Form 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the year ended December 31, 2002
Commission File Number 1-5828
SAVINGS PLAN OF
CARPENTER TECHNOLOGY CORPORATION
(Full title of the plan)
CARPENTER TECHNOLOGY CORPORATION
(Name of issuer of the securities held
pursuant to the plan)
2 Meridian Drive
Treeview Corporate Center
Wyomissing, Pennsylvania 19610
(Address of principal executive
office of the issuer)
Financial Statements and Exhibits
(a) Financial Statements
The financial statements filed as part of this report are
listed in the Index to Financial Statements included herein.
(b) Exhibits
23 Consent of Independent Accountants
99.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350
99.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350
1
CARPENTER TECHNOLOGY CORPORATION SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
FORM 11-K ANNUAL REPORT
Form 11-K
Pages
Report of Independent Auditors 3
Financial Statements:
Statements of Net Assets Available for
Benefits as of December 31, 2002 and 2001 4
Statements of Changes in Net Assets Available
for Benefits for the years ended December 31,
2002 and 2001 5
Notes to Financial Statements 6-11
Supplemental Schedule:
Schedule of Assets (Held at End of Year) 12
2
Report of Independent Auditors
To the Participants and Administrator of the Savings Plan of
Carpenter Technology Corporation:
In our opinion, the accompanying statements of net assets
available for benefits and the related statements of changes in
net assets available for benefits present fairly, in all
material respects, the net assets available for benefits of the
Savings Plan of Carpenter Technology Corporation (the "Plan") at
December 31, 2002 and 2001, and the changes in net assets
available for benefits for the years then ended in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental Schedule of Assets (Held at End of Year) is
presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is
supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's
management. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as
a whole.
June 13, 2003 /s/ PricewaterhouseCoopers LLP
3
SAVINGS PLAN OF
CARPENTER TECHNOLOGY CORPORATION
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
as of December 31, 2002 and 2001
(dollars in thousands)
ASSETS 2002 2001
Investments, at fair value $250,305 $275,715
Cash 502 -
Receivables:
Investment income receivable 1,291 426
Receivable for securities sold 1,247 -
Miscellaneous receivables - 1
Total receivables 2,538 427
Total assets 253,345 276,142
LIABILITIES
Accrued administration expenses 181 205
Payable for securities purchased 210 -
Total liabilities 391 205
Net assets available for benefits $252,954 $275,937
The accompanying notes are an integral part of these financial
statements.
4
SAVINGS PLAN OF
CARPENTER TECHNOLOGY CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
for the years ended December 31, 2002 and 2001
(dollars in thousands)
2002 2001
Additions to net assets attributed to:
Investment income:
Interest $ 5,547 $ 6,147
Dividends 3,270 3,092
Net depreciation in fair value of
investments (47,924) (32,536)
(39,107) (23,297)
Contributions:
Salary deferral 7,935 9,124
Participant 1,780 2,142
Rollover 271 958
Company basic 4,063 4,683
14,049 16,907
Transfers from merged plans (Note 1) 27,801 -
Total additions 2,743 (6,390)
Deductions from net assets attributed to:
Benefits paid to participants 25,343 21,087
Administrative expenses 383 911
Total deductions 25,726 21,998
Net decrease (22,983) (28,388)
Net assets available for benefits:
Beginning of year 275,937 304,325
End of year $252,954 $275,937
The accompanying notes are an integral part of these financial
statements.
5
SAVINGS PLAN OF
CARPENTER TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan:
The following description of the Savings Plan of Carpenter
Technology Corporation (the "Plan") provides only general
information. A more comprehensive description of the Plan's
provisions can be found in the Plan document, which is
available to participants upon request from Carpenter
Technology Corporation or any participating affiliate
(collectively referred to as the "Company").
General:
The Plan is a profit-sharing and stock bonus plan which
covers substantially all domestic employees of the Company.
It is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA), as amended.
Effective January 1, 2002, Mellon Trust replaced State
Street Bank as Trustee and Mellon HR Solutions replaced
Hewitt Associates as Recordkeeper of the Plan. Also,
effective in January 2002, the Carpenter Stock Fund within
the Plan was converted to an Employee Stock Ownership Plan
(ESOP).
