losses) 1,921,981 -- 2,228,749 87,193 (113,145) 194,216
Net Unrealized
Gains (Losses) 8,951,349 -- 6,243,312 868,935 485,549 2,224,377
Loan Repayments -- 87,026 251,969 54,287 108,128 193,884
Other 82,098 71,611 -- -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total Additions 43,407,096 5,638,177 18,784,440 2,947,870 4,546,598 8,173,884
------------ ----------- ----------- ----------- ----------- -----------
Deductions:
Benefit Payments (10,478,105) (6,284,609) (2,405,731) (337,829) (413,462) (341,939)
Loan Issues -- (825,836) (800,277) (119,078) (138,819) (278,421)
Loan Distributions (93,666) -- -- -- -- --
Employee Withdrawals (2,701,946) (914,138) (762,416) (143,608) (402,102) (265,932)
Administrative Fees (123,760) (101,812) (10,421) (2,195) (2,257) (3,497)
Forfeitures (71,611) (3,957) (35,589) (6,429) (4,578) (9,543)
Other (82,332) (82,328) -- -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total Deductions (13,551,420) (8,212,680) (4,014,434) (609,139) (961,218) (899,332)
------------ ----------- ----------- ----------- ----------- -----------
Net Transfers
Between Funds -- (1,280,240) (9,534,184) (1,906,891) 77,144 1,243,203
------------ ----------- ----------- ----------- ----------- -----------
Net Assets at
December 31, 1998 $198,009,242 $58,786,939 $67,433,093 $12,841,774 $12,266,895 $17,950,148
============ =========== =========== =========== =========== ===========
<CAPTION>
Putnam Mutual Funds
------------------------------------------
Asset Asset Kennametal
Allocation Allocation International Common Contributions Loan
Growth Conservative Growth Stock Receivable Fund
------ ------------ ------ ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Assets at
December 31, 1997 $2,548,786 $2,367,461 $3,192,797 $ 1,994,428 $274,881 $2,489,562
Additions:
Participant
Contributions 1,039,532 513,568 1,008,579 1,013,501 (4,886) --
Employer Contributions 347,187 178,843 319,690 345,017 4,527 --
Earnings on Investments
(includes interest
on loans) 119,275 157,411 161,224 143,322 -- --
Net Realized
Gains (Losses) (15,560) (35,444) (32,775) (391,253) -- --
Net Unrealized
Gains (Losses) 337,210 148,766 486,843 (1,843,643) -- --
Loan Repayments 53,420 27,490 57,526 73,190 -- (906,920)
Other -- -- -- 10,487 -- --
---------- ---------- ---------- ----------- -------- ----------
Total Additions 1,881,064 990,634 2,001,087 (649,379) (359) (906,920)
---------- ---------- ---------- ----------- -------- ----------
Deductions:
Benefit Payments (133,291) (322,612) (203,958) (34,674) -- --
Loan Issues (65,673) (40,236) (69,677) (106,762) -- 2,444,779
Loan Distributions -- -- -- -- -- (93,666)
Employee Withdrawals (47,733) (33,423) (48,313) (63,933) -- (20,348)
Administrative Fees (988) (434) (1,036) (1,120) -- --
Forfeitures (4,380) (919) (2,298) (3,918) -- --
Other -- -- -- (4) -- --
---------- ---------- ---------- ----------- -------- ----------
Total Deductions (252,065) (397,624) (325,282) (210,411) -- 2,330,765
---------- ---------- ---------- ----------- -------- ----------
Net Transfers
Between Funds (329,410) 849,469 137,913 10,742,996 -- --
---------- ---------- ---------- ----------- -------- ----------
Net Assets at
December 31, 1998 $3,848,375 $3,809,940 $5,006,515 $11,877,634 $274,522 $3,913,407
========== ========== ========== =========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 6
THE KENNAMETAL THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Putnam Mutual Funds
----------------------------------------------------------
Asset
Primco Allocation Growth & New
Totals Fund Voyager Balanced Income Opportunities
------ ---- ------- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets at
June 30, 1997 $158,198,838 $ 78,332,505 $57,532,476 $12,132,867 $2,547,112 $3,047,449
Additions:
Participant Contributions 8,362,297 891,866 2,122,804 641,551 1,092,154 2,006,612
Employer Contributions 2,424,093 231,229 705,351 203,155 344,642 622,067
