FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
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
of incorporation) Identification No.)
ROUTE 981 AT WESTMORELAND COUNTY AIRPORT
P.O. BOX 231
LATROBE, PENNSYLVANIA 15650
(Address of registrant's principal executive offices)
Registrant's telephone number, including area code: (412) 539-5000
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
TITLE OF EACH CLASS OUTSTANDING AT OCTOBER 31, 1994
- ---------------------------------------- -------------------------------
Capital Stock, par value $1.25 per share 26,473,356
KENNAMETAL INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1994
------------------------------------
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
- --------------------------------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1994 and June 30, 1994
Condensed Consolidated Statements of Income (Unaudited)
Three months ended September 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended September 30, 1994 and 1993
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KENNAMETAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------
(Dollars in thousands)
September 30, June 30,
1994 1994
------------- ---------
ASSETS
- ------
Current Assets:
Cash and equivalents $ 9,444 $ 17,190
Accounts receivable, less allowance for
doubtful accounts of $10,419 and $9,328 149,542 143,691
Inventories 170,122 158,179
Deferred income taxes 13,768 13,744
--------- ---------
Total current assets 342,876 332,804
--------- ---------
Property, Plant and Equipment 475,734 467,652
Less: accumulated depreciation (232,687) (224,554)
--------- ---------
Net property, plant and equipment 243,047 243,098
--------- ---------
Other Assets:
Investments in affiliated companies 7,239 6,393
Intangible assets, less accumulated
amortization of $17,358 and $16,540 30,522 32,141
Deferred income taxes 65,803 65,606
Other 14,956 17,490
--------- ---------
Total other assets 118,520 121,630
--------- ---------
Total assets $ 704,443 $ 697,532
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current maturities of term debt
and capital leases $ 6,007 $ 4,364
Notes payable to banks 53,718 52,753
Accounts payable 48,142 52,148
Accrued vacation pay 14,769 15,569
Other 76,643 77,193
--------- ---------
Total current liabilities 199,279 202,027
--------- ---------
Term Debt and Capital Leases,
Less Current Maturities 89,291 90,178
Deferred Income Taxes 19,457 19,279
Other Liabilities 53,152 51,800
--------- ---------
Total liabilities 361,179 363,284
--------- ---------
Minority Interest 10,135 11,412
Shareholders' Equity:
Capital stock, $1.25 par value;
70,000,000 shares authorized;
29,369,658 shares issued 36,712 36,712
Preferred stock, 5,000,000 shares
authorized; none issued - -
Additional paid-in capital 84,407 83,839
Retained earnings 252,144 245,428
Treasury shares, at cost (2,896,374 and
3,015,466 shares) (37,517) (39,247)
Pension liability adjustment (536) (536)
Cumulative translation adjustments (2,081) (3,360)
--------- ---------
Total shareholders' equity 333,129 322,836
--------- ---------
Total liabilities and shareholders' equity $ 704,443 $ 697,532
========= =========
See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------
(Dollars in thousands, except per share data)
Three Months Ended
------------------
September 30,
1994 1993
-------- --------
NET SALES $218,838 $175,665
COSTS AND EXPENSES:
Cost of goods sold 128,051 105,647
Research and development 4,419 3,632
Marketing 50,768 42,830
General and administrative 12,877 14,057
Interest expense 3,474 4,084
Amortization of intangibles 773 948
Restructuring charge - 24,749
-------- --------
Total costs and expenses 200,362 195,947
-------- --------
OTHER INCOME 92 726
-------- --------
INCOME (LOSS) BEFORE TAXES ON INCOME
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGES 18,568 (19,556)
PROVISION (BENEFIT) FOR INCOME TAXES 7,900 (1,500)
-------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 10,668 (18,056)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES,
NET OF INCOME TAXES:
Postretirement benefits - (20,060)
Income taxes - 5,057
-------- --------
NET INCOME (LOSS) $ 10,668 $(33,059)
======== ========
PER SHARE DATA:
Earnings (loss) before cumulative
effect of accounting changes $ 0.40 $ (0.82)
Cumulative effect of accounting changes:
Postretirement benefits - (0.92)
Income taxes - 0.23
-------- --------
Earnings (loss) per share $ 0.40 $ (1.51)
======== ========
Dividends per share $ 0.15 $ 0.145
======== ========
Average shares outstanding
