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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, 2002
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:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ----------------------------
Capital Stock, par value $1.25 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of September 3, 2002, the aggregate market value of the registrant's Capital
Stock held by non-affiliates of the registrant, estimated solely for the
purposes of this Form 10-K, was approximately $945,130,000. 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 Capital Stock have been deemed affiliates.
As of September 3, 2002, there were 35,073,626 shares of the Registrant's
Capital Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2002 Annual Report to Shareowners are incorporated by reference
into Parts I, II and IV.
Portions of the Proxy Statement for the 2002 Annual Meeting of Shareowners are
incorporated by reference into Parts III and IV.
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TABLE OF CONTENTS
Item No. Page
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PART I
1. Business...................................................................................... 1
2. Properties.................................................................................... 8
3. Legal Proceedings............................................................................. 9
4. Submission of Matters to a Vote of Security Holders........................................... 9
Executive Officers of the Registrant.......................................................... 10
PART II
5. Market for the Registrant's Common Equity 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 Disclosures About Market Risk.................................... 12
8. Financial Statements and Supplementary Data................................................... 12
9. Changes in and Disagreements with Accountants 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
and Related Shareowner Matters............................................................. 13
13. Certain Relationships and Related Transactions................................................ 13
14. Controls and Procedures....................................................................... 13
PART IV
15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................. 14
Signatures.................................................................................... 18
Certifications................................................................................ 20
PART I
ITEM 1. BUSINESS
OVERVIEW
Kennametal Inc. was incorporated in Pennsylvania in 1943. We are a leading
global manufacturer, marketer and distributor of a broad range of cutting tools,
tooling systems, supplies and technical services, as well as wear-resistant
parts. We believe that our reputation for manufacturing excellence and
technological expertise and innovation in our principal products has helped us
achieve a leading market presence in our primary markets. We believe we are the
second largest global provider of metalcutting tools and tooling systems. End
users of our products include metalworking manufacturers and suppliers in the
aerospace, automotive, machine tool and farm machinery industries, as well as
manufacturers and suppliers in the highway construction, coal mining, quarrying
and oil and gas exploration industries.
We specialize in developing and manufacturing metalworking tools and
wear-resistant parts using a specialized type of powder metallurgy. Our
metalworking tools are made of cemented tungsten carbides, ceramics, cermets,
high-speed steel and other hard materials. We also manufacture and market a
complete line of toolholders, toolholding systems and rotary cutting tools by
machining and fabricating steel bars and other metal alloys. We are one of the
largest suppliers of metalworking consumables and related products in the United
States and Europe. We also manufacture tungsten carbide products used in
engineered applications, mining and highway construction, and other similar
applications, including circuit board drills, compacts and metallurgical
powders.
This Form 10-K contains "forward-looking" statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. You can identify these
forward-looking statements by the fact they use words such as "should,"
"anticipate," "estimate," "approximate," "expect," "may," "will," "project,"
"intend," "plan," "believe" and other words of similar meaning and expression in
connection with any discussion of future operating or financial performance. One
can also identify forward-looking statements by the fact that they do not relate
strictly to historical or current facts. These statements are likely to relate
to, among other things, our goals, plans and projections regarding our financial
position, results of operations, cash flows, market position and product
development, which are based on current expectations that involve inherent risks
and uncertainties, including factors that could delay, divert or change any of
them in the next several years. Although it is not possible to predict or
identify all factors, they may include the following: global economic
conditions; risks associated with integrating and divesting businesses and
achieving the expected savings and synergies; demands on management resources;
risks associated with international markets such as currency exchange rates, and
social and political environments; competition; labor relations; commodity
prices; demand for and market acceptance of new and existing products, and risks
associated with the implementation of restructuring plans and environmental
remediation matters. We can give no assurance that any goal or plan set forth in
forward-looking statements can be achieved and readers are cautioned not to
place undue reliance on such statements, which speak only as of the date made.
We undertake no obligation to release publicly any revisions to forward-looking
statements as a result of future events or developments.
BUSINESS SEGMENT REVIEW
We operate four global business units consisting of Metalworking Solutions &
Services Group (MSSG), Advanced Materials Solutions Group (AMSG), J&L Industrial
Supply (J&L) and Full Service Supply (FSS). Segment selection was based upon
internal organizational structure, the manner in which we organize segments for
making operating decisions and assessing performance, the availability of
separate financial results, and materiality considerations. Sales and operating
income by segment are presented on pages 56 and 57 of the 2002 Annual Report to
Shareowners, and such information is incorporated herein by reference.
Additional information about our operations and assets by segment and geographic
area is presented on pages 57 and 58 of the 2002 Annual Report to Shareowners,
and such information is incorporated herein by reference.
1
METALWORKING SOLUTIONS & SERVICES GROUP - MSSG
In the MSSG segment, we provide 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. Our tooling systems consist of a steel toolholder and
cutting tool such as an indexable insert or drill made from cemented tungsten
carbides, high-speed steel and other hard materials. We also provide solutions
to our customers' metalcutting needs through engineering services aimed at
improving their competitiveness.
During a metalworking operation, the toolholder is positioned in a machine 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.
We serve 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, power generation
equipment, machinery, appliances, factory equipment and metal components, as
well as the job shops and maintenance operations. We deliver our products to
customers through a direct field sales force, distribution, integrated supply
programs, mail-order and e-business.