Earnings on Investments
(includes interest
on loans) 8,584,842 2,109,053 3,717,980 972,553 1,036,397 222,321
Net Realized
Gains (Losses) 1,747,936 -- 1,446,404 222,603 (17,282) 61,092
Net Unrealized
Gains (Losses) 912,480 -- 2,218,132 (628,797) (671,467) 339,402
Loan Repayments -- 21,987 59,120 12,876 22,012 47,814
Other 67,166 65,438 181 387 -- 270
------------ ------------ ----------- ----------- ---------- ----------
Total Additions 22,098,814 3,319,573 10,269,972 1,424,328 1,806,456 3,299,578
------------ ------------ ----------- ----------- ---------- ----------
Deductions:
Benefit Payments (10,422,051) (5,011,661) (3,923,488) (720,923) (213,771) (284,915)
Loan Issues -- (719,481) (578,003) (134,069) (79,319) (119,572)
Loan Distributions (6,469) -- -- -- -- --
Employee Withdrawals (1,498,314) (865,541) (366,918) (50,446) (66,138) (82,816)
Administrative Fees (111,497) (96,749) (7,495) (1,703) (1,129) (1,509)
Forfeitures (105,755) (72,447) (19,169) (4,987) (1,342) (3,852)
------------ ------------ ----------- ----------- ---------- ----------
Total Deductions (12,144,086) (6,765,879) (4,895,073) (912,128) (361,699) (492,664)
------------ ------------ ----------- ----------- ---------- ----------
Net Transfers
Between Funds -- (12,244,517) (710,104) (235,133) 4,612,502 3,578,030
------------ ------------ ----------- ----------- ---------- ----------
Net Assets at
December 31, 1997 $168,153,566 $ 62,641,682 $62,197,271 $12,409,934 $8,604,371 $9,432,393
============ ============ =========== =========== ========== ==========
<CAPTION>
Putnam Mutual Funds
--------------------------------------------
Asset Asset Kennametal
Allocation Allocation International Common Contributions Loan
Growth Conservative Growth Stock Receivable Fund
------ ------------ ------ ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Assets at
June 30, 1997 $ 744,475 $ 739,612 $1,298,280 $ 285,172 $ 557,073 $ 981,817
Additions:
Participant Contributions 504,307 308,750 533,828 335,243 (74,818) --
Employer Contributions 164,823 95,308 150,773 114,119 (207,374) --
Earnings on Investments
(includes interest
on loans) 189,643 132,472 192,385 12,038 -- --
Net Realized
Gains (Losses) 3,743 5,059 (12,298) 38,615 -- --
Net Unrealized
Gains (Losses) (135,900) (100,648) (229,200) 120,958 -- --
Loan Repayments 10,408 5,892 14,932 7,113 -- (202,154)
Other 585 294 -- 11 -- --
---------- ---------- ---------- ---------- --------- ----------
Total Additions 737,609 447,127 650,420 628,097 (282,192) (202,154)
---------- ---------- ---------- ---------- --------- ----------
Deductions:
Benefit Payments (36,085) (50,990) (161,340) (18,878) -- --
Loan Issues (23,126) (17,931) (28,891) (18,476) -- 1,718,868
Loan Distributions -- -- -- -- -- (6,469)
Employee Withdrawals (14,098) (13,554) (18,962) (17,341) -- (2,500)
Administrative Fees (383) (258) (451) (1,820) -- --
Forfeitures (1,089) (110) (1,146) (1,613) -- --
---------- ---------- ---------- ---------- --------- ----------
Total Deductions (74,781) (82,843) (210,790) (58,128) -- 1,709,899
---------- ---------- ---------- ---------- --------- ----------
Net Transfers
Between Funds 1,141,483 1,263,565 1,454,887 1,139,287 -- --
---------- ---------- ---------- ---------- --------- ----------
Net Assets at
December 31, 1997 $2,548,786 $2,367,461 $3,192,797 $1,994,428 $ 274,881 $2,489,562
========== ========== ========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 7
THE KENNAMETAL THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Putnam Mutual Funds
---------------------------------------
Alliance Alliance Asset
Equity Balanced Primco Allocation Growth &
Totals Fund Fund Fund Voyager Balanced Income
------ ---- ---- ---- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets at
June 30, 1996 $134,650,201 $ 47,290,863 $ 9,573,308 $77,786,030 $ -- $ -- $ --
Additions:
Participant
