FORM 10-Q

                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549


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


               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995


                      Commission file number 1-5318


                              KENNAMETAL INC.
             (Exact name of registrant as specified in its charter)


          PENNSYLVANIA                        25-0900168
  (State or other jurisdiction             (I.R.S. Employer
        of incorporation)                 Identification No.)


                    ROUTE 981 AT WESTMORELAND COUNTY AIRPORT
                               P.O. BOX 231
                       LATROBE, PENNSYLVANIA  15650
             (Address of registrant's principal executive offices)


   Registrant's telephone number, including area code:  (412) 539-5000


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 [X]  NO [ ]


Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:


         TITLE OF EACH CLASS                OUTSTANDING AT OCTOBER 31, 1995
- ----------------------------------------    -------------------------------
Capital Stock, par value $1.25 per share             26,624,461


                         KENNAMETAL INC.
                           FORM 10-Q
               FOR QUARTER ENDED SEPTEMBER 30, 1995
               ------------------------------------

                       TABLE OF CONTENTS


PART I.   FINANCIAL INFORMATION
- --------------------------------

Item 1.   Financial Statements:

          Condensed Consolidated Balance Sheets (Unaudited)
             September 30, 1995 and June 30, 1995

          Condensed Consolidated Statements of Income (Unaudited)
             Three months ended September 30, 1995 and 1994

          Condensed Consolidated Statements of Cash Flows (Unaudited)
             Three months ended September 30, 1995 and 1994

          Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations


PART II.  OTHER INFORMATION
- ---------------------------

Item 1.   Legal Proceedings

Item 4.   Submission of Matters to a Vote of Security Holders

Item 6.   Exhibits and Reports on Form 8-K


                      PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
KENNAMETAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------
(in thousands)