With a global marketing organization and operations worldwide, we believe we are
the second largest global provider of consumable metalcutting tools and
supplies.
ADVANCED MATERIALS SOLUTIONS GROUP - AMSG
In the AMSG segment, the principal business is the production and sale of
cemented tungsten carbide products used in mining, highway construction,
engineered applications, including circuit board drills, compacts and other
similar applications. These products have technical commonality to our core
metalworking products. We also sell metallurgical powders to manufacturers of
cemented tungsten carbide products. We also provide application specific
component design services and on-site application support services.
Our mining and construction 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. We
produce these products for mine operators and suppliers, highway construction
companies, municipal governments and manufacturers of mining equipment. We
believe we are the worldwide market leader in mining and highway construction
tooling.
Our customers use engineered products in manufacturing or other operations where
extremes of abrasion, corrosion or impact require combinations of hardness or
other toughness afforded by cemented tungsten carbides or other hard materials.
We sell these products through a direct field sales force and distribution. We
believe we are 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."
J&L INDUSTRIAL SUPPLY - J&L
In this segment, we provide metalworking consumables and related products to
small- and medium-sized manufacturers in the United States and the United
Kingdom. J&L markets products and services through annual mail-order catalogs
and monthly sales flyers, telemarketing, the Internet and field sales. J&L
distributes a broad range of metalcutting tools, abrasives, drills, machine tool
accessories, precision measuring tools, gauges, hand tools and other supplies
used in metalcutting operations. The majority of industrial supplies distributed
by J&L are purchased from other manufacturers, although the product offering
does include Kennametal-manufactured items.
FULL SERVICE SUPPLY - FSS
In the FSS segment, we provide metalworking consumables and related products to
medium- and large-sized manufacturers in the United States and Canada. FSS
offers integrated supply programs that provide inventory management systems,
just-in-time availability and programs that focus on total cost savings. Through
FSS programs, large commercially-oriented customers seeking a single source of
metalcutting supplies engage us to carry out all aspects of complex metalworking
supply processes, including needs assessment, cost analysis, procurement
planning, supplier selection, "just-in-time" restocking of supplies and ongoing
technical support.
2
INTERNATIONAL OPERATIONS
Our international operations are subject to the usual risks of doing business in
those countries, including foreign currency exchange fluctuations and changes in
social, political and economic environments. Our principal international
operations in the MSSG and AMSG segments are conducted in Western Europe,
Canada, the Asia Pacific region, China, South Africa and Mexico. In addition, we
have manufacturing and/or distribution in Israel and South America, and sales
agents and distributors in Eastern Europe and other areas of the world. Our
Western European operations are integral to our U.S. operations, however, the
diversification of our overall operations tend to minimize the impact on total
sales and earnings of changes in demand in any one particular geographic area.
Our international assets and sales are presented on page 58 of the 2002 Annual
Report to Shareowners, and such information is incorporated herein by reference.
Information pertaining to the effects of foreign exchange risk is contained
under the caption "Market Risk" in Management's Discussion and Analysis on pages
30 and 31 of the 2002 Annual Report to Shareowners and under the captions
"Foreign Currency Translation" and "Derivative Financial Instruments and Hedging
Activities" in the notes to the consolidated financial statements on pages 41
and 42 of the 2002 Annual Report to Shareowners. Such information is
incorporated herein by reference.
THE WIDIA ACQUISITION
On August 30, 2002, we announced that we completed the previously reported
acquisition of the Widia Group from Milacron Inc. for EUR 188 million subject to
post-closing adjustments.
Widia, with approximately $240 million in sales, is a leading manufacturer and
marketer of metalworking tools, engineered products and related services in
Europe and India. Widia has an extensive product line of metalworking
consumables, and is a recognized leader in milling applications. The company
employs approximately 3,400 employees, and operates eight manufacturing
facilities in Europe and two in India. Management currently intends to continue
using the acquired assets for such purpose and to integrate the operations of
the Widia Group with existing operations. Widia sells primarily through direct
sales and has sales and service personnel in many European countries.
On August 30, 2002, to fund the acquisition, we borrowed EUR 188 million under
our new revolving credit facility.
MARKETING AND DISTRIBUTION
We sell our manufactured products through the following distinct sales channels:
(i) a direct sales force; (ii) integrated supply and FSS programs; (iii)
mail-order catalogs; (iv) a network of independent distributors and sales agents
in the United States and certain international markets; and (v) the Internet.
Service engineers and technicians directly assist customers with product design,
selection and application.
We market our products 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*, JLK*, J&L*,
Kennametal Hertel*, Hertel*, KM Micro*, Widia*, Top Notch*, Erickson*, Kyon*,
KM*, Drill-Fix*, Fix-Perfect*, Disston*, Chicago Latrobe*, Greenfield*,
RTW* and Cleveland*. We also sell 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 adequate supply of these raw materials currently exists, our major
sources for raw materials are located abroad and prices at times have been
volatile. For these reasons, we exercise great care in the selection, purchase
and inventory availability of raw materials. We also purchase steel bars and
forgings for making toolholders, high-speed steel and other tool parts, rotary
cutting tools and accessories. We obtain products purchased for use in
manufacturing processes and for resale from thousands of suppliers located in
the United States and abroad. Information pertaining to the effects of energy
and raw material costs is contained under the caption "Market Risk" in
Management's Discussion and Analysis on pages 30 and 31 of the 2002 Annual
Report to Shareowners.
