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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
| Filed by the Registrant | ☒ | Filed by a Party other than the Registrant | ☐ |
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Check the appropriate box:
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| ☐ | Preliminary Proxy Statement |
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| ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| ☒ | Definitive Proxy Statement |
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| ☐ | Definitive Additional Materials |
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| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
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KENNAMETAL INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
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| ☒ | No fee required. |
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| ☐ | Fee paid previously with preliminary materials: |
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| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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A MESSAGE FROM OUR BOARD OF DIRECTORS
September 17, 2024
Dear Fellow Shareowners,
We are pleased to invite you to the Kennametal Annual Meeting of Shareowners on Tuesday, October 29, 2024, at 2:00 p.m. Eastern Time. The meeting will be held virtually via live audio only webcast.
The Annual Meeting will include consideration of the matters included in the accompanying Notice of Annual Meeting and Proxy Statement. Every shareholder’s vote is important and if you are unable to attend the virtual meeting, please see the Notice of Annual Meeting of Shareowners for details on voting.
As you know, our Board of Directors is committed to excellent corporate governance, compliance and ethical conduct, promoting the best interests of our shareholders. As noted in this Proxy Statement, we continue to follow good governance practices in line with these interests.
We also continue to advance our Corporate Responsibility (CR) strategy, and you can learn more about that progress in our FY24 Corporate Responsibility Report found on the CR page of our Investor Relations website.
On behalf of the Board of Directors, thank you for your continued ownership and support of Kennametal.
Sincerely,
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| | Sanjay Chowbey | | William Lambert | |
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| | President and Chief Executive Officer | | Chairman of the Board | |
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Notice of Annual Meeting of Shareowners
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| When: | 2:00 p.m. (Eastern Time) on Tuesday, October 29, 2024 |
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| Where: | Virtually, via live audio webcast at www.virtualshareholdermeeting.com/KMT2024 |
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| Record Date: | Friday, August 30, 2024 (Only shareowners of record at the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting.) |
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Agenda
The Annual Meeting of Shareowners (“Annual Meeting”) will be held to consider and act upon the following matters:
| 1. | The election of nine directors for terms to expire in 2025; |
| 2. | The ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2025; |
| 3. | A non-binding (advisory) vote to approve the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement; and |
| 4. | The approval of the Kennametal Inc. 2024 Stock and Incentive Plan. |
Shareowners also will be asked to consider such other business as may properly come before the meeting. The Board of Directors has fixed Friday, August 30, 2024, as the record date (the “Record Date”). Only shareowners of record at the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting.
How to Vote
We are utilizing a U.S. Securities and Exchange Commission Rule that allows companies to furnish their proxy materials over the Internet rather than in paper form. We believe that this delivery process will reduce our environmental impact, and over time, lower the costs of printing and distributing our proxy materials. We believe that we can achieve these benefits with no impact on our shareowners’ timely access to this important information. If you have received a Notice, and you would prefer to receive proxy materials (including a proxy card) in printed form by mail or electronically by email, please follow the instructions contained in the Notice.
It is not necessary to attend the Annual Meeting to vote your shares. You may vote by proxy via telephone, Internet or by completing, dating, signing and returning a paper proxy card.
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| | By Order of the Board of Directors |
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| | Michelle R. Keating |
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| | Vice President, Secretary |
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| | and General Counsel |
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September 17, 2024
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALSFOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELDOCTOBER 29, 2024
This Proxy Statement and the 2024 Annual Report are available for viewing at
www.proxyvote.com
2024 Proxy Summary
This 2024 Proxy Summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider before voting, and we strongly encourage you to carefully read the Proxy Statement before voting.
