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, 2002
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:
GREENFIELD INDUSTRIES, INC.
RETIREMENT INCOME SAVINGS 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
GREENFIELD INDUSTRIES, INC.
RETIREMENT INCOME SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants............................................................................. 2
Financial Statements:
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001............................................................................... 3
Statements of Changes in Net Assets Available for Benefits
Year ended December 31, 2002 and 2001.................................................................... 4
Notes to Financial Statements............................................................................ 5
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002........................................................................................ 10
Signatures.................................................................................................... 11
Exhibit 23 - Consent of Independent Accountants............................................................... 12
Exhibit 99.1 - Certification Pursuant to 18 U.S. C. Section 1350.............................................. 13
as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 executed by Michael Pepperney,
Plan Administrator.
Note: Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
the Greenfield Industries, Inc. Retirement Income Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Greenfield Industries, Inc. Retirement Income Savings Plan (the "Plan")
at December 31, 2002 and 2001, and the changes in net assets available for
benefits for the years ended December 31, 2002 and 2001, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is 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. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 6, 2003
2
GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
December 31, December 31,
2002 2001
------------ ------------
ASSETS
Receivables:
Participant contributions $ 199,201 $ 25,294
Employer contributions 495,559 804,769
----------- -----------
Total receivables 694,760 830,063
----------- -----------
Investments 83,315,904 96,115,437
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $84,010,664 $96,945,500
=========== ===========
The accompanying notes are an integral part of these statements.
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GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---- ----
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Participant contributions $ 4,911,721 $ 6,086,453
Employer contributions 2,094,898 3,626,011
Dividends and interest 2,746,545 3,232,224
Transfers from other Kennametal Plans 209,603 127,112
------------ ------------
Total additions 9,962,767 13,071,800
------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to retirees (7,443,957) (7,313,974)
Loan distributions (709,539) (490,083)
Net depreciation of investments (13,007,516) (7,640,204)
Employee withdrawals (985,638) (639,670)
Transfers to other Kennametal Plans (750,953) --
------------ ------------
Total deductions (22,897,603) (16,083,931)
------------ ------------
NET DECREASE (12,934,836) (3,012,131)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 96,945,500 99,957,631
------------ ------------
End of year $ 84,010,664 $ 96,945,500
============ ============
The accompanying notes are an integral part of these statements.
4
GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF PLAN
The following general description of the Greenfield Industries, Inc. Retirement
Income Savings 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 for the
purpose of providing eligible employees of Greenfield Industries, Inc. (the
Company), a wholly-owned subsidiary of Kennametal Inc., the opportunity to defer
a portion of their annual 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). The Company serves as sponsor
of the Plan. Certain amounts were reclassified in the prior years' consolidated
financial statements to conform with the current year presentation.
ADMINISTRATION OF THE PLAN - The management of the Company has the authority and
responsibility for the general administration of the Plan. Putnam Fiduciary
Trust Company serves as the Trustee of the Plan and Putnam Investment functions
as the recordkeeper for the Plan.
ELIGIBILITY - The Plan covers all non-union and certain unionized employees of
the Company. Employees may become participants in the Plan as of the first entry
date (January 1, April 1, July 1, or October 1) after completing 500 hours of
service within a six consecutive month period. 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 - All participant and employer contributions vest immediately.
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 Company is required to contribute a base amount of 2% of
each eligible employee's wages, which include base salary, overtime, shift
differential pay and incentive compensation. Participants may elect to
contribute to the Plan from 1% to 15% of their wages through payroll deductions.
Effective April 1, 2003, participants may elect to contribute to the Plan from
1% to 20% of their wages through payroll deductions. In addition, the Company
makes employer matching contributions equal to 50% of the participant
contribution up to a maximum of 2% of a participant's wages. Employer
contributions are made quarterly and solely in Kennametal Inc. common stock.
These employer contributions can be transferred to other investment options at
any time at the participant's election. Effective January 1, 2002, employer
matching contributions were temporarily suspended for all participants except
certain union employees. These contributions were reinstated January 1, 2003.
5
DISTRIBUTIONS - If a participant's employment with the Company is terminated due
to retirement pursuant to the terms of the Plan, the total amount of a
participant's account shall be distributed in cash to the participant according
to one of the options as described in the Plan and as elected by the
participant. If a participant's employment with the Company is terminated for
any reason other than retirement pursuant to the terms of the Plan, the
participant will receive a lump sum amount equal to the value of the
participant's vested interest in his or her account; provided, however, that if
such account exceeds $5,000, a participant may elect to defer distribution to a
future date as more fully described in the Plan.
