<PAGE> 1
================================================================================
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
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.)
WORLD HEADQUARTERS
1600 TECHNOLOGY WAY
P. O. BOX 231
LATROBE, PENNSYLVANIA 15650-0231
(Address of principal executive offices)
Registrant's telephone number, including area code: 724-539-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1.25 New York Stock Exchange
per share New York Stock Exchange
Preferred Stock Purchase Rights
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 September 5, 2000, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant, estimated solely for the
purposes of this Form 10-K, was approximately $609,200,000. 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 Common Stock have been deemed affiliates.
As of September 5, 2000, there were 30,782,894 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2000 Annual Report to Shareowners are incorporated by reference
into Parts I, II and IV.
Portions of the Proxy Statement for the 2000 Annual Meeting of Shareowners are
incorporated by reference into Parts III and IV.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Item No. Page
-------- ----
PART I
1. Business......................................................... 1
2. Properties....................................................... 7
3. Legal Proceedings................................................ 8
4. Submission of Matters to a Vote of Security Holders.............. 9
Officers of the Registrant....................................... 10
PART II
5. Market for the Registrant's Common Stock and Related Shareowner
Matters......................................................... 12
6. Selected Financial Data......................................... 12
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 12
7a. Quantitative and Qualitative Disclosure About Market Risk....... 12
8. Financial Statements and Supplementary Data..................... 12
9. Changes in and Disagreements on Accounting and Financial
Disclosure...................................................... 12
PART III
10. Directors and Executive Officers of the Registrant.............. 13
11. Executive Compensation.......................................... 13
12. Security Ownership of Certain Beneficial Owners and Management.. 13
13. Certain Relationships and Related Transactions.................. 13
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K............................................................ 14
<PAGE> 3
PART I
ITEM 1. BUSINESS
OVERVIEW
Kennametal Inc. was incorporated in Pennsylvania in 1943. Kennametal Inc.
(Kennametal or the company) is a global leader engaged in the manufacture,
purchase and distribution of a broad range of tools, tooling systems, and
solutions to the metalworking, mining, oil and energy industries, and
wear-resistant parts for a wide range of industries. Unless otherwise specified,
any reference to a "year" is to a fiscal year ended June 30.
Kennametal specializes in developing and manufacturing metalworking tools and
wear-resistant parts using a specialized type of powder metallurgy. Kennametal's
metalworking tools are made of cemented tungsten carbides, ceramics, cermets,
high-speed steel and other hard materials. Kennametal also manufactures and
markets a complete line of toolholders, toolholding systems and rotary cutting
tools by machining and fabricating steel bars and other metal alloys. The
company, through its 83 percent-owned subsidiary JLK Direct Distribution Inc.
(JLK), also is one of the largest suppliers of metalworking consumables and
related products in the United States. Kennametal also manufactures tungsten
carbide products used in engineered applications, mining and highway
construction, and other similar applications, including circuit board drills,
compacts and metallurgical powders.
During 1998, the company expanded its metalworking focus by acquiring Greenfield
Industries, Inc. (Greenfield), a leading worldwide manufacturer of consumable
cutting tools and related products used in a variety of industrial, electronics,
energy and construction, engineered and consumer markets. Greenfield
manufactures a complete line of high-speed steel and tungsten carbide products,
including drills; endmills; taps and dies and fixed limit gages; products used
in oil and gas drilling; carbide drills, endmills and routers used to make
printed circuit boards for the electronics industry; and "made-to-order"
tungsten carbide parts for demanding wear applications such as plastics
processing, tool and die manufacturing and petroleum flow control. The company
also manufactures cutting tools, drill bits, saw blades and other tools for
builders, contractors, mechanics and "do-it-yourselfers."
This Form 10-K contains "forward-looking statements" as defined by Section 21E
of the Securities Exchange Act of 1934. Actual results may differ materially
from those expressed or implied in the forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited to,
the extent that the economic conditions in the United States and Europe, and to
a lesser extent, Asia Pacific are not sustained, risks associated with
integrating businesses, demands on management resources, risks associated with
international markets such as currency exchange rates, competition, and risks
associated with the implementation of restructuring actions and environmental
remediation. The company undertakes no obligation to publicly release any
revisions to forward-looking statements to reflect events or circumstances
occurring after the date hereof.
BUSINESS SEGMENT REVIEW
The company reports global business units consisting of Metalworking, Engineered
Products, Mining & Construction and JLK/Industrial Supply. Segment selection was
based upon internal organizational structure, the manner in which management
organizes segments for making operating decisions and assessing performance, the
availability of separate financial results, and materiality considerations. The
company's sales and operating income by segment are presented on pages 13
through 15 of the 2000 Annual Report to Shareowners, and such information is
incorporated herein by reference. Additional information about the company's
operations and assets by segment and geographic area is presented on pages 43
through 45 of the 2000 Annual Report to Shareowners, and such information is
incorporated herein by reference.
METALWORKING
In the metalworking segment, the company provides consumable metalcutting tools
and tooling systems to manufacturing companies in a wide range of industries
throughout the world. Metalcutting operations include turning, boring,
threading, grooving, milling and drilling. The company's tooling systems
consists of a steel toolholder and an indexable cutting tool such as an insert
or drill made from cemented tungsten carbides, ceramics, cermets, high-speed
steel and other hard materials. Other cutting tools include end mills, reamers
and taps. The company provides application support and simultaneous engineering
services. The company also manufactures cutting tools, drill bits, saw blades
and other tools for the consumer market which are marketed under private label
and other proprietary brands.
-1-
<PAGE> 4
During a metalworking operation, the toolholder is positioned in a machine tool
that provides the turning power. While the workpiece or toolholder is rapidly
rotating, the cutting tool insert or drill contacts the workpiece and cuts or
shapes the workpiece. The cutting tool insert or drill is consumed during use
and must be replaced periodically.