Contributions 12,194,394 3,393,808 737,710 3,603,379 1,166,092 327,388 706,136
Employer Contributions 4,322,740 1,205,154 270,120 1,392,078 390,346 119,936 180,582
Earnings on Investments
(includes interest
on loans) 1,788,518 -- -- 1,669,606 -- 108,826 5,908
Net Realized Gains 9,052,496 4,847,699 811,054 3,073,961 268,869 39,523 1,265
Net Unrealized Gains 6,129,984 -- -- -- 5,029,097 750,884 63,087
Other 10,999 -- -- 10,999 -- -- --
Transfers From RSP 3,673,020 -- -- 3,673,020 -- -- --
------------ ------------ ----------- ----------- ----------- ----------- ----------
Total Additions 37,172,151 9,446,661 1,818,884 13,423,043 6,854,404 1,346,557 956,978
------------ ------------ ----------- ----------- ----------- ----------- ----------
Deductions:
Benefit Payments (12,534,412) (3,082,379) (545,508) (8,521,140) (324,307) (51,811) (2,592)
Loan Issues -- -- -- (501,990) (390,306) (52,439) (7,792)
Employee Withdrawals (920,691) -- -- (705,624) (152,110) (27,827) (6,131)
Administrative Fees (165,308) (20,058) (4,103) (134,035) (5,869) (1,130) (27)
Forfeitures (3,103) -- -- (2,215) (713) (14) (56)
------------ ------------ ----------- ----------- ----------- ----------- ----------
Total Deductions (13,623,514) (3,102,437) (549,611) (9,865,004) (873,305) (133,221) (16,598)
------------ ------------ ----------- ----------- ----------- ----------- ----------
Net Transfers
Between Funds -- (53,635,087) (10,842,581) (3,011,564) 51,551,377 10,919,531 1,606,732
------------ ------------ ----------- ----------- ----------- ----------- ----------
Net Assets at
June 30, 1997 $158,198,838 $ -- $ -- $78,332,505 $57,532,476 $12,132,867 $2,547,112
============ ============ =========== =========== =========== =========== ==========
<CAPTION>
Putnam Mutual Funds
--------------------------------------------------------
Asset Asset Kennametal
New Allocation Allocation International Common Contributions Loan
Opportunities Growth Conservative Growth Stock Receivable Fund
------------- ------ ------------ ------ ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets at
June 30, 1996 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Additions:
Participant
Contributions 1,004,640 297,042 154,829 224,424 168,381 410,565 --
Employer Contributions 340,145 89,385 55,484 74,481 58,521 146,508 --
Earnings on Investments
(includes interest
on loans) -- -- 3,395 -- 552 -- 231
Net Realized Gains 6,079 926 1,169 1,116 835 -- --
Net Unrealized Gains 178,470 29,764 10,145 41,476 27,061 -- --
Other -- -- -- -- -- -- --
Transfers From RSP -- -- -- -- -- -- --
---------- -------- -------- ---------- -------- -------- --------
Total Additions 1,529,334 417,117 225,022 341,497 255,350 557,073 231
---------- -------- -------- ---------- -------- -------- --------
Deductions:
Benefit Payments (1,792) (1,715) (2,464) (456) (248) -- --
Loan Issues (14,740) (3,791) (2,438) (4,723) (3,367) -- 981,586
Employee Withdrawals (13,847) (7,170) (2,742) (1,540) (3,700) -- --
Administrative Fees (41) (10) (6) (16) (13) -- --
Forfeitures -- (69) (36) -- -- -- --
---------- -------- -------- ---------- -------- -------- --------
Total Deductions (30,420) (12,755) (7,686) (6,735) (7,328) -- 981,586
---------- -------- -------- ---------- -------- -------- --------
Net Transfers
Between Funds 1,548,535 340,113 522,276 963,518 37,150 -- --
---------- -------- -------- ---------- -------- -------- --------
Net Assets at
June 30, 1997 $3,047,449 $744,475 $739,612 $1,298,280 $285,172 $557,073 $981,817
========== ======== ======== ========== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 8
THE KENNAMETAL THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997, AND JUNE 30, 1997
1. DESCRIPTION OF PLAN
The following general description of the Kennametal Thrift Plan (the Plan) is
provided for general information purposes only. Participants should refer to the
Plan document for complete information.