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* Trademark owned by Kennametal Inc. or a subsidiary of Kennametal Inc.
3
RESEARCH AND DEVELOPMENT
Our product development efforts focus on providing solutions to our customers'
manufacturing problems and productivity requirements. Our Achieving a
Competitive Edge (ACE) Program provides discipline and focus for the product
development process by establishing "gateways," or sequential tests, during the
development process to remove inefficiencies and accelerate improvements. 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
us to gain full benefit from our investment in new product development.
Research and development expenses totaled $18.3 million, $18.9 million and $19.2
million in 2002, 2001 and 2000, respectively. Additionally, certain costs
associated with improving manufacturing processes are included in cost of goods
sold. We hold a number of patents and licenses, which, in the aggregate, are not
material to the operation of our businesses.
SEASONALITY
Our business is not materially affected by seasonal variations. However, to
varying degrees, traditional summer vacation shutdowns of metalworking
customers' plants and holiday shutdowns often affect our sales levels during the
first and second quarters of our fiscal year.
BACKLOG
Our backlog of orders generally is not significant to our operations. We fill
approximately 90 percent of all orders from stock, and the balance generally is
filled within short lead times.
COMPETITION
We are one of the world's leading producers of cemented carbide products and
high-speed steel tools, and maintain a strong competitive position, especially
in North America and Europe. We actively compete in the sale of all our
products, with approximately 40 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 ours and buy the cemented tungsten carbide
components for such tools from cemented tungsten carbide producers, including
us. Major competition exists from both U.S.-based and international-based
concerns. In addition, we compete with thousands of industrial supply
distributors.
The principal elements of competition in our businesses are service, product
innovation, quality, availability and price. We believe that our competitive
strength rests on our customer service capabilities, including multiple
distribution channels, our global presence, state-of-the-art manufacturing
capabilities, ability to develop solutions to customer needs through new and
improved tools, and the consistent high quality of our products. Based upon our
strengths, we are able to sell products based on the value added to 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 our 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.
We are involved in various environmental cleanup and remediation activities at
several of our manufacturing facilities. In addition, we are currently named as
a potentially responsible party (PRP) at the Li Tungsten Superfund site in Glen
Cove, New York. In December 1999, we recorded a remediation reserve of $3.0
million with respect to our involvement in these matters, which is recorded as a
component of operating expense. This represents our best estimate of the
undiscounted future obligation based on our evaluations and discussions with
outside counsel and independent consultants, and the current facts and
circumstances related to these matters. We recorded this liability because
certain events occurred, including the identification of other PRPs, an
assessment of potential remediation solutions and direction from the government
for the remedial action plan, that clarified our level of involvement in these
matters and our relationship to other PRPs. This led us to conclude that it was
probable that a liability had been incurred. At June 30, 2002, we have an
accrual of $2.8 million recorded relative to this environmental issue.
4
In addition to the amount currently reserved, we may be subject to loss
contingencies related to these matters estimated to be up to an additional $3.0
million. We believe that such undiscounted unreserved losses are reasonably
possible but are not currently considered to be probable of occurrence. The
reserved and unreserved liabilities for all environmental concerns could 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, the
identification of new PRPs and the involvement of and direction taken by the
government on these matters.
Additionally, we also maintain reserves for other potential environmental issues
associated with our Greenfield Industries, Inc. (Greenfield) operations and a
location operated by our German subsidiary. At June 30, 2002, the total of these
accruals was $1.4 million and represents anticipated costs associated with the
remediation of these issues.
We maintain 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, we
have established an EH&S administrator at all our global manufacturing
facilities. Our 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 contingencies. On a quarterly
basis, we establish or adjust financial provisions and reserves for
environmental contingencies in accordance with SFAS No. 5, "Accounting for
Contingencies."
PUBLIC OFFERINGS
On June 19, 2002, we sold 3.5 million shares of capital stock at a price of $36
per share. Net of issuance costs, this offering yielded proceeds of $120.6
million. On the same date, we issued $300.0 million of 7.2% Senior Unsecured
Notes due 2012 at 99.629% of face amount for net proceeds of $294.3 million
after related financing costs. Proceeds of these offerings were utilized to
repay senior bank indebtedness and for general corporate purposes.
BUSINESS DEVELOPMENT
As previously discussed, on August 30, 2002 we completed the acquisition of the
Widia Group. See "The Widia Acquisition."
On April 19, 2002, we sold Strong Tool Company, our industrial supply
distributor based in Cleveland, Ohio, for $8.6 million.
In January 2002, we acquired Carmet Company for $5.1 million. Located in Duncan,
South Carolina, this entity is a producer of tungsten carbide cutting tools and
wear parts.
We 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
We employed approximately 11,660 persons at June 30, 2002, of which
approximately 7,400 were located in the United States and 4,260 in other parts
of the world, principally Europe and Asia Pacific. At June 30, 2002,
approximately 2,300 of the above employees were represented by labor unions. We
consider our labor relations to be generally good.
5
CORPORATE DIRECTORY
Our consolidated subsidiaries and affiliated companies as of June 30, 2002 are:
Consolidated Subsidiaries of Kennametal Inc.
Kennametal Argentina S.A.
Kennametal Australia Pty. Ltd.
Kennametal Foreign Sales Corporation
Kennametal do Brasil Ltda.
Kennametal Ltd.
Kennametal Chile Ltda.
