10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Commission File Number 1-5318

KENNAMETAL INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-0900168
(State or other jurisdiction of incorporation or organization)	(I.R.S. 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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Capital Stock, par value $1.25 per share	New York Stock Exchange
Preferred Stock Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

As of December 31, 2010, the aggregate market value of the registrant’s Capital Stock held by non-affiliates of the registrant, estimated solely for the purposes of this Form 10-K, was approximately $2,977,300,000. For purposes of the foregoing calculation only, all directors and executive officers of the registrant and each person who may be deemed to own beneficially more than 5% of the registrant’s Capital Stock have been deemed affiliates.

As of July 31, 2011, there were 81,256,614 shares of the Registrant’s Capital Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2011 Annual Meeting of Shareowners are incorporated by reference into Part III.

Table of Contents
Item No.	Page
PART I
1. Business		1
1A. Risk Factors		4
1B. Unresolved Staff Comments		6
2. Properties		6
3. Legal Proceedings		7
PART II
5. Market for the Registrant’s Common Equity, Related Shareowner Matters and Issuer Purchases of Equity Securities		8
6. Selected Financial Data		10
7. Management’s Discussion and Analysis of Financial Condition and Results of Operation		11
7A. Quantitative and Qualitative Disclosures About Market Risk		22
8. Financial Statements and Supplementary Data		23
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		57
9A. Controls and Procedures		57
9B. Other Information		57
PART III
10. Directors, Executive Officers and Corporate Governance		57
11. Executive Compensation		59
12. Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters		59
13. Certain Relationships and Related Transactions, and Director Independence		59
14. Principal Accountant Fees and Services		59
PART IV
15. Exhibits, Financial Statement Schedules		59
SIGNATURES		64
EX-10.20
EX-10.22
EX-10.35
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not relate strictly to historical or current facts. For example, statements about Kennametal’s outlook for earnings, sales volumes, and cash flow for its fiscal year 2012, its expectations regarding future growth and any statements regarding future operating or financial performance or events are forward-looking. We have also included forward looking statements in this Form 10-K concerning, among other things, our strategy, goals, plans and projections regarding our financial position, liquidity and capital resources, results of operations, market position, and product development. These statements are based on current estimates that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: economic recession; anticipated benefits resulting from our recently completed restructuring activities; availability and cost of the raw materials we use to manufacture our products; our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; our ability to protect and defend our intellectual property; competition; our ability to retain our management and employees; demands on management resources; potential claims relating to our products; integrating acquisitions and achieving the expected savings and synergies; business divestitures; global or regional catastrophic events; energy costs; commodity prices; labor relations; demand for and market acceptance of new and existing products; and implementation of environmental remediation matters. We provide additional information about many of the specific risks we face in the “Risk Factors” Section of this Annual Report on Form 10-K. We can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or development.

PART I

ITEM 1 — BUSINESS

OVERVIEW Kennametal Inc. was incorporated in Pennsylvania in 1943. We deliver productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions, enabled through our advanced materials sciences, application knowledge and commitment to a sustainable environment. We believe that our reputation for manufacturing excellence, as well as our technological expertise and innovation in our principal products, has helped us to achieve a leading market presence in our primary markets. End users of our products include metalworking manufacturers and suppliers across a diverse array of industries, including the aerospace, defense, transportation, machine tool, light machinery and heavy machinery industries, as well as manufacturers, producers and suppliers in a number of other industries including coal mining, highway construction, quarrying, and oil and gas exploration and production industries. Our end users’ products include items ranging from airframes to coal mining, engines to oil wells and turbochargers to construction.

Our product offering includes a wide array of standard and custom solution products in metalworking, such as metal cutting tools and tooling systems, and advanced materials, such as cemented tungsten carbide products, to address customer demands. These products are offered through a variety of channels via an enterprise approach. We are a leading global supplier of tooling, engineered components and advanced materials consumed in production processes. We believe we are one of the largest global providers of consumable metal cutting tools and tooling supplies.

We specialize in developing and manufacturing metalworking tools and wear-resistant parts and coatings using a specialized type of powder metallurgy. Our metalworking tools are made of cemented tungsten carbides, ceramics, cermets and other hard materials. We also manufacture and market a complete line of toolholders, toolholding systems and rotary cutting tools by machining and fabricating steel bars and other metal alloys. We also manufacture products made from tungsten carbide or other hard materials that are used in engineered applications, mining and highway construction and other similar applications, including compacts and metallurgical powders. Additionally, we manufacture and market engineered components with a proprietary metal cladding technology and provide our customers with engineered component process technology and materials that focus on component deburring, polishing and producing controlled radii.

Unless otherwise specified, any reference to a “year” is to a fiscal year ended June 30.

BUSINESS SEGMENT REVIEW In order to take additional advantage of growth opportunities, as well as to provide a better platform for continually improving the efficiency and effectiveness of operations, we implemented a new operating structure at the start of 2011. Our operations are now organized into two reportable operating segments; Industrial and Infrastructure. Segment determination is based upon internal organizational structure, the manner in which we organize segments for making operating decisions and assessing performance, the availability of separate financial results and materiality considerations. Sales and operating income by segment are presented in Management’s Discussion and Analysis set forth in Item 7 of this annual report on Form 10-K (MD&A). Additional segment data is provided in Note 20 of our consolidated financial statements set forth in Item 8 of this annual report.

INDUSTRIAL The Industrial segment is focused on customers within the transportation, aerospace, defense and general engineering market sectors, as well as the machine tool industry. The customers in these end markets manufacture engines, airframes, automobiles, trucks, ships and various industrial goods. The technology needs and level of customization vary by customer and industry served. We deliver value to our Industrial segment customers through our application expertise and diverse product offering.

INFRASTRUCTURE The Infrastructure segment is focused on customers within the energy and earthworks industries. These customers support primary industries such as oil and gas, power generation, underground mining, surface and hard rock mining, highway construction and road maintenance. Generally, our Infrastructure segment customers are served through a customer intimacy model that allows us to offer full system solutions by gaining an in-depth understanding of our customers’ engineering needs. Our product offering promotes value by bringing enhanced performance and productivity to our customers’ processes and systems.

INTERNATIONAL OPERATIONS During 2011, we generated 56.7 percent of our sales in markets outside of the U.S. Our principal international operations are conducted in Western Europe, Asia Pacific, India, Latin America and Canada. In addition, we have manufacturing and distribution operations in Israel and South Africa, as well as sales companies, sales agents and distributors in Eastern Europe and other areas of the world. The diversification of our overall operations tends to minimize the impact of changes in demand in any one particular geographic area on total sales and earnings. Our international operations are subject to the risks of doing business in those countries, including foreign currency exchange rate fluctuations and changes in social, political and economic environments.

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Our international assets and sales are presented in Note 20 of our consolidated financial statements set forth in Item 8 of this annual report on Form 10-K (Item 8). Information pertaining to the effects of foreign currency exchange rate risk is presented in Quantitative and Qualitative Disclosures About Market Risk as set forth in Item 7A of this annual report on Form 10-K.

GENERAL DEVELOPMENT OF BUSINESS We continue to engage in balancing our geographic footprint between North America, Western Europe, and the rest of the world markets. This strategy, together with steps to enhance the balance of our sales among our served end markets and business units, has helped to create a more diverse business base and thereby provide additional sales opportunities, as well as limit reliance on and exposure to any specific region or market sector.

In fiscal 2011, we experienced sequential sales growth in every quarter, as well as year-over-year quarterly sales growth. Our sales for the year ended June 30, 2011 were $2.4 billion, comprised of 46 percent in North America, 28 percent in Western Europe and 26 percent in the rest of the world. We completed our restructuring programs which are expected to reduce our cost structure by approximately $170 million annually, yielding higher benefits on costs that were lower than anticipated.

While the global economy continues to improve, we remain confident in our ability to respond quickly to changes in global markets while continuing to serve our customers and preserve our competitive strengths. At the same time, we continue to focus on and maximize cash flow and liquidity. Further discussion and analysis of the developments in our business is set forth in MD&A.

ACQUISITIONS AND DIVESTITURES We continue to evaluate new opportunities for the expansion of existing product lines into new market areas where appropriate. We also continue to evaluate opportunities for the introduction of new and/or complementary product offerings into new and/or existing market areas where appropriate. Going forward, we expect to evaluate potential acquisitions to continue to grow our business and further enhance our market position.

MARKETING AND DISTRIBUTION We sell our products through the following distinct sales channels: (i) a direct sales force; (ii) a network of independent distributors and sales agents in North America, Europe, Latin America, Asia Pacific and other markets around the world; (iii) integrated supply; and (iv) the Internet. Application engineers and technicians directly assist customers with product design, selection, application and support.

We market our products through two basic brand names; Kennametal and Widia. These master brands also include sub-brands under various trademarks and trade names, such as Kennametal with other identifying sub-brands: Kennametal Conforma Clad, Kennametal Tricon, Kennametal Extrude Hone, Kennametal Sintec, Kennametal International Specialty Alloys, Kennametal Camco, and similarly with Widia and other identifying sub-brands: Widia GTD, Widia Rubig, Widia Circle, Widia Manchester, Widia Hanita, Widia Clappdico, as well as various product names such as ToolBoss, Kyon, Fix-Perfect and Mill1™. Kennametal Inc. or a subsidiary of Kennametal Inc. owns these trademarks and trade names. We also sell products to customers who resell such products under the customers’ names or private labels.

RAW MATERIALS AND SUPPLIES Major metallurgical raw materials consist of ore concentrates, compounds and secondary materials containing tungsten, tantalum, titanium, niobium and cobalt. Although an adequate supply of these raw materials currently exists, our major sources for raw materials are located abroad and prices fluctuate at times. We have entered into extended raw material supply agreements and will implement product price increases as deemed necessary to mitigate rising costs. For these reasons, we exercise great care in selecting, purchasing and managing availability of raw materials. We also purchase steel bars and forgings for making toolholders and other tool parts, as well as for producing rotary cutting tools and accessories. We obtain products purchased for use in manufacturing processes and for resale from thousands of suppliers located in the U.S. and abroad.

RESEARCH AND DEVELOPMENT Our product development efforts focus on providing solutions to our customers for their manufacturing challenges and productivity requirements. Our product development program provides discipline and focus for the product development process by establishing “gateways,” or sequential tests, during the development process to remove inefficiencies and accelerate improvements. This program speeds and streamlines development into a series of actions and decision points, combining efforts and resources to produce new and enhanced products faster. This program is designed to assure a strong link between customer requirements and corporate strategy, and to enable us to gain full benefit from our investment in new product development. We hold a number of patents which, in the aggregate, are material to the operation of our businesses.

Research and development expenses included in operating expense totaled $33.3 million, $28.0 million and $27.6 million in 2011, 2010 and 2009, respectively.

SEASONALITY Our business is not materially affected by seasonal variations. However, to varying degrees, traditional summer vacation shutdowns of customers’ plants and holiday shutdowns often affect our sales levels during the first and second quarters of our fiscal year.

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BACKLOG Our backlog of orders generally is not significant to our operations.

COMPETITION We are one of the world’s leading producers of cemented carbide products, and we maintain a strong competitive position in all major markets worldwide. We actively compete in the sale of all our products with approximately 30 companies engaged in the cemented tungsten carbide business in the U.S. and many more outside the U.S. Several of our competitors are divisions of larger corporations. In addition, several hundred fabricators and toolmakers, many of which operate out of relatively small shops, produce tools similar to ours and buy the cemented tungsten carbide components for such tools from cemented tungsten carbide producers, including us. Major competition exists from both U.S.-based and internationally-based concerns. In addition, we compete with thousands of industrial supply distributors.

The principal elements of competition in our businesses are service, product innovation and performance, quality, availability, price and productivity delivered to our customers. We believe that our competitive strength derives from our global presence, our ability to develop solutions to address customer needs through new and improved tools, consistent high quality of our products, our customer service capabilities, our state-of-the-art manufacturing capabilities and multiple sales channels. With these strengths, we are able to sell products based on the value added productivity to the customer rather than strictly on competitive prices.

REGULATION From time to time, we are a party to legal claims and proceedings that arise in the ordinary course of business, which may relate to our operations or assets, including real, tangible, or intellectual property. While we currently believe that the amount of ultimate liability, if any, with respect to these actions will not materially affect our financial position, results of operations or liquidity, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur or if protracted litigation were to ensue, the impact could be material to us.

Compliance with government laws and regulations pertaining to the discharge of materials or pollutants into the environment or otherwise relating to the protection of the environment did not have a material effect on our capital expenditures or competitive position for the years covered by this report, nor is such compliance expected to have a material effect in the future.

We are involved as a potentially responsible party (PRP) at various sites designated by the United States Environmental Protection Agency (USEPA) as Superfund sites. For certain of these sites, we have evaluated the claims and potential liabilities and have determined that neither are material, individually or in the aggregate. For certain other sites, proceedings are in the very early stages and have not yet progressed to a point where it is possible to estimate the ultimate cost of remediation, the timing and extent of remedial action that may be required by governmental authorities or the amount of our liability alone or in relation to that of any other PRPs.

Reserves for other potential environmental issues at June 30, 2011 and 2010 were $5.4 million and $5.2 million, respectively. The reserves that we have established for environmental liabilities represent our best current estimate of the costs of addressing all identified environmental situations, based on our review of currently available evidence, and take into consideration our prior experience in remediation and that of other companies, as well as public information released by the USEPA, other governmental agencies, and by the PRP groups in which we are participating. Although the reserves currently appear to be sufficient to cover these environmental liabilities, there are uncertainties associated with environmental liabilities, and we can give no assurance that our estimate of any environmental liability will not increase or decrease in the future. The reserved and unreserved liabilities for all environmental concerns could change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements, technological changes, discovery of new information, the financial strength of other PRPs, the identification of new PRPs and the involvement of and direction taken by the U.S. government on these matters.

We maintain a Corporate Environmental, Health and Safety (EHS) Department, as well as an EHS Steering Committee, to monitor compliance with environmental regulations and to oversee remediation activities. In addition, we have designated EHS coordinators who are responsible for each of our global manufacturing facilities. Our financial management team periodically meets with members of the Corporate EHS Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly basis, we review financial provisions and reserves for environmental contingencies and adjust these reserves when appropriate.

EMPLOYEES We employed approximately 11,600 persons at June 30, 2011, of which approximately 4,800 were located in the U.S. and 6,800 in other parts of the world, principally Europe, India and Asia Pacific. At June 30, 2011, approximately 3,000 of the above employees were represented by labor unions. We consider our labor relations to be generally good.

AVAILABLE INFORMATION Our Internet address is www.kennametal.com. On the SEC Filings page of our Web Site, which is accessible under the Investor Relations tab, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC): our annual report on Form 10-K, our annual proxy statement, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or

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furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act). Our Sec Filings Web page also includes Forms 3, 4 and 5 filed pursuant to Section 16(a) of the Exchange Act. All filings posted on our SEC Filings Web page are available to be viewed on this page free of charge. On the Corporate Governance page of our Web site, which is under the Investor Relations tab, we post the following charters and guidelines: Audit Committee Charter, Compensation Committee Charter, Nominating/Corporate Governance Committee Charter, Kennametal Inc. Corporate Governance Guidelines, Code of Business Ethics and Conduct and Stock Ownership Guidelines. All charters and guidelines posted on our Corporate Governance Web page are available to be viewed on this page free of charge. Information contained on our Web site is not part of this annual report on Form 10-K or our other filings with the SEC.

ITEM 1A — RISK FACTORS

Kennametal’s business, financial condition or results of operations may be materially affected by a number of factors. Our management regularly monitors the risks inherent in our business, with input and assistance from our Enterprise Risk Management department. In addition to real time monitoring, we conduct a formal, annual, enterprise-wide risk assessment to identify factors and circumstances that might present significant risk to the company. Many of these factors are discussed throughout this report. In addition, the following list details some of the important factors and uncertainties that we believe could cause Kennametal’s actual results to differ materially from those projected in any forward-looking statements:

Downturns in the business cycle could adversely affect our sales and profitability. Our business has historically been cyclical and subject to significant impact from economic downturns. The recent global economic downturn that occurred in 2008 and 2009, coupled with the global financial and credit market disruptions had a negative impact on our sales and profitability. These events contributed to weak end markets, a sharp drop in demand and higher costs of borrowing and/or diminished credit availability. While the economy has recovered from the crisis of the economic downturn and we believe that the long-term prospects for our business remain positive, we are unable to predict the future course of industry variables or the strength, pace or sustainability of the economic recovery and the effects of government intervention. We implemented restructuring and other actions to reduce our manufacturing costs and operating expenses over the past several years. However, there is no assurance that these actions, or any others that we have taken or may take, will be sufficient to counter any future economic or industry disruptions.

Our international operations pose certain risks that may adversely impact sales and earnings. We have manufacturing operations and assets located outside of the U.S., including Brazil, Canada, China, Europe, India, Israel and South Africa. We also sell our products to customers and distributors located outside of the U.S. During the year ended June 30, 2011, 56.7 percent of our consolidated sales were derived from non-U.S. markets. A key part of our long-term strategy is to increase our manufacturing, distribution and sales presence in international markets. These international operations are subject to a number of special risks, in addition to the risks of our domestic business, including currency exchange rate fluctuations, differing protections of intellectual property, trade barriers, exchange controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, labor unrest, risk of governmental expropriation, domestic and foreign customs and tariffs, current and changing regulatory environments (including, but not limited to, the risks associated with the importation and exportation of products and raw materials), risk of failure of our foreign employees to comply with both U.S. and foreign laws, including antitrust laws, trade regulations and the Foreign Corrupt Practices Act, difficulty in obtaining distribution support, difficulty in staffing and managing widespread operations, differences in the availability and terms of financing, political instability and unrest and risks of increases in taxes. Also, in some foreign jurisdictions, we may be subject to laws limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to affiliated companies unless specified conditions are met. To the extent we are unable to effectively manage our international operations and these risks, our international sales may be adversely affected, we may be subject to additional and unanticipated costs, and we may be subject to litigation or regulatory action. As a consequence, our business, financial condition and results of operations could be seriously harmed.

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Changes in the regulatory environment, including environmental, health and safety regulations, could subject us to increased compliance and manufacturing costs, which could have a material adverse effect on our business.

Health and Safety Regulations. Certain of our products contain hard metals, including tungsten and cobalt. Hard metal dust is being studied for potential adverse health effects by organizations in several regions throughout the world, including the U.S., Europe and Japan. Future studies on the health effects of hard metals may result in our products being classified as hazardous to human health, which could lead to new regulations in countries in which we operate that may restrict or prohibit the use of, and/or exposure to, hard metal dust. New regulation of hard metals could require us to change our operations, and these changes could affect the quality of our products and materially increase our costs.

Environmental Regulations. We are subject to various environmental laws, and any violation of, or our liabilities under, these laws could adversely affect us. Our operations necessitate the use and handling of hazardous materials and, as a result, we are subject to various federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment, including those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes, the cleanup of contaminated sites and the maintenance of a safe workplace. These laws impose penalties, fines and other sanctions for noncompliance and liability for response costs, property damages and personal injury resulting from past and current spills, disposals or other releases of, or exposure to, hazardous materials. We could incur substantial costs as a result of noncompliance with or liability for cleanup or other costs or damages under these laws. We may be subject to more stringent environmental laws in the future. If more stringent environmental laws are enacted in the future, these laws could have a material adverse effect on our business, financial condition and results of operations.

Regulations affecting the mining and drilling industries or utilities industry. Some of our principal customers are mining and drilling or utility companies. Many of these customers supply coal, oil, gas or other fuels as a source for the production of utilities in the U.S. and other industrialized regions. The operations of these mining and drilling companies are geographically diverse and are subject to or affected by a wide array of regulations in the jurisdictions where they operate, such as applicable environmental laws and regulations governing the operations of utilities. As a result of changes in regulations and laws relating to such industries, our customers’ operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with mining, drilling and environmental regulations may also induce customers to discontinue or limit their operations, and may discourage companies from developing new opportunities. As a result of these factors, demand for our mining- and drilling-related products could be substantially affected by regulations adversely impacting the mining and drilling industries or altering the consumption patterns of utilities.

Our continued success depends on our ability to protect and defend our intellectual property. Our future success depends in part upon our ability to protect and defend our intellectual property. We rely principally on nondisclosure agreements and other contractual arrangements and trade secret law and, to a lesser extent, trademark and patent law, to protect our intellectual property. However, these measures may be inadequate to protect our intellectual property from infringement by others or prevent misappropriation of our proprietary rights. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do U.S. laws. If one of our patents is infringed upon by a third party, we may need to devote significant time and financial resources to attempt to halt the infringement. We may not be successful in defending the patents involved in such a dispute. Similarly, while we do not knowingly infringe on patents, copyrights or other intellectual property rights owned by other parties, we may be required to spend a significant amount of time and financial resources to resolve any infringement claims against us. We may not be successful in defending our position or negotiating an alternative remedy. Our inability to protect our proprietary information and enforce or defend our intellectual property rights in proceedings initiated by or against us could have a material adverse effect on our business, financial condition and results of operations.

We operate in a highly competitive environment. Our domestic and foreign operations are subject to significant competitive pressures. We compete directly and indirectly with other manufacturers and suppliers of metalworking tools, engineered components and advanced materials. Some of our competitors are larger than we are and may have greater access to financial resources or be less leveraged than us. In addition, the industry in which our products are used is a large, fragmented industry that is highly competitive.

If we are unable to retain our qualified management and employees, our business may be negatively affected. Our ability to provide high quality products and services depends in part on our ability to retain our skilled personnel in the areas of management, product engineering, servicing and sales. Competition for such personnel is intense, and our competitors can be expected to attempt to hire our management and skilled employees from time to time. In addition, our restructuring activities and strategies for growth have placed, and are expected to continue to place, increased demands on our management’s skills and resources. If we are unable to retain our management team and professional personnel, our customer relationships and level of technical expertise could be negatively affected, which may materially and adversely affect our business.

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Our future operating results may be affected by fluctuations in the prices and availability of raw materials. The raw materials we use for our products include ore concentrates, compounds and secondary materials containing tungsten, tantalum, titanium, niobium and cobalt. A significant portion of our raw materials is supplied by sources outside the U.S. The raw materials industry as a whole is highly cyclical, and at times pricing and supply can be volatile due to a number of factors beyond our control, including natural disasters, general economic and political conditions, labor costs, competition, import duties, tariffs and currency exchange rates. This volatility can significantly affect our raw material costs. In an environment of increasing raw material prices, competitive conditions can affect how much of the price increases in raw materials that we can recover in the form of higher sales prices for our products. To the extent we are unable to pass on any raw material price increases to our customers, our profitability could be adversely affected. Furthermore, restrictions in the supply of tungsten, cobalt and other raw materials could adversely affect our operating results. If the prices for our raw materials increase or we are unable to secure adequate supplies of raw materials on favorable terms, our profitability could be impaired.

Product liability claims could have a material adverse effect on our business. The sale of metalworking, mining, highway construction and other tools and related products as well as engineered components and advanced materials entails an inherent risk of product liability claims. We cannot give assurance that the coverage limits of our insurance policies will be adequate or that our policies will cover any particular loss. Insurance can be expensive, and we may not always be able to purchase insurance on commercially acceptable terms, if at all. Claims brought against us that are not covered by insurance or that result in recoveries in excess of insurance coverage could have a material adverse affect on our business, financial condition and results of operations.

Natural disasters or other global or regional catastrophic events could disrupt our operations and adversely affect results. Despite our concerted effort to minimize risk to our production capabilities and corporate information systems and to reduce the effect of unforeseen interruptions to us through business continuity planning, we still may be exposed to interruptions due to catastrophe, natural disaster, pandemic, terrorism or acts of war, which are beyond our control. Disruptions to our facilities or systems, or to those of our key suppliers, could also interrupt operational processes and adversely impact our ability to manufacture our products and provide services and support to our customers. As a result, our business, our results of operations, financial position, cash flows and stock price could be adversely affected.

ITEM 1B  – UNRESOLVED STAFF COMMENTS

None.

ITEM 2  – PROPERTIES

Our principal executive offices are located at 1600 Technology Way, P.O. Box 231, Latrobe, Pennsylvania, 15650. A summary of our principal manufacturing facilities and other materially important properties is as follows:

Location	Owned/Leased	Principal Products	Segment
United States:
Irondale, Alabama	Owned	Custom Fabricated Wear Plate Solutions and Pins	Infrastructure
Rogers, Arkansas	Owned/Leased	Carbide Products and Pelletizing Die Plates	Infrastructure
University Park, Illinois	Owned	Custom Fabricated Wear Plate Solutions	Infrastructure
Rockford, Illinois	Owned	Indexable Tooling	Industrial
New Albany, Indiana	Leased	High Wear Coating for Steel Parts	Infrastructure
Greenfield, Massachusetts	Owned	High-Speed Steel Taps	Industrial
Shelby Township, Michigan	Leased	Thermal Deburring and High Energy Finishing	Industrial
Traverse City, Michigan	Owned	Wear Parts	Industrial
Walker, Michigan	Leased	Thermal Energy Machining	Industrial
Elko, Nevada	Owned	Custom Fabricated Wear Plate Solutions	Infrastructure
Fallon, Nevada	Owned	Metallurgical Powders	Infrastructure
Asheboro, North Carolina	Owned	High-Speed Steel and Carbide Round Tools	Industrial
Henderson, North Carolina	Owned	Metallurgical Powders	Infrastructure
Roanoke Rapids, North Carolina	Owned	Metalworking Inserts	Industrial
Cleveland, Ohio	Leased	Distribution	Industrial
Orwell, Ohio	Owned	Metalworking Inserts	Industrial
Solon, Ohio	Owned	Metalworking Toolholders	Industrial
Whitehouse, Ohio	Owned	Metalworking Inserts and Round Tools	Industrial

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Location	Owned/Leased	Principal Products	Segment
Bedford, Pennsylvania	Owned/Leased	Mining and Construction Tools and Wear Parts and Distribution	Infrastructure
Irwin, Pennsylvania	Owned	Carbide Wear Parts	Industrial
Irwin, Pennsylvania	Leased	Abrasive Flow Machining	Industrial
Latrobe, Pennsylvania	Owned	Metallurgical Powders	Infrastructure
Nenshannock, Pennsylvania	Leased	Specialty Metals and Alloys	Industrial
Union, Pennsylvania	Owned	Specialty Metals and Alloys	Industrial
Johnson City, Tennessee	Owned	Metalworking Inserts	Industrial
Lyndonville, Vermont	Owned	High-Speed Steel Taps	Industrial
Chilhowie, Virginia	Owned	Mining and Construction Tools and Wear Parts	Infrastructure
New Market, Virginia	Owned	Metalworking Toolholders	Industrial
International:
Indaiatuba, Brazil	Leased	Metalworking Carbide Drills and Toolholders	Industrial
Victoria, Canada	Owned	Wear Parts	Industrial
Fengpu, China	Owned	Intermetallic Composite Ceramic Powders and Parts	Infrastructure
Tianjin, China	Owned	Metalworking Inserts and Carbide Round Tools	Industrial
Xuzhou, China	Leased	Mining Tools	Infrastructure
Kingswinford, England	Leased	Distribution	Industrial
Ebermannstadt, Germany	Owned	Metalworking Inserts	Industrial
Essen, Germany	Owned	Metallurgical Powders and Wear Parts	Industrial
Koenigsee, Germany	Leased	Metalworking Carbide Drills	Industrial
Lichtenau, Germany	Owned	Metalworking Toolholders	Industrial
Mistelgau, Germany	Owned	Metallurgical Powders, Metalworking Inserts and Wear Parts	Infrastructure
Nabburg, Germany	Owned	Metalworking Toolholders	Industrial
Nabburg, Germany	Owned	Metalworking Round Tools, Drills and Mills	Industrial
Nuenkirchen, Germany	Owned	Distribution	Industrial
Vohenstrauss, Germany	Owned	Metalworking Carbide Drills	Industrial
Bangalore, India	Owned	Metalworking Inserts and Toolholders and Wear Parts	Industrial
Shlomi, Israel	Owned	High-Speed Steel and Carbide Round Tools	Industrial
Milan, Italy	Owned	Metalworking Cutting Tools	Industrial
Zory, Poland	Leased	Mining and Construction Conicals	Infrastructure
Barcelona, Spain	Leased	Metalworking Cutting Tools	Industrial
Newport, United Kingdom	Owned	Intermetallic Composite Powders	Infrastructure

We also have a network of warehouses and customer service centers located throughout North America, Europe, India, Asia Pacific and Latin America, a significant portion of which are leased. The majority of our research and development efforts is conducted in a corporate technology center located adjacent to our world headquarters in Latrobe, Pennsylvania, U.S., as well as in our facilities in Rogers, Arkansas, U.S.; Fuerth, Germany and Essen, Germany.

We use all significant properties in the businesses of powder metallurgy, tools, tooling systems, engineered components and advanced materials. Our production capacity is adequate for our present needs. We believe that our properties have been adequately maintained, are generally in good condition and are suitable for our business as presently conducted.

ITEM 3  - LEGAL PROCEEDINGS

The information set forth in Part I, Item 1, of this annual report on Form 10-K under the caption “Regulation” is incorporated into this Item 3. From time to time, we are party to legal claims and proceedings that arise in the ordinary course of business, which may relate to our operations or assets, including real, tangible, or intellectual property. Although certain of these actions are currently pending, we do not believe that any individual proceeding is material or that our pending legal proceedings in the aggregate are material to Kennametal.

EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference into this Part I is the information set forth in Part III, Item 10 under the caption “Executive Officers of the Registrant” of this annual report on Form 10-K.

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PART II

ITEM 5  - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREOWNER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our capital stock is traded on the New York Stock Exchange (symbol KMT). The number of shareowners of record as of July 31, 2011 was 2,199. Stock price ranges and dividends declared and paid were as follows:

Quarter ended	September 30		December 31		March 31		June 30
2011
High	$	31.80	$	39.81	$	44.11	$	43.48
Low		24.08		30.35		36.57		37.38
Dividends		0.12		0.12		0.12		0.12
2010
High	$	25.17	$	28.29	$	30.64	$	34.89
Low		15.29		21.66		23.45		25.31
Dividends		0.12		0.12		0.12		0.12

The information incorporated by reference in Part III, Item 12 of this annual report on Form 10-K from our 2011 Proxy Statement under the heading “Equity Compensation Plans — Equity Compensation Plan Information” is hereby incorporated by reference into this Item 5.

PERFORMANCE GRAPH

The following graph compares cumulative total shareowner return on our capital stock with the cumulative total shareowner return on the common equity of the companies in the Standard & Poor’s Mid-Cap 400 Market Index (S&P Mid-Cap 400), the Standard & Poor’s Composite 1500 Market Index (S&P Composite), and the peer group of companies determined by us for the period from July 1, 2005 to June 30, 2011.

The Peer Group consists of the following companies: Allegheny Technologies Incorporated; Ametek Inc.; Barnes Group Inc.; Carpenter Technology Corporation; Crane Co.; Donaldson Company, Inc.; Dresser-Rand Group Inc.; Flowserve Corp.; Greif Inc.; Harsco Corporation; Joy Global Inc.; Lincoln Electric Holdings, Inc.; Pall Corporation.; Parker-Hannifin Corporation; Pentair Inc.; Sauer-Danfoss, Inc.; Teleflex, Incorporated; and The Timken Co.

Comparison of 5-Year Cumulative Total Return

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Assumes $100 Invested on July 1, 2005 and All Dividends Reinvested

	2006		2007		2008		2009		2010		2011
Kennametal	$	100.00	$	133.55	$	107.35	$	64.69	$	87.47	$	147.21
Peer Group Index		100.00		131.21		132.76		79.60		102.50		163.59
S&P Mid-Cap 400		100.00		118.51		109.81		79.04		98.74		137.63
S&P 1500 Composite		100.00		120.22		104.92		77.29		89.32		117.58

ISSUER PURCHASES OF EQUITY SECURITIES

					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May Yet
	Total Number of				Part of Publicly		Be Purchased Under
	Shares		Average Price		Announced Plans or		the Plans or
Period	Purchased (1)		Paid per Share		Programs		Programs (2)
April 1 through April 30, 2011		17,129	$	38.95		17,000		7,284,600
May 1 through May 31, 2011		255,550		40.27		250,000		7,034,600
June 1 through June 30, 2011		540,998		38.99		529,500		6,505,100
Total		813,677	$	39.39		796,500

(1)

During the current period, 6,549 shares and 3,232 shares were purchased on the open market on behalf of Kennametal to fund the Company’s 401(k) matching contribution and the Company’s dividend reinvestment program, respectively. Also, during the current period, employees delivered 2,796 shares of restricted stock to Kennametal, upon vesting, to satisfy tax-withholding requirements and 4,600 shares of Kennametal stock as payment for the exercise price of stock options.

(2)

On October 26, 2010, the Company publicly announced a repurchase programs of up to 8 million shares of its outstanding capital stock.

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ITEM 6- SELECTED FINANCIAL DATA

		2011			2010			2009			2008			2007
OPERATING RESULTS (in thousands)
Sales		$	2,403,493		$	1,884,067		$	1,999,859		$	2,589,786		$	2,265,336
Cost of goods sold			1,519,102			1,256,339			1,423,320			1,682,715			1,438,137
Operating expense			538,530			477,487			489,567			594,187			543,952
Restructuring and asset impairment charges	(1)		12,586			43,923			173,656			39,891			5,970
Interest expense			22,760			25,203			27,244			31,586			28,999
Provision (benefit) for income taxes			63,856			26,977			(11,205	)		62,754			68,251
Income (loss) from continuing operations attributable to Kennametal			229,727			47,842			(102,402	)		163,666			174,717
Net income (loss) attributable to Kennametal	(2)		229,727			46,419			(119,742	)		167,775			174,243
FINANCIAL POSITION (in thousands)
Working capital		$	446,064		$	522,926		$	496,935		$	630,675		$	529,265
Total assets			2,754,469			2,267,823			2,346,974			2,784,349			2,606,227
Long-term debt, including capital leases, excluding current maturities			1,919			314,675			436,592			313,052			361,399
Total debt, including capital leases and notes payable			312,882			337,668			485,957			346,652			366,829
Total Kennametal shareowners’ equity			1,638,072			1,315,500			1,247,443			1,647,907			1,484,467
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL
Basic earnings (loss) from continuing operations		$	2.80		$	0.59		$	(1.40	)	$	2.13		$	2.28
Basic earnings (loss)	(3)		2.80			0.57			(1.64	)		2.18			2.27
Diluted earnings (loss) from continuing operations			2.76			0.59			(1.40	)		2.10			2.22
Diluted earnings (loss)	(4)		2.76			0.57			(1.64	)		2.15			2.22
Dividends			0.48			0.48			0.48			0.47			0.41
Book value (at June 30)			20.19			16.06			17.03			21.44			19.04
Market Price (at June 30)			42.21			25.43			19.18			32.55			40.50
OTHER DATA (in thousands, except number of employees)
Capital expenditures		$	83,442		$	56,679		$	104,842		$	163,489		$	92,001
Number of employees (at June 30)			11,612			11,047			11,584			13,673			13,947
Basic weighted average shares outstanding			82,063			80,966			73,122			76,811			76,788
Diluted weighted average shares outstanding			83,173			81,690			73,122			78,201			78,545
KEY RATIOS
Sales growth			27.6	%		(5.8	%)		(22.8	%)		14.3	%		2.4	%
Gross profit margin			36.8			33.3			28.8			35.0			36.5
Operating profit (loss) margin			13.4			4.9			(5.0	)		10.0			11.7

(1)	In 2011 and 2010, charges related to restructuring activity. In 2009, the charges related to an impairment of $111.0 million for Industrial goodwill and an Industrial indefinite-lived trademark as well as restructuring charges of $62.6 million. In 2008, the charges related to an Industrial goodwill impairment of $35.0 million as well as restructuring charges of $4.9 million. In 2007, the charge related to the impairment of an indefinite-lived Industrial trademark
(2)	Net income (loss) attributable to Kennametal includes (loss) income from discontinued operations of ($1.4) million, ($17.3) million, $4.1 million and ($0.5) million for 2010, 2009, 2008 and 2007, respectively.
(3)	Basic earnings (loss) per share includes basic (loss) earnings from discontinued operations per share of ($0.02), ($0.24), $0.05 and ($0.01) for 2010, 2009, 2008 and 2007 respectively.
(4)	Diluted earnings (loss) per share includes diluted (loss) earnings from discontinued operations per share of ($0.02), ($0.24) and $0.05 for 2010, 2009 and 2008, respectively.

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ITEM 7  - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in connection with the consolidated financial statements of Kennametal Inc. and the related financial statement notes. Unless otherwise specified, any reference to a “year” is to a fiscal year ended June 30. Additionally, when used in this annual report on Form 10-K, unless the context requires otherwise, the terms “we,” “our” and “us” refer to Kennametal Inc. and its subsidiaries.

OVERVIEW Kennametal Inc. delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions, enabled through our advanced materials sciences, application knowledge and commitment to a sustainable environment. We believe that our reputation for manufacturing excellence, as well as our technological expertise and innovation in our principal products, has helped us to achieve a leading market presence in our primary markets. We believe that we are one of the largest global providers of consumable metalcutting tools and tooling supplies.

In 2011, the Company achieved sequential sales growth each quarter, with an organic sales increase of 28 percent for the year. The Company had strong earnings per diluted share (EPS) of $2.76 as a result of sales growth and solid operating margins. We completed our restructuring programs which are expected to reduce our cost structure by approximately $170 million annually, yielding higher benefits on costs that were lower than anticipated.

For 2011, sales were $2.4 billion, an increase of 27.6 percent compared to prior year sales of $1.9 billion. Operating income was $321.7 million, an increase of $228.4 million compared to operating income of $93.2 million in 2010. The increase in operating income was primarily due to sales volume and price realization, improved capacity utilization and incremental restructuring benefits of approximately $28 million, partially offset by higher raw material costs.

We generated cash flow from operating activities of $230.8 million in the current year. Capital expenditures were $83.4 million during the year.

In addition, we invested further in technology and innovation to continue delivering a high level of new products to our customers. Research and development expenses included in operating expense totaled $33.3 million for 2011. In 2011, we generated approximately 40 percent of our sales from new products.

NEW OPERATING STRUCTURE In order to take additional advantage of growth opportunities as well as to provide a better platform for continually improving the efficiency and effectiveness of operations, we implemented a new operating structure as of July 1, 2010. We restated the segment financial information for the years ended June 30, 2010 and 2009, respectively, to reflect the change in reportable operating segments.

The new structure provides for an enhanced market sector approach coupled with a more customer-centric focus for the sales organization and other key market-facing functions such as customer service, marketing, product management, engineering and product development. The new structure also involves the formation of a single, global integrated supply chain and logistics organization that unleashes additional opportunities to achieve higher customer satisfaction and realize lower costs to serve. Furthermore, the new structure provides for more uniform management of administrative functions on a global basis to further improve the consistency, effectiveness and efficiency of the services provided by these functions.

A key attribute of the new structure is the establishment of two new operating segments by market sector which replace the previous two operating segments that were based on a product focus. The two new reportable operating segments are named Industrial and Infrastructure. The Industrial business is primarily focused on customers within the transportation, aerospace, defense and general engineering market sectors. The Infrastructure business is primarily focused on customers within the energy and earthworks industries. The formation of the two new reportable operating segments is consistent with the new management approach and internal financial reporting established under the new structure.

Under the new structure, more corporate expenses will be allocated to the new segments than were allocated to the previous segments. The remaining corporate expenses that are determined to be non-allocable will continue to be reported as Corporate.

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RESTRUCTURING ACTIONS During 2011, we completed our restructuring programs to reduce costs and improve operating efficiencies. These programs related to the rationalization of certain manufacturing and service facilities, as well as other employment and cost reduction programs. Restructuring and related charges recorded in 2011 amounted to $21.5 million. This included $13.7 million of restructuring charges of which $1.1 million were related to inventory disposals and recorded as cost of goods sold. Restructuring related charges of $4.4 million were recorded in cost of goods sold and $3.4 million in operating expense during 2011. We realized pre-tax benefits from these restructuring programs of approximately $165 million during 2011.

The Company’s restructuring programs are expected to deliver annual ongoing pre-tax savings of approximately $170 million now that all programs are fully implemented. Total pre-tax charges recorded from inception to June 30, 2011 was approximately $150 million.

ACQUISITIONS AND DIVESTITURES In 2011 and 2010, we had no acquisitions or divestitures.

In 2009, we acquired Tricon Metals and Services Inc. (Tricon) in our Infrastructure segment for a net purchase price of $64.1 million. Tricon is a leading supplier of custom wear solutions specializing in consumable proprietary steels for the surface and underground mining markets, including hard rock and coal. During 2009, we also made an acquisition within our Industrial segment. We also had one divestiture in 2009 that was accounted for as discounted operations and described below.

DISCONTINUED OPERATIONS On June 30, 2009, we divested our high speed steel business (HSS) from our Industrial segment as part of our continuing focus to shape our business portfolio and rationalize our manufacturing footprint. This divestiture was accounted for as discontinued operations. Cash proceeds from this divestiture amounted to $28.5 million. We incurred pre-tax charges related to the divestiture of $2.3 million and $25.9 million during 2010 and 2009, respectively. The pre-tax charges as well as the related tax effects were recorded in discontinued operations. We do not expect to incur any additional pre-tax charges related to this divestiture.

The following represents the results of discontinued operations for the years ended June 30:

(in thousands)	2010			2009
Sales	$	–		$	80,630
Loss from discontinued operations before income taxes	$	(2,269	)	$	(25,923	)
Income tax expense (benefit)		(846	)		(8,583	)
Loss from discontinued operations	$	(1,423	)	$	(17,340	)

RESULTS OF CONTINUING OPERATIONS

SALES Sales of $2,403.5 million in 2011 increased 27.6 percent from $1,884.1 million in 2010 as a result of strong organic growth. Organic sales increased in both segments and across all regions. Organic sales growth drivers were general engineering of 40 percent, transportation of 30 percent and energy markets of 26 percent.

Sales of $1,884.1 million in 2010 decreased 5.8 percent from $1,999.9 million in 2009. Sales declined organically by 8 percent as a result of the global economy, partially offset by a 1 percent increase from favorable foreign currency effects and a 1 percent increase from an acquisition. Organic sales declined in Europe and the Americas, partially offset by an organic sales increase in Asia. Organic sales decreased in both segments primarily due to lower sales in general engineering of 14 percent and reduced demand in energy markets of 13 percent, partially offset by an increase in the transportation and earthworks market sectors of 8 percent and 3 percent, respectively.

GROSS PROFIT Gross profit increased $256.7 million to $884.4 million in 2011 from $627.7 million in 2010. The increase was primarily due to increased organic sales of $523.9 million, price realization, improved absorption of manufacturing costs due to higher production levels, cost reduction benefits, favorable business mix and favorable foreign currency effects of $3.5 million. The impact of these items was partially offset by higher raw material costs and one-time benefits in the prior year from certain labor negotiations in Europe that did not occur in the current period. The gross profit margin for 2011 increased to 36.8 percent from 33.3 percent in 2010.

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Gross profit increased $51.2 million to $627.7 million in 2010 from $576.5 million in 2009. The increase was primarily due to restructuring and other cost reduction benefits, lower raw material costs which more than offset unfavorable price realization, one-time benefits from certain labor negotiations in Europe, favorable foreign currency effects of $7.5 million, a decrease in restructuring and related charges of $7.0 million, as well as improved absorption of manufacturing costs due to higher production levels. The impact of these items was partially offset by lower organic sales of $151.2, unfavorable business mix and the restoration of salaries and other employment costs that had been temporarily reduced. The gross profit margin for 2010 increased to 33.3 percent from 28.8 percent in 2009.

OPERATING EXPENSE Operating expense in 2011 was $538.5 million, an increase of $61.0 million, or 12.8 percent, compared to $477.5 million in 2010. The increase is primarily driven by higher employment costs of $31.9 million due to the reinstatement of salaries and other temporary employment cost reductions and a higher provision for incentive compensation of $18.7 million, as a result of better operating performance. Foreign currency unfavorably impacted operating expense by $2.1 million

Operating expense in 2010 was $477.5 million, a decrease of $12.1 million, or 2.5 percent, compared to $489.6 million in 2009. The decrease is primarily attributable to a $40.2 million decrease in employment expenses driven by restructuring and cost management activities and a $5.4 million decrease in the provision for bad debts. These decreases were partially offset by higher provisions for incentive compensation programs of $20.5 million, increased spending on strategic projects of $8.2 million and the unfavorable impact of foreign currency of $4.3 million.

RESTRUCTURING AND ASSET IMPAIRMENT CHARGES During 2011, we completed our restructuring programs and recognized $21.5 million of restructuring charges of which $13.7 million were recorded as restructuring charges including $1.1 million related to inventory disposals and recorded in cost of goods sold. No asset impairment occurred in 2011. See the discussion under the heading “Restructuring Actions” within this MD&A for additional information.

During 2010, we continued to implement restructuring actions and recognized $48.9 million of restructuring charges of which $44.3 million were recorded as restructuring charges including $0.4 million related to inventory disposals and recorded in cost of goods sold. No asset impairment occurred in 2010.

During 2009, restructuring and related charges amounted to $73.3 million, including $64.7 million of restructuring charges of which $2.1 million were related to inventory disposals and recorded in cost of goods sold. During 2009, we recorded a goodwill impairment charge of $100.2 million. Of this amount, $37.3 million related to our surface finishing machines and services business and $62.9 million related to our engineered products business. No goodwill remains on the books for our surface finishing machines and services business and $39.6 million of goodwill remains on the engineered products business. We also recorded a $10.8 million impairment charge for the indefinite-lived trademark for our surface finishing machines and services business.

AMORTIZATION OF INTANGIBLES Amortization expense was $11.6 million, $13.1 million and $13.1 million in 2011, 2010 and 2009, respectively.

INTEREST EXPENSE Interest expense decreased $2.4 million to $22.8 million in 2011, compared with $25.2 million in 2010. This decrease was due to a decrease in the average interest rates on domestic borrowings to 4.8 percent, compared to 5.0 percent in 2010, partially offset by higher borrowings. The portion of our debt subject to variable rates of interest was approximately 2 percent and 6 percent at June 30, 2011 and 2010, respectively.

