Kennametal Inc. 8-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 8, 2006
Kennametal Inc.
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania
(State or Other Jurisdiction of Incorporation)
     
1-5318   25-0900168
(Commission File Number)   (IRS Employer Identification No.)
World Headquarters
1600 Technology Way
P.O. Box 231
Latrobe, Pennsylvania 15650-0231
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (724) 539-5000
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


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Item 2.01 Completion of Acquisition or Disposition of Assets
Item 9.01 Financial Statements and Exhibits
Signatures
Exhibit 99.1 Press Release dated June 8, 2006


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Item 2.01 Completion of Acquisition or Disposition of Assets
On June 8, 2006, Kennametal Inc. (Company) issued a press release announcing the completion of its previously announced divestiture of its J&L Industrial Supply (J&L) business unit to MSC Industrial Direct Co., Inc. (MSC). The transaction was consummated pursuant to the terms of the Stock Purchase Agreement dated March 15, 2006 (Stock Purchase Agreement), pursuant to which MSC Acquisition Corp. VI (a wholly owned subsidiary of MSC) paid $349.5 million in cash, subject to post closing adjustment, for all of the outstanding stock of J&L America, Inc. (a wholly owned subsidiary of the Company).
No material relationship existed other than in respect of the transaction between the Company and MSC or any of their respective affiliates, directors, officers or associates of any directors or officers. A copy of the Company’s press release is attached to this report as Exhibit 99.1 and is incorporated herein by reference.
The foregoing description of the transaction does not purport to be complete and is qualified in its entirety by the terms and conditions of the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Form 8-K filed on March 16, 2006 and incorporated by reference into this Item 2.01.
Item 9.01 Financial Statements and Exhibits
(b) Pro Forma Financial Statements
The following unaudited pro forma condensed consolidated financial statements give effect to the divestiture of J&L and are not necessarily indicative of future results.
The unaudited pro forma condensed consolidated balance sheet assumes divestiture of J&L on March 31, 2006. Such pro forma information is based upon the historical balance sheet data of the Company and J&L as of that date.
The unaudited pro forma condensed consolidated statements of income give effect to the divestiture of J&L for the year ended June 30, 2005 and for the nine months ended March 31, 2006 as if the divestiture occurred on July 1, 2004. These unaudited pro forma financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2005 and its Quarterly Report on Form 10-Q for the three and nine months ended March 31, 2006 as filed with the Securities and Exchange Commission.

 


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KENNAMETAL INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, 2006
                                 
(in thousands)   Kennametal Inc.     J&L (a)     Adjustments     Pro Forma  
ASSETS
                               
Current assets:
                               
Cash and cash equivalents
  $ 41,908     $     $ 222,477 (b)   $ 264,385  
Accounts receivables, net
    271,580             25,423 (c)     297,003  
Inventories
    366,845                   366,845  
Current assets held for sale
    88,185       (86,682 )           1,503  
Deferred income taxes
    72,807                   72,807  
Other current assets
    28,813                   28,813  
 
                           
Total current assets
    870,138                       1,031,356  
 
                           
 
                               
Property, plant and equipment, net
    508,299                       508,299  
 
                           
 
                               
Other assets:
                               
Investments in affiliated companies
    16,564                   16,564  
Goodwill
    504,872                   504,872  
Intangible assets, net
    119,857                   119,857  
Deferred income taxes
    46,399                   46,399  
Long-term assets held for sale
    50,243       (50,243 )            
Other
    40,246                   40,246  
 
                           
Total other assets
    778,181                       727,938  
 
                           
Total assets
  $ 2,156,618                     $ 2,267,593  
 
                           
 
                               
LIABILITIES
                               
Current liabilities:
                               
Current maturities of long-term debt and capital leases
  $ 1,595     $     $     $ 1,595  
Notes payable to bank
    2,793                   2,793  
Accounts payable
    111,826                   111,826  
Accrued income taxes
    35,495                   35,495  
Accrued expenses
    78,476             (1,691 )(d)     76,785  
Current liabilities of operations held for sale
    27,474       (27,474 )            
Other current liabilities
    129,186                   129,186  
 
                           
Total current liabilities
    386,845                       357,680  
Long-term debt and capital leases, less current maturities
    361,518                   361,518  
Deferred income taxes
    52,927                   52,927  
Accrued pension and postretirement benefits
    186,371                   186,371  
Other liabilities
    35,793                   35,793  
 
                           
Total liabilities
    1,023,454                       994,289  
 
                           
 
                               
Minority interest in consolidated subsidiaries
    18,054                   18,054  
 
                           
 
                               
SHAREOWNERS’ EQUITY
                               
Preferred stock
                       
Capital stock
    49,905                   49,905  
Additional paid-in capital
    612,155                   612,155  
Retained earnings
    513,782             140,140 (e)     653,922  
Treasury shares
    (20,131 )                 (20,131 )
Accumulated other comprehensive loss
    (40,601 )                 (40,601 )
 
