FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 Commission file number 1-5318 KENNAMETAL INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0900168 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) ROUTE 981 AT WESTMORELAND COUNTY AIRPORT P.O. BOX 231 LATROBE, PENNSYLVANIA 15650 (Address of registrant's principal executive offices) Registrant's telephone number, including area code: (412) 539-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: TITLE OF EACH CLASS OUTSTANDING AT APRIL 30, 1997 - ---------------------------------------- ----------------------------- Capital Stock, par value $1.25 per share 26,081,259
KENNAMETAL INC. FORM 10-Q FOR QUARTER ENDED MARCH 31, 1997 TABLE OF CONTENTS Item No. PART I. FINANCIAL INFORMATION 1. Financial Statements: Condensed Consolidated Balance Sheets (Unaudited) March 31, 1997 and June 30, 1996 Condensed Consolidated Statements of Income (Unaudited) Three months and nine months ended March 31, 1997 and 1996 Condensed Consolidated Statements of Cash Flows (Unaudited) Nine months ended March 31, 1997 and 1996 Notes to Condensed Consolidated Financial Statements (Unaudited) 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION 1. Legal Proceedings 5. Other Information 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KENNAMETAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - ----------------------------------------------------------------------------- (in thousands) March 31, June 30, 1997 1996 --------- -------- ASSETS Current Assets: Cash and equivalents $ 18,698 $ 17,090 Accounts receivable, less allowance for doubtful accounts of $7,678 and $9,296 187,719 189,820 Inventories 203,902 204,934 Deferred income taxes 23,827 24,620 -------- -------- Total current assets 434,146 436,464 -------- -------- Property, Plant and Equipment: Land and buildings 156,279 156,064 Machinery and equipment 461,566 415,443 Less accumulated depreciation (325,361) (304,400) -------- -------- Net property, plant and equipment 292,484 267,107 -------- -------- Other Assets: Investments in affiliated companies 11,151 8,742 Intangible assets, less accumulated amortization of $23,010 and $20,795 42,980 33,756 Deferred income taxes 35,812 41,757 Other 15,819 11,665 -------- -------- Total other assets 105,762 95,920 -------- -------- Total assets $832,392 $799,491 ======== ======== LIABILITIES Current Liabilities: Current maturities of term debt and capital leases $ 12,799 $ 17,543 Notes payable to banks 77,930 57,549 Accounts payable 58,625 64,663 Accrued vacation pay 21,272 19,228 Other 71,617 59,830 -------- -------- Total current liabilities 242,243 218,813 -------- -------- Term Debt and Capital Leases, Less Current Maturities 52,442 56,059 Deferred Income Taxes 20,745 20,611 Other Liabilities 54,106 52,559 -------- -------- Total liabilities 369,536 348,042 -------- -------- Minority Interest in Consolidated Subsidiaries 8,796 12,500 -------- -------- SHAREHOLDERS' EQUITY Shareholders' Equity: Preferred stock, 5,000 shares authorized; none issued - - Capital stock, $1.25 par value; 70,000 shares authorized; 29,370 shares issued 36,712 36,712 Additional paid-in capital 90,437 87,417 Retained earnings 388,183 351,594 Treasury shares, at cost; 2,972 and 2,667 shares held (51,411) (35,734) Cumulative translation adjustments (9,861) (1,040) -------- -------- Total shareholders' equity 454,060 438,949 -------- -------- Total liabilities and shareholders' equity $832,392 $799,491 ======== ======== See accompanying notes to condensed consolidated financial statements.