Interest expense decreased $2.0 million to $25.2 million in 2010, compared with $27.2 million in 2009. This decrease was due to lower borrowings, partially offset by an increase in the average interest rates on domestic borrowings to 5.0 percent compared to 3.9 percent in 2009. The portion of our debt subject to variable rates of interest was approximately 6 percent and 34 percent at June 30, 2010 and 2009, respectively, due to lower borrowings outstanding against our revolving credit facility.

OTHER EXPENSE (INCOME), NET In 2011, other expense, net decreased by $11.4 million to $2.8 million expense, net compared to $8.6 million income, net in 2010. The decrease was primarily due to a $10.2 million unfavorable change in foreign currency transaction results, primarily driven by the euro.

In 2010, other income, net decreased by $6.0 million to $8.6 million compared to $14.6 million in 2009. The decrease was primarily due to an unfavorable change in foreign currency transaction results of $3.2 million, primarily due to the euro and a $3.1 million decrease in interest income due to a decrease in interest rates.

INCOME TAXES The effective tax rate from continuing operations for 2011 was 21.6 percent compared to 35.2 percent for 2010. The change in the effective rate from 2010 to 2011 was primarily driven by increased income in international locations where the tax rate is lower than the U.S. as well as restructuring charges in the prior year in jurisdictions where no tax benefit could be recognized.

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The 2011 effective rate was favorably impacted by a $21.5 million release of a valuation allowance in the United Kingdom, but that impact was offset by the tax cost of approximately $22.0 million, predominately U.S., associated with dividends of current year net income from some of our international subsidiaries. The 2010 effective rate was unfavorably impacted by the expiration of the research, development and experimental tax credit as well as the impact of restructuring charges in jurisdictions where no tax benefit could be recognized.

During 2011, we generated taxable income in other jurisdictions where we have valuation allowances recorded against our net deferred tax assets. The corresponding impact on the 2011 effective tax rate was immaterial. In conjunction with our annual planning process during the fourth quarter of 2011, we determined that sustainability of future income in the United Kingdom is likely, and as a result, we believe that it is more likely than not that we will be able to realize the net deferred tax assets in this jurisdiction. Accordingly, we recorded a valuation allowance adjustment of $21.5 million that reduced tax expense. With respect to the other jurisdictions, we believe sustainability of future income remains uncertain. We therefore have not adjusted the valuation allowance in these jurisdictions. We will continue to monitor our ability to realize the net deferred tax assets in these jurisdictions, and if appropriate, will adjust the valuation allowance. Such an adjustment would likely result in a material reduction to tax expense in the period the adjustment occurs.

The effective tax rate from continuing operations for 2010 was 35.2 percent (provision on income) compared to 10.0 percent (benefit on a loss) for 2009. The change in the effective rate from 2009 to 2010 was primarily driven by asset impairment charges in the prior period. In addition, the 2010 effective rate was unfavorably impacted by the expiration of the research, development and experimental tax credit as well as the impact of restructuring charges in jurisdictions where no tax benefit could be recognized. The 2009 effective rate benefited from a valuation allowance adjustment in Europe.

INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO KENNAMETAL SHAREOWNERS Income from continuing operations attributable to Kennametal Shareowners was $229.7 million, or $2.76 per diluted share, in 2011 compared to $47.8 million, or $0.59 per diluted share, in 2010. The increase in income from continuing operations was a result of the factors previously discussed.

Income from continuing operations attributable to Kennametal Shareowners was $47.8 million, or $0.59 per diluted share, in 2010 compared to loss of ($102.4) million, or ($1.40) per diluted share, in 2009. The increase in income from continuing operations was a result of the factors previously discussed.

BUSINESS SEGMENT REVIEW We operate two reportable operating segments consisting of Industrial and Infrastructure. Corporate expenses that do not have a meaningful base for allocation are reported in Corporate. Segment determination is based upon internal organizational structure, the manner in which we organize segments for making operating decisions and assessing performance, the availability of separate financial results and materiality considerations.

INDUSTRIAL

	2011		2010		2009
External sales	$	1,528,672	$	1,166,793	$	1,277,981
Operating income (loss)		209,663		31,210		(115,083	)

External sales of $1,528.7 million in 2011 increased by $361.9 million, or 31.0 percent, from 2010. The increase in sales was attributed to an organic sales increase of 32 percent and favorable foreign currency effects of 1 percent, offset by the impact of fewer business days. On an organic basis, sales increased in all served market sectors led by strong growth in general engineering and transportation sales of 40 percent and 30 percent, respectively. On a regional basis, organic sales increased by approximately 40 percent in Asia, 29 percent in Europe and 28 percent in the Americas.

Operating income for 2011 was $209.7 million and reflects an increase in operating performance of $178.5 million from 2010. The primary drivers of the increase in operating income were higher organic sales of $369.7 million, price realization, improved capacity utilization and incremental restructuring benefits. These benefits were partially offset by higher raw material costs. Industrial operating income included restructuring and related charges of $12.9 million and $35.5 million in 2011 and 2010, respectively. Industrial operating margin increased to 13.7 percent from 2.7 percent in the prior year.

External sales of $1,166.8 million in 2010 decreased by $111.2 million, or 8.7 percent, from 2009. The decrease in sales was attributed to organic sales decline of 10 percent offset by favorable foreign currency effects of 2 percent. On an organic basis, sales decreased in both aerospace and defense and general engineering, by 28 percent and 14 percent, respectively, partially offset by an increase in transportation sales of 8 percent. On a regional basis, organic sales decreased by approximately 15 percent in Europe and 12 percent in the Americas, partially offset by a 13 percent increase in Asia.

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Operating income for 2010 was $31.2 million and reflects an increase in operating performance of $146.3 million from the operating loss generated in 2009. The primary drivers of the increase in operating performance were cost savings from restructuring programs, continued cost containment actions and favorable price realization, partially offset by lower organic sales of $133.5 million. Industrial operating income (loss) included restructuring and related charges of $35.5 million and $24.5 million in 2010 and 2009, respectively and $111.0 million of asset impairment charges in 2009.

INFRASTRUCTURE

	2011		2010		2009
External sales	$	874,821	$	717,274	$	721,878
Operating income		121,733		79,899		19,768

External sales of $874.8 million in 2011 increased by $157.5 million, or 22.0 percent, from 2010. The increase in sales was attributed to organic sales increase of 21 percent and favorable foreign currency effects of 1 percent. The organic increase was driven by higher sales in the energy and earthworks markets of 26 percent and 18 percent, respectively. On a regional basis, organic sales increased by approximately 27 percent in Asia, 22 percent in the Americas and 13 percent in Europe.

Operating income for 2011 was $121.7 million and reflects an increase of $41.8 million from 2010. Operating income improved primarily due to higher organic sales of $153.1 million, price realization, increased capacity utilization and incremental restructuring benefits, partially offset by higher raw material costs. Infrastructure operating income included restructuring and related charges of $6.2 million and $13.4 million in 2011 and 2010, respectively. Infrastructure operating margin increased from the prior year quarter to 13.9 percent from 11.1 percent.

External sales of $717.3 million in 2010 decreased by $4.6 million, or 0.6 percent, from 2009. The decrease in sales was attributed to organic sales decline of 4 percent offset by the positive effects of acquisitions of 2 percent and favorable foreign currency effects of 1 percent. The decrease in organic sales was driven by lower sales in the energy market of 13 percent, partially offset by an increase in the earthworks market of 3 percent. On a regional basis, organic sales decreased by approximately 8 percent in Europe and 6 percent in the Americas, partially offset by a 14 percent increase in Asia.

Operating income for 2010 was $79.9 million and reflects an increase of $60.1 million from 2009. The increase was driven by cost savings from restructuring programs and continued cost containment actions, partially offset due to lower organic sales of $27.0 million and unfavorable price realization. For 2010, operating loss included $13.4 million of restructuring and related charges, compared to $47.9 million of restructuring and related charges in 2009.

CORPORATE

	2011			2010			2009
Corporate unallocated expense	$	(9,723	)	$	(17,881	)	$	(4,503	)

In 2011, unallocated expense decreased $8.2 million, or 45.6 percent from 2010. The decrease was driven by $4.2 million of lower strategic project spending, $4.1 million higher allocation of Corporate expense to the segments than in the prior year, $1.2 million higher foreign government subsidy income for certain research projects and a $1.1 million reversal of an international environmental liability, partially offset by charge of $2.4 million recorded to write-off our pre-existing ERP system.

In 2010, unallocated expense increased $13.4 million from 2009. The increase was primarily due to $9.0 million of higher strategic project spending and $1.7 million higher foreign government subsidy income for certain research projects.

LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations is our primary source of funding for capital expenditures. During the year ended June 30, 2011, cash flow provided by operating activities was $230.8 million, driven by our operating performance.

To augment cash from operations and as an additional source of funds, we maintain a syndicated revolving credit-facility. On June 25, 2010 we entered into a five-year, multi-currency, revolving credit facility (2010 Credit Agreement) that extends to June 2015. This agreement replaces the prior credit facility that was scheduled to mature in March 2011. The 2010 Credit Agreement permits revolving credit loans of up to $500.0 million for working capital, capital expenditures and general corporate purposes. The 2010 Credit Agreement allows for borrowings in U.S. dollars, euro, Canadian dollars, pound sterling and Japanese yen. Interest payable under the 2010 Credit Agreement is based upon the type of borrowing under the facility and may be (1) LIBOR plus an applicable margin, (2) the greater of the prime rate or the Federal Funds effective rate plus an applicable margin, or (3) fixed as negotiated by us.

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The 2010 Credit Agreement requires us to comply with various restrictive and affirmative covenants, including two financial covenants: a maximum leverage ratio and a minimum consolidated interest coverage ratio (as those terms are defined in the agreement). We were in compliance with these financial covenants as of June 30, 2011. We had no borrowings outstanding under the 2010 Credit Agreement as of June 30, 2011.

Borrowings under the 2010 Credit Agreement are guaranteed by our significant domestic subsidiaries.

Our $300 million Senior Unsecured Notes due in June 2012 have been reclassified to current maturities of long-term debt as of June 30, 2011. The repayment of this debt is expected to be financed in due course through a new corporate bond issuance.

Additionally, we obtain local financing through credit lines with commercial banks in the various countries in which we operate. At June 30, 2011, these borrowings amounted to $3.7 million of notes payable and $3.3 million of term debt, capital leases and other debt. We believe that cash flow from operations and the availability under our credit lines will be sufficient to meet our cash requirements over the next 12 months.

Based upon our debt structure at June 30, 2011 and 2010, approximately 2 percent and 6 percent of our debt, respectively, was exposed to variable rates of interest. The decrease in the portion of our debt subject to variable rates was due to a reduction in notes payable and term debt subject to variable interest rates.

At June 30, 2011, we had cash and cash equivalents of $204.6 million. Total Kennametal shareowners’ equity was $1,658.1 million and total debt was $312.9 million. Our current senior credit ratings are at investment grade levels. We believe that our current financial position, liquidity and credit ratings provide us access to the capital markets. We continue to closely monitor our liquidity position and the condition of the capital markets, as well as the counterparty risk of our credit providers.

Following is a summary of our contractual obligations and other commercial commitments as of June 30, 2011 (in thousands):

Contractual Obligations			Total		2012		2013-2014		2015-2016		Thereafter
Long-term debt	(1	)	$	327,718	$	327,651	$	67	$	-	$	-
Notes payable	(2	)		3,821		3,821		-		-		-
Pension benefit payments				(3)		41,230		83,988		91,304		(3)
Postretirement benefit payments				(3)		2,416		4,586		4,203		(3)
Capital leases	(4	)		3,505		1,392		1,385		728		-
Operating leases				64,893		16,962		17,516		6,714		23,701
Purchase obligations	(5	)		830,285		616,984		90,493		57,792		65,016
Unrecognized tax benefits	(6	)		21,462		16,096		-		-		5,366
Total					$	1,026,552	$	198,035	$	160,741

(1)	Long-term debt includes interest obligations of $21.6 million. Interest obligations were determined assuming interest rates as of June 30, 2011 remain constant.
(2)	Notes payable includes interest obligations of $0.2 million. Interest obligations were determined assuming interest rates as of June 30, 2011 remain constant.
(3)	Annual payments are expected to continue into the foreseeable future at the amounts noted in the table.
(4)	Capital leases include interest obligations of $0.4 million.
(5)	Purchase obligations consist of purchase commitments for materials, supplies and machinery and equipment as part of the ordinary conduct of business. Purchase obligations with variable price provisions were determined assuming market prices as of June 30, 2011 remain constant.
(6)	Unrecognized tax benefits are positions taken or expected to be taken on an income tax return that may result in additional payments to tax authorities. These amounts include interest of $3.2 million accrued related to such positions as of June 30, 2011. The amount included for 2012 is expected to be settled within the next twelve months. The remaining amount of unrecognized tax benefits is included in the ‘Thereafter’ column as we are not able to reasonably estimate the timing of potential future payments. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.

Other Commercial Commitments	Total		2012		2013-2014		2015-2016		Thereafter
Standby letters of credit	$	5,234	$	5,234	$	-	$	-	$	-
Guarantees		32,241		25,725		454		9		6,053
Total	$	37,475	$	30,959	$	454	$	9	$	6,053

The standby letters of credit relate to insurance and other activities. The guarantees are non-debt guarantees in foreign locations with financial institutions required primarily for security deposits, product performance guarantees and advances.

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Cash flows from discontinued operations are not deemed material and have been combined with cash flows from continuing operations within each cash flow statement category. The absence of cash flows from discontinued operations is not expected to have a material impact on our future liquidity and capital resources.

Cash Flow Provided by Operating Activities

During 2011, cash flow provided by operating activities was $230.8 million, compared to $164.8 million in 2010. Cash flow provided by operating activities for the current year consisted of net income and non-cash items amounting to $329.8 million, offset by changes in certain assets and liabilities netting to $99.0 million. These changes were primarily driven by an increase in inventory of $124.1 million, due to increased demand and higher raw material costs, and an increase in accounts receivable of $89.2 million driven by higher sales volumes, partially offset by an increase in accounts payable and accrued liabilities of $100.3 million, driven by higher accounts payable balances related to increased production and an increase in accrued income taxes of $22.2 million.

During 2010, cash flow provided by operating activities was $164.8 million, compared to $192.3 million in 2009. Cash flow provided by operating activities for 2010 consisted of net income and non-cash items amounting to $158.4 million and changes in certain assets and liabilities netting to $6.5 million. These changes were driven by an increase in accounts receivable of $58.2 million, driven by higher sales volumes in the latter part of the year, partially offset by an increase in accounts payable and accrued liabilities of $41.0 million, driven by increased accounts payable related to increased production and an increase in accrued income taxes of $19.2 million.

During 2009, cash flow provided by operating activities was $192.3 million. Cash flow provided by operating activities for 2009 consisted of net loss and non-cash items amounting to $113.1 million of cash generation, including $115.2 million of restructuring and asset impairment charges, and changes in certain assets and liabilities netting to $79.2 million. Contributing to these changes was a decrease in accounts receivable of $200.2 million and a decrease in inventories of $36.0 million, partially offset by a decrease in accounts payable and accrued liabilities of $118.1 million, a decrease in accrued income taxes of $12.0 million and a net change in other assets and liabilities of $26.9 million.

Cash Flow Used for Investing Activities
Cash flow used for investing activities was $71.8 million for 2011, an increase of $31.4 million, compared to $40.4 million in 2010. During the current year, cash flow used for investing activities included $83.4 million used for purchases of property, plant and equipment, which consisted primarily of upgrades of equipment and our enterprise resource planning (ERP) system.

We have projected our capital expenditures for 2012 to be approximately $100 million, which are expected to be used primarily to invest in equipment upgrades and manufacturing capabilities. We believe this level of capital spending is sufficient to maintain competitiveness and improve productivity.

Cash flow used for investing activities was $40.4 million for 2010, a decrease of $129.7 million, compared to $170.1 million in 2009. During 2010, cash flow used for investing activities included $56.7 million used for purchases of property, plant and equipment, which consisted primarily of equipment upgrades, and $17.0 million used for the acquisition of business assets, primarily the deferred purchase price of $16.0 million for a 2007 acquisition, as well as $27.8 million of cash proceeds from divestitures.

Cash flow used for investing activities was $170.1 million for 2009 and included $104.8 million used for purchases of property, plant and equipment, which consisted primarily of equipment upgrades, and $69.5 million used for the acquisition of business assets, primarily the Tricon acquisition with a net purchase price of $64.1 million.

Cash Flow Used for Financing Activities
Cash flow used for financing activities was $96.0 million for 2011, compared to $58.2 million in 2010. During the current year, cash flow used for financing activities included $57.9 million used for the purchase of capital stock, $39.8 million of cash dividends paid to shareowners and a $17.6 million net decrease in borrowings, partially offset by $18.3 million of dividend reinvestment and the effect of employee benefit and stock plans.

Cash flow used for financing activities was $58.2 million for 2010, compared to $15.5 million in 2009. During 2010, cash flow used for financing activities included a $143.0 million net decrease in borrowings and $39.3 million of cash dividends paid to shareowners, partially offset by $120.7 million in net proceeds from equity offering and $10.7 million of dividend reinvestment and the effect of employee benefit and stock plans.

In 2009, cash flow used for financing activities was $15.5 million and included a $128.0 million net increase in borrowings, $12.6 million in proceeds from termination of interest rate swap contracts and $4.9 million of dividend reinvestment and the effect of employee benefit and stock plans offset by $127.7 million used for the purchase of capital stock and $35.5 million of cash dividends paid to shareowners.

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FINANCIAL CONDITION At June 30, 2011, total assets were $2,754.5 million, an increase of $486.7 million from $2,267.8 million at June 30, 2010. Total liabilities increased $161.4 million from $934.4 million at June 30, 2010 to $1,095.8 million at June 30, 2011.

Working capital was $446.1 million at June 30, 2011, a decrease of $76.8 million or 14.7 percent from $522.9 million at June 30, 2010. The decrease in working capital was primarily driven by an increase in current maturities of long-term debt and capital leases and notes payable to banks of $288.0 million due to the $306.0 million senior unsecured notes being reclassified from long-term to current as they are due in 2012, an increase in accounts payable of $97.3 million due to increased production and better working capital management, an increase in accrued payroll of $25.9 million due to the timing of the payroll disbursement at year end and an increase in accrued income taxes of $20.2 million, partially offset by an increase in inventories of $155.7 million driven by the impact of higher production to meet demand and higher raw material costs, an increase of $121.1 million in accounts receivable due to higher sales and an increase of $86.4 million in cash and cash equivalents. Foreign currency effects accounted for $54.4 million of the working capital change.

Property, plant and equipment, net increased $32.6 million from $664.5 million at June 30, 2010 to $697.1 million at June 30, 2011, primarily due to capital additions of $83.4 million, consisting of equipment upgrades and ERP system capitalization and foreign currency impact of $38.6 million, partially offset by depreciation expense of $81.9 million.

At June 30, 2011, other assets were $769.8 million, an increase of $82.4 million from $687.4 million at June 30, 2010. The primary drivers for the increase were an increase in other assets of $47.0 million, an increase in goodwill of $21.9 million and an increase in deferred income taxes of $18.0 million. The increase in other assets was primarily due to an increase in pension assets due to higher return on plan assets. Foreign currency effects accounted for $21.6 million and $5.3 million in the change in goodwill and deferred income taxes, respectively.

Long-term debt and capital leases decreased $312.8 million to $1.9 million at June 30, 2011 from $314.7 million at June 30, 2010. The decrease was driven by the reclassification of senior unsecured notes which are due in 2012 to current.

Kennametal shareowners’ equity was $1,638.1 million at June 30, 2011, an increase of $322.6 million from $1,315.5 million in the prior year. The increase was primarily due to net income attributable to Kennametal of $229.7 million, foreign currency translation adjustments of $120.1 million, effect of amortization of employee benefit plan gains into other comprehensive income of $35.2 million and capital stock issued under employee benefit and stock plans of $34.9 million, partially offset by purchase of capital stock of $57.9 million and cash dividends paid to shareowners of $39.8 million.

ENVIRONMENTAL MATTERS The operation of our business has exposed us to certain liabilities and compliance costs related to environmental matters. We are involved in various environmental cleanup and remediation activities at certain of our locations.

Superfund Sites We are involved as a PRP at various sites designated by the USEPA as Superfund sites. For certain of these sites, we have evaluated the claims and potential liabilities and have determined that neither are material, individually or in the aggregate. For certain other sites, proceedings are in the very early stages and have not yet progressed to a point where it is possible to estimate the ultimate cost of remediation, the timing and extent of remedial action that may be required by governmental authorities or the amount of our liability alone or in relation to that of any other PRPs.

Other Environmental Issues We establish and maintain reserves for other potential environmental issues. At June 30, 2011 and 2010, the total of accruals for these reserves was $5.4 million and $5.2 million, respectively. These totals represent anticipated costs associated with the remediation of these issues. We recorded additional reserves of $1.5 million and $0.6 million in 2011 and 2010, respectively. We recorded unfavorable foreign currency translation adjustments of $0.6 million during 2011 and favorable foreign currency translation adjustment of $0.6 million during 2010, respectively. Cash payments of $0.8 million and $0.1 million were made against these reserves during 2011 and 2010, respectively. We also had a $1.1 million reversal of an international environmental liability in 2011. We maintain a Corporate EHS Department, as well as an EHS Steering Committee, to monitor compliance with environmental regulations and to oversee remediation activities. In addition, we have designated EHS coordinators who are responsible for each of our global manufacturing facilities. Our financial management team periodically meets with members of the Corporate EHS Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly basis, we review financial provisions and reserves for environmental contingencies and adjust these reserves when appropriate.

EFFECTS OF INFLATION Despite modest inflation in recent years, rising costs, including the cost of certain raw materials, continue to affect our operations throughout the world. We strive to minimize the effects of inflation through cost containment, productivity improvements and price increases.

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DISCUSSION OF CRITICAL ACCOUNTING POLICIES In preparing our financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), we make judgments and estimates about the amounts reflected in our financial statements. As part of our financial reporting process, our management collaborates to determine the necessary information on which to base our judgments and develops estimates used to prepare the financial statements. We use historical experience and available information to make these judgments and estimates. However, different amounts could be reported using different assumptions and in light of different facts and circumstances. Therefore, actual amounts could differ from the estimates reflected in our financial statements. Our significant accounting policies are described in Note 2 of our consolidated financial statements set forth in Item 8. We believe that the following discussion addresses our critical accounting policies.

Revenue Recognition We recognize revenue upon shipment of our products and assembled machines. Our general conditions of sale explicitly state that the delivery of our products and assembled machines is F.O.B. shipping point and that title and all risks of loss and damages pass to the buyer upon delivery of the sold products or assembled machines to the common carrier.

Our general conditions of sale explicitly state that acceptance of the conditions of shipment is considered to have occurred unless written notice of objection is received by Kennametal within 10 calendar days of the date specified on the invoice. We do not ship products or assembled machines unless we have documentation authorizing shipment to our customers. Our products are consumed by our customers in the manufacture of their products. Historically, we have experienced very low levels of returned products and assembled machines and do not consider the effect of returned products and assembled machines to be material. We have recorded an estimated returned goods allowance to provide for any potential returns.

We warrant that products and services sold are free from defects in material and workmanship under normal use and service when correctly installed, used and maintained. This warranty terminates 30 days after delivery of the product to the customer and does not apply to products that have been subjected to misuse, abuse, neglect or improper storage, handling or maintenance. Products may be returned to Kennametal only after inspection and approval by Kennametal and upon receipt by the customer of shipping instructions from Kennametal. We have included an estimated allowance for warranty returns in our returned goods allowance discussed above.

We recognize revenue related to the sale of specialized assembled machines upon customer acceptance and installation, as installation is deemed essential to the functionality of a specialized assembled machine. Sales of specialized assembled machines were immaterial for 2011, 2010 and 2009.

Stock-Based Compensation We recognize stock-based compensation expense for all stock options, restricted stock awards and restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period). We utilize the Black-Scholes valuation method to establish the fair value of all stock option awards.

Accounting for Contingencies We accrue for contingencies when it is probable that a liability or loss has been incurred and the amount can be reasonably estimated. Contingencies by their nature relate to uncertainties that require the exercise of judgment in both assessing whether or not a liability or loss has been incurred and estimating the amount of probable loss. The significant contingencies affecting our financial statements include environmental, health and safety matters and litigation.

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Long-Lived Assets We evaluate the recoverability of property, plant and equipment and intangible assets that are amortized whenever events or changes in circumstances indicate the carrying amount of such assets may not be fully recoverable. Changes in circumstances include technological advances, changes in our business model, capital structure, economic conditions or operating performance. Our evaluation is based upon, among other things, our assumptions about the estimated future undiscounted cash flows these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value, we will recognize an impairment loss to the extent that carrying value exceeds fair value. We apply our best judgment when performing these evaluations to determine if a triggering event has occurred, the undiscounted cash flows used to assess recoverability and the fair value of the asset.

Goodwill and Indefinite-Lived Intangible Assets We evaluate the recoverability of goodwill of each of our reporting units by comparing the fair value of each reporting unit with its carrying value. The fair values of our reporting units are determined using a combination of a discounted cash flow analysis and market multiples based upon historical and projected financial information. We apply our best judgment when assessing the reasonableness of the financial projections used to determine the fair value of each reporting unit. We evaluate the recoverability of indefinite-lived intangible assets using a discounted cash flow analysis based on projected financial information. These valuations are sensitive to changes in market interest rates.

Pension and Other Postretirement and Postemployment Benefits We sponsor these types of benefit plans for certain employees and retirees. Accounting for the cost of these plans requires the estimation of the cost of the benefits to be provided well into the future and attributing that cost over the expected work life of employees participating in these plans. This estimation requires our judgment about the discount rate used to determine these obligations, expected return on plan assets, rate of future compensation increases, rate of future health care costs, withdrawal and mortality rates and participant retirement age. Differences between our estimates and actual results may significantly affect the cost of our obligations under these plans.

In the valuation of our pension and other postretirement and postemployment benefit liabilities, management utilizes various assumptions. We determine our discount rate based on investment grade bond yield curves with a duration that approximates the benefit payment timing of each plan. This rate can fluctuate based on changes in investment grade bond yields. At June 30, 2011, a hypothetical 25 basis point increase or decrease in our discount rates would increase or decrease, respectively, our pre-tax income by approximately $2.7 million.

The long-term rate of return on plan assets is estimated based on an evaluation of historical returns for each asset category held by the plans, coupled with the current and short-term mix of the investment portfolio. The historical returns are adjusted for expected future market and economic changes. This return will fluctuate based on actual market returns and other economic factors.

The rate of future health care cost increases is based on historical claims and enrollment information projected over the next fiscal year and adjusted for administrative charges. This rate is expected to decrease until 2029. At June 30, 2011, a hypothetical 1 percent increase or decrease in our health care cost trend rates would be immaterial to our pre-tax income.

Future compensation rates, withdrawal rates and participant retirement age are determined based on historical information. These assumptions are not expected to significantly change. Mortality rates are determined based on a review of published mortality tables.

We expect to contribute $7.0 million and $2.1 million to our pension and other postretirement benefit plans, respectively, in 2012.

Allowance for Doubtful Accounts We record allowances for estimated losses resulting from the inability of our customers to make required payments. We assess the creditworthiness of our customers based on multiple sources of information and analyze additional factors such as our historical bad debt experience, industry and geographic concentrations of credit risk, current economic trends and changes in customer payment terms. This assessment requires significant judgment. If the financial condition of our customers was to deteriorate, additional allowances may be required, resulting in future operating losses that are not included in the allowance for doubtful accounts at June 30, 2011.

Inventories Inventories are stated at the lower of cost or market. We use the last-in, first-out method for determining the cost of a significant portion of our U.S. inventories. The cost of the remainder of our inventories is determined under the first-in, first-out or average cost methods. When market conditions indicate an excess of carrying costs over market value, a lower-of-cost-or-market provision is recorded. Excess and obsolete inventory reserves are established based upon our evaluation of the quantity of inventory on hand relative to demand.

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Income Taxes Realization of our deferred tax assets is primarily dependent on future taxable income, the timing and amount of which are uncertain, in part, due to the expected profitability of certain foreign subsidiaries. A valuation allowance is recognized if it is “more likely than not” that some or all of a deferred tax asset will not be realized. As of June 30, 2011, the deferred tax assets net of valuation allowances relate primarily to net operating loss carryforwards, accrued employee benefits and inventory reserves. In the event that we were to determine that we would not be able to realize our deferred tax assets in the future, an increase in the valuation allowance would be required. In the event we were to determine that we are able to use our deferred tax assets and a valuation allowance had been recorded against the deferred tax assets, a decrease in the valuation allowance would be required.

NEW ACCOUNTING STANDARDS

Adopted

As of January 1, 2011, Kennametal adopted changes to intangible impairment testing for reporting units with zero or negative carrying amounts. These changes require an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not that an intangible impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s intangible assets are not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of January 1, 2011, Kennametal adopted changes to the disclosures related to business combinations for a public entity that presents comparative financial statements. This guidance also expanded the supplemental pro forma business combination disclosures. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on consolidations for enterprises involved with variable interest entities. The guidance modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights should be consolidated and clarifies that the determination of whether a company is required to consolidate a variable interest entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on accounting for transfers of financial assets. This guidance requires additional disclosure regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance allows companies to allocate arrangement consideration in multiple deliverable arrangements in a manner that better reflects the transaction’s economics and may result in earlier revenue recognition. In addition, the residual method of allocating arrangement consideration is no longer permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Issued

In June 2011, the Financial Accounting Standards Board (FASB) issued new guidance on presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement (referred to as the statement of comprehensive income) or in two separate consecutive statements. Each component of net income and other comprehensive income, together with totals for comprehensive income and its two parts — net income and other comprehensive income, would need to be displayed under either alternative. The statement(s) would need to be presented with equal prominence as the other primary financial statements. This guidance is effective for Kennametal beginning July 1, 2012.

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In May 2011, the FASB issued new guidance on fair value measurements and disclosure. The objective of the new guidance is a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between accounting principles U.S. GAAP and international financial reporting standards (IFRS). Many of the amendments in this new guidance represent clarifications to existing guidance or changes in the measurement guidance for determining fair value. The most significant change in disclosures is an expansion of the information required for Level 3 measurements. New disclosures are required about the use of a nonfinancial asset measured or disclosed at fair value if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. This guidance is effective for Kennametal beginning January 1, 2012. We are in the process of evaluating the impact of adoption on our consolidated financial statements.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. As part of our financial risk management program, we use certain derivative financial instruments to manage these risks. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We use derivative financial instruments to provide predictability to the effects of changes in foreign exchange rates on our consolidated results and to achieve our targeted mix of fixed and floating interest rates on outstanding debt. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow, allowing us to focus more of our attention on business operations. With respect to interest rate management, these derivative instruments allow us to achieve our targeted fixed-to-floating interest rate mix as a separate decision from funding arrangements in the bank and public debt markets. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense (income), net. See Notes 2 and 16 set forth in Item 8.

We are exposed to counterparty credit risk for nonperformance of derivative contracts and, in the event of nonperformance, to market risk for changes in interest and currency rates, as well as settlement risk. We manage exposure to counterparty credit risk through credit standards, diversification of counterparties and procedures to monitor concentrations of credit risk. We do not anticipate nonperformance by any of the counterparties.

The following provides additional information on our use of derivative instruments. Included below is a sensitivity analysis that is based upon a hypothetical 10 percent weakening or strengthening in the U.S. dollar compared to the June 30, 2011 foreign currency rates and the effective interest rates under our current borrowing arrangements. We compared the contractual derivative and borrowing arrangements in effect at June 30, 2011 to the hypothetical foreign exchange or interest rates in the sensitivity analysis to determine the effect on interest expense, pre-tax income or accumulated other comprehensive income. Our analysis takes into consideration the different types of derivative instruments and the applicability of hedge accounting.

CASH FLOW HEDGES Currency A portion of our operations consists of investments in foreign subsidiaries. Our exposure to market risk for changes in foreign exchange rates arises from these investments, intercompany loans utilized to finance these subsidiaries, trade receivables and payables and firm commitments arising from international transactions. We manage our foreign exchange transaction risk to reduce the volatility of cash flows caused by currency fluctuations through natural offsets where appropriate and through foreign exchange contracts. These contracts are designated as hedges of transactions that will settle in future periods and otherwise would expose us to foreign currency risk.

Our foreign exchange hedging program minimizes our exposure to foreign exchange rate movements. This exposure arises largely from anticipated cash flows from cross-border intercompany sales of products and services. This program utilizes range forwards and forward contracts primarily to sell foreign currency. The notional amounts of the contracts translated into U.S. dollars at June 30, 2011 and 2010 rates were $37.6 million and $9.4 million, respectively. We would have paid immaterial amounts at June 30, 2011 and 2010, respectively, to settle these contracts, which represent the fair value of these contracts. At June 30, 2011, a hypothetical 10 percent strengthening or weakening of the U.S. dollar would change accumulated other comprehensive (loss) income, net of tax, by $1.5 million.

In addition, we may enter into forward contracts to hedge transaction exposures or significant cross-border intercompany loans by either purchasing or selling specified amounts of foreign currency at a specified date. At June 30, 2011 and 2010, we had outstanding forward contracts to purchase and sell foreign currency with notional amounts, translated into U.S. dollars at June 30, 2011 and 2010 rates, of $39.3 million and $134.0 million, respectively. At June 30, 2011, a hypothetical 10 percent change in the year-end exchange rates would result in an increase or decrease in pre-tax income of $0.8 million related to these positions.

Interest Rate Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We seek to manage our interest rate risk in order to balance our exposure between fixed and floating rates, while attempting to minimize our borrowing costs. To achieve these objectives, we primarily use interest rate swap contracts to manage exposure to interest rate changes

- 22 -

related to these borrowings. We had forward starting interest rate swap contracts outstanding for forecasted transactions that effectively converted a cumulative notional amount of $150 million and $75 million from floating to fixed interest rates as of June 30, 2011 and 2010, respectively. These contracts are expected to be settled by December 2011. We would have paid $2.4 million and $2.3 million at June 30, 2011 and 2010, respectively, to settle these interest rate swap contracts, which represented the fair value of these contracts.

FAIR VALUE HEDGES Interest Rate As discussed above, our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We seek to manage this risk through the use of interest rate swap contracts. At June 30, 2011 and 2010, we had no such contracts in place.

DEBT AND NOTES PAYABLE At June 30, 2011 and 2010, we had $312.9 million and $337.7 million, respectively, of outstanding debt, including capital leases and notes payable. Effective interest rates as of June 30, 2011 and 2010 were 4.8 percent and 5.0 percent, respectively, including the effect of interest rate swaps. A hypothetical change of 10 percent in interest rates from June 30, 2011 levels would increase or decrease annual interest expense by approximately $2.2 million.

On June 25, 2010, we entered into a five-year, multi-currency, revolving credit facility (2010 Credit Agreement) that extends to June 2015. This agreement replaces the prior credit facility that was scheduled to mature in March 2011. The 2010 Credit Agreement permits revolving credit loans of up to $500.0 million for working capital, capital expenditures and general corporate purposes. We had no borrowings outstanding under the 2010 Credit Agreement as of June 30, 2011.

Also during July 2009, the Company completed the issuance of 8.1 million shares of its common stock generating net proceeds of $120.7 million which were used to pay down outstanding indebtedness under the revolving credit facility.

FOREIGN CURRENCY EXCHANGE RATE FLUCTUATIONS Foreign currency exchange rate fluctuations materially decreased earnings in 2011 and materially increased earnings in 2009. Such fluctuations did not materially impact earnings in 2010. Foreign currency exchange rate fluctuations may have a material impact on future earnings in the short term and long term.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management has conducted an assessment of the Company’s internal controls over financial reporting as of June 30, 2011 using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that the Company maintained effective internal control over financial reporting as of June 30, 2011, based on criteria in Internal Control — Integrated Framework issued by the COSO. The effectiveness of the Company’s internal control over financial reporting as of June 30, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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Report of Independent Registered Public Accounting Firm

To the Shareowners of Kennametal Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareowners’ equity and cash flow present fairly, in all material respects, the financial position of Kennametal Inc. and its subsidiaries at June 30, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
August 11, 2011

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CONSOLIDATED STATEMENTS OF INCOME

Year ended June 30 (in thousands, except per share data)	2011		2010			2009
Sales	$	2,403,493	$	1,884,067		$	1,999,859
Cost of goods sold		1,519,102		1,256,339			1,423,320
Gross profit		884,391		627,728			576,539
Operating expense		538,530		477,487			489,567
Restructuring and asset impairment charges (Notes 2 and 15)		12,586		43,923			173,656
Amortization of intangibles		11,602		13,090			13,134
Operating income (loss)		321,673		93,228			(99,818	)
Interest expense		22,760		25,203			27,244
Other expense (income), net		2,780		(8,577	)		(14,566	)
Income (loss) from continuing operations before income taxes		296,133		76,602			(112,496	)
Provision (benefit) for income taxes (Note 12)		63,856		26,977			(11,205	)
Income (loss) from continuing operations		232,277		49,625			(101,291	)
Loss from discontinued operations (Note 5)		-		(1,423	)		(17,340	)
Net income (loss)		232,277		48,202			(118,631	)
Less: Net income attributable to noncontrolling interests		2,550		1,783			1,111
Net income (loss) attributable to Kennametal	$	229,727	$	46,419		$	(119,742	)
Amounts attributable to Kennametal Shareowners:
Income (loss) from continuing operations	$	229,727	$	47,842		$	(102,402	)
Loss from discontinued operations (Note 5)		-		(1,423	)		(17,340	)
Net income (loss) attributable to Kennametal	$	229,727	$	46,419		$	(119,742	)
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL
Basic earnings (loss) per share:
Continuing operations	$	2.80	$	0.59		$	(1.40	)
Discontinued operations		-		(0.02	)		(0.24	)
	$	2.80	$	0.57		$	(1.64	)
Diluted earnings (loss) per share:
Continuing operations	$	2.76	$	0.59		$	(1.40	)
Discontinued operations		-		(0.02	)		(0.24	)
	$	2.76	$	0.57		$	(1.64	)
Dividends per share	$	0.48	$	0.48		$	0.48
Basic weighted average shares outstanding		82,063		80,966			73,122
Diluted weighted average shares outstanding		83,173		81,690			73,122

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

As of June 30 (in thousands, except per share data)	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	204,565		$	118,129
Accounts receivable, less allowance for doubtful accounts of $20,958 and $24,789		447,835			326,699
Inventories (Note 8)		519,973			364,268
Deferred income taxes (Note 12)		60,257			62,083
Other current assets		54,955			44,752
Total current assets		1,287,585			915,931
Property, plant and equipment:
Land and buildings		373,971			341,748
Machinery and equipment		1,396,306			1,281,872
Less accumulated depreciation		(1,073,215	)		(959,085	)
Property, plant and equipment, net		697,062			664,535
Other assets:
Investments in affiliated companies		829			2,251
Goodwill (Note 2)		511,328			489,443
Other intangible assets, less accumulated amortization of $78,712 and $63,343 (Note 2)		152,279			155,306
Deferred income taxes (Note 12)		29,876			11,827
Other		75,510			28,530
Total other assets		769,822			687,357
Total assets	$	2,754,469		$	2,267,823
LIABILITIES
Current liabilities:
Current maturities of long-term debt and capital leases (Note 10)	$	307,304		$	3,539
Notes payable to banks (Note 11)		3,659			19,454
Accounts payable		222,678			125,360
Accrued income taxes (Note 12)		38,098			17,857
Accrued vacation pay		37,311			34,615
Accrued payroll		65,265			39,374
Other current liabilities (Note 9)		167,206			152,806
Total current liabilities		841,521			393,005
Long-term debt and capital leases, less current maturities (Note 10)		1,919			314,675
Deferred income taxes (Note 12)		83,310			63,266
Accrued postretirement benefits (Note 13)		17,853			17,894
Accrued pension benefits (Note 13)		117,066			111,807
Accrued income taxes (Note 12)		3,094			5,193
Other liabilities		31,065			28,540
Total liabilities		1,095,828			934,380
Commitments and contingencies (Note 19)
EQUITY
Kennametal Shareowners’ Equity:
Preferred stock, no par value; 5,000 shares authorized; none issued		-			-
Capital stock, $1.25 par value; 120,000 shares authorized; 81,129 and 81,903 shares issued		101,411			102,379
Additional paid-in capital		470,758			492,454
Retained earnings		983,374			793,448
Accumulated other comprehensive income (loss)		82,529			(72,781	)
Total Kennametal Shareowners’ Equity		1,638,072			1,315,500
Noncontrolling interests		20,569			17,943
Total equity		1,658,641			1,333,443
Total liabilities and equity	$	2,754,469		$	2,267,823

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOW

Year ended June 30 (in thousands)	2011			2010			2009
OPERATING ACTIVITIES
Net income (loss)	$	232,277		$	48,202		$	(118,631	)
Adjustments for non-cash items:
Depreciation		81,869			83,339			83,247
Amortization		11,602			13,090			13,134
Stock-based compensation expense		18,852			16,640			9,412
Restructuring and asset impairment charges (Note 15)		2,914			855			115,212
Loss on divestitures		-			527			22,704
Deferred income tax (benefit) provision		(7,881	)		230			(10,898	)
Other		(9,872	)		(4,506	)		(1,088	)
Changes in certain assets and liabilities, excluding effects of acquistions and divestitures:
Accounts receivable		(89,153	)		(58,245	)		200,159
Inventories		(124,082	)		(2,576	)		36,048
Accounts payable and accrued liabilities		100,325			40,985			(118,133	)
Accrued income taxes		22,158			19,227			(11,969	)
Other		(8,212	)		7,060			(26,934	)
Net cash flow provided by operating activities		230,797			164,828			192,263
INVESTING ACTIVITIES
Purchases of property, plant and equipment		(83,442	)		(56,679	)		(104,842	)
Disposals of property, plant and equipment		9,755			5,141			2,914
Cash paid for acquisitions, net of cash acquired (Note 4)		-			(16,969	)		(69,485	)
Proceeds from divestitures (Notes 4 and 5)		-			27,788			1,544
Proceeds from sale of investments in affiliated companies		1,723			23			108
Other		139			276			(295	)
Net cash flow used for investing activities		(71,825	)		(40,420	)		(170,056	)
FINANCING ACTIVITIES
Net (decrease) increase in notes payable		(15,992	)		(27,335	)		14,311
Term debt borrowings		450,109			564,366			974,248
Term debt repayments		(451,748	)		(680,023	)		(860,522	)
Purchase of capital stock		(57,909	)		(306	)		(127,720	)
Net proceeds from equity offering		-			120,696			-
Proceeds from interest rate swap agreement termination (Note 7)		-			-			12,566
Dividend reinvestment and the effect of employee benefit and stock plans		18,328			10,677			4,873
Cash dividends paid to shareowners		(39,801	)		(39,316	)		(35,466	)
Other		988			(6,926	)		2,184
Net cash flow used for financing activities		(96,025	)		(58,167	)		(15,526	)
Effect of exchange rate changes on cash and cash equivalents		23,489			(17,935	)		(23,336	)
CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash equivalents		86,436			48,306			(16,655	)
Cash and cash equivalents, beginning of period		118,129			69,823			86,478
Cash and cash equivalents, end of period	$	204,565		$	118,129		$	69,823

The accompanying notes are an integral part of these consolidated financial statements.

Note: Amounts presented include cash flows from discontinued operations.

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CONSOLIDATED STATEMENTS OF SHAREOWNERS’ EQUITY

	2011						2010						2009
Year ended June 30 (in thousands)	Shares			Amount			Shares			Amount			Shares			Amount
CAPITAL STOCK
Balance at beginning of year		81,903		$	102,379			73,232		$	91,540			76,858		$	96,076
Dividend reinvestment		8			10			12			15			28			35
Capital stock issued under employee benefit and stock plans		721			901			621			776			346			429
Equity offering		-			-			8,050			10,063			-			-
Purchase of capital stock		(1,503	)		(1,879	)		(12	)		(15	)		(4,000	)		(5,000	)
Balance at end of year		81,129			101,411			81,903			102,379			73,232			91,540
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year					492,454						357,839						468,169
Dividend reinvestment					354						290						569
Capital stock issued under employee benefit and stock plans					33,980						23,986						11,821
Equity offering					-						110,630						-
Purchase of capital stock					(56,030	)					(291	)					(122,720	)
Balance at end of year					470,758						492,454						357,839
RETAINED EARNINGS
Balance at beginning of year					793,448						786,345						941,553
Net income (loss)					229,727						46,419						(119,742	)
Cash dividends paid to shareowners					(39,801	)					(39,316	)					(35,466	)
Balance at end of year					983,374						793,448						786,345
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of year					(72,781	)					11,719						142,109
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of tax					642						(936	)					(3,006	)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of tax					(679	)					(1,482	)					5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of tax					28,087						(17,397	)					(14,283	)
Reclassification of net pension and other postemployment benefit losses, net of tax					7,131						2,975						1,496
Foreign currency translation adjustments, net of tax					120,129						(67,660	)					(119,887	)
Other comprehensive income (loss), net of tax					155,310						(84,500	)					(130,390	)
Balance at end of year					82,529						(72,781	)					11,719
NONCONTROLLING INTERESTS
Balance at beginning of year					17,943						20,012						21,527
Net income					2,550						1,783						1,111
Other comprehensive income (loss), net of tax					2,229						(1,177	)					(2,158	)
Purchase of noncontrolling interests					-						(401	)					(165	)
Cash dividends paid to noncontrolling interests					(2,153	)					(2,274	)					(303	)
Balance at end of year					20,569						17,943						20,012
Total equity, June 30				$	1,658,641					$	1,333,443					$	1,267,455

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

Kennametal Inc. delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions, enabled through our advanced materials sciences, application knowledge and commitment to a sustainable environment. We believe that our reputation for manufacturing excellence, as well as our technological expertise and innovation in our principal products, has helped us to achieve a leading market presence in our primary markets. End users of our products include metalworking manufacturers and suppliers across a diverse array of industries, including the aerospace, defense, transportation, machine tool, light machinery and heavy machinery industries, as well as manufacturers, producers and suppliers in a number of other industries including coal mining, highway construction, quarrying, and oil and gas exploration and production industries. Our end users’ products include items ranging from airframes to coal mining, engines to oil wells and turbochargers to construction.

