ACQUISITIONS

TMB

On November 4, 2013, the Company completed its transaction to acquire the Tungsten Materials Business (TMB) from Allegheny Technologies Incorporated (ATI) which included all of the assets of TDY Industries, LLC, a wholly owned subsidiary of ATI, used or held for use by TDY in connection with the business; and all of the shares of TDY Limited and ATI Holdings SAS, both wholly-owned subsidiaries of ATI, for a purchase price of $607.0 million. We funded the acquisition primarily through a combination of cash from operations and available borrowings under our existing credit facility.

TMB, with approximately $340.0 million in annual sales, is a leading producer of tungsten metallurgical powders, as well as tooling technologies and components. The business has approximately 1,175 employees in 12 locations across 7 countries. The acquisition aligns with Company's long-term growth strategies, expands presence in aerospace and energy end markets, further augments the Company's tooling portfolio and accelerates our metallurgical strategy including planned tungsten carbide recycling and production.

As part of the acquisition of TMB, Kennametal incurred $1.7 million and $2.8 million for the three and six months ended December 31, 2013 of acquisition-related costs, which are included in operating expenses.

Purchase Price Allocation

This acquisition was accounted for under the acquisition method of accounting and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on estimated fair values at the date of acquisition. The Condensed Consolidated Balance Sheet as of December 31, 2013 reflects the preliminary allocation of the purchase price and is subject to revision when appraisals are finalized, which is expected to be in the fourth quarter of fiscal 2014.

The preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed is as follows:



(in thousands)	Total
ASSETS
Current assets:
Cash and cash equivalents	$	1,294
Accounts Receivable	41,164
Inventory	98,664
Other current assets	4,014
Total current assets	$	145,136
Property and equipment	125,283
Goodwill	242,363
Other intangible assets	124,200
Deferred income taxes	3,699
Other	1,565
Total assets	$	642,246
LIABILITIES
Current liabilities:
Accounts payable	$	21,001
Accrued payroll	3,646
Deferred income taxes	3,563
Accrued expenses	1,959
Total current liabilities	$	30,169
Accrued pension and postretirement benefits	88
Other long-term liabilities	5,021
Total liabilities	35,278
Net assets acquired	$	606,968

In connection with this acquisition, we identified and valued certain intangible assets, including existing customer relationships, technologies and trademarks, as further discussed in Note 18. It is expected that the majority of the preliminary goodwill recorded of $242.4 million will be deductible for tax purposes. The goodwill is attributable to the operating synergies we expect to gain from the acquisition. These intangible assets are part of both the Industrial and Infrastructure segments.

TMB contributed net sales of $44.8 million and a net loss of $7.2 million during the two months ended December 31, 2013, including $1.7 million of acquisition-related pre-tax costs.

Unaudited Pro Forma Financial Information

The following unaudited pro forma summary of operating results presents the consolidated results of operations as if the TMB acquisition had occurred on July 1, 2012. These amounts were calculated after applying our accounting policies and adjusting TMB's results to reflect increased depreciation and amortization expense resulting from recording fixed assets and intangible assets at fair value. The pro forma results for the three and six months ended December 31, 2013 exclude $1.7 million and $2.8 million of acquisition-related pre-tax costs. The pro forma results for the three and six months ended December 31, 2013 includes $4.5 million and $9.0 million, respectively, of integration-related and restructuring-related expenses. The pro forma results have been presented for comparative purposes only and are not indicative of future results of operations or what would have occurred had the acquisition been made on July 1, 2012.

Unaudited pro forma summary of operating results of Kennametal, assuming the acquisition had occurred as of July 1, 2012, are as follows:



	Three Months Ended December 31,				Six Months Ended December 31,
(in thousands, except per share amounts)	2013		2012		2013		2012
Pro forma (unaudited):
Net Sales	$	721,062	$	731,941	$	1,434,250	$	1,468,196
Net income attributable to Kennametal	$	35,934	$	33,112	$	70,778	$	78,239
Per share data attributable to Kennametal:
Basic earnings per share	$	0.46	$	0.42	$	0.90	$	0.98
Diluted earnings per share	$	0.45	$	0.41	$	0.89	$	0.96

Emura

On August 1, 2013, the Company acquired the operating assets of Comercializadora Emura S.R.L. and certain related entities (Emura), based in La Paz, Bolivia, and secured related material sourcing agreements for a purchase price of $40.1 million, of which $26.1 million represents cash paid of which $25.6 million was paid in fiscal year 2014 and $0.5 million was paid in fiscal year 2013, and $14.0 million of contingent consideration (see Note 6). Emura is the region’s principal operation engaged in collecting, testing, processing and exporting tungsten ore material, and was a long-standing supplier to Kennametal. The addition of Emura enhances the Company's strategic tungsten sourcing capabilities to serve growth globally.

Other

The Company acquired one other acquisition in the Infrastructure segment for $2.0 million.