KMT 6.30.15 PRESS RELEASE

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 28, 2015

(Exact Name of Registrant as Specified in Its Charter)




Pennsylvania	1-5318	25-0900168

(State or Other Jurisdiction of Incorporation)	(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):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On July 30, 2015, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement for its fiscal fourth quarter and fiscal year ended June 30, 2015.

The press release contains certain non-generally accepted accounting principles (GAAP) financial measures. The following GAAP financial measures have been presented on an adjusted basis: gross profit and margin, operating expense, operating expense as a percentage of sales, operating income (loss) and margin, net income (loss), diluted EPS (LPS), effective tax rate, Industrial operating income and margin and Infrastructure operating income (loss) and margin. Adjustments for the three months ended June 30, 2015 include: (1) restructuring and related charges, (2) tax impact of prior impairment charges and (3) tax redeployment expense. Adjustments for the three months ended June 30, 2014 include: (1) acquisition-related charges, (2) restructuring and related charges and (3) loss on divestiture. Adjustments for the twelve months ended June 30, 2015 include: (1) restructuring and related charges, (2) technology asset impairment charge, (3) goodwill and other intangible asset impairment charges and (4) tax redeployment expense. Adjustments for the twelve months ended June 30, 2014 include: (1) TMB inventory step-up, (2) acquisition-related charges, (3) restructuring and related charges, (4) tax repatriation expense and (5) loss on divestiture. Management adjusts for these items in measuring and compensating internal performance and to more readily compare the Company’s financial performance period-to-period. The press release also contains free operating cash flow which is a non-GAAP measure and is defined below.

Management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. Management believes that investors should have available the same information that management uses to assess operating performance, determine compensation and assess the capital structure of the Company. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Investors are cautioned that non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

Free Operating Cash Flow

Free operating cash flow is a non-GAAP financial measure and is defined by the Company as cash provided by operations (which is the most directly comparable GAAP measure) less capital expenditures plus proceeds from disposals of fixed assets. Management considers free operating cash flow to be an important indicator of Kennametal’s cash generating capability because it better represents cash generated from operations that can be used for dividends, debt repayment, strategic initiatives (such as acquisitions), and other investing and financing activities.

Debt to Capital is a non-GAAP financial measure and is defined by Kennametal as total debt divided by the sum of total equity plus total debt. The most directly comparable GAAP measure is debt to equity, which is defined as total debt divided by total equity. Management believes that Debt to Capital provides additional insight into the underlying capital structure and performance of the Company.



DEBT TO CAPITAL (UNAUDITED)
(in thousands, except percents)	June 30, 2015		June 30, 2014
Total debt	751,587		1,061,783
Total equity	1,375,435		1,961,608
Debt to equity, GAAP	54.6	%	54.1	%
Total debt	751,587		1,061,783
Total equity	1,375,435		1,961,608
Total capital	2,127,022		3,023,391
Debt to capital	35.3	%	35.1	%

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On July 28, 2015, the Compensation Committee of the Board of Directors of Kennametal Inc. (the “Corporation”) approved modified Forms of Equity Agreement to be issued under the Kennametal Inc. Stock and Incentive Plan of 2010 (as Amended and Restated October 22, 2013), and as further amended on January 27, 2015 (the “Stock and Incentive Plan”). Each Form of Equity Agreement has been modified (i) to change the vesting schedule from four years to three years; and (ii) to add a definition of termination by employee for “Good Cause” in connection with a Change in Control event. The foregoing description of the material terms of the modified Equity Forms of Agreement are qualified in their entirety by reference to the complete copy of the Equity Forms of Agreement, which are filed herewith.

Item 9.01 Financial Statements and Exhibits

Form of Kennametal Inc. Performance Unit Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Performance Unit Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Restricted Unit Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Restricted Unit Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Restricted Unit Award - Alternate Form (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Cash Settled Share-Based Award for China-based Employees (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Nonstatutory Stock Option Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Nonstatutory Stock Option Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Nonstatutory Stock Option Award - Alternate Form (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

Form of Kennametal Inc. Stock Appreciation Right Award for China-based Employees (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))

99.1 Fiscal 2015 Fourth Quarter Earnings Announcement

99.2 Fiscal 2015 Fourth Quarter Supplemental Presentation Materials

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: July 30, 2015	By:	/s/ Martha Fusco
		Martha Fusco
		Interim Chief Financial Officer, Vice President Finance and Corporate Controller

PERFORMANCE UNIT AWARD

Grant Date: ____________________

Kennametal Inc. (the “Company”) hereby grants to [NAME] (the “Awardee”), as of the Grant Date listed above, this Performance Unit Award (the “Award”) for [TARGET NUMBER OF STOCK UNITS] Stock Units, subject to the terms and conditions of the Kennametal Inc. Stock and Incentive Plan of 2010, as Amended and Restated on October 22, 2013, as further amended January 27, 2015 (the “Plan”) and the additional terms listed below. Capitalized terms used herein, but not otherwise defined, shall have the same meaning ascribed to them in the Plan.