Unless otherwise specified, any reference to a “year” is to a fiscal year ended June 30. When used in this annual report on Form 10-K, unless the context requires otherwise, the terms “we,” “our” and “us” refer to Kennametal Inc. and its subsidiaries.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of our significant accounting policies is presented below to assist in evaluating our consolidated financial statements.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All significant intercompany balances and transactions are eliminated. Investments in entities of less than 50 percent of the voting stock over which we have significant influence are accounted for on an equity basis. The factors used to determine significant influence include, but are not limited to, our management involvement in the investee, such as hiring and setting compensation for management of the investee, the ability to make operating and capital decisions of the investee, representation on the investee’s board of directors and purchase and supply agreements with the investee. Investments in entities of less than 50 percent of the voting stock in which we do not have significant influence are accounted for on the cost basis.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we make judgments and estimates about the amounts reflected in our financial statements. As part of our financial reporting process, our management collaborates to determine the necessary information on which to base our judgments and develop estimates used to prepare the financial statements. We use historical experience and available information to make these judgments and estimates. However, different amounts could be reported using different assumptions and in light of different facts and circumstances. Therefore, actual amounts could differ from the estimates reflected in our financial statements.

CASH AND CASH EQUIVALENTS Cash investments having original maturities of three months or less are considered cash equivalents. Cash equivalents principally consist of investments in money market funds and bank deposits at June 30, 2011.

ACCOUNTS RECEIVABLE We market our products to a diverse customer base throughout the world. Trade credit is extended based upon periodically updated evaluations of each customer’s ability to satisfy its obligations. We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Accounts receivable reserves are determined based upon an aging of accounts and a review of specific accounts.

INVENTORIES Inventories are stated at the lower of cost or market. We use the last-in, first-out (LIFO) method for determining the cost of a significant portion of our United States (U.S.) inventories. The cost of the remainder of our inventories is determined under the first-in, first-out or average cost methods. When market conditions indicate an excess of carrying costs over market value, a lower-of-cost-or-market provision is recorded. Excess and obsolete inventory reserves are established based upon our evaluation of the quantity of inventory on hand relative to demand. The excess and obsolete inventory reserve at June 30, 2011 and 2010 was $55.3 million and $68.3 million, respectively.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Major improvements are capitalized, while maintenance and repairs are expensed as incurred. Retirements and disposals are removed from cost and accumulated depreciation accounts, with the gain or loss reflected in operating income. Interest related to the construction of major facilities is capitalized as part of the construction costs and is amortized over the facilities estimated useful life.

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Depreciation for financial reporting purposes is computed using the straight-line method over the following estimated useful lives: building and improvements over 15-40 years; machinery and equipment over 4-15 years; furniture and fixtures over 5-10 years and computer hardware and software over 3-5 years.

Leased property and equipment under capital leases are amortized using the straight-line method over the terms of the related leases.

LONG-LIVED ASSETS We evaluate the recoverability of property, plant and equipment and intangible assets that are amortized, whenever events or changes in circumstances indicate the carrying amount of any such assets may not be fully recoverable. Changes in circumstances include technological advances, changes in our business model, capital structure, economic conditions or operating performance. Our evaluation is based upon, among other things, our assumptions about the estimated future undiscounted cash flows these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value of the asset or asset group, we will recognize an impairment loss to the extent that carrying value exceeds fair value. We apply our best judgment when performing these evaluations to determine if a triggering event has occurred, the undiscounted cash flows used to assess recoverability and the fair value of the asset.

GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of cost over the fair value of the net assets of acquired companies. Goodwill and intangible assets with indefinite lives are tested at least annually for impairment. We perform our annual impairment tests during the June quarter in connection with our annual planning process unless there are impairment indicators that warrant a test prior to that.

The carrying amount of goodwill attributable to each segment at June 30 is as follows:

(in thousands)	Industrial			Infrastructure			Total
Goodwill	$	406,626		$	247,199		$	653,825
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2009	$	255,784		$	247,199		$	502,983
Acquisitions / Divestitures		536			-			536
Translation		(13,188	)		(888	)		(14,076	)
Change in goodwill		(12,652	)		(888	)		(13,540	)
Goodwill	$	393,974		$	246,311		$	640,285
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2010	$	243,132		$	246,311		$	489,443
Adjustments	$	252		$	-		$	252
Translation		17,719			3,914			21,633
Change in goodwill		17,971			3,914			21,885
Goodwill		411,945			250,225			662,170
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2011	$	261,103		$	250,225		$	511,328

We recorded no goodwill or intangible asset impairments in 2011 and 2010. We also recorded goodwill impairment charges of $37.3 million related to our surface finishing machines and services business and $62.9 million related to our engineered products business in 2009.

During 2010, we acquired the remaining noncontrolling interest of a consolidated entity which resulted in additional Industrial goodwill of $0.7 million.

- 30 -

The components of our intangible assets were as follows as of June 30:

	Estimated		2011					2010
	Useful Life		Gross Carrying		Accumulated			Gross Carrying		Accumulated
(in thousands)	(in years)		Amount		Amortization			Amount		Amortization
Contract-based		4 to 15	$	6,349	$	(5,380	)	$	6,357	$	(5,218	)
Technology-based and other		4 to 15		39,743		(25,442	)		37,136		(20,422	)
Customer-related		10 to 20		113,977		(38,275	)		108,470		(29,255	)
Unpatented technology		30		19,540		(4,740	)		19,216		(4,572	)
Trademarks		5 to 20		10,902		(4,875	)		10,647		(3,876	)
Trademarks	Indefinite			40,480		-			36,823		-
Total			$	230,991	$	(78,712	)	$	218,649	$	(63,343	)

During 2011, we recorded foreign currency translation adjustments which increased intangible assets by $8.5 million. During 2010, we recorded foreign currency translation adjustments which decreased intangible assets by $6.0 million. We also recorded a $10.8 million impairment charge in 2009 for the indefinite-lived trademark for our surface finishing machines and services business.

Amortization expense for intangible assets was $11.6 million, $13.1 million and $13.1 million for 2011, 2010 and 2009, respectively. Estimated amortization expense for 2012 through 2016 is $10.8 million, $10.1 million, $9.8 million, $9.5 million, and $9.1 million, respectively.

PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We sponsor these types of benefit plans for certain employees and retirees. Accounting for the cost of these plans requires the estimation of the cost of the benefits to be provided well into the future and attributing that cost over the expected work life of employees participating in these plans. This estimation requires our judgment about the discount rate used to determine these obligations, expected return on plan assets, rate of future compensation increases, rate of future health care costs, withdrawal and mortality rates and participant retirement age. Differences between our estimates and actual results may significantly affect the cost of our obligations under these plans.

In the valuation of our pension and other postretirement and postemployment benefit liabilities, management utilizes various assumptions. We determine our discount rate based on investment grade bond yield curves with a duration that approximates the benefit payment timing of each plan. This rate can fluctuate based on changes in investment grade bond yields.

The long-term rate of return on plan assets is estimated based on an evaluation of historical returns for each asset category held by the plans, coupled with the current and short-term mix of the investment portfolio. The historical returns are adjusted for expected future market and economic changes. This return will fluctuate based on actual market returns and other economic factors.

The rate of future health care costs is based on historical claims and enrollment information projected over the next year and adjusted for administrative charges. This rate is expected to decrease until 2029.

Future compensation rates, withdrawal rates and participant retirement age are determined based on historical information. These assumptions are not expected to significantly change. Mortality rates are determined based on a review of published mortality tables.

EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding during the period, while diluted earnings per share is calculated to reflect the potential dilution that occurs related to the issuance of capital stock under stock option grants, restricted stock awards and restricted stock units. The difference between basic and diluted earnings per share relates solely to the effect of capital stock options, restricted stock awards and restricted stock units.

For purposes of determining the number of diluted shares outstanding at June 30, 2011 and 2010, weighted average shares outstanding for basic earnings per share calculations were increased due solely to the dilutive effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units by 1.1 million and 0.7 million shares, respectively. For June 30, 2009, the effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units was anti-dilutive and therefore has been excluded from diluted shares outstanding as well as from the diluted earnings per share calculation. Unexercised capital stock options, restricted stock units and restricted stock awards of 0.4 million, 2.3 million and 2.6 million shares at June 30, 2011, 2010, and 2009, respectively, were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price, and therefore the inclusion would have been anti-dilutive.

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REVENUE RECOGNITION We recognize revenue upon shipment of our products and assembled machines. Our general conditions of sale explicitly state that the delivery of our products and assembled machines is F.O.B. shipping point and that title and all risks of loss and damage pass to the buyer upon delivery of the sold products or assembled machines to the common carrier.

Our general conditions of sale explicitly state that acceptance of the conditions of shipment are considered to have occurred unless written notice of objection is received by Kennametal within 10 calendar days of the date specified on the invoice. We do not ship products or assembled machines unless we have documentation from our customers authorizing shipment. Our products are consumed by our customers in the manufacture of their products. Historically, we have experienced very low levels of returned products and assembled machines and do not consider the effect of returned products and assembled machines to be material. We have recorded an estimated returned goods allowance to provide for any potential returns.

We warrant that products and services sold are free from defects in material and workmanship under normal use and service when correctly installed, used and maintained. This warranty terminates 30 days after delivery of the product to the customer and does not apply to products that have been subjected to misuse, abuse, neglect or improper storage, handling or maintenance. Products may be returned to Kennametal, only after inspection and approval by Kennametal and upon receipt by the customer of shipping instructions from Kennametal. We have included an estimated allowance for warranty returns in our returned goods allowance.

We recognize revenue related to the sale of specialized assembled machines upon customer acceptance and installation, as installation is deemed essential to the functionality of a specialized assembled machine. Sales of specialized assembled machines were immaterial for 2011, 2010 and 2009.

STOCK-BASED COMPENSATION We recognize stock-based compensation expense for all stock options, restricted stock awards and restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period). We utilize the Black-Scholes valuation method to establish the fair value of all stock option awards.

Capital stock options are granted to eligible employees at fair market value at the date of grant. Capital stock options are exercisable under specified conditions for up to 10 years from the date of grant. On October 26, 2010, the Company’s shareowners approved the Kennametal Inc., Stock and Incentive Plan of 2010 (2010 Plan). The 2010 Plan authorizes the issuance of up to 3,500,000 shares of the Company’s capital stock plus any shares remaining unissued under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended (2002 Plan). Under the provisions of these Plans, participants may deliver our stock, owned by the holder for at least six months, in payment of the option price and receive credit for the fair market value of the shares on the date of delivery. The fair value of shares delivered during 2011, 2010 and 2009 was $0.8 million, $0.1 million, and $0.7 million, respectively. In addition to stock option grants, these Plans permit the award of stock appreciation rights, performance shares, performance units, restricted stock and restricted stock units to directors, officers and key employees.

RESEARCH AND DEVELOPMENT COSTS Research and development costs of $33.3 million, $28.0 million and $27.6 million in 2011, 2010 and 2009, respectively, were expensed as incurred. These costs are included in operating expense in the consolidated statements of income.

SHIPPING AND HANDLING FEES AND COSTS All fees billed to customers for shipping and handling are classified as a component of sales. All costs associated with shipping and handling are classified as a component of cost of goods sold.

INCOME TAXES Deferred income taxes are recognized based on the future income tax effects (using enacted tax laws and rates) of differences in the carrying amounts of assets and liabilities for financial reporting and tax purposes. A valuation allowance is recognized if it is “more likely than not” that some or all of a deferred tax asset will not be realized.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES As part of our financial risk management program, we use certain derivative financial instruments. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We use derivative financial instruments to provide predictability to the effects of changes in foreign exchange rates on our consolidated results, achieve our targeted mix of fixed and floating interest rates on outstanding debt and forecasted transactions. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow, allowing us to focus more of our attention on business operations. With respect to interest rate management, these derivative instruments allow us to achieve our targeted fixed-to-floating interest rate mix, as a separate decision from funding arrangements, in the bank and public debt markets.

We account for derivative instruments as a hedge of the related asset, liability, firm commitment or anticipated transaction, when the derivative is specifically designated as a hedge of such items. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense (income), net.

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Certain currency forward contracts hedging significant cross-border intercompany loans are considered other derivatives and, therefore, do not qualify for hedge accounting. These contracts are recorded at fair value in the balance sheet, with the offset to other expense (income), net.

CASH FLOW HEDGES Currency Forward contracts and range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive income (loss), net of tax, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings.

Interest Rate Floating-to-fixed interest rate swap contracts, designated as cash flow hedges, are entered into from time to time to hedge our exposure to interest rate changes on a portion of our floating rate debt. These interest rate swap contracts convert a portion of our floating rate debt to fixed rate debt. We record the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet, with the offset to accumulated other comprehensive income (loss), net of tax.

FAIR VALUE HEDGES Interest Rate Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. These interest rate swap contracts convert a portion of our fixed rate debt to floating rate debt. When in place, these contracts require periodic settlement, and the difference between amounts to be received and paid under the contracts is recognized in interest expense.

FOREIGN CURRENCY TRANSLATION Assets and liabilities of international operations are translated into U.S. dollars using year-end exchange rates, while revenues and expenses are translated at average exchange rates throughout the year. The resulting net translation adjustments are recorded as a component of accumulated other comprehensive income (loss). The local currency is the functional currency of most of our locations. Losses from foreign currency transactions included in other expense (income), net were $6.6 million for 2011. Gains from foreign currency transactions included in other expense (income), net were $3.5 million and $6.8 million for 2010 and 2009, respectively.

NEW ACCOUNTING STANDARDS

Adopted

As of January 1, 2011, Kennametal adopted changes to intangible impairment testing for reporting units with zero or negative carrying amounts. These changes require an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not that an intangible impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s intangible assets are not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of January 1, 2011, Kennametal adopted changes to the disclosures related to business combinations for a public entity that presents comparative financial statements. This guidance also expanded the supplemental pro forma business combination disclosures. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on consolidations for enterprises involved with variable interest entities. The guidance modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights should be consolidated and clarifies that the determination of whether a company is required to consolidate a variable interest entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The adoption of this guidance did not have an impact on our consolidated financial statements.

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As of July 1, 2010, Kennametal adopted new guidance on accounting for transfers of financial assets. This guidance requires additional disclosure regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance allows companies to allocate arrangement consideration in multiple deliverable arrangements in a manner that better reflects the transaction’s economics and may result in earlier revenue recognition. In addition, the residual method of allocating arrangement consideration is no longer permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Issued

In June 2011, the Financial Accounting Standards Board (FASB) issued new guidance on presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement (referred to as the statement of comprehensive income) or in two separate consecutive statements. Each component of net income and other comprehensive income, together with totals for comprehensive income and its two parts — net income and other comprehensive income, would need to be displayed under either alternative. The statement(s) would need to be presented with equal prominence as the other primary financial statements. This guidance is effective for Kennametal beginning July 1, 2012.

In May 2011, the FASB issued new guidance on fair value measurements and disclosure. The objective of the new guidance is a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. Many of the amendments in this new guidance represent clarifications to existing guidance or changes in the measurement guidance for determining fair value. The most significant change in disclosures is an expansion of the information required for Level 3 measurements. New disclosures are required about the use of a nonfinancial asset measured or disclosed at fair value if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. This guidance is effective for Kennametal beginning January 1, 2012. We are in the process of evaluating the impact of adoption on our consolidated financial statements.

NOTE 3 – SUPPLEMENTAL CASH FLOW INFORMATION

Year ended June 30 (in thousands)	2011		2010		2009
Cash paid during the period for:
Interest	$	26,624	$	28,626	$	26,328
Income taxes		95,382		3,788		18,020
Supplemental disclosure of non-cash information:
Contribution of capital stock to employees’ defined contribution benefit plans		948		6,352		1,738
Change in fair value of derivative contracts		-		-		730
Changes in accounts payable related to purchases of property, plant and equipment		-		-		(12,800	)

NOTE 4 – ACQUISITIONS AND DIVESTITURES

During 2009, we acquired Tricon for a net purchase price of $64.1 million. As part of our Infrastructure segment, we acquired Tricon to expand our products and solutions in the surface and underground mining markets, including hard rock and coal. During 2009, we also made an acquisition within our Industrial segment. Also during 2009, we made final payments for two Industrial acquisitions that we made in Europe during 2008. During 2009, we had one divestiture that was accounted for as discontinued operations, see Note 5.

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NOTE 5 – DISCONTINUED OPERATIONS

Effective June 30, 2009, we divested HSS from our Industrial segment as part of our continuing focus to shape our business portfolio and rationalize our manufacturing footprint. This divestiture was accounted for as discontinued operations. The net assets disposed of as a result of this transaction had a net book value of approximately $51 million and consisted primarily of inventory and equipment, as well as owned and leased facilities. Cash proceeds from this divestiture amounted to $28.5 million, the majority of which was received in 2010. We incurred pre-tax charges related to the divestiture of $2.3 million and $25.9 million during 2010 and 2009, respectively. The pre-tax charges as well as the related tax effects were recorded in discontinued operations. We do not expect to incur any additional pre-tax charges related to this divestiture.

The following represents the results of discontinued operations for the years ended June 30:

(in thousands)	2010			2009
Sales	$	-		$	80,630
Loss from discontinued operations before income taxes	$	(2,269	)	$	(25,923	)
Income tax expense (benefit)		(846	)		(8,583	)
Loss from discontinued operations	$	(1,423	)	$	(17,340	)

NOTE 6 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy consists of three levels to prioritize the inputs used in valuations, as defined below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Inputs that are unobservable.

As of June 30, 2011 the fair values of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis are categorized as follows:

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	896	$	-	$	896
Total assets at fair value	$	-	$	896	$	-	$	896
Liabilities:
Derivatives (1)	$	-	$	3,330	$	-	$	3,330
Total liabilities at fair value	$	-	$	3,330	$	-	$	3,330

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As of June 30, 2010 the fair values of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis are categorized as follows:

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	43	$	-	$	43
Total assets at fair value	$	-	$	43	$	-	$	43
Liabilities:
Derivatives (1)	$	-	$	3,453	$	-	$	3,453
Total liabilities at fair value	$	-	$	3,453	$	-	$	3,453

⁽¹⁾ Foreign currency derivative and interest rate swap contracts are valued based on observable market spot and forward rates and are classified within Level 2 of the fair value hierarchy.

NOTE 7 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of our financial risk management program, we use certain derivative financial instruments. See Note 2 for discussion on our derivative instruments and hedging activities policy.

The fair value of derivatives designated and not designated as hedging instruments in the consolidated balance sheets at June 30 is as follows:

(in thousands)	2011			2010
Derivatives designated as hedging instruments
Other current assets — range forward contracts	$	87		$	34
Other current liabilities — range forward contracts		(159	)		(2	)
Other assets — forward starting interest rate swap contracts		772			-
Other liabilities — forward starting interest rate swap contracts		(3,169	)		(2,348	)
Total derivatives designated as hedging instruments		(2,469	)		(2,316	)
Derivatives not designated as hedging instruments
Other current assets — currency forward contracts		37			9
Other current liabilities — currency forward contracts		(2	)		(1,103	)
Total derivatives not designated as hedging instruments		35			(1,094	)
Total derivatives	$	(2,434	)	$	(3,410	)

Certain currency forward contracts hedging significant cross-border intercompany loans are considered as other derivatives and therefore, do not qualify for hedge accounting. These contracts are recorded at fair value in the balance sheet, with the offset to other expense (income), net. The following represents (gains) losses related to derivatives not designated as hedging instruments for the years ended June 30:

(in thousands)	2011			2010		2009
| | |
Other expense (income), net — currency forward contracts	$	(1,126	)	$	1,077	$	73

FAIR VALUE HEDGES

Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. We had no such contracts outstanding at June 30, 2011 and 2010, respectively.

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In February 2009, we terminated interest rate swap contracts to convert $200 million of our fixed rate debt to floating rate debt. These contracts were originally set to mature in June 2012. Upon termination, we received a cash payment of $13.2 million. Within the consolidated statement of cash flow for the year ended June 30, 2009, $12.6 million related to the forward portion of the payment and has been disclosed under cash flow used for financing activities and the $0.6 million related to the current interest portion has been disclosed under cash flow provided by operating activities. This gain is being amortized as a component of interest expense over the remaining term of the related debt using the effective interest rate method. During the years ended June 30, 2011, 2010 and 2009 $5.9 million, $5.6 million and $3.2 million, respectively were recognized as a reduction in interest expense.

CASH FLOW HEDGES

Currency forward contracts and range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive (loss) income, net of tax, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings. The notional amount of the contracts translated into U.S. dollars at June 30, 2011 and 2010 was $37.6 million and $9.4 million, respectively. The time value component of the fair value of range forwards is excluded from the assessment of hedge effectiveness. Assuming the market rates remain constant with the rates at June 30, 2011, we expect to recognize into earnings in the next 12 months immaterial losses on outstanding derivatives.

Floating-to-fixed interest rate swap contracts, designated as cash flow hedges, are entered into from time to time to hedge our exposure to interest rate changes on a portion of our floating rate debt. These interest rate swap contracts convert a portion of our floating rate debt to fixed rate debt. We record the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet, with the offset to accumulated other comprehensive income (loss), net of tax. We had forward starting interest rate swap contracts outstanding for forecasted transactions that effectively converted a cumulative notional amount of $150 million and $75 million at June 30, 2011 and 2010, respectively from floating to fixed interest rates. As of June 30, 2011 and 2010 we recorded a liability of $2.4 million and $2.3 million, respectively on these contracts which was recorded as an offset in other comprehensive income (loss), net of tax. Over the next 12 months, assuming the market rates remain constant with the rates at June 30, 2011, we do not expect to recognize into earnings any significant gains or losses on outstanding derivatives.

The following represents gains (losses) related to cash flow hedges for the years ended June 30:

(in thousands)	2011			2010			2009
(Losses) gains recognized in other comprehensive income (loss)	$	(26	)	$	(962	)	$	107
Losses (gains) reclassified from accumulated other comprehensive loss into other expense (income), net	$	1,041		$	(1,107	)	$	(8,505	)

No portion of the gains or losses recognized in earnings was due to ineffectiveness and no amounts were excluded from our effectiveness testing for the years ended June 30, 2011, 2010 and 2009.

NOTE 8 – INVENTORIES

Inventories consisted of the following at June 30:

(in thousands)	2011			2010
Finished goods	$	303,716		$	227,096
Work in process and powder blends	202,940				134,732
Raw materials and supplies		109,683			62,673
Inventories at current cost		616,339			424,501
Less: LIFO valuation		(96,366	)		(60,233	)
Total inventories	$	519,973		$	364,268

We used the LIFO method of valuing our inventories for approximately 50 percent and 51 percent of total inventories at June 30, 2011 and 2010, respectively.

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NOTE 9 – OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following at June 30:

(in thousands)	2011		2010
Accrued employee benefits	$	55,833	$	44,474
Payroll, state and local taxes		15,997		9,107
Accrued restructuring expense (Note 15)		12,711		27,254
Other		82,665		71,971
Total other current liabilities	$	167,206	$	152,806

NOTE 10 – LONG-TERM DEBT AND CAPITAL LEASES

Long-term debt and capital lease obligations consisted of the following at June 30:

(in thousands)	2011			2010
7.2% Senior Unsecured Notes due 2012 net of discount of $0.1 million and $0.2 million for 2011 and 2010, respectively. Also including interest rate swap adjustments of $6.1 million and $12.1 million in 2011 and 2010, respectively	$	305,954		$	311,849
Capital leases with terms expiring through 2015 at 2.3% to 2.8% in 2011 and 2.0% to 4.7% in 2010		3,113			6,020
Other		156			345
Total debt and capital leases		309,223			318,214
Less current maturities:
Long-term debt		(306,032	)		(133	)
Capital leases		(1,272	)		(3,406	)
Total current maturities		(307,304	)		(3,539	)
Long-term debt and capital leases, less current maturities	$	1,919		$	314,675

Senior Unsecured Notes On June 19, 2002, we issued $300 million of 7.2 percent Senior Unsecured Notes due 2012 (Senior Unsecured Notes). Interest is payable semi-annually on June 15 and December 15 of each year. The Senior Unsecured Notes contain covenants that restrict our ability to create liens, enter into sale-leaseback transactions or certain consolidations or mergers, or sell all or substantially all of our assets. These notes have been reclassified to current maturities of long-term debt as of June 30, 2011. The repayment of this debt is expected to be financed in due course through a new corporate bond issuance.

2010 Credit Agreement On June 25, 2010 we entered into a five-year, multi-currency, revolving credit facility (2010 Credit Agreement) that extends to June 2015. This agreement replaces the prior credit facility that was scheduled to mature in March 2011. The 2010 Credit Agreement permits revolving credit loans of up to $500 million for working capital, capital expenditures and general corporate purposes. The 2010 Credit Agreement allows for borrowings in U.S. dollars, euro, Canadian dollars, pound sterling and Japanese yen. Interest payable under the 2010 Credit Agreement is based upon the type of borrowing under the facility and may be (1) LIBOR plus an applicable margin, (2) the greater of the prime rate or the Federal Funds effective rate plus an applicable margin, or (3) fixed as negotiated by us.

The 2010 Credit Agreement requires us to comply with various restrictive and affirmative covenants, including two financial covenants: a maximum leverage ratio and a minimum consolidated interest coverage ratio (as those terms are defined in the agreement). We were in compliance with these financial covenants as of June 30, 2011. We had no borrowings outstanding under the 2010 Credit Agreement as of June 30, 2011 or 2010.

Borrowings under the 2010 Credit Agreement are guaranteed by our significant domestic subsidiaries.

Future principal maturities of long-term debt are $306.0 million and $0.1 million, respectively, in 2012 and 2013.

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Future minimum lease payments under capital leases for the next five years and thereafter in total are as follows:

(in thousands)
2012	$	1,392
2013		1,111
2014		274
2015		728
2016		—
After 2016		—
Total future minimum lease payments		3,505
Less amount representing interest		(392	)
Amount recognized as capital lease obligations	$	3,113

Our collateralized debt at June 30, 2011 and 2010 was comprised of industrial revenue bond obligations of $0.2 million and $0.3 million, respectively, and the capitalized lease obligations of $3.1 million and $6.0 million, respectively. The underlying assets collateralize these obligations.

NOTE 11 - NOTES PAYABLE AND LINES OF CREDIT

Notes payable to banks of $3.7 million and $19.5 million at June 30, 2011 and 2010, respectively, represents short-term borrowings under credit lines with commercial banks. These credit lines, translated into U.S. dollars at June 30, 2011 exchange rates, totaled $200.6 million at June 30, 2011, of which $196.9 million was unused. The weighted average interest rate for notes payable and lines of credit was 4.4 percent and 3.1 percent at June 30, 2011 and 2010, respectively.

NOTE 12 - INCOME TAXES

Income from continuing operations before income taxes consisted of the following for the years ended June 30:

(in thousands)	2011			2010			2009
Income (loss) from continuing operations before income taxes:
United States	$	69,042		$	3,925		$	(135,133	)
International		227,091			72,677			22,637
Total income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Current income taxes:
Federal	$	26,234		$	1,915		$	(25,071	)
State		1,063			1,376			2,019
International		44,440			23,456			21,169
Total current income taxes		71,737			26,747			(1,883	)
Deferred income taxes		(7,881	)		230			(9,322	)
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)
Effective tax rate		21.6	%		35.2	%		10.0	%

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The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes was as follows for the years ended June 30:

(in thousands)	2011			2010			2009
Income taxes at U.S. statutory rate	$	103,647		$	26,811		$	(39,374	)
State income taxes, net of federal tax benefits		1,956			2,290			(131	)
U.S. income taxes provided on international income		21,556			1,107			(47	)
Combined tax effects of international income		(35,423	)		(4,460	)		4,029
Change in valuation allowance and other uncertain tax positions		(20,215	)		2,024			(4,638	)
Impact of goodwill impairment charges		-			-			29,296
Impact of domestic production activities deduction		(6,413	)		(456	)		672
Research and development credit		(2,685	)		(460	)		(1,501	)
Other		1,433			121			489
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)

During 2011, we recorded net valuation allowance adjustments of $20.5 million, which reduced income tax expense. The valuation allowance adjustments reflect a change in judgment about the realizability of certain deferred tax assets in the United Kingdom and Europe. The effect of this tax benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

During 2011, we incurred U.S. Federal income taxes of $17.9 million associated with dividends of international subsidiary current year income. The effect of this expense is included in the income tax reconciliation table under the caption “U.S. income taxes provided on international income.”

During 2010, we recorded restructuring charges related to our engineered products business for which there was no tax benefit. The effect of this is included in the income tax reconciliation table under the caption “combined tax effects of international income.”

During 2009, we recorded goodwill impairment charges related to our surface finishing machines and services business and our engineered products business for the majority of which there was no tax benefit. The federal effect of these permanent differences is included in the income tax reconciliation table under the caption “impact of goodwill impairment charges.”

During 2009, the Internal Revenue Service completed its examination of our 2005 and 2006 tax years, which resulted in a net tax benefit of $1.8 million, including the impact of state taxes and interest. The federal effect of this benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

During 2009, we recorded a valuation allowance adjustment of $2.8 million, which reduced income tax expense. This valuation allowance adjustment reflects a change in circumstances that caused a change in judgment about the realizability of certain deferred tax assets in Europe. The effect of this tax benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

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The components of net deferred tax assets and liabilities were as follows at June 30:

(in thousands)	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	65,768		$	61,605
Inventory valuation and reserves		29,646			29,302
Pension benefits		713			15,913
Other postretirement benefits		8,312			10,499
Accrued employee benefits		30,975			22,551
Other accrued liabilities		7,939			6,755
Hedging activities		13,528			9,785
Tax credits and other carryforwards		5,431			5,541
Other		2,558			7,953
Total		164,870			169,904
Valuation allowance		(25,662	)		(47,987	)
Total deferred tax assets	$	139,208		$	121,917
Deferred tax liabilities:
Tax depreciation in excess of book	$	98,957		$	79,712
Intangible assets		35,965			33,271
Total deferred tax liabilities	$	134,922		$	112,983
Total net deferred tax assets (liabilities)	$	4,286		$	8,934

Included in deferred tax assets at June 30, 2011 is $65.8 million associated with net operating loss carryforwards in foreign and state jurisdictions. Of that amount, $9.3 million expires through June 2016, $6.8 million expires through 2021, $4.3 million expires through 2026, $6.9 million expires through 2031, and the remaining $38.5 million do not expire. The realization of these tax benefits is primarily dependent on future taxable income in these jurisdictions.

A valuation allowance of $25.7 million has been placed against deferred tax assets in Europe, China, Hong Kong, Mexico, Brazil and the U.S., which would be allocated to income tax expense upon realization of these tax benefits. In 2011, the valuation allowance related to these deferred tax assets decreased $22.3 million. As the respective operations generate sufficient income, the valuation allowances will be partially or fully reversed at such time we believe it will be more likely than not that the deferred tax assets will be realized. In 2011, a change in judgment about the realizability of certain deferred tax assets in the United Kingdom resulting in the valuation allowance of $21.5 million being reversed.

June 30, 2011 unremitted earnings of our non-U.S. subsidiaries and affiliates of $1,084.5 million, the majority of which have not been previously taxed in the U.S., are permanently reinvested, and accordingly, no deferred tax liability has been recorded in connection therewith. It is not practical to estimate the income tax effect that might be incurred if cumulative prior year earnings not previously taxed in the U.S. were remitted to the U.S.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest) is as follows as of June 30:

(in thousands)	2011			2010
Balance at beginning of year	$	16,391		$	15,817
Increases for tax positions of prior years		-			1,303
Decreases for tax positions of prior years		(85	)		(184	)
Increases for tax positions related to the current year		285			2,390
Decreases related to settlement with taxing authority		-			(1,190	)
Decreases related to lapse of statute of limitations		(794	)		-
Foreign currency translation		2,492			(1,745	)
Balance at end of year	$	18,289		$	16,391

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The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in 2011, 2010 and 2009 is $18.0 million, $15.8 million and $15.2 million, respectively. Our policy is to recognize interest and penalties related to income taxes as a component of the provision for income taxes in the consolidated statement of income. We recognized interest expense of $0.9 million, $0.4 million and an interest reduction of $0.8 million for 2011, 2010 and 2009, respectively. As of June 30, 2011 and 2010 the amount of interest accrued was $3.2 million and $2.0 million, respectively.

With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2002. The Internal Revenue Service has audited all U.S. tax years prior to 2009 and is currently examining 2009 and 2010. Various state and foreign jurisdiction tax authorities are in the process of examining our income tax returns for various tax years ranging from 2002 to 2010. We continue to execute and expand our pan-European business model. As a result of this and other matters, we continuously review our uncertain tax positions and evaluate any potential issues that may lead to an increase or decrease in the total amount of unrecognized tax benefits recorded. We believe that it is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $13.0 million to $14.0 million within the next twelve months as a result of the progression of various federal, state, and foreign audits in process.

NOTE 13 - PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

Pension benefits under defined benefit pension plans are based on years of service and, for certain plans, on average compensation for specified years preceding retirement. We fund pension costs in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, for U.S. plans and in accordance with local regulations or customs for non-U.S. plans.

We have an Executive Retirement Plan (ERP) for various executives and a Supplemental Executive Retirement Plan (SERP) which was closed to future participation on July 26, 2006.

We presently provide varying levels of postretirement health care and life insurance benefits (OPEB) to certain employees and retirees. Postretirement health care benefits are available to employees and their spouses retiring on or after age 55 with 10 or more years of service. Beginning with retirements on or after January 1, 1998, our portion of the costs of postretirement health care benefits is capped at 1996 levels. Beginning with retirements on or after January 1, 2009, we have no obligation to provide a company subsidy for retiree medical costs.

In 2010 and 2009, special termination benefits of $3.6 million and $2.7 million, respectively, were recognized in the U.S.-based defined benefit pension plan due to an amendment of the plan for supplemental retirement benefits.

We use a June 30 measurement date for all of our plans.

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Defined Benefit Pension Plans

The funded status of our pension plans and amounts recognized in the consolidated balance sheets as of June 30 were as follows:

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	759,075		$	687,700
Service cost		7,650			7,949
Interest cost		40,984			42,437
Participant contributions		39			33
Actuarial (gains) losses		(4,400	)		78,606
Benefits and expenses paid		(37,082	)		(41,848	)
Foreign currency translation adjustments		22,074			(19,679	)
Plan amendments		675			3,577
Plan curtailments		(2,443	)		300
Benefit obligation, end of year	$	786,572		$	759,075
Change in plan assets:
Fair value of plan assets, beginning of year	$	656,516		$	606,875
Actual return on plan assets		93,570			90,623
Company contributions		8,536			6,970
Participant contributions		39			33
Benefits and expenses paid		(39,525	)		(41,847	)
Foreign currency translation adjustments		6,330			(6,138	)
Fair value of plan assets, end of year	$	725,466		$	656,516
Funded status of plan	$	(61,106	)	$	(102,559	)
Amounts recognized in the balance sheet consist of:
Long-term prepaid benefit	$	63,579		$	16,026
Short-term accrued benefit obligation		(7,619	)		(6,778	)
Accrued pension benefits		(117,066	)		(111,807	)
Net amount recognized	$	(61,106	)	$	(102,559	)

The pre-tax amounts related to our defined benefit pension plans recognized in accumulated other comprehensive income were as follows at June 30:

(in thousands)	2011			2010
Unrecognized net actuarial losses	$	66,734		$	125,971
Unrecognized net prior service credits		(1,540	)		(2,534	)
Unrecognized transition obligations		1,202			1,120
Total	$	66,396		$	124,557

Prepaid pension benefits are included in other long-term assets. The assets of our U.S. and international defined benefit pension plans consist principally of capital stocks, corporate bonds and government securities.

To the best of our knowledge and belief, the asset portfolios of our defined benefit pension plans do not contain our capital stock. We do not issue insurance contracts to cover future annual benefits of defined benefit pension plan participants. Transactions between us and our defined benefit pension plans include the reimbursement of plan expenditures incurred by us on behalf of the plans. To the best of our knowledge and belief, the reimbursement of cost is permissible under current ERISA rules or local government law. The accumulated benefit obligation for all defined benefit pension plans was $772.6 million and $743.0 million as of June 30, 2011 and 2010, respectively.

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Included in the above information are plans with accumulated benefit obligations exceeding the fair value of plan assets as of June 30 as follows:

(in thousands)	2011		2010
Projected benefit obligation	$	124,684	$	189,042
Accumulated benefit obligation		123,016		186,723
Fair value of plan assets		-		70,456

The components of net periodic pension cost include the following as of June 30:

(in thousands)	2011			2010			2009
Service cost	$	7,650		$	7,949		$	7,824
Interest cost		40,984			42,437			41,652
Expected return on plan assets		(48,203	)		(46,226	)		(46,939	)
Amortization of transition obligation		52			56			63
Amortization of prior service credit		(281	)		(280	)		(213	)
Special termination benefits		-			3,577			2,651
Curtailment loss		-			300			-
Settlement loss		18			-			-
Recognition of actuarial losses		12,277			4,447			1,900
Net periodic pension cost	$	12,497		$	12,260		$	6,938

Net periodic pension cost increased $5.4 million to $12.3 million in 2010 from $6.9 million in 2009. This increase was primarily the result of discount rate changes and recognition of special termination charges.

As of June 30, 2011, the projected benefit payments, including future service accruals for these plans for 2012 through 2016, are

$41.2 million, $41.4 million, $42.6 million, $44.7 million and $46.6 million, respectively and $270.3 million in 2017 through 2021.

The amounts of accumulated other comprehensive loss expected to be recognized in net periodic pension cost during 2012 related to net actuarial losses and transition obligations are $8.2 million and $0.1 million, respectively. The amount of accumulated other comprehensive income expected to be recognized in net periodic pension cost during 2012 related to prior service credit is $0.2 million.

We expect to contribute approximately $7.0 million to our pension plans in 2012.

Other Postretirement Benefit Plans

The funded status of our other postretirement benefit plans and the related amounts recognized in the consolidated balance sheets were as follows:

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	19,910		$	20,598
Service cost		77			99
Interest cost		1,037			1,265
Actuarial losses		2,474			1,260
Benefits paid		(3,203	)		(3,312	)
Plan amendment		(524	)		-
Benefit obligation, end of year	$	19,771		$	19,910
Funded status of plan	$	(19,771	)	$	(19,910	)

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(in thousands)	2011			2010
Amounts recognized in the balance sheet consist of:
Short-term accrued benefit obligation	$	(1,918	)	$	(2,016	)
Accrued postretirement benefits		(17,853	)		(17,894	)
Net amount recognized	$	(19,771	)	$	(19,910	)

The pre-tax amounts related to our OPEB plans which were recognized in accumulated other comprehensive income were as follows at June 30:

(in thousands)	2011			2010
Unrecognized net actuarial gains	$	(864	)	$	(3,529	)
Unrecognized net prior service cost		(524	)		-
Total	$	(1,388	)	$	(3,529	)

The components of net periodic other postretirement costs (benefit) include the following for the years ended June 30:

(in thousands)	2011			2010			2009
Service cost	$	77		$	99		$	294
Interest cost		1,037			1,266			1,631
Amortization of prior service cost		-			8			39
Recognition of actuarial gains		(190	)		(368	)		(107	)
Curtailment gain		-			-			(3,169	)
Net periodic other postretirement benefit cost (income)	$	924		$	1,005		$	(1,312	)

As of June 30, 2010, the projected benefit payments, including future service accruals for our other postretirement benefit plans for 2012 through 2016, are $2.4 million, $2.3 million, $2.3 million, $2.1 million and $2.1 million, respectively and $8.6 million in 2017 through 2021.

The amounts of accumulated other comprehensive income expected to be recognized in net periodic other postretirement benefit cost during 2012 related to net actuarial gains are immaterial for prior service cost.

We expect to contribute approximately $2.1 million to our postretirement benefit plans in 2012.

Assumptions

The significant actuarial assumptions used to determine the present value of net benefit obligations for our defined benefit pension plans and other postretirement benefit plans were as follows:

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		5.5	%		6.5	%
International plans		5.5-5.8	%		5.0-5.5	%		5.8-7.0	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		2.0 -3.5	%		3.5	%		3.5	%

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The significant assumptions used to determine the net periodic costs (benefits) for our pension and other postretirement benefit plans were as follows:

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		6.5	%		6.8	%
International plans		5.0-5.5	%		5.8-7.0	%		6.3 -6.8	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		3.5	%		3.5	%		3.5-4.0	%
Rate of return on plans assets:
U.S. plans		8.0	%		8.0	%		8.0	%
International plans		6.4	%		6.7	%		7.1	%

The rates of return on plan assets are based on historical performance, as well as future expected returns by asset class considering macroeconomic conditions, current portfolio mix, long-term investment strategy and other available relevant information.

The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for our postretirement benefit plans was as follows:

	2011			2010			2009
Health care costs trend rate assumed for next year		8.3	%		8.6	%		8.8	%
Rate to which the cost trend rate gradually declines		4.5	%		4.5	%		4.5	%
Year that the rate reaches the rate at which it is assumed to remain		2029			2029			2029

Assumed health care cost trend rates have a significant effect on the cost components and obligation for the health care plans. A change of one percentage point in the assumed health care cost trend rates would have the following effects on the total service and interest cost components of our other postretirement cost and other postretirement benefit obligation at June 30, 2011:

(in thousands)	1% Increase		1% Decrease
Effect on total service and interest cost components	$	58	$	(51	)
Effect on other postretirement obligation		849		(757	)

Plan Assets

The primary objective of certain of our pension plans’ investment policies is to ensure that sufficient assets are available to provide the benefit obligations at the time the obligations come due. The overall investment strategy for the defined benefit pension plans’ assets combine considerations of preservation of principal and moderate risk-taking. The assumption of an acceptable level of risk is warranted in order to achieve satisfactory results consistent with the long-term objectives of the portfolio. Fixed income securities comprise a significant portion of the portfolio due to their plan-liability-matching characteristics and to address the plans’ cash flow requirements. Additionally, diversification of investments within each asset class is utilized to further reduce the impact of losses in single investments.

Investment management practices must comply with ERISA and all applicable regulations and rulings thereof. The use of derivative instruments is permitted where appropriate and necessary for achieving overall investment policy objectives. Currently, the use of derivative instruments is not significant when compared to the overall investment portfolio.

The Company utilizes a liability driven investment strategy (LDI) for the assets of its U.S. defined benefit pension plans in order to reduce the volatility of the funded status of these plans and to meet the obligations at an acceptable cost over the long term. This LDI strategy entails modifying the asset allocation and duration of the assets of the plans to more closely match the liability profile of these plans. The asset reallocation involves increasing the fixed income allocation, reducing the equity component and adding alternative investments. Longer duration interest rate swaps have been added in order to increase the overall duration of the asset portfolio to more closely match the liabilities.

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Our defined benefit pension plans’ asset allocations as of June 30, 2011 and 2010 and target allocations for 2012, by asset class, were as follows:

	2011			2010			Target		%
Equity		35	%		31	%		30	%
Fixed Income		60	%		66	%		70	%
Other		5	%		3	%		0	%

The following sections describe the valuation methodologies used by the trustee to measure the fair value of the defined benefit pension plan assets, including an indication of the level in the fair value hierarchy in which each type of asset is generally classified (see Note 6 for the definition of fair value and a description of the fair value hierarchy).

Corporate fixed income securities Investments in corporate fixed income securities consist of corporate debt and asset backed securities. These investments are classified as level two and are valued using independent observable market inputs such as the treasury curve, swap curve and yield curve.

Common / collective trusts Investments in common / collective trusts invest primarily in publicly traded securities and are classified as level two and valued based on observable market data.

Common stock Common stocks are classified as level one and are valued at their quoted market price.

Government securities Investments in government securities consist of fixed income securities such as U.S. government and agency obligations and foreign government bonds and asset and mortgage backed securities such as obligations issued by government sponsored organizations. These investments are classified as level two and are valued using independent observable market inputs such as the treasury curve, credit spreads and interest rates.

Other fixed income securities Investments in other fixed income securities are classified as level two and valued based on observable market data.

Other Other investments consist primarily of short term instruments including money market funds, certificates of deposit and state and local obligations. These investments are primarily classified as level two and are valued using independent observable market inputs.

The fair value methods described may not be reflective of future fair values. Additionally, while the Company believes the valuation methods used by the plans’ trustee are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurement at the reporting date.