                           
Total shareowners’ equity
    1,115,110                       1,255,250  
 
                           
 
                               
Total liabilities and shareowners’ equity
  $ 2,156,618                     $ 2,267,593  
 
                           
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

 


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KENNAMETAL INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
For the year ended June 30, 2005
                                 
(in thousands)   Kennametal Inc. (f)     J&L (g)     Adjustments     Pro Forma  
Operations
                               
Sales
  $ 2,304,167     $ (255,840 )   $ 39,639 (h)   $ 2,087,966  
Cost of goods sold
    1,513,634       (179,934 )     25,578 (h)     1,359,278  
 
                       
Gross profit
    790,533       (75,906 )     14,061       728,688  
 
Operating expense
    574,495       (49,060 )     (1,595 )(i)     523,840  
Goodwill impairment charge
    4,707                   4,707  
Amortization of intangibles
    3,460                   3,460  
 
                       
Operating income
    207,871       (26,846 )     15,656       196,681  
 
Interest expense
    27,277                   27,277  
Other income, net
    (3,683 )     (1,406 )     (626 )(j)     (5,715 )
 
                       
Income before provision for income taxes and minority interest
    184,277       (25,440 )     16,282       175,119  
Provision for income taxes
    61,394       (8,355 )     6,187 (k)     59,226  
Minority interest
    3,592                   3,592  
 
                       
Net income
  $ 119,291     $ (17,085 )   $ 10,095     $ 112,301  
 
                       
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
KENNAMETAL INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
For the nine months ended March 31, 2006
                                 
(in thousands)   Kennametal Inc. (l)     J&L (g)     Adjustments     Pro Forma  
Operations
                               
Sales
  $ 1,785,590     $ (204,725 )   $ 31,729 (h)   $ 1,612,594  
Cost of goods sold
    1,168,681       (143,501 )     20,970 (h)     1,046,150  
 
                       
Gross profit
    616,909       (61,224 )     10,759       566,444  
 
Operating expense
    441,442       (38,746 )     (348 )(i)     402,348  
Goodwill impairment charge
    5,030                   5,030  
Loss on assets held for sale
    692                   692  
Amortization of intangibles
    4,198                   4,198  
 
                       
Operating income
    165,547       (22,478 )     11,107       154,176  
 
Interest expense
    23,541                   23,541  
Other income, net
    (1,855 )     (294 )     (758 ) (j)     (2,907 )
 
                       
Income before provision for income taxes and minority interest
    143,861       (22,184 )     11,865       133,542  
Provision for income taxes
    49,733       (7,116 )     4,509 (k)     47,126  
Minority interest
    2,041                   2,041  
 
                       
Net income
  $ 92,087     $ (15,068 )   $ 7,356     $ 84,375  
 
                       
The accompany notes are an integral part of these pro forma condensed consolidated financial statements.

 


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KENNAMETAL INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands)
BALANCE SHEET
(a)   Represents assets and liabilities of J&L as of March 31, 2006, held for sale pursuant to the Stock Purchase Agreement.
 
(b)   Represents cash proceeds of $349.5 million and estimated post closing adjustments of $8.0 million less (i) estimated non-recurring transaction-related costs assumed to be paid as of March 31, 2006, including (a) $98.0 million income taxes, (b) $5.8 million employee-related payments, (c) $3.5 million advisor and professional fees and (c) $2.3 million other costs, and (ii) $25.4 million actual repayment related to J&L’s portion of the Company’s accounts receivable securitization program assumed to be paid as of March 31, 2006.
 
(c)   Represents J&L’s portion of the Company’s accounts receivable securitization program assumed to be repaid as of March 31, 2006 (see note b).
 
(d)   Represents the reversal of accrued employee-related costs assumed to have been paid as of March 31, 2006 (see note b).
 
(e)   Represents non-recurring gain (net of $98.0 million income taxes) less transaction-related costs (see notes b and d).
STATEMENTS OF INCOME
(f)   Derived from the Company’s audited Consolidated Statement of Income for the year ended June 30, 2005.
 
(g)   Represents operating results of J&L for the period presented.
 
(h)   Represents results of recurring sales to J&L and associated cost of sales previously eliminated in the consolidation of the Company for the period presented.
 
(i)   Represents J&L employee-related charges incurred by the Company during the period presented not previously allocated to J&L.
 
(j)   Represents fees related to J&L’s portion of the Company’s accounts receivable securitization program incurred by the Company during the period presented.
 
(k)   Provision for income taxes calculated utilizing the Company’s statutory tax rate of 38.0%.
 
(l)   Derived from the Company’s unaudited Condensed Consolidated Statement of Income for the nine months ended March 31, 2006.

 


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(d) Exhibits
Exhibit 99.1   Press Release dated June 8, 2006
-end-

 


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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
 
      KENNAMETAL INC.
 
       
Date: June 14, 2006
  By:   /s/ Frank P. Simpkins
 
       
 
      Frank P. Simpkins
 
      Vice President of Finance and Corporate Controller