The Plan is a defined contribution employee benefit plan, established to
encourage investment and savings for certain salaried and hourly employees of
Kennametal Inc. and certain subsidiaries and to provide a method to supplement
their retirement income benefits. The Plan provides a vehicle for employee
savings with an added 401(k) tax-deferred feature. Kennametal Inc. is the Plan
sponsor.
CORPORATE ACTIONS - Effective March 1, 1997, the assets of the Kennametal Inc.
Retirement Savings Plan (RSP) were merged into the Plan. Effective January 1,
1998, the Plan year end was changed from a fiscal year end of June 30 to a
December 31 year end.
ADMINISTRATION OF THE PLAN - Putnam Fiduciary Trust Company serves as the
Trustee of the Plan. Prior to March 1, 1997, Kennametal Inc. served as Trustee
of the Plan.
Putnam Investments functions as the recordkeeper for the Plan. Prior to March 1,
1997, Benefit Services Corporation, a firm providing defined contribution
administration services, served as recordkeeper for the Plan.
PRIMCO Capital Management, Inc. (PRIMCO) serves as the investment manager for
the fixed income fund of the Plan. The Equitable Life Assurance Society of the
United States served as the investment manager and custodian for the Alliance
Equity Fund and Alliance Balanced Fund (the Alliance Funds) through February 28,
1997. Effective March 1, 1997, the investments held in the Alliance Funds were
transferred to certain mutual funds of Putnam Investments. Accordingly, Putnam
Fiduciary Trust Company was appointed the investment manager and the custodian.
ELIGIBILITY - All eligible employees are entitled to become active participants
of the Plan on the first day of the month coinciding with or following the
completion of ten (10) days of service. Under present federal income tax law,
employer contributions and all earnings of the Plan do not constitute taxable
income to the participants until withdrawn from the Plan by the participants.
VESTING - Employee contributions are fully vested. Employer matching
contributions are fully vested after the third anniversary of the participant's
employment date. Forfeitures of employer contributions as a result of
withdrawals, terminations, etc., reduce the amount of future contributions
required by the employer.
PARTICIPANT ACCOUNTS - A separate account is maintained for each participant in
the Plan, reflecting contributions, investments, investment gains and losses,
distributions, loans, withdrawals and transfers.
7
<PAGE> 9
CONTRIBUTIONS - The Plan allows participants to elect a contribution rate
(either before-tax, after-tax, or a combination of both) of 2% - 12% of the
employee's base salary. Employer contributions equal 50% of the participant
contribution up to a maximum of 3% of the participant's salary. Employer
contributions are made concurrently with participant contributions. The
participants can elect to have their contributions invested in the different
investment funds available under the Plan.
DISTRIBUTIONS - Distributions to participants due to disability, retirement,
hardship or death are payable in either a lump sum, periodic payments for a
period not to exceed ten (10) years, or through the purchase of an annuity at
the participant's election.
PARTICIPANT LOANS - Effective June 2, 1997, a participant may borrow up to the
lesser of $50,000 or 50% of his or her vested account balance, with a minimum
loan amount of $1,000. Loans are repayable through payroll deductions over a
period not to exceed five years. If the proceeds are used to acquire a
participant's principal residence, the repayment period shall be no more than 15
years. The interest rate is determined by the Plan Administrator based on
existing market conditions and is fixed over the life of the loan. The interest
rate at December 31, 1998 was 8.75%. There were no delinquent loans as of
December 31, 1998 and 1997, or June 30, 1997.
INVESTMENTS - Investment contracts placed by PRIMCO represented investment of
combined assets for both the RSP and the Plan until the merger of these plans as
of March 1, 1997.
Effective March 1, 1997, Kennametal Inc. common stock was added as an investment
option to the Plan.
A participant may direct contributions to any of the following investment
options:
PRIMCO Stable Value Fund - Investments of this fixed income fund consist of
traditional investment contracts issued by insurance companies, banks and other
financial institutions (or corporations), asset-backed investment contracts,
synthetic investment contracts and short-term investments.
