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The industrial toolmaker based in Unity, Westmoreland County, didn't say how much money it expects to save by cutting salaries of the executives, middle managers and other employees not represented by labor unions.
Managerial-level employees will earn 10 percent less and the other workers' paychecks will be cut by 5 percent in the steps tied to the recession. Kennametal spokeswoman Christina Reitano said she "cannot answer specifics on the amount of savings, due to competitive issues."
"All KMT employees are making financial sacrifices for the same cause," Reitano said. The company has about 12,500 employees worldwide.
The pay cuts take effect Wednesday, the start of Kennametal's 2010 fiscal year. They will remain in effect until the board of directors' compensation committee "determines that business conditions have improved to a level that supports an upward adjustment or the reinstatement of previous salary levels," the company said in a Securities and Exchange Commission filing.
Reitano said Kennametal expects the salary reductions to stay in place for the 2010 fiscal year. "However, we will revisit the time frame if economic conditions significantly improve," she said.
Kennametal lost almost $138 million, or $1.90 a share, in the quarter that ended March 31. Shares closed yesterday at $18.81, up 47 cents.
Since April 2008, when the company announced a restructuring, it has cut its work force by about 1,600 through layoffs, plant closings and selling off businesses. About 800 job cuts were announced in January -- including about 90 from its headquarters and another 20 from its Carbidie plant in Hempfield.
Kennametal's executive team is making the right moves to deal with the global economic slowdown, said Walter Liptak, an analyst who follows Kennametal for Barrington Research Associates of Chicago.
"Kennametal is suffering from a great depression in industrial manufacturing. Kennametal (management) is an 'A' team," and reductions in salaries and layoffs are necessary, Liptak said.
Four of Kennametal's top five officers will take the deepest pay cut -- 15 percent pay of their base salary. One unidentified executive, whose position and responsibilities have expanded, is exempt from the salary cut, the securities filing said.
Top officers and their base salaries for the current fiscal year are: Cardoso, $818,750; Frank Simpkins, chief financial officer, $396,250; Gary Weismann, vice president and president of advanced materials solutions group, $342,917; David Greenfield, vice president and general counsel, $327,667; and John Jacko Jr., vice president and chief marketing officer, $325,000.
The executives, however, earn most of their compensation through stock awards, incentive plan compensation and pension increases. Cardoso's compensation for the current fiscal year, for example, totals $4.65 million.
Kennametal also cut costs by requiring all workers to take one week of unpaid leave per month, for each of the past three months. The company doesn't expect the one-week furloughs to continue, Reitano said.
The board of directors cut its compensation by 15 percent. Eight directors not employed by the company received pay ranging from $50,000 to lead director Larry Yost's $108,000 this year.
Joe Napsha can be reached via e-mail or at 724-836-5252.
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