The company serves a wide variety of industries that cut and shape metal parts
including manufacturers of automobiles, trucks, aerospace components, farm
equipment, oil and gas drilling and processing equipment, railroad, marine and
power generation equipment, machinery, appliances, factory equipment and metal
components, as well as the job shops and maintenance operations. Products are
delivered to customers through a direct field sales force, distribution,
integrated supply programs, mail-order and e-commerce.
With a global marketing organization and operations worldwide, the company
believes it is the largest North American and the second largest global provider
of consumable metalcutting tools and supplies.
ENGINEERED PRODUCTS
This segment's principal business is the production and sale of cemented
tungsten carbide products used in engineered applications, including circuit
board drills, compacts, punches, dies molds, seal rings and a wide variety of
other parts. The company also provides application specific component design
services. These products have technical commonality to the company's core
metalworking products.
These products are used by manufacturers or in operations where extremes of
abrasion, corrosion or impact require combinations of hardness or other
toughness afforded by cemented tungsten carbides or other hard materials. These
products are sold through a direct field sales force and distribution. The
company believes that it is the largest independent supplier of oil field
compacts in the world. Compacts are the cutting edges of oil well drilling bits,
which are commonly referred to as "rock bits."
MINING & CONSTRUCTION
This segment's principal business is the production and sale of cemented
tungsten carbide products used in mining and highway construction and other
similar applications. These products also have technical commonality to the
company's core metalworking products. The company also sells metallurgical
powders to manufacturers of cemented tungsten carbide products.
These 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, conical bits, drills, pinning rods, augers and a
wide range of mining tool accessories. Highway 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. The company also provides on-site application
support services.
The company produces these products for mine operators and suppliers, highway
construction companies, municipal governments and manufacturers of mining
equipment. Products are distributed through a direct field sales force and
distribution. The company believes it is the world market leader in mining and
highway construction tooling.
JLK/INDUSTRIAL SUPPLY
This segment's operations include the distribution of industrial supply products
through JLK. JLK distributes a broad range of metalcutting tools, abrasives,
drills, machine tool accessories, precision measuring tools, gages, hand tools
and other supplies used in metalcutting operations. The majority of industrial
supplies distributed by JLK are purchased from other manufacturers, although the
product offering does include Kennametal-manufactured items.
The markets served include convenience-oriented users of metalcutting tools and
supplies and large commercially-oriented customers seeking a single source of
metalcutting supplies. Sales of metalworking consumable products are distributed
through mail-order catalogs, retail showrooms, integrated supply or Full Service
Supply (FSS) programs, a distributor-based direct field sales force and
e-commerce. The company markets to the needs of the small-and medium-sized
customers through its direct marketing catalog and showroom programs and serves
medium- and large-sized industrial manufacturers through FSS programs and
distributor-based direct field sales.
Through FSS programs, the industrial manufacturers engage JLK to carry out all
aspects of complex metalworking supply processes, including needs assessment,
cost analysis, procurement planning, supplier selection, "just-in-time"
-2-
<PAGE> 5
restocking of supplies and ongoing technical support. JLK also distributes
through mail-order catalogs to small- and medium-sized customers in the United
Kingdom and Germany.
INTERNATIONAL OPERATIONS
The company's principal international operations are conducted in Western
Europe, Canada, the Asia Pacific region, South Africa and Mexico. In addition,
the company has joint ventures in China, Poland and Russia, manufacturing and/or
distribution in Israel and South America, and sales agents and distributors in
Eastern Europe and other areas of the world.
The company's international 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 international
location involving significant risk.
The company's international assets and sales are presented on page 45 of the
2000 Annual Report to Shareowners, and such information is incorporated herein
by reference. Information pertaining to the effects of foreign currency
fluctuations is contained under the caption "Market Risk" in Management's
Discussion and Analysis on pages 22 and 23 of the 2000 Annual Report to
Shareowners and under the captions "Foreign Currency Translation" and
"Derivative Financial Instruments" in the notes to the consolidated financial
statements on page 31 of the 2000 Annual Report to Shareowners. Such information
is incorporated herein by reference.
MARKETING AND DISTRIBUTION
The company's manufactured products are sold primarily through the following
distinct sales channels: (i) a direct sales force; (ii) integrated supply and
FSS programs; (iii) retail showrooms; (iv) mail-order catalogs; (v) a network of
independent distributors and sales agents in the United States and certain
international markets; and (vi) the Internet. Service engineers and technicians
directly assist customers with product design, selection and application. In
addition, purchased products are sold through FSS programs, retail showrooms,
mail-order catalogs and the Internet.
The company's products are marketed under various trademarks and tradenames,
such as Kennametal*, Hertel*, the letter K combined with other identifying
letters and/or numbers*, Block Style K*, Kendex*, Kenloc*, KennaMAX*, Top
Notch*, Erickson*, Kyon*, KM*, Drill-Fix*, Fix-Perfect*, Disston*, Chicago
Latrobe*, Putnam*, Greenfield*, RTW* and Cleveland*. The company also sells
products to customers who resell such products under the customers' names or
private labels.
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 steel bars and
forgings for making toolholders, high-speed steel and other tool parts, rotary
cutting tools and accessories. Products purchased for use in manufacturing
processes and for resale are obtained from thousands of suppliers located in the
United States and abroad.
RESEARCH AND DEVELOPMENT
The company's product development efforts are focused on providing solutions to
customers' manufacturing problems and productivity requirements. The company has
implemented a program, ACE or Achieving a Competitive Edge, that provides
discipline and focus for the product development process. ACE speeds and
streamlines development into a series of actions and decision points, combining
effort and resources to produce new and enhanced products, faster. ACE assures a
strong link between customer needs and corporate strategy, and enables the
company to gain full benefit from its investment in new product development.
