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FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number: 1-5318
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
THE KENNAMETAL THRIFT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Kennametal Inc.
1600 Technology Way
P.O. Box 231
Latrobe, Pennsylvania 15650
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THE KENNAMETAL THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS
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Report of Independent Public Accountants...................................................................... 2
Financial Statements:
Statements of Net Assets Available for Plan Benefits
December 31, 1999 and 1998............................................................................... 3
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1999 and 1998................................................................... 4
Notes to Financial Statements............................................................................ 5
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999........................................................................................ 9
Schedule H, Line 4j - Schedule of Reportable Transactions
Year ended December 31, 1999............................................................................. 10
Signatures.................................................................................................... 11
Exhibit 23 - Consent of Independent Public Accountants........................................................ 12
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Kennametal Inc.
and to the Kennametal Inc. ERISA Compliance Committee:
We have audited the accompanying statements of net assets available for plan
benefits of The Kennametal Thrift Plan (the Plan) as of December 31, 1999 and
1998, and the related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements and the schedules
referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1999 and 1998, and the changes in net assets available for plan
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
and fund information have been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
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Arthur Andersen LLP
Pittsburgh, Pennsylvania
June 20, 2000
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THE KENNAMETAL THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1999 AND 1998
December 31, December 31,
1999 1998
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ASSETS
Receivables:
Participant contributions $ 194,146 $ 198,305
Employer contributions 75,005 76,217
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Total Receivables 269,151 274,522
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General Investments:
Mutual funds 193,490,234 123,156,740
Common/collective trusts - Fixed income fund 60,532,752 58,786,939
Kennametal Inc. common stock 18,146,163 11,877,634
Participant loans 4,814,041 3,913,407
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Total General Investments 276,983,190 197,734,720
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $277,252,341 $198,009,242
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The accompanying notes are an integral part of these statements.
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THE KENNAMETAL THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
December 31, 1999
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Kennametal Inc. All
Common Other December 31,
Stock Fund Funds Total 1998
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ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Participant contributions $ 1,140,127 $ 13,189,300 $ 14,329,427 $ 16,114,687
Employer contributions 1,531,949 3,541,919 5,073,868 5,261,948
Earnings on investments 424,289 19,384,998 19,809,287 11,075,033
Net realized gains on disposition and unrealized
appreciation in fair value of investments 7,325,468 44,389,784 51,715,252 10,873,330
Transfers from other plans 17 6,136,690 6,136,707 --
Other 2,247 153,443 155,690 82,098
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Total Additions 10,424,097 86,796,134 97,220,231 43,407,096
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefit payments (733,113) (13,749,762) (14,482,875) (10,478,105)
Loan distribution -- (206,291) (206,291) (93,666)
Employee withdrawals (153,270) (2,798,501) (2,951,771) (2,701,946)
Administrative fees (717) (97,366) (98,083) (123,760)
Forfeitures (8,294) (128,064) (136,358) (71,611)
Other -- (101,754) (101,754) (82,332)
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Total Deductions (895,394) (17,081,738) (17,977,132) (13,551,420)
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NET TRANSFERS BETWEEN FUNDS (3,260,174) 3,260,174 -- --
NET INCREASE 6,268,529 72,974,570 79,243,099 29,855,676
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 11,877,634 186,131,608 198,009,242 168,153,566
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End of year $18,146,163 $259,106,178 $277,252,341 $198,009,242
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The accompanying notes are an integral part of these statements.
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THE KENNAMETAL THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF PLAN
The following general description of the Kennametal Thrift Plan, as amended (the
Plan), is provided for general information purposes only. Participants should
refer to the Plan document for complete information.
The Plan is a defined contribution employee benefit plan, established to
encourage investment and savings for certain salaried and hourly employees of
Kennametal Inc. and certain subsidiaries and to provide a method to supplement
their retirement income benefits. The Plan provides these employees the
opportunity to defer a portion of their annual base compensation for federal
income tax purposes in accordance with Section 401(k) of the Internal Revenue
Code, as amended (the Code). The Plan is subject to certain provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). Kennametal
Inc. is the Plan sponsor.
During Kennametal Inc.'s fiscal years ended June 30, 1997 and 1998, Kennametal
Inc., through a majority-owned subsidiary, acquired five companies, each
sponsoring a defined contribution employee benefit plan. During 1999, the assets
of these plans were merged into the Plan.
In September 1999, all Putnam mutual fund balances were transferred from Class A
shares to Class Y shares to take advantage of lower management fees associated
with the Class Y shares. This transfer did not change the participant investment
choices or the value of participant accounts.
ADMINISTRATION OF THE PLAN - Putnam Fiduciary Trust Company serves as the
Trustee of the Plan. Putnam Investments functions as the recordkeeper for the
Plan.
ELIGIBILITY - All eligible employees are entitled to become active participants
of the Plan on the first day of the month coinciding with or following the
completion of ten (10) days of service. Under present federal income tax law,
employer contributions and all earnings of the Plan do not constitute taxable
income to the participants until withdrawn from the Plan by the participants.
