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SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE For the fiscal year ended June 30, 2000 Commission file number 1-5828 CARPENTER TECHNOLOGY CORPORATION Delaware 1047 N. Park
Road, Wyomissing, Pennsylvania 19610-1339 610-208-2000 Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange 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 the filing requirements for at least the past 90
days. Yes X . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of August 31, 2000, 22,024,060 shares of Common Stock of Carpenter Technology
Corporation were outstanding and the aggregate market value of such Common Stock held by
non-affiliates (based upon its closing transaction price on the Composite Tape on such
date) was $623,571,878. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates by reference certain information from the 2000
definitive Proxy Statement, dated September 18, 2000. The Exhibit Index appears on pages E-1 to E-4. TABLE OF CONTENTS Page Number 3 3 8 9 9 12 12 13 14 22 57 58 58 58 58 58 59 59 61 E-1
Washington, D.C. 20549
FORM 10-K
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of
incorporation or organization) 23-0458500
(I.R.S. Employer Identification No.)
(Address of principal executive offices)
(Zip Code)
(Registrant's telephone number, including area code)
(Title of each class)
on which registered)
Common stock, par value $5 per
share..
.New York Stock Exchange
PART
I
Item
1
Business
Item
2
Properties
Item
3
Legal Proceedings
Item 4
Submission of Matters to
a Vote of Security
Holders
PART
II
Item 5
Market for Registrant's
Common Stock
and Related Stockholder Matters
Item
6
Selected Financial
Data
Item 7
Management's Discussion
and Analysis of
Financial Condition and Results of Operations
Operations
Item
8
Financial Statements
and Supplementary Data
Item 9
Disagreements on
Accounting and Financial
Disclosure
PART
III
Item
10
Directors and
Executive Officers of the Registrant
Item
11
Executive
Compensation
Item
12
Security Ownership of
Certain Beneficial Owners
and Management
Item
13
Certain Relationships
and Related Transactions
PART
IV
Item
14
Exhibits, Financial
Statement Schedules and
Reports on Form 8-K
SIGNATURES
EXHIBIT
INDEX
(a) General Development of Business:
Carpenter Technology Corporation, incorporated in 1904, is engaged in the manufacture, fabrication, and distribution of specialty metals and certain engineered products. There were no significant changes in the form of organization or mode of conducting business of Carpenter Technology Corporation (hereinafter called "the Company" or "Carpenter") during the year ended June 30, 2000, except that on February 1, 2000, Carpenter acquired the Anval Nyby Powder AB ("Anval"), a powder metal producer based in Torshalla, Sweden, at a cost of $7 million in cash, including acquisition costs, and assumed Anval's debt with a fair market value of $1.6 million.
(b)
Financial Information About Segments:
Carpenter is organized on a product basis and managed in three segments: Specialty Alloys, Titanium Alloys and Engineered Products. The Specialty Alloys and Titanium segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers, distribution methods and economic characteristics. See note 19 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data" for additional segment reporting information.
(c) Narrative Description of Business:
( 1) Products:
Carpenter primarily processes basic raw materials such as chromium, nickel, titanium, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire, narrow strip, special shapes, and hollow forms in many sizes and finishes and produces certain metal powders and fabricated metal products. In addition, ceramic and metal-injection molded products are produced from various raw materials using molding, heating and other processes.
Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in bar, wire, rod and strip forms. Sales are distributed both directly from producing plants and from a Carpenter operated distribution network. Specialty metals products include:
Stainless Steels -A broad range of corrosion resistant alloys including conventional stainless steels and many proprietary grades for special applications.
Special Alloys -
Other special purpose alloys used in critical components such as bearings and fasteners. Heat resistant alloys that range from slight modifications of the stainless steels to complex nickel and cobalt base alloys. Alloys for electronic, magnetic and electrical applications with controlled thermal expansion characteristics, or high electrical resistivity or special magnetic characteristics. Fabrication of special stainless steels and zirconium base alloys into tubular products for the aircraft industry and nuclear reactors.
Titanium Products -
A corrosion resistant, highly specialized metal with a combination of high strength and low density. Most common uses are in aircraft, medical devices, sporting equipment and chemical and petroleum processing.
Tool and Other Steel -
Tool and die steels which are extremely hard alloys used for tooling and other wear-resisting components in metalworking operations such as stamping, extrusion and machining. Other steel includes carbon steels purchased for distribution and other miscellaneous products.
Engineered Products includes structural ceramic products, ceramic cores for the casting industry, metal-injection molded products, tubular metal products for nuclear and aerospace applications, custom shaped bar and ultra hard wear materials. Engineered Products finished products include:
Ceramics and Other Materials -
Certain engineered products, including ceramic cores for casting ranging from small simple configurations to large complex shapes and structural ceramic components. Also, metal injected molded designs in a variety of materials, ultra-hard parts, and precision welded tubular products, as well as drawn solid tubular shapes.
( 2) Classes of Products:
The approximate percentage of Carpenter's consolidated net sales contributed by the major classes of products for the last three fiscal years are as follows:
2000 |
1999 |
1998 |
|
Stainless steel | 48% |
46% |
47% |
Special alloys | 28% |
29% |
30% |
Titanium products | 8% |
10% |
11% |
Ceramics and other materials | 9% |
8% |
6% |
Tool and other steel | 7% |
7% |
6% |
100% |
100% |
100% |
( 3) Raw Materials:
Carpenter's Specialty Metals segment depends on continued delivery of critical raw materials for its day-to-day operations. These raw materials are nickel, ferrochrome, cobalt, molybdenum, titanium, manganese and scrap. Some of these raw materials sources are located in countries subject to potential interruptions of supply. These potential interruptions could cause material shortages and affect the availability and price.
Carpenter is in a strong raw material position because of its long-term relationships with major suppliers. These suppliers provide availability of material and competitive prices for these key raw materials to help Carpenter maintain the appropriate levels of raw materials.
( 4) Patents and Licenses:Carpenter owns a number of United States and foreign patents and has granted licenses under some or all of them. Certain of the products produced by Carpenter are covered by patents of other companies from whom licenses have been obtained. Carpenter does not consider its business to be materially dependent upon any patent or patent rights.
( 5) Seasonality of Business:
Carpenter's sales and earnings results are normally influenced by seasonal factors. The first fiscal quarter (three months ending September 30) is typically the lowest - principally because of annual plant vacation and maintenance shutdowns in this period by Carpenter as well as by many of its customers. The timing of major changes in the general economy can alter this pattern, but over the longer time frame, the historical patterns generally prevail.
The chart below shows the percent of net sales by quarter for the past three fiscal years:
Quarter Ended | 2000 |
1999 |
1998 |
September 30 | 22% |
24% |
21% |
December 31 | 23% |
24% |
24% |
March 31 | 27% |
26% |
28% |
June 30 | 28% |
26% |
27% |
100% |
100% |
100% |
The above trends were also affected by the acquisitions of businesses. Fiscal 2000 includes the effects of the acquisition of Anval on February 1, 2000. Fiscal 1999 includes the effects of the acquisition of certain assets of Telcon, Ltd. in October 1998. Fiscal 1998 includes the effects of the acquisition of a majority interest in Talley Industries, Inc. on December 5, 1997 and the remainder on February 19, 1998.
( 6) Customers:Carpenter is not dependent upon a single customer, or a very few customers, to the extent that the loss of any one or more would have a materially adverse effect.
( 7) Backlog:
As of June 30,
2000, Carpenter had a backlog of orders, believed to be firm, of approximately $275
million, substantially all of which is expected to be shipped within the current fiscal
year. The backlog as of June 30, 1999 was approximately $200 million.
( 8) Competition:
Carpenter's business is highly competitive. It supplies materials to a wide variety of end-use market sectors, none of which consumes more than about 30 percent of Carpenter's output, and competes with various companies depending on end-use sector, product or geography.
There are approximately 10 domestic companies producing one or more similar specialty metal products that are considered to be major competitors to the specialty metals operations in one or more product sectors. There are several dozen smaller producing companies and converting companies in the United States who are competitors. Carpenter also competes directly with several hundred independent distributors of products similar to those distributed by Carpenter's wholly owned distribution system. Additionally, numerous foreign producers import into the United States various specialty metal products similar to those produced by Carpenter. Furthermore, a number of different products may, in certain instances, be substituted for Carpenter's finished product.
Imports of foreign specialty steels have long been a concern to the domestic steel industry because of the potential for unfair pricing by foreign producers. Such pricing practices have usually been supported by foreign governments through direct and indirect subsidies.
Because of these unfair trade practices, Carpenter several years ago joined with other domestic producers in the filing of trade actions against foreign producers who had dumped their specialty steel products into the United States. As a result of these actions, the U.S. Department of Commerce issued antidumping orders for the collection of dumping duties on imports of stainless bar from Brazil, India, Japan and Spain at rates ranging up to about 63% of their value and on imports of stainless rod from Brazil, France and India at rates ranging up to about 49% of their value.
As a result of a sunset review determination made by the International Trade Commission in July 2000, the antidumping orders on stainless rod were extended to July 2005. The antidumping orders on stainless bar will end or be extended in calendar year 2001, depending upon the sunset review determination to be made by the Commission.
Additional antidumping orders are in place with regard to imports of stainless rod from Italy, Japan, Korea, Spain, Sweden and Taiwan at rates ranging up to 34% of their value. Countervailing duty orders are also in place against stainless rod imports from Italy. These orders were established in 1998 and will continue in effect until September 2003, at which time they will be subject to a sunset review.
( 9) Research, Product and Process Development:Carpenter's expenditures for company-sponsored research and development were approximately $14.4 million, $15.4 million and $16.1 million in fiscal 2000, 1999 and 1998, respectively.
(10) Environmental Regulations:
Carpenter is subject to various stringent federal, state, and local environmental laws and regulations. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental remediation costs which represent management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. Recoveries of expenditures are recognized as a receivable when they are estimable and probable. For further information on environmental remediation, see the Contingencies section included in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and note 18 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".
The costs of maintaining and operating environmental control equipment were about $5.3 million and $9.8 million for fiscal 2000 and 1999, respectively. The capital expenditures for environmental control equipment were $2.6 million and $.3 million for fiscal 2000 and 1999, respectively. Carpenter anticipates spending approximately $3.8 million on major domestic environmental capital projects over the next five fiscal years. This includes $1.0 million for fiscal 2001 and $1.0 million for fiscal 2002. Due to the possibility of unanticipated factual or regulatory developments, the amount of future capital expenditures may vary from these estimates.