Research and development expenses totaled $19.2 million, $18.8 million and $20.4
million in 2000, 1999 and 1998, 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.
-------------------------------------------------------------
* Trademark owned by Kennametal Inc. or a subsidiary of Kennametal Inc.
-3-
<PAGE> 6
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 generally is not significant to its operations.
Approximately 90 percent of all orders are filled from stock, and the balance
generally is filled within short lead times.
COMPETITION
Kennametal is one of the world's leading producers of cemented carbide tools and
high-speed steel tools, and maintains a strong competitive position, especially
in North America and Europe. There is active competition in the sale of all
products made by the company, with approximately 30 companies engaged in the
cemented tungsten carbide business in the United States and many more outside
the United States. Several competitors are divisions of larger corporations. In
addition, several hundred fabricators and toolmakers, many of whom operate out
of relatively small shops, produce tools similar to those made by the company
and buy the cemented tungsten carbide components for such tools from cemented
tungsten carbide producers, including the company. Major competition exists from
both U.S.-based and international-based concerns. In addition, the company
competes with thousands of industrial supply distributors.
The principal elements of competition in the company's business are service,
product innovation, quality, availability and price. The company believes that
its competitive strength rests on its customer service capabilities, including
its multiple distribution channels, its global presence, its state-of-the-art
manufacturing capabilities, its ability to develop solutions to customer needs
through new and improved tools, 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 competitive prices.
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 or competitive position for the years covered by this
report, nor is such compliance expected to have a material effect in the future.
The company has been involved in various environmental cleanup and remediation
activities at several of its manufacturing facilities. In addition, the company
is currently named as a potentially responsible party (PRP) at several Superfund
sites in the United States. In the December 1999 quarter, the company recorded a
remediation reserve of $3.0 million with respect to its involvement in these
matters, which is recorded as a component of operating expense. This represents
management's best estimate of its undiscounted future obligation based on its
evaluations and discussions with outside counsel and independent consultants,
and the current facts and circumstances related to these matters. The company
recorded this liability in the December quarter because certain events occurred,
including sufficient progress made by the government and the PRPs in the
identification of other PRPs and review of potential remediation solutions, that
clarified the level of involvement in these matters by the company and its
relationship to other PRPs. This led the company to conclude that it was
probable that a liability had been incurred.
In addition to the amount currently reserved, the company may be subject to loss
contingencies related to these matters estimated to be up to an additional $3.3
million. The company believes that such undiscounted unreserved losses are
reasonably possible but are not currently considered to be probable of
occurrence. The reserved and unreserved liabilities may change substantially in
the near term due to factors such as the nature and extent of contamination,
changes in remedial requirements, technological changes, discovery of new
information, the financial strength of other PRPs and the identification of new
PRPs.
The company maintains a Corporate Environmental, Health and Safety (EH&S)
Department, as well as an EH&S Policy Committee, to ensure compliance with
environmental regulations and to monitor and oversee remediation activities. In
addition, the company has established an EH&S administrator at each of its
domestic manufacturing facilities. The company's financial management team
periodically meets with members of the Corporate EH&S Department and the
Corporate Legal Department to review and evaluate the status of environmental
projects and
-4-
<PAGE> 7
contingencies. On a quarterly basis, management establishes or adjusts financial
provisions and reserves for environmental contingencies in accordance with
Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies."
STOCK ISSUANCES
On March 20, 1998, the company sold 3.45 million shares of common stock
resulting in net proceeds of $171.4 million. The proceeds were used to reduce a
portion of the company's long-term debt.
On July 2, 1997, an initial public offering (IPO) of approximately 4.9 million
shares of Class A Common Stock of JLK was consummated at a price of $20.00 per
share. JLK operates the industrial supply operations consisting of the company's
wholly owned J&L America, Inc. subsidiary and its FSS programs. The net proceeds
from the offering were $90.4 million and represented the sale of approximately
20 percent of JLK's common stock. The net proceeds were used by JLK to repay
$20.0 million of indebtedness related to a dividend to the company and $20.0
million related to intercompany obligations to the company incurred in 1997. The
company used these proceeds to repay short-term debt. JLK used the remaining net
proceeds of $50.4 million from the offering during 1998 to make acquisitions.
The company's ownership in JLK increased to approximately 83 percent due to
treasury stock purchases made by JLK since the IPO.
ACQUISITIONS
In November 1997, the company completed the acquisition of Greenfield for $1.0
billion. The company acquired all of Greenfield's outstanding common stock for
$38.00 per share, and assumed outstanding debt and convertible securities of
$320.0 million. Greenfield is a manufacturer of consumable cutting tools and
related products used in a variety of industrial, electronics, energy and
construction, engineered and consumer markets. The acquisition of Greenfield
increased the company's market share in the high-speed rotary steel product
markets.
Additionally, the company also has made several other acquisitions in 1999 and
1998 to expand its product offering and distribution channels. All acquisitions
were accounted for using the purchase method of accounting.
The company will continue to evaluate new opportunities that allow for the
expansion of existing product lines into new market areas, either directly or
indirectly through joint ventures, where appropriate.
EMPLOYEES
The company employed approximately 13,200 persons at June 30, 2000, of which
approximately 8,800 were located in the United States and 4,400 in other parts
of the world, principally Europe and Asia Pacific. Approximately 2,600 employees
were represented by labor unions, of which approximately 800 were hourly-rated
employees located at five plants in the United States. The remaining 1,800
employees represented by labor unions were employed at twelve locations outside
of the United States. The company considers its labor relations to be generally
good.