Putnam Voyager Fund - This fund seeks aggressive capital appreciation by
investing in a combination of stocks of small companies expected to grow over
time as well as in stocks of larger, more established corporations.
Putnam Asset Allocation: Balanced Portfolio - For investors who want an
investment with moderate risk and the potential for moderate growth, this fund
seeks a balance between the relative stability of bonds and the fluctuation of
stocks, in efforts to reduce overall risk.
The Putnam Fund for Growth & Income - This fund seeks growth and income by
investing in attractively priced stocks of companies that offer long-term growth
potential while also providing income.
Putnam New Opportunities Fund - This fund seeks long-term capital appreciation
by investing primarily in common stocks of companies within certain emerging
industry groups that Putnam Management believes offer above-average potential
for growth.
8
<PAGE> 10
Putnam Asset Allocation: Growth Portfolio - For more aggressive investors who
will accept more risk in exchange for a higher growth potential, this fund seeks
diversification among different types of stocks, with some investments in bonds
and money market funds.
Putnam Asset Allocation: Conservative Portfolio - For investors who are willing
to assume a reduced potential for growth in exchange for less risk, this fund
seeks to reduce overall risk through substantial investments in investment-grade
bonds, with some investments in stocks to help stay ahead of inflation.
Putnam International Growth Fund - This fund seeks capital appreciation by
investing in a diversified portfolio of companies located outside the United
States.
Kennametal Common Stock Fund - This fund consists entirely of Kennametal Inc.
common stock, for investors who want to participate in the growth of Kennametal
Inc. as part owners of Kennametal Inc.
Effective March 1, 1997, the investments of the Alliance Funds were transferred
to two mutual funds, the Putnam Voyager Fund and the Putnam Asset Allocation:
Balanced Portfolio Fund. Investments of the Alliance Equity Fund consisted
solely of common stocks whereas the Alliance Balanced Fund's investments were a
combination of stocks, bonds, cash and convertible securities.
2. ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are maintained on the
accrual basis of accounting.
INVESTMENTS - Investment transactions are recorded on a trade date basis, and
revenues are recorded on an accrual basis of accounting. Investments in mutual
funds, Kennametal Inc. common stock and other short-term investments are stated
at fair value as measured by readily available market prices; benefit-responsive
investment contracts are valued at contract value. According to the provisions
of AICPA Statement of Position (SOP) 94-4, "Reporting of Investment Contracts
Held by Health and Welfare Benefit Plans and Defined-Contribution Pension
Plans," guaranteed investment contracts of defined contribution plans are
considered to be fully benefit-responsive. As a result, these contracts are
accounted for at contract value in the accompanying financial statements. PRIMCO
Capital Management, Inc. certified that all the investment contracts held in the
Fixed Income Fund are fully benefit-responsive. The difference between the
contract value and the fair value of all investment contracts was $1,342,443 and
$777,974 at December 31, 1998 and 1997, respectively. The crediting interest
rates on the contracts ranged from 4.38% to 7.55% at December 31, 1998, from
5.05% to 7.55% at December 31, 1997, and from 4.88% to 8.15% at June 30, 1997.
INVESTMENT INCOME - Interest and dividend income are recorded in the period
earned. Gains and losses on securities sold or redeemed are determined on the
basis of specific identification.
PLAN EXPENSES - Investment management, recordkeeping and other administrative
fees and expenses of the Plan are paid from assets and income of the Plan.
9
<PAGE> 11
REALIZED/UNREALIZED GAINS AND LOSSES - Realized gains and losses on investments
sold or redeemed and unrealized gains and losses are determined using the
average cost method based on the beginning market value.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires the plan administrator to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual
results may differ from these estimates.
3. INVESTMENTS EXCEEDING FIVE PERCENT OF NET ASSETS
The fair market values of individual investments that represent five percent or
more of the Plan's total plan assets as of December 31, 1998 and 1997, were as
follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Common/Collective Trusts - Fixed Income Fund $58,786,939 $62,641,682
Putnam Mutual Funds -
Voyager 67,433,093 62,197,271
New Opportunities 17,950,148 9,432,393
Asset Allocation - Balanced Portfolio 12,841,774 12,409,934
Growth & Income 12,266,895 8,604,371
Kennametal Inc. Common Stock 11,877,634 --
</TABLE>
4. COMMON TRUST ASSETS AND INCOME
The Plan's interest in the assets of the common trust is included in the
accompanying Statements of Net Assets Available for Plan Benefits. During the
plan year ended June 30, 1997, all of the assets of the RSP were merged into the
Plan. Accordingly, there were no assets held by the RSP as of December 31, 1998,
1997 or June 30, 1997.