The following table presents the fair value of the benefit plan assets classified under the appropriate level of the fair value hierarchy as of June 30, 2011:

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	338,955	$	-	$	338,955
Common / collective trusts:
Value funds		-		92,625		-		92,625
Growth funds		-		54,392		-		54,392
Balanced funds		-		15,798		-		15,798
Common stock		93,403		-		-		93,403
Government securities:
U.S. Government securities		-		30,236		-		30,236
Foreign government securities		-		27,465		-		27,465
Other fixed income securities		-		41,043		-		41,043
Other		1,723		36,772		-		38,495
Total investments	$	95,126	$	637,286	$	-	$	732,412

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The following table presents the fair value of the benefit plan assets classified under the appropriate level of the fair value hierarchy as of June 30, 2010:

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	364,773	$	-	$	364,773
Common / collective trusts:
Value funds		-		74,532		-		74,532
Growth funds		-		42,985		-		42,985
Balanced funds		-		12,460		-		12,460
Common stock		75,714		-		-		75,714
Government securities:
U.S. Government securities		-		30,562		-		30,562
Foreign government securities		-		20,627		-		20,627
Other fixed income securities		-		17,114		-		17,114
Other		1,513		16,294		-		17,807
Total investments	$	77,227	$	579,347	$	-	$	656,574

NOTE 14 – COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

years ended June 30 (in thousands)	2011			2010			2009
Net income (loss)	$	232,277		$	48,202		$	(118,631	)
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $(0.6) million and $(1.9) million, respectively		642			(936	)		(3,006	)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively		(679	)		(1,482	)		5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of income tax expense (benefit) of $15.1 million, $(14.1) million and $0.6 million, respectively		28,087			(17,397	)		(14,283	)
Reclassification of net pension and other postretirement benefit losses, net of income tax benefit of $4.4 million, $0.9 million and $0.5 million, respectively		7,131			2,975			1,496
Foreign currency translation adjustments, net of income tax expense (benefit) of $75.0 million, $(41.5) million and $(73.5) million, respectively		122,358			(68,837	)		(122,044	)
Total comprehensive income (loss), net of tax		389,816			(37,475	)		(251,178	)
Comprehensive income (loss) attributable to noncontrolling interests		4,779			606			(1,046	)
Comprehensive income (loss) attributable to Kennametal Shareowners	$	385,037		$	(38,081	)	$	(250,132	)

The components of accumulated other comprehensive income (loss) consist of the following at June 30 (in thousands):

2011	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(3,227	)	$	1,331		$	(1,896	)
Unrecognized net actuarial losses		(71,262	)		23,003			(48,259	)
Unrecognized net prior service credit		2,252			(963	)		1,289
Unrecognized transition obligation		(1,203	)		(95	)		(1,298	)
Foreign currency translation adjustments		161,451			(28,758	)		132,693
Total accumulated other comprehensive income	$	88,011		$	(5,482	)	$	82,529

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2010	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(2,998	)	$	1,139		$	(1,859	)
Unrecognized net actuarial losses		(122,442	)		38,629			(83,813	)
Unrecognized net prior service credit		2,534			(962	)		1,572
Unrecognized transition obligation		(1,120	)		(127	)		(1,247	)
Foreign currency translation adjustments		19,913			(7,347	)		12,566
Total accumulated other comprehensive loss	$	(104,113	)	$	31,332		$	(72,781	)

NOTE 15 - RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

During 2011, we completed our restructuring plans to reduce costs and improve operating efficiencies. These actions related to the rationalization of certain manufacturing and service facilities as well as other employment and cost reduction programs. Restructuring and related charges recorded in 2011 amounted to $21.5 million, including $13.7 million of restructuring charges of which $1.1 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $4.4 million were recorded in cost of goods sold and $3.4 million in operating expense during 2011.

During 2010, restructuring and related charges amounted to $48.9 million, including $44.3 million of restructuring charges of which $0.4 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $3.5 million were recorded in cost of goods sold and $1.1 million in operating expense during 2010.

During 2009, restructuring and related charges amounted to $73.3 million, including $64.7 million of restructuring charges of which $2.1 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $8.8 million were recorded in cost of goods sold and a net restructuring related benefit of $0.2 million was recorded in operating expense during 2009.

The combined total pre-tax charges from inception of these restructuring programs through June 30, 2011 were approximately $150 million. The majority of these pre-tax charges were severance charges. Total restructuring and related charges since inception through June 30, 2011 have been recorded as follows: approximately $104 million in Industrial, approximately $44 million in Infrastructure and approximately $2 million in Corporate for the write-off our pre-existing ERP system. These restructuring programs are complete and we do not expect any additional charges.

Restructuring accruals are recorded in other current liabilities in our consolidated balance sheet and the amount attributable to each segment is as follows:

					Asset			Cash
(in thousands)	June 30, 2010		Expense		Write-down			Expenditures			Translation		June 30, 2011
Industrial
Severance	$	18,327	$	4,363	$	-		$	(16,510	)	$	1,631	$	7,811
Facilities		508		2,318		(1,857	)		(444	)		-		525
Other		403		2,031		-			(931	)		101		1,604
Total Industrial		19,238		8,712		(1,857	)		(17,885	)		1,732		9,940
Infrastructure
Severance		7,637		2,484		-			(9,399	)		928		1,650
Facilities		211		1,319		(1,057	)		(204	)		-		269
Other		168		1,156		-			(530	)		58		852
Total Infrastructure		8,016		4,959		(1,057	)		(10,133	)		986		2,771
Total	$	27,254	$	13,671	$	(2,914	)	$	(28,018	)	$	2,718	$	12,711

- 49 -

					Asset
(in thousands)	June 30, 2009		Expense		Write-down			Cash Expenditures			Translation			June 30, 2010
Industrial
Severance	$	18,378	$	29,082	$	-		$	(28,086	)	$	(1,047	)	$	18,327
Facilities		477		790		(604	)		(142	)		(13	)		508
Other		176		1,393		-			(1,241	)		75			403
Total Industrial		19,031		31,265		(604	)		(29,469	)		(985	)		19,238
Infrastructure
Severance		7,659		12,119		-			(11,704	)		(437	)		7,637
Facilities		199		329		(251	)		(59	)		(7	)		211
Other		73		580		-			(517	)		32			168
Total Infrastructure		7,931		13,028		(251	)		(12,280	)		(412	)		8,016
Total	$	26,962	$	44,293	$	(855	)	$	(41,749	)	$	(1,397	)	$	27,254

Asset impairment See discussion of our 2009 Industrial goodwill and indefinite-lived trademark impairment charges in Note 2 under the caption “Goodwill and Other Intangible Assets.”

NOTE 16 - FINANCIAL INSTRUMENTS

The methods used to estimate the fair value of our financial instruments are as follows:

Cash and Equivalents, Current Maturities of Long-Term Debt and Notes Payable to Banks The carrying amounts approximate their fair value because of the short maturity of the instruments.

Long-Term Debt Fixed rate debt had a fair market value of $315.8 million and $325.5 million at June 30, 2011 and 2010, respectively. The fair value is determined based on the quoted market price of this debt as of June 30.

Foreign Exchange Contracts The notional amount of outstanding foreign exchange contracts, translated at current exchange rates, was $37.6 million and $9.4 million at June 30, 2011 and 2010, respectively. We would have paid immaterial amounts at June 30, 2011 and 2010, respectively, to settle these contracts representing the fair value of these agreements. The carrying value equaled the fair value for these contracts at June 30, 2011 and 2010. Fair value was estimated based on quoted market prices of comparable instruments.

Interest Rate Swap Contracts The cumulative notional amount of outstanding forward starting interest rate swap contracts was $150 million at June 30, 2011. We recorded a net liability of $2.4 million on these contracts which was recorded as an offset in other comprehensive income, net of tax. The carrying value equaled the fair value for these contracts at June 30, 2011. Fair value was estimated based on quoted market prices of comparable instruments.

Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of temporary cash investments and trade receivables. By policy, we make temporary cash investments with high credit quality financial institutions and limit the amount of exposure to any one financial institution. With respect to trade receivables, concentrations of credit risk are significantly reduced, because we serve numerous customers in many industries and geographic areas.

We are exposed to counterparty credit risk for nonperformance of derivatives and, in the unlikely event of nonperformance, to market risk for changes in interest and currency rates, as well as settlement risk. We manage exposure to counterparty credit risk through credit standards, diversification of counterparties and procedures to monitor concentrations of credit risk. We do not anticipate nonperformance by any of the counterparties. As of June 30, 2011 and 2010, we had no significant concentrations of credit risk.

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NOTE 17 — STOCK-BASED COMPENSATION

Options

The assumptions used in our Black-Scholes valuation related to grants made during 2011, 2010 and 2009 were as follows:

	2011			2010			2009
Risk-free interest rate		1.4	%		2.3	%		3.0	%
Expected life (years) (2)		4.5			4.5			4.5
Expected volatility (3)		47.0	%		44.0	%		27.7	%
Expected dividend yield		2.0	%		1.8	%		1.3	%

(2)	Expected life is derived from historical experience.
(3)	Expected volatility is based on the implied historical volatility of our stock.

Changes in our stock options for 2011 were as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic value
	Options			Exercise Price		Life (years)		(in thousands)
Options outstanding, June 30, 2010		3,582,075		$	25.59
Granted		559,987			27.30
Exercised		(646,567	)		22.25
Lapsed and forfeited		(107,492	)		26.05
Options outstanding, June 30, 2011		3,388,003		$	26.50		6.0	$	53,216
Options vested and expected to vest, June 30, 2011		3,299,431		$	26.54		5.9	$	51,706
Options exercisable, June 30, 2011		1,948,442		$	26.85		4.6	$	29,937

During 2011, 2010 and 2009, compensation expense related to stock options was $5.2 million, $4.3 million and $4.0 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to options outstanding was $4.6 million and is expected to be recognized over a weighted average period of 2.2 years.

Weighted average fair value of options granted during 2011, 2010 and 2009 was $9.33, $7.32 and $7.15, respectively. Fair value of options vested during 2011, 2010 and 2009 was $4.4 million, $4.1 million and $3.5 million, respectively.

Tax benefits, relating to excess stock-based compensation deductions, are presented in the statement of cash flow as financing cash inflows. Tax benefits resulting from stock-based compensation deductions in excess of amounts reported for financial reporting purposes were $2.9 million, $0.5 million and $0.9 million in 2011, 2010 and 2009, respectively.

The amount of cash received from the exercise of capital stock options during 2011, 2010 and 2009 was $13.6 million, $7.2 million and $2.2 million, respectively. The related tax benefit was $3.2 million, $1.2 million, and $1.1 million for 2011, 2010 and 2009, respectively. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $9.9 million, $4.0 million, and $3.0 million, respectively.

Restricted Stock Awards

Changes in our restricted stock awards for 2011 were as follows:

				Weighted
				Average Fair
	Shares			Value
Unvested restricted stock awards, June 30, 2010		198,701		$	32.71
Vested		(105,847	)		32.56
Forfeited		(3,539	)		33.00
Unvested restricted stock awards, June 30, 2011		89,315		$	32.90

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During 2011, 2010 and 2009, compensation expense related to restricted stock awards was $2.1 million, $2.7 million and $4.5 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to unvested restricted stock awards was

$0.9 million and is expected to be recognized over a weighted average period of 0.9 years.

Restricted Stock Units — Time Vesting and Performance Vesting

In fiscal year 2010, we began granting time vesting restricted stock units under the 2002 Plan in place of restricted stock awards that had been traditionally granted under the plan.

Performance vesting restricted stock units (performance units) were granted to certain individuals in fiscal 2011. These performance units are earned pro rata each year if certain performance goals are met over a 3-year period, and are also subject to a service condition that requires the individual to be employed by the Company at the payment date after the 3-year performance period.

Changes in our time vesting and performance vesting restricted stock units for 2011 were as follows:

				Performance
	Performance			Vesting					Time Vesting
	Vesting			Weighted		Time Vesting			Weighted
	Stock			Average Fair		Stock			Average Fair
	Units			Value		Units			Value
Unvested performance vesting and time vesting restricted stock units, June 30, 2010		—		$	—		546,713		$	24.29
Granted		134,807			26.89		526,153			26.95
Vested		—			—		(84,784	)		23.53
Forfeited		(18,439	)		26.89		(82,000	)		25.47
Unvested performance vesting and time vesting restricted stock units, June 30, 2011		116,368		$	26.89		906,082		$	25.81

During 2011 and 2010, compensation expense related to time vesting and performance vesting restricted stock units was $10.3 million and $2.7 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to unvested time vesting and performance vesting restricted stock units was $13.1 million and is expected to be recognized over a weighted average period of 2.4 years.

Restricted Stock Units – STEP

On November 26, 2007, the Company adopted a one-time, long-term equity program, the Kennametal Inc. 2008 Strategic Transformational Equity Program, under the 2002 Plan (STEP). The STEP was designed to compensate participating executives for achievement of certain performance conditions during the period which began on October 1, 2007 and ends on September 30, 2011. Each participant was awarded a maximum number of restricted stock units, each representing a contingent right to receive one share of capital stock of the Company to the extent the unit is earned during the performance period and becomes payable under the STEP. The performance conditions are based on the Company’s total shareholder return (TSR), which governs 35 percent of the awarded restricted stock units, and cumulative adjusted earnings per share (EPS), which governs 65 percent of the awarded restricted stock units. As of June 30, 2011, participating executives had been granted awards equal to that number of restricted stock units having a value of $26.0 million. A further amount of $11.3 million remains available under the STEP for additional awards that could be made to other executives; however, the Company has decided that it will not make any further awards under the STEP. No new grants under the STEP were made in 2011. There are no voting rights or dividends associated with restricted stock units under the STEP.

Under the STEP, there are two interim measurement dates, September 30, 2009 and 2010, and a final measurement date, September 30, 2011, at which performance is assessed. Participants may earn up to a cumulative 35 percent of the maximum restricted stock units awarded if certain threshold levels of performance are achieved through the two interim measurement dates. The threshold level of performance for September 30, 2009 and September 30, 2010 were not achieved. Generally, the payment of any restricted stock units under the STEP is also conditioned upon the participants being employed by the Company on the date of distribution and the satisfaction of all other provisions of the STEP. As of June 30, 2011, no restricted stock units have been earned or paid under the STEP.

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Changes in the EPS performance-based portion of STEP restricted stock units for 2011 were as follows:

				Weighted
	Stock			Average Fair
	Units			Value
Unvested EPS performance-based restricted stock units, June 30, 2010		502,371		$	35.54
Forfeited		(70,582	)		37.45
Unvested EPS performance-based restricted stock units, June 30, 2011		431,789		$	35.23

As of June 30, 2011, we assumed that none of the EPS performance-based restricted stock units will vest.

Changes in the TSR performance-based STEP restricted stock units for 2011 were as follows:

				Weighted
	Stock			Average Fair
	Units			Value
Unvested TSR performance-based restricted stock units, June 30, 2010		270,501		$	8.35
Forfeited		(38,004	)		9.20
Unvested TSR performance-based restricted stock units, June 30, 2011		232,497		$	8.21

During 2011 and 2010, compensation expense related to STEP restricted stock units was $0.4 million and $0.5 million, respectively. Based on a change in the probability of achieving the performance criteria related to the vesting of the EPS performance-based portion of these restricted stock units, in 2009, we reversed previously recognized compensation expense related to these units. The net credit recognized as compensation expense related to restricted stock units was $0.6 million for 2009. As of June 30, 2011, the total unrecognized compensation cost related to unvested STEP restricted stock units was $0.1 million and is expected to be recognized over a weighted average period of 0.3 years.

NOTE 18 — ENVIRONMENTAL MATTERS

The operation of our business has exposed us to certain liabilities and compliance costs related to environmental matters. We are involved in various environmental cleanup and remediation activities at certain of our locations.

Superfund Sites We are involved as a PRP at various sites designated by the USEPA as Superfund sites. For certain of these sites, we have evaluated the claims and potential liabilities and have determined that neither are material, individually or in the aggregate. For certain other sites, proceedings are in the very early stages and have not yet progressed to a point where it is possible to estimate the ultimate cost of remediation, the timing and extent of remedial action that may be required by governmental authorities or the amount of our liability alone or in relation to that of any other PRPs.

Other Environmental Issues We establish and maintain reserves for other potential environmental issues. At June 30, 2011 and 2010, the total of accruals for these reserves was $5.4 million and $5.2 million, respectively. These totals represent anticipated costs associated with the remediation of these issues. We recorded additional reserves of $1.5 million and $0.6 million in 2011 and 2010, respectively. Additional reserves recorded in 2011 primarily relate to an environmental liability in our international operations. We recorded unfavorable foreign currency translation adjustments of $0.6 million during 2011 and favorable foreign currency translation adjustment of $0.6 million during 2010, respectively. Cash payments of $0.8 million and $0.1 million were made against these reserves during 2011 and 2010, respectively. In 2011 we also had a $1.1 million reversal of an international environmental liability and payment of a civil penalty of $0.2 million related to our Chestnut Ridge, Pennsylvania facility closure. The reserves we have established for environmental liabilities represent our best current estimate of the costs of addressing all identified environmental situations, based on our review of currently available evidence, and take into consideration our prior experience in remediation and that of other companies, as well as public information released by the USEPA, other governmental agencies, and by the PRP groups in which we are participating. Although the reserves currently appear to be sufficient to cover these environmental liabilities, there are uncertainties associated with environmental liabilities, and we can give no assurance that our estimate of any environmental liability will not increase or decrease in the future. The reserved and unreserved liabilities for all environmental concerns could change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements, technological changes, discovery of new information, the financial strength of other PRPs, the identification of new PRPs and the involvement of and direction taken by the government on these matters.

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We maintain a Corporate EHS Department, as well as an EHS Steering Committee, to monitor compliance with environmental regulations and to oversee remediation activities. In addition, we have designated EHS coordinators who are responsible for each of our global manufacturing facilities at each of our global manufacturing facilities. Our financial management team periodically meets with members of the Corporate EHS Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly basis, we review financial provisions and reserves for environmental contingencies and adjust these reserves when appropriate.

NOTE 19 — COMMITMENTS AND CONTINGENCIES

Legal Matters Various lawsuits arising during the normal course of business are pending against us. In our opinion, the ultimate liability, if any, resulting from these matters will have no significant effect on our consolidated financial positions or results of operations.

Lease Commitments We lease a wide variety of facilities and equipment under operating leases, primarily for warehouses, production and office facilities and equipment. Lease expense under these rentals amounted to $27.1 million, $28.2 million and $30.9 million in 2011, 2010 and 2009, respectively. Future minimum lease payments for non-cancelable operating leases are $17.0 million, $11.0 million, $6.5 million, $4.1 million and $2.6 million for the years 2012 through 2016 and $23.7 million thereafter.

Purchase Commitments We have purchase commitments for materials, supplies and machinery and equipment as part of the ordinary conduct of business. A few of these commitments extend beyond one year and are based on minimum purchase requirements. We believe these commitments are not at prices in excess of current market.

Other Contractual Obligations We do not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our liquidity.

Related Party Transactions Sales to affiliated companies were immaterial in 2011, 2010 and 2009. We do not have any other related party transactions that affect our operations, results of operations, cash flow or financial condition.

NOTE 20 — SEGMENT DATA

We operate in two reportable operating segments consisting of Industrial and Infrastructure. We do not allocate certain corporate expenses related to executive retirement plans, the Company’s Board of Directors and strategic initiatives, as well as certain other costs and report them in Corporate. Segment determination is based upon internal organizational structure, the manner in which we organize segments for making operating decisions and assessing performance, the availability of separate financial results and materiality considerations.

Sales to a single customer did not aggregate 3.5 percent or more of total sales in 2011, 2010 or 2009. Export sales from U.S. operations to unaffiliated customers were $90.6 million, $84.1 million, and $116.6 million in 2011, 2010 and 2009, respectively.

INDUSTRIAL The Industrial segment serves customers that operate in industrial end markets such as aerospace, defense, transportation and general engineering. The customers in these end markets manufacture engines, airframes, automobiles, trucks, ships and various industrial goods. The technology needs and level of customization vary by customer and industry served. We deliver value to our Industrial segment customers through our application expertise and diverse product offering.

INFRASTRUCTURE The Infrastructure segment serves customers that operate in the earthworks and energy end markets. These customers support primary industries such as oil and gas, power generation, underground mining, surface and hard rock mining, highway construction and road maintenance. Generally, our Infrastructure segment customers are served through a customer intimacy model that allows us to offer full system solutions by gaining an in-depth understanding of our customers’ engineering needs. Our product offering promotes value by bringing enhanced performance and productivity to our customers’ processes and systems.

We restated the segment financial information for the years ended June 30, 2010 and 2009, respectively, to reflect the change in reportable operating segments.

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Segment data is summarized as follows:

(in thousands)	2011			2010			2009
External sales:
Industrial	$	1,528,672		$	1,166,793		$	1,277,981
Infrastructure		874,821			717,274			721,878
Total external sales	$	2,403,493		$	1,884,067		$	1,999,859
Operating income (loss):
Industrial	$	209,663		$	31,210		$	(115,083	)
Infrastructure		121,733			79,899			19,768
Corporate		(9,723	)		(17,881	)		(4,503	)
Total operating income	$	321,673		$	93,228		$	(99,818	)
Interest expense	$	22,760		$	25,203		$	27,244
Other expense (income), net		2,780			(8,577	)		(14,566	)
Income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Depreciation and amortization
Industrial	$	68,000		$	70,383		$	71,718
Infrastructure		25,471			26,046			24,663
Total depreciation and amortization	$	93,471		$	96,429		$	96,381
Equity income:
Industrial	$	229		$	107		$	(1	)
Infrastructure		-			-			-
Total equity income	$	229		$	107		$	(1	)
Total assets:
Industrial	$	1,531,409		$	1,310,635		$	1,386,324
Infrastructure		785,718			682,169			672,287
Corporate		437,342			275,019			288,363
Total assets	$	2,754,469		$	2,267,823		$	2,346,974
Capital expenditures:
Industrial	$	48,518		$	31,609		$	78,841
Infrastructure		26,411			11,017			26,001
Corporate		8,513			14,053			-
Total capital expenditures	$	83,442		$	56,679		$	104,842
Investments in affiliated companies:
Industrial	$	829		$	748		$	635
Infrastructure		-			1,503			1,503
Total investments in affiliated companies	$	829		$	2,251		$	2,138

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Geographic information for sales, based on country of origin, and assets is as follows:

(in thousands)	2011		2010		2009
External sales:
United States	$	1,041,427	$	839,168	$	907,967
Germany		398,532		313,929		360,560
Asia		441,397		311,616		266,676
United Kingdom		63,466		52,145		59,749
Canada		59,743		44,538		47,348
Other		398,928		322,671		357,559
Total external sales	$	2,403,493	$	1,884,067	$	1,999,859
Total assets:
United States	$	1,165,705	$	1,091,510	$	1,153,109
Germany		472,665		333,917		371,394
Asia		440,535		330,282		302,355
United Kingdom		67,549		35,964		41,233
Canada		40,421		29,025		28,055
Other		567,594		447,125		450,828
Total assets:	$	2,754,469	$	2,267,823	$	2,346,974

NOTE 21 – SELECTED QUARTERLY FINANCIAL DATA (unaudited)

For the quarter ended (in thousands, except per share data)	September 30			December 31		March 31		June 30
2011
Sales	$	529,158		$	565,768	$	614,830	$	693,737
Gross profit		188,740			200,025		229,981		265,645
Income from continuing operations attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Net income attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Basic earnings per share attributable to Kennametal (5) Continuing operations		0.43			0.53		0.79		1.06
Net income		0.43			0.53		0.79		1.06
Diluted earnings per share attributable to Kennametal (5) Continuing operations		0.42			0.52		0.77		1.04
Net income		0.42			0.52		0.77		1.04
2010
Sales	$	409,395		$	442,865	$	493,165	$	538,642
Gross profit		117,801			140,088		170,324		199,515
(Loss) income from continuing operations attributable to Kennametal (4)		(8,450	)		6,023		9,685		40,584
Net (loss) income attributable to Kennametal (4)		(9,817	)		5,967		9,685		40,584
Basic (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.50
Net (loss) income		(0.12	)		0.07		0.12		0.50
Diluted (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.49
Net (loss) income		(0.12	)		0.07		0.12		0.49

(4)

Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2011 and December 31 and September 30, 2010, includes restructuring charges of $4.9 million, $1.0 million, $3.4 million and $3.3 million, respectively. Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2010, includes restructuring charges of $12.0 million and $20.7 million, respectively. Income (loss) from continuing operations and net income (loss) attributable to Kennametal for the quarter ended December 31 and September 30, 2009, includes restructuring charges of $3.3 million and $7.8 million, respectively.

(5)

Earnings per share amounts attributable to Kennametal for each quarter are computed using the weighted average number of shares outstanding during the quarter. Earnings per share amounts attributable to Kennametal for the full year are computed using the weighted average number of shares outstanding during the year. Thus, the sum of the four quarters’ earnings per share attributable to Kennametal does not always equal the full-year earnings per share attributable to Kennametal.

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ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A — CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures
	The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). The Company’s disclosure controls were designed to provide a reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide reasonable assurance of achieving the controls’ stated goals. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance at June 30, 2011 to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
(b)	Management’s Report on Internal Control over Financial Reporting
	Management’s Report on Internal Control over Financial Reporting is included in Item 8 of this Form 10-K and incorporated here by reference.
(c)	Attestation Report of the Independent Registered Public Accounting Firm
	The effectiveness of Kennametal’s internal control over financial reporting as of June 30, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included in Item 8 of this annual report on Form 10-K.
(d)	Changes in Internal Control over Financial Reporting
	There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B — OTHER INFORMATION

None.

Part III

ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the executive officers of Kennametal Inc. is as follows: Name, Age, Position, and Experience During the Past Five Years ⁽¹⁾.

Carlos M. Cardoso, 53

Chairman of the Board, President and Chief Executive Officer
Chairman of the Board of Directors since January 2008; President and Chief Executive Officer since January 2006.

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Judith L. Bacchus, 49
Vice President and Chief Human Resources Officer
Vice President and Chief Human Resources Officer since June 2011; Vice President, Human Resources Field Services from July 2009
to June 2011; Director, Human Resources Shared Services from December 2007 to July 2009; Manger Global Talent Acquisition from
April 2006 to December 2007.

Martha A. Bailey, 37
Vice President Finance and Corporate Controller
Vice President Finance and Corporate Controller since December 2009; Controller, Metalworking Americas from January 2009 to
December 2009; Manager, Global Financial Reporting from June 2005 to July 2009.

Steven R. Hanna, 57
Vice President and Chief Information Officer
Vice President and Chief Information Officer since October 2008. Formerly, Corporate Information Officer at General Motors
Corporation (a manufacturer of automobiles) from May 1998 to September 2008.

John H. Jacko, Jr., 54
Vice President and Chief Marketing Officer
Vice President and Chief Marketing Officer since July 2008; Vice President Corporate Strategy and MSSG Global Marketing from
March 2007 to July 2008. Formerly, Vice President, Chief Marketing Officer at Flowserve Corporation (a manufacturer / provider of
flow management products and services) from November 2002 to February 2007.

Lawrence J. Lanza, 62
Vice President and Treasurer
Vice President since October 2006; Treasurer since July 2003.

Kevin G. Nowe, 59
Vice President, Secretary and General Counsel
Vice President, Secretary and General Counsel since November 2009; Assistant General Counsel and Assistant Secretary from November 1992 to October 2009.

Frank P. Simpkins, 48
Vice President and Chief Financial Officer
Vice President and Chief Financial Officer since December 2006; Vice President Finance and Corporate Controller from February
2006 to December 2006.

John R. Tucker, 64
Vice President and President Business Groups
Vice President and President Business Groups since December 2010; Vice President and Chief Technical Officer October 2008 to
December 2010. Formerly, Chairman and Chief Executive Officer of Sermatech International (a developer of engineered protective
coatings) from August 2006 to May 2008; President and Chief Executive Officer of Capstone Turbine Corporation (a producer of low-
emission microturbine systems) from August 2003 to July 2006.

Philip H. Weihl, 55
Vice President, Integrated Supply Chain and Logistics
Vice President, Integrated Supply Chain and Logistics since July 2009; Vice President Kennametal Value Business System and Lean
Enterprise from January 2005 to June 2009.

(1) Each executive officer has been elected by the Board of Directors to serve until removed or until a successor is elected and qualified. Unless otherwise noted, none of the executive officers (i) has an arrangement or understanding with any other person(s) pursuant to which he was selected as an officer, (ii) has any family relationship with any director or executive officer of the company, or (iii) is involved in any legal proceeding which would require disclosure under this item.

Incorporated herein by reference is the information under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after June 30, 2011 (2011 Proxy Statement). Incorporated herein by reference is the information set forth under the caption “Ethics and Corporate Governance-Code of Business Ethics and Conduct” in the 2011 Proxy Statement.

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The Company has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are: Timothy R. McLevish (Chair); Lawrence W. Stranghoener; Steven H. Wunning; and Larry D. Yost. Incorporated herein by reference is the information set forth in the second and third sentences under the caption “Board of Directors and Board Committees-Committee Functions-Audit Committee” in the 2011 Proxy Statement.

ITEM 11 — EXECUTIVE COMPENSATION

Incorporated herein by reference is the information set forth under the captions “Executive Compensation” and “Executive Compensation Tables” and certain information regarding directors’ compensation under the caption “Board of Directors and Board Committees-Board of Directors Compensation and Benefits” and “Board of Directors and Board Committees-Committee Functions-Compensation Committee Interlocks and Insider Participation” in the 2011 Proxy Statement.

ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREOWNER MATTERS

Incorporated herein by reference from our 2011 Proxy Statement are: (i) the information set forth under the caption “Equity Compensation Plans” and the related tabular disclosure under the table entitled “Equity Compensation Plan Information;” (ii) the information set forth under the caption “Ownership of Capital Stock by Directors, Nominees and Executive Officers” with respect to the directors’ and officers’ shareholdings; and (iii) the information set forth under the caption “Principal Holders of Voting Securities” with respect to other beneficial owners.

ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated herein by reference is certain information set forth under the captions “Ethics and Corporate Governance – Corporate Governance – Board of Director Review and Approval of a Related Person Transations,” “Executive Compensation,” “Executive Compensation Tables” and “Ethics and Corporate Governance – Corporate Governance – Board Composition and Independence” in the 2011 Proxy Statement.

ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated herein by reference is the information with respect to pre-approval policies set forth under the caption “Independent Registered Public Accounting Firm – Proposal II. Ratification of The Selection of the Independent Registered Public Accounting Firm – Audit Committee Pre-Approval Policy” and the information with respect to principal accountant fees and services set forth under “Independent Registered Public Accounting Firm – Proposal II. Ratification of the Selection of The Independent Registered Public Accounting Firm – Fees and Services” in the 2011 Proxy Statement.

Part IV

ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this Form 10-K report.
1. Financial Statements included in Part II, Item 8
2. Financial Statement Schedule

The financial statement schedule required by Part II, Item 8 of this document is filed as part of this report. All of the other schedules are omitted as the required information is inapplicable or the information is presented in our consolidated financial statements or related notes.

FINANCIAL STATEMENT SCHEDULE:	Page
Schedule II—Valuation and Qualifying Accounts and Reserves for the Years Ended June 30, 2011, 2010 and 2009		65

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3. Exhibits

(3)	Articles of Incorporation and Bylaws
(3.1)	Amended and Restated Articles of Incorporation as amended through October 30, 2006	Exhibit 3.1 of the December 31, 2006 Form 10-Q filed February 9, 2007 is incorporated herein by reference.
(3.2)	Bylaws of Kennametal Inc. as amended through May 8, 2007	Exhibit 3.1 of March 31, 2007 Form 10-Q filed May 9, 2007 is incorporated herein by reference.
(4)	Instruments Defining the Rights of Security Holders, Including Indentures
(4.1)	Indenture, dated as of June 19, 2002, by and between the Registrant and Bank One Trust Company, N.A., as trustee	Exhibit 4.1 of the Form 8-K filed June 20, 2002 is incorporated herein by reference.
(4.2)	First Supplemental Indenture, dated as of June 19, 2002, by and between the Registrant and Bank One Trust Company, N.A., as trustee	Exhibit 4.2 of the Form 8-K filed June 20, 2002 is incorporated herein by reference.
(10)	Material Contracts
(10.1)*	Kennametal Inc. Management Performance Bonus Plan	Appendix A to the 2005 Proxy Statement filed September 26, 2005 is incorporated herein by reference.
(10.2)*	Deferred Fee Plan for Outside Directors, as amended and restated effective December 30, 2008	Exhibit 10.1 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.3)*	Executive Deferred Compensation Trust Agreement	Exhibit 10.5 of the June 30, 1988 Form 10- K (SEC file no. reference 1-5318; docket entry date—September 23, 1988) is incorporated herein by reference.
(10.4)*	Directors Stock Incentive Plan, as amended and restated effective December 30, 2008	Exhibit 10.2 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.5)*	Performance Bonus Stock Plan of 1995, as amended and restated effective December 30, 2008	Exhibit 10.3 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.6)*	Stock Option and Incentive Plan of 1996	Exhibit 10.14 of the September 30, 1996 Form 10-Q filed November 13, 1996 is incorporated herein by reference.
(10.7)*	Kennametal Inc. 1999 Stock Plan	Exhibit 10.5 of the Form 8-K filed June 11, 1999 is incorporated herein by reference.
(10.8)*	Kennametal Inc. Stock Option and Incentive Plan of 1999	Exhibit A of the 1999 Proxy Statement filed September 20, 1999 is incorporated herein by reference.
(10.9)*	Kennametal Inc. Stock and Incentive Plan of 2002 (as amended on October 21, 2008)	Appendix A to the 2008 Proxy Statement filed September 8, 2008 is incorporated herein by reference.
(10.10)*	Forms of Award Agreements under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended	Exhibit 10.18 of the June 30, 2004 Form 10-K filed September 10, 2004 is incorporated herein by reference.
(10.11)*	Form of Kennametal Inc. Restricted Unit Award (granted under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended)	Exhibit 10.1 of the September 30, 2009 Form 10-Q filed November 5, 2009 is incorporated herein by reference.

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(10.12)*	Form of Kennametal Inc. Performance Unit Award (granted under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended)	Exhibit 10.1 of Form 10-Q filed November 5, 2010 is incorporated herein by reference.
(10.13)*	Kennametal Inc. 2008 Strategic Transformational Equity Program	Exhibit 10.2 of the December 31, 2007 Form 10-Q filed February 7, 2008 is incorporated herein by reference.
(10.14)*	Form of Award Agreement under the Kennametal Inc. 2008 Strategic Transformational Equity Program	Exhibit 10.3 of the December 31, 2007 Form 10-Q filed February 7, 2008 is incorporated herein by reference.
(10.15)*	Form of Employment Agreement with Carlos M. Cardoso	Exhibit 10.9 of the June 30, 2000 Form 10-K filed September 22, 2000 is incorporated herein by reference.
(10.16)*	Letter Agreement amending Employment Agreement with Carlos M. Cardoso	Exhibit 10.2 of the Form 8-K filed December 9, 2005 is incorporated herein by reference.
(10.17)*	Amendment No. 3 to Employment Agreement with Carlos M. Cardoso	Exhibit 10.5 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.18)*	Form of Amended and Restated Employment Agreement with Named Executive Officers (other than Mr. Cardoso)	Exhibit 10.1 of the December 31, 2006 Form 10-Q filed February 9, 2007 is incorporated herein by reference.
(10.19)*	Form of Amendment to Amended and Restated Employment Agreement with Named Executive Officers (other than Mr. Cardoso)	Exhibit 10.6 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.20)*	Schedule of Named Executive Officers who have entered into the Form of Amended and Restated Employment Agreement and Form of Amendment as set forth in Exhibits 10.18 and 10.19	Filed herewith.
(10.21)*	Form of Indemnification Agreement for Named Executive Officers	Exhibit 10.2 of the Form 8-K filed March 22, 2005 is incorporated herein by reference.
(10.22)*	Schedule of Named Executive Officers who have entered into the Form of Indemnification Agreement as set forth in Exhibit 10.21	Filed herewith.
(10.23)*	Kennametal Inc. Executive Retirement Plan (for Designated Others) (as amended effective December 30, 2008)	Exhibit 10.8 of the December 31, 2008

		Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.24)*	Kennametal Inc. Supplemental Executive Retirement Plan (as amended effective December 30, 2008)	Exhibit 10.9 of the December 31, 2008 Form 10-Q filed February 4, 2009 is incorporated herein by reference.
(10.25)*	Description of Compensation Payable to Non-Employee Directors	Exhibit 10.23 from the June 30, 2008 Form 10-K filed August 14, 2008 is incorporated herein by reference.

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(10.26)	Third Amended and Restated Credit Agreement dated as of June 25, 2010 among Kennametal Inc., Kennametal Europe GmbH, Bank of America, N.A., London Branch (as Euro Swingline Lender), PNC Bank, National Association and JPMorgan Chase Bank, N.A. (as Co-Syndication Agents), Citizens Bank of Pennsylvania and Bank of Tokyo- Mitsubishi UFJ Trust Company (as Co-Documentation Agents), Bank of America, N.A. (as the Administrative Agent), and the following lenders:	Exhibit 10.1 of Form 8-K filed June 30, 2010 is incorporated herein by reference.
	Bank of America, N.A., PNC Bank, National Association, JPMorgan Chase Bank, N.A., Bank of Tokyo-Mitsubishi UFJ Trust Company, Citizens Bank of Pennsylvania, Mizuho Corporate Bank, Ltd., Comerica Bank, Commerzbank AG New York and Grand Cayman Branches, HSBC Bank USA, National Association, Intesa Sanpaolo S.p.A New York Branch, U.S. Bank National Association, First Commonwealth Bank and TriState Capital Bank
(10.27)	Form of Third Amended and Restated Guarantee (in connection with the Third Amended and Restated Credit Agreement set forth in Exhibit 10.24)	Exhibit 10.26 of Form 10-K filed August 12, 2010 is incorporated herein by reference.
(10.28)*	Stock and Incentive Plan of 2010	Exhibit A of the 2010 Proxy Statement filed September 13, 2010 is incorporated herein by reference.
(10.29)*	Form of Kennametal Inc. Performance Unit Award (granted under the Kennametal Inc. Stock and Incentive Plan of 2010)	Exhibit 10.2 of Form 10-Q filed February 8, 2011 is incorporated herein by reference.
(10.30)*	Form of Kennametal Inc. Restricted Unit Award (granted under the Kennametal Inc. Stock and Incentive Plan of 2010)	Exhibit 10.3 of Form 10-Q filed February 8, 2011 is incorporated herein by reference.
(10.31)*	Form of Kennametal Inc. Restricted Unit Award for Non-Employee Directors (granted under the Kennametal Inc. Stock and Incentive Plan of 2010)	Exhibit 10.4 of Form 10-Q filed February 8, 2011 is incorporated herein by reference.
(10.32)*	Form of Kennametal Inc. Nonstatutory Stock Option Award (granted under the Kennametal Inc. Stock and Incentive Plan of 2010)	Exhibit 10.5 of Form 10-Q filed February 8, 2011 is incorporated herein by reference.
(10.33)*	Form of Kennametal Inc. Nonstatutory Stock Option Award for Non-Employee Directors (granted under the Kennametal Inc. Stock and Incentive Plan of 2010)	Exhibit 10.6 of Form 10-Q filed February 8, 2011 is incorporated herein by reference.
(10.34)*	Form of Officer’s Employment Agreement	Exhibit 10.1 of Form 10-Q filed May 13, 2011 is incorporated herein by reference.
(10.35)*	Schedule of Executive Officers who have entered into the Form of Officer’s Employment Agreement as set forth in Exhibits 10.34.	Filed herewith.
(21)	Subsidiaries of the Registrant	Filed herewith.
(23)	Consent of Independent Registered Public Accounting Firm	Filed herewith.
(31)	Certifications
(31.1)	Certification executed by Carlos M. Cardoso, Chairman, President and Chief Executive Officer of Kennametal Inc.	Filed herewith.
(31.2)	Certification executed by Frank P. Simpkins, Vice President and Chief Financial Officer of Kennametal Inc.	Filed herewith.
(32)	Section 1350 Certifications
(32.1)	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Carlos M. Cardoso, Chairman, President and Chief Executive Officer of Kennametal Inc., and Frank P. Simpkins, Vice President and Chief Financial Officer of Kennametal Inc.	Filed herewith.
	*Denotes management contract or compensatory plan or arrangement.

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(101)	XBRL
(101.INS)**	XBRL Instance Document	Filed herewith.
(101.SCH)**	XBRL Taxonomy Extension Schema Document	Filed herewith.
(101.CAL)**	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
(101.DEF)**	XBRL Taxonomy Definition Linkbase	Filed herewith.
(101.LAB)**	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith.
(101.PRE)**	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.

** The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” or part of a registration statement or prospects for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of these sections.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KENNAMETAL INC.
Date: August 11, 2011	By:	/s/ Martha A. Bailey
		Martha A. Bailey
		Vice President Finance and Corporate Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ CARLOS M. CARDOSO
Carlos M. Cardoso	Chairman, President and Chief Executive Officer	August 11, 2011
/s/ FRANK P. SIMPKINS
Frank P. Simpkins	Vice President and Chief Financial Officer	August 11, 2011
/s/ MARTHA A. BAILEY
Martha A. Bailey	Vice President Finance and Corporate Controller	August 11, 2011
/s/ RONALD M. DEFEO
Ronald M. DeFeo	Director	August 11, 2011
/s/ PHILIP A. DUR
Philip A. Dur	Director	August 11, 2011
/s/ WILLIAM J. HARVEY
William J. Harvey	Director	August 11, 2011
/s/ TIMOTHY R. MCLEVISH
Timothy R. McLevish	Director	August 11, 2011
/s/ WILLIAM R. NEWLIN
William R. Newlin	Director	August 11, 2011
/s/ LAWRENCE W. STRANGHOENER
Lawrence W. Stranghoener	Director	August 11, 2011
/s/ STEVEN H. WUNNING
Steven H. Wunning	Director	August 11, 2011
/s/ LARRY D. YOST
Larry D. Yost	Director	August 11, 2011

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SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

			Charged			Charged to
(In thousands)	Balance at		(Recoveries)			Other								Deductions
For the year ended	Beginning		to Costs and			Comprehensive					Other			from			Balance at
June 30	of Year		Expenses			Income			Recoveries		Adjustments			Reserves			End of Year
2011
Allowance for doubtful accounts	$	24,789	$	518		$	—		$	966	$	1,993	(1)	$	7,308	(3)	$	20,958
Reserve for obsolete inventory		68,270		4,971			—			—		4,525	(1)		22,483	(4)		55,283
Deferred tax asset valuation allowance		47,987		(27,313	)		—			—		5,491	(1)		503	(5)		25,662
2010
Allowance for doubtful accounts	$	25,228	$	4,163		$	—		$	1,181	$	(1,055	)(1)	$	4,728	(3)	$	24,789
Reserve for obsolete inventory		61,123		19,580			—			—		2,854	(1)		15,287	(4)		68,270
Deferred tax asset valuation allowance		48,206		5,035			(1,715	)		—		(3,539	)(1)		—			47,987
2009
Allowance for doubtful accounts	$	18,473	$	9,597		$	—		$	856	$	1,566	(2)	$	5,264	(3)	$	25,228
Reserve for obsolete inventory		61,470		22,730			—			—		(14,164	)(1)		8,913	(4)		61,123
Deferred tax asset valuation allowance		46,650		2,490			4,572			—		(5,506	)(1)		—			48,206

(1)	Represents foreign currency translation adjustment.
(2)	Represents foreign currency translation adjustment and $0.2 million of reserves acquired through business combinations.
(3)	Represents uncollected accounts charged against the allowance.
(4)	Represents scrapped inventory and other charges against the reserve.
(5)	Represents a forfeited net operating loss deduction.

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EX-10.20

Exhibit 10.20

SCHEDULE OF NAMED EXECUTIVE OFFICERS WHO HAVE ENTERED INTO THE FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT AND FORM OF AMENDMENT AS SET FORTH IN EXHIBITS 10.18 AND 10.19

NAME

Frank P. Simpkins
Philip H. Weihl

EX-10.22

Exhibit 10.22

SCHEDULE OF NAMED EXECUTIVE OFFICERS WHO HAVE ENTERED INTO THE FORM OF INDEMNIFICATION AGREEMENT AS SET FORTH IN EXHIBIT 10.21

Each of the following Named Executive Officers has entered into a Form of Indemnification Agreement:

NAME

Carlos M. Cardoso
Frank P. Simpkins
Kevin R. Walling
Philip H. Weihl
Gary W. Weismann

EX-10.35

Exhibit 10.35

SCHEDULE OF EXECUTIVE OFFICERS WHO HAVE ENTERED INTO THE FORM OF OFFICER’S EMPLOYMENT AGREEMENT AS SET FORTH IN EXHIBIT 10.34

NAME

Judith L. Bacchus

EX-21

Exhibit 21

CORPORATE DIRECTORY

Our consolidated subsidiaries and affiliated companies as of June 30, 2011 are:

Consolidated Subsidiaries and affiliated companies of Kennametal Inc.
Kennametal Australia Pty. Ltd.
Kennametal Distribution Services Asia Pte. Ltd.
Kennametal (Thailand) Co., Ltd.
Kennametal Japan Ltd.
Kennametal (Malaysia) Sdn. Bhd.
Kennametal de Mexico, S.A. de C.V.
Kennametal Sp. Z.o.o
Kennametal (Singapore) Pte. Ltd.
Kennametal South Africa (Pty.) Ltd.
Kennametal Korea Ltd.
Kennametal Hungary Holdings Inc.
Kennametal Hungary Finance Services Kft.
Kennametal Financing I Corp.
Kennametal Holdings Europe Inc.
Kennametal Extrude Hone Corporation
Hanita Metal Works, Ltd.
Kennametal Tricon Metals & Services, Inc.
Kennametal Shared Services Private Limited
Kennametal Hardpoint (Taiwan) Inc.
ISIS GHH Limited

Consolidated Subsidiary of Kennametal Holdings Europe Inc.
Kennametal Luxembourg Holding S.à.r.l.
Kennametal Verwaltungs GmbH & Co. KG (partnership)

Consolidated Subsidiaries of Kennametal Sp. z.o.o
Kennametal Produkcja Sp. z o.o.

Consolidated Subsidiaries of Kennametal Luxembourg Holding S.à.r.l.
Kennametal Luxembourg S.à.r.l.
Kennametal Europe Holding GmbH
Kennametal Holding (Cayman Islands) Ltd.

Consolidated Subsidiaries of Kennametal Luxembourg S.à.r.l.
Kennametal Ltd. (Canada)
Kennametal Asia (HK) Ltd.
Kennametal Sintec Holding GmbH

Consolidated Subsidiary of Kennametal Ltd
Camco Cutting Tools Ltd.