CORPORATE DIRECTORY
The following is a summary of the company's consolidated subsidiaries and
affiliated companies as of June 30, 2000:
CONSOLIDATED SUBSIDIARIES (% OWNERSHIP, IF LESS THAN 100%)
Kennametal Hertel de Argentina S.A., Argentina
Kennametal Australia Pty. Ltd., Australia
Kennametal Foreign Sales Corporation, Barbados
Kennametal Hertel do Brasil Ltda., Brazil
Kennametal Ltd., Canada
Kennametal Hertel Chile Ltda., Chile
Kennametal (China) Limited, China
Kennametal (Shanghai) Ltd., China
Kennametal Hardpoint (Shanghai) Ltd., China (90%)
Shanxi-Kennametal Mining Cutting Systems Manufacturing
Company Limited, China (70%)
Xuzhou-Kennametal Mining Cutting Systems Manufacturing
Company Limited, China (70%)
-5-
<PAGE> 8
CONSOLIDATED SUBSIDIARIES (% OWNERSHIP, IF LESS THAN 100%) (CONTINUED)
Kennametal Hertel AG, Germany (96%)
Kennametal Hardpoint H.K. Ltd., Hong Kong (90%)
Kennametal Hertel Japan, Ltd., Japan
Kennametal Hertel (Malaysia) Sdn. Bhd., Malaysia
Kennametal de Mexico, S.A. de C.V., Mexico
Kennametal/Becker-Warkop Ltd., Poland (84%)
Kennametal Hertel (Singapore) Pte. Ltd., Singapore
Kennametal South Africa (Proprietary) Limited, South Africa
Kennametal Hertel Korea Ltd., South Korea
Kennametal Hardpoint (Taiwan) Inc., Taiwan (90%)
Kennametal Hertel Co., Ltd., Thailand (75%)
Adaptive Technologies Corp., United States
Circle Machine Company, United States
Greenfield Industries, Inc., United States
JLK Direct Distribution Inc., United States (83%)
Kennametal Financing II, United States
Kennametal PC Inc., United States
Kennametal Receivables Corporation, United States
Kennametal TC Inc., United States
CONSOLIDATED SUBSIDIARIES OF KENNAMETAL HERTEL AG (% OWNERSHIP, IF LESS THAN
100%)
Kennametal Hertel Belgium S.A., Belgium
Kennametal Hertel EDG Limited, England
Kennametal Hertel Limited, England
Kennametal Hertel France S.A., France
Kennametal Hertel G.m.b.H., Germany
Kennametal Hertel Korea G.m.b.H., Germany
Rubig G.m.b.H. & Co. K.G., Germany
Kennametal Hertel S.p.A., Italy (55%)
Kennametal Hertel Nederland B.V., Netherlands
Nederlandse Hardmetaal Fabrieken B.V., Netherlands
Kennametal Hertel Kesici Takimlar ve Sistemler Anonim Sirketi, Turkey (55%)
CONSOLIDATED SUBSIDIARIES OF JLK DIRECT DISTRIBUTION INC.
J&L America, Inc., United States
CONSOLIDATED SUBSIDIARIES OF J&L AMERICA, INC.
J&L Industrial Supply Ltd., Canada
J&L Industrial Supply U.K., England (branch)
J&L Werkzeuge und Industriebedarf G.m.b.H., Germany
Abrasive & Tool Specialties Company, United States
GRS Industrial Supply Company, United States
Production Tools Sales, Inc., United States
Strong Tool Co., United States
CONSOLIDATED SUBSIDIARIES OF GREENFIELD INDUSTRIES, INC.
Greenfield Industries, Incorporated Canada, Canada
Cirbo Limited, England
Kemmer Hartmetallwerkzeuge G.m.b.H., Germany
Kemmer Prazision G.m.b.H., Germany
Hanita Metal Works, Ltd., Israel
Kemmer-Cirbo S.r.L., Italy
Cleveland Twist Drill de Mexico, S.A. de C.V., Mexico
Greenfield Tools de Mexico, S.A. de C.V., Mexico
-6-
<PAGE> 9
CONSOLIDATED SUBSIDIARIES OF GREENFIELD INDUSTRIES, INC. (CONTINUED)
Herramientas Cleveland, S.A. de C.V., Mexico
Bassett Rotary Tool Company, United States
Carbidie Corporation, United States
Hanita Cutting Tools, Inc., United States
Kemmer International, Inc., United States
Rogers Tool Works, Inc., United States
South Deerfield Industrial, Inc., United States
TCM Europe, Inc., United States
AFFILIATED COMPANIES (% OWNERSHIP)
Kennametal Hertel G. Beisteiner G.m.b.H., Austria (26%)
ISIS Informatics Limited, England (20%)
Birla Kennametal Ltd., India (44%)
Kemmer Japan, Japan (29%)
Wilke Carbide B.V., Netherlands (50%)
PIGMA-Kennametal Joint Venture, Russia (49%)
Carbidie Asia Pacific Pte. Ltd., Singapore (40%)
Kenci, S.A., Spain (20%)
ITEM 2. PROPERTIES
The company's principal executive offices are located at 1600 Technology Way,
P.O. Box 231, Latrobe, Pennsylvania, 15650. Presented below is a summary of
principal manufacturing facilities used by the company.