Kennametal (Shanghai) Ltd.
Kennametal Hardpoint (Shanghai) Ltd.
Kennametal (Xuzhou) Company Ltd.
Kennametal Hardpoint H.K. Ltd.
Kennametal Japan Ltd.
Kennametal (Malaysia) Sdn. Bhd.
Kennametal de Mexico, S.A. de C.V.
Kennametal SP. zo.o
Kennametal (Singapore) Pte. Ltd.
Kennametal South Africa (Proprietary) Limited
Kennametal Korea Ltd.
Kennametal Hardpoint (Taiwan) Inc.
Kennametal Co., Ltd.
Circle Machine Company
Greenfield Industries, Inc.
Kennametal Financing II
Kennametal Holdings Europe Inc.
Adaptive Technologies Corp.
Consolidated Subsidiaries of Kennametal Financing II
Kennametal PC Inc.
Kennametal TC Inc.
Kennametal Receivables Corporation
Consolidated Subsidiaries of Kennametal Holdings Europe Inc.
JLK Direct Distribution Inc.
Kennametal W Holdings Inc.
Consolidated Subsidiaries of Kennametal W Holdings Inc.
KH Holding (DE) Gmbh
Kennametal Europe Holdings Gmbh
Kennametal Deutschland Gmbh & Co. KG
Consolidated Subsidiaries of KH Holding (DE) Gmbh
Widia Gmbh
V & S Werkzeuge Gmbh
Consolidated Subsidiaries of Widia Gmbh
Metruit AG
Widia Vetriebsgesellschaft mbH
Consolidated Subsidiaries of Metruit AG
Widia India Ltd.
Consolidated Subsidiaries of Kennametal Europe Holdings G.m.b.H.
Cirbo LimitedEngland
Kennametal Hertel Europe Holding G.m.b.H.
6
Consolidated Subsidiaries of JLK Direct Distribution Inc.
J&L America, Inc.
Full Service Supply Inc.
Consolidated Subsidiaries of Kennametal Hertel Europe Holding G.m.b.H.
Kennametal Hertel AG
Kemmer Hartmetallwerkzeuge G.m.b.H.
Kemmer Prazision G.m.b.H.
Kennametal Hertel Hungaria Kft.
Kemmer Cirbo S.r.L. Italy
Consolidated Subsidiaries of Kennametal Hertel AG
Kennametal Hertel Belgium S.A.
Kennametal Hertel Limited
Kennametal Hertel France S.L.
Kennametal Hertel Beteiligungs G.m.b.H.
Kennametal Europe G.m.b.H.
Kennametal Hertel Deutschland G.m.b.H.
Kennametal Hertel International G.m.b.H.
Kennametal Hertel GmbH & Co. K.G.
Kennametal Korea G.m.b.H.
Rubig G.m.b.H. & Co. K.G.
Kennametal Hertel S.p.A.
Kennametal Hertel Nederland B.V.
Nederlandse Hardmetaal Fabrieken B.V.
Kennametal Hertel Kesici Takimlar ve Sistemler Anonim Sirketi
Kennametal Hertel International Gmbh
Kennametal Hertel Iberica S.L.
Consolidated Subsidiaries of Kennametal Hertel Limited
Widia UK Ltd.
Consolidated Subsidiaries of Kennametal Hertel Nederland B.V.
Widia Nederland B.B.
Consolidated Subsidiaries of Kennametal Hertel France S.L.
Widia France SAS
Consolidated Subsidiaries of Kennametal Hertel Iberica S.L.
Widia Iberica S.L.
Consolidated Subsidiaries of Kennametal Hertel International Gmbh
Kennametal Hertel Italia S.r.l.
Consolidated Subsidiaries of Kennametal Hertel Italia S.r.L.
Widia Italia S.r.l.
Consolidated Subsidiaries of J&L America, Inc.
J&L Industrial Supply Ltd.
J&L Industrial Supply UK (branch)
GRS Industrial Supply Company
Production Tools Sales, Inc.
Consolidated Subsidiaries of Greenfield Industries, Inc.
Greenfield Industries Canada Incorporated
Hanita Metal Works, Ltd.
Cleveland Twist Drill de Mexico, S.A. de C.V.
Greenfield Tools de Mexico, S.A. de C.V.
Herramientas Cleveland, S.A. de C.V.
Carbidie Corporation
Kemmer International, Inc.
Rogers Tool Works, Inc.
TCM Europe, Inc.
South Deerfield Industrial, Inc.
Hanita Cutting Tools, Inc.
Consolidated Subsidiaries of Rogers Tool Works Inc.
Kennametal Hungary Holdings Inc.
Kennametal Hungary Finance Services Kft.