Consolidated Affiliated Companies of Kennametal Europe Holding GmbH
Kennametal Europe GmbH

Consolidated Subsidiaries of Kennametal Europe GmbH
Kennametal Holding GmbH
Kennametal Nederland B.V.
OOO Kennametal

Consolidated Subsidiaries of Kennametal Holding GmbH (Germany)
Kennametal Hertel Europe Holding GmbH
Kennametal Widia Beteiligungs GmbH

Consolidated and affiliated Subsidiaries of Kennametal Hertel Europe Holding GmbH
Kennametal GmbH
Kennametal Hungaria Kft.
Kennametal Logistics GmbH
Kennametal Shared Services GmbH
Kennametal Sintec Keramik GmbH
Widia GmbH

Consolidated Subsidiaries and Affiliated Companies of Kennametal GmbH
Kennametal Belgium S.p.r.l.
Kennametal Deutschland GmbH
Kennametal France S.A.S
Kennametal Italia S.p.A.
Kennametal Kesici Takimlar Sanayi Ve Ticaret Anonim Sirketi
Kennametal Polska Sp. Z.o.o.
Kennametal Produktions GmbH & Co. KG. (partnership)
Kennametal UK Limited
Kenci S.L.
Kennametal AMSG GmbH
Ruebig Real Estate GmbH & Co. KG

Consolidated Subsidiary of Kennametal Italia S.p.A.
Kennametal Italia Produzione S.R.L.

Consolidated Affiliated Company of Kennametal Produktions GmbH & Co. KG (partnership)
Kennametal Real Estate GmbH & Co. KG (partnership)

Consolidated Affiliated Company of Kennametal Deutschland GmbH
Kennametal (Deutschland) Real Estate GmbH & Co. KG (partnership)

Consolidated Subsidiaries of Kennametal Asia (HK) Ltd.
Kennametal Hardpoint (Shanghai) Co., Ltd.
Kennametal (China) Co. Ltd.
Kennametal (Xuzhou) Company, Ltd.

Consolidated Subsidiaries and Affiliated Companies of Widia GmbH
Kennametal Widia Real Estate GmbH & Co. KG (partnership)
Kennametal Widia Produktions GmbH & Co. KG (partnership)
Meturit AG

Consolidated Subsidiary of Meturit AG
Kennametal India Ltd.

Consolidated Subsidiaries of Kennametal Holding (Cayman Islands) Ltd.
Kennametal Argentina S.A.
Kennametal do Brasil Ltda.
Kennametal Chile Ltda.

Consolidated Subsidiaries of Kenci S.L.
Kenci Lda.
Kennametal Manufacturing Barcelona S.L.
Materiales y Accesorios Kenem S.L.

Consolidated Subsidiaries of Kennametal UK Ltd.
Kennametal Logistics UK Ltd.
Kennametal Manufacturing UK Ltd.
Kennametal Sintec Keramik UK Ltd.

Consolidated Subsidiary of Kennametal France S.A.S.
Kennametal Production France S.A.R.L.

Consolidated Subsidiaries of Kennametal Extrude Hone Corporation
Kennametal Extrude Hone Ltd. (U.K.)
Kennametal Extrude Hone Limited (Ireland)
Extrude Hone Participacoes Ltda.
Extrude Hone Shanghai, Co. Ltd.

Consolidated Subsidiaries and Affiliated Company of Kennametal Extrude Hone Limited (Ireland)
Kennametal Extrude Hone Holding GmbH
Extrude Hone KK (Japan)
Kennametal Extrude Hone GmbH & Co. KG (partnership)

Consolidated Subsidiaries of Kennametal Extrude Hone Holding GmbH
Kennametal Extrude Hone GmbH
Kennametal Extrude Hone Czech s.r.o

Affiliated Company of Extrude Hone Participacoes Ltda.
Extrude Hone do Brasil Sistemas De Acabamentos De Peca Ltda.

Consolidated Subsidiaries of Hanita Metal Works, Ltd.
Hanita Cutting Tools, Inc.

Consolidated Subsidiaries of Kennametal Sintec Holding GmbH
Sintec Keramik Shanghai Co., Ltd.
Kennametal Sintec Keramik Asia Ltd.

Consolidated Subsidiary of Kennametal Sintec Keramik Asia Ltd.
Kennametal Sunshine Powder Technology Co., Ltd.

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-55768, 33-55766, 33-65023, No. 333-18423, No. 333-18429, No. 333-18437, No. 333-77411, No. 333-88049, No. 333-30454, No. 333-30448 , No. 333-53562, No. 333-100867, No. 333-120314, No. 333-124774, No. 333-142727, No. 333-154705, No. 333-170348) and on Form S-3 (No. 333-40809, No. 333-154703, No. 333-160474) of Kennametal Inc. of our report dated August 11, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP  

PricewaterhouseCoopers LLP 

Pittsburgh, Pennsylvania 

August 11, 2011

EX-31.1

Exhibit 31.1

I, Carlos M. Cardoso, certify that:

1.	I have reviewed this annual report on Form 10-K of Kennametal Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Carlos M. Cardoso

Carlos M. Cardoso 

Chairman, President and Chief Executive Officer 
August 11, 2011

EX-31.2

Exhibit 31.2

I, Frank P. Simpkins, certify that:

1.	I have reviewed this annual report on Form 10-K of Kennametal Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Frank P. Simpkins

Frank P. Simpkins 

Vice President and Chief Financial Officer 
August 11, 2011

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Kennametal Inc. (the “Corporation”) on Form 10-K for the period ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Corporation certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

/s/ Carlos M. Cardoso

 

Carlos M. Cardoso 

Chairman, President and Chief Executive Officer 
August 11, 2011

/s/ Frank P. Simpkins 

Frank P. Simpkins 

Vice President and Chief Financial Officer 
August 11, 2011

*   This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

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Financial Instruments (Details) (USD $)	Jun. 30, 2011	Jun. 30, 2010
Derivatives, Fair Value [Line Items]
Notional Amount of outstanding exchange contract	$ 37,600,000
Financial Instruments (Textuals) [Abstract]
Fair value of fixed rate long-term debt	315,800,000	325,500,000
Contracts translated to US dollars [Member]
Derivatives, Fair Value [Line Items]
Notional Amount of outstanding exchange contract	37,600,000	9,400,000
Forward starting interest rate swap contracts [Member]
Derivatives, Fair Value [Line Items]
Notional Amount of outstanding exchange contract	150,000,000	75,000,000
Estimated Amount of payable on settlement of interest rate swap contracts	$ 2,400,000

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Discontinued Operations (Details) (USD $)	12 Months Ended
	Jun. 30, 2010	Jun. 30, 2009
Results of discontinued operations
Sales		$ 80,630,000
Loss from discontinued operations before income taxes	(2,269,000)	(25,923,000)
Income tax expense (benefit)	(846,000)	(8,583,000)
Loss from discontinued operations	(1,423,000)	(17,340,000)
Discontinued Operations (Textuals) [Abstract]
Net book value of assets disposed		51,000,000
Proceeds from divestitures	28,500,000
Pretax charges related to the divestiture	$ 2,300,000	$ 25,900,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Current assets:
Cash and cash equivalents	$ 204,565	$ 118,129
Accounts receivable, less allowance for doubtful accounts of $20,958 and $24,789	447,835	326,699
Inventories (Note 8)	519,973	364,268
Deferred income taxes (Note 12)	60,257	62,083
Other current assets	54,955	44,752
Total current assets	1,287,585	915,931
Property, plant and equipment:
Land and buildings	373,971	341,748
Machinery and equipment	1,396,306	1,281,872
Less accumulated depreciation	(1,073,215)	(959,085)
Property, plant and equipment, net	697,062	664,535
Other assets:
Investments in affiliated companies	829	2,251
Goodwill (Note 2)	511,328	489,443
Other intangible assets, less accumulated amortization of $78,712 and $63,343 (Note 2)	152,279	155,306
Deferred income taxes (Note 12)	29,876	11,827
Other	75,510	28,530
Total other assets	769,822	687,357
Total assets	2,754,469	2,267,823
Current liabilities:
Current maturities of long-term debt and capital leases (Note 10)	307,304	3,539
Notes payable to banks (Note 11)	3,659	19,454
Accounts payable	222,678	125,360
Accrued income taxes (Note 12)	38,098	17,857
Accrued vacation pay	37,311	34,615
Accrued Payroll	65,265	39,374
Other current liabilities (Note 9)	167,206	152,806
Total current liabilities	841,521	393,005
Long-term debt and capital leases, less current maturities (Note 10)	1,919	314,675
Deferred income taxes (Note 12)	83,310	63,266
Accrued postretirement benefits (Note 13)	17,853	17,894
Accrued pension benefits (Note 13)	117,066	111,807
Accrued income taxes (Note 12)	3,094	5,193
Other liabilities	31,065	28,540
Total liabilities	1,095,828	934,380
Commitments and contingencies (Note 19)
Kennametal shareowners' Equity:
Preferred stock, no par value; 5,000 shares authorized; none issued	0	0
Capital stock, $1.25 par value; 120,000 shares authorized; 81,129 and 81,903 shares issued	101,411	102,379
Additional paid-in capital	470,758	492,454
Retained earnings	983,374	793,448
Accumulated other comprehensive income (loss)	82,529	(72,781)
Total Kennametal Shareowners' Equity	1,638,072	1,315,500
Noncontrolling interests	20,569	17,943
Total equity	1,658,641	1,333,443
Total liabilities and equity	$ 2,754,469	$ 2,267,823

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data	Jun. 30, 2011	Jun. 30, 2010
Current assets:
Allowance for doubtful accounts	$ 20,958	$ 24,789
Other assets:
Accumulated amortization on other intangible assets	$ 78,712	$ 63,343
Kennametal shareowners' Equity:
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Capital stock, par value	$ 1.25	$ 1.25
Capital stock, shares authorized	120,000	120,000
Capital stock, shares issued	81,129	81,903

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Pension and Other Postretirement and Postemployment Benefits (Details 5) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Net periodic other postretirement costs (benefit)
Net periodic pension cost			$ 6,938
Pension plans contribution [Member]
Pre-tax amounts recognized in accumulated other comprehensive income
Unrecognized net actuarial gains	(66,734)	(125,971)
Unrecognized net prior service credits	1,540	2,534
Total	(66,396)	(124,557)
Net periodic other postretirement costs (benefit)
Service cost	7,650	7,949	7,824
Interest cost	40,984	42,437	41,652
Amortization of prior service cost	(281)	(280)	(213)
Recognition of actuarial gains/losses	12,277	4,447	1,900
Curtailment loss (gain)		300
Net periodic pension cost	12,497	12,260	6,938
Other postretirement benefit plans [Member]
Pre-tax amounts recognized in accumulated other comprehensive income
Unrecognized net actuarial gains	(864)	(3,529)
Unrecognized net prior service credits	(524)	0
Total	(1,388)	(3,529)
Net periodic other postretirement costs (benefit)
Service cost	77	99	294
Interest cost	1,037	1,266	1,631
Amortization of prior service cost	0	8	39
Recognition of actuarial gains/losses	(190)	(368)	(107)
Curtailment loss (gain)	0	0	(3,169)
Net periodic pension cost	$ 924	$ 1,005	$ (1,312)

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Derivative Instruments and Hedging Activities (Details 1) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Currency forward contracts [Member] | Other Expense Income Net [Member]
(Gains) losses related to derivatives not designated as hedging instruments
Other expense (income), net - currency forward contracts	$ (1,126)	$ 1,077	$ 73
Range forward contracts [Member] | Cash flow hedging [Member]
(Gains) losses related to cash flow hedges
(Losses) gains recognized in other comprehensive income (loss)	(26)	(962)	107
Losses (gains) reclassified from accumulated other comprehensive loss into other expense (income), net	$ 1,041	$ (1,107)	$ (8,505)

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Stock-Based Compensation (Details 1) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2011
Changes in stock options
Options outstanding, June 30, 2010	3,582,075
Options, Granted	559,987
Options, Exercised	(646,567)
Options, Lapsed and Forfeited	(107,492)
Options outstanding, June 30, 2011	3,388,003
Options vested and expected to vest, June 30, 2011	3,299,431
Options exercisable, June 30, 2011	1,948,442
Weighted Average Exercise Price, Options outstanding, June 30, 2010	$ 25.59
Weighted Average Exercise Price, Granted	$ 27.30
Weighted Average Exercise Price, Exercised	$ 22.25
Weighted Average Exercise Price, Lapsed and Forfeited	$ 26.05
Weighted Average Exercise Price, Options outstanding, June 30, 2011	$ 26.5
Weighted Average Exercise Price, Option vested and expected to vest, June 30, 2011	$ 26.54
Weighted Average Exercise Price, Options exercisable, June 30, 2011	$ 26.85
Weighted Average Remaining Life, Options outstanding, June 30, 2011	6.0
Weighted Average Remaining Life, Options vested and expected to vest, June 30, 2011	5.9
Weighted Average Remaining Life, Options exercisable, June 30, 2011	4.6
Aggregate Intrinsic value, Options outstanding, June 30, 2011	$ 53,216
Aggregate Intrinsic Value, Options vested and expected to vest, June 30, 2011	51,706
Aggregate Intrinsic Value, Options exercisable, June 30, 2011	$ 29,937

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Segment Data (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
External sales:
Total external sales	$ 2,403,493	$ 1,884,067	$ 1,999,859
Operating income (loss):
Total operating income (loss)	321,673	93,228	(99,818)
Interest expense	22,760	25,203	27,244
Other expense (income), net	2,780	(8,577)	(14,566)
Income (loss) from continuing operations before income taxes	296,133	76,602	(112,496)
Depreciation and amortization
Total depreciation and amortization	93,471	96,429	96,381
Equity income:
Total equity income	229	107	(1)
Total assets:
Total assets	2,754,469	2,267,823	2,346,974
Capital expenditures:
Total capital expenditures	83,442	56,679	104,842
Investments in affiliated companies:
Total investments in affiliated companies	829	2,251	2,138
Industrial [Member]
External sales:
Total external sales	1,528,672	1,166,793	1,277,981
Operating income (loss):
Total operating income (loss)	209,663	31,210	(115,083)
Depreciation and amortization
Total depreciation and amortization	68,000	70,383	71,718
Equity income:
Total equity income	229	107	(1)
Total assets:
Total assets	1,531,409	1,310,635	1,386,324
Capital expenditures:
Total capital expenditures	48,518	31,609	78,841
Investments in affiliated companies:
Total investments in affiliated companies	829	748	635
Infrastructure [Member]
External sales:
Total external sales	874,821	717,274	721,878
Operating income (loss):
Total operating income (loss)	121,733	79,899	19,768
Depreciation and amortization
Total depreciation and amortization	25,471	26,046	24,663
Equity income:
Total equity income	0	0	0
Total assets:
Total assets	785,718	682,169	672,287
Capital expenditures:
Total capital expenditures	26,411	11,017	26,001
Investments in affiliated companies:
Total investments in affiliated companies	0	1,503	1,503
Corporate [Member]
Operating income (loss):
Total operating income (loss)	(9,723)	(17,881)	(4,503)
Total assets:
Total assets	437,342	275,019	288,363
Capital expenditures:
Total capital expenditures	$ 8,513	$ 14,053

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Stock-Based Compensation

12 Months Ended

Jun. 30, 2011

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 17 — STOCK-BASED COMPENSATION

Options

The assumptions used in our Black-Scholes valuation related to grants made during 2011, 2010 and 2009 were as follows:

	2011			2010			2009
Risk-free interest rate		1.4	%		2.3	%		3.0	%
Expected life (years) (2)		4.5			4.5			4.5
Expected volatility (3)		47.0	%		44.0	%		27.7	%
Expected dividend yield		2.0	%		1.8	%		1.3	%

(2)	Expected life is derived from historical experience.
(3)	Expected volatility is based on the implied historical volatility of our stock.

Changes in our stock options for 2011 were as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic value
	Options			Exercise Price		Life (years)		(in thousands)
Options outstanding, June 30, 2010		3,582,075		$	25.59
Granted		559,987			27.30
Exercised		(646,567	)		22.25
Lapsed and forfeited		(107,492	)		26.05
Options outstanding, June 30, 2011		3,388,003		$	26.50		6.0	$	53,216
Options vested and expected to vest, June 30, 2011		3,299,431		$	26.54		5.9	$	51,706
Options exercisable, June 30, 2011		1,948,442		$	26.85		4.6	$	29,937

During 2011, 2010 and 2009, compensation expense related to stock options was $5.2 million, $4.3 million and $4.0 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to options outstanding was $4.6 million and is expected to be recognized over a weighted average period of 2.2 years.

Weighted average fair value of options granted during 2011, 2010 and 2009 was $9.33, $7.32 and $7.15, respectively. Fair value of options vested during 2011, 2010 and 2009 was $4.4 million, $4.1 million and $3.5 million, respectively.

Tax benefits, relating to excess stock-based compensation deductions, are presented in the statement of cash flow as financing cash inflows. Tax benefits resulting from stock-based compensation deductions in excess of amounts reported for financial reporting purposes were $2.9 million, $0.5 million and $0.9 million in 2011, 2010 and 2009, respectively.

The amount of cash received from the exercise of capital stock options during 2011, 2010 and 2009 was $13.6 million, $7.2 million and $2.2 million, respectively. The related tax benefit was $3.2 million, $1.2 million, and $1.1 million for 2011, 2010 and 2009, respectively. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $9.9 million, $4.0 million, and $3.0 million, respectively.

Restricted Stock Awards

Changes in our restricted stock awards for 2011 were as follows:

				Weighted
				Average Fair
	Shares			Value
Unvested restricted stock awards, June 30, 2010		198,701		$	32.71
Vested		(105,847	)		32.56
Forfeited		(3,539	)		33.00
Unvested restricted stock awards, June 30, 2011		89,315		$	32.90

During 2011, 2010 and 2009, compensation expense related to restricted stock awards was $2.1 million, $2.7 million and $4.5 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to unvested restricted stock awards was

$0.9 million and is expected to be recognized over a weighted average period of 0.9 years.

Restricted Stock Units — Time Vesting and Performance Vesting

In fiscal year 2010, we began granting time vesting restricted stock units under the 2002 Plan in place of restricted stock awards that had been traditionally granted under the plan.

Performance vesting restricted stock units (performance units) were granted to certain individuals in fiscal 2011. These performance units are earned pro rata each year if certain performance goals are met over a 3-year period, and are also subject to a service condition that requires the individual to be employed by the Company at the payment date after the 3-year performance period.

Changes in our time vesting and performance vesting restricted stock units for 2011 were as follows:

				Performance
	Performance			Vesting					Time Vesting
	Vesting			Weighted		Time Vesting			Weighted
	Stock			Average Fair		Stock			Average Fair
	Units			Value		Units			Value
Unvested performance vesting and time vesting restricted stock units, June 30, 2010		—		$	—		546,713		$	24.29
Granted		134,807			26.89		526,153			26.95
Vested		—			—		(84,784	)		23.53
Forfeited		(18,439	)		26.89		(82,000	)		25.47
Unvested performance vesting and time vesting restricted stock units, June 30, 2011		116,368		$	26.89		906,082		$	25.81

During 2011 and 2010, compensation expense related to time vesting and performance vesting restricted stock units was $10.3 million and $2.7 million, respectively. As of June 30, 2011, the total unrecognized compensation cost related to unvested time vesting and performance vesting restricted stock units was $13.1 million and is expected to be recognized over a weighted average period of 2.4 years.

Restricted Stock Units – STEP

On November 26, 2007, the Company adopted a one-time, long-term equity program, the Kennametal Inc. 2008 Strategic Transformational Equity Program, under the 2002 Plan (STEP). The STEP was designed to compensate participating executives for achievement of certain performance conditions during the period which began on October 1, 2007 and ends on September 30, 2011. Each participant was awarded a maximum number of restricted stock units, each representing a contingent right to receive one share of capital stock of the Company to the extent the unit is earned during the performance period and becomes payable under the STEP. The performance conditions are based on the Company’s total shareholder return (TSR), which governs 35 percent of the awarded restricted stock units, and cumulative adjusted earnings per share (EPS), which governs 65 percent of the awarded restricted stock units. As of June 30, 2011, participating executives had been granted awards equal to that number of restricted stock units having a value of $26.0 million. A further amount of $11.3 million remains available under the STEP for additional awards that could be made to other executives; however, the Company has decided that it will not make any further awards under the STEP. No new grants under the STEP were made in 2011. There are no voting rights or dividends associated with restricted stock units under the STEP.

Under the STEP, there are two interim measurement dates, September 30, 2009 and 2010, and a final measurement date, September 30, 2011, at which performance is assessed. Participants may earn up to a cumulative 35 percent of the maximum restricted stock units awarded if certain threshold levels of performance are achieved through the two interim measurement dates. The threshold level of performance for September 30, 2009 and September 30, 2010 were not achieved. Generally, the payment of any restricted stock units under the STEP is also conditioned upon the participants being employed by the Company on the date of distribution and the satisfaction of all other provisions of the STEP. As of June 30, 2011, no restricted stock units have been earned or paid under the STEP.

Changes in the EPS performance-based portion of STEP restricted stock units for 2011 were as follows:

				Weighted
	Stock			Average Fair
	Units			Value
Unvested EPS performance-based restricted stock units, June 30, 2010		502,371		$	35.54
Forfeited		(70,582	)		37.45
Unvested EPS performance-based restricted stock units, June 30, 2011		431,789		$	35.23

As of June 30, 2011, we assumed that none of the EPS performance-based restricted stock units will vest.

Changes in the TSR performance-based STEP restricted stock units for 2011 were as follows:

				Weighted
	Stock			Average Fair
	Units			Value
Unvested TSR performance-based restricted stock units, June 30, 2010		270,501		$	8.35
Forfeited		(38,004	)		9.20
Unvested TSR performance-based restricted stock units, June 30, 2011		232,497		$	8.21

During 2011 and 2010, compensation expense related to STEP restricted stock units was $0.4 million and $0.5 million, respectively. Based on a change in the probability of achieving the performance criteria related to the vesting of the EPS performance-based portion of these restricted stock units, in 2009, we reversed previously recognized compensation expense related to these units. The net credit recognized as compensation expense related to restricted stock units was $0.6 million for 2009. As of June 30, 2011, the total unrecognized compensation cost related to unvested STEP restricted stock units was $0.1 million and is expected to be recognized over a weighted average period of 0.3 years.

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Restructuring and Asset Impairment Charges (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Other current liabilities amount attributable to each segment
Beginning Balance	$ 27,254	$ 26,962
Expense	13,671	44,293
Asset Write-down	(2,914)	(855)
Cash Expenditures	(28,018)	(41,749)
Translation	2,718	(1,397)
Ending Balance	12,711	27,254
Industrial [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	19,238	19,031
Expense	8,712	31,265
Asset Write-down	(1,857)	(604)
Cash Expenditures	(17,885)	(29,469)
Translation	1,732	(985)
Ending Balance	9,940	19,238
Industrial [Member] | Facilities [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	508	477
Expense	2,318	790
Asset Write-down	(1,857)	(604)
Cash Expenditures	(444)	(142)
Translation		(13)
Ending Balance	525	508
Industrial [Member] | Severance [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	18,327	18,378
Expense	4,363	29,082
Cash Expenditures	(16,510)	(28,086)
Translation	1,631	(1,047)
Ending Balance	7,811	18,327
Industrial [Member] | Other [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	403	176
Expense	2,031	1,393
Cash Expenditures	(931)	(1,241)
Translation	101	75
Ending Balance	1,604	403
Infrastructure [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	8,016	7,931
Expense	4,959	13,028
Asset Write-down	(1,057)	(251)
Cash Expenditures	(10,133)	(12,280)
Translation	986	(412)
Ending Balance	2,771	8,016
Infrastructure [Member] | Facilities [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	211	199
Expense	1,319	329
Asset Write-down	(1,057)	(251)
Cash Expenditures	(204)	(59)
Translation		(7)
Ending Balance	269	211
Infrastructure [Member] | Severance [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	7,637	7,659
Expense	2,484	12,119
Cash Expenditures	(9,399)	(11,704)
Translation	928	(437)
Ending Balance	1,650	7,637
Infrastructure [Member] | Other [Member]
Other current liabilities amount attributable to each segment
Beginning Balance	168	73
Expense	1,156	580
Cash Expenditures	(530)	(517)
Translation	58	32
Ending Balance	$ 852	$ 168

XML



Document and Entity Information (USD $)	12 Months Ended
	Jun. 30, 2011	Jul. 31, 2011	Dec. 31, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	Kennametal Inc.
Entity Central Index Key	0000055242
Document Type	10-K
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 2,977,300,000
Entity Common Stock, Shares Outstanding		81,256,614

XML



Supplemental Cash Flow Information (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Cash paid (received) during the period for:
Interest	$ 26,624	$ 28,626	$ 26,328
Income taxes	95,382	3,788	18,020
Supplemental disclosure of non-cash information:
Contribution of capital stock to employees' defined contribution benefit plans	948	6,352	1,738
Change in fair value of derivative contracts			730
Changes in accounts payable related to purchases of property, plant and equipment			$ (12,800)

XML



Segment Data

12 Months Ended

Jun. 30, 2011

Segment Data [Abstract]

SEGMENT DATA

NOTE 20 — SEGMENT DATA

We operate in two reportable operating segments consisting of Industrial and Infrastructure. We do not allocate certain corporate expenses related to executive retirement plans, the Company’s Board of Directors and strategic initiatives, as well as certain other costs and report them in Corporate. Segment determination is based upon internal organizational structure, the manner in which we organize segments for making operating decisions and assessing performance, the availability of separate financial results and materiality considerations.

Sales to a single customer did not aggregate 3.5 percent or more of total sales in 2011, 2010 or 2009. Export sales from U.S. operations to unaffiliated customers were $90.6 million, $84.1 million, and $116.6 million in 2011, 2010 and 2009, respectively.

INDUSTRIAL The Industrial segment serves customers that operate in industrial end markets such as aerospace, defense, transportation and general engineering. The customers in these end markets manufacture engines, airframes, automobiles, trucks, ships and various industrial goods. The technology needs and level of customization vary by customer and industry served. We deliver value to our Industrial segment customers through our application expertise and diverse product offering.

INFRASTRUCTURE The Infrastructure segment serves customers that operate in the earthworks and energy end markets. These customers support primary industries such as oil and gas, power generation, underground mining, surface and hard rock mining, highway construction and road maintenance. Generally, our Infrastructure segment customers are served through a customer intimacy model that allows us to offer full system solutions by gaining an in-depth understanding of our customers’ engineering needs. Our product offering promotes value by bringing enhanced performance and productivity to our customers’ processes and systems.

We restated the segment financial information for the years ended June 30, 2010 and 2009, respectively, to reflect the change in reportable operating segments.

Segment data is summarized as follows:

(in thousands)	2011			2010			2009
External sales:
Industrial	$	1,528,672		$	1,166,793		$	1,277,981
Infrastructure		874,821			717,274			721,878
Total external sales	$	2,403,493		$	1,884,067		$	1,999,859
Operating income (loss):
Industrial	$	209,663		$	31,210		$	(115,083	)
Infrastructure		121,733			79,899			19,768
Corporate		(9,723	)		(17,881	)		(4,503	)
Total operating income	$	321,673		$	93,228		$	(99,818	)
Interest expense	$	22,760		$	25,203		$	27,244
Other expense (income), net		2,780			(8,577	)		(14,566	)
Income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Depreciation and amortization
Industrial	$	68,000		$	70,383		$	71,718
Infrastructure		25,471			26,046			24,663
Total depreciation and amortization	$	93,471		$	96,429		$	96,381
Equity income:
Industrial	$	229		$	107		$	(1	)
Infrastructure		-			-			-
Total equity income	$	229		$	107		$	(1	)
Total assets:
Industrial	$	1,531,409		$	1,310,635		$	1,386,324
Infrastructure		785,718			682,169			672,287
Corporate		437,342			275,019			288,363
Total assets	$	2,754,469		$	2,267,823		$	2,346,974
Capital expenditures:
Industrial	$	48,518		$	31,609		$	78,841
Infrastructure		26,411			11,017			26,001
Corporate		8,513			14,053			-
Total capital expenditures	$	83,442		$	56,679		$	104,842
Investments in affiliated companies:
Industrial	$	829		$	748		$	635
Infrastructure		-			1,503			1,503
Total investments in affiliated companies	$	829		$	2,251		$	2,138

Geographic information for sales, based on country of origin, and assets is as follows:

(in thousands)	2011		2010		2009
External sales:
United States	$	1,041,427	$	839,168	$	907,967
Germany		398,532		313,929		360,560
Asia		441,397		311,616		266,676
United Kingdom		63,466		52,145		59,749
Canada		59,743		44,538		47,348
Other		398,928		322,671		357,559
Total external sales	$	2,403,493	$	1,884,067	$	1,999,859
Total assets:
United States	$	1,165,705	$	1,091,510	$	1,153,109
Germany		472,665		333,917		371,394
Asia		440,535		330,282		302,355
United Kingdom		67,549		35,964		41,233
Canada		40,421		29,025		28,055
Other		567,594		447,125		450,828
Total assets:	$	2,754,469	$	2,267,823	$	2,346,974

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Summary of Significant Accounting Policies (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Summary of Significant Accounting Policies (Additional Textuals) [Abstract]
Impairment chanrge for the indefinite lived trade mark	$ 10,800,000
Goodwill	511,328,000	489,443,000	502,983,000
Summary Of Significant Accounting Policies (Textuals) [Abstract]
Conditions for investments in entities accounted for an equity basis	Investments in entities of less than 50 percent of the voting stock over which we have significant influence are accounted for on an equity basis.
Conditions for investments in entities accounted for on the cost basis	Investments in entities of less than 50 percent of the voting stock in which we do not have significant influence are accounted for on the cost basis.
Excess and obsolete inventory reserve	55,300,000	68,300,000
Goodwill or intangible asset impairments	0	0
Intangible assets decreased due to foreign currency translation adjustments	8,500,000	6,000,000
Amortization expense for intangible assets	11,600,000	13,100,000	13,100,000
Estimated amortization expense for year 2012	10,800,000
Estimated amortization expense for year 2013	10,100,000
Estimated amortization expense for year 2014	9,800,000
Estimated amortization expense for year 2015	9,500,000
Estimated amortization expense for year 2016	9,100,000
Increase in weighted average shares due to increase due to dilutive effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units	1,100,000	700,000
Unexercised capital stock options, restricted stock units and restricted stock awards excluded from computation of diluted EPS	400,000	2,300,000	2,600,000
The conditions of shipment are considered to have occurred unless written notice of objection is received by Kennametal	within 10 calander days of the date specified on the invoice.
Termination of warranty	30 days after delivery of the product to the customer and does not apply to products that have been subjected to misuse, abuse, neglect or improper storage, handling or maintenance.
Exercisable period for capital stock options	10 years from the date of grant
Fair value of shares delivered	800,000	100,000	700,000
Research and development cost	33,300,000	28,000,000	27,600,000
Gains from foreign currency transactions included in other income	(6,600,000)	3,500,000	6,800,000
Computer hardware and software [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of Property, plant and equipment, Minimum	3
Estimated useful lives of Property, plant and equipment, Maximum	5
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of Property, plant and equipment, Minimum	15
Estimated useful lives of Property, plant and equipment, Maximum	40
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of Property, plant and equipment, Minimum	4
Estimated useful lives of Property, plant and equipment, Maximum	15
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of Property, plant and equipment, Minimum	5
Estimated useful lives of Property, plant and equipment, Maximum	10
Industrial [Member]
Summary of Significant Accounting Policies (Additional Textuals) [Abstract]
Goodwill, Acquired During Period		700,000
Goodwill	261,103,000	243,132,000	255,784,000
Surface finishing machines and services business [Member]
Summary of Significant Accounting Policies (Additional Textuals) [Abstract]
Impairment losses			(37,300,000)
Engineered products business [Member]
Summary of Significant Accounting Policies (Additional Textuals) [Abstract]
Impairment losses			$ (62,900,000)
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate number of shares available for issuance under stock and incentive plan	3,500,000
Summary Of Significant Accounting Policies (Textuals) [Abstract]
Aggregate number of shares available for issuance under stock and incentive plan	3,500,000

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Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Comprehensive Loss Income (Details) [Abstract]
Net income (loss)	$ 232,277	$ 48,202	$ (118,631)
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $(0.6) million and $(1.9) million, respectively	642	(936)	(3,006)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively	(679)	(1,482)	5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of incometax expense (benefit) of $15.1 million, $(14.1) million and $0.6 million, respectively	28,087	(17,397)	(14,283)
Reclassification of net pension and other postretirement benefit losses, net of income tax benefit of $4.4 million, $0.9 million and $0.5 million, respectively	7,131	2,975	1,496
Foreign currency translation adjustments, net of income tax expense (benefit) of $75.0 million, $(41.5) million and $(73.5) million, respectively	122,358	(68,837)	(122,044)
Total comprehensive (loss) income, net of tax	389,816	(37,475)	(251,178)
Comprehensive income (loss) attributable to noncontrolling interests	4,779	606	(1,046)
Comprehensive income (loss) attributable to Kennametal Shareowners	$ 385,037	$ (38,081)	$ (250,132)

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Fair Value Measurements

12 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 6 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy consists of three levels to prioritize the inputs used in valuations, as defined below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Inputs that are unobservable.

As of June 30, 2011 the fair values of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis are categorized as follows:

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	896	$	-	$	896
Total assets at fair value	$	-	$	896	$	-	$	896
Liabilities:
Derivatives (1)	$	-	$	3,330	$	-	$	3,330
Total liabilities at fair value	$	-	$	3,330	$	-	$	3,330

As of June 30, 2010 the fair values of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis are categorized as follows:

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	43	$	-	$	43
Total assets at fair value	$	-	$	43	$	-	$	43
Liabilities:
Derivatives (1)	$	-	$	3,453	$	-	$	3,453
Total liabilities at fair value	$	-	$	3,453	$	-	$	3,453

⁽¹⁾ Foreign currency derivative and interest rate swap contracts are valued based on observable market spot and forward rates and are classified within Level 2 of the fair value hierarchy.

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Selected Quarterly Financial Data

12 Months Ended

Jun. 30, 2011

Selected Quarterly Financial Information [Abstract]

SELECTED QUARTERLY FINANCIAL DATA (unaudited)

NOTE 21 – SELECTED QUARTERLY FINANCIAL DATA (unaudited)

For the quarter ended (in thousands, except per share data)	September 30			December 31		March 31		June 30
2011
Sales	$	529,158		$	565,768	$	614,830	$	693,737
Gross profit		188,740			200,025		229,981		265,645
Income from continuing operations attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Net income attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Basic earnings per share attributable to Kennametal (5) Continuing operations		0.43			0.53		0.79		1.06
Net income		0.43			0.53		0.79		1.06
Diluted earnings per share attributable to Kennametal (5) Continuing operations		0.42			0.52		0.77		1.04
Net income		0.42			0.52		0.77		1.04
2010
Sales	$	409,395		$	442,865	$	493,165	$	538,642
Gross profit		117,801			140,088		170,324		199,515
(Loss) income from continuing operations attributable to Kennametal (4)		(8,450	)		6,023		9,685		40,584
Net (loss) income attributable to Kennametal (4)		(9,817	)		5,967		9,685		40,584
Basic (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.50
Net (loss) income		(0.12	)		0.07		0.12		0.50
Diluted (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.49
Net (loss) income		(0.12	)		0.07		0.12		0.49

(4)

Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2011 and December 31 and September 30, 2010, includes restructuring charges of $4.9 million, $1.0 million, $3.4 million and $3.3 million, respectively. Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2010, includes restructuring charges of $12.0 million and $20.7 million, respectively. Income (loss) from continuing operations and net income (loss) attributable to Kennametal for the quarter ended December 31 and September 30, 2009, includes restructuring charges of $3.3 million and $7.8 million, respectively.

(5)

Earnings per share amounts attributable to Kennametal for each quarter are computed using the weighted average number of shares outstanding during the quarter. Earnings per share amounts attributable to Kennametal for the full year are computed using the weighted average number of shares outstanding during the year. Thus, the sum of the four quarters’ earnings per share attributable to Kennametal does not always equal the full-year earnings per share attributable to Kennametal.

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Segment Data (Tables)

12 Months Ended

Jun. 30, 2011

Segment Data (Tables) [Abstract]

Segment Data

(in thousands)	2011			2010			2009
External sales:
Industrial	$	1,528,672		$	1,166,793		$	1,277,981
Infrastructure		874,821			717,274			721,878
Total external sales	$	2,403,493		$	1,884,067		$	1,999,859
Operating income (loss):
Industrial	$	209,663		$	31,210		$	(115,083	)
Infrastructure		121,733			79,899			19,768
Corporate		(9,723	)		(17,881	)		(4,503	)
Total operating income	$	321,673		$	93,228		$	(99,818	)
Interest expense	$	22,760		$	25,203		$	27,244
Other expense (income), net		2,780			(8,577	)		(14,566	)
Income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Depreciation and amortization
Industrial	$	68,000		$	70,383		$	71,718
Infrastructure		25,471			26,046			24,663
Total depreciation and amortization	$	93,471		$	96,429		$	96,381
Equity income:
Industrial	$	229		$	107		$	(1	)
Infrastructure		-			-			-
Total equity income	$	229		$	107		$	(1	)
Total assets:
Industrial	$	1,531,409		$	1,310,635		$	1,386,324
Infrastructure		785,718			682,169			672,287
Corporate		437,342			275,019			288,363
Total assets	$	2,754,469		$	2,267,823		$	2,346,974
Capital expenditures:
Industrial	$	48,518		$	31,609		$	78,841
Infrastructure		26,411			11,017			26,001
Corporate		8,513			14,053			-
Total capital expenditures	$	83,442		$	56,679		$	104,842
Investments in affiliated companies:
Industrial	$	829		$	748		$	635
Infrastructure		-			1,503			1,503
Total investments in affiliated companies	$	829		$	2,251		$	2,138

Geographic information for sales

(in thousands)	2011		2010		2009
External sales:
United States	$	1,041,427	$	839,168	$	907,967
Germany		398,532		313,929		360,560
Asia		441,397		311,616		266,676
United Kingdom		63,466		52,145		59,749
Canada		59,743		44,538		47,348
Other		398,928		322,671		357,559
Total external sales	$	2,403,493	$	1,884,067	$	1,999,859
Total assets:
United States	$	1,165,705	$	1,091,510	$	1,153,109
Germany		472,665		333,917		371,394
Asia		440,535		330,282		302,355
United Kingdom		67,549		35,964		41,233
Canada		40,421		29,025		28,055
Other		567,594		447,125		450,828
Total assets:	$	2,754,469	$	2,267,823	$	2,346,974

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Income Taxes (Tables)

12 Months Ended

Jun. 30, 2011

Income Taxes (Tables) [Abstract]

Income from continuing operations before income taxes

(in thousands)	2011			2010			2009
Income (loss) from continuing operations before income taxes:
United States	$	69,042		$	3,925		$	(135,133	)
International		227,091			72,677			22,637
Total income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Current income taxes:
Federal	$	26,234		$	1,915		$	(25,071	)
State		1,063			1,376			2,019
International		44,440			23,456			21,169
Total current income taxes		71,737			26,747			(1,883	)
Deferred income taxes		(7,881	)		230			(9,322	)
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)
Effective tax rate		21.6	%		35.2	%		10.0	%

Reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes

(in thousands)	2011			2010			2009
Income taxes at U.S. statutory rate	$	103,647		$	26,811		$	(39,374	)
State income taxes, net of federal tax benefits		1,956			2,290			(131	)
U.S. income taxes provided on international income		21,556			1,107			(47	)
Combined tax effects of international income		(35,423	)		(4,460	)		4,029
Change in valuation allowance and other uncertain tax positions		(20,215	)		2,024			(4,638	)
Impact of goodwill impairment charges		-			-			29,296
Impact of domestic production activities deduction		(6,413	)		(456	)		672
Research and development credit		(2,685	)		(460	)		(1,501	)
Other		1,433			121			489
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)

Components of net deferred tax assets and liabilities

(in thousands)	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	65,768		$	61,605
Inventory valuation and reserves		29,646			29,302
Pension benefits		713			15,913
Other postretirement benefits		8,312			10,499
Accrued employee benefits		30,975			22,551
Other accrued liabilities		7,939			6,755
Hedging activities		13,528			9,785
Tax credits and other carryforwards		5,431			5,541
Other		2,558			7,953
Total		164,870			169,904
Valuation allowance		(25,662	)		(47,987	)
Total deferred tax assets	$	139,208		$	121,917
Deferred tax liabilities:
Tax depreciation in excess of book	$	98,957		$	79,712
Intangible assets		35,965			33,271
Total deferred tax liabilities	$	134,922		$	112,983
Total net deferred tax assets (liabilities)	$	4,286		$	8,934

Reconciliation of unrecognized tax benefits excluding interest

(in thousands)	2011			2010
Balance at beginning of year	$	16,391		$	15,817
Increases for tax positions of prior years		-			1,303
Decreases for tax positions of prior years		(85	)		(184	)
Increases for tax positions related to the current year		285			2,390
Decreases related to settlement with taxing authority		-			(1,190	)
Decreases related to lapse of statute of limitations		(794	)		-
Foreign currency translation		2,492			(1,745	)
Balance at end of year	$	18,289		$	16,391

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Schedule II Valuation and Qualifying Accounts and Reserves (Details) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Valuation and Qualifying Accounts and Reserves (Textuals) [Abstract]
Reserve acquired through business combination included in Allowance for doubtful accounts	$ 200,000
Allowance for doubtful accounts [Member]
Valuation and Qualifying accounts and reserves
Balance at Beginning of Year	24,789,000	25,228,000	18,473,000
Charged (recoveries) to Costs and Expenses	518,000	4,163,000	9,597,000
Recoveries	966,000	1,181,000	856,000
Other Adjustments	1,993,000	(1,055,000)	1,566,000
Deductions from Reserves	7,308,000	4,728,000	5,264,000
Balance at End of Year	20,958,000	24,789,000	25,228,000
Reserve for obsolete inventory [Member]
Valuation and Qualifying accounts and reserves
Balance at Beginning of Year	68,270,000	61,123,000	61,470,000
Charged (recoveries) to Costs and Expenses	4,975,000	19,580,000	22,730,000
Other Adjustments	4,525,000	2,854,000	(14,164,000)
Deductions from Reserves	22,483,000	15,287,000	8,913,000
Balance at End of Year	55,283,000	68,270,000	61,123,000
Deferred tax asset valuation allowance [Member]
Valuation and Qualifying accounts and reserves
Balance at Beginning of Year	47,987,000	48,206,000	46,650,000
Charged (recoveries) to Costs and Expenses	(27,313,000)	5,035,000	2,490,000
Charged to Other Comprehensive Income		(1,715,000)	4,572,000
Other Adjustments	5,491,000	(3,539,000)	(5,506,000)
Deductions from Reserves	503,000	0	0
Balance at End of Year	$ 25,662,000	$ 47,987,000	$ 48,206,000

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Commitments and Contingencies

12 Months Ended

Jun. 30, 2011

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 19 — COMMITMENTS AND CONTINGENCIES

Legal Matters Various lawsuits arising during the normal course of business are pending against us. In our opinion, the ultimate liability, if any, resulting from these matters will have no significant effect on our consolidated financial positions or results of operations.

Lease Commitments We lease a wide variety of facilities and equipment under operating leases, primarily for warehouses, production and office facilities and equipment. Lease expense under these rentals amounted to $27.1 million, $28.2 million and $30.9 million in 2011, 2010 and 2009, respectively. Future minimum lease payments for non-cancelable operating leases are $17.0 million, $11.0 million, $6.5 million, $4.1 million and $2.6 million for the years 2012 through 2016 and $23.7 million thereafter.

Purchase Commitments We have purchase commitments for materials, supplies and machinery and equipment as part of the ordinary conduct of business. A few of these commitments extend beyond one year and are based on minimum purchase requirements. We believe these commitments are not at prices in excess of current market.

Other Contractual Obligations We do not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our liquidity.

Related Party Transactions Sales to affiliated companies were immaterial in 2011, 2010 and 2009. We do not have any other related party transactions that affect our operations, results of operations, cash flow or financial condition.

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Notes Payable and Lines of Credit

12 Months Ended

Jun. 30, 2011

Notes Payable and Lines of Credit [Abstract]

NOTES PAYABLE AND LINES OF CREDIT

NOTE 11 - NOTES PAYABLE AND LINES OF CREDIT

Notes payable to banks of $3.7 million and $19.5 million at June 30, 2011 and 2010, respectively, represents short-term borrowings under credit lines with commercial banks. These credit lines, translated into U.S. dollars at June 30, 2011 exchange rates, totaled $200.6 million at June 30, 2011, of which $196.9 million was unused. The weighted average interest rate for notes payable and lines of credit was 4.4 percent and 3.1 percent at June 30, 2011 and 2010, respectively.

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Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of our significant accounting policies is presented below to assist in evaluating our consolidated financial statements.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All significant intercompany balances and transactions are eliminated. Investments in entities of less than 50 percent of the voting stock over which we have significant influence are accounted for on an equity basis. The factors used to determine significant influence include, but are not limited to, our management involvement in the investee, such as hiring and setting compensation for management of the investee, the ability to make operating and capital decisions of the investee, representation on the investee’s board of directors and purchase and supply agreements with the investee. Investments in entities of less than 50 percent of the voting stock in which we do not have significant influence are accounted for on the cost basis.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we make judgments and estimates about the amounts reflected in our financial statements. As part of our financial reporting process, our management collaborates to determine the necessary information on which to base our judgments and develop estimates used to prepare the financial statements. We use historical experience and available information to make these judgments and estimates. However, different amounts could be reported using different assumptions and in light of different facts and circumstances. Therefore, actual amounts could differ from the estimates reflected in our financial statements.

CASH AND CASH EQUIVALENTS Cash investments having original maturities of three months or less are considered cash equivalents. Cash equivalents principally consist of investments in money market funds and bank deposits at June 30, 2011.

ACCOUNTS RECEIVABLE We market our products to a diverse customer base throughout the world. Trade credit is extended based upon periodically updated evaluations of each customer’s ability to satisfy its obligations. We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Accounts receivable reserves are determined based upon an aging of accounts and a review of specific accounts.