September 30, June 30, 1995 1995 ------------- --------- ASSETS Current Assets: Cash and equivalents $ 12,636 $ 10,827 Accounts receivable, less allowance for doubtful accounts of $12,067 and $12,106 167,143 175,405 Inventories 212,218 200,680 Deferred income taxes 22,262 22,362 -------- -------- Total current assets 414,259 409,274 -------- -------- Property, Plant and Equipment: Land and buildings 152,651 151,905 Machinery and equipment 372,274 365,275 Less accumulated depreciation (262,266) (256,838) -------- -------- Net property, plant and equipment 262,659 260,342 -------- -------- Other Assets: Investments in affiliated companies 7,001 6,873 Intangible assets, less accumulated amortization of $19,451 and $19,009 31,810 32,253 Deferred income taxes 51,273 56,629 Other 24,961 16,238 -------- -------- Total other assets 115,045 111,993 -------- -------- Total assets $791,963 $781,609 ======== ======== LIABILITIES Current Liabilities: Current maturities of term debt and capital leases $ 16,433 $ 17,475 Notes payable to banks 62,145 53,555 Accounts payable 57,479 60,211 Accrued vacation pay 18,116 18,424 Other 74,131 75,537 -------- -------- Total current liabilities 228,304 225,202 -------- -------- Term Debt and Capital Leases, Less Current Maturities 78,177 78,700 Deferred Income Taxes 21,154 20,998 Other Liabilities 50,967 51,615 -------- -------- Total liabilities 378,602 376,515 -------- -------- Minority Interest in Consolidated Subsidiaries 13,861 13,209 SHAREHOLDERS' EQUITY Shareholders' Equity: Preferred stock, 5,000 shares authorized; none issued - - Capital stock, $1.25 par value; 70,000 shares authorized; 29,370 shares issued 36,712 36,712 Additional paid-in capital 86,285 85,768 Retained earnings 307,490 297,838 Treasury shares, at cost; 2,745 and 2,793 shares held (36,435) (36,737) Cumulative translation adjustments 5,448 8,304 -------- -------- Total shareholders' equity 399,500 391,885 -------- -------- Total liabilities and shareholders' equity $791,963 $781,609 ======== ======== See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - ------------------------------------------------------- (in thousands, except per share data)
Three Months Ended ------------------ September 30, 1995 1994 -------- -------- OPERATIONS: Net sales $254,903 $218,838 Cost of goods sold 148,461 128,051 -------- -------- Gross profit 106,442 90,787 Research and development expenses 4,964 4,419 Selling, marketing and distribution expenses 59,375 50,768 General and administrative expenses 15,692 12,877 Amortization of intangibles 384 773 -------- -------- Operating income 26,027 21,950 Interest expense 2,939 3,474 Other income (expense) (249) 92 -------- -------- Income before taxes 22,839 18,568 Provision for income taxes 9,200 7,900 -------- -------- Net income $ 13,639 $ 10,668 ======== ======== PER SHARE DATA: Earnings per share $ 0.51 $ 0.40 ======== ======== Dividends per share $ 0.15 $ 0.15 ======== ======== Weighted average shares outstanding 26,597 26,390 ======== ======== See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ----------------------------------------------------------- (in thousands)
Three Months Ended ------------------ September 30, 1995 1994 ------- ------- OPERATING ACTIVITIES: Net income $13,639 $10,668 Adjustments for noncash items: Depreciation and amortization 9,767 9,935 Other 2,970 227 Changes in certain assets and liabilities net of effects from acquisitions: Accounts receivable 2,537 (4,627) Inventories (13,046) (10,463) Accounts payable and accrued liabilities (4,848) (12,063) Other 3,868 5,742 ------- ------- Net cash flow from (used for) operating activities 14,887 (581) ------- ------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (18,030) (7,713) Disposals of property, plant and equipment 1,008 1,040 Other (418) 555 ------- ------- Net cash flow used for investing activities (17,440) (6,118) ------- ------- FINANCING ACTIVITIES: Increase in short-term debt 8,498 24 Increase in term debt 1,041 2,288 Reduction in term debt (1,879) (1,831) Dividend reinvestment and employee stock plans 819 2,299 Cash dividends paid to shareholders (3,987) (3,953) ------- ------- Net cash flow from (used for) financing activities 4,492 (1,173) ------- ------- Effect of exchange rate changes on cash (130) 126 ------- ------- CASH AND EQUIVALENTS: Net increase (decrease) in cash and equivalents 1,809 (7,746) Cash and equivalents, beginning 10,827 17,190 ------- ------- Cash and equivalents, ending $12,636 $ 9,444 ======= ======= SUPPLEMENTAL DISCLOSURES: Interest paid $ 1,654 $ 2,294 Income taxes paid 4,995 1,627 See accompanying notes to condensed consolidated financial statements.
KENNAMETAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ---------------------------------------------------------------- 1. The condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's 1995 Annual Report. The condensed consolidated balance sheet as of June 30, 1995 has been derived from the audited balance sheet included in the Company's 1995 Annual Report. These interim statements are unaudited; however, management believes that all adjustments necessary for a fair presentation have been made and all adjustments are normal, recurring adjustments. The results for the three months ended September 30, 1995 are not necessarily indicative of the results to be expected for the full fiscal year. 2. Inventories are stated at lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for a significant portion of domestic inventories and the first-in, first-out (FIFO) method or average cost for other inventories. The Company used the LIFO method of valuing its inventories for approximately 55 percent of total inventories at September 30, 1995. Because inventory valuations under the LIFO method are based on an annual determination of quantities and costs as of June 30 of each year, the interim LIFO valuations are based on management's projections of expected year-end inventory levels and costs. Therefore, the interim financial results are subject to any final year-end LIFO inventory adjustments. 3. The major classes of inventory as of the balance sheet dates were as follows (in thousands):
September 30, June 30, 1995 1995 ------------- --------- Finished goods $157,072 $147,231 Work in process and powder blends 67,934 65,231 Raw materials and supplies 26,603 24,629 -------- -------- Inventory at current cost 251,609 237,091 Less LIFO valuation (39,391) (36,411) -------- -------- Total inventories $212,218 $200,680 ======== ========
4. The Company has been involved in various environmental cleanup and remediation activities at several of its manufacturing facilities. In addition, the Company has been named as a potentially responsible party at four Superfund sites in the United States. However, it is management's opinion, based on its evaluations and discussions with outside counsel and independent consultants, that the ultimate resolution of these environmental matters will not have a material adverse effect on the results of operations, financial position or cash flows of the Company. The Company maintains a Corporate Environmental, Health and Safety (EH&S) Department to ensure compliance with all environmental regulations and to monitor and oversee remediation activities. In addition, the Company has established an EH&S administrator at each of its domestic manufacturing facilities. The Company's financial management team periodically meets with members of the Corporate EH&S Department and the Corporate Legal Department to review and evaluate the status of environmental projects and contingencies. On a quarterly and annual basis, management establishes or adjusts financial provisions and reserves for environmental contingencies in accordance with Statement of Financial Accounting Standards (SFAS) No. 5, "Accounting for Contingencies." 