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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, 2003
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
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Report of Independent Registered Public Accounting Firm....................................................... 2
Financial Statements:
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002............................................................................... 3
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002................................................................... 4
Notes to Financial Statements............................................................................ 5
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003........................................................................................ 11
Signatures.................................................................................................... 12
Exhibit 23 - Consent of Independent Registered Public Accounting Firm......................................... 13
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 REGISTERED PUBLIC ACCOUNTING FIRM
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 statements 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, 2003 and 2002, and the changes in net assets available for
benefits for the years ended December 31, 2003 and 2002, 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 the
standards of the Public Company Accounting Oversight Board (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, 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 25, 2004
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GREENFIELD INDUSTRIES, INC. RETIREMENT INCOME SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
December 31, December 31,
2003 2002
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ASSETS
Receivables:
Participant contributions $ 64,013 $ 199,201
Employer contributions 802,134 495,559
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Total receivables 866,147 694,760
----------------- -----------------
Investments 96,481,750 83,315,904
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NET ASSETS AVAILABLE FOR BENEFITS $ 97,347,897 $ 84,010,664
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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
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
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ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Participant contributions $ 4,590,538 $ 4,911,721
Employer contributions 3,045,709 2,094,898
Dividends and interest 2,265,609 2,746,545
Net appreciation of investments 12,336,062 --
Transfers from other Kennametal Plans -- 209,603
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Total additions 22,237,918 9,962,767
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to retirees (7,208,621) (7,443,957)
Loan distributions (272,368) (709,539)
Net depreciation of investments -- (13,007,516)
Employee withdrawals (1,018,221) (985,638)
Transfers to other Kennametal Plans (401,475) (750,953)
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Total deductions (8,900,685) (22,897,603)
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NET INCREASE (DECREASE) 13,337,233 (12,934,836)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 84,010,664 96,945,500
--------------- ----------------
End of year $ 97,347,897 $ 84,010,664
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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
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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.
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. Effective April 1, 2003,
participants may elect to contribute to the Plan from 1% to 20% of their wages
through payroll deductions. Prior to April 1, 2003, participants could elect to
contribute to the Plan from 1% to 15% 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.
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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 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 5.0% to 10.5% at December 31, 2003 and 5.3% to 10.5% at December 31,
2002. Participant loans outstanding at December 31, 2003 have maturity dates
ranging from 2004 to 2032.
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 at December 31, 2003:
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), 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.
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 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.
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,
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a widely recognized benchmark of U.S. stock market performance, and it remains
fully vested in stocks at all times.
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.
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.
Retirement Ready Funds - Each Retirement Ready Portfolio has a different target
date that relates to expected retirement dates. The dates range from 2010 to
2045 in five-year intervals, with the exception of the Maturity Portfolio, which
is designed for participants who are at or near retirement. All of the
Retirement Ready Portfolios are diversified across an array of Putnam mutual
funds that invest in different styles and include a mix of stocks, bonds, and
capital preservation investments. The portfolios can invest significantly in
foreign securities, which involve certain risks, such as currency fluctuations,
economic instability, and political developments.
Artisan Mid Cap Fund - This fund seeks long-term capital growth through a
diversified portfolio of stocks of midsize companies. The fund invests all or a
portion of its assets in small to midsize companies. Such investments increase
the risk of greater price fluctuations.
MSIF Small Company Growth Portfolio - This fund seeks to maximize long-term
capital appreciation by investing primarily in the equity securities of small
and midsize companies that are in the early stages of their life cycle. The fund
invests all or a portion of its assets in small to midsize companies. Such
investments increase the risk of greater price fluctuations.
Lord Abbett Small Cap Value Fund - This fund seeks long-term capital
appreciation by investing primarily in common stocks of small companies with a
market capitalization of less than $2 billion. Lord Abbett believes in a
low-risk approach to investing in these stocks. The fund invests all or a
portion of its assets in small to midsize companies. Such investments increase
the risk of greater price fluctuations.
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 corporate securities.
In addition, during the year ended December 31, 2003, participants were able to
direct their contributions to certain other investment options. Amounts held in
the discontinued investment options were converted to available investment
options with similar investment objectives.
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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.
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". INVESCO Institutional, Inc. certified that
all the investment contracts held in the Stable Value Fund (see Note 4) are
fully benefit-responsive. Shares of registered investment companies are valued
at the net asset value of shares held by the Plan at year-end. Units of
common/collective trust funds are valued at the net asset value of units held by
the Plan at year-end. Investments in common stock are valued at their quoted
market price at year-end. Participant loans are valued at cost, which
approximates fair value.
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, 2003 and 2002, 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, 2003 and 2002 were as follows:
2003 2002
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Kennametal Inc. Common Stock Fund $ 1,989,192 $ (1,800,343)
Common/Collective Trusts 1,250,033 --
All Other 9,096,837 (11,207,173)
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Total $ 12,336,062 $(13,007,516)
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USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and changes therein, and disclosure of
contingent assets and liabilities. Actual results may differ from these
estimates.