(11) Employees:
As of
August 31, 2000, Carpenter and its affiliates had approximately 5,900 employees.
(d) Financial information about foreign and domestic operations and export sales:
Sales outside of the United States, including export sales, were $207.1 million, $184.8 million and $179.6 million in fiscal 2000, 1999 and 1998, respectively.
Reference note 19 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".
The primary locations of Carpenter's specialty metals manufacturing and fabrication plants are: Reading, Pennsylvania; Hartsville, South Carolina; Washington, Pennsylvania; Orangeburg, South Carolina; Orwigsburg, Pennsylvania; Clearwater, Florida; and Crawley, England. The Reading, Hartsville, Washington, Orangeburg, Orwigsburg and Crawley plants are owned in fee. The Clearwater plant is owned, but the land is leased.
The primary locations of Carpenter's engineered products manufacturing operations are: Wood-Ridge, New Jersey; Carlstadt, New Jersey; Corby, England; Wilkes-Barre, Pennsylvania; Chicago, Illinois; Auburn, California; El Cajon, California; Petaluma, California and Palmer, Massachusetts. The Corby and Chicago plants are owned, while the rest of the locations are leased.
The Reading plant has an annual practical melting capacity of approximately 231,000 ingot tons of its normal product mix. The annual tons shipped will be considerably less than the tons melted due to processing losses and finishing operations. During the years ended June 30, 2000 and 1999, the plant operated at approximately 91 percent and 79 percent, respectively, of its melting capacity.
During the fiscal years 2000 and 1999, the Talley Metals plant in Hartsville, South Carolina had an annual hot rolling capacity of approximately 78,500 tons. The annual tons shipped will be less than the tons hot rolled due to processing losses in finishing operations. During the year ended June 30, 2000 and 1999, the plant operated at approximately 73% and 84%, respectively, of its hot rolling capacity.
Carpenter also operates sales offices and distribution and service centers, most of which are leased, at various locations in many states and several foreign countries.
The plants, service centers and offices of Carpenter have been acquired at various times over many years. There is an active maintenance program to keep facilities in good condition. In addition, Carpenter has had an active capital spending program to replace equipment as needed to keep it technologically competitive on a world-wide basis. Carpenter believes its facilities are in good condition and suitable for its business needs.
On August 6, 1999, the Bridgeport, Connecticut Port Authority filed a Certificate of Taking, acquiring fee simple ownership of Carpenters former plant site in that city. The proposed compensation for the site is $2.5 million and the Port Authority has stated its intention to seek reimbursement of any additional site remediation costs. The carrying value for the site on Carpenters books is approximately $14 million and is based upon a recent appraisal and arms-length negotiated selling prices with interested parties. Carpenter has begun legal proceedings in court to obtain a fair value for the property and a declaratory judgment absolving Carpenter from any remediation costs caused by the Port Authoritys development efforts. This matter is pending in the U.S. District Court for the District of Connecticut. While the ultimate outcome of these proceedings is undeterminable, in the opinion of management, the Port Authoritys proposed compensation and remediation reimbursement are unreasonable and will not be upheld and accordingly, no provision has been made for an impairment in carrying value.
Other pending legal proceedings involve ordinary routine litigation incidental to the business of Carpenter. There are no material proceedings to which any Director, Officer, or affiliate of Carpenter, or any owner of more than five percent of any class of voting securities of Carpenter, or any associate of any Director, Officer, affiliate, or security holder of Carpenter, is a party adverse to Carpenter or has a material interest adverse to the interest of Carpenter or its subsidiaries. There is no administrative or judicial proceeding arising under any Federal, State or local provisions regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that (1) is material to the business or financial condition of Carpenter (2) involves a claim for damages, potential monetary sanctions or capital expenditures exceeding ten percent of the current assets of Carpenter or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
Listed below are the names of corporate executive officers as of fiscal year end, including those required to be listed as executive officers for Securities and Exchange Commission purposes, each of whom assumes office after the annual meeting of the Board of Directors which immediately follows the Annual Meeting of Stockholders. All of the corporate officers listed below have held responsible positions with the registrant for more than five years except for Dennis M. Draeger, who joined Carpenter in 1996.
Mr. Draeger, who was elected President and Chief Operating Officer and Director of Carpenter effective June 1, 1999, was Executive Vice President of Carpenter from July 1, 1998 to May 31, 1999 and a director of the corporation from 1992 until June 30, 1996. Mr. Draeger assumed the duties of Senior Vice President - Specialty Alloys Operations for Carpenter effective July 1, 1996, when he resigned from Carpenter's Board of Directors. Prior to that he had been President of Worldwide Floor Products Operations for Armstrong World Industries, Inc. since 1994 and he became Group Vice President for Armstrong in 1988.
Mr. Shor, who was appointed Senior Vice President - Specialty Alloys Operations, effective January 31, 2000, was Vice President - Manufacturing Operations from March 3, 1997 through January 30, 2000; General Manager - Global Marketing and Product Services from July 13, 1995 through March 2, 1997; and General Manager - Marketing from October 1, 1994 through July 12, 1995.
Mr. Torcolini, who
was appointed Senior Vice President - Engineered Products Operations, effective January
31, 2000, has been President of Dynamet, Incorporated, a subsidiary of Carpenter
Technology Corporation since February 28, 1997 and was Vice President - Manufacturing
Operations of Carpenter from January 29, 1993 through
February 27, 1997.
Name |
Age |
Positions |
Assumed Present Position |
Robert W. Cardy | 64 |
Chairman and Chief Executive Officer Director |
|
G. Walton Cottrell | 60 |
Senior Vice President - Finance & Chief Financial Officer |
|
Dennis M. Draeger | 59 |
President and Chief Operating Officer Director |
|
Robert W. Lodge | 57 |
Vice President - Human Resources |
September 1991 |
Michael L. Shor | 41 |
Senior Vice President - Specialty Alloys Operations |
|
Robert J. Torcolini | 49 |
Senior Vice President - Engineered Products Operations |
|
John R. Welty | 51 |
Vice President, General Counsel & Secretary |
|
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Common stock of Carpenter is listed on the New York Stock Exchange. The ticker symbol is CRS. The high and low market prices of Carpenter's stock for the past two fiscal years are indicated below:
2000 | 1999 | |||
Quarter Ended: | High | Low | High | Low |
September 30 | $29-3/8 | $22-3/16 |
$54-3/16 | $30 |
December 31 | $27-13/16 | $22-9/16 |
$37-3/4 | $30-3/16 |
March 31 | $28-15/16 | $20-1/4 |
$37-1/8 | $23-5/8 |
June 30 | $21-7/8 | $18-3/4 |
$32-13/16 | $24-15/16 |
Annual | $29-3/8 | $18-3/4 |
$54-3/16 | $23-5/8 |
The range of Carpenter's common stock price from July 1, 2000 to September 20, 2000 was $21 to $33-1/4. The closing price of the common stock was $29-15/16 on September 20, 2000.
Carpenter has paid quarterly cash dividends on its common stock for 94 consecutive years. The quarterly dividend rate was $.33 per share for the fiscal years ended June 30, 2000, 1999 and 1998.
Carpenter had 5,728 common shareholders of record as of August 31, 2000. The balance of the information required by this item is disclosed in note 9 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".
Item 6. Selected Financial Data
Five-Year Financial Summary
Dollar amounts in millions, except per share data
(years ended June 30)
2000 |
1999 |
1998 |
1997 |
1996 |
|
Summary of Operations | |||||
Net Sales | $1,095.8 |
$1,036.7 |
$1,176.7 |
$ 939.0 |
$ 865.3 |
Net Income | $ 53.3 |
$ 37.1 |
$ 84.0 |
$ 60.0 |
$ 60.1 |
Financial
Position at Year-End |
|||||
Total Assets | $1,745.9 |
$1,607.8 |
$1,698.9 |
$1,223.0 |
$ 912.0 |
Long-term debt, net of current portion |
|
|
|
|
|
Per Share Data | |||||
Earnings: | |||||
Basic | $ 2.35 |
$ 1.61 |
$ 4.01 |
$ 3.32 |
$ 3.54 |
Diluted | $ 2.31 |
$ 1.58 |
$ 3.84 |
$ 3.16 |
$ 3.38 |
Cash dividends-common | $ 1.32 |
$ 1.32 |
$ 1.32 |
$ 1.32 |
$ 1.32 |
See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" for discussion of factors that affect the comparability of the "Selected Financial Data".
Item 7. Management's Discussion and Analysis of
Financial
Condition
and Results of Operations
Management's Discussion of Operations
Overview
Fiscal 2000 was a year of partial recovery from the cyclical downturn which occurred in fiscal 1999. While demand for most products recovered strongly, profitability was impacted by a surge in nickel costs and selling price erosion due to foreign imports and weakness in the euro. Carpenter was able to partially mitigate these negatives through cost reduction efforts, a higher operating level and several non-operating gains.
Net sales and earnings trends for the past three fiscal years are summarized below:
(in millions, except per share data) | 2000 |
1999 |
1998 |
Net sales | $1,095.8 |
$1,036.7 |
$1,176.7 |
Net income | 53.3 |
45.6* |
84.0 |
Diluted earnings per share | 2.31 |
1.95* |
3.84 |
The chart below shows net sales by major material group for the past three fiscal years:
(in millions) | 2000 |
1999 |
1998 |
|||
Sales |
% |
Sales |
% |
Sales |
% |
|
Stainless steel | $ 528.4 |
48% |
$ 479.9 |
46% |
$ 552.6 |
47% |
Special alloys | 304.1 |
28% |
294.9 |
29% |
348.7 |
30% |
Titanium products | 83.4 |
8% |
102.6 |
10% |
128.5 |
11% |
Ceramics and other materials |
99.7 |
9% |
86.2 |
8% |
69.2 |
6% |
Tool and other steel | 80.2 |
7% |
73.1 |
7% |
77.7 |
6% |
Total | $1,095.8 |
100% |
$1,036.7 |
100% |
$ 1,176.7 |
100% |
*Excludes a special charge of $8.5 million after taxes or $.37 per diluted share for a salaried work force reduction and a reconfiguration of Carpenters U.S. distribution network (see note 15 to the consolidated financial statements).
Results of Operations - Fiscal 2000 Compared to Fiscal 1999
Net sales were $1,095.8 million in fiscal 2000, a 6 percent increase from those of fiscal 1999. Improved unit volume raised net sales by approximately $98.6 million. Demand was higher for most of Carpenters products except for those used in aerospace applications, a market where customer inventory corrections took place for most of the past year until recovery began in the fourth quarter.Unit selling prices decreased by an average of 3 percent, equivalent to $34.6 million in sales, even though raw material surcharges were implemented to recover cost increases. Increased imports, weaker demand for titanium products and a decline in the value of the euro were the key factors in the price erosion.