Plan Merger:
Effective December 31, 2002, four of the Company's qualified
defined contribution plans (Dynamet Inc. Defined
Contribution Plan, The Savings Plan for Affiliates,
Retirement Plan of Talley Metals Technology, Inc., and ICI
Ceramics, Inc. Employee Savings & Retirement Plan) merged
with and into the Plan. Pursuant to the merger,
participants in the other plans, with assets having a fair
market value of $27,801,000 at the time of the merger,
became part of the Plan.
6
Contributions:
Each year, participants may contribute up to 35 percent of
annual compensation on a pretax basis (known as salary
deferral contributions), and up to 35 percent of annual
compensation on an after-tax basis (known as participant
contributions), as defined in the Plan. The combined
contributions cannot exceed 35 percent of total
compensation. Participants who are age 50 or older may make
"catch-up contributions," which are additional pretax
contributions. Participants may also contribute amounts
representing distributions from other qualified defined
contribution plans (known as rollovers). The Company
contributes an amount equal to three percent of each
employee's base pay (known as company basic contributions).
Contributions are subject to certain limitations.
Participant's Accounts:
Several accounts are maintained for each participant which
are credited with contributions and Plan net earnings on
funds invested within the respective accounts, as follows:
- Employee pretax salary deferral account - credited with
salary deferral contributions on a before tax basis,
which are participant directed;
- Employee after tax account - credited with participant
contributions after tax, which are participant directed;
- Company basic contribution account - Company
contributions which are participant directed;
- Rollover contribution account - credited with rollover
contributions, which are participant directed;
- Inter-plan transfer accounts - transfers from other
Carpenter Plans, and are participant directed;
- Profit sharing account - credited with Company
contributions prior to 1988, which were non-participant
directed. No further contributions may be made to this
account, and participants are able to transfer amounts to
other investment funds.
7
- Prior plan money purchase plan account - transferred from
the Retirement Plan of Talley Metals and are participant
directed and not eligible for loan or withdrawal.
Vesting:
All contributions and Plan earnings thereon are 100
percent vested and nonforfeitable.
Investment Funds:
The Plan maintains nineteen investment funds. Each
participant may designate separately the investment fund
or funds in which their monies are to be invested.
Participant Loans:
Loans are available from various participant accounts in
a particular hierarchy for active employees of the
Company. Participants are subject to certain
restrictions on their number of loans, amount and terms
of repayment. Interest is charged at the prime rate for
commercial lenders at the time the loan is initiated,
plus one percent. Loan repayments are required with each
pay, and payment in full is required at the time of the
participant's separation.
Benefits Paid to Participants:
Benefits paid to participants include participant
distributions and withdrawals. Participants are entitled
to a lump sum distribution upon separation from service.
Upon separation, a participant may elect to defer such
distribution, provided the account balance is at least
$5,000. The total distribution of benefits to all
separated participants must occur by December 31st of the
year in which the participant attains age 70-1/2.
Hardship and non-hardship in-service withdrawals are
permitted subject to certain restrictions. Upon reaching
age 59-1/2, the following hierarchy applies to
withdrawals: 1) Rollover account, 2) Profit sharing
account, 3) Employee pre-tax account, 4) Company basic
contribution account, 5) Inter-plan transfer accounts.
The Money purchase plan account is not available for
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withdrawal. Benefits paid to participants are in cash,
except that distribution of accounts which consist of
investments in the Carpenter Technology Stock Fund shall
be made in shares of the Company's common stock or cash,
at the participant's option.
Administrative Expenses:
All fees directly related to the Plan are paid by the
Plan.
Plan Termination:
The Company has the right under the Plan to discontinue
or change its contributions at any time and to terminate
the Plan subject to the provisions of ERISA and any
contractual obligations.
2. Summary of Significant Accounting Policies:
A. The financial statements of the Plan are prepared under
the accrual method of accounting.
B. The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America requires management to make
estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
C. The Plan's investments are stated at fair value. Quoted
market prices are used to value investments. Shares of
registered investment companies are valued at quoted
market prices, which generally represent the net asset
values of shares held by the Plan at year end.
Participant loans are valued at their outstanding
balances, which approximates fair value. Purchases and
sales of investments are recorded on a trade-date basis.
Gain or loss on sales of investments is based on average
cost. Dividend income is recorded on the ex-dividend
date. Income from other investments is recorded as
earned on an accrual basis.
9
D. The net appreciation (depreciation) in the fair value of
investments in the statements of changes in net assets
available for benefits consists of realized gains or
losses and unrealized appreciation (depreciation) on
investments.