Common trust income allocated to the participating plans for the year ended
December 31, 1998, the six months ended December 31, 1997, and the year ended
June 30, 1997, were as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Thrift Plan $3,733,483 $2,109,053 $4,866,795
Retirement Savings Plan (as of March 1, 1997) -- -- 140,343
---------- ---------- ----------
Total Earnings on Investments $3,733,483 $2,109,053 $5,007,138
========== ========== ==========
</TABLE>
10
<PAGE> 12
5. QUALIFICATION OF PLAN
The Plan has been determined by the Internal Revenue Service to be qualified
under the Internal Revenue Code. The Internal Revenue Service issued a favorable
determination on April 23, 1996. Plans that are qualified under regulations of
the Internal Revenue Service are not subject to federal income taxes.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, Kennametal Inc. has the right
to terminate the Plan at any time, subject to the provisions of the Employee
Retirement Income Security Act of 1974. In the event of Plan termination, the
accounts of all participants will become fully vested and non-forfeitable.
7. CONTRIBUTIONS RECEIVABLE
As of December 31, 1997, the Plan recorded contributions receivable from the
employer and the participants in the amount of $274,881. This amount is recorded
as an asset in the accompanying statements in accordance with generally accepted
accounting principles. However, this amount is not recorded as an asset in the
Plan's Form 5500 as the Trustee prepares this Form using the cash-basis method
of accounting.
8. BENEFIT PAYABLE
As of June 30, 1996, the Plan was liable for participant benefits due but unpaid
in the amount of $2,102,139. This amount is recorded as a liability in the
Plan's Form 5500; however, this amount is not recorded as a liability in the
accompanying Statements of Net Assets Available for Plan Benefits in accordance
with generally accepted accounting principles. It is included in the total
benefit payments in the accompanying Statements of Changes in Net Assets
Available for Plan Benefits for the year end June 30, 1997. As of December 31,
1998 and 1997, the Plan was not liable for participant benefits due but unpaid.
9. SUBSEQUENT EVENT
During fiscal 1997 and 1998, Kennametal Inc., through a majority-owned
subsidiary, acquired six companies, each sponsoring a defined contribution
employee benefit plan. On February 9, 1999, a resolution was unanimously
approved by the Kennametal Inc. ERISA Compliance Committee authorizing Putnam to
act as Trustee for the assets of these six plans when these plans are merged
into the Plan. These six plans will be merged into the Plan as soon as it is
practicable.
11
<PAGE> 13
THE KENNAMETAL THRIFT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Identity Current
of Issue Description of Investment Cost Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Security Backed Investments
---------------------------
Bankers Bankers Trust (Del) Basic, Contract No.: 97-883THT
Trust Maturity: 12/30/01, Yield: 7.05% $ 6,172,919 $ 6,503,169
Transamerica Transamerica Life & Annuity, Contract No.: 76543
Life Maturity: 11/15/04, Yield: 5.97% 5,773,840 6,020,426
Allstate Life Allstate Life Ins. Co., Contract No.: 31007
Maturity: 7/1/01, Yield: 5.99% 2,397,724 2,443,646
Allstate Life Ins. Co., Contract No.: 77077
Maturity: 12/30/01, Yield: 4.38% 3,025,831 3,002,970
John Hancock John Hancock Mutual Life, Contract No.: 7562
Maturity: 5/1/07, Yield: 6.35% 4,731,498 4,928,354
Mass Mutual Mass Mutual Life Ins. Co., Contract No.: 10480
Maturity: 7/5/02, Yield: 6.45% 3,102,086 3,136,562
Metropolitan Metropolitan Life Ins. Co., Contract No.: 13708
Life Maturity: 1/2/01, Yield: 6.20% 2,375,150 2,405,386
Metropolitan Life Ins. Co., Contract No.: 24850
Maturity: 12/30/01, Yield: 6.50% 5,322,293 5,458,743
Monumental Monumental Life Ins. Co., Contract No.: 00028TR
Life Maturity: 3/30/07, Yield: 6.13% 8,964,905 9,211,650