(in thousands) 26,390 21,954
======== ========
See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------
(Dollars in thousands)
Three Months Ended
------------------
September 30,
1994 1993
-------- --------
OPERATING ACTIVITIES:
Net income (loss) $ 10,668 $(33,059)
Adjustments for non-cash items 10,162 25,676
Changes in certain assets and liabilities (21,411) 13,151
-------- --------
Net cash flow from (used for) operating activities (581) 5,768
-------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (7,713) (4,205)
Purchase of Hertel AG, net of cash - (19,226)
Other 1,595 (483)
-------- --------
Net cash flow used for investing activities (6,118) (23,914)
-------- --------
FINANCING ACTIVITIES:
Increase in short-term debt 24 40,175
Increase in term debt 2,288 12,669
Reduction in term debt (1,831) (15,055)
Dividend reinvestment and employee stock plans 2,299 1,284
Cash dividends paid to shareholders (3,953) (3,181)
Other - (125)
-------- --------
Net cash flow from (used for) financing activities (1,173) 35,767
-------- --------
Effect of exchange rate changes on cash 126 1,479
-------- --------
CASH AND EQUIVALENTS:
Net increase (decrease) in cash and equivalents (7,746) 19,100
Cash and equivalents, beginning 17,190 4,149
-------- --------
Cash and equivalents, ending $ 9,444 $ 23,249
======== ========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 2,294 $ 2,585
Income taxes paid $ 1,627 $ 2,678
See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ----------------------------------------------------------------
1. The condensed consolidated financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements included
in the company's 1994 Annual Report. The condensed consolidated balance
sheet as of June 30, 1994 has been derived from the audited balance
sheet included in the company's 1994 Annual Report. These interim
statements are unaudited; however, management believes that all
adjustments necessary for a fair presentation have been made and all
adjustments are normal, recurring adjustments. The results for the
three months ended September 30, 1994 are not necessarily indicative of
the results to be expected for the full fiscal year.
2. Inventories are stated at lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for a significant portion of
domestic inventories and the first-in, first-out (FIFO) method or
average cost for other inventories. The company used the LIFO method
of valuing its inventories for approximately 60 percent of total
inventories at September 30, 1994. Because inventory valuations under
the LIFO method are based on an annual determination of quantities and
costs as of June 30 of each year, the interim LIFO valuations are based
on management's projections of expected year-end inventory levels and
costs. Therefore, the interim financial results are subject to any
final year-end LIFO inventory adjustments.
3. The major classes of inventory as of the balance sheet dates were as
follows (dollars in thousands):
September 30, June 30,
1994 1994
------------- ---------
Finished goods $125,406 $112,202
Work in process and powder blends 53,783 54,831
Raw materials and supplies 22,561 20,571
-------- --------
Inventory at current cost 201,750 187,604
Less LIFO valuation (31,628) (29,425)
-------- --------
Total inventories $170,122 $158,179
======== ========
4. The company has been involved in various environmental cleanup and
remediation activities at several of its manufacturing facilities. In
addition, the company has been named as a potentially responsible party
at four Superfund sites in the United States. However, it is
management's opinion, based on its evaluations and discussions with
outside counsel and independent consultants, that the ultimate
resolution of these environmental matters will not have a material
adverse effect on the results of operations or financial position of the
company.
The company maintains a Corporate Environmental, Health and Safety
(EH&S) Department to effect compliance with all 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 contingencies. On a quarterly and
annual basis, management establishes or adjusts financial provisions and
reserves for environmental contingencies in accordance with Statement of
Financial Accounting Standards (SFAS) No. 5, "Accounting for
Contingencies."
5. On August 4, 1993, the company completed the acquisition of an 81
percent interest in Hertel AG (Hertel) for $43 million in cash and $55
million of assumed debt. Hertel is a manufacturer of cemented carbide
tools and tooling systems based in Furth, Germany.