Sales outside of the U.S. improved by 12 percent to $207.1 million as compared to fiscal 1999. Most of the sales increase came from the Mexico, Canada and Asia-Pacific regions. In Europe, which accounted for approximately one-half of all sales outside the United States, sales were about the same as fiscal 1999 because of the increased competition caused by the weaker euro. Details of sales by geographical region for the past three fiscal years are presented in note 19 to the consolidated financial statements.
Cost of sales as a percentage of net sales were 75 percent in fiscal 2000 and 1999. Higher sales and production levels, manufacturing cost reductions and higher pension credits were the key positives. Higher costs for nickel offset much of these favorable effects. Carpenters raw material surcharge recovers cost increases approximately 60 days after they are incurred but cost increases affect cost of sales in the month they occur because of Carpenters use of the LIFO method of accounting for inventories.
Selling and administrative expenses increased by $13.9 million from the fiscal 1999 level. Increased freight and depreciation costs, start-up costs related to the consolidation of the distribution system and development costs for Carpenters e-business activities were the primary cost drivers. Increased pension credits and salaried staff reductions partially offset these cost increases.
Other (income) expense, net was $13.2 million more favorable in fiscal 2000 than in fiscal 1999. Most of the improvement was due to non-recurring gains in fiscal 2000 related to sales of warehouses ($5.6 million), adjustments to liabilities for environmental remediation and insurance claims and other matters related to the acquisition of Talley Industries, Inc. ($3.3 million), and insurance and investment gains ($2.1 million).
Interest expense was $33.4 million in fiscal 2000, a $4.1 million increase over the fiscal 1999 level. Increased short-term debt and higher interest rates were the major causes of this cost increase.
Income taxes as a percent of pre-tax income (effective tax rate) were approximately 33.3 percent in fiscal 2000 and 33.5 percent in fiscal 1999. Both years were favorably affected by the resolution of foreign and state tax issues related to prior years. See note 14 to the consolidated financial statements for a reconciliation of the statutory federal tax rate to the effective tax rate for each of the past three years.
Business Segment Results
(Segment data for fiscal 1999 have been restated - see note 19 to the consolidated
financial statements.)
Specialty Metals Segment
(in millions) |
|
|
Increase |
Net sales | $968.0 |
$923.8 |
$ 44.2 |
Income before interest expense and income taxes (EBIT) |
$ 84.3 |
|
|
*Excludes special charge of $14.2 million (see note 15 to the consolidated financial statements).
Net sales for this segment, which aggregates the Specialty Alloys Operations (SAO) and Dynamet units of Carpenter, were 5 percent higher than those of fiscal 1999. The increase was primarily due to higher volume and was offset by lower selling prices and mix changes. Sales for SAO rose by 7 percent while Dynamet sales were lower by 15 percent. Most of SAOs end-use market sectors were improved but aerospace demand for both SAO and Dynamet products was at lower levels than in fiscal 1999.
EBIT was slightly lower than that of fiscal 1999, excluding the 1999 special charge. The improved unit volume shipments and cost reductions at SAO were offset by the lag in recovering the significant rise in nickel costs in the SAO unit and lower sales volume for Dynamet.
Engineered Products Segment
(in millions) | 2000 |
1999 |
Increase |
Net sales | $ 130.8 |
$114.9 |
$15.9 |
Income before interest expense and income taxes (EBIT) |
$ 7.1 |
$ 2.0 |
$ 5.1 |
The 14 percent increase in sales resulted from improved volume at all of the Engineered Products business units. Demand was particularly strong for ceramic cores for land-based turbine blade castings and structural ceramic parts.
This improved profit level resulted from higher sales volume, manufacturing cost efficiencies and reduced product development and administrative costs.
Pension Credits
Pension credits, related to overfunded defined benefit pension plans, were $45.7 million during fiscal 2000 compared to $36.1 million in fiscal 1999. The increase in these credits was primarily due to the strong investment returns on the pension plan assets during fiscal 1999 that resulted in an excess of plan assets over liabilities of $413.6 million at June 30, 1999. Based upon the actuarial valuation as of June 30, 2000, the pension credits for fiscal 2001 will be approximately $48 million.
Results of Operations --
Fiscal 1999 Compared to Fiscal 1998
Net sales were $1,036.7 million in fiscal 1999, a 12 percent decrease from the record level of $1,176.7 million in fiscal 1998. Reduced unit volume accounted for approximately $121 million of the sales decrease. Unit selling price decreases averaged 6 percent, accounting for $74 million of the sales decrease. Most of these negative effects were experienced in the Specialty Metals segment and were partially offset by the inclusion of a full years sales in fiscal 1999 for companies acquired during fiscal 1998.
Cost of sales as a percentage of sales increased to 75 percent in fiscal 1999 from 72 percent a year earlier, because of lower production levels, selling price reductions and a less profitable product mix in the Specialty Metals segment. Reduced staffing levels, lower raw material costs and increased pension credits helped to partially offset the margin decline.
Selling and administrative expenses for fiscal 1999 were higher than in fiscal 1998 by $5.1 million, primarily because of the impact of newly acquired companies and increases in salaries. Reductions in salaried staffing levels, lower bonus payments and improved pension credits helped to offset these effects.
Other (income) expense, net was favorable by $2.2 million as compared to fiscal 1998. This improvement was primarily related to a nonrecurring pre-tax loss of $2.7 million in fiscal 1998 for the sale of a joint venture in Taiwan.
Income taxes as a percent of pre-tax income (effective tax rate) were approximately 33.5 percent in fiscal 1999 and 38.7 percent in fiscal 1998. The resolution of certain prior year state tax issues was the major factor in the lower rate. See note 14 to the consolidated financial statements for a reconciliation of the statutory federal tax rate to the effective tax rate.
Business Segment Results
(Segment data for 1999 and 1998 have been restated -- see note 19 to the consolidated
financial statements.)
Specialty Metals Segment
(in millions) | 1999 |
1998 |
(Decrease) |
Net sales | $ 923.8 |
$1,075.5 |
$(151.7) |
Income before interest expense and income taxes (EBIT) |
$ 84.7* |
$ 158.8 |
$ (74.1) |
*Excludes special charge of $14.2 million (see note 15 to the consolidated financial statements).
The 14 percent decrease in net sales was due to a combination of lower unit volume and reduced selling prices, each accounting for about one-half of the sales decline. Selling prices for both the Specialty Alloys products and Dynamet titanium products were lower by 7 percent, in part due to lower nickel, cobalt and titanium costs but also because of intense competition from imported steel.
Sales to the aerospace market sector were adversely affected by inventory reductions by customers to correct for overstocked inventory positions. Sales to industrial end-use markets were another area of weakness, especially in products for petrochemical, semiconductor and processing industry applications. Automotive products were down moderately as a result of a General Motors strike early in fiscal 1999 and design changes.
EBIT fell 47 percent primarily because of the lower unit sales volume and selling prices. Profit margins were also affected by a less profitable product mix and a lower production level as inventories were reduced. Lower costs for raw materials, more favorable pension credits and reductions in salaried and production staffing levels helped offset the sales effects.
Engineered Products Segment
(in millions) |
|
|
Increase |
Net sales | $ 114.9 |
$ 102.5 |
$12.4 |
Income before interest expense
and income taxes (EBIT) |
$ 2.0 |
$ 5.5 |
$ (3.5) |
The 12 percent increase in sales was the result of including a full years sales in fiscal 1999 for Carpenter Advanced Ceramics, which was acquired during 1998, and volume growth, particularly in ceramic cores for aerospace and land-based turbine blade castings and in structural ceramics applications.
The 64 percent decrease in EBIT was due to several factors. Developmental costs for new metal injection molded products, start-up costs for three new ceramics facilities and expanded sales, marketing and process research programs adversely impacted fiscal 1999. Also, an equipment impairment loss of $1.5 million was recognized in fiscal 1999.
Net pension credits were $36.1 million in fiscal 1999 and $23.6 million in fiscal 1998.
Management's Discussion of Cash Flow and Financial Condition
Cash Flow
Net cash generated from operating activities was $62.4 million in fiscal 2000. This level was down from $87.4 million and $108.4 million in fiscal 1999 and 1998, because of increases in working capital.
Capital expenditures, including software, continued at a high level. Fiscal 2000 expenditures totaled $105.0 million versus $153.1 million in fiscal 1999 and $99.5 million in fiscal 1998. The major expenditures during fiscal 2000 were for new strip facilities and a new 4500-ton forging press. These projects completed a five-year, $500 million capital program for capacity expansion and modernization. Total capital spending is expected to be approximately $55 million in fiscal 2001.
Fiscal 2000 acquisition spending totaled $7.0 million versus $23.1 million in fiscal 1999 and $177.8 million in fiscal 1998. The acquisition in fiscal 2000 was for the Anval Group, a powder metal producer based in Sweden. Fiscal 1999 acquisitions included the strip products business of Telcon, Ltd., in the United Kingdom and a joint venture for specialty steel production and distribution in India. The most significant acquisition in fiscal 1998 was Talley Industries, Inc. Details of acquisition activities for the past three years are included in note 3 to the consolidated financial statements.
During fiscal 1999 and 1998, Carpenter sold all of the businesses of the Talley Industries, Inc., government products and services and industrial products segments except for one insignificant company, as planned at the time Talley was acquired in fiscal 1998. These sales resulted in net proceeds before taxes of $121.4 million in fiscal 1999 and $20.7 million in fiscal 1998. Additional details regarding these divestitures are provided in note 16 to the consolidated financial statements.
Total debt increased by $72.2 million to $582.6 million in fiscal 2000, including debt of an acquired company. Debt as a percent of total capital (debt, deferred taxes and shareholders equity) increased to 41.6 percent at June 30, 2000, from 39.4 percent at the beginning of the fiscal year. During fiscal 2000, Carpenters borrowing capacity was increased by $25 million. Additionally, a long-term collateralized note was issued for $7.6 million in connection with an equipment purchase. Details of debt and financing agreements are provided in note 7 to the consolidated financial statements.
In fiscal 1999, $35.0 million of cash was used to acquire 955,567 treasury common shares. The dividend payout rates on common and preferred stock were maintained at $1.32 and $5,362.50 per share, respectively, and totaled $30.8 million, $30.7 million and $28.5 million in fiscal years 2000, 1999 and 1998, respectively.