1. Each Stock Unit represents the right to receive one Share of the Company’s Capital Stock, par value $1.25 per share, subject to the satisfaction of the Service Condition described herein and the Performance Conditions attached hereto as Exhibit A. Stock Units as initially awarded have no independent economic value, but rather are mere units of measurement used for purposes of calculating the number of Shares, if any, to be delivered under this Award. The maximum amount of Stock Units that may be earned under this Award is equal to two times the target number of Stock Units listed in the preamble above.

2. Except as otherwise provided in this Award, Awardee must be actively employed by the Company on the Payment Date (defined below) to be eligible to receive Shares in payment of any Stock Units earned under this Award (the “Service Condition”).

3. In addition to satisfaction of the Service Condition, payment under this Award is subject to, and contingent upon, achievement of the annual Performance Conditions during the Performance Period. The amount of this Award payable to Awardee will be determined by the level of achievement of the annual Performance Conditions as set forth in Exhibit A. Achievement of the Performance Conditions, including the level of achievement, if any, for each fiscal year in the Performance Period shall be determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”), in its sole discretion, and Awardee agrees to be bound by such determination; provided, however, the Compensation Committee shall not use its discretionary authority reserved to it under Section 6(g) of the Plan to reduce the number of Stock Units earned, if any, based on the achievement of the Performance Conditions pursuant to the terms and conditions of this Award. For each fiscal year of the Performance Period, any Stock Units that are not earned will be cancelled and forfeited at the end of such fiscal year.

4. Issuance and Distribution.

a. At the end of each fiscal year of the Performance Period to which this Award relates, the Compensation Committee will certify in writing the extent to which the applicable annual Performance Conditions have been achieved. For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee meeting in which the certification is made may be treated as written certification.

b. Subject to the terms and conditions of this Award and unless otherwise specifically provided herein, Stock Units earned by an Awardee will be settled and paid in Shares of the Company’s Capital Stock as soon as practicable following the end of the three-year Performance Period on a date determined in the Company’s discretion, but in no event later than the last day of the “applicable 2½ month period” specified in Treas. Reg. §1.409A-1(b)(4) (the “Payment Date”).

5. Change in Awardee’s Status; Change in Control.

a. Death or Disability. In the event an Awardee Separates from Service before the Payment Date on account of death or Disability, the Service Condition will be waived. For completed fiscal years, Awardee shall be entitled to receive payment for any Stock Units that have been earned based on the achievement of the Performance Conditions applicable to such fiscal year. For fiscal years not completed, the Performance Conditions will be deemed to have been achieved at the target level and the Awardee will be deemed to have earned for each such fiscal year a number of Stock Units that were able to be earned for such fiscal year.

Subject to the terms and conditions of this Award and unless otherwise specifically provided herein, in the event an Awardee Separates from Service on account of death or Disability, the Stock Units, to the extent earned by the Awardee, shall be paid as soon as practicable following the date of such Separation from Service, but in no event later than the last day of the “applicable 2½ month period” specified in Treas. Reg. §1.409A-1(b)(4).

b. Change of Control. In the event there is a Change in Control during the Performance Period, and unless otherwise specifically provided herein, payment under this Award will remain subject to the satisfaction of the Service Condition. For completed fiscal years prior to the Change in Control, Awardee shall remain eligible to receive payment for any Stock Units that have been earned based on the achievement of the Performance Conditions applicable to such fiscal year. For fiscal years not completed prior to the Change in Control, the Performance Conditions will be deemed to have been achieved at the target level and the Awardee will remain eligible to earn for each such fiscal year a number of Stock Units that were able to be earned for such fiscal year.

c. Change in Control Separation. In the event an Awardee Separates from Service prior to the Payment Date on account of an involuntary termination by the Company without cause or Awardee voluntarily terminates employment for Good Reason (as defined herein) (a) within the six-month period immediately preceding a Change in Control in contemplation of such Change in Control (and the Change in Control actually occurs) or (b) during the two-year period following a Change in Control (a “Change in Control Separation”), the Service Condition will be waived. For completed fiscal years prior to the Change in Control, Awardee shall be entitled to receive payment for any Stock Units that have been earned based on the achievement of the Performance Conditions applicable to such fiscal year. For fiscal years not completed prior to the Change in Control, the Performance Conditions will be deemed to have been achieved at the target level and the Awardee will be deemed to have earned for each such fiscal year a number of Stock Units that were able to be earned for such fiscal year.

Subject to the terms and conditions of this Award and unless otherwise specifically provided herein, in the event of an Change in Control Separation, the Stock Units, to the extent earned by the Awardee, shall be paid as soon as practicable following the date of such Change in Control Separation, but in no event later than the last day

of the “applicable 2½ month period” specified in Treas. Reg. §1.409A-1(b)(4); provided that, in the Committee’s discretion, the Stock Units may be settled in cash and/or securities or other property.