INVENTORIES Inventories are stated at the lower of cost or market. We use the last-in, first-out (LIFO) method for determining the cost of a significant portion of our United States (U.S.) inventories. The cost of the remainder of our inventories is determined under the first-in, first-out or average cost methods. When market conditions indicate an excess of carrying costs over market value, a lower-of-cost-or-market provision is recorded. Excess and obsolete inventory reserves are established based upon our evaluation of the quantity of inventory on hand relative to demand. The excess and obsolete inventory reserve at June 30, 2011 and 2010 was $55.3 million and $68.3 million, respectively.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Major improvements are capitalized, while maintenance and repairs are expensed as incurred. Retirements and disposals are removed from cost and accumulated depreciation accounts, with the gain or loss reflected in operating income. Interest related to the construction of major facilities is capitalized as part of the construction costs and is amortized over the facilities estimated useful life.

Depreciation for financial reporting purposes is computed using the straight-line method over the following estimated useful lives: building and improvements over 15-40 years; machinery and equipment over 4-15 years; furniture and fixtures over 5-10 years and computer hardware and software over 3-5 years.

Leased property and equipment under capital leases are amortized using the straight-line method over the terms of the related leases.

LONG-LIVED ASSETS We evaluate the recoverability of property, plant and equipment and intangible assets that are amortized, whenever events or changes in circumstances indicate the carrying amount of any such assets may not be fully recoverable. Changes in circumstances include technological advances, changes in our business model, capital structure, economic conditions or operating performance. Our evaluation is based upon, among other things, our assumptions about the estimated future undiscounted cash flows these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value of the asset or asset group, we will recognize an impairment loss to the extent that carrying value exceeds fair value. We apply our best judgment when performing these evaluations to determine if a triggering event has occurred, the undiscounted cash flows used to assess recoverability and the fair value of the asset.

GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of cost over the fair value of the net assets of acquired companies. Goodwill and intangible assets with indefinite lives are tested at least annually for impairment. We perform our annual impairment tests during the June quarter in connection with our annual planning process unless there are impairment indicators that warrant a test prior to that.

The carrying amount of goodwill attributable to each segment at June 30 is as follows:

(in thousands)	Industrial			Infrastructure			Total
Goodwill	$	406,626		$	247,199		$	653,825
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2009	$	255,784		$	247,199		$	502,983
Acquisitions / Divestitures		536			-			536
Translation		(13,188	)		(888	)		(14,076	)
Change in goodwill		(12,652	)		(888	)		(13,540	)
Goodwill	$	393,974		$	246,311		$	640,285
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2010	$	243,132		$	246,311		$	489,443
Adjustments	$	252		$	-		$	252
Translation		17,719			3,914			21,633
Change in goodwill		17,971			3,914			21,885
Goodwill		411,945			250,225			662,170
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2011	$	261,103		$	250,225		$	511,328

We recorded no goodwill or intangible asset impairments in 2011 and 2010. We also recorded goodwill impairment charges of $37.3 million related to our surface finishing machines and services business and $62.9 million related to our engineered products business in 2009.

During 2010, we acquired the remaining noncontrolling interest of a consolidated entity which resulted in additional Industrial goodwill of $0.7 million.

The components of our intangible assets were as follows as of June 30:

	Estimated		2011					2010
	Useful Life		Gross Carrying		Accumulated			Gross Carrying		Accumulated
(in thousands)	(in years)		Amount		Amortization			Amount		Amortization
Contract-based		4 to 15	$	6,349	$	(5,380	)	$	6,357	$	(5,218	)
Technology-based and other		4 to 15		39,743		(25,442	)		37,136		(20,422	)
Customer-related		10 to 20		113,977		(38,275	)		108,470		(29,255	)
Unpatented technology		30		19,540		(4,740	)		19,216		(4,572	)
Trademarks		5 to 20		10,902		(4,875	)		10,647		(3,876	)
Trademarks	Indefinite			40,480		-			36,823		-
Total			$	230,991	$	(78,712	)	$	218,649	$	(63,343	)

During 2011, we recorded foreign currency translation adjustments which increased intangible assets by $8.5 million. During 2010, we recorded foreign currency translation adjustments which decreased intangible assets by $6.0 million. We also recorded a $10.8 million impairment charge in 2009 for the indefinite-lived trademark for our surface finishing machines and services business.

Amortization expense for intangible assets was $11.6 million, $13.1 million and $13.1 million for 2011, 2010 and 2009, respectively. Estimated amortization expense for 2012 through 2016 is $10.8 million, $10.1 million, $9.8 million, $9.5 million, and $9.1 million, respectively.

PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We sponsor these types of benefit plans for certain employees and retirees. Accounting for the cost of these plans requires the estimation of the cost of the benefits to be provided well into the future and attributing that cost over the expected work life of employees participating in these plans. This estimation requires our judgment about the discount rate used to determine these obligations, expected return on plan assets, rate of future compensation increases, rate of future health care costs, withdrawal and mortality rates and participant retirement age. Differences between our estimates and actual results may significantly affect the cost of our obligations under these plans.

In the valuation of our pension and other postretirement and postemployment benefit liabilities, management utilizes various assumptions. We determine our discount rate based on investment grade bond yield curves with a duration that approximates the benefit payment timing of each plan. This rate can fluctuate based on changes in investment grade bond yields.

The long-term rate of return on plan assets is estimated based on an evaluation of historical returns for each asset category held by the plans, coupled with the current and short-term mix of the investment portfolio. The historical returns are adjusted for expected future market and economic changes. This return will fluctuate based on actual market returns and other economic factors.

The rate of future health care costs is based on historical claims and enrollment information projected over the next year and adjusted for administrative charges. This rate is expected to decrease until 2029.

Future compensation rates, withdrawal rates and participant retirement age are determined based on historical information. These assumptions are not expected to significantly change. Mortality rates are determined based on a review of published mortality tables.

EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding during the period, while diluted earnings per share is calculated to reflect the potential dilution that occurs related to the issuance of capital stock under stock option grants, restricted stock awards and restricted stock units. The difference between basic and diluted earnings per share relates solely to the effect of capital stock options, restricted stock awards and restricted stock units.

For purposes of determining the number of diluted shares outstanding at June 30, 2011 and 2010, weighted average shares outstanding for basic earnings per share calculations were increased due solely to the dilutive effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units by 1.1 million and 0.7 million shares, respectively. For June 30, 2009, the effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units was anti-dilutive and therefore has been excluded from diluted shares outstanding as well as from the diluted earnings per share calculation. Unexercised capital stock options, restricted stock units and restricted stock awards of 0.4 million, 2.3 million and 2.6 million shares at June 30, 2011, 2010, and 2009, respectively, were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price, and therefore the inclusion would have been anti-dilutive.

REVENUE RECOGNITION We recognize revenue upon shipment of our products and assembled machines. Our general conditions of sale explicitly state that the delivery of our products and assembled machines is F.O.B. shipping point and that title and all risks of loss and damage pass to the buyer upon delivery of the sold products or assembled machines to the common carrier.

Our general conditions of sale explicitly state that acceptance of the conditions of shipment are considered to have occurred unless written notice of objection is received by Kennametal within 10 calendar days of the date specified on the invoice. We do not ship products or assembled machines unless we have documentation from our customers authorizing shipment. Our products are consumed by our customers in the manufacture of their products. Historically, we have experienced very low levels of returned products and assembled machines and do not consider the effect of returned products and assembled machines to be material. We have recorded an estimated returned goods allowance to provide for any potential returns.

We warrant that products and services sold are free from defects in material and workmanship under normal use and service when correctly installed, used and maintained. This warranty terminates 30 days after delivery of the product to the customer and does not apply to products that have been subjected to misuse, abuse, neglect or improper storage, handling or maintenance. Products may be returned to Kennametal, only after inspection and approval by Kennametal and upon receipt by the customer of shipping instructions from Kennametal. We have included an estimated allowance for warranty returns in our returned goods allowance.

We recognize revenue related to the sale of specialized assembled machines upon customer acceptance and installation, as installation is deemed essential to the functionality of a specialized assembled machine. Sales of specialized assembled machines were immaterial for 2011, 2010 and 2009.

STOCK-BASED COMPENSATION We recognize stock-based compensation expense for all stock options, restricted stock awards and restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period). We utilize the Black-Scholes valuation method to establish the fair value of all stock option awards.

Capital stock options are granted to eligible employees at fair market value at the date of grant. Capital stock options are exercisable under specified conditions for up to 10 years from the date of grant. On October 26, 2010, the Company’s shareowners approved the Kennametal Inc., Stock and Incentive Plan of 2010 (2010 Plan). The 2010 Plan authorizes the issuance of up to 3,500,000 shares of the Company’s capital stock plus any shares remaining unissued under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended (2002 Plan). Under the provisions of these Plans, participants may deliver our stock, owned by the holder for at least six months, in payment of the option price and receive credit for the fair market value of the shares on the date of delivery. The fair value of shares delivered during 2011, 2010 and 2009 was $0.8 million, $0.1 million, and $0.7 million, respectively. In addition to stock option grants, these Plans permit the award of stock appreciation rights, performance shares, performance units, restricted stock and restricted stock units to directors, officers and key employees.

RESEARCH AND DEVELOPMENT COSTS Research and development costs of $33.3 million, $28.0 million and $27.6 million in 2011, 2010 and 2009, respectively, were expensed as incurred. These costs are included in operating expense in the consolidated statements of income.

SHIPPING AND HANDLING FEES AND COSTS All fees billed to customers for shipping and handling are classified as a component of sales. All costs associated with shipping and handling are classified as a component of cost of goods sold.

INCOME TAXES Deferred income taxes are recognized based on the future income tax effects (using enacted tax laws and rates) of differences in the carrying amounts of assets and liabilities for financial reporting and tax purposes. A valuation allowance is recognized if it is “more likely than not” that some or all of a deferred tax asset will not be realized.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES As part of our financial risk management program, we use certain derivative financial instruments. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We use derivative financial instruments to provide predictability to the effects of changes in foreign exchange rates on our consolidated results, achieve our targeted mix of fixed and floating interest rates on outstanding debt and forecasted transactions. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow, allowing us to focus more of our attention on business operations. With respect to interest rate management, these derivative instruments allow us to achieve our targeted fixed-to-floating interest rate mix, as a separate decision from funding arrangements, in the bank and public debt markets.

We account for derivative instruments as a hedge of the related asset, liability, firm commitment or anticipated transaction, when the derivative is specifically designated as a hedge of such items. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense (income), net.

Certain currency forward contracts hedging significant cross-border intercompany loans are considered other derivatives and, therefore, do not qualify for hedge accounting. These contracts are recorded at fair value in the balance sheet, with the offset to other expense (income), net.

CASH FLOW HEDGES Currency Forward contracts and range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive income (loss), net of tax, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings.

Interest Rate Floating-to-fixed interest rate swap contracts, designated as cash flow hedges, are entered into from time to time to hedge our exposure to interest rate changes on a portion of our floating rate debt. These interest rate swap contracts convert a portion of our floating rate debt to fixed rate debt. We record the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet, with the offset to accumulated other comprehensive income (loss), net of tax.

FAIR VALUE HEDGES Interest Rate Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. These interest rate swap contracts convert a portion of our fixed rate debt to floating rate debt. When in place, these contracts require periodic settlement, and the difference between amounts to be received and paid under the contracts is recognized in interest expense.

FOREIGN CURRENCY TRANSLATION Assets and liabilities of international operations are translated into U.S. dollars using year-end exchange rates, while revenues and expenses are translated at average exchange rates throughout the year. The resulting net translation adjustments are recorded as a component of accumulated other comprehensive income (loss). The local currency is the functional currency of most of our locations. Losses from foreign currency transactions included in other expense (income), net were $6.6 million for 2011. Gains from foreign currency transactions included in other expense (income), net were $3.5 million and $6.8 million for 2010 and 2009, respectively.

NEW ACCOUNTING STANDARDS

Adopted

As of January 1, 2011, Kennametal adopted changes to intangible impairment testing for reporting units with zero or negative carrying amounts. These changes require an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not that an intangible impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s intangible assets are not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of January 1, 2011, Kennametal adopted changes to the disclosures related to business combinations for a public entity that presents comparative financial statements. This guidance also expanded the supplemental pro forma business combination disclosures. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on consolidations for enterprises involved with variable interest entities. The guidance modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights should be consolidated and clarifies that the determination of whether a company is required to consolidate a variable interest entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on accounting for transfers of financial assets. This guidance requires additional disclosure regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance allows companies to allocate arrangement consideration in multiple deliverable arrangements in a manner that better reflects the transaction’s economics and may result in earlier revenue recognition. In addition, the residual method of allocating arrangement consideration is no longer permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Issued

In June 2011, the Financial Accounting Standards Board (FASB) issued new guidance on presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement (referred to as the statement of comprehensive income) or in two separate consecutive statements. Each component of net income and other comprehensive income, together with totals for comprehensive income and its two parts — net income and other comprehensive income, would need to be displayed under either alternative. The statement(s) would need to be presented with equal prominence as the other primary financial statements. This guidance is effective for Kennametal beginning July 1, 2012.

In May 2011, the FASB issued new guidance on fair value measurements and disclosure. The objective of the new guidance is a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. Many of the amendments in this new guidance represent clarifications to existing guidance or changes in the measurement guidance for determining fair value. The most significant change in disclosures is an expansion of the information required for Level 3 measurements. New disclosures are required about the use of a nonfinancial asset measured or disclosed at fair value if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. This guidance is effective for Kennametal beginning January 1, 2012. We are in the process of evaluating the impact of adoption on our consolidated financial statements.

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Inventories (Tables)

12 Months Ended

Jun. 30, 2011

Inventories (Tables) [Abstract]

Inventories

(in thousands)	2011			2010
Finished goods	$	303,716		$	227,096
Work in process and powder blends	202,940				134,732
Raw materials and supplies		109,683			62,673
Inventories at current cost		616,339			424,501
Less: LIFO valuation		(96,366	)		(60,233	)
Total inventories	$	519,973		$	364,268

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Inventories

12 Months Ended

Jun. 30, 2011

Inventories [Abstract]

INVENTORIES

NOTE 8 – INVENTORIES

Inventories consisted of the following at June 30:

(in thousands)	2011			2010
Finished goods	$	303,716		$	227,096
Work in process and powder blends	202,940				134,732
Raw materials and supplies		109,683			62,673
Inventories at current cost		616,339			424,501
Less: LIFO valuation		(96,366	)		(60,233	)
Total inventories	$	519,973		$	364,268

We used the LIFO method of valuing our inventories for approximately 50 percent and 51 percent of total inventories at June 30, 2011 and 2010, respectively.

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Pension and Other Postretirement and Postemployment Benefits

12 Months Ended

Jun. 30, 2011

Pension and Other Postretirement and Postemployment Benefits [Abstract]

PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

NOTE 13 - PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

Pension benefits under defined benefit pension plans are based on years of service and, for certain plans, on average compensation for specified years preceding retirement. We fund pension costs in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, for U.S. plans and in accordance with local regulations or customs for non-U.S. plans.

We have an Executive Retirement Plan (ERP) for various executives and a Supplemental Executive Retirement Plan (SERP) which was closed to future participation on July 26, 2006.

We presently provide varying levels of postretirement health care and life insurance benefits (OPEB) to certain employees and retirees. Postretirement health care benefits are available to employees and their spouses retiring on or after age 55 with 10 or more years of service. Beginning with retirements on or after January 1, 1998, our portion of the costs of postretirement health care benefits is capped at 1996 levels. Beginning with retirements on or after January 1, 2009, we have no obligation to provide a company subsidy for retiree medical costs.

In 2010 and 2009, special termination benefits of $3.6 million and $2.7 million, respectively, were recognized in the U.S.-based defined benefit pension plan due to an amendment of the plan for supplemental retirement benefits.

We use a June 30 measurement date for all of our plans.

Defined Benefit Pension Plans

The funded status of our pension plans and amounts recognized in the consolidated balance sheets as of June 30 were as follows:

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	759,075		$	687,700
Service cost		7,650			7,949
Interest cost		40,984			42,437
Participant contributions		39			33
Actuarial (gains) losses		(4,400	)		78,606
Benefits and expenses paid		(37,082	)		(41,848	)
Foreign currency translation adjustments		22,074			(19,679	)
Plan amendments		675			3,577
Plan curtailments		(2,443	)		300
Benefit obligation, end of year	$	786,572		$	759,075
Change in plan assets:
Fair value of plan assets, beginning of year	$	656,516		$	606,875
Actual return on plan assets		93,570			90,623
Company contributions		8,536			6,970
Participant contributions		39			33
Benefits and expenses paid		(39,525	)		(41,847	)
Foreign currency translation adjustments		6,330			(6,138	)
Fair value of plan assets, end of year	$	725,466		$	656,516
Funded status of plan	$	(61,106	)	$	(102,559	)
Amounts recognized in the balance sheet consist of:
Long-term prepaid benefit	$	63,579		$	16,026
Short-term accrued benefit obligation		(7,619	)		(6,778	)
Accrued pension benefits		(117,066	)		(111,807	)
Net amount recognized	$	(61,106	)	$	(102,559	)

The pre-tax amounts related to our defined benefit pension plans recognized in accumulated other comprehensive income were as follows at June 30:

(in thousands)	2011			2010
Unrecognized net actuarial losses	$	66,734		$	125,971
Unrecognized net prior service credits		(1,540	)		(2,534	)
Unrecognized transition obligations		1,202			1,120
Total	$	66,396		$	124,557

Prepaid pension benefits are included in other long-term assets. The assets of our U.S. and international defined benefit pension plans consist principally of capital stocks, corporate bonds and government securities.

To the best of our knowledge and belief, the asset portfolios of our defined benefit pension plans do not contain our capital stock. We do not issue insurance contracts to cover future annual benefits of defined benefit pension plan participants. Transactions between us and our defined benefit pension plans include the reimbursement of plan expenditures incurred by us on behalf of the plans. To the best of our knowledge and belief, the reimbursement of cost is permissible under current ERISA rules or local government law. The accumulated benefit obligation for all defined benefit pension plans was $772.6 million and $743.0 million as of June 30, 2011 and 2010, respectively.

Included in the above information are plans with accumulated benefit obligations exceeding the fair value of plan assets as of June 30 as follows:

(in thousands)	2011		2010
Projected benefit obligation	$	124,684	$	189,042
Accumulated benefit obligation		123,016		186,723
Fair value of plan assets		-		70,456

The components of net periodic pension cost include the following as of June 30:

(in thousands)	2011			2010			2009
Service cost	$	7,650		$	7,949		$	7,824
Interest cost		40,984			42,437			41,652
Expected return on plan assets		(48,203	)		(46,226	)		(46,939	)
Amortization of transition obligation		52			56			63
Amortization of prior service credit		(281	)		(280	)		(213	)
Special termination benefits		-			3,577			2,651
Curtailment loss		-			300			-
Settlement loss		18			-			-
Recognition of actuarial losses		12,277			4,447			1,900
Net periodic pension cost	$	12,497		$	12,260		$	6,938

Net periodic pension cost increased $5.4 million to $12.3 million in 2010 from $6.9 million in 2009. This increase was primarily the result of discount rate changes and recognition of special termination charges.

As of June 30, 2011, the projected benefit payments, including future service accruals for these plans for 2012 through 2016, are

$41.2 million, $41.4 million, $42.6 million, $44.7 million and $46.6 million, respectively and $270.3 million in 2017 through 2021.

The amounts of accumulated other comprehensive loss expected to be recognized in net periodic pension cost during 2012 related to net actuarial losses and transition obligations are $8.2 million and $0.1 million, respectively. The amount of accumulated other comprehensive income expected to be recognized in net periodic pension cost during 2012 related to prior service credit is $0.2 million.

We expect to contribute approximately $7.0 million to our pension plans in 2012.

Other Postretirement Benefit Plans

The funded status of our other postretirement benefit plans and the related amounts recognized in the consolidated balance sheets were as follows:

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	19,910		$	20,598
Service cost		77			99
Interest cost		1,037			1,265
Actuarial losses		2,474			1,260
Benefits paid		(3,203	)		(3,312	)
Plan amendment		(524	)		-
Benefit obligation, end of year	$	19,771		$	19,910
Funded status of plan	$	(19,771	)	$	(19,910	)

(in thousands)	2011			2010
Amounts recognized in the balance sheet consist of:
Short-term accrued benefit obligation	$	(1,918	)	$	(2,016	)
Accrued postretirement benefits		(17,853	)		(17,894	)
Net amount recognized	$	(19,771	)	$	(19,910	)

The pre-tax amounts related to our OPEB plans which were recognized in accumulated other comprehensive income were as follows at June 30:

(in thousands)	2011			2010
Unrecognized net actuarial gains	$	(864	)	$	(3,529	)
Unrecognized net prior service cost		(524	)		-
Total	$	(1,388	)	$	(3,529	)

The components of net periodic other postretirement costs (benefit) include the following for the years ended June 30:

(in thousands)	2011			2010			2009
Service cost	$	77		$	99		$	294
Interest cost		1,037			1,266			1,631
Amortization of prior service cost		-			8			39
Recognition of actuarial gains		(190	)		(368	)		(107	)
Curtailment gain		-			-			(3,169	)
Net periodic other postretirement benefit cost (income)	$	924		$	1,005		$	(1,312	)

As of June 30, 2010, the projected benefit payments, including future service accruals for our other postretirement benefit plans for 2012 through 2016, are $2.4 million, $2.3 million, $2.3 million, $2.1 million and $2.1 million, respectively and $8.6 million in 2017 through 2021.

The amounts of accumulated other comprehensive income expected to be recognized in net periodic other postretirement benefit cost during 2012 related to net actuarial gains are immaterial for prior service cost.

We expect to contribute approximately $2.1 million to our postretirement benefit plans in 2012.

Assumptions

The significant actuarial assumptions used to determine the present value of net benefit obligations for our defined benefit pension plans and other postretirement benefit plans were as follows:

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		5.5	%		6.5	%
International plans		5.5-5.8	%		5.0-5.5	%		5.8-7.0	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		2.0 -3.5	%		3.5	%		3.5	%

The significant assumptions used to determine the net periodic costs (benefits) for our pension and other postretirement benefit plans were as follows:

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		6.5	%		6.8	%
International plans		5.0-5.5	%		5.8-7.0	%		6.3 -6.8	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		3.5	%		3.5	%		3.5-4.0	%
Rate of return on plans assets:
U.S. plans		8.0	%		8.0	%		8.0	%
International plans		6.4	%		6.7	%		7.1	%

The rates of return on plan assets are based on historical performance, as well as future expected returns by asset class considering macroeconomic conditions, current portfolio mix, long-term investment strategy and other available relevant information.

The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for our postretirement benefit plans was as follows:

	2011			2010			2009
Health care costs trend rate assumed for next year		8.3	%		8.6	%		8.8	%
Rate to which the cost trend rate gradually declines		4.5	%		4.5	%		4.5	%
Year that the rate reaches the rate at which it is assumed to remain		2029			2029			2029

Assumed health care cost trend rates have a significant effect on the cost components and obligation for the health care plans. A change of one percentage point in the assumed health care cost trend rates would have the following effects on the total service and interest cost components of our other postretirement cost and other postretirement benefit obligation at June 30, 2011:

(in thousands)	1% Increase		1% Decrease
Effect on total service and interest cost components	$	58	$	(51	)
Effect on other postretirement obligation		849		(757	)

Plan Assets

The primary objective of certain of our pension plans’ investment policies is to ensure that sufficient assets are available to provide the benefit obligations at the time the obligations come due. The overall investment strategy for the defined benefit pension plans’ assets combine considerations of preservation of principal and moderate risk-taking. The assumption of an acceptable level of risk is warranted in order to achieve satisfactory results consistent with the long-term objectives of the portfolio. Fixed income securities comprise a significant portion of the portfolio due to their plan-liability-matching characteristics and to address the plans’ cash flow requirements. Additionally, diversification of investments within each asset class is utilized to further reduce the impact of losses in single investments.

Investment management practices must comply with ERISA and all applicable regulations and rulings thereof. The use of derivative instruments is permitted where appropriate and necessary for achieving overall investment policy objectives. Currently, the use of derivative instruments is not significant when compared to the overall investment portfolio.

The Company utilizes a liability driven investment strategy (LDI) for the assets of its U.S. defined benefit pension plans in order to reduce the volatility of the funded status of these plans and to meet the obligations at an acceptable cost over the long term. This LDI strategy entails modifying the asset allocation and duration of the assets of the plans to more closely match the liability profile of these plans. The asset reallocation involves increasing the fixed income allocation, reducing the equity component and adding alternative investments. Longer duration interest rate swaps have been added in order to increase the overall duration of the asset portfolio to more closely match the liabilities.

Our defined benefit pension plans’ asset allocations as of June 30, 2011 and 2010 and target allocations for 2012, by asset class, were as follows:

	2011			2010			Target		%
Equity		35	%		31	%		30	%
Fixed Income		60	%		66	%		70	%
Other		5	%		3	%		0	%

The following sections describe the valuation methodologies used by the trustee to measure the fair value of the defined benefit pension plan assets, including an indication of the level in the fair value hierarchy in which each type of asset is generally classified (see Note 6 for the definition of fair value and a description of the fair value hierarchy).

Corporate fixed income securities Investments in corporate fixed income securities consist of corporate debt and asset backed securities. These investments are classified as level two and are valued using independent observable market inputs such as the treasury curve, swap curve and yield curve.

Common / collective trusts Investments in common / collective trusts invest primarily in publicly traded securities and are classified as level two and valued based on observable market data.

Common stock Common stocks are classified as level one and are valued at their quoted market price.

Government securities Investments in government securities consist of fixed income securities such as U.S. government and agency obligations and foreign government bonds and asset and mortgage backed securities such as obligations issued by government sponsored organizations. These investments are classified as level two and are valued using independent observable market inputs such as the treasury curve, credit spreads and interest rates.

Other fixed income securities Investments in other fixed income securities are classified as level two and valued based on observable market data.

Other Other investments consist primarily of short term instruments including money market funds, certificates of deposit and state and local obligations. These investments are primarily classified as level two and are valued using independent observable market inputs.

The fair value methods described may not be reflective of future fair values. Additionally, while the Company believes the valuation methods used by the plans’ trustee are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurement at the reporting date.

The following table presents the fair value of the benefit plan assets classified under the appropriate level of the fair value hierarchy as of June 30, 2011:

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	338,955	$	-	$	338,955
Common / collective trusts:
Value funds		-		92,625		-		92,625
Growth funds		-		54,392		-		54,392
Balanced funds		-		15,798		-		15,798
Common stock		93,403		-		-		93,403
Government securities:
U.S. Government securities		-		30,236		-		30,236
Foreign government securities		-		27,465		-		27,465
Other fixed income securities		-		41,043		-		41,043
Other		1,723		36,772		-		38,495
Total investments	$	95,126	$	637,286	$	-	$	732,412

The following table presents the fair value of the benefit plan assets classified under the appropriate level of the fair value hierarchy as of June 30, 2010:

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	364,773	$	-	$	364,773
Common / collective trusts:
Value funds		-		74,532		-		74,532
Growth funds		-		42,985		-		42,985
Balanced funds		-		12,460		-		12,460
Common stock		75,714		-		-		75,714
Government securities:
U.S. Government securities		-		30,562		-		30,562
Foreign government securities		-		20,627		-		20,627
Other fixed income securities		-		17,114		-		17,114
Other		1,513		16,294		-		17,807
Total investments	$	77,227	$	579,347	$	-	$	656,574

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Pension and Other Postretirement and Postemployment Benefits (Details 7)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Minimum [Member] | U.S. Plans [Member]
Rates of future salary increases:
Rates of future salary increases	3.00%	3.00%	3.00%
Minimum [Member] | International Plans [Member]
Discount Rate:
Discount Rate	5.00%	5.80%	6.30%
Rates of future salary increases:
Rates of future salary increases			3.50%
Maximum [Member] | U.S. Plans [Member]
Rates of future salary increases:
Rates of future salary increases	5.00%	5.00%	5.00%
Maximum [Member] | International Plans [Member]
Discount Rate:
Discount Rate	5.50%	7.00%	6.80%
Rates of future salary increases:
Rates of future salary increases			4.00%
U.S. Plans [Member]
Discount Rate:
Discount Rate	5.50%	6.50%	6.80%
Rate of return on plans assets:
Rate of return on plans assets	8.00%	8.00%	8.00%
International Plans [Member]
Rates of future salary increases:
Rates of future salary increases	3.50%	3.50%
Rate of return on plans assets:
Rate of return on plans assets	6.40%	6.70%	7.10%

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Other Current Liabilities

12 Months Ended

Jun. 30, 2011

Other Current Liabilities [Abstract]

OTHER CURRENT LIABILITIES

NOTE 9 – OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following at June 30:

(in thousands)	2011		2010
Accrued employee benefits	$	55,833	$	44,474
Payroll, state and local taxes		15,997		9,107
Accrued restructuring expense (Note 15)		12,711		27,254
Other		82,665		71,971
Total other current liabilities	$	167,206	$	152,806

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Commitment And Contingencies (Details) (USD $) In Millions	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Commitments And Contingencies (Textuals) [Abstract]
Lease expense under rentals	$ 27.1	$ 28.2	$ 30.9
Future minimum operating lease payment for year one	17.0
Future minimum operating lease payment for year two	11.0
Future minimum operating lease payment for year three	6.5
Future minimum operating lease payment for year four	4.1
Future minimum operating lease payment for year five	2.6
Future minimum operating lease payment for after five years	$ 23.7

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Stock-Based Compensation (Details 2) (USD $)	12 Months Ended
	Jun. 30, 2011
Restricted Stock Award [Member]
Changes in restricted stock awards
Unvested restricted stock awards, June 30, 2010, Shares	198,701
Vested, Shares	(105,847)
Forfeited, Shares	(3,539)
Unvested restricted stock awards, June 30, 2011, Shares	89,315
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2010	$ 32.71
Weighted Average Fair Value, Vested	$ 32.56
Weighted Average Fair Value, Forfeited	$ 33.00
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2011	$ 32.90
Restricted Stock Units - Time Vesting [Member]
Changes in restricted stock awards
Unvested restricted stock awards, June 30, 2010, Shares	546,713
Granted, Shares	526,153
Vested, Shares	(84,784)
Forfeited, Shares	(82,000)
Unvested restricted stock awards, June 30, 2011, Shares	906,082
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2010	$ 24.29
Weighted Average Fair Value, Granted	$ 26.95
Weighted Average Fair Value, Vested	$ 23.53
Weighted Average Fair Value, Forfeited	$ 25.47
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2011	$ 25.81
Restricted Stock Units Performance Vesting [Member]
Changes in restricted stock awards
Unvested restricted stock awards, June 30, 2010, Shares	0
Granted, Shares	134,807
Vested, Shares	0
Forfeited, Shares	(18,439)
Unvested restricted stock awards, June 30, 2011, Shares	116,368
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2010	$ 0
Weighted Average Fair Value, Granted	$ 26.89
Weighted Average Fair Value, Vested	$ 0
Weighted Average Fair Value, Forfeited	$ 26.89
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2011	$ 26.89
EPS performance based portion of STEP [Member]
Changes in restricted stock awards
Unvested restricted stock awards, June 30, 2010, Shares	502,371
Forfeited, Shares	(70,582)
Unvested restricted stock awards, June 30, 2011, Shares	431,789
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2010	$ 35.54
Weighted Average Fair Value, Forfeited	$ 37.45
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2011	$ 35.23
TSR performance based portion of STEP [Member]
Changes in restricted stock awards
Unvested restricted stock awards, June 30, 2010, Shares	270,501
Forfeited, Shares	(38,004)
Unvested restricted stock awards, June 30, 2011, Shares	232,497
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2010	$ 8.35
Weighted Average Fair Value, Forfeited	$ 9.20
Weighted Average Fair Value, Unvested restricted stock awards, June 30, 2011	$ 8.21

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Discontinued Operations (Tables)

12 Months Ended

Jun. 30, 2011

Discontinued Operations (Tables) [Abstract]

Results of discontinued operations

(in thousands)	2010			2009
Sales	$	-		$	80,630
Loss from discontinued operations before income taxes	$	(2,269	)	$	(25,923	)
Income tax expense (benefit)		(846	)		(8,583	)
Loss from discontinued operations	$	(1,423	)	$	(17,340	)

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Derivative Instruments and Hedging Activities

12 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 7 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of our financial risk management program, we use certain derivative financial instruments. See Note 2 for discussion on our derivative instruments and hedging activities policy.

The fair value of derivatives designated and not designated as hedging instruments in the consolidated balance sheets at June 30 is as follows:

(in thousands)	2011			2010
Derivatives designated as hedging instruments
Other current assets — range forward contracts	$	87		$	34
Other current liabilities — range forward contracts		(159	)		(2	)
Other assets — forward starting interest rate swap contracts		772			-
Other liabilities — forward starting interest rate swap contracts		(3,169	)		(2,348	)
Total derivatives designated as hedging instruments		(2,469	)		(2,316	)
Derivatives not designated as hedging instruments
Other current assets — currency forward contracts		37			9
Other current liabilities — currency forward contracts		(2	)		(1,103	)
Total derivatives not designated as hedging instruments		35			(1,094	)
Total derivatives	$	(2,434	)	$	(3,410	)

Certain currency forward contracts hedging significant cross-border intercompany loans are considered as other derivatives and therefore, do not qualify for hedge accounting. These contracts are recorded at fair value in the balance sheet, with the offset to other expense (income), net. The following represents (gains) losses related to derivatives not designated as hedging instruments for the years ended June 30:

(in thousands)	2011			2010		2009
| | |
Other expense (income), net — currency forward contracts	$	(1,126	)	$	1,077	$	73

FAIR VALUE HEDGES

Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. We had no such contracts outstanding at June 30, 2011 and 2010, respectively.

In February 2009, we terminated interest rate swap contracts to convert $200 million of our fixed rate debt to floating rate debt. These contracts were originally set to mature in June 2012. Upon termination, we received a cash payment of $13.2 million. Within the consolidated statement of cash flow for the year ended June 30, 2009, $12.6 million related to the forward portion of the payment and has been disclosed under cash flow used for financing activities and the $0.6 million related to the current interest portion has been disclosed under cash flow provided by operating activities. This gain is being amortized as a component of interest expense over the remaining term of the related debt using the effective interest rate method. During the years ended June 30, 2011, 2010 and 2009 $5.9 million, $5.6 million and $3.2 million, respectively were recognized as a reduction in interest expense.

CASH FLOW HEDGES

Currency forward contracts and range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive (loss) income, net of tax, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings. The notional amount of the contracts translated into U.S. dollars at June 30, 2011 and 2010 was $37.6 million and $9.4 million, respectively. The time value component of the fair value of range forwards is excluded from the assessment of hedge effectiveness. Assuming the market rates remain constant with the rates at June 30, 2011, we expect to recognize into earnings in the next 12 months immaterial losses on outstanding derivatives.

Floating-to-fixed interest rate swap contracts, designated as cash flow hedges, are entered into from time to time to hedge our exposure to interest rate changes on a portion of our floating rate debt. These interest rate swap contracts convert a portion of our floating rate debt to fixed rate debt. We record the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet, with the offset to accumulated other comprehensive income (loss), net of tax. We had forward starting interest rate swap contracts outstanding for forecasted transactions that effectively converted a cumulative notional amount of $150 million and $75 million at June 30, 2011 and 2010, respectively from floating to fixed interest rates. As of June 30, 2011 and 2010 we recorded a liability of $2.4 million and $2.3 million, respectively on these contracts which was recorded as an offset in other comprehensive income (loss), net of tax. Over the next 12 months, assuming the market rates remain constant with the rates at June 30, 2011, we do not expect to recognize into earnings any significant gains or losses on outstanding derivatives.

The following represents gains (losses) related to cash flow hedges for the years ended June 30:

(in thousands)	2011			2010			2009
(Losses) gains recognized in other comprehensive income (loss)	$	(26	)	$	(962	)	$	107
Losses (gains) reclassified from accumulated other comprehensive loss into other expense (income), net	$	1,041		$	(1,107	)	$	(8,505	)

No portion of the gains or losses recognized in earnings was due to ineffectiveness and no amounts were excluded from our effectiveness testing for the years ended June 30, 2011, 2010 and 2009.

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Derivative Instruments and Hedging Activities (Details) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Derivatives designated as hedging instruments
Total derivatives designated as hedging instruments	$ (2,469)	$ (2,316)
Derivatives not designated as hedging instruments
Derivatives not designated as hedging instruments	35	(1,094)
Total derivatives	(2,434)	(3,410)
Range forward contracts [Member] | Other current assets [Member]
Derivatives designated as hedging instruments
Derivative assets designated as hedging instruments	87	34
Range forward contracts [Member] | Other current liabilities [Member]
Derivatives designated as hedging instruments
Derivative liabilities designated as hedging instruments	(159)	(2)
Currency forward contracts [Member] | Other current assets [Member]
Derivatives not designated as hedging instruments
Derivative assets not designated as hedging instruments	37	9
Currency forward contracts [Member] | Other current liabilities [Member]
Derivatives not designated as hedging instruments
Derivative liabilities not designated as hedging instruments	(2)	(1,103)
Forward starting interest rate swap contracts [Member] | Other Assets [Member]
Derivatives designated as hedging instruments
Derivative assets designated as hedging instruments	772	0
Forward starting interest rate swap contracts [Member] | Other liabilities [Member]
Derivatives designated as hedging instruments
Derivative liabilities designated as hedging instruments	$ (3,169)	$ (2,348)

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Consolidated Statements of Shareowners' Equity (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Beginning Balance	$ 1,333,443	$ 1,267,455
Net income (loss)	232,277	48,202	(118,631)
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of tax	642	(936)	(3,006)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively	(679)	(1,482)	5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of tax	28,087	(17,397)	(14,283)
Reclassification of net pension and other postemployment benefit losses, net of tax	7,131	2,975	1,496
Foreign currency translation adjustments, net of tax	122,358	(68,837)	(122,044)
Ending Balance	1,658,641	1,333,443	1,267,455
CAPITAL STOCK
Beginning Balance	102,379	91,540	96,076
Beginning Balance, Shares	81,903	73,232	76,858
Dividend reinvestment	10	15	35
Dividend reinvestment, Shares	8	12	28
Capital stock issued under employee benefit and stock plans	901	776	429
Capital stock issued under employee benefit and stock plans, Shares	721	621	346
Equity offering		10,063
Equity offering, Shares		8,050
Purchase of capital stock	(1,879)	(15)	(5,000)
Purchase of capital stock, Shares	(1,503)	(12)	(4,000)
Ending Balance	101,411	102,379	91,540
Ending Balance, Shares	81,129	81,903	73,232
ADDITIONAL PAID-IN CAPITAL
Beginning Balance	492,454	357,839	468,169
Dividend reinvestment	354	290	569
Capital stock issued under employee benefit and stock plans	33,980	23,986	11,821
Equity offering		110,630
Purchase of capital stock	(56,030)	(291)	(122,720)
Ending Balance	470,758	492,454	357,839
RETAINED EARNINGS
Beginning Balance	793,448	786,345	941,553
Cash dividends paid to shareowners	(39,801)	(39,316)	(35,466)
Net income (loss)	229,727	46,419	(119,742)
Ending Balance	983,374	793,448	786,345
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning Balance	(72,781)	11,719	142,109
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of tax	642	(936)	(3,006)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively	(679)	(1,482)	5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of tax	28,087	(17,397)	(14,283)
Reclassification of net pension and other postemployment benefit losses, net of tax	7,131	2,975	1,496
Foreign currency translation adjustments, net of tax	120,129	(67,660)	(119,887)
Other comprehensive income (loss), net of tax	155,310	(84,500)	(130,390)
Ending Balance	82,529	(72,781)	11,719
NONCONTROLLING INTERESTS
Beginning Balance	17,943	20,012	21,527
Net income (loss)	2,550	1,783	1,111
Other comprehensive income (loss), net of tax	2,229	(1,177)	(2,158)
Purchase of noncontrolling interests		(401)	(165)
Cash dividends paid to noncontrolling interests	(2,153)	(2,274)	(303)
Ending Balance	$ 20,569	$ 17,943	$ 20,012

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Stock-Based Compensation (Details) (Stock Option [Member])	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Stock Option [Member]
Assumptions used in valuation of stock options
Risk-free interest rate	1.40%	2.30%	3.00%
Expected life (years)	4.5	4.5	4.5
Expected volatility	47.00%	44.00%	27.70%
Expected dividend yield	2.00%	1.80%	1.30%

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Supplemental Cash Flow Information

12 Months Ended

Jun. 30, 2011

Supplemental Cash Flow Information [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 3 – SUPPLEMENTAL CASH FLOW INFORMATION

Year ended June 30 (in thousands)	2011		2010		2009
Cash paid during the period for:
Interest	$	26,624	$	28,626	$	26,328
Income taxes		95,382		3,788		18,020
Supplemental disclosure of non-cash information:
Contribution of capital stock to employees’ defined contribution benefit plans		948		6,352		1,738
Change in fair value of derivative contracts		-		-		730
Changes in accounts payable related to purchases of property, plant and equipment		-		-		(12,800	)

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Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income (Tables)

12 Months Ended

Jun. 30, 2011

Comprehensive Loss Income and Accumulated Other Comprehensive Loss Income (Tables) [Abstract]

Comprehensive Loss Income

years ended June 30 (in thousands)	2011			2010			2009
Net income (loss)	$	232,277		$	48,202		$	(118,631	)
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $(0.6) million and $(1.9) million, respectively		642			(936	)		(3,006	)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively		(679	)		(1,482	)		5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of income tax expense (benefit) of $15.1 million, $(14.1) million and $0.6 million, respectively		28,087			(17,397	)		(14,283	)
Reclassification of net pension and other postretirement benefit losses, net of income tax benefit of $4.4 million, $0.9 million and $0.5 million, respectively		7,131			2,975			1,496
Foreign currency translation adjustments, net of income tax expense (benefit) of $75.0 million, $(41.5) million and $(73.5) million, respectively		122,358			(68,837	)		(122,044	)
Total comprehensive income (loss), net of tax		389,816			(37,475	)		(251,178	)
Comprehensive income (loss) attributable to noncontrolling interests		4,779			606			(1,046	)
Comprehensive income (loss) attributable to Kennametal Shareowners	$	385,037		$	(38,081	)	$	(250,132	)

Components of accumulated other comprehensive (loss) income

2011	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(3,227	)	$	1,331		$	(1,896	)
Unrecognized net actuarial losses		(71,262	)		23,003			(48,259	)
Unrecognized net prior service credit		2,252			(963	)		1,289
Unrecognized transition obligation		(1,203	)		(95	)		(1,298	)
Foreign currency translation adjustments		161,451			(28,758	)		132,693
Total accumulated other comprehensive income	$	88,011		$	(5,482	)	$	82,529

2010	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(2,998	)	$	1,139		$	(1,859	)
Unrecognized net actuarial losses		(122,442	)		38,629			(83,813	)
Unrecognized net prior service credit		2,534			(962	)		1,572
Unrecognized transition obligation		(1,120	)		(127	)		(1,247	)
Foreign currency translation adjustments		19,913			(7,347	)		12,566
Total accumulated other comprehensive loss	$	(104,113	)	$	31,332		$	(72,781	)

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Jun. 30, 2011

Supplemental Cash Flow Information (Tables) [Abstract]

Supplemental cash flow information

Year ended June 30 (in thousands)	2011		2010		2009
Cash paid during the period for:
Interest	$	26,624	$	28,626	$	26,328
Income taxes		95,382		3,788		18,020
Supplemental disclosure of non-cash information:
Contribution of capital stock to employees’ defined contribution benefit plans		948		6,352		1,738
Change in fair value of derivative contracts		-		-		730
Changes in accounts payable related to purchases of property, plant and equipment		-		-		(12,800	)

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Selected Quarterly Financial Data (Details Textual) (USD $) In Millions	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Selected Quarterly Financial Data (Textuals) [Abstract]
Restructuring charges	$ 13.7	$ 44.3	$ 64.7

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Long-Term Debt and Capital Lease (Details 1) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Future minimum lease payments under capital leases
2012	$ 1,392
2013	1,111
2014	274
2015	728
2016	0
After 2016	0
Total future minimum lease payments	3,505
Less amount representing interest	(392)
Amount recognized as capital lease obligations	$ 3,113	$ 6,020

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Notes Payable and Lines of Credit (Details Textual) (USD $)	Jun. 30, 2011	Jun. 30, 2010	Jun. 25, 2010
Notes Payable and Lines of Credit (Textuals) [Abstract]
Maximum borrowing capacity under Credit Agreement			$ 500,000,000
Notes Payable and Lines of Credit (Additional Textuals) [Abstract]
Notes payable to banks	3,659,000	19,454,000
Weighted average Interest rate for notes payable and line of credit	4.40%	3.10%
Notes Payable to Banks [Member]
Notes Payable and Lines of Credit (Textuals) [Abstract]
Maximum borrowing capacity under Credit Agreement	200,600,000
Total unused amount of credit lines, translated into U.S. dollars exchange rates under short-term borrowings	$ 196,900,000

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Fair Value Measurements (Details) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]
Assets	$ 896	$ 43
Fair Value, Liabilities Measured on Recurring Basis, Financial Statement Captions [Line Items]
Liabilities	3,330	3,453
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]
Assets	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Liabilities Measured on Recurring Basis, Financial Statement Captions [Line Items]
Liabilities	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]
Assets	896	43
Fair Value, Inputs, Level 2 [Member]
Fair Value, Liabilities Measured on Recurring Basis, Financial Statement Captions [Line Items]
Liabilities	3,330	3,453
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]
Assets	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Liabilities Measured on Recurring Basis, Financial Statement Captions [Line Items]
Liabilities	$ 0	$ 0

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Income Taxes (Details 3) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Reconciliation of unrecognized tax benefits excluding interest
Balance at beginning of year	$ 16,391	$ 15,817
Increases for tax positions of prior years		1,303
Decreases for tax positions of prior years	(85)	(184)
Increases for tax positions related to the current year	285	2,390
Decreases related to settlement with taxing authority		(1,190)
Decreases related to lapse of statue of limitations	(794)
Foreign currency translation	2,492	(1,745)
Balance at end of year	$ 18,289	$ 16,391

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Acquisitions and Divestitures

12 Months Ended

Jun. 30, 2011

Acquisitions and Divestitures [Abstract]

ACQUISITIONS AND DIVESTITURES

NOTE 4 – ACQUISITIONS AND DIVESTITURES

During 2009, we acquired Tricon for a net purchase price of $64.1 million. As part of our Infrastructure segment, we acquired Tricon to expand our products and solutions in the surface and underground mining markets, including hard rock and coal. During 2009, we also made an acquisition within our Industrial segment. Also during 2009, we made final payments for two Industrial acquisitions that we made in Europe during 2008. During 2009, we had one divestiture that was accounted for as discontinued operations, see Note 5.