E. Benefits are recorded when paid.
F. Investments are exposed to various risks, such as
interest rate, market and credit risks. Due to the
level of risk associated with certain investments and
the level of uncertainty related to changes in the value
of investments, it is reasonably possible that changes
in these risks in the near term could materially affect
the amounts reported in the statement of net assets
available for benefits and the statement of changes in
net assets available for benefits.
3. Investments:
The following presents investments that represent 5 percent
or more of the Plan's net assets.
(in thousands)
at December 31
2002 2001
Certus Stable Value Fund (2002); and
Selection Fund for Employee Trusts of
State Street Bank and Trust Company (2001) $85,947 $75,419
American Balanced Fund $16,153 $ -
Fidelity Dividend Growth Fund (2002);
and Matrix Synthesis Fund for Employee
Trusts of State Street Bank and Trust
Co. (2001) $45,997 $68,187
Carpenter Technology Stock Fund $19,702 $38,345
Mellon EB DL S&P 500 Index Fund (2002);
and BZW Barclay's Equity Index Fund (2001) $19,748 $25,358
Putnam Vista Fund $ - $15,371
10
During 2002 and 2001, the Plan's investments (including
gains and losses on investments bought and sold, as well as
held during the year) depreciated in value by $47,924,000
and $32,536,000, respectively, as follows:
2002 2001
(in thousands)
Common stock $(19,043) $(13,413)
Registered investment companies (28,881) ( 9,178)
Collective trusts - ( 9,945)
$(47,924) $(32,536)
4. Tax Status:
The Internal Revenue Service has determined and informed the
Company by letter dated March 21, 2003, that the Plan and
related trust as of February 20, 2002 are designed in
accordance with applicable sections of the Internal Revenue
Code (IRC). Although the Plan has been amended since
receiving the determination letter, the Plan administrator
believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of
the IRC.
5. Related Party Transactions:
Certain Plan investments are shares of registered investment
companies managed by Mellon Bank. Mellon Bank is the
trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest. Fees paid by the
Plan for the investment management services amounted to
$375,000, and approximately $422,000 for the years ended
December 31, 2002 and 2001, respectively.
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Schedule H, line 4i - Schedule of Assets (Held at End of Year)
Savings Plan of Carpenter Technology Corporation
as of December 31, 2002
(A) (B) (C) (E)
Identity of issue, Description of investment, Current
borrower, lessor or including maturity date Value
similar party rate of interest, collateral,
par or maturity value
* Certus Stable Value Registered Investment Company
Fund $ 85,946,616
Fidelity Dividend Registered Investment Company
Growth Fund $ 45,997,016
Carpenter Technology Corporate Stocks - Common
Corporation $ 19,701,618
* Mellon EB DL Stock Registered Investment Company
Index Fund $ 19,747,652
American Balanced Registered Investment Company
Fund $ 16,153,315
PIMCO Total Return Registered Investment Company
Fund $ 10,531,111
* Dreyfus MidCap Value Registered Investment Company
Fund $ 11,217,274
* Dreyfus Government Registered Investment Company
Cash Management Fund $ 10,112,071
Dodge & Cox Stock Registered Investment Company
Fund $ 7,332,293
American Funds Registered Investment Company
EuroPacific Growth Fund $ 5,675,433
Vanguard Small Cap Registered Investment Company
Index Fund $ 2,814,334
Managers Special Equity Registered Investment Company
Fund $ 901,980
MFS Strategic Growth Registered Investment Company
Fund $ 2,166,029
Fidelity Freedom 2020 Registered Investment Company
Fund $ 303,158
Fidelity Freedom 2010 Registered Investment Company
Fund $ 302,078
Fidelity Freedom Income Registered Investment Company
Fund $ 165,506
Fidelity Freedom 2000 Registered Investment Company
Fund $ 65,240
Fidelity Freedom 2030 Registered Investment Company
Fund $ 25,153
Fidelity Freedom 2040 Registered Investment Company
Fund $ 14,285
Participant Loans Loans to Participants - interest
rate range 5.25% to 10.5%; no
loans due past 12/04/2026 $ 11,133,037
TOTAL $250,305,199
* Party-in-Interest
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Carpenter Technology Corporation has duly caused this
annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
SAVINGS PLAN OF
CARPENTER TECHNOLOGY CORPORATION
(Name of Plan)
Date: June 30, 2003 By /s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice President -
Finance and
Chief Financial Officer
13
EXHIBIT INDEX
Exhibit Number
23 Consent of Independent Accountants
99.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350
99.2 Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350
14