Location Owned/Leased Principal Products
-------- ------------ ------------------
United States:
Bentonville, Arkansas Owned Carbide Round Tools
Pine Bluff, Arkansas Leased High Speed Steel Drills
Rogers, Arkansas Owned Carbide Products
Monrovia, California Leased Boring Bars
Placentia, California Leased Wear Parts
Evans, Georgia Owned High Speed Steel Drills
Chicago, Illinois Leased Circuit Board Drills
Elk Grove Village, Illinois Leased Fixed Limited Gages
Rockford, Illinois Owned Indexable Tooling
Monticello, Indiana Owned Carbide Round Tools
Framingham, Massachusetts Leased Fixed Limited Gages
Greenfield, Massachusetts Owned High Speed Taps
South Deerfield, Massachusetts Leased Consumer Products
Traverse City, Michigan Owned Ceramic Wear Parts
Troy, Michigan Leased Metalworking Toolholders
Fallon, Nevada Owned Metallurgical Powders
Asheboro, North Carolina Owned High Speed End Mills
Henderson, North Carolina Owned Metallurgical Powders
Roanoke Rapids, North Carolina Owned Metalworking Inserts
Orwell, Ohio Owned Metalworking Inserts
Solon, Ohio Owned Metalworking Toolholders
Bedford, Pennsylvania Owned Mining and Construction
Tools and Wear Parts
Irwin, Pennsylvania Owned Carbide Wear Parts
Latrobe, Pennsylvania Owned Metallurgical Powders
and Wear Parts
Hendersonville, Tennessee Leased Fixed Limited Gages
-7-
<PAGE> 10
Location Owned/Leased Principal Products
-------- ------------ ------------------
United States (continued):
Johnson City, Tennessee Owned Metalworking Inserts
Whitehouse, Tennessee Leased Fixed Limited Gages
Clemson, South Carolina Owned High Speed Steel Drills
Lyndonville, Vermont Leased High Speed Taps
Chilhowee, Virginia Owned Mining and Construction
Tools and Wear Parts
New Market, Virginia Owned Metalworking Toolholders
International:
Victoria, Canada Owned Wear Parts
Shanghai, China Owned Metalworking Inserts
Shanxi, China Owned Mining Tools
Xuzhou, China Owned Mining Tools
Bodmin, England Owned Circuit Board Drills and
Routers
Kingswinford, England Leased Metalworking Toolholders
Sheffield, England Leased High Speed Steel Drills, Taps
and End Mills
Bordeaux, France Leased Metalworking Cutting Tools
Ebermannstadt, Germany Owned Metalworking Inserts
Mistelgau, Germany Owned Metallurgical Powders,
Metalworking Inserts
and Wear Parts
Nabburg, Germany Owned Metalworking Toolholders
Schwabisch Gmund, Germany Leased Circuit Board Drills
Vohenstrauss, Germany Owned Metalworking Carbide Drills
Schlomi, Israel Owned High Speed Endmills
Milan, Italy Owned Metalworking Cutting Tools
Pachuca, Mexico Owned High Speed Steel Drills
Arnhem, Netherlands Owned Wear Products
The company also has a network of warehouses and customer service centers
located throughout North America, Western Europe, Asia, South America and
Australia, a significant portion of which are leased. The majority of the
company's research and development efforts are conducted in a corporate
technology center located adjacent to world headquarters in Latrobe,
Pennsylvania and in Furth, Germany.
All significant properties are used in the company's business of powder
metallurgy, tools, tooling systems and industrial supply. 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
In July 2000, the company, JLK and the JLK directors (including one former
director) were named as defendants in several putative class action lawsuits.
The lawsuits seek an injunction, rescission, damages, costs and attorney fees in
connection with the company's proposal to acquire the outstanding stock of JLK
not owned by the company. The company believes the actions lack merit and will
defend them vigorously. The amount of any ultimate exposure cannot be determined
with certainty at this time. Management believes that any losses derived from
the final outcome of these actions and proceedings will not be material in the
aggregate to the company's financial condition.
-8-
<PAGE> 11
Other than noted above, there are no 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 2000, there were no matters submitted to a vote of
security holders through the solicitation of proxies or otherwise.
-9-
<PAGE> 12
OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name, Age, and Position Experience During Past Five Years (2)
----------------------- -------------------------------------
<S> <C>
Markos I. Tambakeras, 49 (1) President and Chief Executive Officer since July 1,
President and Chief Executive Officer 1999. Formerly, employed by Honeywell Inc. as
Director President of Industrial Controls Business from 1997 to
1999 and President, Industrial Automation and Control
from 1995 to 1996.
William R. Newlin, 59 (1) Chairman of the Board since October 1996. Director
Chairman of the Board since 1982.
David B. Arnold, 61 (1) Vice President since 1979. Chief Technical Officer
Vice President since 1988.
Chief Technical Officer
James R. Breisinger, 50 (1) Vice President since 1990. Named Chief Operating
Vice President Officer, Advanced Materials Solutions Group in August
Chief Operating Officer, 2000. Chief Financial Officer from September 1998 to
Advanced Materials Solutions Group August 2000. Chief Operating Officer, Greenfield
Industries, Inc. from March through September 1998.
Corporate Controller from 1994 to 1998.
M. Rizwan Chand, 37 (1) Vice President since May 2000. Previously, Vice
Vice President President, Human Resources for Aetna International in
Human Resources 1999. Previously, with Mary Kay Inc. as Senior Vice
President, Global Human Resources from 1996 to 1999
and Vice President - International Human Resources
from 1995 to 1996.
David T. Cofer, 55 (1) Vice President since 1986. Secretary and General
Vice President Counsel since 1982.
Secretary and General Counsel
Stanley R. Duzy, Jr., 53 (1) Vice President since November 1999. Formerly, employed
Vice President by Honeywell Inc. as Vice President of Industrial
Business Development and Administration Controls Business from 1998 to 1999 and Vice President
and Controller, Asia Pacific from 1992 to 1997.
