Form 4: Kennametal CEO Sanjay Chowbey Awarded Performance Stock Units

Sanjay Chowbey, President and CEO of Kennametal Inc., was awarded performance stock units based on the achievement of certain performance metrics, as determined by the Compensation and Human Capital Committee.

Summary

• On July 29, 2024, Kennametal Inc.'s Compensation and Human Capital Committee determined that Sanjay Chowbey, President and CEO, had earned performance stock units under the company's 2020 Stock and Incentive Plan.
• These units relate to the third tranche of the 2021 Performance Unit Award (2,010 units), the second tranche of the 2022 Performance Unit Award (2,909 units), and the first tranche of the 2023 Performance Unit Award (3,137 units).
• The committee approved an adjusted ROIC payout multiple of 67.3% for each of these tranches.
• Vesting and distribution of these shares are contingent upon Chowbey's continued employment with Kennametal through August 15, 2024, August 15, 2025, and August 15, 2026, respectively.
• Following these transactions, Chowbey beneficially owns 57,326.27 shares of Kennametal Inc. common stock, including 261.27 shares held in the Kennametal Inc. 401(k) Plan.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as it reflects the achievement of performance targets and continued alignment of management with shareholder interests. However, the ROIC payout multiple being less than 100% and the vesting conditions temper the enthusiasm.

Positives

• The awarding of performance stock units suggests that Kennametal's Compensation and Human Capital Committee believes that performance targets are being met.
• The ROIC payout multiple of 67.3% indicates that the company is achieving some level of financial performance as defined in the incentive plan.

Risks

• The vesting of the performance stock units is contingent upon Sanjay Chowbey's continued employment with Kennametal, creating a potential risk if he were to leave the company before the vesting dates.
• The ROIC payout multiple of 67.3% may be lower than the maximum possible payout, suggesting that the company's performance, while positive, may not be exceeding expectations.

Future Outlook

Vesting and distribution of the awarded shares are contingent upon the reporting person's continued employment with the Company through August 15, 2024, August 15, 2025 and August 15, 2026.

Industry Context

This type of equity compensation is common in publicly traded companies to align management's interests with those of shareholders and incentivize performance.

Comparison to Industry Standards

• Performance-based equity awards are a standard practice among publicly traded companies, including Kennametal's competitors such as Sandvik, Stanley Black & Decker, and Illinois Tool Works.
• The specific metrics used (like ROIC) and the payout percentages vary depending on the company's strategic goals and industry benchmarks.
• Comparing Kennametal's ROIC payout multiple of 67.3% to similar companies would require access to their executive compensation disclosures, which are typically found in proxy statements.

Stakeholder Impact

• Shareholders: The awarding of performance stock units aligns management's interests with shareholder value creation.
• Employees: The performance-based compensation structure can incentivize employees to achieve company goals.
• Management: The vesting of the awards provides an incentive for continued service and performance.

Next Steps

• Continued monitoring of Sanjay Chowbey's employment status to ensure vesting conditions are met.
• Tracking Kennametal's performance against the ROIC targets in future periods.

Key Dates