PARTICIPANT LOANS - Participants may withdraw certain basic contributions and
related earnings thereon only in the event of a financial hardship as defined by
the Plan or the Code. The Plan also permits participants to borrow from their
accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 less
the excess of the highest outstanding loan balance during the previous one-year
period over the outstanding balance as of the date of the loan or 50% of their
account balance as defined by the Plan or the Code. Such borrowings are allowed
at the sole discretion of the plan administrator. Loan terms range from one to
five years or up to 29 years for the purchase of a primary residence and are
secured by the balance in the participant's account. Principal and interest are
paid ratably through payroll deductions. Interest rates on participant loans
ranged from 6.0% to 10.5% at December 31, 2001 and 5.3% to 10.5% at December 31,
2002. Participant loans outstanding at December 31, 2002 have maturity dates
ranging from 2003 to 2031.
INVESTMENTS - Participants direct their contributions by electing that such
contributions be placed in a single investment fund or allocated to any
combination of investment funds. Earnings derived from the assets of any
investment fund are reinvested in the fund to which they relate. Participants
may elect at any time to transfer all or a portion of the value of their
accounts among the investment funds. The following investment options were
available to participants for the years ended December 31, 2002 and 2001:
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 believes offer above-average potential for growth.
6
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 composed mainly of stocks of companies
located outside the United States.
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.
MSIF US Small Cap Core Portfolio - 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. The name of this fund was changed from MAS Small Cap Value
Fund to MSIF US Small Cap Core Portfolio on August 1, 2001.
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. Assets held in the Vanguard 500 Index Fund were
converted to the Vanguard Institutional Index Fund on October 16, 2002.
Vanguard Institutional Index Fund - This fund seeks long-term growth of capital
and income from dividends. The fund holds all 500 stocks that make up the
Standard & Poor's 500 Index in proportion to their weighting in the index. The
fund attempts to track the performance of the index, a widely recognized
benchmark of U.S. stock market performance, and it remains fully invested in
stocks at all times. Assets held in the Vanguard 500 Index Fund were converted
to the Vanguard Institutional Index Fund on October 16, 2002.
Northrop Grumman Common Stock - This fund consists entirely of Northrop Grumman
common stock for investors who want to participate in the growth of Northrop
Grumman as part owners of Northrop Grumman. This investment fund is closed to
new participants. This investment option replaced TRW Inc. Common Stock on
December 12, 2002, when the acquisition of TRW Inc. by Northrop Grumman was
completed.
Beginning October 1, 2002, participants are also able to direct their
contributions to the two additional investment options:
PIMCO Renaissance Fund - This fund seeks long-term growth of capital and income.
The fund invests primarily in common stocks of "value" style, midsize companies
with market capitalizations of $1 billion to $10 billion at the time of
investment, although it may invest in companies of any size. The fund invests
all or a portion of its assets in small to midsize companies. Such investments
increase the risk of greater price fluctuations.
7
Vanguard Total Bond Market Index Fund - This fund invests in a sample of bonds
from the Lehman Aggregate Bond Index, which is an index of U.S. Treasury,
federal agency, mortgage-backed, and high-quality securities.
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.
Investments in mutual funds, common stock, fixed income funds 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 in
accordance with 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". PRIMCO Capital Management, Inc. certified
that all the investment contracts held in this fixed income fund are fully
benefit-responsive. The fair value of all investment contracts exceeded the
contract value by $1,560,496 and $870,515 at December 31, 2002 and 2001. The
crediting interest rates on the contracts ranged from 2.44% to 7.22% and 3.94%
to 7.12% at December 31, 2002 and 2001.
PAYMENT OF BENEFITS - Benefit payments are recorded as distributed.
INVESTMENT INCOME - Interest and dividend income are recorded in the period
earned.
PLAN EXPENSES - Expenses attributable to the administration or operation of the
Plan and related trust are allocated pro rata on the basis of account balances
to the accounts of participants unless the Board of Directors of the Company, at
its sole discretion, determines that such expenses are to be paid by the
Company. For the years ended December 31, 2002 and 2001, the Company paid all
expenses related to the operation of the Plan.
NET APPRECIATION / (DEPRECIATION) - Net appreciation (depreciation) of
investments is comprised of unrealized gains and losses due to the change in
market value compared to the cost of investments retained in the Plan and
realized gains or losses on security transactions which represents the
difference between proceeds received and average cost. Net appreciation
(depreciation) for the years ended December 31, 2002 and 2001 were as follows:
2002 2001
---- ----
Kennametal Inc. Common Stock Fund (1,800,343) 3,269,402
All Other Funds (11,207,173) (10,909,606)
----------- -----------
Total (13,007,516) (7,640,204)
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America 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.