The term “Good Reason” for purposes of this Award shall mean the occurrence of any of the following in connection with a Change in Control:

(i) without the Awardee's express written consent, the material diminution of responsibilities or the assignment to the Awardee of any duties materially and substantially inconsistent with his positions, duties, responsibilities and status with Company immediately prior to a Change in Control, or a material change in his or her reporting responsibilities, titles or offices as in effect immediately prior to a Change in Control, or any removal of the Awardee from or any failure to re-elect the Awardee to any of such positions, except in connection with the termination of the Awardee's employment due to Cause (as hereinafter defined) or as a result of the Awardee’s death;

(ii) a material reduction by Company in the Awardee's base salary as in effect immediately prior to any Change in Control;

(iii) a failure by Company to continue to provide incentive compensation, under the rules by which incentives are provided, on a basis not materially less favorable to that provided by Company immediately prior to any Change in Control;

(iv) a material reduction in the overall level of employee benefits, including any benefit or compensation plan, stock option plan, retirement plan, life insurance plan, health and accident plan or disability plan in which Awardee is actively participating immediately prior to a Change in Control (provided, however, that there shall not be deemed to be any such failure if Company substitutes for the discontinued plan, a plan providing Awardee with substantially similar benefits) or the taking of any action by Company which would adversely affect Awardee's participation in or materially reduce Awardee's overall level of benefits under such plans or deprive Awardee of any material fringe benefits enjoyed by Awardee immediately prior to a Change-in-Control;

(v) the breach of this Agreement caused by the failure of Company to obtain the assumption of this Agreement by any successor; and

(vi) the relocation of the Awardee to a facility or a location more than 50 miles from the Awardee's then present location, without the Awardee's prior written consent.

Notwithstanding the forgoing, in order for the Awardee to terminate for Good Reason: (a) the Awardee must give written notice to Company or its successor of the Awardee's intention to terminate employment for Good Reason within sixty (60) days after the event or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Awardee of his right to terminate for Good Reason as a result of such act or omission, (b) the event must remain uncorrected by the Company for thirty (30) days following such notice (the "Notice Period"), and (c) such termination must occur within sixty (60) days after the expiration of the Notice Period.

d. Retirement. In the event a Retirement Eligible Awardee (as defined below) Separates from Service on account of Retirement during the Performance Period, the Service Condition will be waived and the amount of this Award to be paid, if any, will be determined as follows. For completed fiscal years, Awardee shall be entitled to receive payment for any Stock Units that have been earned based on the achievement of the Performance Conditions applicable to such Performance Period. For the fiscal year in which the Separation from Service occurs, the Awardee will be entitled to receive payment for a number of Stock Units determined by multiplying (x) the number of Stock Units that are earned based on the achievement of the Performance Conditions applicable to such fiscal year, times (y) the fraction equal to the number of completed months starting with July 1^st of the fiscal year in which the Separation from Service occurs and ending with the month of the Awardee’s Retirement, divided by the number of months within the

period. All other Stock Units granted under this Award, including Stock Units that could have been earned for fiscal years after the fiscal year in which the Separation from Service occurred, shall be cancelled and forfeited without payment by the Company or any Affiliate.

Notwithstanding any other provision of this Award to the contrary, with respect to an Awardee who is or becomes eligible to Separate from Service on account of Retirement during the Performance Period (a “Retirement Eligible Awardee”), any payment made to such Retirement Eligible Awardee under this Award by reason of (i) a Separation from Service on account of death shall be paid in the month following the month containing the date of such Separation from Service; (ii) a Separation from Service on account of Disability shall be paid in the month following the month containing the 6-month anniversary of the date of such Separation from Service (or, if earlier, the date specified in (iv) below); (iii) a Change in Control Separation shall be paid in the month following the month containing the 6-month anniversary of the date of such Change in Control Separation (or, if earlier, the date specified in (iv) below); or (iv) achievement of the annual Performance Conditions during the Performance Period as specified herein (and regardless of whether Retirement Eligible Awardee Separates from Service on account of Retirement) shall be paid in [August 20XX].

e. All Other Separations from Service. In the event an Awardee Separates from Service for any other reason (other than death, Disability, Retirement or Change in Control Separation), including, but not limited to, voluntarily by the Awardee or involuntarily by the Company with or without cause, prior to the Payment Date, all Stock Units granted to the Awardee shall be cancelled and forfeited, whether payable or not, without payment by the Company or any Affiliate.

6. The Stock Units will be entitled to receive Dividend Equivalents, which will be subject to all conditions and restrictions applicable to the underlying Stock Units to which they relate. Dividend Equivalents will accrue during the Performance Period. At the end of each fiscal year, Dividend Equivalents will be earned only for Stock Units that are earned or deemed earned under this Award for that fiscal year. With respect to Stock Units that are not earned for a fiscal year (because the applicable Performance Conditions are not satisfied or otherwise), Dividend Equivalents that were accrued for those Stock Units will be cancelled and forfeited along with the Stock Units and underlying Shares, without payment by the Company or any Affiliate. Dividend Equivalents will be paid in cash at such time as the underlying Stock Units to which they relate are paid.

7. The Stock Units may not be sold, assigned, pledged, exchanged, hypothecated, gifted or otherwise transferred, encumbered or disposed of prior to the Payment Date, except as described herein or in the Plan.