7
ITEM 2. PROPERTIES
Our principal executive offices are located at 1600 Technology Way, P.O. Box
231, Latrobe, Pennsylvania, 15650. A summary of our principal owned and leased
manufacturing facilities is as follows:
Location Owned/Leased Principal Products
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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 Steel Taps
South Deerfield, Massachusetts Leased High Speed Steel Drills and Saw Blades
Traverse City, Michigan Owned Ceramic Wear Parts
Troy, Michigan Leased Metalworking Toolholders
Fallon, Nevada Owned Metallurgical Powders
Asheboro, North Carolina Owned High Speed Steel 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
Johnson City, Tennessee Owned Metalworking Inserts
Whitehouse, Tennessee Leased Fixed Limited Gages
Clemson, South Carolina Owned High Speed Steel Drills
Lyndonville, Vermont Owned High Speed Steel Taps
Chilhowee, Virginia Owned Mining and Construction Tools and Wear Parts
New Market, Virginia Owned Metalworking Toolholders
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Location Owned/Leased Principal Products
-------- ------------ ------------------
International:
Victoria, Canada Owned Wear Parts
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
Bordeaux, France Leased Metalworking Cutting Tools
Boutheon Cedex, France Owned Metalworking Inserts
Altenburg, Germany Leased High Speed Steel Taps
Ebermannstadt, Germany Owned Metalworking Inserts
Essen, Germany Owned/Leased Metallurgical Powders and Wear Parts
Koenigsee, Germany Leased Carbide and High Speed Steel Drills
Lichtenau, Germany Owned/Leased Metalworking Toolholders
Lorch, Germany Leased Circuit Board Drills
Mistelgau, Germany Owned Metallurgical Powders, Metalworking Inserts and Wear Parts
Nabburg, Germany Owned Metalworking Toolholders
Sinsheim, Germany Leased Metalworking Special Tooling
Vohenstrauss, Germany Owned Metalworking Carbide Drills
Bangalore, India Owned Metalworking Inserts and Toolholders and Wear Parts
Patancheru, India Owned Mining Tools and Wear Parts
Schlomi, Israel Owned High Speed Steel Endmills
Milan, Italy Owned Metalworking Cutting Tools
Pachuca, Mexico Owned High Speed Steel Drills
Arnhem, Netherlands Owned Wear Products
Hardenberg, Netherlands Owned Wear Products
Vitoria, Spain Leased Metalworking Carbide Drills
We also have a network of warehouses and customer service centers located
throughout North America, Western Europe, India, Asia, South America and
Australia, a significant portion of which are leased. The majority of our
research and development efforts are conducted in a corporate technology center
located adjacent to the world headquarters in Latrobe, Pennsylvania, Rogers,
Arkansas and in Furth, Germany.
We use all significant properties in the business of powder metallurgy, tools,
tooling systems and industrial supply. Our production capacity is adequate for
our present needs. We believe that our properties have been adequately
maintained, generally are in good condition and are suitable for our business as
presently conducted.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference is information set forth in Part I herein under the
caption "Regulation." Other than noted therein, there are no material pending
legal proceedings, other than litigation incidental to the ordinary course of
business, to which Kennametal or any of our subsidiaries is a party or of which
any of our property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 2002, there were no matters submitted to a vote of
security holders through the solicitation of proxies or otherwise.
9
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of Kennametal Inc. is as follows
(included herein pursuant to Item 401(b) of Regulation S-K):
Name, Age, and Position Experience During Past Five Years (2)
----------------------- -------------------------------------
Markos I. Tambakeras, 51 (1) Chairman of the Board effective July 1, 2002.
Chairman, President and Chief Executive Officer, President and Chief Executive Officer since July 1,
1999. Formerly employed by Honeywell Inc. as President
of Industrial Controls Business from 1997 to 1999.
David B. Arnold, 62 (1) Vice President since 1979. Chief Technical Officer
Vice President, since 1988.
Chief Technical Officer
R. Daniel Bagley, 42 (1) Vice President since July 2002. Formerly, Business
Vice President, Development Director and Industrial Consultant for
Corporate Strategy and Business Development Deloitte & Touche Consulting Group from 1997-2002; Vice
President, Global Sales & Sourcing for General Signal
Corporation from 1993-1997; and Director, U.S.
Marketing and Distribution for Robert Bosch Fluid Power
Corporation from 1992-1993.
James R. Breisinger, 52 (1) Vice President since 1990. Chief Operating Officer,
Vice President, Advanced Materials Solutions Group since August 2000.
Chief Operating Officer, Chief Financial Officer from September 1998 to August
Advanced Materials Solutions Group 2000. Chief Operating Officer, Greenfield Industries,
Inc. from March through September 1998. Corporate
Controller from 1994 to 1998.
M. Rizwan Chand, 38 (1) Vice President and Chief Human Resources Officer since
Vice President, May 2000. Previously Vice President, Human Resources
Chief Human Resources Officer for Aetna International in 1999. Previously with Mary
Kay Inc. as Senior Vice President, Global Human
Resources from 1996 to 1999.
Stanley B. Duzy, Jr., 55 (1) Vice President since November 1999. Formerly employed
Vice President, by Honeywell Inc. as Vice President of Industrial
Mergers and Acquisitions and Controls Business from 1998 to 1999 and Vice President
Chief Administrative Officer and Controller, Asia Pacific from 1992 to 1997.
F. Nicholas Grasberger III, 38 (1) Vice President and Chief Financial Officer since August
Vice President, 2000. Formerly, Corporate Treasurer, H.J. Heinz
Chief Financial Officer Company from 1997 to 2000.
David W. Greenfield, 52 (1) Vice President, Secretary and General Counsel since
Vice President, Secretary and October 2001. Formerly a member of Buchanan Ingersoll
General Counsel Professional Corporation (attorneys-at-law) July 2000
to September 2001. Special Counsel for ArvinMeritor (a
provider of components for vehicles) from February 1999
to July 2000. Senior Vice President, General Counsel
and Secretary for Meritor Automotive, Inc. (predecessor
to ArvinMeritor) from May 1997 to February 1999.