General Information About the 2024 Annual Meeting of Shareowners
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| 2:00 p.m. (Eastern Time) on Tuesday, October 29, 2024 |
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| Virtually, via live audio webcast at www.virtualshareholdermeeting.com/KMT2024 |
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| August 30, 2024 |
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| For all matters, shareowners as of the Record Date have one vote for each share of capital stock held by such person on the Record Date |
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Proposals to be Considered and Board Recommendations
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| · Proposal · Board VotingRecommendation · Page Reference(for more detail) |
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| | | Election of nine directors with terms to expire in 2025. | FOR each Director Nominee | 7 |
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| | | Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2025. | FOR | 35 |
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| | | Non-binding (advisory) vote to approve the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement. | FOR | 92 |
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| | | Approval of the Kennametal Inc. 2024 Stock and Incentive Plan. | FOR | 97 |
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| | Kennametal Inc. 2024 Proxy Statement | I |
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Board Nominees
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| · · · · · · · · · · CommitteeMemberships · · Other Public |
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| Name · Age · DirectorSince (1) · Occupation · Independent · AC · CHC · N/CG · CompanyBoards |
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| Joseph Alvarado | | 72 | | 2018 | | Board of Directors,Arcosa, Inc.,PNC Financial Services Group,Inc. and Trinseo, S.A. | | Yes | | — | | ✘ | | Chair | | Arcosa, Inc.;PNC FinancialServices Group, Inc.;Trinseo, S.A. |
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| Sanjay Chowbey | | 56 | | 2024 | | President and ChiefExecutive Officer (“CEO”),Kennametal Inc. | | No | | — | | — | | — | | — |
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| Cindy L. Davis | | 62 | | 2012 | | Board of Directors,Brinker International, Inc. andDeckers Outdoor Corporation | | Yes | | — | | Chair | | ✘ | | BrinkerInternational, Inc.;Deckers OutdoorCorporation |
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| William J. Harvey | | 73 | | 2011 | | Board of Directors,Bridgestone Americas, Inc.,Origin Materials, Inc., HuberEngineered Woods LLC and CleanChemistry, Inc. | | Yes | | — | | ✘ | | ✘ | | Origin Materials, Inc. |
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| William M. Lambert | | 66 | | 2016 | | Chairman of the Board,Kennametal Inc. | | Yes | | — | | — | | — | | MSA Safety, Inc. |
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| Lorraine M. Martin | | 62 | | 2018 | | President and CEO,National Safety Council | | Yes | | — | | ✘ | | | | IperionX Limited |
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| Sagar A. Patel | | 58 | | 2016 | | Consultant, Aerospace &Defense industry | | Yes | | ✘ | | — | | ✘ | | — |
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| Paul Sternlieb | | 52 | | 2023 | | President and CEO and member ofthe Board of Directors, Enerpac ToolGroup | | Yes | | ✘ | | — | | — | | Enerpac Tool Group |
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| Steven H. Wunning | | 73 | | 2005 | | Board of Directors,Summit Materials, Inc. | | Yes | | Chair | | — | | — | | Summit Materials, Inc. |
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| (1) | References are to calendar years. |
| CHC | Compensation and Human Capital Committee |
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| N/CG | Nominating/Corporate Governance Committee |
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| ● | Attendance: In Fiscal 2024, each of our director nominees serving on the Board attended at least 75% of the Board and committee meetings on which he or she sat during his or her tenure as a director. The following changes were made to the Board in Fiscal 2024: Mr. Rossi retired from the Kennametal Inc. Board effective May 31, 2024; Mr. Chowbey was elected to the Kennametal Inc. Board effective June 1, 2024; Mr. Stranghoener stepped down as Chairman of the Board effective November 1, 2023; Mr. Lambert was appointed as Chairman of the Board effective November 1, 2023. Effective November 1, 2023, within the Audit Committee the following changes became effective: Mr. Lambert stepped down as the Chair and was replaced by Mr. Wunning and Mr. Stranghoener was appointed to serve. At the same time, effective November 1, 2023, within the Nominating/Corporate Governance Committee, the following changes occurred: Mr. Harvey stepped down as the Chair and was replaced by Mr. Alvarado; Mr. Wunning came off of the Committee; and Mr. Patel was appointed to serve. During Fiscal 2024, there were no changes to the Compensation and Human Capital Committee membership. |
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| ● | Director Elections: Directors are elected by a majority of votes cast; meaning that the number of votes cast “for” such director nominee must exceed the number of votes cast “against” such nominee in order for a director to be elected. |
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| II | Kennametal Inc. 2024 Proxy Statement | |
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Corporate Governance Highlights
Our Board has a strong commitment to ethical conduct and good corporate governance, which promotes the long-term interests of shareowners, strengthens Board and management accountability and helps build public trust in the Company. The dashboard below provides a snapshot of the Company’s current corporate governance policies.