8. The Shares underlying the Stock Units shall not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. The Company may refuse to register a transfer of the Shares on the stock transfer records of the Company if the transfer constitutes a violation of any applicable securities law and the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Shares.

will be construed accordingly. To the extent a payment is subject to Section 409A and not excepted therefrom, such payment shall be treated as made on the specified date of payment if such payment is made at such date or a later date in the same calendar year or, if later, by the 15th day of the third calendar month following the specified date of payment, as provided and in accordance with Treas. Reg. § 1.409A-3(d). An Awardee shall have no right to designate the date of any payment under this Award. The Company reserves the right to administer, amend or modify the Award or to take any other action necessary or desirable to enable the Award to be interpreted and construed accordingly. Notwithstanding the foregoing, the Awardee acknowledges and agrees that Section 409A may impose upon the Awardee certain taxes or interest charges for which the Awardee is and shall remain solely responsible.

10. Notwithstanding anything to the contrary in this Award or the Plan, in the event that this Award is not accepted by the Awardee on or before the date that is 180 days from the grant date noted herein (the “Forfeiture Date”), then this Award shall become null and void and all Stock Units subject to this Award shall be forfeited by the Awardee as of the Forfeiture Date. For acceptance to be valid, the Awardee must accept this Award in the manner specified by the Company. Any Shares underlying the Stock Units covered by this Award that are forfeited by the Awardee shall be returned to the Plan and resume the status of shares available for grant.

11. All other terms and conditions applicable to this Award are contained in the Plan. A copy of the Plan and related Prospectus is available on your accounts page at netbenefits.fidelity.com under Plan Information and Documents, as well as on The Hub under Human Resources.

Title: Vice President, Secretary and General Counsel

Performance Conditions for FY16 LTIP Performance Unit Awards

I. ADJUSTED RETURN ON INVESTED CAPITAL (ADJ. ROIC) COMPONENT: WEIGHTED AT 60%



ADJ. ROIC
	FY16	FY17	FY18
Maximum	14%	14%	14%
Target	10%	10%	10%
Threshold	7%	7%	7%

Note: The table sets forth the three year period beginning July 1, 2014 and ending June 30, 2017 (“Performance Period”) referenced in the Performance Unit Award Agreement to which this Exhibit A is attached.



Performance Conditions Payout Table for ROIC Component
	Threshold	Target	Maximum
Performance Goal	7%	10%	14%
Payout Range	50%	100%	200%

Note: Interpolation between values shown in the above table will be made on a straight line basis. There will be no payment for performance below Threshold, and no additional payment for performance above Maximum.

Subject to the terms and conditions of this Award, up to one-third of the maximum number of Stock Units may be earned for each fiscal year of the Performance Period,

II. RELATIVE TOTAL SHAREHOLDER RETURN (RELATIVE TSR) COMPONENT: WEIGHTED AT 40%

(a) The Stock Units that may be earned by the Participant will be based on (i) the Corporation’s Total Shareholder Return, as described below, relative to the Peer Group’s (as set forth in Attachment) Total Shareholder Return for each specified period of time (“Performance Period”) and (ii) satisfaction of the condition of employment, as set forth below.

(i) “Total Shareholder Return” (or “TSR”) over each specified period shall be calculated in accordance with the following formula: ((Final Price + all cash dividends paid during the specified period, included as of the applicable ex-dividend date)/Initial Price) - 1, expressed as a percentage.

(ii) “Final Price” shall mean the average of the closing prices of the Common Stock of each peer company and the Company for the final thirty trading days of the specified period plus all cash dividends paid during the final thirty (30) trading days. For purposes of this Agreement, this shall mean the final thirty (30) trading days in fiscal 2016, 2017 and 2018, as applicable.

(iii) “Initial Price” shall mean the average of the closing prices of the Common Stock of each peer company and the Company for the last thirty (30) trading days preceding the beginning of the specified period plus all cash dividends paid during the last thirty (30) trading days. For purposes of this Agreement, the Initial Price shall be calculated based on the average of the closing stock prices over the thirty days ending on June 30, 2015 and the final thirty trading days ending on June 30, 2016 and June 30, 2017, as applicable.

(iv) The Company’s Total Shareholder Return for each specified period shall be measured as a percentile ranking in comparison with the index of the Peer Group Total Shareholder Return (the “Index”).

(b) The total number of shares of Common Stock to be received pursuant to this agreement shall be the “Award Shares” and shall be calculated as follows:

(i) 25% of the Target Stock Units shall be earned if the Company’s Total Shareholder Return for July 1, 2015 - June 30, 2016 (“Period 1”) is equal to the 55th percentile Total Shareholder Return of the Index for Period 1;

(ii) 25% of the Target Stock Units shall be earned if the Company’s Total Shareholder Return for July 1, 2016 - June 30, 2017 (“Period 2”) is equal to the 55th percentile Total Shareholder Return of the Index for Period 2;

(iii) 25% of the Target Stock Units shall be earned if the Company’s Total Shareholder Return for July 1, 2017 - June 30, 2018 (“Period 3”) is equal to the 55th percentile Total Shareholder Return of the Index for Period 3; and

(iv) 25% of the Target Stock Units shall be earned if the Company’s Total Shareholder Return for July 1, 2015 - June 30, 2018 (“Period 4”) is equal to the 55th percentile Total Shareholder Return of the Index for Period 4 (each of Period 1, Period 2, Period 3 and Period 4 is an “Applicable Period”);

The percentile rank calculation shall be calculated without including the Company.