Derwin R. Gilbreath, 52 (1) Vice President since January 1997. Named Chief
Vice President, Operating Officer, Metalworking Solutions and Services
Chief Operating Officer, Group in August 2000. Chief Operating Officer,
Metalworking Solutions and Services Group Greenfield Industries Inc. from September 1998 to
August 2000. Director of Global Manufacturing from
1995 to 1998.
F. Nicholas Grasberger, III, 36 (1) Elected Vice President and Chief Financial Officer in
Vice President August 2000. Formerly, Corporate Treasurer, H.J. Heinz
Chief Financial Officer Company from 1997 to 2000 and General Manager of
Business Planning from 1994 to 1997.
Richard C. Hendricks, 61 (1) Vice President since 1982. Director of Corporate
Vice President Development since 1992.
Corporate Development
</TABLE>
-10-
<PAGE> 13
<TABLE>
<CAPTION>
Name, Age, and Position Experience During Past Five Years (2)
----------------------- -------------------------------------
<S> <C>
Brian E. Kelly, 37 Elected Assistant Treasurer and named Director of Tax
Assistant Treasurer in September 1998. Manager of Corporate Tax from 1996
Director of Tax to 1998. Formerly, Tax Consultant with Westinghouse
Electric Corporation from 1995 to 1996.
Lawrence J. Lanza, 51 Elected Assistant Treasurer and named Director of
Assistant Treasurer Treasury Services in April 1999. Previously, Director,
Director of Treasury Services Global Capital Markets for CBS Corporation, formerly
Westinghouse Electric Corporation, from 1972 to 1998.
H. Patrick Mahanes, Jr., 57 (1) Vice President since 1987. Named Executive Vice
Executive Vice President President, Global Strategic Initiatives in 2000. Chief
Global Strategic Initiatives Operating Officer from 1995 to August 2000.
James E. Morrison, 49 Vice President since 1994. Treasurer since 1987.
Vice President
Treasurer
Wayne D. Moser, 47 Vice President since 1998. General Manager, Mining &
Vice President Construction since 1997. Chief Financial Officer of
General Manager, Mining & Construction Kennametal Hertel AG from 1993 to 1997.
Ralph G. Niederst, 49 (1) Elected Vice President in May 2000. Formerly, Director
Vice President of Management Information Technology at Harsco
Chief Information Officer Corporation's Heckett Multiserv from 1995 to 2000.
Kevin G. Nowe, 48 Joined the company as Assistant General Counsel in 1992
Assistant Secretary and was elected Assistant Secretary in 1993.
Assistant General Counsel
Ajita G. Rajendra, 48 Elected Kennametal Vice President in 1998. General
Vice President Manager of Industrial Products Group since 1997. Vice
General Manager, Industrial Products Group President of Greenfield's Electronic Products Group
from 1996 to 1997. Previously, in various positions
with Corning, Inc. from 1978 to 1996.
P. Mark Schiller, 52 Vice President since 1992. Director of Kennametal
Vice President Distribution Services since 1990.
Director of Kennametal Distribution Services
Frank P. Simpkins, 37 (1) Named Corporate Controller and Chief Accounting Officer
Corporate Controller and Chief in October 1998. Manager, External Reporting and
Accounting Officer Investor Relations from 1995 to 1998.
A. David Tilstone, 46 (1) Vice President since July 1997. Named Director of
Vice President Global Marketing in April 1997. Director of Asia
Director of Global Marketing and Sales Pacific Operations from 1995 to 1997.
</TABLE>
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.
-11-
<PAGE> 14
PART II
The information required under Items 5 through 8 is included in the 2000 Annual
Report to Shareowners and such information is incorporated herein by reference
as indicated below.
ITEM 5. MARKET FOR THE REGISTRANT COMMON STOCK AND RELATED SHAREOWNER MATTERS
Incorporated by reference is the Quarterly Financial Information (Unaudited) set
forth on pages 45 and 46 and the information under Stock Issuances set forth
pages 32 and 33 of the 2000 Annual Report to Shareowners.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference is information with respect to the years 1996 to 2000
contained in the Eleven-Year Financial Highlights set forth on pages 48 and 49
of the 2000 Annual Report to Shareowners.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference is Management's Discussion & Analysis set forth on
pages 13 to 24 of the 2000 Annual Report to Shareowners.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Incorporated by reference is the Management's Discussion & Analysis set forth on
pages 22 and 23 and the information under Financial Instruments on pages 40 and
41 of the 2000 Annual Report to Shareowners.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference is Item 14(a) 1 of this Form 10K and the Quarterly
Financial Information (Unaudited) set forth on pages 45 and 46 of the 2000
Annual Report to Shareowners.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-12-
<PAGE> 15
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, 2000 ("2000 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 2000 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 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is certain information set forth in the notes
to the tables under the captions "Election of Directors" and "Compensation of
Executive Officers" in the 2000 Proxy Statement.
-13-
<PAGE> 16
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, 2000 and 1999, the
consolidated statements of income, shareowners' equity, and cash flows
for each of the three years in the period ended June 30, 2000 and the
notes to consolidated financial statements, together with the report
thereon of Arthur Andersen LLP dated July 24, 2000 (except with
respect to the matter discussed in Note 3, as to which the date is
September 1, 2000), presented in the company's 2000 Annual Report to
Shareowners, are incorporated herein by reference.
2. Financial Statement Schedule
The financial statement schedule shown below should be read in
conjunction with the consolidated financial statements contained in
the 2000 Annual Report to Shareowners. 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 significant
subsidiaries included in the consolidated financial statements are
wholly owned, with the exception of Kennametal Hertel AG, in which the
company has a 96 percent interest, and JLK Direct Distribution Inc.,
in which the company has an 83 percent interest.