10
Name, Age, and Position Experience During Past Five Years (2)
----------------------- -------------------------------------
Timothy A. Hibbard, 45 Elected Corporate Controller and Chief Accounting
Corporate Controller and Chief Officer in February 2002. Director of Finance for the
Accounting Officer Advanced Materials Solutions Group from September 2000
to February 2002. Vice President and Controller of
Greenfield Industries, Inc. from October 1998 to
September 2000. Division Controller of Mining &
Construction Division from April 1998 to October 1998.
Vice President, Finance, Automotive Remanufacturers,
Inc. prior thereto.
Brian E. Kelly, 39 Assistant Treasurer and Director of Tax since September
Assistant Treasurer and 1998. Manager of Corporate Tax from 1996 to 1998.
Director of Tax
Lawrence J. Lanza, 53 Assistant Treasurer and Director of Treasury Services
Assistant Treasurer and since April 1999. Previously, Director, Global Capital
Director of Treasury Services Markets for CBS Corporation, formerly Westinghouse
Electric Corporation, from 1972 to 1998.
H. Patrick Mahanes, Jr., 59 (1) Appointed Interim Chief Operating Officer, Metalworking
Executive Vice President, Solutions and Services Group in August 2002. Vice
Interim Chief Operating Officer, President since 1987. Executive Vice President, Global
Metalworking Solutions and Services Group Strategic Initiatives since 2000. Chief Operating
Officer - Metalworking from 1995 to August 2000.
James E. Morrison, 51 Vice President since 1994. Treasurer since 1987.
Vice President,
Treasurer
Wayne D. Moser, 49 (3) Vice President since 1998. Formerly, General Manager,
Vice President, Integration Director Mining & Construction from 1997 to 2002.
Ralph G. Niederst, 51 (1) Vice President since May 2000. Formerly, Director of
Vice President, Management Information Technology at Harsco
Chief Information Officer Corporation's Heckett Multiserv from 1995 to 2000.
Kevin G. Nowe, 50 Assistant General Counsel since 1992 and Assistant
Assistant Secretary, Secretary since 1993.
Assistant General Counsel
Ajita G. Rajendra, 50 Vice President since 1998. General Manager of
Vice President and Industrial Products Group since 1997. Vice President of
General Manager, Industrial Products Group the Electronic Products Group of Greenfield Industries,
Inc. from 1996 to 1997.
P. Mark Schiller, 54 Vice President since 1992. Director of Distribution
Vice President, Services since 1990.
Director of Distribution Services
Michael P. Wessner, 41 (1) Vice President since January 2001. Formerly, Chief
Vice President, Executive Officer, Emco/ESS Holdings from 1999 to 2000
Chief Operating Officer, and Vice President, Midwest Region for Office Depot
J&L Industrial Supply from 1995 to 1999.
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.
(3) Mr. Moser has been selected to lead the integration of Widia and Kennametal
effective May 2002.
11
PART II
The information required under Items 5 through 8 is included in the 2002 Annual
Report to Shareowners and such information is incorporated herein by reference
as indicated below.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREOWNER MATTERS
Incorporated by reference is the Quarterly Financial Information (Unaudited) set
forth on page 59 of the 2002 Annual Report to Shareowners.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference is information with respect to the years 1998 to 2002
contained in the Eleven-Year Financial Highlights set forth on pages 62 and 63
of the 2002 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 18 to 33 of the 2002 Annual Report to Shareowners.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference is the information contained in Management's
Discussion & Analysis under the caption "Market Risk" set forth on pages 30 and
31 and the information under the caption "Derivative Financial Instruments and
Hedging Activities" on pages 41 and 42 of the 2002 Annual Report to Shareowners.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference is Item 14(a)1 of this Form 10-K and the Quarterly
Financial Information (Unaudited) set forth on page 59 of the 2002 Annual Report
to Shareowners.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective May 14, 2002, the Board of Directors, upon the recommendation of the
Audit Committee, approved the engagement of PricewaterhouseCoopers LLP as its
independent accountants for the fiscal year ending June 30, 2002 and dismissed
the firm of Arthur Andersen LLP.
The reports of Arthur Andersen LLP on our consolidated financial statements for
each of the past two fiscal years did not contain an adverse opinion or
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principle.
During the past two fiscal years and through May 14, 2002, there were no
disagreements between us and Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to Arthur Andersen LLP's satisfaction, would
have caused the firm to make reference to the subject matter thereof in
connection with their report on our consolidated financial statements and there
were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.
During the years ended June 30, 2001 and 2000 and through May 14, 2002, we did
not consult with PricewaterhouseCoopers LLP with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our consolidated
financial statements, or any other matters or reportable events as set forth in
Items 304(a)(2)(i) and (ii) of Regulation S-K.
12
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 "Executive Officers of the Registrant" and the information under the
captions "Election of Directors" and "Compliance with Section 16 (a) of the
Exchange Act" in our definitive proxy statement to be filed with the Securities
and Exchange Commission within 120 days after June 30, 2002 ("2002 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 2002 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREOWNER MATTERS
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, under the caption
"Principal Holders of Voting Securities" with respect to other beneficial owners
in the 2002 Proxy Statement and under the caption "Equity Compensation Plan
Information" with respect to disclosure regarding the number of outstanding
options, warrants and rights granted under equity compensation plans and the
number of shares remaining for issuance under such plans.