<TABLE> KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - ----------------------------------------------------------------------------------- (in thousands, except per share data) <CAPTION> Three Months Ended Nine Months Ended March 31, March 31, ------------------- ------------------- 1997 1996 1997 1996 -------- -------- -------- -------- <S> <C> <C> <C> <C> OPERATIONS: Net sales $295,365 $286,095 $844,003 $800,172 Cost of goods sold 168,799 162,129 489,381 461,960 -------- -------- -------- -------- Gross profit 126,566 123,966 354,622 338,212 Research and development expenses 6,154 5,346 17,587 15,287 Selling, marketing and distribution expenses 67,150 61,037 194,940 181,044 General and administrative expenses 17,351 16,810 51,356 48,484 Amortization of intangibles 735 417 2,029 1,199 -------- -------- -------- -------- Operating income 35,176 40,356 88,710 92,198 Interest expense 2,744 2,896 8,159 9,008 Other income (expense) ( 304) 204 547 889 -------- -------- -------- -------- Income before taxes 32,128 37,664 81,098 84,079 Provision for income taxes 12,200 14,300 31,400 33,200 -------- -------- -------- -------- Net income $ 19,928 $ 23,364 $ 49,698 $ 50,879 ======== ======== ======== ======== PER SHARE DATA: Earnings per share $ 0.75 $ 0.88 $ 1.86 $ 1.91 ======== ======== ======== ======== Dividends per share $ 0.17 $ 0.15 $ 0.49 $ 0.45 ======== ======== ======== ======== Weighted average shares outstanding 26,691 26,644 26,719 26,622 ======== ======== ======== ======== See accompanying notes to condensed consolidated financial statements. </TABLE>
<TABLE> KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ------------------------------------------------------------------------------- (in thousands) <CAPTION> Nine Months Ended March 31, ----------------------- 1997 1996 ------- ------- <S> <C> <C> OPERATING ACTIVITIES: Net income $49,698 $50,879 Adjustments for noncash items: Depreciation and amortization 31,117 29,889 Other 6,911 11,950 Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable (653) (21,042) Inventories 1,405 (15,091) Accounts payable and accrued liabilities (2,658) (3,880) Other, net (16,669) (4,147) ------- ------- Net cash flow from operating activities 69,151 48,558 ------- ------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (57,024) (40,537) Disposals of property, plant and equipment 348 5,131 Acquisitions, net of cash (17,665) (1,441) Other 4,637 1,745 ------- ------- Net cash flow used for investing activities (69,704) (35,102) ------- ------- FINANCING ACTIVITIES: Increase in short-term debt 21,390 4,993 Increase in term debt 943 7,734 Reduction in term debt (8,427) (13,713) Purchase of treasury stock (2,631) - Dividend reinvestment and employee stock plans 4,762 1,583 Cash dividends paid to shareholders (13,109) (11,978) ------- ------- Net cash flow from (used for) financing activities 2,928 (11,381) ------- ------- Effect of exchange rate changes on cash (767) (278) ------- ------- CASH AND EQUIVALENTS: Net increase in cash and equivalents 1,608 1,797 Cash and equivalents, beginning 17,090 10,827 ------- ------- Cash and equivalents, ending $18,698 $12,624 ======= ======= SUPPLEMENTAL DISCLOSURES: Interest paid $ 6,421 $ 7,753 Income taxes paid 35,445 31,378 Purchase of treasury stock included in current liabilities 14,788 - See accompanying notes to condensed consolidated financial statements. </TABLE>
KENNAMETAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------ 1. The condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report. The condensed consolidated balance sheet as of June 30, 1996 has been derived from the audited balance sheet included in the Company's 1996 Annual Report. These interim statements are unaudited; however, management believes that all adjustments necessary for a fair presentation have been made and all adjustments are normal, recurring adjustments. The results for the nine months ended March 31, 1997 are not necessarily indicative of the results to be expected for the full fiscal year. 2. Inventories are stated at lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for a significant portion of domestic inventories and the first-in, first-out (FIFO) method or average cost for other inventories. The Company used the LIFO method of valuing its inventories for approximately 55 percent of total inventories at March 31, 1997. Because inventory valuations under the LIFO method are based on an annual determination of quantities and costs as of June 30 of each year, the interim LIFO valuations are based on management's projections of expected year-end inventory levels and costs. Therefore, the interim financial results are subject to any final year-end LIFO inventory adjustments. 3. The major classes of inventory as of the balance sheet dates were as follows (in thousands): March 31, June 30, 1997 1996 -------- -------- Finished goods $174,625 $169,108 Work in process and powder blends 49,093 59,326 Raw materials and supplies 21,097 16,514 -------- -------- Inventory at current cost 244,815 244,948 Less LIFO valuation (40,913) (40,014) -------- -------- Total inventories $203,902 $204,934 ======== ======== 4. The Company has been involved in various environmental cleanup and remediation activities at several of its manufacturing facilities. In addition, the Company has been named as a potentially responsible party at four Superfund sites in the United States. However, it is management's opinion, based on its evaluations and discussions with outside counsel and independent consultants, that the ultimate resolution of these environmental matters will not have a material adverse effect on the results of operations, financial position or cash flows of the Company. The Company maintains a Corporate Environmental, Health and Safety (EH&S) Department to facilitate compliance with environmental regulations and to monitor and oversee remediation activities. In addition, the Company has established an EH&S administrator at each of its domestic manufacturing facilities. The Company's financial management team periodically meets with members of the Corporate EH&S Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly and annual basis, management establishes or adjusts financial provisions and reserves for environmental contingencies in accordance with Statement of Financial Accounting Standards (SFAS) No. 5, "Accounting for Contingencies." 