The Hertel acquisition was recorded under the purchase method of
accounting and, accordingly, the results of operations of Hertel for the
period beginning as of August 4, 1993, forward are included in the
accompanying condensed consolidated financial statements. The purchase
price has been allocated to assets acquired and liabilities assumed
based on fair market value at the date of acquisition. The excess of
the purchase price over the fair market value of the net assets acquired
has been recorded as goodwill and is being amortized over twenty years.
The fair values (as adjusted) of assets acquired and liabilities assumed
are summarized below (in thousands):
Current assets $114,800
Property, plant and equipment 70,200
Intangible assets (goodwill) 5,800
Deferred tax asset 40,600
Other noncurrent assets 12,400
Current liabilities 104,700
Long-term liabilities 89,400
As presented above, current liabilities includes a reserve of
approximately $36.0 million (pretax) for the restructuring of Hertel.
The restructuring costs primarily include amounts for severance, phase-
out and relocation. The cumulative charges to the restructuring reserve
total $20.1 million, leaving a balance of $16.3 million at September 30,
1994. It is expected that the restructuring, which began in fiscal
1994, will be substantially completed during fiscal year 1995.
In the September 1994 quarter, the company purchased an additional
37,000 common shares of Hertel at a purchase price of DM128 per share.
The company's ownership interest in Hertel as of September 30, 1994 was
85 percent.
In connection with the acquisition of Hertel, the company recognized a
special charge in the September 1993 quarter of approximately $20.4
million after taxes in connection with the closure of its manufacturing
facility in Neunkirchen, Germany, and other integration related actions.
The cumulative charges to the related reserve total $19.4 million, a
significant portion of which were cash charges, leaving a balance of
$5.3 million at September 30, 1994. It is expected that spending
related to this charge will be substantially completed during fiscal
year 1995.
The effect of the purchase on the company's operations, assuming the
transaction had occurred on July 1, 1992, would be as follows:
Pro Forma (Unaudited)
(Dollars in Thousands, Except Per Share Data)
---------------------------------------------
Three Months Ended
------------------
September 30,
1994 1993
-------- ----------
(Actual) (Pro Forma)
Net sales $218,838 $188,347
======== ========
Income (loss) before cumulative
effect of accounting changes $ 10,668 $(19,829)
======== ========
Net income (loss) $ 10,668 $(34,832)
======== ========
Per share data:
Earnings (loss) before cumulative
effect of accounting changes $ 0.40 $ (0.90)
Cumulative effect of accounting changes:
Postretirement benefits - (0.92)
Income taxes - 0.23
-------- -------
Earnings (loss) per share $ 0.40 $ (1.59)
======== =======
The pro forma financial information presented above does not purport to
present what the company's results of operations would actually have
been if the acquisition of Hertel had occurred on July 1, 1992, or to
project the company's results of operations for any future period.
6. Effective July 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The change
did not significantly affect earnings before cumulative effect of
changes in methods of accounting in the first quarter of fiscal year
1994.
The company provides varying levels of postretirement health care and
life insurance benefits to most U.S. employees who retire from active
service after having attained age 55 and 10 years of service. This plan
remains in effect for all current retirees and employees who will retire
prior to January 1, 1997. However, for those employees retiring on or
after January 1, 1997, the following plan amendments will be effective.
The company's retiree health care payments will be capped at 1996
levels. To qualify for medical benefits at normal retirement (age 65 or
later), employees must have a minimum of 5 years of service after age
40. Medical benefits will be available for only those retirements that
begin on or after the normal retirement age of 65.
The following table presents the components of the company's liability
for future retiree health care and life insurance benefits as of June
30, 1994 and July 1, 1993.
(Dollars in thousands)
June 30, July 1,
1994 1993
--------- --------
Accumulated postretirement benefit obligations:
Retirees $(14,800) $(15,100)
Fully eligible active participants (8,000) (7,600)
Other active participants (13,000) (11,300)
-------- --------
Total obligation $(35,800) $(34,000)
Assets at fair value - -
-------- --------
Accrued postretirement benefit cost $(35,800) $(34,000)
======== ========
As of September 30, 1994, the company's accrued postretirement benefit
liability was $35.8 million.