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3. INVESTMENTS EXCEEDING FIVE PERCENT OF NET ASSETS
The values of individual investments that represent five percent or more of the
Plan's total net assets as of December 31, 2003 and 2002 were as follows:
2003 2002
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AT CONTRACT VALUE:
Stable Value Fund $27,115,469 $28,227,043
AT FAIR MARKET VALUE AS DETERMINED BY QUOTED MARKET PRICES:
Artisan Mid Cap Fund 11,432,085 --
Kennametal Inc. Common Stock Fund 14,870,515 11,880,404
Putnam New Opportunities Fund -- 9,749,034
The Putnam Fund for Growth & Income 9,566,654 9,397,888
Putnam Asset Allocation: Balanced Fund -- 7,851,669
Vanguard Institutional Index Fund 9,119,451 7,318,432
Loans to Participants 5,307,750 5,538,975
AT ESTIMATED FAIR VALUE:
Putnam Retirementready 2015, Class Y 9,425,953 --
4. STABLE VALUE FUND
A portion of the Plan's investments are held in a Stable Value Fund which was
established for the investment of assets of the Plan and several other
Company-sponsored retirement plans. Each plan has an undivided interest in the
underlying assets of the Stable Value Fund. The assets of the Stable Value Fund
are held by Mellon Bank, N.A. (Trustee). At December 31, 2003 and 2002, the
Plan's interest in the Stable Value Fund was 24.4 percent and 23.5 percent,
respectively. Investment income and administrative expenses relating to the
Stable Value Fund are allocated to the individual plans based upon average
monthly balances invested by each plan. The underlying assets of the Stable
Value Fund include benefit-responsive investment contracts (the contracts). The
crediting interest rates on the contracts ranged from 1.0 percent to 7.1 percent
and 1.4 percent to 7.2 percent at December 31, 2003 and 2002, respectively. The
average yields on the contracts ranged from 1.2 percent to 7.1 percent and 2.2
percent to 7.1 percent for the years ended December 31, 2003 and 2002,
respectively. The fair value of all investment contracts was $115,879,042 and
$126,432,678 at December 31, 2003 and 2002, respectively.
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Investments at contract value held by the Stable Value Fund at December 31, 2003
and 2002 are as follows:
December 31,
2003 2002
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Short Term Investments $ 1,253,506 $ 4,055,704
Insurance Investment Contracts 11,861,790 13,088,689
Synthetic Investment Contracts
Underlying Assets:
Common / Collective Trusts 93,307,466 48,955,815
Insurance Separate Account 4,464,219 6,563,123
Asset-Backed Securities 1,003,413 46,488,164
Treasury Obligations 3,367,910 5,590,884
Cash 117,088 777,965
Synthetic Wrapper Agreement (4,007,195) (5,670,635)
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Total $ 111,368,197 $ 119,849,709
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Total investment income for the Stable Value Fund was $5,061,804 and $6,178,565
for the years ended December 31, 2003 and 2002, respectively.
5. 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.
6. 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.
7. RELATED PARTY TRANSACTIONS
Certain investments of the Plan are mutual funds managed by Putnam Investments.
The trustee of the Plan is Putnam Fiduciary Trust Company 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 374,101 and 344,559 shares of
Kennametal Inc. common stock at December 31, 2003 and 2002, respectively. As a
result, transactions related to this investment fund 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, 2003
(a) (b)Issuer (c)Description (d)Cost (e)Fair Value
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Mutual Funds
Artisan Artisan Mid Cap Fund $ 11,432,085
*Putnam The Putnam Fund for Growth & Income 9,566,654
Vanguard Vanguard Institutional Index Fund 9,119,451
*Putnam Putnam International Equity Fund 1,534,594
PIMCO PIMCO Renaissance Institutional Fund 1,166,773
*Putnam Putnam Voyager Fund 1,165,196
Lord Abbett Lord Abbett Small Cap Value Fund 1,083,660
Morgan Stanley MSIF Small Company Growth Portfolio 625,032
Vanguard Vanguard Total Bond Mkt. Index Fund 574,186
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Total Mutual Funds 36,267,631
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Common/Collective Trusts
*Putnam Putnam Retirementready 2015 9,425,953
*Putnam Putnam Retirementready 2025 1,037,493
*Putnam Putnam Retirementready 2020 818,049
*Putnam Putnam Retirementready 2030 542,662
*Putnam Putnam Retirementready Income Fund 523,930
*Putnam Putnam Retirementready 2045 160,385
*Putnam Putnam Retirementready 2040 138,993
*Putnam Putnam Retirementready 2035 105,790
*Putnam Putnam Retirementready 2010 72,473
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Total Common/Collective Trusts 12,825,728
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Master Trust
Invesco Stable Value Fund 27,115,469
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Common Stock
*Kennametal Kennametal Inc. Common Stock Fund 14,870,515
Northrop Northrop Grumman Common Stock Fund 94,657
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Grumman
Total Common Stock 14,965,172
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Loans to Participants
Participants Loans to Participants, Maturities: from 2004 to
2032, Interest rates 5.0% to 10.5% 5,307,750
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Total Investments $ 96,481,750
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* Party-in-interest, for which a statutory exemption exists.
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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 29, 2004 By: /s/ Veronica McDonough
----------------------
Veronica McDonough
Plan Administrator
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