5. Effective July 1, 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The adoption of SFAS No. 121 did not have an impact on the consolidated financial statements, as the statement is consistent with existing Company policy. 6. During the nine-month period ended March 31, 1997, the Company acquired three companies with annual sales totaling approximately $22 million for a total consideration of approximately $19 million. The acquisitions were accounted for using the purchase method of accounting. The consolidated financial statements include the operating results of each business from the date of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions were not significant. 7. On April 25, 1997, the Company's J&L America, Inc. subsidiary ("J&L") obtained a $25.0 million line of credit with a bank and shortly thereafter borrowed $20.0 million under the line of credit to fund a dividend to Kennametal. Interest payable under the line of credit is based on the LIBOR rate plus 25 basis points and is required to be repaid in full within six months. Kennametal has guaranteed repayment of the line of credit in the event of default by J&L. 8. On April 28, 1997, the Company's board of directors approved a proposal for the sale, by a newly formed subsidiary, JLK Direct Distribution Inc. ("JLK"), of up to 20 percent of its common stock in an initial public offering ("IPO"). It is expected that, following the IPO, Kennametal will own approximately 80 percent of the outstanding common stock of JLK and will retain a majority of both the economic and voting interests of JLK. JLK filed a registration statement with the Securities and Exchange Commission covering this IPO. JLK will operate the industrial supply business consisting of the Company's wholly owned J&L subsidiary and its Full Service Supply organization. JLK will meet the needs of small- and medium-sized customers through its direct marketing catalog and showroom programs and will serve large industrial manufacturers through integrated industrial supply programs. Additionally, on April 30, 1997, Kennametal, through its J&L subsidiary, acquired all the outstanding stock of the Strelinger Company (Strelinger). Strelinger is based in Troy, Michigan, and is engaged in the distribution of metalcutting tools and industrial supplies. Strelinger had sales of $30 million in its latest fiscal year and employed approximately 85 people. J&L paid approximately $4 million in cash and assumed certain liabilities totaling $7 million. 9. The Financial Accounting Standards Board ("FASB") recently issued SFAS No. 128, "Earnings Per Share" ("SFAS No. 128") and SFAS No. 129, "Disclosure of Information about Capital Structures" ("SFAS No. 129"). SFAS No. 128 was issued in February 1997 and is effective for periods ending after December 15, 1997. This statement, upon adoption, will require all prior ending earnings per share ("EPS") data to be restated to conform to the provisions of the statement. This statement's objective is to simplify the computations of EPS and to make the U.S. standard for EPS computations more compatible with that of the International Accounting Standards Committee. The Company will adopt SFAS No. 128 in fiscal 1998 and does not anticipate that the statement will have a significant impact on its reported EPS. SFAS No. 129 was issued in February 1997 and is effective for periods ending after December 15, 1997. This statement, upon adoption, will require all companies to provide specific disclosure regarding their capital structure. SFAS No. 129 will specify the disclosure for all companies, including descriptions of their capital structure and the contractual rights of the holders of such securities. The Company will adopt SFAS No. 129 in fiscal 1998 and does not anticipate that the statement will have a significant impact on its disclosure. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ----------------------------------------------------------------------------- FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES There were no material changes in financial position, liquidity or capital resources between June 30, 1996 and March 31, 1997. The ratio of current assets to current liabilities was 1.8 as of March 31, 1997, compared to 2.0 as of June 30, 1996. The debt-to-capital ratio (i.e., total debt divided by the sum of total debt and shareholders' equity) was 24 percent as of March 31, 1997, and 23 percent as of June 30, 1996. On January 31, 1997, the Company announced the adoption of a program to repurchase from time to time up to a total of 1.6 million shares of its outstanding capital stock. The repurchases were made in the open market or in negotiated or other permissible transactions. During the period ended March 31, 1997, the Company repurchased approximately 465,000 shares of its common stock at a total cost of approximately $17.4 million. Furthermore, through April 30, 1997, the Company purchased an additional 316,000 shares of its common stock at a total cost of approximately $11.2 million. On April 25, 1997, the Company's J&L subsidiary obtained a $25.0 million line of credit with a bank and shortly thereafter borrowed $20.0 million under the line or credit to fund a dividend to Kennametal. Interest payable under