Financial Condition and Liquidity
During the past three fiscal years, Carpenter maintained the ability to provide adequate cash to meet its needs through cash flow from operations, management of working capital and the flexibility to use outside sources of financing to supplement internally generated funds.
Carpenter ended fiscal 2000 with current assets exceeding current liabilities by $88.6 million (a ratio of 1.2 to 1). This ratio is conservatively stated because certain inventories are valued $126.0 million less than the current cost as a result of using the LIFO method.
Financing is available under a $275 million revolving credit agreement with four banks. Carpenter limits the aggregate commercial paper and credit facility borrowings at any one time to a maximum of $275 million. As of June 30, 2000, $59.7 million was available under the credit facility and commercial paper program. Details of financing agreements are provided in note 7 to the consolidated financial statements.
Carpenter believes that its present financial resources, both from internal and external resources, will be adequate to meet its foreseeable short-term and long-term liquidity needs.
Market Sensitive Instruments and Risk Management
Carpenter uses derivative financial instruments to reduce certain types of financial risk. Raw material cost fluctuations for the Specialty Metals Segment are normally offset by selling price adjustments, primarily through the use of surcharge mechanisms and base price adjustments. Firm price sales contracts involve a risk of profit margin decline in the event of raw material increases. Carpenter reduces this risk on nickel and cobalt by entering into commodity forward contracts and commodity price swaps which are effective hedges of the risk. Fluctuations in foreign exchange subject Carpenter to risk of losses on anticipated future cash flows from its foreign operations. Foreign currency forward contracts are used to hedge this foreign exchange risk. These hedging strategies are reviewed and approved by management before being implemented. Management has established policies regarding the use of derivative instruments which prohibit the use of speculative or leveraged derivatives. Market valuations are performed at least quarterly to monitor the effectiveness of Carpenters risk management programs.
The status of Carpenters financial instruments as of June 30, 2000 and 1999, is provided in note 8 to the consolidated financial statements. Assuming (a) an instantaneous 10 percent decrease in the price of raw materials for which Carpenter has commodity forward contracts and swaps, (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, (c) a 10 percent change in interest rates on Carpenters short-term debt, and (d) a 10 percent decrease in the market value of investments in corporate-owned life insurance had all occurred on June 30, 2000 and 1999, Carpenters results of operations, cash flow and financial position would not have been materially affected.
Contingencies
Environmental
Carpenter has environmental liabilities at some of its owned operating facilities, and has been designated as a potentially responsible party ("PRP") with respect to certain Superfund waste disposal sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact amount of cleanup costs nor the final method of their allocation among all designated PRPs at these Superfund sites has been determined. Carpenter accrues amounts for environmental remediation costs that represent managements best estimate of the probable and reasonably estimable costs related to environmental remediation. The liability recorded for environmental cleanup costs at June 30, 2000 was $7.7 million. The estimated range of the reasonably possible costs of remediation at Carpenter-owned operating facilities and the Superfund sites is between $7.7 million and $11.4 million as of June 30, 2000. Recoveries of expenditures are recognized as receivables when they are estimable and probable.
Additional details are provided in note 18 to the consolidated financial statements. Carpenter does not anticipate that its financial position will be materially affected by additional environmental remediation costs, although quarterly or annual operating results could be materially affected by future developments.
Other
Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Additional details are provided in note 18 to the consolidated financial statements. While it is not feasible to determine the outcome of these matters, management believes that any total ultimate liability will not have a material effect on Carpenters financial position or results of operations and cash flows.
Forward-Looking Statements
This Form 10-K contains various "Forward-looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which represent Carpenter's expectations or beliefs concerning various future events, include statements concerning future revenues and continued growth in various market segments. These statements are based on current expectations regarding future events that involve a number of risks and uncertainties which could cause actual results to differ from those of such forward-looking statements. These risks and uncertainties include those set forth in other filings made by Carpenter under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and also include the following factors: 1) the cyclical nature of the specialty materials business and certain end-use markets, including, but not limited to, aerospace, automotive and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to recoup increased costs of fuel and raw materials, such as nickel, through increased prices and surcharges; 3) excess inventory and the impact of inventory adjustments in Carpenter's aerospace customer base; 4) worldwide excess capacity for certain alloys which Carpenter produces, resulting in increased competition and downward pricing pressure on Carpenter products; 5) the impact on the overfunding of Carpenter's pension plans, of an increase in the pension liability or a decrease in plan assets, approximately 70 percent of which are invested in common stock equities; 6) the criticality of certain raw materials acquired from foreign sources, some of which are located in countries that may be subject to unstable political and economic conditions, potentially affecting the prices of these materials; 7) the level of export sales impacted by political and economic instability, particularly in Asia, Eastern Europe and Latin America, resulting in lower global demand for stainless steel products; 8) the ability of Carpenter, along with other domestic producers of stainless steel products, to obtain and retain favorable rulings in dumping and countervailing duty claims against foreign producers; 9) the level of sales impacted by export controls, changes in legal and regulatory requirements, policy changes affecting the markets, changes in tax laws and tariffs, exchange rate fluctuations and accounts receivable collection; 10) the effects on operations of changes in U.S. and foreign governmental laws and public policy, including environmental regulations; and 11) the outcome of the litigation between the Bridgeport, Connecticut, Port Authority and Carpenter concerning the value of the Corporation's former plant site and responsibility for site remediation costs caused by the Port Authority's development efforts. Any of these factors could have an adverse and/or fluctuating effect on Carpenter's results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
Report of Independent Accountants
To the Board of Directors and
Shareholders of Carpenter Technology Corporation
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial position of Carpenter Technology Corporation and subsidiaries at June 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of Carpenter'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, 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 the opinion expressed above.
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
July 27, 2000
Consolidated Statement of Income
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998
(in millions, except per share data) |
2000 |
1999 |
1998 |
Net sales | $1,095.8 |
$1,036.7 |
$1,176.7 |
Costs and expenses: | |||
Cost of sales | 816.4 |
772.0 |
848.3 |
Selling and
administrative expenses |
179.4 |
165.5 |
160.4 |
Interest expense | 33.4 |
29.3 |
29.0 |
Special charge | - |
14.2 |
- |
Other (income) expense, net | (13.3) |
(0.1) |
2.1 |
1,015.9 |
980.9 |
1,039.8 |
|
Income before income taxes | 79.9 |
55.8 |
136.9 |
Income taxes | 26.6 |
18.7 |
52.9 |
Net income | $ 53.3 |
$ 37.1 |
$ 84.0 |
Earnings per common share: | |||
Basic | $ 2.35 |
$ 1.61 |
$ 4.01 |
Diluted | $ 2.31 |
$ 1.58 |
$ 3.84 |
See accompanying notes to consolidated financial statements.
Consolidated Statement of Cash Flows
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998
(in millions) | 2000 |
1999 |
1998 |
OPERATIONS | |||
Net income | $ 53.3 |
$ 37.1 |
$ 84.0 |
Adjustments to reconcile
net income to net cash provided from operations: |
|||
Depreciation | 53.1 |
51.8 |
46.8 |
Amortization of intangible assets | 15.2 |
13.9 |
11.4 |
Deferred income taxes | 15.0 |
(6.2) |
14.6 |
Pension and postretirement costs, net | (38.1) |
(30.1) |
(21.9) |
Net (gain) loss on asset disposals | (5.2) |
1.5 |
5.0 |
Special charge | - |
14.2 |
- |
Changes
in working capital and other, net of acquisitions: |
|||
Receivables | (34.5) |
28.7 |
5.5 |
Inventories | (16.7) |
18.9 |
(17.2) |
Accounts payable | 35.9 |
(23.2) |
(12.0) |
Accrued current liabilities | (11.7) |
(18.9) |
(7.8) |
Other, net | (3.9) |
(0.3) |
- |
Net cash provided from operations | 62.4 |
87.4 |
108.4 |
INVESTING ACTIVITIES | |||
Purchases of plant, equipment and software | (105.0) |
(153.1) |
(99.5) |
Proceeds from disposals
of plant and equipment |
|
|
|
Acquisitions of
businesses, net of cash received |
|
|
|
Proceeds from net assets held for sale | - |
121.4 |
20.7 |
Proceeds from sale of
interest in joint venture |
|
|
|
Net cash used for investing activities | (98.6) |
(54.3) |
(250.2) |
FINANCING ACTIVITIES | |||
Net change in short-term debt | 78.5 |
20.2 |
39.3 |
Proceeds from issuance of long-term debt | 7.6 |
- |
198.0 |
Payments on long-term debt | (15.5) |
(36.6) |
(182.8) |
Dividends paid | (30.8) |
(30.7) |
(28.5) |
Payments to acquire treasury stock | - |
(35.0) |
- |
Proceeds from issuance of common stock | 0.4 |
2.1 |
149.6 |
Net
cash provided from (used for) financing activities |
|
|
|
INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS |
|
|
|
Cash and cash
equivalents at beginning of year |
5.5 |
|
|
Cash and cash equivalents at end of year | $ 9.5 |
$ 5.5 |
$ 52.4 |
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheet
Carpenter Technology Corporation
June 30, 2000 and 1999
(in millions, except share data) | 2000 |
1999 |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 9.5 |
$ 5.5 |
Accounts
receivable, net of allowance for doubtful accounts of $2.2 and $1.9 at June 30, 2000 and 1999, respectively |
|
|
Inventories | 270.2 |
250.3 |
Other current assets | 16.3 |
16.3 |
Total current assets | 483.0 |
422.7 |
Property, plant and equipment, net | 789.9 |
750.4 |
Prepaid pension cost | 185.2 |
140.5 |
Goodwill, net | 172.3 |
179.2 |
Other assets | 115.5 |
115.0 |
Total assets | $1,745.9 |
$1,607.8 |
LIABILITIES | ||
Current liabilities: | ||
Short-term debt | $ 219.9 |
$ 140.0 |
Accounts payable | 97.3 |
59.6 |
Accrued liabilities | 61.2 |
70.9 |
Deferred income taxes | 5.6 |
1.3 |
Current portion of long-term debt | 10.4 |
15.4 |
Total current liabilities | 394.4 |
287.2 |
Long-term debt, net of current portion | 352.3 |
355.0 |
Accrued postretirement benefits | 152.3 |
146.2 |
Deferred income taxes | 158.0 |
149.8 |
Other liabilities | 35.3 |
37.1 |
SHAREHOLDERS' EQUITY | ||
Preferred stock - authorized 2,000,000 shares | 26.0 |
26.8 |
Common stock - authorized 100,000,000 shares | 115.4 |
115.3 |
Capital in excess of par value - common stock | 192.2 |
191.9 |
Reinvested earnings | 388.0 |
365.5 |
Common stock in treasury, at cost | (38.4) |
(38.4) |
Deferred compensation | (14.1) |
(16.4) |
Accumulated other comprehensive income | (15.5) |
(12.2) |
Total shareholders' equity | 653.6 |
632.5 |
Total liabilities and shareholders' equity | $1,745.9 |
$1,607.8 |
See accompanying notes to consolidated financial statements
.