Each of the share amounts set forth in (i), (ii), (iii) and (iv) above shall be subject to adjustment based on the following formula: shares earned = TSR Payout Factor x 0.25 x Target Stock Units. The “TSR Payout Factor” is based on the Company’s Total Shareholder Return for the Applicable Period relative to the Index, determined in accordance with the following table:



If the Company’s TSR rank against the Peer Group is:	TSR Payout Factor (% of Target TSR tock Units)
at the 30th percentile (Threshold)	50%
at the 55th percentile (Target)	100%
at the 80th percentile or more (Maximum)	200%

Subject to the terms and conditions of this Award, up to one-quarter of the maximum number of Stock Units may be earned in each measurement period of the performance period.

The TSR Payout Factor shall be interpolated on a straight-line basis between the percentile levels in the above table, but no amounts will be payable if the Company’s TSR rank against the Peer Group is below the Threshold level and no amounts over 200% will be paid out if the Company’s TSR rank against the Peer Group is above the 80th percentile.

By way of example to illustrate the calculation of the number of Award Shares earned if the Target Award Share amount is 1,200 shares. If the Company’s TSR rank in Period 1 was the 25th percentile, Period 2 was the 65th percentile, Period 3 was the 55th percentile and Period 4 was the 80th percentile, the number of Award Shares would be 1,320 shares (0+420+300+600) as shown in the table below:



				Award Shares (1,200 Target)
Period 1	25^th percentile	0%	25%	0
Period 2	65^th percentile	140%	25%	420
Period 3	55^th percentile	100%	25%	300
Period 4	80^th percentile	200%	25%	600
		Total Award Shares Earned		1,320

The Index group companies shall consist of those companies that comprise the S&P 400 Capital Goods Index on the date of grant. A detailed list of the companies that comprise the Index as of July 21, 2014 is attached. Peer Group companies will be adjusted as follows for activity during the Performance Period:

If the Company or a member of the Peer Group splits its stock, such company’s TSR will be adjusted for the stock split

If a member of the Peer Group is acquired by another company, the acquired Peer Group company will be removed from the Peer Group for the entire Performance Period

If a member of the Peer Group sells, spins‐off, or disposes of a portion of its business representing more than 50% of such Company’s total assets during the Performance Period, such Company will be removed from the Peer Group

If a member of the Peer Group acquires another company, the acquiring Peer Group company will remain in the Peer Group for the Performance Period

If a member of the Peer Group is delisted on all major stock exchanges, such delisted company will be removed from the Peer Group for the entire Performance Period

Members of the Peer Group that file for bankruptcy, liquidation or similar reorganization during the Performance Period will remain in the Peer Group, positioned below the lowest performing nonbankrupt member of the Peer Group

Any adjustments resulting in the removal of a peer company will not impact completed measurement periods during an outstanding performance period.

The Compensation Committee shall have the authority to make adjustments in response to a change in circumstances that results in a member of the peer group no longer satisfying the criteria for which such member was originally selected.

INDEX PEER GROUP COMPANIES

(as of July 16, 2015)

S&P 400 Capital Goods Index

AECOM Technology Corporation

Carlisle Companies Incorporated

Donaldson Company, Inc.

Esterline Technologies Corp.

Fortune Brands Home & Security, Inc.

Granite Construction Incorporated

Huntington Ingalls Industries, Inc.

Lennox International, Inc.

Lincoln Electric Holdings Inc.

MSC Industrial Direct Co. Inc.

Regal Beloit Corporation

Teledyne Technologies Inc.

Trinity Industries Inc.

Valmont Industries, Inc.

Westinghouse Air Brake Technologies Corporation

PERFORMANCE UNIT AWARD

(FOR PRESIDENT AND CEO)

Grant Date: ____________________

4. Issuance and Distribution.

For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee meeting in which the certification is made may be treated as written certification.

5. Change in Awardee’s Status; Change in Control.

soon as practicable following the date of such Change in Control Separation, but in no event later than the last day of the “applicable 2½ month period” specified in Treas. Reg. §1.409A-1(b)(4); provided that, in the Committee’s discretion, the Stock Units may be settled in cash and/or securities or other property.

The term “Good Reason” for purposes of this Award shall mean the occurrence of any of the following in connection with a Change in Control:

(ii) a material reduction by Company in the Awardee's base salary as in effect immediately prior to any Change in Control;

(v) the breach of this Agreement caused by the failure of Company to obtain the assumption of this Agreement by any successor; and

(vi) the relocation of the Awardee to a facility or a location more than 50 miles from the Awardee's then present location, without the Awardee's prior written consent.

Service occurs and ending with the month of the Awardee’s Retirement, divided by the number of months within the period. All other Stock Units granted under this Award, including Stock Units that could have been earned for fiscal years after the fiscal year in which the Separation from Service occurred, shall be cancelled and forfeited without payment by the Company or any Affiliate.