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 2002 Proxy Statement.
ITEM 14. CONTROLS AND PROCEDURES
Item 14 is not yet applicable pursuant to the transition provisions of Exchange
Act Release No. 34-46427.
13
PART IV
ITEM 15. 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, 2002 and 2001, the
consolidated statements of income, shareowners' equity, and cash flows
for each of the three years in the period ended June 30, 2002 and the
notes to consolidated financial statements, together with the reports
thereon of PricewaterhouseCoopers LLP dated July 26, 2002, except as
for Note 19 as to which the date is August 30, 2002, and Arthur
Andersen LLP dated July 20, 2001, presented in the 2002 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 2002 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 Kennametal are omitted because
Kennametal 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
Kennametal has a 98 percent interest.
Financial Statement Schedule: Page
---------------------------- ----
Reports of Independent Accountants 22-23
Schedule II - Valuation and Qualifying Accounts
and Reserves for the Three Years
Ended June 30, 2002 24
3. Exhibits
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation, or Succession
(2.1) Stock Purchase Agreement dated Exhibit 2.1 of the May 6, 2002 Form
May 3, 2002 among Milacron Inc., 8-K is incorporated herein by reference.
Milacron B.V. and Kennametal Inc.
(3) Articles of Incorporation and Bylaws
(3.1) Bylaws of Kennametal Inc. as Exhibit 3.1 of December 31, 2001
amended through January 29, Form 10-Q is incorporated herein by
2002 reference.
(3.2) Amended and Restated Articles Exhibit 3.1 of the September 30, 1994
of Incorporation as Amended Form 10-Q (SEC file no. reference 1-5318;
docket entry date - November 14, 1994)
is incorporated herein by reference.
14
(4) Instruments Defining the Rights of
Security Holders, Including Indentures
(4.1) Rights Agreement effective Exhibit 1 of the Form 8-A dated October 10,
as of November 2, 2002 2000 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
Organization and Compensation"
contained in the 2002 Proxy Statement is
incorporated herein by reference.
(10.2)* Stock Option and Exhibit 10.1 of the December 31, 1988
Incentive Plan of 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 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 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 June 30, 1999
Plan, as amended Form 10-K is incorporated herein by
reference.
(10.6)* Performance Bonus Stock Exhibit 10.6 of the 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 September 30,
Plan of 1996 1996 Form 10-Q is incorporated herein
by reference.
(10.8)* Stock Option and Incentive Plan Exhibit 10.8 of the December 31, 1996
of 1992, as amended Form 10-Q is incorporated herein by
reference.
- --------------------------
* Denotes management contract or compensatory plan or arrangement.
15
(10.9)* Form of Employment Agreement with Exhibit 10.9 of the June 30, 2000 Form
Named Executive Officers 10-K is incorporated herein by reference.
(other than Mr. Tambakeras)
(10.10)* Supplemental Executive Exhibit 10.10 of the June 30, 1999
Retirement Plan, as amended Form 10-K is incorporated herein by
reference.
(10.11)* Executive Employment Agreement Filed herewith.
dated May 1, 2002 between Kennametal
Inc. and Markos I. Tambakeras
(10.12)* Kennametal Inc. 1999 Stock Plan Exhibit 10.5 of the June 11, 1999
Form 8-K is incorporated herein
by reference.
(10.13)* Kennametal Inc. Stock Option and Exhibit A of the 1999 Proxy Statement
Incentive Plan of 1999 is incorporated herein by reference.
(10.14) Credit Agreement dated as of June 27, Exhibit 10.1 of the September 11, 2002
2002 among Kennametal Inc., and the Form 8-K is incorporated herein by
several lenders from time to time reference.
parties thereto, Bank of Tokyo-
Mitsubishi Trust Company; Bank One,
N.A.; Fleet National Bank; and PNC
Bank, N.A. as the Co-Syndication
Agents, and JP Morgan Chase Bank,
as the Administrative Agent
(13) Annual Report to Shareowners Portions of the 2002 Annual Report are
filed herewith.
(21) Subsidiaries of the Registrant Filed herewith.
(23) Consent of Independent Accountants Filed herewith.
(99) Additional Exhibits
(99.1) Certification Pursuant to 18 U.S.C. Filed herewith.
Section 1350 as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002, executed by Markos I.
Tambakeras, Chief Executive Officer
of Kennametal Inc. and F. Nicholas
Grasberger III, Chief Financial Officer
of Kennametal Inc.
- --------------------------------
* Denotes management contract or compensatory plan or arrangement.
16
(b) Reports on Form 8-K.
The following were filed during the quarter ended June 30, 2002:
Form 8-K dated May 1, 2002, reporting under Item 4. Changes in
Registrant's Certifying Accountant regarding the appointment of
PricewaterhouseCoopers LLP as independent auditors for fiscal year ended
June 30, 2002. Additionally, the dismissal of Arthur Andersen LLP as the
company's independent auditors as of April 30, 2002 was also reported.
Form 8-K dated May 7, 2002, reporting under Item 5. Acquisition or
Disposition of Assets regarding the signing of a definitive agreement to
purchase the Widia Group in Europe and India from Milacron, Inc. for EUR
188 million.
Form 8-K/A dated May 8, 2002, reporting under Item 5. Other Events
correcting the omission of the indication that the purchase price of 188
million was in EUROs relative to the agreement to purchase the Widia
Group.