The components of retiree health care cost for the first quarter of
fiscal year 1995 were as follows:
(Dollars in thousands)
Service cost $ 300
Interest cost 725
------
Total cost $1,025
======
The discount rate used in calculating the accumulated postretirement
benefit obligations was 8.5 percent. In determining the accumulated
postretirement benefit obligations at July 1, 1993 and June 30, 1994,
the assumed rates of increase in health care were 15 percent for
retirees under age 65 and 10 percent for persons age 65 and older.
These rates are assumed to decrease to varying degrees annually to
6 percent for years 2002 and thereafter. A 1 percent increase in the
trend rate would increase both the accumulated postretirement benefit
obligation at June 30, 1994 and the total cost of the plan for the first
quarter of fiscal year 1995 by approximately 8 percent. The accumulated
postretirement benefit obligation is unfunded.
Effective July 1, 1994, the company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." Under the new standard, the
company must recognize the obligation to provide benefits to former or
inactive employees after employment, but before retirement. The
implementation of the new standard did not have a material impact on the
results of operations or financial position of the company.
7. Effective July 1, 1993, the company adopted SFAS No. 109, "Accounting
for Income Taxes." The company previously accounted for income taxes
pursuant to the provisions of APB No. 11. The new standard requires the
use of the liability method to recognize deferred income tax assets and
liabilities using enacted tax rates. As a result of implementing the
change in accounting principle, a net deferred tax liability of $5.6
million was recognized relating to net operating loss carryforwards and
other tax attributes existing as of July 1, 1993. In addition, the
income tax effect of the new method of accounting related to the
company's adoption of SFAS No. 106 as of July 1, 1993 was the
recognition of additional deferred tax assets of $13.9 million. The
combined effect of these items resulted in the recognition of an $8.3
million net deferred tax asset and a net income tax benefit of $5.1
million.
The components of the company's deferred tax assets and liabilities
arising under SFAS No. 109 were as follows:
(Dollars in thousands)
June 30, July 1,
1994 1993
--------- --------
Deferred tax assets:
Net operating loss carryforwards $ 50,839 $ 1,086
Deductible temporary differences:
Inventories 8,071 6,375
Property, plant and equipment 3,889 1,902
Vacation pay 3,471 3,287
Pensions and other long-term liabilities 1,630 2,288
Postretirement benefits other than pensions 13,972 13,940
Other deductible temporary differences 4,575 2,424
-------- --------
Total deferred tax assets 86,447 31,302
Valuation allowance (5,760) (1,086)
-------- --------
Net deferred tax asset $ 80,687 $ 30,216
======== ========
Deferred tax liabilities:
Accumulated depreciation $ 20,617 $ 21,953
======== ========
As a component of its cumulative adjustment from implementing SFAS No.
109, the company recognized a charge of $1.1 million to establish a
valuation reserve related to certain tax attributes comprising its net
deferred tax asset. As of July 1, 1993, deferred tax liabilities
associated with existing taxable temporary differences exceeded deferred
tax assets from future deductible temporary differences, excluding those
attributable to SFAS No. 106, by approximately $5.7 million. The
recognition by the company as of July 1, 1993, of the entire transition
obligation related to adopting the provisions of SFAS No. 106 resulted
in the recognition of a $13.9 million deferred tax asset. Future
operating costs under SFAS No. 106 are expected to exceed deductible
amounts for income tax purposes for many years. In addition, under
current federal tax regulations, should the company incur tax losses in
future periods, such losses may be carried forward to offset taxable
income for a period of up to 15 years. Based upon the length of the
period during which the SFAS No. 106-generated deferred tax asset can be
utilized, the company believes that it is more likely than not that
future taxable income will be sufficient to offset fully these future
deductions and a valuation allowance for this deferred tax asset is not
necessary.
At June 30, 1994, the company had unused tax benefits of $50.8 million
related to non-U.S. net operating loss (NOL) carryforwards for income
tax purposes, of which $46.7 million can be carried forward indefinitely
with the balance expiring at various dates through 2001. A significant
portion ($46.7 million) of the unused tax benefits relate to the Federal
Republic of Germany.