For purposes of this Award, the term “Retirement" shall mean the Awardee’s Separation from Service with the Company or any Subsidiary, Affiliate or Parent of the Company at a time when the Awardee (a) has attained age 55 with eight (8) years of service, (b) has attained age 65, or (c) is required by law or regulations to Separate from Service with the Company or any Subsidiary, Affiliate or Parent of the Company under a mandatory retirement scheme.

securities law and the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Shares.

9. This Performance Unit Award is intended to comply with Section 409A of the Internal Revenue Code (which deals with nonqualified deferred compensation) or an exception thereto and the regulations promulgated thereunder and will be construed accordingly. To the extent a payment is subject to Section 409A and not excepted therefrom, such payment shall be treated as made on the specified date of payment if such payment is made at such date or a later date in the same calendar year or, if later, by the 15th day of the third calendar month following the specified date of payment, as provided and in accordance with Treas. Reg. § 1.409A-3(d). An Awardee shall have no right to designate the date of any payment under this Award. The Company reserves the right to administer, amend or modify the Award or to take any other action necessary or desirable to enable the Award to be interpreted and construed accordingly. Notwithstanding the foregoing, the Awardee acknowledges and agrees that Section 409A may impose upon the Awardee certain taxes or interest charges for which the Awardee is and shall remain solely responsible.

Title: Vice President, Secretary and General Counsel

Performance Conditions for FY16 LTIP Performance Unit Awards

I. ADJUSTED RETURN ON INVESTED CAPITAL (ADJ. ROIC) COMPONENT: WEIGHTED AT 60%



ADJ. ROIC
	FY16	FY17	FY18
Maximum	14%	14%	14%
Target	10%	10%	10%
Threshold	7%	7%	7%



Performance Conditions Payout Table for ROIC Component
	Threshold	Target	Maximum
Performance Goal	7%	10%	14%
Payout Range	50%	100%	200%

Subject to the terms and conditions of this Award, up to one-third of the maximum number of Stock Units may be earned for each fiscal year of the Performance Period,

II. RELATIVE TOTAL SHAREHOLDER RETURN (RELATIVE TSR) COMPONENT: WEIGHTED AT 40%

Price shall be calculated based on the average of the closing stock prices over the thirty days ending on June 30, 2015 and the final thirty trading days ending on June 30, 2016 and June 30, 2017, as applicable.

(b) The total number of shares of Common Stock to be received pursuant to this agreement shall be the “Award Shares” and shall be calculated as follows:

The percentile rank calculation shall be calculated without including the Company.



If the Company’s TSR rank against the Peer Group is:	TSR Payout Factor (% of Target TSR tock Units)
at the 30th percentile (Threshold)	50%
at the 55th percentile (Target)	100%
at the 80th percentile or more (Maximum)	200%

Subject to the terms and conditions of this Award, up to one-quarter of the maximum number of Stock Units may be earned in each measurement period of the performance period.



				Award Shares (1,200 Target)
Period 1	25^th percentile	0%	25%	0
Period 2	65^th percentile	140%	25%	420
Period 3	55^th percentile	100%	25%	300
Period 4	80^th percentile	200%	25%	600
		Total Award Shares Earned		1,320

If the Company or a member of the Peer Group splits its stock, such company’s TSR will be adjusted for the stock split

If a member of the Peer Group is acquired by another company, the acquired Peer Group company will be removed from the Peer Group for the entire Performance Period

If a member of the Peer Group acquires another company, the acquiring Peer Group company will remain in the Peer Group for the Performance Period

If a member of the Peer Group is delisted on all major stock exchanges, such delisted company will be removed from the Peer Group for the entire Performance Period

Any adjustments resulting in the removal of a peer company will not impact completed measurement periods during an outstanding performance period.



RESTRUCTURING AND RELATED CHARGES AND SAVINGS (PRE-TAX)
	Estimated Charges	Current Quarter Charges	Charges To Date	Estimated Annualized Savings	Approximate Current Quarter Savings	Approximate Savings To Date	Expected Completion Date
Phase 1	$55M-$60M	$8M	$52M	$50M-$55M	$10M	$30M	6/30/2016
Phase 2	$90M-$100M	$12M	$24M	$40M-$50M	$7M	$7M	12/31/2016
Phase 3	$40M-$45M	$1M	$1M	$25M-$30M	—	—	3/31/2017
Total	$185M-$205M	$21M	$77M	$115M-$135M	$17M	$37M