5. Prior to its acquisition by the Company, a non-U.S. subsidiary recorded sales of approximately $60 million in calendar 1993 under contracts with a certain customer to provide various equipment, know-how and training for a manufacturing facility. Upon the acquisition by the Company, the subsidiary decided to complete performance under the contracts with this customer but to not enter into any such contracts in the future. Pursuant to a United States embargo effective June 6, 1995, the subsidiary suspended performance under the contracts pending issuance by the U.S. government of definitive embargo regulations. Other than finalizing the transfer of know-how and training to commence production, performance was substantially completed prior to the suspension. The estimated costs to complete performance are not material and were accrued in the consolidated financial statements. The customer disputed the suspension and advised that it might file suit to require completion of performance as well as for compensation for alleged damages. However, the subsidiary reinstituted performance following the issuance of definitive embargo regulations in September of 1995. Management believes that the ultimate resolution of this matter will not have a material adverse impact on the financial position of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES There were no material changes in financial position, liquidity or capital resources between June 30, 1995 and September 30, 1995. The ratio of current assets to current liabilities was 1.8 as of September 30, 1995 and June 30, 1995. The debt to capital ratio (i.e., total debt divided by the sum of total debt and shareholders' equity) was 28 percent as of September 30, 1995 unchanged from June 30, 1995. Capital expenditures are estimated to be $60-70 million in fiscal year 1996. Expenditures are being made to modernize facilities, upgrade machinery and equipment, and acquire new information technology. Capital expenditures are being financed with cash from operations and borrowings under existing revolving credit agreements with banks. RESULTS OF OPERATIONS SALES AND EARNINGS During the quarter ended September 30, 1995, consolidated sales were $255 million, up 16 percent from $219 million in the same quarter last year. The increase in consolidated sales is attributable to an increase in sales volume of 11 percent, modest price increases, newly-consolidated international subsidiaries and favorable foreign currency translation effects. Excluding favorable foreign currency translation effects, international sales increased 20 percent and continued to show strong demand in all end markets. Net income for the September 1995 quarter was $13.6 million, or $0.51 per share, as compared with net income of $10.7 million, or $0.40 per share in the same quarter last year. Net income increased from higher sales of metalcutting tools in North America and Europe, and the continued growth of catalog sales. The following table presents the Company's sales by product class and geographic area (in thousands):
Quarter ended September 30, 1995 1994 % Change ---------- ---------- -------- Sales by Product Class: Metalworking $216,947 $183,581 18.2 Mining and construction 30,240 28,367 6.6 Metallurgical 7,716 6,890 12.0 -------- -------- Net sales $254,903 $218,838 16.5 ======== ======== Sales by Geographic Area: Within the U.S. $154,940 $140,569 10.2 Foreign and export 99,963 78,269 27.7 -------- -------- Net sales $254,903 $218,838 16.5 ======== ========
METALWORKING PRODUCTS During the September 1995 quarter, worldwide sales of metalworking products increased 18 percent from last year. In the United States, direct sales of metalcutting inserts and toolholding devices increased 5 percent. Total sales of industrial supply products increased 24 percent as a result of increased sales through mail order catalogs and full service supply programs. International sales of metalworking products increased 27 percent from the previous year primarily because of higher sales volume in Europe, the impact of favorable foreign currency translation effects, and newly-consolidated subsidiaries in Japan and China. Excluding the currency translation effect, international metalworking sales increased an estimated 19 percent. MINING AND CONSTRUCTION PRODUCTS During the September 1995 quarter, sales of mining and construction tools increased 7 percent from the previous year primarily because of additional domestic demand for mining and construction tools. International sales of highway construction and mining tools increased because of strong demand in Canada and Europe. METALLURGICAL PRODUCTS During the September 1995 quarter, sales of metallurgical products increased 12 percent from the previous year primarily because of strong international demand for carbide powders. GROSS PROFIT As a percentage of sales, gross profit for the September 1995 quarter was 41.8 percent as compared with 41.5 percent in the prior year. The gross profit margin benefited from higher production levels, modest price increases and favorable currency effects of international sales of products manufactured in the United States. These benefits were largely offset by higher raw material costs and reduced manufacturing efficiencies. OPERATING EXPENSES For the quarter ended September 30, 1995, operating expenses increased 18 percent primarily because of costs necessary to support the higher sales levels, increased spending on research and development, marketing programs, additional catalog branch openings and the implementation of new information systems. As a percentage of sales, operating expenses increased slightly to 31.4 percent as compared with 31.1 percent in the prior year. INCOME TAXES The effective tax rate for the September 1995 quarter was 40.3 percent compared with an effective tax rate of 42.5 percent in the prior year. The effective tax rate decreased primarily because of lower estimated non-U.S. taxes and additional benefits derived from the utilization of the foreign sales corporation. OUTLOOK In looking to the second quarter ending December 31, 1995, management expects consolidated sales to increase from the $230 million achieved in the same quarter last year. Sales of metalworking products in the United States should continue to benefit from full service supply programs and catalog sales as a result of additional branch openings. In addition, international sales are expected to increase as the European and Asia-Pacific economies continue to expand. Sales of mining and construction tools should continue to increase from additional international demand for highway construction and mining tools. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The information set forth in Note 4 to the condensed consolidated financial statements, contained in Part I, Item 1 of this Form 10-Q, is incorporated by reference herein and supplements the information previously reported in Part I, Item 3 of the Company's Form 10-K for the year ended June 30, 1995, which is also incorporated by reference herein. It is management's opinion, based on its evaluation and discussions with outside counsel, that the Company has viable defenses to these cases and that, in any event, the ultimate resolutions of these matters will not have a materially adverse effect on the results of operations, financial position or cash flows of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Stockholders on October 30, 1995, the stockholders of the Company voted on the election of directors and independent auditors, and for the approval of a new Performance Bonus Stock Plan. The following is the number of shares voted in favor of and against each matter, and the number of shares having authority to vote on each matter but withheld. 1. With respect to the votes cast for directors whose terms expire in 1998.
For Withheld Broker Non-Vote ---------- ---------- --------------- A. Peter Held 22,374,882 79,286 0 Aloysius T. McLaughlin, Jr. 22,395,437 58,731 0 Larry Yost 22,156,926 297,242 0 2. With respect to the approval of the new Performance Bonus Stock Plan of 1995. For Against Abstained Broker Non-Vote ---------- --------- --------- --------------- Approval of Performance Bonus Stock Plan of 1995 21,365,723 975,467 112,978 2,352,956 3. With respect to the election of the firm of Arthur Andersen LLP, independent public accountants, to audit the financial statement of the Company and its subsidiary companies for the fiscal year ending June 30, 1996. For Against Abstained Broker Non-Vote ---------- --------- --------- --------------- Arthur Andersen LLP 22,377,216 31,329 45,623 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reference (a) Exhibits (10.1) Performance Bonus Stock Plan of 1995 Filed herewith (27) Financial Data Schedule Filed herewith (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1995.
SIGNATURES Pursuant to the requirements 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: November 13, 1995 By: /s/ RICHARD J. ORWIG ------------------------- Richard J. Orwig Vice President Chief Financial and Administrative Officer
 