Consolidated Statement of Changes in Shareholders' Equity
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998
Common Stock |
||||||||
(in
millions, except per share data) |
Preferred Stock Par Value of $5 |
Par Value of $5 |
Capital in Excess of Par Value |
Reinvested Earnings |
Treasury Stock |
Deferred Compensation |
Acc. Other |
Total Share-holders' Equity |
Balances at June 30, 1997 | $ 28.2 |
$ 98.2 |
$ 54.3 |
$ 303.6 |
$ (3.5) |
$ (20.3) |
$ (11.2) |
$ 449.3 |
Net income | 84.0 |
84.0 |
||||||
Cash dividends: | ||||||||
Common @ $1.32 per share | (26.9) |
(26.9) |
||||||
Preferred @ $5,362.50 per share | (1.6) |
(1.6) |
||||||
Stock options exercised | 0.9 |
4.3 |
5.2 |
|||||
Common stock offering | 15.8 |
128.6 |
144.4 |
|||||
Shares issued
to acquire business |
|
|
|
|||||
Other | (0.4) |
0.1 |
2.3 |
(0.4) |
2.5 |
4.1 |
||
Balances at June 30, 1998 | $ 27.8 |
$ 115.0 |
$ 190.0 |
$ 359.1 |
$ (3.4) |
$ (17.8) |
$ (11.2) |
$ 659.5 |
Net income | 37.1 |
37.1 |
||||||
Cash dividends: | ||||||||
Common @ $1.32 per share | (29.2) |
(29.2) |
||||||
Preferred @ $5,362.50 per share | (1.5) |
(1.5) |
||||||
Stock options exercised | 0.1 |
0.4 |
0.5 |
|||||
Treasury shares purchased | (35.0) |
(35.0) |
||||||
Other | (1.0) |
0.2 |
1.5 |
1.4 |
(1.0) |
1.1 |
||
Balances at June 30, 1999 | $ 26.8 |
$ 115.3 |
$ 191.9 |
$ 365.5 |
$ (38.4) |
$ (16.4) |
$ (12.2) |
$ 632.5 |
Net income | 53.3 |
53.3 |
||||||
Cash dividends: | ||||||||
Common @ $1.32 per share | (29.0) |
(29.0) |
||||||
Preferred @ $5,362.50 per share | (1.8) |
(1.8) |
||||||
Stock options exercised | 0.1 |
0.1 |
||||||
Other | (0.8) |
0.1 |
0.2 |
2.3 |
(3.3) |
(1.5) |
||
Balances at June 30, 2000 | $ 26.0 |
$ 115.4 |
$ 192.2 |
$ 388.0 |
$ (38.4) |
$ (14.1) |
$ (15.5) |
$ 653.6 |
See accompanying notes to consolidated financial statements.
Consolidated Statement of Changes in Shareholders' Equity (continued)
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998
Common Shares |
||||
Preferred Shares Issued |
Issued |
Treasury |
Net Outstanding |
|
Balances at June 30, 1997 | 447.3 |
19,642,920 |
(160,605) |
19,482,315 |
Stock
options exercised, net of 766 shares exchanged |
171,401 |
171,401 |
||
Common stock offering | 3,162,500 |
3,162,500 |
||
Shares issued to acquire business | 21,409 |
21,409 |
||
Treasury shares purchased | (7,432) |
(7,432) |
||
Other | (6.2) |
18,215 |
(1,292) |
16,923 |
Balances at June 30, 1998 | 441.1 |
22,995,036 |
(147,920) |
22,847,116 |
Stock options exercised | 13,940 |
13,940 |
||
Treasury shares purchased | (955,567) |
(955,567) |
||
Other | (15.3) |
42,800 |
(1,554) |
41,246 |
Balances at June 30, 1999 | 425.8 |
23,051,776 |
(1,105,041) |
21,946,735 |
Stock
options exercised, net of 3,753 shares exchanged |
|
|
||
Other | (12.7) |
17,272 |
(2,159) |
15,113 |
Balances at June 30, 2000 | 413.1 |
23,071,635 |
(1,107,200) |
21,964,435 |
Consolidated Statement of Comprehensive Income
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998
(in millions) | 2000 |
1999 |
1998 |
Net income | $ 53.3 |
$ 37.1 |
$ 84.0 |
Foreign currency translation, net of tax | (3.3) |
(1.0) |
- |
Comprehensive income | $ 50.0 |
$ 36.1 |
$ 84.0 |
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
__________
1. Summary of Significant Accounting Policies
Basis of Consolidation - The consolidated financial statements include the accounts of Carpenter and all majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. Investments in companies in which Carpenter has an ownership interest of 20 to 50 percent are accounted for on an equity basis and accordingly, Carpenters share of their income is included in consolidated net income.
Revenue Recognition - Revenue, net of related discounts and allowances, is generally recognized when product is shipped and risk of loss has transferred to the customer.
Cash Equivalents - Cash equivalents consist of highly liquid instruments with maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost, which approximates market.
Inventories - Inventories are valued at the lower of cost or market. Cost for inventories is principally determined by the Last-In, First-Out (LIFO) method. Carpenter also uses the First-In, First-Out (FIFO) and average cost methods.
Depreciation and Amortization - Depreciation for financial reporting purposes is computed by the straight-line method. Depreciation for income tax purposes is computed using accelerated methods. Upon disposal, assets and related depreciation are removed from the accounts and the differences between the net amounts and proceeds from disposal are included in other income and expense in the consolidated statement of income.
The costs of intangible assets other than goodwill, which are included in other assets on the consolidated balance sheet, are comprised principally of trademarks and tradenames, computer software, and agreements not to compete and are amortized for financial reporting purposes on a straight-line basis over their respective estimated useful lives, ranging from 3 to 30 years.
Goodwill - Goodwill, representing the excess of the purchase price over the estimated fair value of the identifiable net assets of companies acquired to date, is being amortized on a straight-line basis over the estimated life of the goodwill, ranging from 20 to 40 years. Accumulated amortization of goodwill was $22.6 million and $16.2 million at June 30, 2000 and 1999, respectively.
Long-Lived Assets - Long-lived assets, including goodwill and other intangibles, are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through future undiscounted cash flows. Carpenter evaluates long-lived assets for impairment by individual business unit.
Environmental Expenditures - Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenters capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the cleanup is probable and the cost can be reasonably estimated. Recoveries of expenditures are recognized as receivables when they are estimable and probable. Estimated liabilities are not discounted to present value, but estimated receivables are measured on a discounted basis.
Foreign Currency Translation - Assets and liabilities of most foreign operations are translated at exchange rates in effect at year-end, and their income statements are translated at the average monthly exchange rates prevailing during the year. Translation gains and losses are accumulated in a separate component of stockholders equity until the foreign entity is sold or liquidated. For operations in highly inflationary countries and where the local currency is not the functional currency, inventories, property, plant and equipment, and other noncurrent assets are converted to U.S. dollars at historical exchange rates, and all gains or losses from conversion are included in net income.
Derivatives -
Forward Contracts and Commodity Price Swaps - In connection with the anticipated purchase of raw materials for certain fixed-price sales arrangements, Carpenter enters into forward contracts and commodity price swaps to reduce the risk of cost increases. The contracts do not have leveraged features and generally are not entered into for speculative purposes. The significant characteristics and terms of the anticipated purchase of raw materials are identifiable, and the contracts are designated and effective as hedges, because of the high correlation between the contracts and the items being hedged. As such, they are accounted for as hedges and unrealized gains and losses are deferred and included in cost of sales in the periods when the related transactions are completed.
Foreign Currency Forward Contracts - Carpenter hedges certain anticipated foreign currency transactions and commitments by entering into forward exchange contracts to reduce the risk of losses from foreign currency fluctuations. Gains and losses on forward contracts hedging anticipated foreign currency transactions are marked to market and any related gain or loss is included in other income and expense in the consolidated statement of income. Gains and losses for the years presented were not material to Carpenters results of operations or cash flows. Gains and losses related to hedges of foreign currency commitments are deferred and recognized in earnings when the committed transactions occur.
Overhaul Costs - Major maintenance costs incurred during scheduled plant shutdowns are capitalized when incurred and amortized over the period until the next scheduled shutdown, which is typically one year.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications - Certain reclassifications of prior years amounts have been made to conform with the current years presentation.
Pending Accounting Pronouncements (Unaudited) - The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities" which will be effective for Carpenters fiscal 2001. This standard, as amended, requires that all derivative instruments be recorded on the balance sheet at their fair value and that changes in fair value be recorded each period in current earnings or comprehensive income. Carpenter anticipates that the adoption of SFAS 133 will result in the recording of a cumulative adjustment as of July 1, 2000 for the change in accounting required by SFAS 133. This adjustment is expected to increase current assets by $1.2 million and other comprehensive income, net of tax, by $0.8 million as of July 1, 2000. No significant effects on future net income are expected as a result of adopting SFAS 133 because Carpenters current hedging instruments are considered to be highly effective.
The Securities and Exchange Commission (SEC) has issued Staff Accounting Bulletin 101 (SAB101) which sets forth the SECs guidelines on revenue recognition. This bulletin is effective for Carpenter no later than the fourth quarter of fiscal 2001 (June 2001 quarter). Carpenter has not made a determination of the impact of SAB101 on its financial statements.