the line of credit is based on the LIBOR rate plus 25 basis points and is required to be repaid in full within six months. Kennametal has guaranteed repayment of the line of credit in the event of default by J&L. Capital expenditures are estimated to be $70-80 million in fiscal year 1997. Expenditures are being made to construct a new corporate headquarters and a manufacturing facility in China to acquire additional client-server information systems and to upgrade machinery and equipment. Capital expenditures are being financed with cash from operations and borrowings under existing revolving credit agreements with banks. RESULTS OF OPERATIONS SALES AND EARNINGS During the quarter ended March 31, 1997, consolidated sales were $295 million, up 3 percent from $286 million in the same quarter last year. Net income was $19.9 million, or $0.75 per share, as compared with net income of $23.4 million, or $0.88 per share in the same quarter last year. During the nine-month period ended March 31, 1997, consolidated sales were $844 million, up 5 percent from $800 million last year. Net income was $49.7 million, or $1.86 per share, compared to $50.9 million, or $1.91 per share last year. For the quarter ended March 31, 1997, the overall increase in sales was attributed to higher sales of metalworking products and industrial supplies sold to the Industrial Supply market through J&L Industrial Supply and through Full Service Supply programs. The increase in sales was offset in part by lower sales of metalworking products in Europe, primarily in Germany, as a result of weak economic conditions in Germany and negative currency translation effects. The following table presents the Company's sales by market and geographic area (in thousands): <TABLE> <CAPTION> Three Months Ended Nine Months Ended March 31, March 31, -------------------------- -------- -------- -------- 1997 1996 % Change 1997 1996 % Change -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> By Market: Metalworking: North America $ 95,992 $ 97,524 (2)% $277,835 $274,600 1% Europe 65,116 73,417 (11) 187,525 206,548 (9) Asia-Pacific 9,721 9,144 6 30,480 25,715 19 Industrial Supply 86,693 69,677 24 234,061 185,354 26 Mining and Construction 37,843 36,333 4 114,102 107,955 6 -------- -------- --- -------- -------- --- Net sales $295,365 $286,095 3% $844,003 $800,172 5% ======== ======== === ======== ======== === By Geographic Area: Within the United States $192,173 $175,813 9% $545,843 $488,173 12% International 103,192 110,282 (6) 298,160 311,999 (4) -------- -------- --- -------- -------- --- Net sales $295,365 $286,095 3% $844,003 $800,172 5% ======== ======== === ======== ======== === </TABLE> METALWORKING MARKETS During the March 1997 quarter, sales of traditional metalcutting products sold through all sales channels in North America, including sales through the Industrial Supply market, increased 4 percent due to modest but steadily improving economic conditions in the United States and due to continued emphasis on milling and drilling products. Sales, as reflected in the North America Metalworking market, decreased 2 percent during the quarter. Sales in the Europe Metalworking market decreased 11 percent. Demand for metalworking products continued to be slow due to weak economic conditions in Europe, principally in Germany. However, sales grew in the United Kingdom and France. Excluding the impact of unfavorable foreign currency translation effects, sales in the Europe Metalworking market decreased 6 percent. In the Asia-Pacific Metalworking market, sales rose 6 percent as a result of increased demand in Australia, Singapore and Japan, although sales were again impacted by soft economic conditions in Korea and Thailand. Excluding unfavorable foreign currency translation effects, sales in the Asia-Pacific Metalworking market increased 11 percent. For the nine-month period, sales in the North America Metalworking market increased 1 percent because of stable economic conditions in the United States and due to continued emphasis on milling and drilling products. In the Europe Metalworking market, sales decreased 9 percent because of weak economic conditions in Europe, primarily in Germany, and from the impact of unfavorable foreign currency translation effects. In the Asia-Pacific Metalworking market, sales increased 19 percent because of increased demand. INDUSTRIAL SUPPLY MARKET During the March 1997 quarter, sales in the Industrial Supply market increased 24 percent as a result of increased sales through mail order and Full Service Supply programs. Sales increased primarily because of the expanded product offering of over 20,000 new stock keeping units (SKUs) in J&L's 1997 master catalog and from the addition of new showrooms and innovative marketing programs. During the third quarter, J&L opened a new location in Houston, Texas, and now operates a total of 23 locations in the United States and one location in the United Kingdom. The Industrial Supply market now represents 29 percent of total sales. For the nine-month period, sales in the Industrial Supply market increased 26 percent due to an expanded product offering in the 1997 master catalog, new showrooms and innovative marketing programs and due to new and existing Full Service Supply programs with large customers. MINING AND CONSTRUCTION MARKET During the March 1997 quarter, sales in the Mining and Construction market increased 4 percent from the previous year as a result of increased domestic demand for mining tools offset by slightly lower demand for highway construction tools. International sales of mining and highway construction tools declined slightly as a result of weak economic conditions in Europe. For the nine-month period, sales of mining and construction tools increased 6 percent from the prior year primarily because of increased