5 This schedule contains summary financial information extracted from the September 30, 1995 Condensed Consolidated Financial Statements (unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 12,636 0 179,210 12,067 212,218 414,259 524,925 262,266 791,963 228,304 0 36,712 0 0 362,788 791,963 254,903 254,903 148,461 148,461 5,348 523 2,939 22,839 9,200 13,639 0 0 0 13,639 .51 .51
                                Kennametal Inc.

                     PERFORMANCE BONUS STOCK PLAN OF 1995


                                  ARTICLE I
                             General Provisions

	Section 1.1.  ESTABLISHMENT AND PURPOSE.  There is hereby established 
the Kennametal Inc. (the "Corporation") Performance Bonus Stock Plan of 1995 
(the "Plan") pursuant to which each participant in a  Management Performance 
Bonus Plan (as defined herein) shall be eligible:  (a) to elect to receive 
shares of the Corporation's capital stock, par value $1.25 per share (the 
"Capital Stock"), in lieu of cash bonus compensation; and/or (b) through an 
election to defer receipt of  compensation to be earned by such participant 
made under any Corporation deferred compensation plan or arrangement 
("Deferred Compensation Plan"), to have Stock Credits (as hereinafter defined) 
credited to an account ("Stock Credit Account") established for such 
participant by the Corporation.  The purposes of the Plan are to provide an 
incentive to Corporation executives to increase their ownership of Capital 
Stock and to promote this goal by establishing stock as an alternative method 
by which managers and/or senior executives may elect to be compensated.