| ● | Declassified Board of Directors — The Company’s By-Laws provide for a declassified Board of Directors, whereby all Directors are elected to one-year terms. |
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| ● | Separation of CEO and Chairman — The roles of the Chief Executive Officer and the Chairman of the Board are separate. An independent director serves as our Chairman of the Board. |
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| ● | Majority Voting in Director Elections — Director elections are conducted on a majority voting basis and without cumulative voting. |
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| ● | Change in Control Double-Trigger Vesting Provision — The Company’s 2020 Stock and Incentive Plan requires both a change in control of the Company and termination of the executive’s employment (“double-trigger”) for unvested or unearned equity awards to vest on an accelerated basis. |
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| ● | Governance Guidelines — The Board has established Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as the Board’s mission, a Director’s responsibilities, Director qualifications, determination of Director independence, Board committee structure, Chief Executive Officer performance evaluations and management succession. The Board regularly reviews developments in corporate governance and updates the Corporate Governance Guidelines and other governance materials as it deems necessary and appropriate. The Company’s Corporate Governance Guidelines are available on its website at www.kennametal.com on the “Corporate Governance” page under “Investor Relations.” |
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| ● | Independent Directors — Our Board is comprised of all independent directors, other than our President and CEO. |
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| ● | Independent Directors Regularly Meet — Our independent directors meet in executive sessions, led by our independent Chairman of the Board, at each regularly scheduled Board meeting. |
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| ● | Independent Board Committees — We have three standing Board committees with only independent directors serving as members. |
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| ● | Annual Board and Committee Self-Evaluation — Our Board and Board committees engage in a self-evaluation process annually. |
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| ● | High Rate of Board Attendance — In Fiscal 2024, each of our directors serving on the Board attended at least 75% of the Board and committee meetings on which he or she sat during his or her tenure. |
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| ● | No Poison Pill — The Company currently does not have a poison pill in place. |
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| ● | Strong Stock Ownership Guidelines for Directors and Executive Officers — We have adopted Stock Ownership Guidelines for directors, executives and key managers to effectively link the interests of management and our shareowners and to promote an ownership culture throughout our organization. We believe that stock should be acquired and held in quantities that encourage management to make decisions and take actions that will enhance Company performance and increase its value. |
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| ● | Policies Prohibiting Hedging, Pledging, and Shorting Company Securities — Our insider trading policy prohibits the hedging, pledging and shorting of Company stock by any member of the Board, executive officer, or other corporate officer, as defined in the policy, and their family members, without the prior approval and express authorization of the Company’s General Counsel. An exception to this prohibition may be granted where an individual wishes to pledge Company stock as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resorting to the pledged stock. |
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| | Kennametal Inc. 2024 Proxy Statement | III |
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Fiscal 2024 Summary
The Company achieved the following performance in sales, profitability and returns for Fiscal 2024 (see Appendix A for a reconciliation of these non-GAAP financial measures to the comparable GAAP measures):
| ● | Sales of $2.0 billion for Fiscal 2024, compared with sales of $2.1 billion for Fiscal 2023. |
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| ● | Net income attributable to Kennametal for Fiscal 2024 was $109.3 million, compared to $118.5 million in Fiscal 2023. |
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| ● | Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) for Fiscal 2024 was $300 million, or 14.7% EBITDA margin. Adjusted EBITDA for Fiscal 2024 was $313 million, or 15.3% Adjusted EBITDA margin. EBITDA for Fiscal 2023 was $316 million, or 15.2% EBITDA margin. Adjusted EBITDA for Fiscal 2023 was $323 million, or 15.5% Adjusted EBITDA margin. |
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| ● | Return on Invested Capital (“ROIC”) for Fiscal 2024 was 7.0% compared with 7.5% in Fiscal 2023. Adjusted ROIC for Fiscal 2024 was 7.6% compared with Adjusted ROIC of 7.8% in Fiscal 2023. |
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| ● | Primary Working Capital was $626 million as of June 30, 2024, compared to $662 million as of June 30, 2023. Primary Working Capital as a Percent of Sales (“PWCPS”) was 32.0% as of June 30, 2024, compared to 32.4% as of June 30, 2023. |
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Executive Compensation Highlights for Fiscal 2024
The following are the highlights of our 2024 executive compensation program:
| ● | Our Compensation and Human Capital Committee has adopted a strong pay-for-performance philosophy which is tested on an annual basis through a realizable pay-for-performance alignment assessment for the CEO position conducted by the Committee’s independent consultant. |
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| ● | Compensation is provided through a mix of base salary, annual cash-based incentives under our AIP, and equity-based long-term incentive awards (consisting of RSUs and PSUs). |
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| ● | Compensation is significantly tied to Company financial and stock performance, so that a substantial portion of the compensation provided to our executive officers is at risk. |
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| ● | The Committee has adopted certain design methodologies in our incentive arrangements to help mitigate the impact of cyclicality, commodity exposure and other factors which can impact performance goals established by the Committee and actual payouts received by executives. These methodologies include: |
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| ● | Annual cash-based incentive plan: “first half” and “second half” goal setting which provides the Committee with better insights into economic conditions which can impact our business either positively or negatively in rapid order. |
| ● | PSU plan: ROIC performance goals established annually for each fiscal year. No awards are paid until following the full three-year performance period. The Committee adopted this methodology to alleviate instances where rapidly changing economic conditions render performance goals unachievable early in the three-year performance period which can result in retention risks and the need for separate retention awards. |
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| IV | Kennametal Inc. 2024 Proxy Statement | |
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| ● | Payment of annual cash-based incentives under the AIP is primarily based on achieving critical measures of Company performance, consistent with our pay-for-performance philosophy. Payments earned under the Fiscal 2024 AIP were based on three corporate performance metrics for corporate (non-segment) NEOs: Revenue, Adjusted EBITDA, and PWCPS with ESG goals as a modifier. For Segment NEOs (Metal Cutting and Infrastructure), payments earned under the Fiscal 2024 AIP were based on four performance metrics: Corporate Adjusted EBITDA, Corporate PWCPS, segment revenue and segment Adjusted EBIT with ESG goals as a modifier. All financial metrics had two six-month performance periods, while the ESG goal modifier was measured over the full fiscal year. No earned award is paid prior to the end of the fiscal year. |
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| ● | Our equity-based long-term incentive program is intended to drive the achievement of critical long-term business objectives, align management’s interests with those of our shareowners and foster retention of key executives. In Fiscal 2024, 60% of the target value of each executive’s long-term incentive opportunity was granted as PSUs and 40% was granted as RSUs, all of which are settled in stock. |
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| ● | Vesting of Fiscal 2024 PSUs is based on the attainment of Adjusted ROIC financial performance goals (66.66% weight) and Average Adjusted EBITDA Margin (33.34% weight). PSUs are subject to an additional continuous service requirement, which provides that award recipients must remain employed by the Company through the payout date to receive the payout, which is three years after the grant date. For Fiscal 2024, only one-third of the Adjusted ROIC component of the FY2024-2026 PSU award will be reported in the subsequent tables following the Compensation and Human Capital Committee Report, as financial targets for remaining tranches will be set at or near the beginning of each subsequent fiscal year. Accordingly, under applicable disclosure rules, only the Fiscal 2024 tranche for Adjusted ROIC performance is included as part of the grant in the tables below. The remaining tranches will be reported as separate grants when the applicable PSU targets are set. |
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Our Fiscal 2024 financial and ESG performance had the following effects on the performance-based awards held by our named executive officers (“NEOs”), with no adjustments made to the actual financial performance.
Fiscal 2024 AIP
| ● | For Fiscal 2024 full year, including “first half” and “second half” performance, the Fiscal Year total payout for 12 months is 84.8% of target for corporate; 85.5% for the Metal Cutting segment; and 84.9% for the Infrastructure segment. Such payouts are based on performance against financial and ESG metrics. No payments are made at the end of the first six-month period. |
Performance Stock Units
| ● | The first of three tranches of the 2024 PSUs achieved Adjusted ROIC performance at a 67.3% multiple of target PSUs awarded. Average Adjusted EBITDA Margin is yet to be calculated for the three-year period ending June 30, 2026. |
| ● | The second of three tranches of the 2023 PSUs achieved Adjusted ROIC performance at a 67.3% multiple of target PSUs awarded. Average Adjusted EBITDA Margin is yet to be calculated for the three-year period ending June 30, 2025. |
| ● | The third of three tranches of the 2022 PSUs, as measured by Adjusted ROIC performance, was achieved at a 67.3% multiple of target. Average Adjusted EBITDA Margin for the three-year period ending June 30, 2024 was 0% , and the cumulative total payout for this tranche was 67.3% for the combined three years of performance (fiscal years 2022, 2023, and 2024). |
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| | Kennametal Inc. 2024 Proxy Statement | V |
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