VESTING - Employee contributions are fully vested. Employer matching
contributions are fully vested after the third anniversary of the participant's
employment date. Forfeitures of employer contributions as a result of
withdrawals, terminations, etc., reduce the amount of future contributions
required by the employer.
PARTICIPANT ACCOUNTS - A separate account is maintained for each participant in
the Plan, reflecting contributions, investments, investment gains and losses,
distributions, loans, withdrawals and transfers.
CONTRIBUTIONS - The Plan allows participants to elect a contribution rate
(either before-tax, after-tax, or a combination of both) of 2% to 12% of the
employee's base salary. The participants can elect to have their contributions
invested in the different investment funds available under the Plan. Employer
contributions equal 50% of the participant contribution up to a maximum of 3% of
the participant's salary. Employer contributions are made concurrently with
participant contributions. Effective October 1, 1999, employer contributions are
made solely in Kennametal Inc. common stock.
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DISTRIBUTIONS - Distributions to participants due to disability, retirement,
hardship or death are payable in either a lump sum, periodic payments for a
period not to exceed ten (10) years, or through the purchase of an annuity at
the participant's election.
PARTICIPANT LOANS - A participant may borrow up to the lesser of $50,000 or 50%
of his or her vested account balance, with a minimum loan amount of $1,000.
Loans are repayable through payroll deductions over a period not to exceed five
years. If the proceeds are used to acquire a participant's principal residence,
the repayment period shall be no more than 15 years. The interest rate is
determined by the plan administrator based on existing market conditions and is
fixed over the life of the loan. The interest rate at December 31, 1999 was
9.25%.
INVESTMENTS - A participant may direct contributions to any of the following
investment options:
PRIMCO Stable Value Fund - Investments of this fixed income fund consist of
traditional investment contracts issued by insurance companies, banks and other
financial institutions (or corporations), asset-backed investment contracts,
synthetic investment contracts and short-term investments.
Putnam Voyager Fund - This fund seeks aggressive capital appreciation by
investing in a combination of stocks of small companies expected to grow over
time as well as in stocks of larger, more established corporations.
Putnam Asset Allocation: Balanced Portfolio - For investors who want an
investment with moderate risk and the potential for moderate growth, this fund
seeks a balance between the relative stability of bonds and the fluctuation of
stocks, in efforts to reduce overall risk.
The Putnam Fund for Growth & Income - This fund seeks growth and income by
investing in attractively priced stocks of companies that offer long-term growth
potential while also providing income.
Putnam New Opportunities Fund - This fund seeks long-term capital appreciation
by investing primarily in common stocks of companies within certain emerging
industry groups that Putnam Management believes offer above-average potential
for growth.
Putnam Asset Allocation: Growth Portfolio - For more aggressive investors who
will accept more risk in exchange for a higher growth potential, this fund seeks
diversification among different types of stocks, with some investments in bonds
and money market funds.
Putnam Asset Allocation: Conservative Portfolio - For investors who are willing
to assume a reduced potential for growth in exchange for less risk, this fund
seeks to reduce overall risk through substantial investments in investment-grade
bonds, with some investments in stocks to help stay ahead of inflation.
Putnam International Growth Fund - This fund seeks capital appreciation by
investing in a diversified portfolio of companies located outside the United
States.
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Kennametal Inc. Common Stock Fund - This fund consists entirely of Kennametal
Inc. common stock, for investors who want to participate in the growth of
Kennametal Inc. as part owners of Kennametal Inc.
MAS Small Cap Value Fund - This fund seeks above average total return over a
three- to five-year period by investing primarily in common stocks and other
equity securities similar to companies included in the Russell 2000 Index. The
fund focuses on stocks that are undervalued based on the advisor's own measures
of value.
Vanguard 500 Index Fund - This fund seeks to provide long-term growth of capital
and income from dividends by holding all the 500 stocks that make up the
Standard & Poor's 500 Composite Stock Price Index in proportion to their
weightings in the index.
2. ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are maintained on the
accrual basis of accounting.
INVESTMENTS - Investment transactions are recorded on a trade date basis and
revenues are recorded on an accrual basis of accounting. Investments in mutual
funds, Kennametal Inc. common stock and other short-term investments are stated
at fair value as measured by readily available market prices. Participant loans
are valued at cost, which approximates fair value. Benefit-responsive investment
contracts are valued at contract value. According to the provisions of AICPA
Statement of Position (SOP) 94-4, "Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension Plans,"
guaranteed investment contracts of defined contribution plans are considered to
be fully benefit-responsive. As a result, these contracts are accounted for at
contract value in the accompanying financial statements. PRIMCO Capital
Management, Inc. certified that all the investment contracts held in the Fixed
Income Fund are fully benefit-responsive. The difference between the contract
value and the fair value of all investment contracts was $1,082,260 and
$1,342,443 at December 31, 1999 and 1998, respectively. The crediting interest
rates on the contracts ranged from 4.96% to 7.55% at December 31, 1999 and from
4.38% to 7.55% at December 31, 1998.