	Section 1.2.  DEFINITIONS.  In addition to the terms previously or 
hereafter defined herein, the following terms when used herein shall have the 
meaning set forth below:

	"Board" shall mean the Board of Directors of the Corporation.

	"Bonus Compensation" shall mean all remuneration designated as bonus 
compensation that is earned by a Participant (as defined below) pursuant to a 
Management Performance Bonus Plan.

	"Committee" shall mean the committee of the Board appointed by the Board 
to administer the Plan.  Unless otherwise determined by the Board, the 
Committee shall be the Committee on Executive Compensation of the Board.

	"Deferred Bonus Compensation"  shall mean all  Bonus Compensation that 
is deferred by a Participant pursuant to a Deferred Compensation Plan.

	"Fair Market Value" shall mean, as of any date, the average of the 
highest and lowest sales prices for the Capital Stock as reported in the New 
York Stock Exchange - Composite Transactions reporting system for the date in 
question or, if no sales were effected on such date, on the next preceding 
date on which sales were effected.

	"Management Performance Bonus Plan" shall mean any performance-based 
bonus compensation plan for management and/or senior executives of the 
Corporation or its subsidiaries which the Committee has determined to be then 
eligible for participation in the Plan.

	"Non-Deferred Bonus Compensation" shall mean all Bonus Compensation that 
is not deferred by a Participant pursuant to a Deferred Compensation Plan.

	"Participant" shall mean any employee of the Corporation or any of its 
subsidiaries who is eligible to participate in a Management Performance Bonus 
Plan.

	"Plan Year" shall mean the Corporation's fiscal year.

	"Stock Credit" shall mean a credit that is equivalent to one share of 
Capital Stock.

	Section 1.3.  ADMINISTRATION.  The Plan shall be administered by the 
Committee.  The Committee shall serve at the pleasure of the Board.  A 
majority of the Committee shall constitute a quorum, and the acts of a 
majority of the members of the Committee present at any meeting at which a 
quorum is present, or acts approved in writing by a majority of the members of 
the Committee, shall be deemed the acts of the Committee.  The Committee is 
authorized to interpret and construe the Plan, to make all determinations and 
take all other actions necessary or advisable for the administration of the 
Plan, and to delegate to employees of the Corporation or any subsidiary the 
authority to perform administrative functions under the Plan.

	Section 1.4.  ELIGIBILITY.  An individual who is a participant in a 
Management Performance Bonus Plan shall be eligible to participate in the 
Plan.  Notwithstanding the foregoing, in the event that the Bonus Compensation 
payable with respect to a Plan Year is less than One Thousand  U.S. Dollars 
($1,000), or the equivalent if payable in another currency, then such 
individual shall not be eligible to participate in the Plan for such Plan Year 
and any Bonus Compensation shall be paid in cash.

	Section 1.5.  CAPITAL STOCK SUBJECT TO THE PLAN.  The maximum number of 
shares of Capital Stock that may be issued pursuant to the Plan is 750,000.  
Capital Stock to be issued under the Plan may be either authorized and 
unissued shares of Capital Stock or shares of Capital Stock held in treasury 
by the Corporation.

                                  ARTICLE II
                          Elections and Distributions

	Section 2.1.  ELECTIONS TO RECEIVE CAPITAL STOCK FROM COMPENSATION.  Any 
Participant may elect to receive Capital Stock under this Plan in lieu of all 
or a portion of the  Non-Deferred Bonus Compensation otherwise payable to such 
Participant in any Plan Year beginning with the Plan Year commencing July 1, 
1995 (a "Stock Acquisition Election"); provided, however, that the percentage 
amount of Bonus Compensation subject to such an election must be in increments 
of ten percent (10%) and may not be less than ten percent (10%) of the Bonus 
Compensation earned by the Participant with respect to the Plan Year or relate 
to Bonus Compensation below One Thousand U.S. Dollars ($1,000), or the 
equivalent if payable in another currency.  If a Participant makes a Stock 
Acquisition Election, the Participant shall receive, as of the date that the 
Bonus Compensation otherwise would have been paid: (i) the number of shares of 
Capital Stock that could have been purchased on that date based on the amount 
of Bonus Compensation subject to the Stock Acquisition Election and the Fair 
Market Value of the Capital Stock on that date, rounded to the nearest whole 
share; and (ii) a number of shares of Capital Stock equal to the product of 
the number of shares awarded pursuant to Section 2.1(i) above multiplied by a 
percentage amount to be determined annually by the Committee (the "Stock 
Premium Percentage") rounded to the nearest whole share.  The Stock Premium 
Percentage shall not exceed twenty-five percent (25%).  In the absence of a 
Stock Acquisition Election, all Bonus Compensation not deferred as Stock 
Credits pursuant to Section 2.2 hereof or otherwise deferred pursuant to a 
Deferred Compensation Plan shall be paid to the Participant in cash in 
accordance with the Corporation's policies and procedures.  Certificates for 
Capital Stock acquired by the Participant pursuant to a Stock Acquisition 
Election shall be issued as soon as practicable following the award of Bonus 
Compensation.