2. Earnings Per Common Share
The computation of basic and diluted earnings per share for the years ended June 30, 2000, 1999 and 1998 follows:
(in millions, except per share data) | 2000 |
1999 |
1998 |
Basic EPS: | |||
Net income | $53.3 |
$37.1 |
$84.0 |
Dividends
accrued on convertible preferred stock, net of tax benefits |
|
|
|
Earnings
available for common shareholders |
|
|
|
Weighted
average common shares outstanding |
|
|
|
Basic earnings per share | $2.35 |
$1.61 |
$4.01 |
Diluted EPS: | |||
Net income | $53.3 |
$37.1 |
$84.0 |
Assumed
shortfall between common and preferred dividends |
|
|
|
Earnings
available for common shareholders |
|
|
|
Weighted
average common shares outstanding |
|
|
|
Assumed
conversion of preferred shares |
|
|
|
Effect
of shares issuable under stock option plans |
|
|
|
Adjusted
weighted average common shares |
|
|
|
Diluted earnings per share | $2.31 |
$1.58 |
$3.84 |
3. Acquisitions of Businesses
During the past three fiscal years, Carpenter acquired the businesses described below, all of which were accounted for by the purchase method of accounting:
Fiscal 2000
On February 1, 2000, Carpenter acquired the Anval Group, a powder metal producer based in Torshella, Sweden, at a cost of $7 million in cash, including acquisition costs, and assumed Anvals debt with a fair market value of $1.6 million. Based upon a preliminary valuation, the purchase price included $3.5 million of goodwill which is being amortized over 20 years. The pro-forma impact of the acquisition was not material.
Fiscal 1999
In April 1999, Carpenter finalized a joint venture with Kalyani Steels Ltd. that established two companies in India, at an initial cost of $10.7 million, including organization costs. The companies established are Kalyani Carpenter Special Steels Ltd. (KCSSL), a specialty steel manufacturing company, and Kalyani Carpenter Metal Centres Ltd. (KCMCL), a specialty steel distribution company. Carpenter owns 26 percent of KCSSL and 51 percent of KCMCL. The investment in KCSSL exceeded Carpenters share of the initial equity of KCSSL by $6.0 million which is included in other assets in the consolidated balance sheet and is being amortized on a straight-line basis over 20 years.
In October 1998, Carpenter acquired the strip producing business of Telcon, Ltd., for $11.4 million of cash, including acquisition costs. This facility produces narrow strip for electronic applications using magnetic and controlled expansion alloys. The fair value of the net assets acquired approximated the purchase price.
Fiscal 1999 included other acquisitions which were immaterial.
Fiscal 1998
On February 19, 1998, Carpenter completed the acquisition of Talley Industries, Inc. ("Talley"). Carpenter acquired the outstanding common and preferred stock of Talley for $187.0 million of cash, including acquisition costs, and assumed Talleys debt with a fair market value of $136.5 million. Talley had $35.1 million of cash at the initial acquisition date. The purchase price included $78.3 million of goodwill which is being amortized on a straight-line basis over 40 years.
Talley was a diversified company composed of a stainless steel products segment, a government products and services segment, and an industrial products segment. Carpenter has retained the companies in the stainless steel products segment, and divested all of the operating companies in the other two segments except for one insignificant company. Accordingly, the divested segments were accounted for as net assets held for sale (see note 16).
On October 31, 1997, Carpenter acquired the net assets of Shalmet Corporation and its affiliates for $9.3 million in stock and cash, including acquisition costs, and assumed $4.1 million of Shalmets debt. Shalmet converts semi-finished coil and bar to finished round bar and coil products. The fair value of the net assets acquired approximated the purchase price.
On September 30, 1997, Carpenter acquired four of the operating units of ICI Australia, Ltd., for $16.6 million of cash, including acquisition costs. These four operating units manufacture structural ceramic components and powder products. The purchase price included $4.9 million of goodwill, which is being amortized on a straight-line basis over 20 years.
Fiscal 1998 included other acquisitions which were immaterial.
The purchase prices have been allocated to the assets purchased and the liabilities assumed, based upon the fair values on the dates of acquisition, as follows:
(in millions) | 2000 |
1999 |
1998 |
Working capital, other than cash | $ 0.3 |
$ 2.3 |
$ 34.7 |
Property, plant and equipment | 3.7 |
9.1 |
81.8 |
Prepaid pension cost | - |
- |
17.2 |
Goodwill | 3.5 |
1.0 |
72.1 |
Other assets | 0.4 |
10.7 |
11.1 |
Noncurrent liabilities | (0.9) |
- |
(38.1) |
Purchase price, net
of cash received |
|
$ 23.1 |
$178.8 |
During fiscal 1999, adjustments for final purchase price allocations resulted in an increase in goodwill of $13.0 million and a reduction of deferred tax liabilities of $10.4 million.
Deferred tax liabilities included in the allocation totaled $0.6 million in fiscal 2000 and $36.8 million in fiscal 1998. Debt included in the allocation was $1.6 million in fiscal 2000 and $141.7 million in fiscal 1998. No debt or deferred tax liabilities were included in the allocation in fiscal 1999.
4. Inventories
June 30 |
||
(in millions) | 2000 |
1999 |
Finished and purchased products | $ 138.1 |
$ 142.6 |
Work in process | 211.9 |
167.3 |
Raw materials and supplies | 46.2 |
41.5 |
Total at current cost | 396.2 |
351.4 |
Less excess of
current cost over LIFO values |
126.0 |
101.1 |
$ 270.2 |
$ 250.3 |
Current cost of LIFO-valued inventories was $346.8 million at June 30, 2000, and $294.9 million at June 30, 1999.
5. Property, Plant and Equipment
June 30 |
||
(in millions) | 2000 |
1999 |
Land | $ 12.5 |
$ 13.9 |
Buildings and building equipment | 231.8 |
220.0 |
Machinery and equipment | 1,060.6 |
923.9 |
Construction in progress | 36.5 |
96.0 |
Total at cost | 1,341.4 |
1,253.8 |
Less accumulated
depreciation and amortization |
551.5 |
503.4 |
$ 789.9 |
$ 750.4 |
The estimated useful lives of depreciable assets are as follows: land improvements - 20 years; buildings and equipment - 20 to 45 years; machinery and equipment - 5 to 30 years; autos and trucks - 3 to 6 years; office furniture and equipment - 3 to 10 years. Effective April 1, 1999, Carpenter changed its estimates of the useful lives of certain major manufacturing equipment from 20 to 30 years. This change recognizes the current expectations of economic useful lives for this equipment and resulted in a reduction of depreciation expense of $1.8 million or $.04 per diluted share during the fourth quarter of fiscal 1999.
6. Accrued Liabilities
June 30 |
||
(in millions) | 2000 |
1999 |
Compensation | $ 20.6 |
$ 27.5 |
Employee benefits | 12.9 |
13.6 |
Interest | 7.8 |
8.5 |
Income taxes | 1.0 |
2.1 |
Environmental costs | 1.0 |
1.9 |
Other | 17.9 |
17.3 |
$ 61.2 |
$ 70.9 |
7. Debt
Carpenter has $275 million of revolving credit agreements with four banks. Interest is based on short-term market rates. As of June 30, 2000, there was $215.3 million outstanding under the credit agreements.
For the years ended June 30, 2000, 1999 and 1998, interest cost totaled $39.4 million, $34.8 million and $31.1 million, of which $6.0 million, $5.5 million and $2.1 million, respectively, were capitalized as part of the cost of plant, equipment and software.
The weighted average interest rates for short-term borrowings during fiscal 2000 and 1999 were 6.1 percent and 5.5 percent, respectively.
Long-term debt outstanding at June 30, 2000 and 1999, consists of the following:
June 30 |
||
(in millions) | 2000 |
1999 |
Medium-term notes at
6.28% to 7.10% due from April 2003 to 2018 |
$ 198.0 |
|
9% Sinking fund
debentures due 2022, callable beginning in March 2002 at 104.2%; sinking fund requirements are $5.0 million annually from 2003 to 2021 |
99.6 |
|
Medium-term notes at
6.78% to 7.80% due from September 2000 to 2005 |
55.0 |
|
Secured note, payable
in monthly installments of $0.1 million including interest of 8% with a final payment of $6.1 million due April 2010 |
7.6 |
|
Other | 2.5 |
2.8 |
Total | 362.7 |
370.4 |
Less amounts due within one year | 10.4 |
15.4 |
Long-term debt, net of current portion | $ 352.3 |
$ 355.0 |
Aggregate maturities of long-term debt for the four years subsequent to June 30, 2001, are $25.7 million in fiscal 2002, $45.7 million in fiscal 2003, $0.8 million in fiscal 2004 and $40.9 million in fiscal 2005.
Carpenters financing agreements contain restrictions on the total amount of debt and the minimum tangible net worth permitted.
8. Financial Instruments
The carrying amounts and estimated fair values of Carpenter's financial instruments were as follows:
June 30 |
||||
2000 |
1999 |
|||
(in millions) | Carrying Value |
Fair Value |
Carrying Value |
Fair |
Cash and cash equivalents | $ 9.5 |
$ 9.5 |
$ 5.5 |
$ 5.5 |
Company-owned life insurance | $ 18.2 |
$ 18.2 |
$ 15.9 |
$ 15.9 |
Short-term debt | $ 219.9 |
$ 219.9 |
$ 140.0 |
$ 140.0 |
Long-term debt | $ 362.7 |
$ 338.0 |
$ 370.4 |
$ 364.5 |
Raw material forward contracts and commodity price swaps |
$ - |
$ 0.9* |
$ - |
$ 1.7 |
Foreign currency forward contracts |
$ 0.6 |
$ 0.9* |
$ 0.8 |
$ 0.8 |
*The unrealized gains and (losses) on raw material commodity price swaps and foreign currency forward contracts are deferred and will be included in the consolidated statement of income when the related transactions are completed.
The carrying amounts for cash, cash equivalents and short-term debt approximate their fair values due to the short maturities of these instruments. The carrying amount for company-owned life insurance reflects cash surrender values based upon market values of underlying securities.
The fair value of long-term debt as of June 30, 2000 and 1999, was determined by using current interest rates and market values of similar issues.
The fair value of raw material forward contracts and commodity price swaps was based on quoted market prices for these instruments. The notional amounts of these instruments were $17.9 million and $17.0 million at June 30, 2000 and 1999, respectively. These financial instruments have various maturity dates through 2003.
The fair value of foreign currency forward contracts represents the amount to be exchanged if the existing contracts were settled at year-end, based on market quotes. The notional amounts of these contracts, principally in the euro, were $15.3 million and $14.0 million at June 30, 2000 and 1999, respectively. The foreign currency forward contracts have various maturity dates through 2002.
Carpenter is exposed to credit risk related to its financial instruments in the event of non-performance by the counterparties. Carpenter does not generally require collateral or other security to support these financial instruments. However, the counterparties to these transactions are major financial institutions deemed credit worthy by Carpenter. Carpenter does not anticipate non-performance by the counterparties.
