Form 4: Kennametal VP Earns Performance Stock Units Based on Company Metrics

Kennametal Inc. Vice President Carlonda R. Reilly was awarded 8,535 performance stock units, contingent on continued employment and based on company performance metrics.

Summary

• Carlonda R. Reilly, Vice President of Kennametal Inc. (KMT), was deemed to have earned a total of 8,535 shares of Common Stock through performance stock units (PSUs) on July 28, 2025.
• The awards include 1,675 PSUs from the third tranche of the 2022 Performance Unit Award, based on adjusted ROIC with an 81.1% payout multiple.
• An additional 2,862 PSUs were earned from the 2022 Performance Unit Award, based on adjusted EBITDA margin with a 92.4% payout.
• A further 1,935 PSUs were earned from the second tranche of the 2023 Performance Unit Award, based on adjusted ROIC with an 81.1% payout multiple.
• Lastly, 2,063 PSUs were earned from the first tranche of the 2024 Performance Unit Award, also based on adjusted ROIC with an 81.1% payout.
• These performance stock units were granted under the Kennametal Inc. 2020 Stock and Incentive Plan and the 2024 Stock and Incentive Plan.
• The vesting and actual distribution of these shares are subject to Ms. Reilly's continued employment with the company through their respective vesting dates.
• Following these transactions, Ms. Reilly beneficially owns 50,660 shares of Common Stock directly.

Sentiment

Score: 7

Explanation: The filing indicates that performance targets were met, leading to the earning of performance stock units by a key executive. This is a positive signal regarding the company's operational performance and management alignment, though it is a routine compensation disclosure.

Positives

• The awarding of performance stock units indicates that the company met specific performance targets, such as adjusted ROIC and adjusted EBITDA margin, which is a positive sign for operational performance.
• Performance-based awards align the interests of the executive with those of the shareholders, incentivizing long-term value creation.
• The continued employment condition for vesting encourages executive retention and stability within the leadership team.

Risks

• The actual distribution of the earned performance stock units is contingent upon the reporting person's continued employment with the company through specified future dates, posing a risk of forfeiture if employment ceases.

Future Outlook

The future outlook indicates continued alignment of executive incentives with company performance, with vesting periods for the awarded performance stock units extending through August 2027, contingent on the executive's continued employment.

Management Comments

• The Compensation and Human Capital Committee approved the adjusted ROIC payout multiple at 81.1% for the relevant tranches of the 2022, 2023, and 2024 Performance Unit Awards.
• The Compensation and Human Capital Committee approved the adjusted EBITDA margin payout at 92.4% for the relevant tranche of the 2022 Performance Unit Award.

Industry Context

The granting of performance stock units tied to financial metrics like ROIC and EBITDA margin is a common and widely accepted practice in executive compensation across various industries, aiming to align management incentives with shareholder value creation and long-term company performance.

Comparison to Industry Standards

• Performance-based equity awards, such as the PSUs granted to Carlonda R. Reilly, are standard practice for executive compensation in publicly traded industrial companies like Kennametal Inc. This approach is consistent with compensation structures observed in peers such as Sandvik AB, Iscar (Berkshire Hathaway), and Ceratizit, which also utilize performance metrics to determine executive incentives.
• The use of adjusted ROIC and adjusted EBITDA margin as performance metrics aligns with common industry benchmarks for evaluating operational efficiency and profitability in the manufacturing and tooling sectors.
• The multi-year vesting schedule (e.g., through August 2027) is typical for long-term incentive plans, promoting executive retention and sustained focus on strategic objectives, comparable to similar programs at companies like Illinois Tool Works (ITW) or Stanley Black & Decker (SWK).

Stakeholder Impact

• Shareholders: The awards align executive incentives with shareholder interests, as they are tied to company performance metrics.
• Employees: The executive recipient benefits directly from the company's performance, potentially fostering a positive internal environment regarding compensation for achieving goals.

Next Steps

• Actual distribution of the earned shares will occur upon the satisfaction of the continued employment condition through the respective vesting dates (August 15, 2025, August 15, 2026, and August 15, 2027).

Key Dates

Recommendation

This Form 4 reports routine executive compensation in the form of performance stock unit awards, indicating that pre-defined performance targets were met. While positive for management alignment and reflecting past performance, it does not provide new fundamental information or a significant change in the company's outlook to warrant a change in investment thesis. It is a standard disclosure of an insider's beneficial ownership change due to compensation.

Keywords

Kennametal, KMT, Performance Stock Units, Executive Compensation, Insider Ownership, Stock Award, ROIC, EBITDA, Corporate Governance, SEC Form 4