	Section 2.2.  ELECTIONS TO RECEIVE STOCK CREDITS FROM DEFERRED 
COMPENSATION.  Any Participant may elect to receive Stock Credits under this 
Plan with respect to all or a portion of the Deferred Bonus Compensation 
credited to the Participant in any Plan Year beginning with the Plan Year 
commencing July 1, 1995 (a "Stock Credit Election"); provided, however, that 
the percentage amount of Bonus Compensation subject to such an election must 
be in increments of ten percent (10%) and may not be less than 10% of the 
total Bonus Compensation earned by the Participant with respect to a Plan Year 
or relate to Bonus Compensation below One Thousand U.S. Dollars ($1,000), or 
the equivalent if payable in another currency.  If a Participant makes a Stock 
Credit Election, a Stock Credit Account established for the Participant and 
maintained by the Corporation shall be credited with: (i) that number of Stock 
Credits equal to the number of shares of Capital Stock (including fractions of 
a share to four decimal places) that could have been purchased with the amount 
of Deferred Bonus Compensation subject to a Stock Credit Election based on the 
Fair Market Value of the Capital Stock on the date that the Bonus Compensation 
would otherwise have been paid if it had not been deferred; and (ii) that 
number of Stock Credits equal to the product of the number of Stock Credits 
awarded pursuant to Section 2.2(i) above multiplied by a percentage amount to 
be determined annually by the Committee, which percentage may be different 
from the Stock Premium Percentage (the "Stock Credit Premium Percentage").  
The Stock Credit Premium Percentage shall not exceed twenty-five percent 
(25%).

	Section 2.3  RESTRICTED PERIOD.  The Committee may, in its sole 
discretion, establish a period of time (the "Restricted Period") that all or 
any portion of the shares of Capital Stock issued pursuant to a Stock 
Acquisition Election or shares of Capital Stock distributed with respect to 
Stock Credits pursuant to Section 2.7 hereof may not be sold, assigned, 
transferred, pledged or otherwise disposed of.  Shares of Capital Stock 
subject to a Restricted Period ("Restricted Stock") shall be represented by a 
stock certificate registered in the name of the Participant which, in the 
discretion of the Committee, could be either held in the custody of the 
Corporation until the end of the Restricted Period applicable to such shares 
or bear a restrictive legend.  Except for the limitations described above, a 
Participant shall have all the rights of a stockholder of the Corporation with 
respect to Restricted Stock, including the right to vote such shares.

	Section 2.4.  TERMS AND CONDITIONS OF ELECTION.  A Stock Acquisition 
Election or Stock Credit Election (an "Election") shall be subject to the 
following terms and conditions.

	(a)	An election shall be in writing and shall be irrevocable; and

	(b)	An Election may be made on or before December 31, 1995, to take 
		effect for the Plan Year ending on June 30, 1996; thereafter an 
		Election shall be effective for any Plan Year only if made at such 
		time as the Committee in its discretion shall determine; provided, 
		however that such election must occur at least six (6) months 
		prior to the date that Bonus Compensation would be paid or 
		otherwise would become payable if it had not been deferred by the 
		Participant.

	(c)	An Election shall remain in effect only for the Plan Year to which 
		it applies.

	Section 2.5.  ADJUSTMENT OF STOCK CREDIT ACCOUNTS.