Financial Statement Schedule: Page
---------------------------- ----
Report of Independent Public Accountants 20
Schedule II - Valuation and Qualifying Accounts for the
Three Years Ended June 30, 2000 21
3. Exhibits
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation, or Succession
(2.1) Agreement and Plan of merger by Exhibit (c)(1) of the company's Schedule
and among Kennametal Inc., 14D-1 (SEC file no. reference no. 1-5318;
Kennametal Acquisition Corp. docket entry date - October 17, 1997) is
(formerly, Palmer Acquisition incorporated herein by reference.
Corp.) and Greenfield Industries,
Inc. dated as of October 10, 1997
(3) Articles of Incorporation and Bylaws
(3.1) Amended and Restated Articles Exhibit 3.1 of the company's September 30,
of Incorporation as Amended 1994 Form 10-Q is incorporated herein
by reference.
(3.2) Bylaws Exhibit 3.1 of the company's March 31, 1991
Form 10-Q (SEC file no. reference 1-5318;
docket entry date - May 14, 1991) is
incorporated herein by reference.
</TABLE>
-14-
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(4) Instruments Defining the Rights of
Security Holders, Including Indentures
(4.1) Rights Agreement dated Exhibit 4 of the company's Form 8-K dated
October 25, 1990 October 23, 1990 (SEC file no. reference
1-5318; docket entry date - November 1,
1990) is incorporated herein by reference.
(10) Material Contracts
(10.1)* Prime Bonus Plan The discussion regarding the Prime Bonus
Plan under the caption "Report of the
Board of Directors Committee on
Executive Compensation" contained in the
company's 2000 Proxy Statement
is incorporated herein by reference.
(10.2)* Stock Option and Exhibit 10.1 of the company's December 31,
Incentive Plan of 1988 1988 Form 10-Q (SEC file no. reference
1-5318; docket entry date - February 9,
1989) is incorporated herein by reference.
(10.3)* Deferred Fee Plan Exhibit 10.4 of the company's June 30, 1988
for Outside Directors Form 10-K (SEC file no. reference 1-5318;
docket entry date - September 23, 1988)
is incorporated herein by reference.
(10.4)* Executive Deferred Exhibit 10.5 of the company's June 30, 1988
Compensation Trust Agreement Form 10-K (SEC file no. reference
1-5318; docket entry date -
September 23, 1988) is incorporated
herein by reference.
(10.5)* Directors Stock Incentive Exhibit 10.5 of the company's June 30, 1999
Plan, as amended Form 10-K is incorporated herein by reference.
(10.6)* Performance Bonus Stock Exhibit 10.6 of the company's June 30, 1999
Plan of 1995, as amended Form 10-K is incorporated herein by reference
(10.7)* Stock Option and Incentive Exhibit 10.14 of the company's September
Plan of 1996 30, 1996 Form 10-Q is incorporated herein
by reference.
(10.8)* Stock Option and Incentive Plan Exhibit 10.8 of the company's December 31,
of 1992, as amended 1996 Form 10-Q is incorporated herein by
reference.
(10.9)* Form of Employment Agreement with Filed herewith.
Named Executive Officers
(other than Mr. Tambakeras)
(10.10)* Supplemental Executive Exhibit 10.10 of the company's June 30, 1999
Retirement Plan, as amended Form 10-K is incorporated herein by reference.
</TABLE>
---------------------------------------------------------
* Denotes management contract or compensatory plan or arrangement.
-15-
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C>
(10.11) Credit Agreement with Mellon Bank, Exhibit 10.2 of the company's December 31,
N.A. and various creditors dated as of 1997 Form 10-Q is incorporated herein
November 17, 1997 by reference.
(10.12) Guaranty and Suretyship Agreement Exhibit 10.3 of the company's December 31,
with Mellon Bank, N.A. dated 1997 Form 10-Q is incorporated herein
November 17, 1997 by reference.
(10.13) Amendment to Credit Agreement with Exhibit 10.18 of the company's June 30,
Mellon Bank, N.A. and various creditors 1998 Form 10-K is incorporated herein
dated as of November 26, 1997 by reference.
(10.14) Amendment to Credit Agreement with Exhibit 10.19 of the company's June 30,
Mellon Bank, N.A. and various creditors 1998 Form 10-K is incorporated herein
dated as of December 19, 1997 by reference.
(10.15) Amendment to Credit Agreement with Exhibit 10.20 of the company's June 30,
Mellon Bank, N.A. and various creditors 1998 Form 10-K is incorporated herein
dated as of March 19, 1998 by reference.
(10.16) Amendment to Credit Agreement with Exhibit 10.1 of the company's December 31,
Mellon Bank, N.A. and various creditors 1998 Form 10-Q is incorporated herein
dated as of December 15, 1998 by reference.
(10.17) Amendment to Credit Agreement with Exhibit 10.1 of the company's March 31,
Mellon Bank, N.A. and various creditors 1999 Form 10-Q is incorporated herein
dated as of March 31, 1999 by reference.
(10.18)* Executive Employment Agreement Exhibit 10.1 of the company's June 11,
dated May 4, 1999 between Kennametal 1999 Form 8-K is incorporated herein
Inc. and Markos I. Tambakeras by reference.
(10.19)* Kennametal Inc. 1999 Stock Plan Exhibit 10.5 of the company's June 11,
1999 Form 8-K is incorporated herein
by reference.
(10.20) Amendment to Credit Agreement with Exhibit 10.1 of the company's September
Mellon Bank, N.A. and various creditors 30,1999 Form 10-Q is incorporated herein
dated as of October 1, 1999 by reference.
(10.21)* Kennametal Inc. Stock Option and Exhibit A of the company's 1999 Proxy
Incentive Plan of 1999 Statement is incorporated herein
by reference.
