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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, 2001
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
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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, 2001 and 2000........................................ 3
Statements of Changes in Net Assets Available for Benefits
Year ended December 31, 2001...................................... 4
Notes to Financial Statements..................................... 5
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001................................................. 10
Report of Former Independent Accountants............................... 11
Signatures............................................................. 12
Exhibit 23 - Consent of Independent Accountants........................ 13
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, 2001, and the changes in net assets available for benefits for
the year ended December 31, 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 audit. We
conducted our audit 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 audit provides a reasonable basis for our opinion. The
financial statements of the Plan as of December 31, 2000, and for the year then
ended were audited by other independent accountants whose report dated June 29,
2001, expressed an unqualified opinion on those financial statements.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule 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 audit 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 28, 2002
2
GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
December 31, December 31,
2001 2000
---- ----
ASSETS
Receivables:
Participant contributions $ 25,294 $ 50,825
Employer contributions 804,769 993,606
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Total receivables 830,063 1,044,431
----------- -----------
Investments 96,115,437 98,913,200
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NET ASSETS AVAILABLE FOR BENEFITS $96,945,500 $99,957,631
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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
YEAR ENDED DECEMBER 31, 2001
Kennametal Inc.
Common All Other
Stock Fund Funds Total
---------- ----- -----
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Participant contributions $ 185,318 $ 5,901,135 $ 6,086,453
Employer contributions 3,626,011 -- 3,626,011
Dividends and interest 429,409 2,802,815 3,232,224
Net appreciation of investments 3,269,402 -- 3,269,402
Other -- 126,077 126,077
------------ ------------ ------------
Total additions 7,510,140 8,830,027 16,340,167
------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to retirees (774,453) (6,538,486) (7,312,939)
Loan distributions -- (490,083) (490,083)
Net depreciation of investments -- (10,909,606) (10,909,606)
Employee withdrawals (91,788) (547,882) (639,670)
------------ ------------ ------------
Total deductions (866,241) (18,486,057) (19,352,298)
------------ ------------ ------------
NET TRANSFERS BETWEEN FUNDS (864,182) 864,182 --
------------ ------------ ------------
NET INCREASE (DECREASE) 5,779,717 (8,791,848) (3,012,131)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,424,123 92,533,508 99,957,631
------------ ------------ ------------
End of year $ 13,203,840 $ 83,741,660 $ 96,945,500
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The accompanying notes are an integral part of these statements.
4
GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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.
On October 1, 2000, several participant accounts were transferred to other
defined contribution plans sponsored by Kennametal Inc. to consolidate these
participant accounts into one plan.
ADMINISTRATION OF THE PLAN - The management of the Company has the authority and
responsibility for the general administration of the Plan. Effective October 1,
2000, Putnam Fiduciary Trust Company serves as the Trustee of the Plan and
Putnam Investment functions as the recordkeeper for the Plan. These functions
were previously performed by Key Trust Company of Ohio, N.A.
ELIGIBILITY - The Plan covers all non-union and certain unionized employees of
the Company and 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 contributes a base amount of 2% of each eligible
participant'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. In addition, the
Company is required to make matching contributions equal to 50% of the first 4%
of a participant's contribution. Company contributions are made quarterly.
Company contributions are made in Kennametal Inc. common stock.
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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 Company. 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. At December 31, 2001, interest rates on participant
loans ranged from 6% to 10.5%, with maturity dates ranging from January 2002 to
April 2026.
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. 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.
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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.
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.
TRW Inc. Common Stock - This fund consists entirely of TRW Inc. common stock for
investors who want to participate in the growth of TRW Inc. as part owners of
TRW. This investment fund is closed to new participants.
2. ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are maintained on the
accrual basis of accounting.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS No. 133), as amended. SFAS No. 133 requires that an
entity recognize all derivatives and measure those instruments at fair value.
The Plan was required to adopt SFAS No. 133 effective January 1, 2001.
Management initially was unable to determine the impact of SFAS No. 133 on the
Plan financial statements as a result of the inconsistency in accounting
literature between SFAS No. 133, requiring derivatives to be measured at fair
value, and the AICPA Audit and Accounting Guide on "Audits of Employee Benefit
Plans" and Statement of Position 94-4, "Reporting of Investment Contracts Held
by Health and Welfare Benefit Plans and Defined-Contribution Pension Plans,"
(SOP 94-4) requiring benefit- responsive investment contracts (including
synthetic GICs) to be measured at contract value.