The company believes that it is more likely than not that $45.1 million
of NOL carryforwards will be utilized in future periods. The recorded
tax benefits are expected to be realized by achieving future profitable
operations in Germany. The German NOL carryforwards can be carried
forward indefinitely.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
There were no material changes in financial position, liquidity or capital
resources between June 30, 1994 and September 30, 1994. The ratio of current
assets to current liabilities was 1.7 as of September 30, 1994 as compared
with 1.6 as of June 30, 1994. The debt to capital ratio (i.e., total debt
divided by the sum of total debt and shareholders' equity) was 31 percent as
of September 30, 1994 unchanged from June 30, 1994.
In the September 1993 quarter, the company recorded cumulative effect charges
aggregating $15 million after taxes for the adoption of SFAS No. 106 and SFAS
No. 109. While these charges did not involve the use of cash, they had a
significant effect on various components of the company's consolidated
financial position at September 30, 1993.
Capital expenditures are estimated to be $50-55 million in fiscal year 1995.
Expenditures are being made to modernize facilities and upgrade machinery and
equipment. Capital expenditures are being financed with cash from operations
and borrowings under existing revolving credit agreements with banks.
RESULTS OF OPERATIONS
SALES AND EARNINGS
During the quarter ended September 30, 1994, consolidated sales were $219
million, up 25 percent from $176 million in the same quarter last year. The
prior year sales include only two months of Hertel revenues. On a comparable
year over year basis, it is estimated that sales were up 16 percent from the
prior year.
Net income for the September 1994 quarter was $10.7 million, or $0.40 per
share, as compared with a net loss of $33.1 million, or $1.51 per share in the
same quarter last year. The net loss in the prior year includes the
unfavorable cumulative noncash effect of adopting SFAS No. 106 ($20.1 million
net of income tax effect) and the favorable cumulative noncash effect of
adopting SFAS No. 109 ($5.1 million). In addition to the cumulative effect of
changes in accounting principles, prior year results included a restructuring
charge of $20.4 million after taxes.
The following table presents the company's sales by product class and
geographic area (dollars in thousands):
Quarter ended September 30,
1994 1993 % Change
---------- ---------- --------
Sales by Product Class:
Metalworking $183,581 $144,991 26.6
Mining and construction 28,367 25,278 12.2
Metallurgical 6,890 5,396 27.7
-------- --------
Net sales $218,838 $175,665 24.6
======== ========
Sales by Geographic Area:
Within the U.S. $140,569 $119,247 17.9
Foreign and export 78,269 56,418 38.7
-------- --------
Net sales $218,838 $175,665 24.6
======== ========
METALWORKING PRODUCTS
During the September 1994 quarter, worldwide sales of metalworking products
increased 27 percent from last year. The prior year metalworking sales
include only two months of Hertel revenues. On a comparable year over year
basis, worldwide sales of metalworking products are estimated to have
increased 15 percent.
In the United States, sales of metalcutting inserts and toolholding devices
increased 15 percent. Total sales of industrial supply products increased 22
percent as a result of increased sales through mail order catalogs and full
service supply programs.
International sales of metalworking products increased 48 percent from the
previous year primarily because of the impacts of the Hertel acquisition,
favorable foreign currency translation effects and higher sales volume in
Europe. Excluding the acquisition impacts and currency translation effects,
international metalworking sales increased an estimated 11 percent.
MINING AND CONSTRUCTION PRODUCTS
During the September 1994 quarter, sales of mining and construction tools
increased 12 percent from the previous year primarily because of strong
domestic demand for mining tools. International demand for highway
construction and mining tools remains weak, particularly in Europe.
METALLURGICAL PRODUCTS
During the September 1994 quarter, sales of metallurgical products increased
28 percent from the previous year primarily because of strong international
demand for carbide powders.
GROSS PROFIT MARGIN
As a percentage of sales, the gross profit margin for the September 1994
quarter was 41.5 percent as compared with 39.9 percent in the prior year. The
gross profit margin benefited from a favorable sales mix and increased
manufacturing efficiencies. However, these benefits were partially offset by
higher raw material costs.