(10.22)* Amendment to Executive Employment Exhibit 10.1 of the company's March 31,
Agreement between Kennametal Inc. 2000 Form 10-Q is incorporated herein
and Markos I. Tambakeras dated by reference.
March 3, 2000
(10.23)* Employment Agreement dated January Filed herewith.
21, 2000 between JLK Direct Distribution
Inc. and Richard J. Orwig
</TABLE>
---------------------------------------------------------
* Denotes management contract or compensatory plan or arrangement.
-16-
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(10.24)* Severance Agreement dated May 2, 2000 Filed herewith.
with Richard J. Orwig
(13) Annual Report to Shareowners Portions of the 2000 Annual Report are
filed herewith.
(21) Subsidiaries of the Registrant Filed herewith.
(23) Consent of Independent Public Accountants Filed herewith.
(27) Financial Data Schedule Filed herewith.
</TABLE>
(b) Reports on Form 8-K.
A report on Form 8-K was filed on May 9, 2000 regarding the announcement
of the resignation of Mr. Richard J. Orwig as President and CEO of JLK
Direct Distribution Inc., an 83 percent-owned subsidiary of Kennametal
Inc.
A report on Form 8-K was filed on July 21, 2000 regarding the announcement
of a proposal by Kennametal Inc. to acquire the outstanding shares of JLK
Direct Distribution Inc., an 83 percent-owned subsidiary of Kennametal
Inc., that it does not already own for $6.70 per share in cash.
A report on Form 8-K was filed on July 25, 2000 regarding the
announcements that the Board of Directors adopted a new shareowner rights
plan to replace its existing plan which has been in effect since 1990,
that Robert L. McGeehan resigned as a member of the Board of Directors
effective July 24, 2000, and that Kennametal and all the directors of JLK
Direct Distribution Inc., an 83 percent-owned subsidiary of Kennametal
Inc., were named in civil action No. GD00-12565, filed in the Court of
Common Pleas in Allegheny County, Pennsylvania.
A report on Form 8-K was filed on September 11, 2000 regarding the
announcement that Kennametal Inc. and JLK Direct Distribution Inc., an 83
percent-owned subsidiary of Kennametal Inc., have entered into a
definitive merger agreement for Kennametal to acquire the outstanding
shares of JLK that Kennametal does not already own.
A report on Form 8-K was filed on September 12, 2000 regarding the
announcement that JLK Direct Distribution Inc., an 83 percent-owned
subsidiary of Kennametal Inc., expects to recognize special charges of $15
- $20 million associated with its business improvement plan.
-------------------------------------------------------
* Denotes management contract or compensatory plan or arrangement.
-17-
<PAGE> 20
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: /s/ Frank P. Simpkins
-----------------------------
Frank P. Simpkins
Corporate Controller and
Chief Accounting Officer
Date: September 22, 2000
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William R. Newlin
----------------------------- Chairman of the Board September 22, 2000
William R. Newlin
/s/ Markos I. Tambakeras
----------------------------- President, Chief Executive September 22, 2000
Markos I. Tambakeras Officer and Director
/s/ F. Nicholas Grasberger, III
----------------------------- Vice President and September 22, 2000
F. Nicholas Grasberger, III Chief Financial Officer
</TABLE>
-18-
<PAGE> 21
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard C. Alberding
----------------------------- Director September 22, 2000
Richard C. Alberding
/s/ Peter B. Bartlett
----------------------------- Director September 22, 2000
Peter B. Bartlett
/s/ A. Peter Held
----------------------------- Director September 22, 2000
A. Peter Held
/s/ Kathleen J. Hempel
----------------------------- Director September 22, 2000
Kathleen J. Hempel
/s/ Timothy S. Lucas
----------------------------- Director September 22, 2000
Timothy S. Lucas
/s/ Aloysius T. McLaughlin, Jr.
----------------------------- Director September 22, 2000
Aloysius T. McLaughlin, Jr.
/s/ Larry Yost
----------------------------- Director September 22, 2000
Larry Yost
</TABLE>
-19-
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareowners of
Kennametal Inc.
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in Kennametal
Inc.'s annual report to shareowners incorporated by reference in this Form 10-K,
and have issued our report thereon dated July 24, 2000. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index in Item 14-(a)2 of this Form 10-K is the
responsibility of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
-------------------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
July 24, 2000
-20-
<PAGE> 23
KENNAMETAL INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Additions
--------------------------------------
Balance at Charged to Deductions Balance at
Beginning of Costs and Other from End of
Description Year Expenses Recoveries Adjustments Reserves Year
----------- ------------ ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2000
Allowance for
doubtful accounts $15,269 $ 4,177 $ 596 $ (307)(a) $ 7,521(b) $12,214
======= ======= ===== ====== ======= =======
Restructuring and asset
impairment charges $ 3,567 $18,626 $ -- $ 595 (c) $15,223(d) $ 7,565
======= ======= ===== ====== ======= =======
1999
Allowance for
doubtful accounts $11,974 $ 8,230 $ 365 $ (398)(a) $ 4,902(b) $15,269
======= ======= ===== ====== ======= =======
Restructuring and asset
impairment charges $ -- $20,837 $ -- $ -- $17,270(d) $ 3,567
======= ======= ===== ====== ======= =======
1998
Allowance for
doubtful accounts $ 7,325 $ 2,453 $ 336 $5,061(a) $ 3,201(b) $11,974
======= ======= ===== ====== ======= =======
</TABLE>
(a) Represents foreign currency translation adjustment and reserves acquired
through business combinations.
(b) Represents uncollected accounts charged against the allowance.
(c) Represents adjustment for company receiving more value upon disposition of
property than initially anticipated.
(d) Represents asset write-downs, non-cash adjustments and cash expenditures
charged against the accrual.
-21-