9. Common Stock
Common Stock Repurchase Program:
On August 6, 1998, a stock repurchase program was approved for up to 1.2 million, or 5 percent, of the outstanding shares of Carpenters common stock. The shares may be purchased over time and held as treasury shares. During fiscal 1999, 0.9 million shares were repurchased at a total cost of $34.5 million.
Common Stock Purchase Rights:
Carpenter has issued one common stock purchase right ("Right") for every outstanding share of common stock. Except as otherwise provided in the Rights Agreement, the Rights will become exercisable and separate Rights certificates will be distributed to the shareholders: (1) 10 days following the acquisition of 20 percent or more of Carpenters common stock, (2) 10 business days (or such later date as the Board of Directors may determine) following the commencement of a tender or exchange offer for 20 percent or more of Carpenters common stock, or (3) 10 days after Carpenters Board of Directors determines that a holder of 15 percent or more of Carpenters shares has an interest adverse to those of Carpenter or its shareholders (an "adverse person"). Upon distribution, each Right would then entitle a holder to buy from Carpenter one newly issued share of its common stock for an exercise price of $145.
After distribution, upon: (1) any person acquiring 20 percent of the outstanding stock (other than pursuant to a fair offer as determined by the Board of Directors), (2) a 20 percent holder engaging in certain self-dealing transactions, (3) the determination of an adverse person, or (4) certain mergers or similar transactions between Carpenter and holder of 20 percent or more of Carpenters common stock, each Right (other than those held by the acquiring party) entitles the holder to purchase shares of common stock of either the acquiring company or Carpenter (depending on the circumstances) having a market value equal to twice the exercise price of the Right. The Rights may be redeemed by Carpenter for $.025 per Right at any time before they become exercisable. The Rights Agreement expires on June 26, 2006.
10. Stock-Based Compensation
Carpenter has three stock-based compensation plans for officers and key employees: a 1993 plan, a 1982 plan and a 1977 plan.
1993 Plan:
The 1993 plan provides that the Board of Directors may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and performance share awards, and determine the terms and conditions of each grant. In fiscal 1998, the plan was amended to provide the Chief Executive Officer with limited authority to grant stock options and restricted stock. As of June 30, 2000 and 1999, 2,116 and 463,415 shares, respectively, were reserved for options and share awards which may be granted under this plan.
Stock option grants under this plan must be at no less than market value on the date of grant, are exercisable after one year of employment following the date of grant, and will expire no more than ten years after the date of grant.
Restricted stock awards outstanding vest over periods ranging from three to five years from the date of grant. When restricted shares are issued, deferred compensation is recorded as a reduction of shareholders equity, and charged to expense over the vesting period. During fiscal 2000, 1999 and 1998, $0.4 million, $0.4 million, and $0.5 million, respectively, were charged to expense for vested restricted shares.
Performance share awards are earned only if Carpenter achieves certain performance levels over a three-year period. The awards are payable at the discretion of the Board of Directors in either shares of common stock or cash and expensed over the three-year performance period. Pre-tax income was increased by $0.3 million in fiscal 2000, and decreased by $0.5 million and $1.0 million in fiscal 1999 and 1998, respectively, for estimated cost of performance shares earned.
1982 and 1977 Plans:
The 1982 plan expired in June 1992; however, all outstanding unexpired options granted prior to that date remain in effect. Under the 1982 and 1977 plans, options are granted at the market value on the date of grant, are exercisable after one year of employment following the date of grant and expire ten years after grant. At June 30, 2000, and 1999, 2,120 shares were reserved for options which may be granted under the 1977 plan.
Carpenter has a stock-based compensation plan which provides for the granting of stock options and other market-based units to non-employee Directors. Options are granted at the market value on the date of the grant and are exercisable after one year of Board service following the date of grant. Options expire ten years after the date of grant. At June 30, 2000 and 1999, 65,000 and 85,000 shares, respectively, were reserved for options which may be granted under this plan.
Option Activity:
Number of Shares |
Weighted Average Exercise Price |
|
Balance at June 30, 1997 | 989,411 |
$34.24 |
Granted | 339,700 |
49.65 |
Exercised | (172,167) |
30.53 |
Cancelled | (5,000) |
41.16 |
Balance at June 30, 1998 | 1,151,944 |
$39.30 |
Granted | 597,500 |
28.80 |
Exercised | (13,940) |
30.67 |
Cancelled | (13,760) |
49.16 |
Balance at June 30, 1999 | 1,721,744 |
$35.65 |
Granted | 371,000 |
20.41 |
Exercised | (6,340) |
24.67 |
Cancelled | (10,120) |
28.37 |
Balance at June 30, 2000 | 2,076,284 |
$32.99 |
Outstanding Options | |||
Exercise Price Range |
Number Outstanding at 06/30/00 |
Weighted Average Remaining Life |
Weighted |
$19 - $30 |
1,112,249 |
8.14 |
$ 25.27 |
$31 - $40 |
398,035 |
5.70 |
$ 33.38 |
$41 - $51 |
566,000 |
7.53 |
$ 47.90 |
2,076,284 |
$ 32.99 |
Of the options outstanding at June 30, 2000, 1,546,275 relate to the 1993 plan, 76,807 relate to the 1982 plan, 304,700 relate to the 1977 plan and 148,502 relate to the plan for non-employee Directors.
Exercisable Options | ||
Exercise Price Range |
Number |
Weighted |
$19 - $30 |
741,249 |
$ 27.70 |
$31 - $40 |
398,035 |
$ 33.38 |
$41 - $51 |
566,000 |
$ 47.90 |
1,705,284 |
$ 35.73 |
Carpenter accounts for its stock option plans in accordance with APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations. Under APB Opinion 25, no compensation cost is recognized because the exercise price of Carpenters employee stock options equals the market price of the underlying stock at the date of the grant. Had compensation cost for Carpenters stock option plans been determined based on the fair value at the grant date for awards in accordance with SFAS 123, "Accounting for Stock-based Compensation," net income would have been reduced by $1.8 million, $1.6 million and $1.1 million, and diluted earnings per share would have been reduced by $.08, $.07 and $.05 in fiscal 2000, 1999 and 1998, respectively.
These pro forma adjustments were calculated using the Black-Scholes option pricing model to value all stock options granted since July 1, 1996.
A summary of the assumptions and data used in these calculations follows:
(in millions) | 2000 |
1999 |
1998 |
Weighted average
exercise price of options exercisable |
$35.73 |
|
|
Weighted average fair value per share of options |
$ 5.54 |
|
|
Fair value assumptions: | |||
Risk-free interest rate | 5.8% |
5.4% |
5.6% |
Expected volatility | 25.7% |
20.3% |
18.3% |
Expected life of options | 5 years |
5 years |
5 years |
Expected dividends | 4.7% |
2.7% |
2.9% |
11. Pension and Other Postretirement Benefits
Carpenter provides several noncontributory defined benefit pension plans and postretirement benefit plans to certain of its employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans.
Other |
||||
Pension Plans |
Postretirement Plans |
|||
(in millions) | 2000 | 1999 | 2000 | 1999 |
Change
in projected benefit obligation |
||||
Projected
benefit obligation at beginning of year |
|
|
|
|
Service cost | 17.3 |
17.6 |
2.8 |
2.9 |
Interest cost | 40.2 |
39.6 |
12.5 |
11.4 |
Plan amendments | 0.9 |
3.2 |
- |
- |
Actuarial (gain) loss | (21.8) |
3.7 |
(7.4) |
6.6 |
Benefits paid | (52.5) |
(42.1) |
(11.7) |
(8.6) |
Change in
purchase price allocation |
|
|
|
|
Special
termination benefits(a) |
|
|
|
|
Projected
benefit obligation at end of year |
|
|
|
|
Change in plan assets | ||||
Fair value of
plan assets at beginning of year |
|
|
|
|
Actual return on plan assets | 91.8 |
151.1 |
21.5 |
19.3 |
Company contributions | 0.3 |
0.4 |
(0.7) |
8.4 |
Benefits
paid from plan assets |
|
|
|
|
Change in
purchase price allocation |
|
|
|
|
Fair value of
plan assets at end of year |
|
|
|
|
Funded status of the plans | $ 446.5 |
$ 389.5 |
$ (89.6) |
$(102.5) |
Unrecognized net gain | (306.7) |
(292.3) |
(55.2) |
(34.7) |
Unrecognized
prior service cost (benefit) |
|
|
|
|
Unrecognized transition asset | (2.7) |
(5.6) |
- |
- |
Prepaid
(accrued) benefit cost |
|
|
|
|
Principal
actuarial assumptions at June 30: |
||||
Discount rate | 7.75% |
7.0% |
7.75% |
7.0% |
Long-term rate
of compensation increase |
|
|
|
|
Long-term rate
of return on plan assets |
|
|
|
|
(a)
Benefits provided to employees terminated as a result of a salaried work
force reduction and reconfiguration of distribution network. See note 15
to the consolidated financial statements.
Pension and other postretirement plans included the following net credits and costs components:
Other |
||||||
Pension Plans |
Postretirement Plans |
|||||
(in millions) | 2000 |
1999 |
1998 |
2000 |
1999 |
1998 |
Service cost | $ 17.3 |
$ 17.6 |
$ 15.1 |
$ 2.8 |
$ 2.9 |
$ 2.4 |
Interest cost | 40.2 |
39.6 |
36.6 |
12.5 |
11.4 |
10.3 |
Expected return on plan assets |
|
|
|
|
|
|
Amortization of net gain | (13.1) |
(9.7) |
(6.4) |
(1.2) |
(1.3) |
(1.5) |
Amortization of prior service cost (benefit) |
|
|
|
|
|
|
Amortization of transition asset |
|
|
|
|
|
|
Change in purchase price allocation |
|
|
|
|
|
|
Net (credit) cost | $ (42.6) |
$(29.1) |
$(21.7) |
$ 6.2 |
$ 6.8 |
$ 6.5 |
For segment reporting (see note 19 to the consolidated financial statements), Carpenter reports separately the credit for the overfunded defined benefit pension plans. The expense for the underfunded defined benefit pension and postretirement benefit plans is charged to the operating segments. The $4.8 million effect of changes to purchase accounting allocations in fiscal 1999 was included in Corporate Costs for segment reporting.
Amounts shown in the Consolidated Statement of Cash Flows for pensions and postretirement benefits are net of cash payments made to the plans and amounts received from the pension plans as reimbursement of postretirement benefits paid by Carpenter.