	Three Months Ended June 30,					Twelve Months Ended June 30,
(in thousands, except per share amounts)	2015			2014		2015			2014
Sales	$	637,653		$	772,204	$	2,647,195		$	2,837,190
Cost of goods sold	448,687			519,364		1,841,202			1,940,187
Gross profit	188,966			252,840		805,993			897,003
Operating expense	130,923			154,785		554,895			589,768
Restructuring and asset impairment charges	16,398			12,594		582,235			17,608
Amortization of intangibles	6,325			7,404		26,686			26,195
Operating income (loss)	35,320			78,057		(357,823		)	263,432
Interest expense	7,537			8,450		31,466			32,451
Other (income) expense, net	(1,705		)	1,267		(1,674		)	2,172
Income (loss) from continuing operations before income taxes	29,488			68,340		(387,615		)	228,809
Provision (benefit) for income taxes	7,321			20,861		(16,654		)	66,611
Net income (loss)	22,167			47,479		(370,961		)	162,198
Less: Net income attributable to noncontrolling interests	1,021			2,024		2,935			3,832
Net income (loss) attributable to Kennametal	$	21,146		$	45,455	$	(373,896	)	$	158,366
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS
Basic earnings (loss) per share	$	0.27		$	0.58	$	(4.71	)	$	2.01
Diluted earnings (loss) per share	$	0.26		$	0.57	$	(4.71	)	$	1.99
Dividends per share	$	0.18		$	0.18	$	0.72		$	0.72
Basic weighted average shares outstanding	79,518			78,818		79,342			78,678
Diluted weighted average shares outstanding	80,113			79,850		79,342			79,667



(in thousands)	June 30, 2015		June 30, 2014
ASSETS
Cash and cash equivalents	$	105,494	$	177,929
Accounts receivable, net	445,373		531,515
Inventories	575,531		703,766
Other current assets	132,148		111,986
Total current assets	1,258,546		1,525,196
Property, plant and equipment, net	815,825		884,458
Goodwill and other intangible assets, net	704,058		1,318,752
Other assets	71,100		139,680
Total assets	$	2,849,529	$	3,868,086
LIABILITIES
Current maturities of long-term debt and capital leases, including notes payable	$	15,702	$	80,117
Accounts payable	187,381		206,891
Other current liabilities	279,661		275,748
Total current liabilities	482,744		562,756
Long-term debt and capital leases	735,885		981,666
Other liabilities	255,465		362,056
Total liabilities	1,474,094		1,906,478
KENNAMETAL SHAREHOLDERS’ EQUITY	1,345,807		1,929,256
NONCONTROLLING INTERESTS	29,628		32,352
Total liabilities and equity	$	2,849,529	$	3,868,086



SEGMENT DATA (UNAUDITED)	Three Months Ended June 30,						Twelve Months Ended June 30,
(in thousands)	2015			2014			2015			2014
Outside Sales:
Industrial	$	357,519		$	415,529		$	1,461,744		$	1,524,075
Infrastructure	280,134			356,675			1,185,451			1,313,115
Total outside sales	$	637,653		$	772,204		$	2,647,195		$	2,837,190
Sales By Geographic Region:
North America	$	295,066		$	353,604		$	1,250,535		$	1,276,704
Western Europe	176,405			232,280			731,014			873,828
Rest of World	166,182			186,320			665,646			686,658
Total sales by geographic region	$	637,653		$	772,204		$	2,647,195		$	2,837,190
Operating Income (Loss):
Industrial	$	39,771		$	52,598		$	160,894		$	177,040
Infrastructure	(3,583		)	26,636			(509,381		)	94,940
Corporate ⁽¹⁾	(868		)	(1,177		)	(9,336		)	(8,548		)
Total operating income (loss)	$	35,320		$	78,057		$	(357,823	)	$	263,432



THREE MONTHS ENDED JUNE 30, 2015 - (UNAUDITED)

(in thousands, except percents)	Sales		Gross Profit			Operating Expense			Operating Income			Net Income ⁽²⁾			Diluted EPS			Effective Tax Rate
2015 Reported Results	$	637,653	$	188,966		$	130,923		$	35,320		$	21,146		$	0.26		24.8	%
2015 Reported Margins			29.6		%	20.5		%	5.5		%
Restructuring and related charges ⁽³⁾	—		2,908			(1,691		)	20,996			18,566			0.24			(5.5	)
Tax impact of prior impairment charges	—		—			—			—			(3,651		)	(0.05		)	7.2
Tax redeployment expense	—		—			—			—			807			0.01			(1.6	)
2015 Adjusted Results	$	637,653	$	191,874		$	129,232		$	56,316		$	36,868		$	0.46		24.9	%
2015 Adjusted Margins			30.1		%	20.3		%	8.8		%


10.1	Form of Kennametal Inc. Performance Unit Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.2	Form of Kennametal Inc. Performance Unit Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.3	Form of Kennametal Inc. Restricted Unit Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.4	Form of Kennametal Inc. Restricted Unit Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.5	Form of Kennametal Inc. Restricted Unit Award - Alternate Form (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.6	Form of Kennametal Inc. Cash Settled Share-Based Award for China-based Employees (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.7	Form of Kennametal Inc. Nonstatutory Stock Option Award (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.8	Form of Kennametal Inc. Nonstatutory Stock Option Award - President and CEO (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.9	Form of Kennametal Inc. Nonstatutory Stock Option Award - Alternate Form (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


10.10	Form of Kennametal Inc. Stock Appreciation Right Award for China-based Employees (granted under Amendment No. 1 to the Kennametal Inc. Stock and Incentive Plan of 2010 (As Amended and Restated October 22, 2013))


Acuity Brands, Inc.	NYSE:AYI


AGCO Corporation	NYSE:AGCO


AO Smith Corp.	NYSE:AOS


B/E Aerospace Inc.	NasdaqGS:BEAV


9.	All other terms and conditions applicable to this Award are contained in the Plan. A copy of the Plan and related Prospectus is available on your accounts page at netbenefits.fidelity.com under Plan Information and Documents, as well as on The Hub under Human Resources.


