KENNAMETAL INCKMT

KENNAMETAL INC Leases Disclosure

10-KFiled Aug 12, 20253 min read
LEASES
At the inception of our contracts, we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement. For leases that do not have a readily determinable implicit rate, we use a discount rate based on our incremental borrowing rate, which is determined considering factors such as the lease term, our credit rating and the economic environment of the location of the lease as of the commencement date.
We account for non-lease components separately from lease components. These costs often relate to the payments for a proportionate share of real estate taxes, insurance, common area maintenance and other operating costs in addition to base rent. We also generally do not recognize ROU assets and liabilities for leases with an initial term of 12 months or less. Lease costs associated with leases of less than 12 months were $7.7 million, $5.9 million and $7.0 million for the years ended June 30, 2025, 2024 and 2023, respectively.
As a lessee, we have various operating lease agreements primarily related to real estate, vehicles and office and plant equipment. Our real estate leases, which are comprised primarily of manufacturing, warehousing, office and administration facilities, represent a majority of our lease liability. Our lease payments are largely fixed. Any variable lease payments, including utilities, common area maintenance and repairs and maintenance, are expensed during the period incurred. Variable lease costs were immaterial for the years ended June 30, 2025, 2024 and 2023. A majority of our real estate leases include options to extend the lease and options to early terminate the lease. Leases with an early termination option generally involve a termination payment. We review all options to extend, terminate, or purchase the ROU assets at the inception of the lease and account for these options when they are reasonably certain of being exercised. Our lease agreements generally do not contain any material residual value guarantees or materially restrictive covenants. We have signed a material lease agreement related to the Company's future innovation center in Germany. The lease has not yet commenced as the facility has yet to be constructed and the Company does not have the right to use the property until the future handover date. We do not have any material lease transactions with related parties.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in operating expense on our consolidated statements of income. Operating lease cost was $24.3 million, $22.3 million and $22.0 million in 2025, 2024 and 2023, respectively.
The following table sets forth supplemental balance sheet information related to our operating leases:
Year Ended June 30
2025
2024
2023
Weighted average remaining lease term9.6 years8.6 years8.0 years
Weighted average discount rate4.6 %4.3 %3.8 %
The following table sets forth supplemental cash flow information related to our operating leases:
Year Ended June 30
(in thousands)
2025
2024
2023
Operating cash outflows from operating leases$16,650 $16,360 $15,040 
ROU assets obtained in exchange for new operating lease liabilities$11,754 $17,640 $8,066 
The following table sets forth the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated balance sheet as of June 30, 2025:
Year Ended June 30 (in thousands)
2026$14,116 
202710,279 
20286,909 
20294,149 
20302,843 
Thereafter14,542 
Total undiscounted operating lease payments$52,838 
   Less: discount to net present value7,243 
Total operating lease liabilities$45,595 
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Historical Timeline

Fiscal YearFiled
2025Aug 12, 2025Showing above
2024Aug 12, 2024
2023Aug 9, 2023
2022Aug 10, 2022
2021Aug 10, 2021
2020Aug 20, 2020
2018Aug 10, 2018
2017Aug 14, 2017
2016Aug 11, 2016

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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