Form 8-K/A dated May 17, 2002, reporting under Item 4. Changes in
Registrant's Certifying Accountant to reflect the fact that Arthur
Andersen's dismissal and PricewaterhouseCoopers' engagement became
effective May 14, 2002.
Form 8-K dated June 20, 2002, reporting under Item 7. Financial Statements
and Exhibits which incorporated by reference certain exhibits into
Registration No. 333-40809 pertaining to certain debt securities of the
Registrant.
Form 8-K dated June 20, 2002, reporting under Item 7. Financial Statement
and Exhibits which incorporated by reference certain exhibits into
Registration No. 333-40809 pertaining to certain equity securities of the
Registrant.
17
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/ Timothy A. Hibbard
----------------------------
Timothy A. Hibbard
Corporate Controller and
Chief Accounting Officer
Date: September 25, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Markos I. Tambakeras
- --------------------------------------
Markos I. Tambakeras Chairman, President and September 25, 2002
Chief Executive Officer
/s/ F. Nicholas Grasberger III
- --------------------------------------
F. Nicholas Grasberger III Vice President and September 25, 2002
Chief Financial Officer
18
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard C. Alberding
- --------------------------------------
Richard C. Alberding Director September 25, 2002
/s/ Peter B. Bartlett
- --------------------------------------
Peter B. Bartlett Director September 25, 2002
/s/ Ronald M. DeFeo
- --------------------------------------
Ronald M. DeFeo Director September 25, 2002
/s/ A. Peter Held
- --------------------------------------
A. Peter Held Director September 25, 2002
/s/ Kathleen J. Hempel
- --------------------------------------
Kathleen J. Hempel Director September 25, 2002
/s/ Aloysius T. McLaughlin, Jr.
- --------------------------------------
Aloysius T. McLaughlin, Jr. Director September 25, 2002
/s/ William R. Newlin
- --------------------------------------
William R. Newlin Director September 25, 2002
/s/ Larry D. Yost
- --------------------------------------
Larry D. Yost Director September 25, 2002
19
CERTIFICATIONS
CERTIFICATION
OF THE
PRINCIPAL EXECUTIVE OFFICER
I, Markos I. Tambakeras, certify that:
1. I have reviewed this annual report on Form 10-K of Kennametal Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 25, 2002
/s/ Markos I. Tambakeras
---------------------------------------
Markos I. Tambakeras
Chairman, President and Chief Executive Officer
20
CERTIFICATION
OF THE
PRINCIPAL FINANCIAL OFFICER
I, F. Nicholas Grasberger, III, certify that:
1. I have reviewed this annual report on Form 10-K of Kennametal Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 25, 2002
/s/ F. Nicholas Grasberger III
---------------------------------------
F. Nicholas Grasberger III
Vice President and Chief Financial Officer
21
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Shareowners of Kennametal Inc.
Our audit of the consolidated financial statements referred to in our report
dated July 26, 2002, except for Note 19 as to which the date is August 30, 2002
appearing in the 2002 Annual Report to Shareowners of Kennametal Inc. (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the financial
statement schedule listed in Item 14 (a) (2) of this Form 10-K. In our opinion,
this financial statement schedule as of and for the year ended June 30, 2002
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements. The
financial statements of Kennametal Inc. as of June 30, 2001, and for each of the
two years in the period ended June 30, 2001, were audited by other independent
accountants who have ceased operations. Those independent accountants expressed
an unqualified opinion on those financial statements, before the revision
described in Note 2, in their report dated July 20, 2001.
/s/ PricewaterhouseCoopers LLP
---------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
July 26, 2002, except for Note 19 as to which the date is August 30, 2002
22
The following report is a copy of a previously issued report by Arthur Andersen
LLP and it has not been reissued by Arthur Andersen LLP. Arthur Andersen LLP has
not consented to its inclusion; therefore an investor's abilities to recover any
potential damage may be limited.
REPORT OF PREVIOUS INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the 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 20, 2001. 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 20, 2001
23
KENNAMETAL INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED JUNE 30, 2002
- -------------------------------------------------------------------------------
(dollars in thousands)
Additions
-----------------------------------------
Balance at Charged to Deductions Balance at
Beginning of Costs and Other from End of
Description Year Expenses Recoveries Adjustments Reserves Year
- ----------- ------------ -------- ---------- ----------- --------- ----------
2002
Allowance for
doubtful accounts $ 7,999 $ 7,137 $ 640 $ 315 (a) $ 3,420(b) $ 12,671
Restructuring and asset
impairment charges $ 6,483 $ 27,499 $ -- $ (192)(c) $ 27,368(d) $ 6,422
2001
Allowance for
doubtful accounts $ 12,214 $ 2,576 $ 324 $ (918)(a) $ 6,197(b) $ 7,999
Restructuring and asset
impairment charges $ 7,565 $ 13,106 $ -- $ 82 (c) $ 14,270(d) $ 6,483
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 (e) $ 15,223(d) $ 7,565
(a) Represents foreign currency translation adjustment and reserves acquired
through business combinations.
(b) Represents uncollected accounts charged against the allowance.
(c) Represents adjustments for net incremental costs incurred related to
restructuring programs initiated in 2001, 2000 and 1999.
(d) Represents asset write-downs, non-cash adjustments and cash expenditures
charged against the accrual.
(e) Represents adjustment for company receiving more value upon disposition of
property than initially anticipated.
24