	(a)	Cash Dividends -- As of the date that any cash dividend is paid to 
		stockholders of the Corporation, the Participant's Stock Credit 
		Account shall be credited with additional Stock Credits equal to 
		the number of shares of Capital Stock (including fractions of a 
		share to four decimal places) that could have been purchased on 
		that date with the dividends paid on the number of shares of 
		Capital Stock equal to the number of Stock Credits in such 
		Participant's Stock Credit Account based on the Fair Market Value 
		of the Capital Stock on that date.

	(b)	Stock Dividends -- In the event that a  stock dividend shall be 
		paid upon the Capital Stock, the number of Stock Credits in each 
		Participant's Stock Credit Account shall be adjusted by adding 
		thereto additional Stock Credits equal to the number of shares of 
		Capital Stock which would have been distributable on the Capital 
		Stock represented by Stock Credits if such shares of Capital Stock 
		had been outstanding on the date fixed for determining the 
		stockholders entitled to receive such stock dividend.

	(c)	Other Adjustments -- In the event that the outstanding shares of 
		Capital Stock of the Corporation shall be changed into or 
		exchanged for a different number or kind of shares of stock or 
		other securities of the Corporation or of another corporation, 
		whether through reorganization, recapitalization, stock split-up, 
		combination of shares, merger or consolidation, then there shall 
		be substituted, for the shares of Capital Stock represented by 
		Stock Credits, the number and kind of shares of stock or other 
		securities which would have been substituted therefor if such 
		shares of Capital Stock had been outstanding on the date fixed for 
		determining the stockholders entitled to receive such changed or 
		substituted stock or other securities.

		In the event there shall be any change, other than specified in 
		this Section 2.5, in the number or kind of outstanding shares of 
		Capital Stock of the Corporation or of any stock or other 
		securities into which such Capital Stock shall be changed or for 
		which it shall have been exchanged, then, if the Board shall 
		determine, in its discretion, that such change equitably requires 
		an adjustment in the number of Stock Credits or the Capital Stock 
		represented by such Stock Credits, such adjustment shall be made 
		by the Board and shall be effective and binding for all purposes 
		of the Plan and on each outstanding Stock Credit Account.

	Section 2.6.  CHANGE IN CONTROL.  In the event of any threatened or 
actual change in control of the Corporation (as set forth in any Deferred 
Compensation Plan to which the Stock Credits relate), issued and outstanding 
shares of Capital Stock shall be substituted for the Stock Credits in each 
Participant's Stock Credit Account and such Capital Stock shall be transferred 
to the deferred compensation trust established under the Deferred Compensation 
Plan to which the Stock Credits relate.

	Section 2.7.  DISTRIBUTION OF STOCK CREDITS.  As soon as practicable 
following the date on which the Participant has elected to have the Deferred 
Bonus Compensation paid pursuant to the applicable Deferred Compensation Plan 
(the "Distribution Date"), the Corporation shall issue to such Participant 
that number of shares of Capital Stock equal to the whole number of Stock 
Credits in such Participant's Stock Credit Account to be distributed and cash 
equal to the fractional Stock Credits in such account to be distributed 
multiplied by the Fair Market Value of the Capital Stock as of the 
Distribution Date provided, however, that the Committee, in its sole 
discretion, shall have the right to pay the Participant a cash amount equal to 
the aggregate value of the whole shares of Capital Stock otherwise 
distributable with respect to the Stock Credits, in lieu of distributing such 
shares.

	Section 2.8.  DISTRIBUTIONS ON DEATH.  Upon the death of a Participant, 
any and all restrictions on transferability of Restricted Stock held by or on 
behalf of such Participant shall lapse and such shares shall become 
immediately transferable.  In the event of the death of a Participant prior to 
the Distribution Date, the Stock Credit Account to which he or she was 
entitled shall be converted to cash and distributed in a lump sum to such 
person or persons or the survivors thereof, including corporations, 
unincorporated associates or trusts, as the Participant may have designated.  
All such designations shall be made in writing, signed by the Participant and 
delivered to the Corporation.  A Participant may from time to time revoke or 
change any such designation by written notice to the Corporation.  If there is 
no unrevoked designation on file with the Corporation at the time of the 
Participant's death, or if the person or persons designated therein shall have 
all predeceased the Participant or otherwise ceased to exist, such 
distributions shall be made to the estate of the Participant.  Such 
distributions shall be made as soon as practicable following notification to 
the Corporation of the Participant's death.  In this case, the Participant's 
Stock Credit Account shall be converted to cash by multiplying the number of 
whole and fractional shares of Capital Stock to which the Participant's Stock 
Credit Account is equivalent by the Fair Market Value of the Capital Stock on 
the date of death.