-	Announces fiscal 2016 EPS range of $1.70 to $2.00; includes $0.30 to $0.35 exchange rate headwinds


•	Sales were $638 million compared with $772 million in the same quarter last year. Sales decreased by 17 percent, reflecting a 10 percent organic sales decline, a 7 percent unfavorable currency exchange impact and a 1 percent decrease from a prior year divestiture, offset partially by a 1 percent increase due to more business days.


•	On a combined basis, pre-tax restructuring and related charges amounted to $21 million, or $0.24 per share, and pre-tax benefits were approximately $17 million, or $0.16 per share in the quarter.


•	The reported effective tax rate was 24.8 percent compared to 30.5 percent in the prior year. The decrease was primarily driven by prior year restructuring charges in tax jurisdictions where a tax benefit was not permitted.


•	EPS were $0.26, compared with the prior year quarter EPS of $0.57. Adjusted EPS were $0.46 in the current year quarter and $0.79 in the prior year quarter.


•	The company realized record free operating cash flow of $267 million compared with $156 million last year despite the unfavorable impact of challenging end markets to cash earnings. The record free operating cash flow was primarily attributable to improved working capital management.


•	Sales were $2,647 million, compared with $2,837 million last year. Sales decreased by 7 percent, driven by 5 percent organic sales decline and 4 percent unfavorable currency exchange, offset partially by 2 percent net increase from prior year acquisition and divestiture activity.


•	LPS were $4.71 in the current year, compared with EPS of $1.99 in the prior year. Adjusted EPS were $2.02 in the current year and $2.53 in the prior year.



(in thousands, except percents)	Industrial Sales		Industrial Operating Income			Infrastructure Sales		Infrastructure Operating (Loss) Income
2015 Reported Results	$	357,519	$	39,771		$	280,134	$	(3,583	)
2015 Reported Operating Margin			11.1		%			(1.3		)%
Restructuring and related charges ⁽⁴⁾	—		10,743			—		9,267
2015 Adjusted Results	$	357,519	$	50,514		$	280,134	$	5,684
2015 Adjusted Operating Margin			14.1		%			2.0		%



THREE MONTHS ENDED JUNE 30, 2014 - (UNAUDITED)

(in thousands, except percents)	Sales		Gross Profit			Operating Expense			Operating Income			Net Income ⁽²⁾		Diluted EPS
2014 Reported Results	$	772,204	$	252,840		$	154,785		$	78,057		$	45,455	$	0.57
2014 Reported Margins			32.7		%	20.0		%	10.1		%
Acquisition-related charges	—		1,041			(2,355		)	3,396			1,914		0.03
Restructuring and related charges	—		1,341			(58		)	13,994			13,874		0.17
Loss on divestiture	—		—			—			—			1,607		0.02
2014 Adjusted Results	$	772,204	$	255,222		$	152,372		$	95,447		$	62,850	$	0.79
2014 Adjusted Margins			33.1		%	19.7		%	12.4		%



TWELVE MONTHS ENDED JUNE 30, 2015 - (UNAUDITED)

(in thousands, except percents)	Sales		Operating (Loss) Income			Net (Loss) Income ⁽²⁾			Diluted (LPS) EPS
2015 Reported Results	$	2,647,195	$	(357,823	)	$	(373,896	)	$	(4.71	)
2015 Reported Operating Margin			(13.5		)%
Restructuring and related charges	—		58,102			44,197			0.56
Technology asset impairment charge	—		5,500			3,377			0.04
Goodwill and other intangible asset impairment charges	—		536,200			483,386			6.09
Tax redeployment expense	—		—			2,945			0.04
2015 Adjusted Results	$	2,647,195	$	241,979		$	160,009		$	2.02
2015 Adjusted Operating Margin			9.1		%



TWELVE MONTHS ENDED JUNE 30, 2014 - (UNAUDITED)

(in thousands, except percents)	Sales		Operating Income			Net Income ⁽²⁾		Diluted EPS
2014 Reported Results	$	2,837,190	$	263,432		$	158,366	$	1.99
2014 Reported Operating Margin			9.3		%
TMB inventory step-up	—		15,420			11,518		0.14
Acquisition-related charges	—		8,674			5,648		0.07
Restructuring and related charges	—		19,085			17,356		0.22
Tax repatriation expense	—		—			7,170		0.09
Loss on divestiture	—		—			1,607		0.02
2014 Adjusted Results	$	2,837,190	$	306,611		$	201,665	$	2.53
2014 Adjusted Operating Margin			10.8		%



FREE OPERATING CASH FLOW (UNAUDITED)	Twelve Months Ended
	June 30,
(in thousands)	2015			2014
Net cash flow from operating activities	$	351,437		$	271,873
Purchases of property, plant and equipment	(100,939		)	(117,376		)
Proceeds from disposals of property, plant and equipment	16,122			1,236
Free operating cash flow	$	266,620		$	155,733