State Street State Street Bank & Trust, Contract No.: 98206
Bank & Trust Maturity: 4/8/02, Yield: 5.23% 2,402,078 2,416,994
CDC Caisse des Depots, Contract No.: 220-01
Maturity: 12/31/99, Yield: 6.19% 432,142 436,575
----------- -----------
Total Security Backed Investments 44,700,466 45,964,475
----------- -----------
General Account Investments
---------------------------
Canada Life Canada Life Assurance Co., Contract No.: 45798
Maturity: 1/4/99, Yield: 5.36% 1,401,989 1,402,115
Metropolitan Metropolitan Life Ins. Co., Contract No.: 13678
Life Maturity: 2/4/00, Yield: 5.55% 3,201,839 3,206,390
Metropolitan Life Ins. Co., Contract No.: 13852
Maturity: 10/1/99, Yield: 7.55% 2,721,834 2,765,240
New York New York Life Ins. Co., Contract No.: 30334
Life Maturity: 4/3/00, Yield: 6.45% 3,074,219 3,101,830
----------- -----------
Total General Account Investments 10,399,881 10,475,575
----------- -----------
</TABLE>
12
<PAGE> 14
THE KENNAMETAL THRIFT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Identity Current
of Issue Description of Investment Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash & Equivalents
------------------
*Putnam Putnam Fiduciary Trust, Contract No.: 522619
Maturity: 1/1/99, Yield: 5.32% $ 3,689,332 $ 3,689,332
----------- ------------
Putnam Mutual Funds
-------------------
*Putnam Putnam Voyager Fund 53,942,552 67,433,093
*Putnam Putnam Asset Allocation - Balanced Portfolio 11,850,753 12,841,774
*Putnam The Putnam Fund for Growth & Income 12,389,725 12,266,895
*Putnam Putnam New Opportunities Fund 15,207,899 17,950,148
*Putnam Putnam Asset Allocation - Growth Portfolio 3,617,301 3,848,375
*Putnam Putnam Asset Allocation - Conservative Portfolio 3,751,678 3,809,940
*Putnam Putnam International Growth Fund 4,707,395 5,006,515
------------ ------------
Total Putnam Mutual Funds 105,467,303 123,156,740
------------ ------------
Kennametal Inc. Common Stock
----------------------------
*Putnam Kennametal Inc. Common Stock 13,573,250 11,877,634
------------ ------------
Loans to Participants
---------------------
*Participants Loans to Participants, Maturities: From January 1999 to December
2013, Yield: 9.32% -- 3,913,407
------------ ------------
Total Investments $177,830,232 $199,077,163
============ ============
</TABLE>
* Party-in-interest.
13
<PAGE> 15
THE KENNAMETAL THRIFT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS (a)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Identity of Current Value
Party Purchase Selling Cost of Asset on Net
Involved Description of Investment Price Price of Asset Transaction Date Gain/(Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*Putnam The Putnam Fund for Growth and Income $ 8,726,912 $ -- $ 8,726,912 $ -- $ --
*Putnam Putnam Voyager Fund 18,168,662 21,404,901 18,168,662 19,176,171 2,228,730
*Putnam PRIMCO Stable Value Fund 22,826,178 26,680,924 22,826,178 26,680,920 4
*Putnam Putnam New Opportunities Fund 11,470,473 -- 11,470,473 -- --
*Putnam Kennametal Inc. Common Stock 14,721,152 17,324,202 14,721,152 17,715,429 (391,227)
</TABLE>
(a) Represents transactions or a series of transactions in excess of 5% of the
fair value of the Plan assets at the beginning of the year.
* Party-in-interest.
14
<PAGE> 16
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the plan administrator of the Kennametal Thrift Plan has duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized,
in Unity Township, Westmoreland County, Commonwealth of Pennsylvania.
KENNAMETAL THRIFT PLAN
Date: June 28, 1999 By: /s/ AMY DOVERSPIKE
------------------
Amy Doverspike
Plan Administrator
15
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports, included in this Form 11-K, into the Company's
previously filed Registration Statement on Form S-8, Registration No. 333-18423,
relating to the Kennametal Thrift Plan.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
June 23, 1999
16