sales of domestic mining tools. GROSS PROFIT MARGIN As a percentage of sales, gross profit margin for the March 1997 quarter was 42.9 percent compared to 43.3 percent last year. The gross profit margin declined as a result of lower production volumes, unfavorable foreign currency translation effects coupled with a less favorable sales mix. This decrease was partially offset by productivity improvements related to the Focused Factory initiative. For the nine-month period, the gross profit margin was 42.0 percent, compared with 42.3 percent last year. The gross profit margin declined slightly as a result of lower production volumes, unfavorable foreign currency translation effects and from a less favorable sales mix. This decline was partially offset by productivity improvements related to the Focused Factory initiative. OPERATING EXPENSES For the quarter ended March 31, 1997, operating expenses as a percentage of sales were 30.7 percent compared to 29.1 percent last year. Operating expenses increased 9 percent primarily because of higher costs related to the J&L showroom expansion program, including higher direct mail costs and increased direct marketing costs in new territories in the United States and in Europe. Operating expenses also increased from higher costs necessary to support new and existing Full Service Supply programs and from higher research and development costs. Also included in operating expenses are relocation and related costs incurred in connection with the construction of the new corporate headquarters which amounted to $1.7 million during the third quarter. For the nine-month period, operating expenses as a percentage of sales were 31.3 percent compared to 30.6 percent last year. Operating expenses increased primarily because of higher costs related to the J&L showroom expansion program, including higher direct mail costs and increased direct marketing in new territories in the United States and in Europe. Operating expenses also increased from higher costs to support new and existing Full Service Supply programs, higher research and development costs and from earlier than anticipated relocation and related costs of $2.6 million related to the new corporate headquarters. INCOME TAXES The effective tax rate was 38 percent, the same as in the third quarter of a year ago. For the nine-month period, the effective tax rate was 39 percent compared to 40 percent in the prior year. OUTLOOK In looking to the fourth quarter ending June 30, 1997, management expects consolidated sales to increase over the fourth quarter of fiscal 1996. Sales to the North America Metalworking market should benefit from slowly improving economic conditions in the United States. Sales in the Europe Metalworking market are expected to remain weak. Sales in the Asia-Pacific Metalworking market are expected to continue to be slow. Sales in the Industrial Supply market should continue to benefit from expansion of locations, increased mail order sales as a result of the expanded product offering in the new J&L Industrial Supply master catalog and new Full Service Supply programs. Sales in the Mining and Construction market should increase from additional domestic demand. This Form 10-Q, including the prior two paragraphs, contains "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934. Actual results can differ from those in the forward-looking statements to the extent that the anticipated economic conditions in the United States, Europe and Asia-Pacific are not realized. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ---------------------------------------------------------------------------- The information set forth in Note 4 to the condensed consolidated financial statements, contained in Part I, Item 1 of this Form 10-Q, is incorporated by reference herein and supplements the information previously reported in Part I, Item 3 of the Company's Form 10-K for the year ended June 30, 1996, which is also incorporated by reference herein. It is management's opinion, based on its evaluation and discussions with outside counsel, that the Company has viable defenses to these cases and that, in any event, the ultimate resolutions of these matters will not have a materially adverse effect on the results of operations, financial position or cash flows of the Company. ITEM 5. OTHER INFORMATION - ------------------------------------------------------------------------------ On April 28, 1997, the Company's board of directors approved a proposal for the sale, by a newly formed subsidiary, JLK Direct Distribution Inc. ("JLK"), of up to 20 percent of its common stock in an initial public offering ("IPO"). It is expected that, following the offering, Kennametal will own approximately 80 percent of the outstanding common stock of JLK and will retain a majority of both the economic and voting interests of JLK. The Company also filed a registration statement with the Securities and Exchange Commission covering this offering. On April 28, 1997, the Company issued a press release announcing the IPO. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------------------------------------------- (a) Exhibits (10) Material Contracts 10.1 Form of Employment Agreement with certain executive officers Filed herewith 10.2 Supplemental Executive Retirement Plan Filed herewith 10.3 Amendment to Credit Agreement dated April 19, 1996 Filed herewith (27) Financial Data Schedule for the nine months ended March 31, 1997, submitted to the Securities and Exchange Commission in electronic format Filed herewith (99) Additional Exhibits Press Release Dated April 28, 1997 Filed herewith (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KENNAMETAL INC. Date: May 13, 1997 By: /s/ RICHARD J. ORWIG -------------------- Richard J. Orwig Vice President Chief Financial and Administrative Officer