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Pension and Other Postretirement and Postemployment Benefits (Details Textuals) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Pension and Other Postretirement and Postemployment Benefits (Textuals) [Abstract]
Postretirement health care benefits are available to	employees and their spouses retiring on or after age 55 with 10 or more years of service
Special termination benefits due to an amendment of the plan			$ 2,651,000
Net periodic pension cost			6,938,000
Pension plans contribution [Member]
Pension and Other Postretirement and Postemployment Benefits (Textuals) [Abstract]
Special termination benefits due to an amendment of the plan	675,000	3,577,000
Accumulated benefit obligation for defined benefit plans	772,600,000	743,000,000
Net periodic pension cost	12,497,000	12,260,000	6,938,000
Increase in net periodic pension costs	200,000	5,400,000
Projected benefit payments in 2012	41,200,000
Projected benefit payments in 2013	41,400,000
Projected benefit payments in 2014	42,600,000
Projected benefit payments in 2015	44,700,000
Projected benefit payments in 2016	46,600,000
Projected benefit payments in 2017 through 2021	270,300,000
Amounts of accumulated other comprehensive loss expected to be recognized in net periodic pension cost during 2012 related to net actuarial losses	8,200,000
Amounts of accumulated other comprehensive loss expected to be recognized in net periodic pension cost during 2012 related to transition obligations	100,000
Amounts of accumulated other comprehensive loss expected to be recognized in net periodic pension cost during 2012 related to Prior service credit	200,000
Expected contribution by Employer in 2012	7,000,000
Other postretirement benefit plans [Member]
Pension and Other Postretirement and Postemployment Benefits (Textuals) [Abstract]
Special termination benefits due to an amendment of the plan	(524,000)
Net periodic pension cost	924,000	1,005,000	(1,312,000)
Projected benefit payments in 2012		2,400,000
Projected benefit payments in 2013		2,300,000
Projected benefit payments in 2014		2,300,000
Projected benefit payments in 2015		2,100,000
Projected benefit payments in 2016		2,100,000
Projected benefit payments in 2017 through 2021		8,600,000
Expected contribution by Employer in 2012		$ 2,100,000

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Stock-Based Compensation (Tables)

12 Months Ended

Jun. 30, 2011

Stock-Based Compensation (Tables) [Abstract]

Assumptions used in our Black-Scholes valuation

	2011			2010			2009
Risk-free interest rate		1.4	%		2.3	%		3.0	%
Expected life (years) (2)		4.5			4.5			4.5
Expected volatility (3)		47.0	%		44.0	%		27.7	%
Expected dividend yield		2.0	%		1.8	%		1.3	%

(2)	Expected life is derived from historical experience.
(3)	Expected volatility is based on the implied historical volatility of our stock.

Changes in stock options

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic value
	Options			Exercise Price		Life (years)		(in thousands)
Options outstanding, June 30, 2010		3,582,075		$	25.59
Granted		559,987			27.30
Exercised		(646,567	)		22.25
Lapsed and forfeited		(107,492	)		26.05
Options outstanding, June 30, 2011		3,388,003		$	26.50		6.0	$	53,216
Options vested and expected to vest, June 30, 2011		3,299,431		$	26.54		5.9	$	51,706
Options exercisable, June 30, 2011		1,948,442		$	26.85		4.6	$	29,937

Restricted Stock Awards

				Weighted
				Average Fair
	Shares			Value
Unvested restricted stock awards, June 30, 2010		198,701		$	32.71
Vested		(105,847	)		32.56
Forfeited		(3,539	)		33.00
Unvested restricted stock awards, June 30, 2011		89,315		$	32.90

Changes in time vesting and performance vesting restricted stock units

				Performance
	Performance			Vesting					Time Vesting
	Vesting			Weighted		Time Vesting			Weighted
	Stock			Average Fair		Stock			Average Fair
	Units			Value		Units			Value
Unvested performance vesting and time vesting restricted stock units, June 30, 2010		—		$	—		546,713		$	24.29
Granted		134,807			26.89		526,153			26.95
Vested		—			—		(84,784	)		23.53
Forfeited		(18,439	)		26.89		(82,000	)		25.47
Unvested performance vesting and time vesting restricted stock units, June 30, 2011		116,368		$	26.89		906,082		$	25.81

Changes in the EPS performance-based portion of STEP restricted stock units

				Weighted
	Stock			Average Fair
	Units			Value
Unvested EPS performance-based restricted stock units, June 30, 2010		502,371		$	35.54
Forfeited		(70,582	)		37.45
Unvested EPS performance-based restricted stock units, June 30, 2011		431,789		$	35.23

Changes in the TSR performance-based STEP restricted stock units

				Weighted
	Stock			Average Fair
	Units			Value
Unvested TSR performance-based restricted stock units, June 30, 2010		270,501		$	8.35
Forfeited		(38,004	)		9.20
Unvested TSR performance-based restricted stock units, June 30, 2011		232,497		$	8.21

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Schedule II Valuation and Qualifying Accounts and Reserves

12 Months Ended

Jun. 30, 2011

Valuation and Qualifying Accounts and Reserves [Abstract]

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

			Charged			Charged to
(In thousands)	Balance at		(Recoveries)			Other								Deductions
For the year ended	Beginning		to Costs and			Comprehensive					Other			from			Balance at
June 30	of Year		Expenses			Income			Recoveries		Adjustments			Reserves			End of Year
2011
Allowance for doubtful accounts	$	24,789	$	518		$	—		$	966	$	1,993	(1)	$	7,308	(3)	$	20,958
Reserve for obsolete inventory		68,270		4,971			—			—		4,525	(1)		22,483	(4)		55,283
Deferred tax asset valuation allowance		47,987		(27,313	)		—			—		5,491	(1)		503	(5)		25,662
2010
Allowance for doubtful accounts	$	25,228	$	4,163		$	—		$	1,181	$	(1,055	)(1)	$	4,728	(3)	$	24,789
Reserve for obsolete inventory		61,123		19,580			—			—		2,854	(1)		15,287	(4)		68,270
Deferred tax asset valuation allowance		48,206		5,035			(1,715	)		—		(3,539	)(1)		—			47,987
2009
Allowance for doubtful accounts	$	18,473	$	9,597		$	—		$	856	$	1,566	(2)	$	5,264	(3)	$	25,228
Reserve for obsolete inventory		61,470		22,730			—			—		(14,164	)(1)		8,913	(4)		61,123
Deferred tax asset valuation allowance		46,650		2,490			4,572			—		(5,506	)(1)		—			48,206

(1)	Represents foreign currency translation adjustment.
(2)	Represents foreign currency translation adjustment and $0.2 million of reserves acquired through business combinations.
(3)	Represents uncollected accounts charged against the allowance.
(4)	Represents scrapped inventory and other charges against the reserve.
(5)	Represents a forfeited net operating loss deduction.

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Pension and Other Postretirement and Postemployment Benefits (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Change in benefit obligation:
Plan amendments			$ 2,651
Change in plan assets:
Fair value of plan assets, end of year	732,412	656,574
Pension plans contribution [Member]
Change in benefit obligation:
Benefit obligation, beginning of year	759,075	687,700
Service cost	7,650	7,949	7,824
Interest cost	40,984	42,437	41,652
Participant contributions	39	33
Actuarial (gains) losses	(4,400)	78,606
Benefit and plan expenses paid	(37,082)	(41,848)
Foreign currency translation adjustments	22,074	(19,679)
Plan amendments	675	3,577
Plan curtailments	(2,443)	300
Benefit obligation, end of year	786,572	759,075	687,700
Change in plan assets:
Fair value of plan assets, beginning of year	656,516	606,875
Actual return on plan assets	93,570	90,623
Company contributions	8,536	6,970
Participant contributions	39	33
Benefits and expenses paid	(39,525)	(41,847)
Foreign currency translation adjustments	6,330	(6,138)
Fair value of plan assets, end of year	725,466	656,516	606,875
Funded status of plan	(61,106)	(102,559)
Amounts recognized in the balance sheet consist of:
Long-term prepaid benefit	63,579	16,026
Short-term accrued benefit obligation	(7,619)	(6,778)
Accrued pension benefits	(117,066)	(111,807)
Net amount recognized	$ (61,106)	$ (102,559)

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Environmental Matters (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Environmental Matters (Textuals) [Abstract]
Total reserves for potential environmental issues	$ 5,400,000	$ 5,200,000
Additional reserves for potential environmental issues	1,500,000	600,000
Foreign currency translation adjustment	600,000	(600,000)
Cash payments made against the reserves of environmental issues	800,000	100,000
Reversal of international environmental liability	1,100,000
Payment of civil penalty	$ 200,000

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Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income (Details 1) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Components of accumulated other comprehensive (loss) income
Unrealized loss on derivatives designated and qualified as cash flow hedges, Pre-tax	$ (3,227)	$ (2,998)
Unrealized loss on derivatives designated and qualified as cash flow hedges, tax	1,331	1,139
Unrealized loss on derivatives designated and qualified as cash flow hedges, After-tax	(1,896)	(1,859)
Unrecognized net actuarial losses, Pre tax	(71,262)	(122,442)
Unrecognized net actuarial losses, Tax	23,003	38,629
Unrecognized net actuarial losses, After-tax	(48,259)	(83,813)
Unrecognized net prior service credits, Pre-Tax	2,252	2,534
Unrecognized net prior service credit, Tax	(963)	(962)
Unrecognized net prior service credit, After-Tax	1,289	1,572
Unrecognized transition obligation, Pre-Tax	(1,203)	(1,120)
Unrecognized transition obligation, Tax	(95)	(127)
Unrecognized transition obligation, After-Tax	(1,298)	(1,247)
Foreign currency translation adjustments, Pre-Tax	161,451	19,913
Foreign currency translation adjustments, Tax	(28,758)	(7,347)
Foreign currency translation adjustments, After-Tax	132,693	12,566
Total accumulated other comprehensive income/loss, Pre-tax	88,011	(104,113)
Total accumulated other comprehensive income/loss, Tax	(5,482)	31,332
Total accumulated other comprehensive income/loss, After-tax	$ 82,529	$ (72,781)

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Income Taxes (Details 1) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes
Income taxes at U.S. statutory rate	$ 103,647	$ 26,811	$ (39,374)
State income taxes, net of federal tax benefits	1,956	2,290	(131)
U.S. income taxes provided on international income	21,556	1,107	(47)
Combined tax effects of international income	(35,423)	(4,460)	4,029
Change in valuation allowance and other uncertain tax positions	(20,215)	2,024	(4,638)
Impact of goodwill impairment charges			29,296
Impact of domestic production activities deduction	(6,413)	(456)	672
Research and development credit	(2,685)	(460)	(1,501)
Other	1,433	121	489
Provision (benefit) for income taxes	$ 63,856	$ 26,977	$ (11,205)

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Fair Value Measurements (Tables)

12 Months Ended

Jun. 30, 2011

Fair Value Measurements (Tables) [Abstract]

Financial instruments at fair value on recurring basis

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	896	$	-	$	896
Total assets at fair value	$	-	$	896	$	-	$	896
Liabilities:
Derivatives (1)	$	-	$	3,330	$	-	$	3,330
Total liabilities at fair value	$	-	$	3,330	$	-	$	3,330

(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Derivatives (1)	$	-	$	43	$	-	$	43
Total assets at fair value	$	-	$	43	$	-	$	43
Liabilities:
Derivatives (1)	$	-	$	3,453	$	-	$	3,453
Total liabilities at fair value	$	-	$	3,453	$	-	$	3,453

⁽¹⁾ Foreign currency derivative and interest rate swap contracts are valued based on observable market spot and forward rates and are classified within Level 2 of the fair value hierarchy.

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Restructuring and Asset Impairement Charges (Tables)

12 Months Ended

Jun. 30, 2011

Restructuring and Asset Impairment Charges (Tables) [Abstract]

Other current liabilities amount attributable to each segment

					Asset			Cash
(in thousands)	June 30, 2010		Expense		Write-down			Expenditures			Translation		June 30, 2011
Industrial
Severance	$	18,327	$	4,363	$	-		$	(16,510	)	$	1,631	$	7,811
Facilities		508		2,318		(1,857	)		(444	)		-		525
Other		403		2,031		-			(931	)		101		1,604
Total Industrial		19,238		8,712		(1,857	)		(17,885	)		1,732		9,940
Infrastructure
Severance		7,637		2,484		-			(9,399	)		928		1,650
Facilities		211		1,319		(1,057	)		(204	)		-		269
Other		168		1,156		-			(530	)		58		852
Total Infrastructure		8,016		4,959		(1,057	)		(10,133	)		986		2,771
Total	$	27,254	$	13,671	$	(2,914	)	$	(28,018	)	$	2,718	$	12,711

					Asset
(in thousands)	June 30, 2009		Expense		Write-down			Cash Expenditures			Translation			June 30, 2010
Industrial
Severance	$	18,378	$	29,082	$	-		$	(28,086	)	$	(1,047	)	$	18,327
Facilities		477		790		(604	)		(142	)		(13	)		508
Other		176		1,393		-			(1,241	)		75			403
Total Industrial		19,031		31,265		(604	)		(29,469	)		(985	)		19,238
Infrastructure
Severance		7,659		12,119		-			(11,704	)		(437	)		7,637
Facilities		199		329		(251	)		(59	)		(7	)		211
Other		73		580		-			(517	)		32			168
Total Infrastructure		7,931		13,028		(251	)		(12,280	)		(412	)		8,016
Total	$	26,962	$	44,293	$	(855	)	$	(41,749	)	$	(1,397	)	$	27,254

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2011

Summary Of Significant Accounting Policies (Tables) [Abstract]

The carrying amount of goodwill

(in thousands)	Industrial			Infrastructure			Total
Goodwill	$	406,626		$	247,199		$	653,825
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2009	$	255,784		$	247,199		$	502,983
Acquisitions / Divestitures		536			-			536
Translation		(13,188	)		(888	)		(14,076	)
Change in goodwill		(12,652	)		(888	)		(13,540	)
Goodwill	$	393,974		$	246,311		$	640,285
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2010	$	243,132		$	246,311		$	489,443
Adjustments	$	252		$	-		$	252
Translation		17,719			3,914			21,633
Change in goodwill		17,971			3,914			21,885
Goodwill		411,945			250,225			662,170
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2011	$	261,103		$	250,225		$	511,328

The components of intangible assets

	Estimated		2011					2010
	Useful Life		Gross Carrying		Accumulated			Gross Carrying		Accumulated
(in thousands)	(in years)		Amount		Amortization			Amount		Amortization
Contract-based		4 to 15	$	6,349	$	(5,380	)	$	6,357	$	(5,218	)
Technology-based and other		4 to 15		39,743		(25,442	)		37,136		(20,422	)
Customer-related		10 to 20		113,977		(38,275	)		108,470		(29,255	)
Unpatented technology		30		19,540		(4,740	)		19,216		(4,572	)
Trademarks		5 to 20		10,902		(4,875	)		10,647		(3,876	)
Trademarks	Indefinite			40,480		-			36,823		-
Total			$	230,991	$	(78,712	)	$	218,649	$	(63,343	)

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Income Taxes

12 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

INCOME TAXES

NOTE 12 - INCOME TAXES

Income from continuing operations before income taxes consisted of the following for the years ended June 30:

(in thousands)	2011			2010			2009
Income (loss) from continuing operations before income taxes:
United States	$	69,042		$	3,925		$	(135,133	)
International		227,091			72,677			22,637
Total income (loss) from continuing operations before income taxes	$	296,133		$	76,602		$	(112,496	)
Current income taxes:
Federal	$	26,234		$	1,915		$	(25,071	)
State		1,063			1,376			2,019
International		44,440			23,456			21,169
Total current income taxes		71,737			26,747			(1,883	)
Deferred income taxes		(7,881	)		230			(9,322	)
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)
Effective tax rate		21.6	%		35.2	%		10.0	%

The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes was as follows for the years ended June 30:

(in thousands)	2011			2010			2009
Income taxes at U.S. statutory rate	$	103,647		$	26,811		$	(39,374	)
State income taxes, net of federal tax benefits		1,956			2,290			(131	)
U.S. income taxes provided on international income		21,556			1,107			(47	)
Combined tax effects of international income		(35,423	)		(4,460	)		4,029
Change in valuation allowance and other uncertain tax positions		(20,215	)		2,024			(4,638	)
Impact of goodwill impairment charges		-			-			29,296
Impact of domestic production activities deduction		(6,413	)		(456	)		672
Research and development credit		(2,685	)		(460	)		(1,501	)
Other		1,433			121			489
Provision (benefit) for income taxes	$	63,856		$	26,977		$	(11,205	)

During 2011, we recorded net valuation allowance adjustments of $20.5 million, which reduced income tax expense. The valuation allowance adjustments reflect a change in judgment about the realizability of certain deferred tax assets in the United Kingdom and Europe. The effect of this tax benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

During 2011, we incurred U.S. Federal income taxes of $17.9 million associated with dividends of international subsidiary current year income. The effect of this expense is included in the income tax reconciliation table under the caption “U.S. income taxes provided on international income.”

During 2010, we recorded restructuring charges related to our engineered products business for which there was no tax benefit. The effect of this is included in the income tax reconciliation table under the caption “combined tax effects of international income.”

During 2009, we recorded goodwill impairment charges related to our surface finishing machines and services business and our engineered products business for the majority of which there was no tax benefit. The federal effect of these permanent differences is included in the income tax reconciliation table under the caption “impact of goodwill impairment charges.”

During 2009, the Internal Revenue Service completed its examination of our 2005 and 2006 tax years, which resulted in a net tax benefit of $1.8 million, including the impact of state taxes and interest. The federal effect of this benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

During 2009, we recorded a valuation allowance adjustment of $2.8 million, which reduced income tax expense. This valuation allowance adjustment reflects a change in circumstances that caused a change in judgment about the realizability of certain deferred tax assets in Europe. The effect of this tax benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.”

The components of net deferred tax assets and liabilities were as follows at June 30:

(in thousands)	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	65,768		$	61,605
Inventory valuation and reserves		29,646			29,302
Pension benefits		713			15,913
Other postretirement benefits		8,312			10,499
Accrued employee benefits		30,975			22,551
Other accrued liabilities		7,939			6,755
Hedging activities		13,528			9,785
Tax credits and other carryforwards		5,431			5,541
Other		2,558			7,953
Total		164,870			169,904
Valuation allowance		(25,662	)		(47,987	)
Total deferred tax assets	$	139,208		$	121,917
Deferred tax liabilities:
Tax depreciation in excess of book	$	98,957		$	79,712
Intangible assets		35,965			33,271
Total deferred tax liabilities	$	134,922		$	112,983
Total net deferred tax assets (liabilities)	$	4,286		$	8,934

Included in deferred tax assets at June 30, 2011 is $65.8 million associated with net operating loss carryforwards in foreign and state jurisdictions. Of that amount, $9.3 million expires through June 2016, $6.8 million expires through 2021, $4.3 million expires through 2026, $6.9 million expires through 2031, and the remaining $38.5 million do not expire. The realization of these tax benefits is primarily dependent on future taxable income in these jurisdictions.

A valuation allowance of $25.7 million has been placed against deferred tax assets in Europe, China, Hong Kong, Mexico, Brazil and the U.S., which would be allocated to income tax expense upon realization of these tax benefits. In 2011, the valuation allowance related to these deferred tax assets decreased $22.3 million. As the respective operations generate sufficient income, the valuation allowances will be partially or fully reversed at such time we believe it will be more likely than not that the deferred tax assets will be realized. In 2011, a change in judgment about the realizability of certain deferred tax assets in the United Kingdom resulting in the valuation allowance of $21.5 million being reversed.

June 30, 2011 unremitted earnings of our non-U.S. subsidiaries and affiliates of $1,084.5 million, the majority of which have not been previously taxed in the U.S., are permanently reinvested, and accordingly, no deferred tax liability has been recorded in connection therewith. It is not practical to estimate the income tax effect that might be incurred if cumulative prior year earnings not previously taxed in the U.S. were remitted to the U.S.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest) is as follows as of June 30:

(in thousands)	2011			2010
Balance at beginning of year	$	16,391		$	15,817
Increases for tax positions of prior years		-			1,303
Decreases for tax positions of prior years		(85	)		(184	)
Increases for tax positions related to the current year		285			2,390
Decreases related to settlement with taxing authority		-			(1,190	)
Decreases related to lapse of statute of limitations		(794	)		-
Foreign currency translation		2,492			(1,745	)
Balance at end of year	$	18,289		$	16,391

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in 2011, 2010 and 2009 is $18.0 million, $15.8 million and $15.2 million, respectively. Our policy is to recognize interest and penalties related to income taxes as a component of the provision for income taxes in the consolidated statement of income. We recognized interest expense of $0.9 million, $0.4 million and an interest reduction of $0.8 million for 2011, 2010 and 2009, respectively. As of June 30, 2011 and 2010 the amount of interest accrued was $3.2 million and $2.0 million, respectively.

With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2002. The Internal Revenue Service has audited all U.S. tax years prior to 2009 and is currently examining 2009 and 2010. Various state and foreign jurisdiction tax authorities are in the process of examining our income tax returns for various tax years ranging from 2002 to 2010. We continue to execute and expand our pan-European business model. As a result of this and other matters, we continuously review our uncertain tax positions and evaluate any potential issues that may lead to an increase or decrease in the total amount of unrecognized tax benefits recorded. We believe that it is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $13.0 million to $14.0 million within the next twelve months as a result of the progression of various federal, state, and foreign audits in process.

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Other Current Liabilities (Details) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Other current liabilities
Accrued employee benefits	$ 55,833	$ 44,474
Payroll, state and local taxes	15,997	9,107
Accrued restructuring expense (Note 15)	12,711	27,254
Other	82,665	71,971
Total other current liabilities	$ 167,206	$ 152,806

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Restructuring and Asset Impairment Charges (Details Textual) (USD $) In Millions	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Restructuring and Related Cost [Line Items]
Restructuring and related charges since inception	$ 150
Restructuring and Asset Impairment Charges (Textuals) [Abstract]
Restructuring and related charges	21.5	48.9	73.3
Restructuring charges	13.7	44.3	64.7
Inventory disposals recorded in cost of goods sold	1.1	0.4	2.1
Restructuring related charges recorded in cost of goods sold	4.4	3.5	8.8
Restructuring related charges recorded in operating expenses	3.4	1.1
Restructuring related benefit recorded in operating expense			0.2
Industrial [Member]
Restructuring and Related Cost [Line Items]
Restructuring and related charges since inception	104
Infrastructure [Member]
Restructuring and Related Cost [Line Items]
Restructuring and related charges since inception	44
Corporate [Member]
Restructuring and Related Cost [Line Items]
Restructuring and related charges since inception	$ 2

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Pension and Other Postretirement and Postemployment Benefits (Details 8) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Annual assumed rate of increase in the per capita cost of covered benefits for our postretirement benefit plans
Health care costs trend rate assumed for next year	8.30%	8.60%	8.80%
Rate to which the cost trend rate gradually declines	4.50%	4.50%	4.50%
Year that the rate reaches the rate at which it is assumed to remain	2029	2029	2029
Calculated effect of change on assumption used to calculate cost components and obligations of healthcare plans
Effect on total service and interest cost components, Increase	$ 58
Effect on total service and interest cost components, Decrease	(51)
Effect on other postretirement obligation, Increase	849
Effect on other postretirement obligation, Decrease	$ (757)
Asset allocations and target allocations by asset class
Equity	35.00%	31.00%
Fixed Income	60.00%	66.00%
Other	5.00%	3.00%
Equity, target percentage	30.00%
Fixed income, target percentage	70.00%
Other, target percentage	0.00%

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Segment Data (Details 1) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
External sales:
Total external sales	$ 2,403,493	$ 1,884,067	$ 1,999,859
Total assets:
Total assets	2,754,469	2,267,823	2,346,974
United States [Member]
External sales:
Total external sales	1,041,427	839,168	907,967
Total assets:
Total assets	1,165,705	1,091,510	1,153,109
Germany [Member]
External sales:
Total external sales	398,532	313,929	360,560
Total assets:
Total assets	472,665	333,917	371,394
Asia [Member]
External sales:
Total external sales	441,397	311,616	266,676
Total assets:
Total assets	440,535	330,282	302,355
United Kingdom [Member]
External sales:
Total external sales	63,466	52,145	59,749
Total assets:
Total assets	67,549	35,964	41,233
Canada [Member]
External sales:
Total external sales	59,743	44,538	47,348
Total assets:
Total assets	40,421	29,025	28,055
Other [Member]
External sales:
Total external sales	398,928	322,671	357,559
Total assets:
Total assets	$ 567,594	$ 447,125	$ 450,828

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Income (loss) from continuing operations before income taxes
United States	$ 69,042	$ 3,925	$ (135,133)
International	227,091	72,677	22,637
Income (loss) from continuing operations before income taxes	296,133	76,602	(112,496)
Current income taxes:
Federal	26,234	1,915	(25,071)
State	1,063	1,376	2,019
International	44,440	23,456	21,169
Total current income taxes	71,737	26,747	(1,883)
Deferred income taxes	(7,881)	230	(9,322)
Provision (benefit) for income taxes	$ 63,856	$ 26,977	$ (11,205)
Effective tax rate	21.60%	35.20%	10.00%

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Discontinued Operations

12 Months Ended

Jun. 30, 2011

Discontinued Operations [Abstract]

DISCONTINUED OPERATIONS

NOTE 5 – DISCONTINUED OPERATIONS

Effective June 30, 2009, we divested HSS from our Industrial segment as part of our continuing focus to shape our business portfolio and rationalize our manufacturing footprint. This divestiture was accounted for as discontinued operations. The net assets disposed of as a result of this transaction had a net book value of approximately $51 million and consisted primarily of inventory and equipment, as well as owned and leased facilities. Cash proceeds from this divestiture amounted to $28.5 million, the majority of which was received in 2010. We incurred pre-tax charges related to the divestiture of $2.3 million and $25.9 million during 2010 and 2009, respectively. The pre-tax charges as well as the related tax effects were recorded in discontinued operations. We do not expect to incur any additional pre-tax charges related to this divestiture.

The following represents the results of discontinued operations for the years ended June 30:

(in thousands)	2010			2009
Sales	$	-		$	80,630
Loss from discontinued operations before income taxes	$	(2,269	)	$	(25,923	)
Income tax expense (benefit)		(846	)		(8,583	)
Loss from discontinued operations	$	(1,423	)	$	(17,340	)

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Stock-Based Compensation (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Stock-Based Compensation (Textuals) [Abstract]
Weighted average fair value of options granted	$ 9.33	$ 7.32	$ 7.15
Fair value of options vested	$ 4,400,000	$ 4,100,000	$ 3,500,000
Tax benefits resulting from stock-based compensation deductions in excess of amounts reported for financial reporting purposes	2,900,000	500,000	900,000
Cash received from the exercise of capital stock option	13,600,000	7,200,000	2,200,000
Tax benefit from the exercise of capital stock option	3,200,000	1,200,000	1,100,000
Total Intrinsic value of options exercised	9,900,000	4,000,000	3,000,000
Value of restricted stock units granted to participating executives under STEP Plan	26,000,000
Value of restricted stock units available to be granted to other executives under STEP Plan	11,300,000
Stock Option [Member]
Stock-Based Compensation (Textuals) [Abstract]
Compensation expense related to stock option	5,200,000	4,300,000	4,000,000
Unrecognized compensation cost	4,600,000
Unrecognized compensation costs, weighted average period	2.2
Restricted Stock Award [Member]
Stock-Based Compensation (Textuals) [Abstract]
Compensation expense related to stock option	2,100,000	2,700,000	4,500,000
Unrecognized compensation cost	900,000
Unrecognized compensation costs, weighted average period	0.9
Restricted Stock Units - Time Vesting [Member]
Stock-Based Compensation (Textuals) [Abstract]
Compensation expense related to stock option	10,300,000	2,700,000
Unrecognized compensation cost	13,100,000
Unrecognized compensation costs, weighted average period		2.4
Restricted Stock Units - STEP [Member]
Stock-Based Compensation (Textuals) [Abstract]
Compensation expense related to stock option	400,000	500,000	(600,000)
Unrecognized compensation cost	$ 100,000
Unrecognized compensation costs, weighted average period	0.3
Performance Condition of STEP	Based on the Company’s total shareholder return (TSR), which governs 35 percent of the awarded restricted stock units, and cumulative adjusted earnings per share (EPS), which governs 65 percent of the awarded restricted stock units

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Restructuring and Asset Impairment Charges

12 Months Ended

Jun. 30, 2011

Restructuring Costs and Asset Impairment Charges [Abstract]

RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

NOTE 15 - RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

During 2011, we completed our restructuring plans to reduce costs and improve operating efficiencies. These actions related to the rationalization of certain manufacturing and service facilities as well as other employment and cost reduction programs. Restructuring and related charges recorded in 2011 amounted to $21.5 million, including $13.7 million of restructuring charges of which $1.1 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $4.4 million were recorded in cost of goods sold and $3.4 million in operating expense during 2011.

During 2010, restructuring and related charges amounted to $48.9 million, including $44.3 million of restructuring charges of which $0.4 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $3.5 million were recorded in cost of goods sold and $1.1 million in operating expense during 2010.

During 2009, restructuring and related charges amounted to $73.3 million, including $64.7 million of restructuring charges of which $2.1 million were related to inventory disposals and recorded in cost of goods sold. Restructuring related charges of $8.8 million were recorded in cost of goods sold and a net restructuring related benefit of $0.2 million was recorded in operating expense during 2009.

The combined total pre-tax charges from inception of these restructuring programs through June 30, 2011 were approximately $150 million. The majority of these pre-tax charges were severance charges. Total restructuring and related charges since inception through June 30, 2011 have been recorded as follows: approximately $104 million in Industrial, approximately $44 million in Infrastructure and approximately $2 million in Corporate for the write-off our pre-existing ERP system. These restructuring programs are complete and we do not expect any additional charges.

Restructuring accruals are recorded in other current liabilities in our consolidated balance sheet and the amount attributable to each segment is as follows:

					Asset			Cash
(in thousands)	June 30, 2010		Expense		Write-down			Expenditures			Translation		June 30, 2011
Industrial
Severance	$	18,327	$	4,363	$	-		$	(16,510	)	$	1,631	$	7,811
Facilities		508		2,318		(1,857	)		(444	)		-		525
Other		403		2,031		-			(931	)		101		1,604
Total Industrial		19,238		8,712		(1,857	)		(17,885	)		1,732		9,940
Infrastructure
Severance		7,637		2,484		-			(9,399	)		928		1,650
Facilities		211		1,319		(1,057	)		(204	)		-		269
Other		168		1,156		-			(530	)		58		852
Total Infrastructure		8,016		4,959		(1,057	)		(10,133	)		986		2,771
Total	$	27,254	$	13,671	$	(2,914	)	$	(28,018	)	$	2,718	$	12,711

					Asset
(in thousands)	June 30, 2009		Expense		Write-down			Cash Expenditures			Translation			June 30, 2010
Industrial
Severance	$	18,378	$	29,082	$	-		$	(28,086	)	$	(1,047	)	$	18,327
Facilities		477		790		(604	)		(142	)		(13	)		508
Other		176		1,393		-			(1,241	)		75			403
Total Industrial		19,031		31,265		(604	)		(29,469	)		(985	)		19,238
Infrastructure
Severance		7,659		12,119		-			(11,704	)		(437	)		7,637
Facilities		199		329		(251	)		(59	)		(7	)		211
Other		73		580		-			(517	)		32			168
Total Infrastructure		7,931		13,028		(251	)		(12,280	)		(412	)		8,016
Total	$	26,962	$	44,293	$	(855	)	$	(41,749	)	$	(1,397	)	$	27,254

Asset impairment See discussion of our 2009 Industrial goodwill and indefinite-lived trademark impairment charges in Note 2 under the caption “Goodwill and Other Intangible Assets.”

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Income Taxes (Textuals) [Abstract]
U.S. Federal income taxes associated with dividends of international subsidiary current year income	$ 17,900,000
Tax benefit after IRS examination of 2005 and 2006 tax years			1,800,000
Valuation allowance adjustment	20,500,000		2,800,000
Unrealized tax benefits associated with net operating loss carryforwards for foreign and state jurisdiction	65,800,000
Unrealized tax benefits expiring through June 2016	9,300,000
Unrealized tax benefits expiring through 2021	6,800,000
Unrealized tax benefits expiring through 2026	4,300,000
Unrealized tax benefits expiring through 2031	6,900,000
Unrealized tax benefits that will not expire	38,500,000
Valuation allowance	(25,662,000)	(47,987,000)
valuation allowance related to deferred tax assets decreased	22,300,000
Reversal of valuation allowance due to change in judgment about the realizability of certain deferred tax assets	21,500,000
Unremitted earnings of non-U.S. subsidiaries and affiliates	1,084,500,000
Effective tax	18,000,000	15,800,000	15,200,000
Interest expense	900,000	400,000	800,000
Interest accrued	3,200,000	2,000,000
Reasonably possible amount of unrecognized tax benefits within the next twelve months as a result of the progression of various state and foreign audits in process, Lower Range	13,000,000
Reasonably possible amount of unrecognized tax benefits within the next twelve months as a result of the progression of various state and foreign audits in process, Upper Range	$ 14,000,000

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Income Taxes (Details 2) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Deferred tax assets:
Net operating loss carryforwards	$ 65,768	$ 61,605
Inventory valuation and reserves	29,646	29,302
Pension benefits	713	15,913
Other postretirement benefits	8,312	10,499
Accrued employee benefits	30,975	22,551
Other accrued liabilities	7,939	6,755
Hedging activities	13,528	9,785
Tax credits and other carryforwards	5,431	5,541
Other	2,558	7,953
Total	164,870	169,904
Valuation allowance	(25,662)	(47,987)
Total deferred tax assets	139,208	121,917
Deferred tax liabilities:
Tax depreciation in excess of book	98,957	79,712
Intangible assets	35,965	33,271
Total deferred tax liabilities	134,922	112,983
Total net deferred tax assets (liabilities)	$ 4,286	$ 8,934

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Pension and Other Postretirement and Postemployment Benefits (Tables)

12 Months Ended

Jun. 30, 2011

Pension and Other Postretirement and Postemployment Benefits (Tables) [Abstract]

Defined Benefit Pension Plans

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	759,075		$	687,700
Service cost		7,650			7,949
Interest cost		40,984			42,437
Participant contributions		39			33
Actuarial (gains) losses		(4,400	)		78,606
Benefits and expenses paid		(37,082	)		(41,848	)
Foreign currency translation adjustments		22,074			(19,679	)
Plan amendments		675			3,577
Plan curtailments		(2,443	)		300
Benefit obligation, end of year	$	786,572		$	759,075
Change in plan assets:
Fair value of plan assets, beginning of year	$	656,516		$	606,875
Actual return on plan assets		93,570			90,623
Company contributions		8,536			6,970
Participant contributions		39			33
Benefits and expenses paid		(39,525	)		(41,847	)
Foreign currency translation adjustments		6,330			(6,138	)
Fair value of plan assets, end of year	$	725,466		$	656,516
Funded status of plan	$	(61,106	)	$	(102,559	)
Amounts recognized in the balance sheet consist of:
Long-term prepaid benefit	$	63,579		$	16,026
Short-term accrued benefit obligation		(7,619	)		(6,778	)
Accrued pension benefits		(117,066	)		(111,807	)
Net amount recognized	$	(61,106	)	$	(102,559	)

Defined benefit plans pretax amounts recognized in accumulated other comprehensive income

(in thousands)	2011			2010
Unrecognized net actuarial losses	$	66,734		$	125,971
Unrecognized net prior service credits		(1,540	)		(2,534	)
Unrecognized transition obligations		1,202			1,120
Total	$	66,396		$	124,557

Accumulated benefit obligations exceeding plan assets fair value

(in thousands)	2011		2010
Projected benefit obligation	$	124,684	$	189,042
Accumulated benefit obligation		123,016		186,723
Fair value of plan assets		-		70,456

Net periodic pension cost

(in thousands)	2011			2010			2009
Service cost	$	7,650		$	7,949		$	7,824
Interest cost		40,984			42,437			41,652
Expected return on plan assets		(48,203	)		(46,226	)		(46,939	)
Amortization of transition obligation		52			56			63
Amortization of prior service credit		(281	)		(280	)		(213	)
Special termination benefits		-			3,577			2,651
Curtailment loss		-			300			-
Settlement loss		18			-			-
Recognition of actuarial losses		12,277			4,447			1,900
Net periodic pension cost	$	12,497		$	12,260		$	6,938

Other postretirement benefit plans

(in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation, beginning of year	$	19,910		$	20,598
Service cost		77			99
Interest cost		1,037			1,265
Actuarial losses		2,474			1,260
Benefits paid		(3,203	)		(3,312	)
Plan amendment		(524	)		-
Benefit obligation, end of year	$	19,771		$	19,910
Funded status of plan	$	(19,771	)	$	(19,910	)

(in thousands)	2011			2010
Amounts recognized in the balance sheet consist of:
Short-term accrued benefit obligation	$	(1,918	)	$	(2,016	)
Accrued postretirement benefits		(17,853	)		(17,894	)
Net amount recognized	$	(19,771	)	$	(19,910	)

Other postretirement benefit plans pretax OPEB amounts recognized in accumulated other comprehensive income

(in thousands)	2011			2010
Unrecognized net actuarial gains	$	(864	)	$	(3,529	)
Unrecognized net prior service cost		(524	)		-
Total	$	(1,388	)	$	(3,529	)

Net periodic other postretirement costs (benefit)

(in thousands)	2011			2010			2009
Service cost	$	77		$	99		$	294
Interest cost		1,037			1,266			1,631
Amortization of prior service cost		-			8			39
Recognition of actuarial gains		(190	)		(368	)		(107	)
Curtailment gain		-			-			(3,169	)
Net periodic other postretirement benefit cost (income)	$	924		$	1,005		$	(1,312	)

Actuarial assumptions used to determine the present value of net benefit obligations

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		5.5	%		6.5	%
International plans		5.5-5.8	%		5.0-5.5	%		5.8-7.0	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		2.0 -3.5	%		3.5	%		3.5	%

Assumptions used to determine the net periodic costs (benefits)

	2011			2010			2009
Discount Rate:
U.S. plans		5.5	%		6.5	%		6.8	%
International plans		5.0-5.5	%		5.8-7.0	%		6.3 -6.8	%
Rates of future salary increases:
U.S. plans		3.0 -5.0	%		3.0 -5.0	%		3.0 -5.0	%
International plans		3.5	%		3.5	%		3.5-4.0	%
Rate of return on plans assets:
U.S. plans		8.0	%		8.0	%		8.0	%
International plans		6.4	%		6.7	%		7.1	%

Annual assumed rate of increase in per capita cost of covered benefits for postretirement benefit plans

	2011			2010			2009
Health care costs trend rate assumed for next year		8.3	%		8.6	%		8.8	%
Rate to which the cost trend rate gradually declines		4.5	%		4.5	%		4.5	%
Year that the rate reaches the rate at which it is assumed to remain		2029			2029			2029

Calculated effect of change on assumption used to calculate cost components and obligations of healthcare plans

(in thousands)	1% Increase		1% Decrease
Effect on total service and interest cost components	$	58	$	(51	)
Effect on other postretirement obligation		849		(757	)

Asset allocations and target allocations by asset class

	2011			2010			Target		%
Equity		35	%		31	%		30	%
Fixed Income		60	%		66	%		70	%
Other		5	%		3	%		0	%

Benefit plan assets classified under appropriate level of fair value hierarchy

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	338,955	$	-	$	338,955
Common / collective trusts:
Value funds		-		92,625		-		92,625
Growth funds		-		54,392		-		54,392
Balanced funds		-		15,798		-		15,798
Common stock		93,403		-		-		93,403
Government securities:
U.S. Government securities		-		30,236		-		30,236
Foreign government securities		-		27,465		-		27,465
Other fixed income securities		-		41,043		-		41,043
Other		1,723		36,772		-		38,495
Total investments	$	95,126	$	637,286	$	-	$	732,412

(in thousands)	Level 1		Level 2		Level 3		Total
Corporate fixed income securities	$	-	$	364,773	$	-	$	364,773
Common / collective trusts:
Value funds		-		74,532		-		74,532
Growth funds		-		42,985		-		42,985
Balanced funds		-		12,460		-		12,460
Common stock		75,714		-		-		75,714
Government securities:
U.S. Government securities		-		30,562		-		30,562
Foreign government securities		-		20,627		-		20,627
Other fixed income securities		-		17,114		-		17,114
Other		1,513		16,294		-		17,807
Total investments	$	77,227	$	579,347	$	-	$	656,574

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Pension and Other Postretirement and Postemployment Benefits (Details 4) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Change in benefit obligation:
Plan amendments			$ 2,651
Other postretirement benefit plans [Member]
Change in benefit obligation:
Benefit obligation, beginning of year	19,910	20,598
Service cost	77	99	294
Interest cost	1,037	1,266	1,631
Actuarial losses	2,474	1,260
Benefits paid	(3,203)	(3,312)
Plan amendments	(524)
Benefit obligation, end of year	19,771	19,910	20,598
Funded status of plan	(19,771)	(19,910)
Amounts recognized in the balance sheet consist of:
Short-term accrued benefit obligation	(1,918)	(2,016)
Accrued pension benefits	(17,853)	(17,894)
Net amount recognized	$ (19,771)	$ (19,910)

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies (Policies) [Abstract]

PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All significant intercompany balances and transactions are eliminated. Investments in entities of less than 50 percent of the voting stock over which we have significant influence are accounted for on an equity basis. The factors used to determine significant influence include, but are not limited to, our management involvement in the investee, such as hiring and setting compensation for management of the investee, the ability to make operating and capital decisions of the investee, representation on the investee’s board of directors and purchase and supply agreements with the investee. Investments in entities of less than 50 percent of the voting stock in which we do not have significant influence are accounted for on the cost basis.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we make judgments and estimates about the amounts reflected in our financial statements. As part of our financial reporting process, our management collaborates to determine the necessary information on which to base our judgments and develop estimates used to prepare the financial statements. We use historical experience and available information to make these judgments and estimates. However, different amounts could be reported using different assumptions and in light of different facts and circumstances. Therefore, actual amounts could differ from the estimates reflected in our financial statements.

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS Cash investments having original maturities of three months or less are considered cash equivalents. Cash equivalents principally consist of investments in money market funds and bank deposits at June 30, 2011.

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE We market our products to a diverse customer base throughout the world. Trade credit is extended based upon periodically updated evaluations of each customer’s ability to satisfy its obligations. We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Accounts receivable reserves are determined based upon an aging of accounts and a review of specific accounts.

INVENTORIES

INVENTORIES Inventories are stated at the lower of cost or market. We use the last-in, first-out (LIFO) method for determining the cost of a significant portion of our United States (U.S.) inventories. The cost of the remainder of our inventories is determined under the first-in, first-out or average cost methods. When market conditions indicate an excess of carrying costs over market value, a lower-of-cost-or-market provision is recorded. Excess and obsolete inventory reserves are established based upon our evaluation of the quantity of inventory on hand relative to demand. The excess and obsolete inventory reserve at June 30, 2011 and 2010 was $55.3 million and $68.3 million, respectively.

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Major improvements are capitalized, while maintenance and repairs are expensed as incurred. Retirements and disposals are removed from cost and accumulated depreciation accounts, with the gain or loss reflected in operating income. Interest related to the construction of major facilities is capitalized as part of the construction costs and is amortized over the facilities estimated useful life.

Depreciation for financial reporting purposes is computed using the straight-line method over the following estimated useful lives: building and improvements over 15-40 years; machinery and equipment over 4-15 years; furniture and fixtures over 5-10 years and computer hardware and software over 3-5 years.

Leased property and equipment under capital leases are amortized using the straight-line method over the terms of the related leases.

LONG-LIVED ASSETS

LONG-LIVED ASSETS We evaluate the recoverability of property, plant and equipment and intangible assets that are amortized, whenever events or changes in circumstances indicate the carrying amount of any such assets may not be fully recoverable. Changes in circumstances include technological advances, changes in our business model, capital structure, economic conditions or operating performance. Our evaluation is based upon, among other things, our assumptions about the estimated future undiscounted cash flows these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value of the asset or asset group, we will recognize an impairment loss to the extent that carrying value exceeds fair value. We apply our best judgment when performing these evaluations to determine if a triggering event has occurred, the undiscounted cash flows used to assess recoverability and the fair value of the asset.

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of cost over the fair value of the net assets of acquired companies. Goodwill and intangible assets with indefinite lives are tested at least annually for impairment. We perform our annual impairment tests during the June quarter in connection with our annual planning process unless there are impairment indicators that warrant a test prior to that.

The carrying amount of goodwill attributable to each segment at June 30 is as follows:

(in thousands)	Industrial			Infrastructure			Total
Goodwill	$	406,626		$	247,199		$	653,825
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2009	$	255,784		$	247,199		$	502,983
Acquisitions / Divestitures		536			-			536
Translation		(13,188	)		(888	)		(14,076	)
Change in goodwill		(12,652	)		(888	)		(13,540	)
Goodwill	$	393,974		$	246,311		$	640,285
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2010	$	243,132		$	246,311		$	489,443
Adjustments	$	252		$	-		$	252
Translation		17,719			3,914			21,633
Change in goodwill		17,971			3,914			21,885
Goodwill		411,945			250,225			662,170
Accumulated impairment losses		(150,842	)		-			(150,842	)
Balance as of June 30, 2011	$	261,103		$	250,225		$	511,328

We recorded no goodwill or intangible asset impairments in 2011 and 2010. We also recorded goodwill impairment charges of $37.3 million related to our surface finishing machines and services business and $62.9 million related to our engineered products business in 2009.