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In October 2001, the Derivatives Implementation Group (DIG) of the FASB
tentatively released Implementation Issue C19 (DIG C19), which provides that
fully benefit-responsive investment contracts accounted for under either
paragraph 4 or 5 of SOP 94-4 are not subject to SFAS No. 133. The tentative
guidance included in DIG C19 has been incorporated into an exposure draft of the
Amendment of SFAS No. 133. Although this amendment project has yet to be
finalized, management believes that it provides the most relevant accounting
guidance for fully benefit- responsive investment contracts. Accordingly, the
Plan has measured all fully benefit responsive investment contracts at contract
value at December 31, 2001 and 2000. The SFAS No. 133 amendment project is
expected to be finalized during 2002. The Plan holds no other material
derivative financial instruments at December 31, 2001 or 2000.
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 difference between the contract value and the fair value
of all investment contracts was $870,515 and $205,109 at December 31, 2001 and
2000. The crediting interest rates on the contracts ranged from 3.94% to 7.12%
and 4.85% to 7.47% at December 31, 2001 and 2000.
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 year ended December 31, 2001, the Company paid all expenses
related to the operation of the Plan.
REALIZED/UNREALIZED GAINS AND LOSSES - Net appreciation (depreciation) of
investments is comprised of the change in market value compared to the cost of
investments retained in the Plan and realized gains or losses on security
transactions represent the difference between proceeds received and average
cost.
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.
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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, 2001 and 2000 were as
follows:
2001 2000
---- ----
Putnam New Opportunities Fund $14,484,463 $21,283,675
The Key Trust EB MaGIC Fund -- 16,586,341
The Putnam Fund for Growth & Income 12,614,750 14,410,492
Vanguard 500 Index Fund 9,753,364 12,071,968
Putnam Asset Allocation: Balanced Fund 9,800,235 11,640,117
PRIMCO Stable Value Fund 27,913,356 8,755,695
Kennametal Inc. common stock 12,399,071 6,430,517
Loans to Participants 6,067,945 5,852,865
4. TAX STATUS
The Internal Revenue Service has determined and informed the Plan sponsor by a
letter dated January 30, 1995, that the Plan and related trust are designed in
accordance with applicable sections of the Code. Although the Plan has been
amended since receiving the determination letter, the Plan administrator and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements 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.
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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, 2001
Identity
of Issue Description of Investment Current Value
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Mutual Funds
*Putnam Putnam New Opportunities Fund $ 14,484,464
*Putnam The Putnam Fund for Growth & Income 12,614,750
Vanguard Vanguard 500 Index Fund 9,753,364
*Putnam Putnam Asset Allocation: Balanced Portfolio 9,800,235
*Putnam Putnam International Growth Fund 1,349,576
*Putnam Putnam Voyager Fund 459,874
Morgan Stanley MAS Small CAP Value Fund 494,840
*Putnam Putnam Asset Allocation: Growth Portfolio 301,667
*Putnam Putnam Asset Allocation: Conservative Portfolio 408,067
------------
Total Mutual Funds 49,666,837
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Collective/Common Trusts
Invesco PRIMCO Stable Value Fund (A) 27,913,356
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Common Stock
*Kennametal Kennametal Inc. Common Stock Fund 12,399,071
*TRW TRW Inc. Common Stock 68,228
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Total Common Stock 12,467,299
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Loans to Participants
*Participants Loans to Participants, Maturities: from January 2002 to
April 2026, Interest rates 6% to 10.5% 6,067,945
------------
Total Investments $ 96,115,437
============
* Party-in-interest.
(A) Fair value of fund is $28,783,871.
10
The following report is a copy of a previously issued report by Arthur Andersen
LLP and it has not been reissued by Arthur Andersen LLP. Arthur Andersen LLP has
not consented to its inclusion; therefore, an investor's ability to recover any
potential damages may be limited.
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 Greenfield Industries, Inc. Retirement Income Savings Plan (the
Plan) as of December 31, 2000 and 1999, 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, 2000 and 1999, 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 29, 2001
11
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 28, 2002 By: /s/ SUZETTE PLETCHER
--------------------
Suzette Pletcher
Plan Administrator
12