8
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 net assets as of December 31, 2002 and 2001 were as
follows:
2002 2001
---- ----
PRIMCO Stable Value Fund $28,227,043 $27,913,356
Kennametal Inc. Common Stock Fund 11,880,404 12,399,071
Putnam New Opportunities Fund 9,749,034 14,484,463
The Putnam Fund for Growth & Income 9,397,888 12,614,750
Putnam Asset Allocation: Balanced Fund 7,851,669 9,800,235
Vanguard Institutional Index Fund 7,318,432 --
Vanguard 500 Index Fund -- 9,753,364
Loans to Participants 5,538,975 6,067,945
4. TAX STATUS
The Internal Revenue Service has determined and informed the plan sponsor by a
letter dated March 10, 2003, that the Plan and related trust are designed in
accordance with applicable sections of the Code.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right to
amend, suspend or terminate the Plan at any time, subject to the provisions of
the ERISA. In the event of Plan termination, the accounts of all participants
will become non-forfeitable.
6. RELATED PARTY TRANSACTIONS
Certain investments of the Plan are mutual funds managed by Putnam. The trustee
of the Plan is also Putnam and, therefore, these transactions qualify as
party-in-interest transactions.
One of the investment fund options available to participants contains stock of
Kennametal Inc., the plan sponsor. The Plan held 344,559 and 307,898 shares of
the Company's common stock at December 31, 2002 and 2001, respectively. As a
result, transactions related to this investment fund qualify as
party-in-interest transactions.
9
GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
PLAN NUMBER: 001
GREENFIELD INDUSTRIES, INC.
EIN: 04-2917072
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
SCHEDULE H, LINE 4I
DECEMBER 31, 2002
Identity
of Issue Description of Investment Current Value
- -------------------------------------------------------------------------------------------------------------------
Mutual Funds
------------
*Putnam Putnam New Opportunities Fund $ 9,749,034
*Putnam The Putnam Fund for Growth & Income 9,397,888
*Putnam Putnam Asset Allocation: Balanced Portfolio 7,851,669
Vanguard Vanguard Institutional Index Fund 7,318,432
*Putnam Putnam International Growth Fund 1,126,873
Morgan Stanley MSIF US Small Cap Core Portfolio 625,707
*Putnam Putnam Asset Allocation: Conservative Portfolio 437,479
*Putnam Putnam Asset Allocation: Growth Portfolio 385,828
*Putnam Putnam Voyager Fund 381,939
Vanguard Vanguard Total Bond Mkt. Index Fund 235,697
PIMCO PIMCO Renaissance Institutional Fund 62,892
-----------
Total Mutual Funds 37,573,438
-----------
Collective/Common Trusts
------------------------
Invesco PRIMCO Stable Value Fund (A) 28,227,043
-----------
Common Stock
------------
*Kennametal Kennametal Inc. Common Stock Fund 11,880,404
Northrop Northrop Grumman Common Stock Fund 96,044
Grumman -----------
Total Common Stock 11,976,448
-----------
Loans to Participants
---------------------
*Participants Loans to Participants, Maturities: from 2003 to
2031, Interest rates 5.3% to 10.5% 5,538,975
-----------
Total Investments $83,315,904
===========
* Party-in-interest.
(A) Fair value of fund is $29,787,539.
10
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the plan administrator of the Greenfield Industries, Inc. Retirement Income
Savings Plan has duly caused this annual report to be signed on its behalf by
the undersigned, hereunto duly authorized, in the City of Augusta, Richmond
County, State of Georgia.
GREENFIELD INDUSTRIES, INC.
RETIREMENT INCOME SAVINGS PLAN
Date: June 25, 2003 By: /s/ Michael Pepperney
-------------------------------
Michael Pepperney
Plan Administrator
11
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-88049) of Kennametal Inc. of our report dated
June 6, 2003 relating to the financial statements of the Greenfield Industries,
Inc. Retirement Income Savings Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
-----------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 25, 2003
12
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Greenfield Industries, Inc. Retirement Income Savings
Plan (the "Plan") on Form 11-K for the period ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
the undersigned, as plan administrator of the Plan, certifies, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Plan.
/s/ Michael Pepperney
- --------------------------
Michael Pepperney
Plan Administrator
Greenfield Industries, Inc. Retirement Income Savings Plan
June 25, 2003
* This certification is made solely for purposes of 18 U.S.C. Section 1350,
subject to the knowledge standard contained therein, and not for any other
purpose. A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to the Plan and
will be retained by the Plan and furnished to the Securities and Exchange
Commission or its staff upon request.
13