During 2010, we acquired the remaining noncontrolling interest of a consolidated entity which resulted in additional Industrial goodwill of $0.7 million.

The components of our intangible assets were as follows as of June 30:

	Estimated		2011					2010
	Useful Life		Gross Carrying		Accumulated			Gross Carrying		Accumulated
(in thousands)	(in years)		Amount		Amortization			Amount		Amortization
Contract-based		4 to 15	$	6,349	$	(5,380	)	$	6,357	$	(5,218	)
Technology-based and other		4 to 15		39,743		(25,442	)		37,136		(20,422	)
Customer-related		10 to 20		113,977		(38,275	)		108,470		(29,255	)
Unpatented technology		30		19,540		(4,740	)		19,216		(4,572	)
Trademarks		5 to 20		10,902		(4,875	)		10,647		(3,876	)
Trademarks	Indefinite			40,480		-			36,823		-
Total			$	230,991	$	(78,712	)	$	218,649	$	(63,343	)

During 2011, we recorded foreign currency translation adjustments which increased intangible assets by $8.5 million. During 2010, we recorded foreign currency translation adjustments which decreased intangible assets by $6.0 million. We also recorded a $10.8 million impairment charge in 2009 for the indefinite-lived trademark for our surface finishing machines and services business.

Amortization expense for intangible assets was $11.6 million, $13.1 million and $13.1 million for 2011, 2010 and 2009, respectively. Estimated amortization expense for 2012 through 2016 is $10.8 million, $10.1 million, $9.8 million, $9.5 million, and $9.1 million, respectively.

PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We sponsor these types of benefit plans for certain employees and retirees. Accounting for the cost of these plans requires the estimation of the cost of the benefits to be provided well into the future and attributing that cost over the expected work life of employees participating in these plans. This estimation requires our judgment about the discount rate used to determine these obligations, expected return on plan assets, rate of future compensation increases, rate of future health care costs, withdrawal and mortality rates and participant retirement age. Differences between our estimates and actual results may significantly affect the cost of our obligations under these plans.

In the valuation of our pension and other postretirement and postemployment benefit liabilities, management utilizes various assumptions. We determine our discount rate based on investment grade bond yield curves with a duration that approximates the benefit payment timing of each plan. This rate can fluctuate based on changes in investment grade bond yields.

The long-term rate of return on plan assets is estimated based on an evaluation of historical returns for each asset category held by the plans, coupled with the current and short-term mix of the investment portfolio. The historical returns are adjusted for expected future market and economic changes. This return will fluctuate based on actual market returns and other economic factors.

The rate of future health care costs is based on historical claims and enrollment information projected over the next year and adjusted for administrative charges. This rate is expected to decrease until 2029.

Future compensation rates, withdrawal rates and participant retirement age are determined based on historical information. These assumptions are not expected to significantly change. Mortality rates are determined based on a review of published mortality tables.

EARNINGS PER SHARE

EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding during the period, while diluted earnings per share is calculated to reflect the potential dilution that occurs related to the issuance of capital stock under stock option grants, restricted stock awards and restricted stock units. The difference between basic and diluted earnings per share relates solely to the effect of capital stock options, restricted stock awards and restricted stock units.

For purposes of determining the number of diluted shares outstanding at June 30, 2011 and 2010, weighted average shares outstanding for basic earnings per share calculations were increased due solely to the dilutive effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units by 1.1 million and 0.7 million shares, respectively. For June 30, 2009, the effect of unexercised capital stock options, unvested restricted stock awards and unvested restricted stock units was anti-dilutive and therefore has been excluded from diluted shares outstanding as well as from the diluted earnings per share calculation. Unexercised capital stock options, restricted stock units and restricted stock awards of 0.4 million, 2.3 million and 2.6 million shares at June 30, 2011, 2010, and 2009, respectively, were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price, and therefore the inclusion would have been anti-dilutive.

REVENUE RECOGNITION

REVENUE RECOGNITION We recognize revenue upon shipment of our products and assembled machines. Our general conditions of sale explicitly state that the delivery of our products and assembled machines is F.O.B. shipping point and that title and all risks of loss and damage pass to the buyer upon delivery of the sold products or assembled machines to the common carrier.

Our general conditions of sale explicitly state that acceptance of the conditions of shipment are considered to have occurred unless written notice of objection is received by Kennametal within 10 calendar days of the date specified on the invoice. We do not ship products or assembled machines unless we have documentation from our customers authorizing shipment. Our products are consumed by our customers in the manufacture of their products. Historically, we have experienced very low levels of returned products and assembled machines and do not consider the effect of returned products and assembled machines to be material. We have recorded an estimated returned goods allowance to provide for any potential returns.

We warrant that products and services sold are free from defects in material and workmanship under normal use and service when correctly installed, used and maintained. This warranty terminates 30 days after delivery of the product to the customer and does not apply to products that have been subjected to misuse, abuse, neglect or improper storage, handling or maintenance. Products may be returned to Kennametal, only after inspection and approval by Kennametal and upon receipt by the customer of shipping instructions from Kennametal. We have included an estimated allowance for warranty returns in our returned goods allowance.

We recognize revenue related to the sale of specialized assembled machines upon customer acceptance and installation, as installation is deemed essential to the functionality of a specialized assembled machine. Sales of specialized assembled machines were immaterial for 2011, 2010 and 2009.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION We recognize stock-based compensation expense for all stock options, restricted stock awards and restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period). We utilize the Black-Scholes valuation method to establish the fair value of all stock option awards.

Capital stock options are granted to eligible employees at fair market value at the date of grant. Capital stock options are exercisable under specified conditions for up to 10 years from the date of grant. On October 26, 2010, the Company’s shareowners approved the Kennametal Inc., Stock and Incentive Plan of 2010 (2010 Plan). The 2010 Plan authorizes the issuance of up to 3,500,000 shares of the Company’s capital stock plus any shares remaining unissued under the Kennametal Inc. Stock and Incentive Plan of 2002, as amended (2002 Plan). Under the provisions of these Plans, participants may deliver our stock, owned by the holder for at least six months, in payment of the option price and receive credit for the fair market value of the shares on the date of delivery. The fair value of shares delivered during 2011, 2010 and 2009 was $0.8 million, $0.1 million, and $0.7 million, respectively. In addition to stock option grants, these Plans permit the award of stock appreciation rights, performance shares, performance units, restricted stock and restricted stock units to directors, officers and key employees.

RESEARCH AND DEVELOPMENT COSTS

RESEARCH AND DEVELOPMENT COSTS Research and development costs of $33.3 million, $28.0 million and $27.6 million in 2011, 2010 and 2009, respectively, were expensed as incurred. These costs are included in operating expense in the consolidated statements of income.

SHIPPING AND HANDLING FEES AND COSTS

SHIPPING AND HANDLING FEES AND COSTS All fees billed to customers for shipping and handling are classified as a component of sales. All costs associated with shipping and handling are classified as a component of cost of goods sold.

INCOME TAXES

INCOME TAXES Deferred income taxes are recognized based on the future income tax effects (using enacted tax laws and rates) of differences in the carrying amounts of assets and liabilities for financial reporting and tax purposes. A valuation allowance is recognized if it is “more likely than not” that some or all of a deferred tax asset will not be realized.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES As part of our financial risk management program, we use certain derivative financial instruments. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We use derivative financial instruments to provide predictability to the effects of changes in foreign exchange rates on our consolidated results, achieve our targeted mix of fixed and floating interest rates on outstanding debt and forecasted transactions. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow, allowing us to focus more of our attention on business operations. With respect to interest rate management, these derivative instruments allow us to achieve our targeted fixed-to-floating interest rate mix, as a separate decision from funding arrangements, in the bank and public debt markets.

We account for derivative instruments as a hedge of the related asset, liability, firm commitment or anticipated transaction, when the derivative is specifically designated as a hedge of such items. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense (income), net.

Certain currency forward contracts hedging significant cross-border intercompany loans are considered other derivatives and, therefore, do not qualify for hedge accounting. These contracts are recorded at fair value in the balance sheet, with the offset to other expense (income), net.

CASH FLOW HEDGES

CASH FLOW HEDGES Currency Forward contracts and range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive income (loss), net of tax, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings.

Interest Rate Floating-to-fixed interest rate swap contracts, designated as cash flow hedges, are entered into from time to time to hedge our exposure to interest rate changes on a portion of our floating rate debt. These interest rate swap contracts convert a portion of our floating rate debt to fixed rate debt. We record the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet, with the offset to accumulated other comprehensive income (loss), net of tax.

FAIR VALUE HEDGES

FAIR VALUE HEDGES Interest Rate Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. These interest rate swap contracts convert a portion of our fixed rate debt to floating rate debt. When in place, these contracts require periodic settlement, and the difference between amounts to be received and paid under the contracts is recognized in interest expense.

FOREIGN CURRENCY TRANSLATION

FOREIGN CURRENCY TRANSLATION Assets and liabilities of international operations are translated into U.S. dollars using year-end exchange rates, while revenues and expenses are translated at average exchange rates throughout the year. The resulting net translation adjustments are recorded as a component of accumulated other comprehensive income (loss). The local currency is the functional currency of most of our locations. Losses from foreign currency transactions included in other expense (income), net were $6.6 million for 2011. Gains from foreign currency transactions included in other expense (income), net were $3.5 million and $6.8 million for 2010 and 2009, respectively.

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

Adopted

As of January 1, 2011, Kennametal adopted changes to intangible impairment testing for reporting units with zero or negative carrying amounts. These changes require an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not that an intangible impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s intangible assets are not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of January 1, 2011, Kennametal adopted changes to the disclosures related to business combinations for a public entity that presents comparative financial statements. This guidance also expanded the supplemental pro forma business combination disclosures. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on consolidations for enterprises involved with variable interest entities. The guidance modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights should be consolidated and clarifies that the determination of whether a company is required to consolidate a variable interest entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on accounting for transfers of financial assets. This guidance requires additional disclosure regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. The adoption of this guidance did not have an impact on our consolidated financial statements.

As of July 1, 2010, Kennametal adopted new guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance allows companies to allocate arrangement consideration in multiple deliverable arrangements in a manner that better reflects the transaction’s economics and may result in earlier revenue recognition. In addition, the residual method of allocating arrangement consideration is no longer permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Issued

In June 2011, the Financial Accounting Standards Board (FASB) issued new guidance on presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement (referred to as the statement of comprehensive income) or in two separate consecutive statements. Each component of net income and other comprehensive income, together with totals for comprehensive income and its two parts — net income and other comprehensive income, would need to be displayed under either alternative. The statement(s) would need to be presented with equal prominence as the other primary financial statements. This guidance is effective for Kennametal beginning July 1, 2012.

In May 2011, the FASB issued new guidance on fair value measurements and disclosure. The objective of the new guidance is a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. Many of the amendments in this new guidance represent clarifications to existing guidance or changes in the measurement guidance for determining fair value. The most significant change in disclosures is an expansion of the information required for Level 3 measurements. New disclosures are required about the use of a nonfinancial asset measured or disclosed at fair value if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. This guidance is effective for Kennametal beginning January 1, 2012. We are in the process of evaluating the impact of adoption on our consolidated financial statements.

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Consolidated Statements of Cash Flow (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
OPERATING ACTIVITIES
Net income (loss)	$ 232,277	$ 48,202	$ (118,631)
Adjustments for non-cash items:
Depreciation	81,869	83,339	83,247
Amortization	11,602	13,090	13,134
Stock-based compensation expense	18,852	16,640	9,412
Restructuring and asset impairment charges (Note 15)	2,914	855	115,212
Loss on divestitures (Note 4)		527	22,704
Deferred income tax (benefit) provision	(7,881)	230	(10,898)
Other	(9,872)	(4,506)	(1,088)
Changes in certain assets and liabilities, excluding effects of acquisitions and divestitures:
Accounts receivable	(89,153)	(58,245)	200,159
Inventories	(124,082)	(2,576)	36,048
Accounts payable and accrued liabilities	100,325	40,985	(118,133)
Accrued income taxes	22,158	19,227	(11,969)
Other	(8,212)	7,060	(26,934)
Net cash flow provided by operating activities	230,797	164,828	192,263
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(83,442)	(56,679)	(104,842)
Disposals of property, plant and equipment	9,755	5,141	2,914
Cash paid for acquisitions, net of cash acquired (note 4)		(16,969)	(69,485)
Proceeds from divestitures (Note 4 and 5)		27,788	1,544
Proceeds from sale of investments in affiliated companies	1,723	23	108
Other	139	276	(295)
Net cash flow used for investing activities	(71,825)	(40,420)	(170,056)
FINANCING ACTIVITIES
Net (decrease) increase in notes payable	(15,992)	(27,335)	14,311
Term debt borrowings	450,109	564,366	974,248
Term debt repayments	(451,748)	(680,023)	(860,522)
Purchase of capital stock	(57,909)	(306)	(127,720)
Net proceeds from equity offering		120,696
Proceeds from interest rate swap agreement termination (Note 7)			12,566
Dividend reinvestment and the effect of employee benefit and stock plans	18,328	10,677	4,873
Cash dividends paid to shareowners	(39,801)	(39,316)	(35,466)
Other	988	(6,926)	2,184
Net cash flow used for financing activities	(96,025)	(58,167)	(15,526)
Effect of exchange rate changes on cash and cash equivalents	23,489	(17,935)	(23,336)
CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash equivalents	86,436	48,306	(16,655)
Cash and cash equivalents, beginning of period	118,129	69,823	86,478
Cash and cash equivalents, end of period	$ 204,565	$ 118,129	$ 69,823

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Financial Instruments

12 Months Ended

Jun. 30, 2011

Financial Instruments [Abstract]

FINANCIAL INSTRUMENTS

NOTE 16 - FINANCIAL INSTRUMENTS

The methods used to estimate the fair value of our financial instruments are as follows:

Cash and Equivalents, Current Maturities of Long-Term Debt and Notes Payable to Banks The carrying amounts approximate their fair value because of the short maturity of the instruments.

Long-Term Debt Fixed rate debt had a fair market value of $315.8 million and $325.5 million at June 30, 2011 and 2010, respectively. The fair value is determined based on the quoted market price of this debt as of June 30.

Foreign Exchange Contracts The notional amount of outstanding foreign exchange contracts, translated at current exchange rates, was $37.6 million and $9.4 million at June 30, 2011 and 2010, respectively. We would have paid immaterial amounts at June 30, 2011 and 2010, respectively, to settle these contracts representing the fair value of these agreements. The carrying value equaled the fair value for these contracts at June 30, 2011 and 2010. Fair value was estimated based on quoted market prices of comparable instruments.

Interest Rate Swap Contracts The cumulative notional amount of outstanding forward starting interest rate swap contracts was $150 million at June 30, 2011. We recorded a net liability of $2.4 million on these contracts which was recorded as an offset in other comprehensive income, net of tax. The carrying value equaled the fair value for these contracts at June 30, 2011. Fair value was estimated based on quoted market prices of comparable instruments.

Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of temporary cash investments and trade receivables. By policy, we make temporary cash investments with high credit quality financial institutions and limit the amount of exposure to any one financial institution. With respect to trade receivables, concentrations of credit risk are significantly reduced, because we serve numerous customers in many industries and geographic areas.

We are exposed to counterparty credit risk for nonperformance of derivatives and, in the unlikely event of nonperformance, to market risk for changes in interest and currency rates, as well as settlement risk. We manage exposure to counterparty credit risk through credit standards, diversification of counterparties and procedures to monitor concentrations of credit risk. We do not anticipate nonperformance by any of the counterparties. As of June 30, 2011 and 2010, we had no significant concentrations of credit risk.

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Selected Quarterly Financial Data (Tables)

12 Months Ended

Jun. 30, 2011

Selected Quarterly Financial Data (Tables) [Abstract]

Selected Quarterly Financials Data

For the quarter ended (in thousands, except per share data)	September 30			December 31		March 31		June 30
2011
Sales	$	529,158		$	565,768	$	614,830	$	693,737
Gross profit		188,740			200,025		229,981		265,645
Income from continuing operations attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Net income attributable to Kennametal (4)		34,921			43,469		64,683		86,655
Basic earnings per share attributable to Kennametal (5) Continuing operations		0.43			0.53		0.79		1.06
Net income		0.43			0.53		0.79		1.06
Diluted earnings per share attributable to Kennametal (5) Continuing operations		0.42			0.52		0.77		1.04
Net income		0.42			0.52		0.77		1.04
2010
Sales	$	409,395		$	442,865	$	493,165	$	538,642
Gross profit		117,801			140,088		170,324		199,515
(Loss) income from continuing operations attributable to Kennametal (4)		(8,450	)		6,023		9,685		40,584
Net (loss) income attributable to Kennametal (4)		(9,817	)		5,967		9,685		40,584
Basic (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.50
Net (loss) income		(0.12	)		0.07		0.12		0.50
Diluted (loss) earnings per share attributable to Kennametal (5)
Continuing operations		(0.10	)		0.07		0.12		0.49
Net (loss) income		(0.12	)		0.07		0.12		0.49

(4)

Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2011 and December 31 and September 30, 2010, includes restructuring charges of $4.9 million, $1.0 million, $3.4 million and $3.3 million, respectively. Income from continuing operations and net income attributable to Kennametal for the quarter ended June 30 and March 31, 2010, includes restructuring charges of $12.0 million and $20.7 million, respectively. Income (loss) from continuing operations and net income (loss) attributable to Kennametal for the quarter ended December 31 and September 30, 2009, includes restructuring charges of $3.3 million and $7.8 million, respectively.

(5)

Earnings per share amounts attributable to Kennametal for each quarter are computed using the weighted average number of shares outstanding during the quarter. Earnings per share amounts attributable to Kennametal for the full year are computed using the weighted average number of shares outstanding during the year. Thus, the sum of the four quarters’ earnings per share attributable to Kennametal does not always equal the full-year earnings per share attributable to Kennametal.

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Selected Quarterly Financial Data (Details) (USD $) In Thousands, except Per Share data	3 Months Ended								12 Months Ended
	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Selected quarterly financial data [Abstract]
Sales	$ 693,737	$ 614,830	$ 565,768	$ 529,158	$ 538,642	$ 493,165	$ 442,865	$ 409,395	$ 2,403,493	$ 1,884,067	$ 1,999,859
Gross profit	265,645	229,981	200,025	188,740	199,515	170,324	140,088	117,801	884,391	627,728	576,539
(Loss) income from continuing operations attributable to Kennametal	86,655	64,683	43,469	34,921	40,584	9,685	6,023	(8,450)	229,727	47,842	(102,402)
Net (loss) income attributable to Kennametal	$ 86,655	$ 64,683	$ 43,469	$ 34,921	$ 40,584	$ 9,685	$ 5,967	$ (9,817)	$ 229,727	$ 46,419	$ (119,742)
Basic (loss) earnings per share attributable to Kennametal
Continuing operations	$ 1.06	$ 0.79	$ 0.53	$ 0.43	$ 0.50	$ 0.12	$ 0.07	$ (0.10)	$ 2.80	$ 0.59	$ (1.40)
Net (loss) income	$ 1.06	$ 0.79	$ 0.53	$ 0.43	$ 0.50	$ 0.12	$ 0.07	$ (0.12)	$ 2.80	$ 0.57	$ (1.64)
Diluted (loss) earnings per share attributable to Kennametal
Continuing operations	$ 1.04	$ 0.77	$ 0.52	$ 0.42	$ 0.49	$ 0.12	$ 0.07	$ (0.10)	$ 2.76	$ 0.59	$ (1.40)
Net (loss) income	$ 1.04	$ 0.77	$ 0.52	$ 0.42	$ 0.49	$ 0.12	$ 0.07	$ (0.12)	$ 2.76	$ 0.57	$ (1.64)

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Environmental Matters

12 Months Ended

Jun. 30, 2011

Environmental Matters [Abstract]

ENVIRONMENTAL MATTERS

NOTE 18 — ENVIRONMENTAL MATTERS

The operation of our business has exposed us to certain liabilities and compliance costs related to environmental matters. We are involved in various environmental cleanup and remediation activities at certain of our locations.

Superfund Sites We are involved as a PRP at various sites designated by the USEPA as Superfund sites. For certain of these sites, we have evaluated the claims and potential liabilities and have determined that neither are material, individually or in the aggregate. For certain other sites, proceedings are in the very early stages and have not yet progressed to a point where it is possible to estimate the ultimate cost of remediation, the timing and extent of remedial action that may be required by governmental authorities or the amount of our liability alone or in relation to that of any other PRPs.

Other Environmental Issues We establish and maintain reserves for other potential environmental issues. At June 30, 2011 and 2010, the total of accruals for these reserves was $5.4 million and $5.2 million, respectively. These totals represent anticipated costs associated with the remediation of these issues. We recorded additional reserves of $1.5 million and $0.6 million in 2011 and 2010, respectively. Additional reserves recorded in 2011 primarily relate to an environmental liability in our international operations. We recorded unfavorable foreign currency translation adjustments of $0.6 million during 2011 and favorable foreign currency translation adjustment of $0.6 million during 2010, respectively. Cash payments of $0.8 million and $0.1 million were made against these reserves during 2011 and 2010, respectively. In 2011 we also had a $1.1 million reversal of an international environmental liability and payment of a civil penalty of $0.2 million related to our Chestnut Ridge, Pennsylvania facility closure. The reserves we have established for environmental liabilities represent our best current estimate of the costs of addressing all identified environmental situations, based on our review of currently available evidence, and take into consideration our prior experience in remediation and that of other companies, as well as public information released by the USEPA, other governmental agencies, and by the PRP groups in which we are participating. Although the reserves currently appear to be sufficient to cover these environmental liabilities, there are uncertainties associated with environmental liabilities, and we can give no assurance that our estimate of any environmental liability will not increase or decrease in the future. The reserved and unreserved liabilities for all environmental concerns could change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements, technological changes, discovery of new information, the financial strength of other PRPs, the identification of new PRPs and the involvement of and direction taken by the government on these matters.

We maintain a Corporate EHS Department, as well as an EHS Steering Committee, to monitor compliance with environmental regulations and to oversee remediation activities. In addition, we have designated EHS coordinators who are responsible for each of our global manufacturing facilities at each of our global manufacturing facilities. Our financial management team periodically meets with members of the Corporate EHS Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly basis, we review financial provisions and reserves for environmental contingencies and adjust these reserves when appropriate.

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Pension and Other Postretirement and Postemployment Benefits (Details 6)	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Minimum [Member] | U.S. Plans [Member]
Rates of future salary increases:
Rates of future salary increases	3.00%	3.00%	3.00%
Minimum [Member] | International Plans [Member]
Discount Rate:
Discount Rate	5.50%	5.00%	5.80%
Rates of future salary increases:
Rates of future salary increases	2.00%
Maximum [Member] | U.S. Plans [Member]
Rates of future salary increases:
Rates of future salary increases	5.00%	5.00%	5.00%
Maximum [Member] | International Plans [Member]
Discount Rate:
Discount Rate	5.80%	5.50%	7.00%
Rates of future salary increases:
Rates of future salary increases	3.50%
U.S. Plans [Member]
Discount Rate:
Discount Rate	5.50%	5.50%	6.50%
International Plans [Member]
Rates of future salary increases:
Rates of future salary increases		3.50%	3.50%

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Pension and Other Postretirement and Postemployment Benefits (Details 2) (Pension plans contribution [Member], USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Pension plans contribution [Member]
Accumulated benefit obligations exceeding the fair value of plan assets
Projected benefit obligation	$ 124,684	$ 189,042
Accumulated benefit obligation	123,016	186,723
Fair value of plan assets	$ 0	$ 70,456

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Nature of Operations

12 Months Ended

Jun. 30, 2011

Nature of Operations [Abstract]

NATURE OF OPERATIONS

NOTE 1 - NATURE OF OPERATIONS

Kennametal Inc. delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions, enabled through our advanced materials sciences, application knowledge and commitment to a sustainable environment. We believe that our reputation for manufacturing excellence, as well as our technological expertise and innovation in our principal products, has helped us to achieve a leading market presence in our primary markets. End users of our products include metalworking manufacturers and suppliers across a diverse array of industries, including the aerospace, defense, transportation, machine tool, light machinery and heavy machinery industries, as well as manufacturers, producers and suppliers in a number of other industries including coal mining, highway construction, quarrying, and oil and gas exploration and production industries. Our end users’ products include items ranging from airframes to coal mining, engines to oil wells and turbochargers to construction.

Unless otherwise specified, any reference to a “year” is to a fiscal year ended June 30. When used in this annual report on Form 10-K, unless the context requires otherwise, the terms “we,” “our” and “us” refer to Kennametal Inc. and its subsidiaries.

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Long-Term Debt and Capital Leases

12 Months Ended

Jun. 30, 2011

Long-Term Debt and Capital Leases [Abstract]

LONG-TERM DEBT AND CAPITAL LEASES

NOTE 10 – LONG-TERM DEBT AND CAPITAL LEASES

Long-term debt and capital lease obligations consisted of the following at June 30:

(in thousands)	2011			2010
7.2% Senior Unsecured Notes due 2012 net of discount of $0.1 million and $0.2 million for 2011 and 2010, respectively. Also including interest rate swap adjustments of $6.1 million and $12.1 million in 2011 and 2010, respectively	$	305,954		$	311,849
Capital leases with terms expiring through 2015 at 2.3% to 2.8% in 2011 and 2.0% to 4.7% in 2010		3,113			6,020
Other		156			345
Total debt and capital leases		309,223			318,214
Less current maturities:
Long-term debt		(306,032	)		(133	)
Capital leases		(1,272	)		(3,406	)
Total current maturities		(307,304	)		(3,539	)
Long-term debt and capital leases, less current maturities	$	1,919		$	314,675

Senior Unsecured Notes On June 19, 2002, we issued $300 million of 7.2 percent Senior Unsecured Notes due 2012 (Senior Unsecured Notes). Interest is payable semi-annually on June 15 and December 15 of each year. The Senior Unsecured Notes contain covenants that restrict our ability to create liens, enter into sale-leaseback transactions or certain consolidations or mergers, or sell all or substantially all of our assets. These notes have been reclassified to current maturities of long-term debt as of June 30, 2011. The repayment of this debt is expected to be financed in due course through a new corporate bond issuance.

2010 Credit Agreement On June 25, 2010 we entered into a five-year, multi-currency, revolving credit facility (2010 Credit Agreement) that extends to June 2015. This agreement replaces the prior credit facility that was scheduled to mature in March 2011. The 2010 Credit Agreement permits revolving credit loans of up to $500 million for working capital, capital expenditures and general corporate purposes. The 2010 Credit Agreement allows for borrowings in U.S. dollars, euro, Canadian dollars, pound sterling and Japanese yen. Interest payable under the 2010 Credit Agreement is based upon the type of borrowing under the facility and may be (1) LIBOR plus an applicable margin, (2) the greater of the prime rate or the Federal Funds effective rate plus an applicable margin, or (3) fixed as negotiated by us.

The 2010 Credit Agreement requires us to comply with various restrictive and affirmative covenants, including two financial covenants: a maximum leverage ratio and a minimum consolidated interest coverage ratio (as those terms are defined in the agreement). We were in compliance with these financial covenants as of June 30, 2011. We had no borrowings outstanding under the 2010 Credit Agreement as of June 30, 2011 or 2010.

Borrowings under the 2010 Credit Agreement are guaranteed by our significant domestic subsidiaries.

Future principal maturities of long-term debt are $306.0 million and $0.1 million, respectively, in 2012 and 2013.

Future minimum lease payments under capital leases for the next five years and thereafter in total are as follows:

(in thousands)
2012	$	1,392
2013		1,111
2014		274
2015		728
2016		—
After 2016		—
Total future minimum lease payments		3,505
Less amount representing interest		(392	)
Amount recognized as capital lease obligations	$	3,113

Our collateralized debt at June 30, 2011 and 2010 was comprised of industrial revenue bond obligations of $0.2 million and $0.3 million, respectively, and the capitalized lease obligations of $3.1 million and $6.0 million, respectively. The underlying assets collateralize these obligations.

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2011	Jun. 30, 2010
Inventories
Finished goods	$ 303,716	$ 227,096
Work in process and powder blends	202,940	134,732
Raw materials and supplies	109,683	62,673
Inventories at current cost	616,339	424,501
Less: LIFO valuation	(96,366)	(60,233)
Total inventories	$ 519,973	$ 364,268
Inventories (Textuals) [Abstract]
Percentage of inventories valued by using LIFO method	50.00%	51.00%

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Long-Term Debt and Capital Lease (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 25, 2010
Long-Term Debt and Capital Lease (Textuals) [Abstract]
Interest Rate Stated Percentage under Senior Unsecured Notes	7.20%
7.20% Senior Unsecured Notes due 2012 net of discount	$ 100,000	$ 200,000
Interest rate swap adjustment	6,100,000	12,100,000
Minimum Interest Rate Stated Percentage under Capital leases with terms	0.023	0.028
Maximum Interest Rate Stated Percentage under Capital leases with terms	0.020	0.047
Capital leases with expiring Period	2015
Frequency of Periodic Interest Payment on Senior Unsecured Notes	semi-annually on June 15 and December 15 of each year
Maximum borrowing capacity under Credit Agreement			500,000,000
Borrowing outstanding under the 2010 Credit Agreement	0
Future principal maturities of Long term Debt for 2012	306,000,000
Future principal maturities of Long term Debt for 2013	100,000
Collateralized Debt Obligations comprised of industrial revenue bond obligations	200,000	300,000
Capitalized lease Obligation	$ 3,113,000	$ 6,020,000

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Pension and Other Postretirement and Postemployment Benefits (Details 3) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Net periodic pension cost
Net periodic pension cost			$ 6,938
Pension plans contribution [Member]
Net periodic pension cost
Service cost	7,650	7,949	7,824
Interest cost	40,984	42,437	41,652
Expected return on plan assets	(48,203)	(46,226)	(46,939)
Amortization of transition obligation	52	56	63
Amortization of prior service credit	(281)	(280)	(213)
Special termination benefit		3,577	2,651
Curtailment loss (gain)		300
Settlement Loss	18
Recognition of actuarial gains/losses	12,277	4,447	1,900
Net periodic pension cost	$ 12,497	$ 12,260	$ 6,938

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Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities (Tables) [Abstract]

Fair value of derivatives

(in thousands)	2011			2010
Derivatives designated as hedging instruments
Other current assets — range forward contracts	$	87		$	34
Other current liabilities — range forward contracts		(159	)		(2	)
Other assets — forward starting interest rate swap contracts		772			-
Other liabilities — forward starting interest rate swap contracts		(3,169	)		(2,348	)
Total derivatives designated as hedging instruments		(2,469	)		(2,316	)
Derivatives not designated as hedging instruments
Other current assets — currency forward contracts		37			9
Other current liabilities — currency forward contracts		(2	)		(1,103	)
Total derivatives not designated as hedging instruments		35			(1,094	)
Total derivatives	$	(2,434	)	$	(3,410	)

(Gains) losses related to derivatives not designated as hedging instruments

(in thousands)	2011			2010		2009
| | |
Other expense (income), net — currency forward contracts	$	(1,126	)	$	1,077	$	73

Gains (losses) related to cash flow hedges

(in thousands)	2011			2010			2009
(Losses) gains recognized in other comprehensive income (loss)	$	(26	)	$	(962	)	$	107
Losses (gains) reclassified from accumulated other comprehensive loss into other expense (income), net	$	1,041		$	(1,107	)	$	(8,505	)

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Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income

12 Months Ended

Jun. 30, 2011

Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income [Abstract]

COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

NOTE 14 – COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

years ended June 30 (in thousands)	2011			2010			2009
Net income (loss)	$	232,277		$	48,202		$	(118,631	)
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $(0.6) million and $(1.9) million, respectively		642			(936	)		(3,006	)
Reclassification of unrealized (gain) loss on expired derivatives designated and qualified as cash flow hedges, net of income tax expense (benefit) of $0.4 million, $0.9 million and $(3.3) million, respectively		(679	)		(1,482	)		5,290
Unrecognized net pension and other postretirement benefit gains (losses), net of income tax expense (benefit) of $15.1 million, $(14.1) million and $0.6 million, respectively		28,087			(17,397	)		(14,283	)
Reclassification of net pension and other postretirement benefit losses, net of income tax benefit of $4.4 million, $0.9 million and $0.5 million, respectively		7,131			2,975			1,496
Foreign currency translation adjustments, net of income tax expense (benefit) of $75.0 million, $(41.5) million and $(73.5) million, respectively		122,358			(68,837	)		(122,044	)
Total comprehensive income (loss), net of tax		389,816			(37,475	)		(251,178	)
Comprehensive income (loss) attributable to noncontrolling interests		4,779			606			(1,046	)
Comprehensive income (loss) attributable to Kennametal Shareowners	$	385,037		$	(38,081	)	$	(250,132	)

The components of accumulated other comprehensive income (loss) consist of the following at June 30 (in thousands):

2011	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(3,227	)	$	1,331		$	(1,896	)
Unrecognized net actuarial losses		(71,262	)		23,003			(48,259	)
Unrecognized net prior service credit		2,252			(963	)		1,289
Unrecognized transition obligation		(1,203	)		(95	)		(1,298	)
Foreign currency translation adjustments		161,451			(28,758	)		132,693
Total accumulated other comprehensive income	$	88,011		$	(5,482	)	$	82,529

2010	Pre-tax			Tax			After-tax
Unrealized loss on derivatives designated and qualified as cash flow hedges	$	(2,998	)	$	1,139		$	(1,859	)
Unrecognized net actuarial losses		(122,442	)		38,629			(83,813	)
Unrecognized net prior service credit		2,534			(962	)		1,572
Unrecognized transition obligation		(1,120	)		(127	)		(1,247	)
Foreign currency translation adjustments		19,913			(7,347	)		12,566
Total accumulated other comprehensive loss	$	(104,113	)	$	31,332		$	(72,781	)

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Consolidated Statements of Income [Abstract]
Sales	$ 2,403,493	$ 1,884,067	$ 1,999,859
Cost of goods sold	1,519,102	1,256,339	1,423,320
Gross profit	884,391	627,728	576,539
Operating expense	538,530	477,487	489,567
Restructuring and asset impairment charges (Notes 2 and 15)	12,586	43,923	173,656
Amortization of intangibles	11,602	13,090	13,134
Operating income (loss)	321,673	93,228	(99,818)
Interest expense	22,760	25,203	27,244
Other expense (income), net	2,780	(8,577)	(14,566)
Income (loss) from continuing operations before income taxes	296,133	76,602	(112,496)
Provision (benefit) for income taxes (Note 12)	63,856	26,977	(11,205)
Income (loss) from continuing operations	232,277	49,625	(101,291)
Loss from discontinued operations (Note 5)		(1,423)	(17,340)
Net income (loss)	232,277	48,202	(118,631)
Less: Net income attributable to noncontrolling interests	2,550	1,783	1,111
Net income (loss) attributable to Kennametal	229,727	46,419	(119,742)
Amounts attributable to Kennametal Shareowners:
Income (loss) from continuing operations	229,727	47,842	(102,402)
Loss from discontinued operations (Note 5)		(1,423)	(17,340)
Net income (loss) attributable to Kennametal	$ 229,727	$ 46,419	$ (119,742)
Basic earnings (loss) per share:
Continuing operations	$ 2.80	$ 0.59	$ (1.40)
Discontinued operations		$ (0.02)	$ (0.24)
Earnings Per Share, Basic, Total	$ 2.80	$ 0.57	$ (1.64)
Diluted earnings (loss) per share:
Continuing operations	$ 2.76	$ 0.59	$ (1.40)
Discontinued operations		$ (0.02)	$ (0.24)
Earnings Per Share, Diluted, Total	$ 2.76	$ 0.57	$ (1.64)
Dividends per share	$ 0.48	$ 0.48	$ 0.48
Basic weighted average shares outstanding	82,063	80,966	73,122
Diluted weighted average shares outstanding	83,173	81,690	73,122

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Other Current Liabilities (Tables)

12 Months Ended

Jun. 30, 2011

Other Current Liabilities (Tables) [Abstract]

Other current liabilities

(in thousands)	2011		2010
Accrued employee benefits	$	55,833	$	44,474
Payroll, state and local taxes		15,997		9,107
Accrued restructuring expense (Note 15)		12,711		27,254
Other		82,665		71,971
Total other current liabilities	$	167,206	$	152,806

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Comprehensive Income (Loss) and Accumulated Other Comprehensive (Loss) Income (Details Textual) (USD $) In Millions	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Comprehensive (Loss) Income and Accumulated Other Comprehensive (Loss) Income (Textuals) [Abstract]
Unrealized gain (loss) on derivatives designated and qualified as cash flow hedges, Tax effect	$ 0.4	$ (0.6)	$ (1.9)
Reclassification of unrealized Loss (gain) on expired derivatives designated and qualified cash flow hedges, Tax effect	0.4	0.9	(3.3)
Unrecognized net pension and other postretirement benefit losses, Tax effect	15.1	(14.1)	0.6
Reclassification of net pension and other postretirement benefit losses, Tax effect	4.4	0.9	0.5
Foreign currency translation adjustments, Tax effect	$ 75.0	$ (41.5)	$ (73.5)

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Segment Data (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Segment Data (Textuals) [Abstract]
Number of customers accountable for 10 percentage or more of total sales	3.5	3.5	3.5
Export sales from U.S. operations to unaffiliated customers	$ 90.6	$ 84.1	$ 116.6
Operations in number of global business unit	2

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Pension and Other Postretirement and Postemployment Benefits (Details 9) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	$ 732,412	$ 656,574
Fair Value, Inputs, Level 1 [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	95,126	77,227
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Value Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Growth Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Balanced Funds[ Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Common Stock [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	93,403	75,714
Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Foreign Government Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Other Fixed Income Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 1 [Member] | Other Investment [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	1,723	1,513
Fair Value, Inputs, Level 2 [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	637,286	579,347
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	338,955	364,773
Fair Value, Inputs, Level 2 [Member] | Value Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	92,625	74,532
Fair Value, Inputs, Level 2 [Member] | Growth Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	54,392	42,985
Fair Value, Inputs, Level 2 [Member] | Balanced Funds[ Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	15,798	12,460
Fair Value, Inputs, Level 2 [Member] | Common Stock [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	30,236	30,562
Fair Value, Inputs, Level 2 [Member] | Foreign Government Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	27,465	20,627
Fair Value, Inputs, Level 2 [Member] | Other Fixed Income Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	41,043	17,114
Fair Value, Inputs, Level 2 [Member] | Other Investment [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	36,772	16,294
Fair Value, Inputs, Level 3 [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Value Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Growth Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Balanced Funds[ Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Common Stock [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | US Government Agencies Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Foreign Government Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Other Fixed Income Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Other Investment [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Corporate Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	338,955	364,773
Value Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	92,625	74,532
Growth Funds [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	54,392	42,985
Balanced Funds[ Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	15,798	12,460
Common Stock [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	93,403	75,714
US Government Agencies Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	30,236	30,562
Foreign Government Debt Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	27,465	20,627
Other Fixed Income Securities [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	41,043	17,114
Other Investment [Member]
Benefit plan assets classified under the appropriate level of the fair value
Defined Benefit Plan, Fair Value of Plan Assets	$ 38,495	$ 17,807

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Acquisitions and Divestitures (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2009
Acquisitions and Divestiture (Textuals) [Abstract]
Purchase price for acquiring Tricon	$ 64.1
Number of divestitures accounted for as discontinued operations	1
Number of acquisition in Europe within our industrial segment	2

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Long-Term Debt and Capital Lease (Details) (USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Long Term Debt And Capital Lease Obligations Current And Non Current
7.20% Senior Unsecured Notes due 2012 net of discount of $0.1 million and $0.2 million for 2011 and 2010, respectively. Also including interest rate swap adjustments of $6.1 million and $12.1 million in 2011 and 2010, respectively	$ 305,954	$ 311,849
Capital leases with terms expiring through 2015 at 2.3% to 2.8% in 2011 and 2.0% to 4.7% in 2010	3,113	6,020
Other	156	345
Total debt and capital leases	309,223	318,214
Less current maturities:
Long-term debt	(306,032)	(133)
Capital leases	(1,272)	(3,406)
Total current maturities	(307,304)	(3,539)
Long-term debt and capital leases, less current maturities	$ 1,919	$ 314,675

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Pension and Other Postretirement and Postemployment Benefits (Details 1) (Pension plans contribution [Member], USD $) In Thousands	Jun. 30, 2011	Jun. 30, 2010
Pension plans contribution [Member]
Pre-tax amounts recognized in accumulated other comprehensive income
Unrecognized net actuarial (gains) losses	$ 66,734	$ 125,971
Unrecognized net prior service credits	(1,540)	(2,534)
Unrecognized transition obligations	1,202	1,120
Total	$ 66,396	$ 124,557

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
The carrying amount of goodwill
Goodwill	$ 662,170	$ 640,285	$ 653,825
Accumulated impairment losses	(150,842)	(150,842)	(150,842)
Goodwill, Beginning Balance	489,443	502,983
Acquisitions/Divestitures		536
Adjustments	252
Translation	21,633	(14,076)
Change in goodwill	21,885	(13,540)
Goodwill, Ending Balance	511,328	489,443
Industrial [Member]
The carrying amount of goodwill
Goodwill	411,945	393,974	406,626
Accumulated impairment losses	(150,842)	(150,842)	(150,842)
Goodwill, Beginning Balance	243,132	255,784
Acquisitions/Divestitures		536
Adjustments	252
Translation	17,719	(13,188)
Change in goodwill	17,971	(12,652)
Goodwill, Ending Balance	261,103	243,132
Infrastructure [Member]
The carrying amount of goodwill
Goodwill	250,225	246,311	247,199
Accumulated impairment losses	0	0	0
Goodwill, Beginning Balance	246,311	247,199
Acquisitions/Divestitures		0
Translation	3,914	(888)
Change in goodwill	3,914	(888)
Goodwill, Ending Balance	$ 250,225	$ 246,311

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Summary of Significant Accounting Policies (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
The components of intangible assets
Accumulated amortization	$ (78,712)	$ (63,343)
Indefinite-lived Intangible Assets by Major Class [Line Items]
Gross carrying amount, total	230,991	218,649
Contract- based[Member]
The components of intangible assets
Estimated useful life minimum (in years)	4
Estimated useful life maximum (in years)	15
Gross carrying amount ,finite	6,349	6,357
Accumulated amortization	(5,380)	(5,218)
Technology-based and other [Member]
The components of intangible assets
Estimated useful life minimum (in years)	4
Estimated useful life maximum (in years)	15
Gross carrying amount ,finite	39,743	37,136
Accumulated amortization	(25,442)	(20,422)
Customer-related [Member]
The components of intangible assets
Estimated useful life minimum (in years)	10
Estimated useful life maximum (in years)	20
Gross carrying amount ,finite	113,977	108,470
Accumulated amortization	(38,275)	(29,255)
Unpatented Technology [Member]
The components of intangible assets
Estimated useful life maximum (in years)	30
Gross carrying amount ,finite	19,540	19,216
Accumulated amortization	(4,740)	(4,572)
Trademarks [Member]
The components of intangible assets
Estimated useful life minimum (in years)	5
Estimated useful life maximum (in years)	20
Gross carrying amount ,finite	10,902	10,647
Accumulated amortization	(4,875)	(3,876)
Trademarks [Member]
Indefinite-lived Intangible Assets by Major Class [Line Items]
Gross carrying amount, Indefinite	$ 40,480	$ 36,823

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Derivative Instruments and Hedging Activities (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Feb. 28, 2009	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2009
Additional Derivative Instruments and Hedging Activities (Textuals) [Abstract]
Notional amount of the contracts translated into U.S. dollars		$ 37,600,000
Derivative Instruments and Hedging Activities (Textuals) [Abstract]
Terminated Interest Rate Swap Contracts	200,000,000
Cash received upon termination of contract	13,200,000
Proceeds from interest rate swap agreement termination related to forward portion				12,600,000
Proceeds from interest rate swap agreement termination related to current interest portion				600,000
Liability on forward starting interest rate swap contracts recorded as offset in other comprehensive loss, net of tax		2,400,000	2,300,000
Gains or losses recognized in earnings due to ineffectiveness and excluded from effectiveness testing		0	0
Interest Rate Swap Contracts [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Reduction in interest expense		5,867,000	5,556,000	3,170,000
Forward starting interest rate swap contracts [Member]
Additional Derivative Instruments and Hedging Activities (Textuals) [Abstract]
Notional amount of the contracts translated into U.S. dollars		150,000,000	75,000,000
Fixed To Floating Interest Rate Swap Contracts [Member]
Additional Derivative Instruments and Hedging Activities (Textuals) [Abstract]
Derivative contracts amount outstanding		0	0
Contracts translated to US dollars [Member]
Additional Derivative Instruments and Hedging Activities (Textuals) [Abstract]
Notional amount of the contracts translated into U.S. dollars		$ 37,600,000	$ 9,400,000

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Long Term Debt And Capital Leases (Tables)

12 Months Ended

Jun. 30, 2011

Long Term Debt And Capital Lease (Tables) [Abstract]

Long Term Debt And Capital Lease Obligations

(in thousands)	2011			2010
7.2% Senior Unsecured Notes due 2012 net of discount of $0.1 million and $0.2 million for 2011 and 2010, respectively. Also including interest rate swap adjustments of $6.1 million and $12.1 million in 2011 and 2010, respectively	$	305,954		$	311,849
Capital leases with terms expiring through 2015 at 2.3% to 2.8% in 2011 and 2.0% to 4.7% in 2010		3,113			6,020
Other		156			345
Total debt and capital leases		309,223			318,214
Less current maturities:
Long-term debt		(306,032	)		(133	)
Capital leases		(1,272	)		(3,406	)
Total current maturities		(307,304	)		(3,539	)
Long-term debt and capital leases, less current maturities	$	1,919		$	314,675

Future minimum lease payments under capital leases

(in thousands)
2012	$	1,392
2013		1,111
2014		274
2015		728
2016		—
After 2016		—
Total future minimum lease payments		3,505
Less amount representing interest		(392	)
Amount recognized as capital lease obligations	$	3,113