OPERATING EXPENSES
For the quarter ended September 30, 1994, research and development, marketing
and general and administrative expenses increased 12 percent as a result of
the acquisition impacts, higher sales volume and unfavorable foreign currency
translation effects.
As a percentage of sales, operating expenses decreased to 31.1 percent as
compared with 34.5 percent last year. The operating expense ratio decreased
as a result of the decrease in general and administrative expenses combined
with the increase in consolidated sales.
INTEREST EXPENSE
Interest expense was $3.5 million for the September 1994 quarter, as compared
with $4.1 million for the same period last year. The decrease was primarily
due to the lower amount of debt outstanding in the September 1994 quarter as
compared with the prior year. As of September 30, 1994 approximately 35
percent of the company's total debt was subject to variable interest rates.
INCOME TAXES
The effective tax rate for the September 1994 quarter was 43 percent compared
with an effective tax rate, excluding the acquisition impacts, effects of the
accounting changes and the restructuring charge, of 41.8 percent in the prior
year.
OUTLOOK
In looking to the second quarter ending December 31, 1994, management expects
consolidated sales to increase from the $195 million achieved in the same
quarter last year. Sales of metalworking products in the United States should
benefit from the continued expansion of the economy, catalog sales and full
service supply programs. In addition, international sales are expected to
improve as the European economies continue to expand. Sales of mining and
construction tools should continue to grow from increased domestic demand for
mining tools.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in footnote 4 to the condensed consolidated
financial statements, contained in Part I, Item 1 of this Form 10-Q, is
incorporated by reference herein and supplements the information previously
reported in Part I, Item 3 of the company's Form 10-K for the year
ended June 30, 1994, which is also incorporated by reference herein.
It is management's opinion, based on its evaluation and discussions with
outside counsel, that the company has viable defenses to these cases and
that, in any event, this litigation will not have a materially adverse effect
on the results of operations or financial position of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders on October 31, 1994, the stockholders
of the company voted on the election of directors, a proposed amendment to
Article Fifth of the Amended and Restated Articles of Incorporation increasing
the authorized capital stock from 30,000,000 shares to 70,000,000 shares and
the election of independent auditors. The following is the number of shares
voted in favor of and against each matter, and the number of shares having
authority to vote on each matter but withheld.
1. With respect to the votes cast for directors whose terms expire in 1997.
For Withheld Broker Non-Vote
---------- ---------- ---------------
<C
Richard C. Alberding 22,452,937 364,042 0
Quentin C. McKenna 22,687,195 129,784 0
William R. Newlin 22,699,115 117,864 0
2. With respect to the resolution proposing that Article Fifth of the Amended and
Restated Articles of Incorporation be amended to increase the authorized number of
shares of the capital stock from 30,000,000 shares to 70,000,000 shares.
For Against Abstained Broker Non-Vote
---------- --------- --------- ---------------
Amendment to Articles 16,770,797 5,903,404 142,778 3,086,766
3. With respect to the election of the firm of Arthur Andersen & Co., independent
auditors, to audit the accounts of the company and its subsidiary companies for the
fiscal year ending June 30, 1995.
For Against Abstained Broker Non-Vote
---------- --------- --------- ---------------
Arthur Andersen & Co. 22,713,474 66,013 37,492 0
ITEM 5. OTHER INFORMATION
On November 2, 1994, the company issued a press release announcing that it had
signed an agreement with W.W. Grainger, Inc. to establish an alliance to
market metalcutting tools and accessories and maintenance, repair and
operations products.
W.W. Grainger, Inc., with 1993 sales of $2.6 billion, is a nationwide
distributor of equipment, components and supplies to the commercial,
industrial, contractor and institutional markets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reference
(a) Exhibits
(3)(i) Articles of Incorporation
Amended and Restated Articles of
Incorporation as Amended Filed herewith
(99) Additional Exhibits
Press Release Dated November 2, 1994 Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENNAMETAL INC.
Date: November 14, 1994 By: /s/ RICHARD J. ORWIG
---------------------
Richard J. Orwig
Vice President
Chief Financial and Administrative Officer