INVESTMENT INCOME - Interest and dividend income are recorded in the period
earned. Gains and losses on securities sold or redeemed are determined on the
basis of specific identification.
PLAN EXPENSES - Investment management, recordkeeping and other administrative
fees and expenses of the Plan are paid from assets and income of the Plan.
REALIZED/UNREALIZED GAINS AND LOSSES - Realized gains and losses on investments
sold or redeemed and unrealized gains and losses are determined using the
average cost method.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires the plan administrator and sponsor to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results may differ from these estimates.
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NEW ACCOUNTING STANDARD - The Accounting Standards Executive Committee issued
SOP 99-3, "Accounting for and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters," which eliminates the requirement for
a defined contribution plan to disclose participant-directed investment
programs. The Plan adopted SOP 99-3 for the 1999 financial statements and
reclassified certain amounts in the 1998 financial statements to eliminate the
participant-directed fund investment program disclosures.
3. INVESTMENTS EXCEEDING FIVE PERCENT OF NET ASSETS
The fair market values of individual investments that represent five percent or
more of the Plan's total plan assets as of December 31, 1999 and 1998, were as
follows:
December 31, December 31,
1999 1998
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Common/Collective Trusts - Fixed Income Fund $ 60,532,752 $58,786,939
Putnam Mutual Funds -
Voyager 100,753,156 67,433,093
New Opportunities 37,805,122 17,950,148
Asset Allocation - Balanced Portfolio 15,401,938 12,841,774
Growth & Income 14,881,798 12,266,895
Kennametal Inc. Common Stock 18,146,163 11,877,634
4. QUALIFICATION OF PLAN
The Plan has been determined by the Internal Revenue Service to be a qualified
employee benefit plan under the Code. The Internal Revenue Service issued a
favorable determination on April 23, 1996. Plans that are qualified under
regulations of the Internal Revenue Service are not subject to federal income
taxes.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, Kennametal Inc. has the right
to amend, suspend or terminate the Plan at any time, subject to the provisions
of ERISA. In the event of Plan termination, the accounts of all participants
will become fully vested and non-forfeitable.
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THE KENNAMETAL THRIFT PLAN
PLAN NUMBER: 002
KENNAMETAL INC.
EIN: 25-0900168
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
SCHEDULE H, LINE 4i
DECEMBER 31, 1999
Identity Current
of Issue Description of Investment Value
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Mutual Funds
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*Putnam Putnam Voyager Fund $100,753,156
*Putnam Putnam New Opportunities Fund 37,805,122
*Putnam Putnam Asset Allocation - Balanced Portfolio 15,401,938
*Putnam The Putnam Fund for Growth & Income 14,881,798
*Putnam Putnam International Growth Fund 12,933,535
*Putnam Putnam Asset Allocation - Growth Portfolio 5,994,250
*Putnam Putnam Asset Allocation - Conservative Portfolio 4,410,723
*Putnam Vanguard 500 Index Fund 1,067,886
*Putnam MAS Small Cap Value Fund 241,826
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Total Mutual Funds 193,490,234
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Collective/Common Trusts
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*Putnam PRIMCO Stable Value Fund 59,450,492
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Kennametal Inc. Common Stock
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*Putnam Kennametal Inc. Common Stock (a) 18,146,163
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Loans to Participants
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*Participants Loans to Participants, Maturities: From January 2000 to December
2014, Interest rates: 8.75% to 9.25% 4,814,041
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Total Investments $275,900,930
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* Party-in-interest.
(a) The cost of this investment is $14,309,974 at December 31, 1999.
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THE KENNAMETAL THRIFT PLAN
PLAN NUMBER: 002
KENNAMETAL INC.
EIN: 25-0900168
SCHEDULE OF REPORTABLE TRANSACTIONS (a)
SCHEDULE H, LINE 4j
YEAR ENDED DECEMBER 31, 1999
Identity of Current Value
Party Purchase Selling Cost of Asset on Net
Involved Description of Investment Price Price of Asset Transaction Date Gain/(Loss)
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*Putnam Putnam Voyager Fund $71,240,091 $71,240,091 $54,026,735 $71,240,091 $17,213,356
*Putnam Putnam New Opportunities Fund 23,558,728 23,558,728 19,144,016 23,558,728 4,414,712
*Putnam The Putnam Fund for Growth & Income 13,832,867 13,832,867 14,574,841 13,832,867 (741,974)
*Putnam Putnam Asset Allocation - Balanced Portfolio 13,111,047 13,111,047 12,120,683 13,111,047 990,364
* Party-in-interest.
(a) Represent non-participant transactions or a series of non-participant
transactions in excess of 5% of the fair value of the Plan assets at the
beginning of the year.
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the plan administrator of the Kennametal Thrift Plan has duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized,
in Unity Township, Westmoreland County, Commonwealth of Pennsylvania.
KENNAMETAL THRIFT PLAN
Date: June 26, 2000 By: /s/ AMY DOVERSPIKE
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Amy Doverspike
Plan Administrator
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