1 ================================================================================ FORM 11-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 ================================================================================
2 THE KENNAMETAL THRIFT PLAN INDEX TO FINANCIAL STATEMENTS Page ---- 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
3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Kennametal Inc. and to the Kennametal Inc. ERISA Compliance Committee: We have audited the accompanying statements of net assets available for plan benefits of The Kennametal Thrift Plan (the Plan) as of December 31, 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 - ----------------------- Arthur Andersen LLP Pittsburgh, Pennsylvania June 20, 2000 2
4 THE KENNAMETAL THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1999 AND 1998 December 31, December 31, 1999 1998 ------------ ------------ ASSETS Receivables: Participant contributions $ 194,146 $ 198,305 Employer contributions 75,005 76,217 ------------ ------------ Total Receivables 269,151 274,522 ------------ ------------ 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 ------------ ------------ Total General Investments 276,983,190 197,734,720 ------------ ------------ NET ASSETS AVAILABLE FOR PLAN BENEFITS $277,252,341 $198,009,242 ============ ============ The accompanying notes are an integral part of these statements. 3
5 THE KENNAMETAL THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEARS ENDED DECEMBER 31, 1999 AND 1998 December 31, 1999 --------------------------------------------------- Kennametal Inc. All Common Other December 31, Stock Fund Funds Total 1998 --------------- ------------ ------------ ------------ 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 ----------- ------------ ------------ ------------ Total Additions 10,424,097 86,796,134 97,220,231 43,407,096 ----------- ------------ ------------ ------------ 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) ----------- ------------ ------------ ------------ Total Deductions (895,394) (17,081,738) (17,977,132) (13,551,420) ----------- ------------ ------------ ------------ 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 ----------- ------------ ------------ ------------ End of year $18,146,163 $259,106,178 $277,252,341 $198,009,242 =========== ============ ============ ============ The accompanying notes are an integral part of these statements. 4
6 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. 5
7 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. 6
8 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. 7
9 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 ------------ ----------- 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. 8
10 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 - ---------------------------------------------------------------------------------------------------------------- Mutual Funds ------------ *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 ------------ Total Mutual Funds 193,490,234 ------------ Collective/Common Trusts ------------------------ *Putnam PRIMCO Stable Value Fund 59,450,492 ----------- Kennametal Inc. Common Stock ---------------------------- *Putnam Kennametal Inc. Common Stock (a) 18,146,163 ------------ Loans to Participants --------------------- *Participants Loans to Participants, Maturities: From January 2000 to December 2014, Interest rates: 8.75% to 9.25% 4,814,041 ------------ Total Investments $275,900,930 ============ * Party-in-interest. (a) The cost of this investment is $14,309,974 at December 31, 1999. 9
11 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) - ------------------------------------------------------------------------------------------------------------------------------------ *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. 10
12 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 -------------------------- Amy Doverspike Plan Administrator 11
1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports, included in this Form 11-K, into the Company's previously filed Registration Statement on Form S-8, Registration No. 333-18423, relating to the Kennametal Thrift Plan. /s/ ARTHUR ANDERSEN LLP ----------------------- ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania June 26, 2000 12