                                  ARTICLE III
                            Miscellaneous Provisions

	Section 3.1.  AMENDMENT AND DISCONTINUANCE.  The Board may alter, amend, 
suspend or discontinue the Plan, provided that no such action shall deprive 
any person without such person's consent of any rights theretofore granted 
pursuant hereto.  The Board may, in its discretion, submit any proposed 
amendment to the Plan to the stockholders of the Corporation for approval and 
shall submit proposed amendments to the Plan to the stockholders of the 
Corporation for approval if such approval is required in order for the Plan to 
comply with Rule 16b-3 of the Securities Exchange Act of 1934 (the "Exchange 
Act") (or any successor rule).

	Section 3.2.  COMPLIANCE WITH GOVERNMENTAL REGULATIONS.  Notwithstanding 
any provision of the Plan or the terms of any agreement entered into pursuant 
to the Plan, the Corporation shall not be required to issue any Capital Stock 
or Stock Credits hereunder prior to registration of the shares subject to the 
Plan under the Securities Act of 1933 or the Exchange Act, if such 
registration shall be necessary, or before compliance by the Corporation or 
any Participant with any other provisions of either of those acts or of 
regulations or rulings of the Securities and Exchange Commission thereunder, 
or before compliance with other federal and state laws and regulations and 
rulings thereunder, including the rules of the New York Stock Exchange, Inc.  
The Corporation shall use its best efforts to effect such registrations and to 
comply with such laws, regulations and rulings forthwith upon advice by its 
counsel that any such registration or compliance is necessary.

	Section 3.3.  COMPLIANCE WITH SECTION 16.  With respect to persons 
subject to Section 16(a) of the Exchange Act, transactions under this Plan are 
intended to comply with all applicable conditions of Rule 16b-3 (or its 
successor rule). To the extent that any provision of the Plan or any action by 
the Board or the Committee fails to so comply, it shall be deemed null and 
void to the extent permitted by law and to the extent deemed advisable by the 
Committee.

	Section 3.4.  NON-ALIENATION OF BENEFITS.  No right or interest of a 
Participant in a Stock Credit Account under the Plan may be sold, assigned, 
transferred, pledged, encumbered or otherwise disposed of except as expressly 
provided in the Plan; and no interest or benefit of any Participant under the 
Plan shall be subject to the claims of creditors of the Participant.

	Section 3.5.  WITHHOLDING TAXES.  To the extent required by applicable 
law or regulation, each Participant must arrange with the Corporation for the 
payment of any federal, state or local income or other tax applicable to the 
receipt of Capital Stock or Stock Credits under the Plan before the 
Corporation shall be required to deliver to the Participant a certificate for 
Capital Stock or distribute cash with respect to a Stock Credit Account.

	At the discretion of the Committee, share tax withholding may be 
permitted.  Share tax withholding shall entitle the Participant to elect to 
satisfy, in whole or in part, any tax withholding obligations in connection 
with the issuance of shares of Capital Stock pursuant to the Plan by either 
(i) withholding shares of Capital Stock otherwise issuable to the Participant; 
or (ii) accepting delivery of previously owned shares of Capital Stock.  
Notwithstanding the foregoing, in the case of a Participant subject to Section 
16(a) of the Exchange Act, no such election shall be effective unless made in 
compliance with any applicable requirements of Rule 16b-3 (or any successor 
rule) that must be satisfied in order to exempt the withholding transaction(s) 
from Section 16(b) of the Exchange Act.

	Section 3.6.  FUNDING.  Except as provided in Section 2.6 hereof, no 
obligation of the Corporation under the Plan shall be secured by any specific 
assets of the Corporation, nor shall any assets of the Corporation be 
designated as attributable or allocated to the satisfaction of any such 
obligation.  To the extent that any person acquires a right to receive 
payments from the Corporation under the Plan, such right shall be no greater 
than the right of any unsecured creditor of the Corporation.

	Section 3.7.  GOVERNING LAW.  The Plan shall be governed by and 
construed and interpreted in accordance with the internal laws of the 
Commonwealth of Pennsylvania.

	Section 3.8.  EFFECTIVE DATE OF THE PLAN.  The Plan shall become 
effective upon approval and adoption of the Plan by the holders of a majority 
of the shares of Capital Stock present at the 1995 annual meeting of 
stockholders.