Pension Plans
Carpenter has several underfunded plans which are included in the data presented above. As of June 30, 2000 and 1999, the projected benefit obligation of the underfunded plans was $23.9 million and $25.3 million, the total fair value of assets was $1.3 million and $1.2 million, and the accumulated benefit obligation was $20.3 million and $21.4 million, respectively.During fiscal 1999, adjustments for final purchase price allocations for pensions resulted in an increase in goodwill of $10.3 million. Additional purchase price adjustments for pensions resulted in a charge to pre-tax income of $4.8 million which was included in other income and expense on the consolidated statement of income.
Carpenter also maintains defined contribution pension and savings plans for substantially all domestic employees. Company contributions were $7.4 million in fiscal 2000, $7.1 million in fiscal 1999 and $6.8 million in fiscal 1998. There were 1,437,110 common shares reserved for issuance under the savings plans at June 30, 2000.
Other Postretirement Plans
The postretirement benefit plans consist of health care and life insurance plans. Prior to June 1999, Carpenter paid claims incurred for most retired employees. Beginning in June 1999, retired employees benefit payments are being paid by a Voluntary Employee Benefit Association (VEBA). Carpenter has contributed discretionary amounts, which have not exceeded the amount deductible for tax purposes, into the VEBA. Plan assets are invested in trust-owned life insurance, which is invested in equity securities.
The assumed health care cost trend rate for fiscal years after 1999 is 6 percent. The health care cost trend rate has a significant effect on the amounts reported. If the assumed health care cost trend rate was increased by 1 percent, the projected benefit obligation at June 30, 2000 would have increased by $19.1 million and the postretirement benefit expense for fiscal 2000 would have increased by $1.8 million. If the assumed health care cost trend rate was decreased by 1 percent, the projected benefit obligation at June 30, 2000 would have decreased by $16.2 million and the postretirement benefit expense for fiscal 2000 would have decreased by $1.5 million.
12. Employee Stock Ownership Plan
Carpenter has a leveraged employee stock ownership plan ("ESOP") to assist certain employees with their future retiree medical obligations. Carpenter issued 461.5 shares of convertible preferred stock in fiscal 1992 at $65,000 per share to the ESOP in exchange for a $30.0 million 15-year 9.345% note which is included in the shareholders equity section of the consolidated balance sheet as deferred compensation. The preferred stock is recorded net of related issuance costs.
Principal and interest obligations on the note are satisfied by the ESOP as Carpenter makes contributions to the ESOP and dividends are paid on the preferred stock. As payments are made on the note, shares of preferred stock are allocated to participating employees accounts within the ESOP. Carpenter contributed $1.6 million in fiscal 2000, $1.5 million in fiscal 1999 and $1.4 million in fiscal 1998 to the ESOP. Compensation expense related to the plan was $1.6 million in fiscal 2000, $1.7 million in fiscal 1999 and $1.8 million in fiscal 1998.
As of June 30, 2000, the ESOP held 413.1 shares of the convertible preferred stock, consisting of 197.3 allocated shares and 215.8 unallocated shares. Each preferred share is convertible into at least 2,000 shares of common stock. There are 826,196 common shares reserved for issuance under the ESOP at June 30, 2000. The shares of preferred stock pay a cumulative annual dividend of $5,362.50 per share, are entitled to vote together with the common stock as a single class and have 2,600 votes per share. To the extent permitted by the ESOP and its trustee, the stock is redeemable at Carpenters option at $67,600 per share, declining to $65,000 per share by 2001.
13. Supplemental Data
(in millions) | 2000 |
1999 |
1998 |
Cost Data: | |||
Research and development costs | $ 14.4 |
$ 15.4 |
$ 16.1 |
Repairs and maintenance costs | $ 62.3 |
$ 61.4 |
$ 63.7 |
Cash Flow Data: | |||
Cash paid during the year for: | |||
Interest payments, net of |
$ 33.4 |
$ 28.3 |
$ 25.6 |
Income tax payments, net of |
$ 12.0 |
$ 19.1 |
$ 54.2 |
Non-cash investing
and financing activities: |
|||
Debt assumed in business |
$ 1.6 |
$ - |
$141.7 |
Property, plant and equipment |
$ 3.4 |
$ - |
$ - |
Treasury stock issued for |
$ - |
$ - |
$ 1.0 |
14. Income Taxes
Provisions for income taxes consisted of the following:
(in millions) | 2000 |
1999 |
1998 |
Current: | |||
Federal |
$ 12.4 |
$ 18.2 |
$ 32.0 |
State |
(3.5) |
3.6 |
3.1 |
Foreign |
2.7 |
3.1 |
3.2 |
Deferred: | |||
Federal |
9.7 |
(5.0) |
9.6 |
State |
5.3 |
(1.2) |
4.1 |
Foreign |
- |
- |
0.9 |
$ 26.6 |
$ 18.7 |
$ 52.9 |
The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:
(% of pre-tax income) | 2000 |
1999 |
1998 |
Federal tax rate | 35.0% |
35.0% |
35.0% |
Increase (decrease)
in taxes resulting from: |
|||
State
income taxes, net of federal tax benefit |
|
|
|
Goodwill amortization | 2.4 | 3.9 | 1.3 |
Settlement
of prior years' tax issues |
(4.4) |
(5.6) |
- |
Nontaxable income | (0.5) | (2.7) | (1.7) |
Federal
and state tax law changes |
- |
(0.8) |
- |
Other, net | (0.9) | (0.1) | 1.4 |
Effective tax rate | 33.3% |
33.5% |
38.7% |
Deferred taxes are recorded based upon temporary differences between financial statement and tax bases of assets and liabilities. The following deferred tax liabilities and assets were recorded as of June 30, 2000 and 1999:
(in millions) | 2000 |
1999 |
Deferred tax liabilities: | ||
Depreciation | $159.6 | $ 150.9 |
Prepaid pensions | 74.0 | 61.1 |
Intangible assets | 12.1 | 12.5 |
Inventories | 12.5 | 11.9 |
Other | 6.8 | 5.8 |
Total deferred tax liabilities | 265.0 | 242.2 |
Deferred tax assets: | ||
Postretirement provisions | 58.1 | 53.2 |
Alternative Minimum Tax credit | 10.0 | - |
Net operating loss benefit | 7.1 | 0.7 |
Other reserve provisions | 30.4 | 38.1 |
Valuation allowance | (4.2) | (0.9) |
Total deferred tax assets | 101.4 | 91.1 |
Net deferred tax liability | $ 163.6 | $ 151.1 |
15. Special Charge
During the third quarter of fiscal 1999, Carpenter recorded a pre-tax charge of $14.2 million ($8.5 million after-tax or $.37 per diluted share) related to a salaried work force reduction and a reconfiguration of its U.S. distribution network. The positions eliminated include various salaried positions throughout the Specialty Alloys Operations and corporate offices. The charge consisted chiefly of various personnel-related costs for about 205 employees to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $13.0 million of the charge was paid from pension funds and, accordingly, this portion of the special charge reduced the prepaid pension cost account on the balance sheet. As of June 30, 2000, the reduction of employees was complete.
16. Net Assets Held for Sale
The eight businesses of the government products and
services and industrial products segments of Talley Industries, Inc. (Talley), were sold
as of June 30, 1999. The net income of all of the businesses in these segments was
excluded from Carpenters consolidated statement of income from the date of
acquisition through December 31, 1998 and amounted to $2.7 million for fiscal 1998 and
$1.5 million for fiscal 1999. The operating results for the remaining businesses were
included in Carpenters consolidated statement of income from January, 1999 until the
dates of their sales. Through December 31, 1998, changes in estimates for net cash proceeds on the sales of
all of the businesses, interest costs and operating cash flows until the time of their
sale were recorded as adjustments of goodwill. Proceeds from net assets held for sale on the statement of cash flows for the years
ended June 30, 1999 and 1998 were calculated as follows:
(in millions) | 1999 |
1998 |
Proceeds from sales of businesses | $ 134.0 |
$ 41.4 |
Net cash funded by Carpenter | (10.3) |
(14.1) |
Interest allocated | (2.3) |
(6.6) |
Proceeds from net assets held for sale | $ 121.4 | $ 20.7 |
17. Operating Leases
Carpenter leases certain facilities and equipment under operating leases. Total rent expense was $10.5 million, $9.5 million and $7.3 million for the years ended June 30, 2000, 1999 and 1998, respectively.
Future minimum payments for noncancelable operating leases in effect at June 30, 2000 were (in millions):
June 30, 2001 |
$ 6.2 |
2002 |
5.7 |
2003 |
5.6 |
2004 |
5.5 |
2005 |
5.4 |
Thereafter |
16.6 |
$ 45.0 |
18. Contingencies
Environmental
Carpenter is subject to various stringent federal, state and local environmental laws and regulations. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental remediation costs which represent managements best estimate of the probable and reasonably estimable costs relating to environmental remediation. Fiscal 2000 included $0.8 million of reversals of prior years accruals for environmental remediation, which were reported in other income. Fiscal 1998 included $8.1 million of environmental remediation cost accruals that were charged to cost of sales. No expense was recognized in fiscal 1999. The liability recorded for environmental cleanup costs remaining at June 30, 2000 and 1999, was $7.7 million and $9.7 million, respectively. The estimated range of the reasonably possible future costs of remediation at Carpenter-owned operating facilities and Superfund sites is between $7.7 million and $11.4 million.
Carpenter entered into partial settlements of litigation relating to insurance coverages for certain environmental remediation sites and recognized income before income taxes of $0.6 million, $1.1 million and $4.6 million for the years ended June 30, 2000, 1999 and 1998, respectively.
Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology and the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based upon information presently available, such future costs are not expected to have a material effect on Carpenters competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year.
Other
On August 6, 1999, the Bridgeport, Connecticut Port Authority filed a Certificate of Taking, acquiring fee simple ownership of Carpenters former plant site in that city. The proposed compensation for the site is $2.5 million and the Port Authority has stated its intention to seek reimbursement of any additional site remediation costs. The carrying value for the site on Carpenters books is approximately $14 million and is based upon a recent appraisal and arms-length negotiated selling prices with interested parties. Carpenter has begun legal proceedings in court to obtain a fair value for the property and a declaratory judgment absolving Carpenter from any remediation costs caused by the Port Authoritys development efforts. While the ultimate outcome of these proceedings is undeterminable, in the opinion of management, the Port Authoritys proposed compensation and remediation reimbursement are unreasonable and will not be upheld and accordingly, no provision has been made for an impairment in carrying value.
Carpenter is also defending various claims and legal actions, and is subject to contingencies which are common to its operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenters future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, in the opinion of management, any total ultimate liability will not have a material effect on Carpenters financial position, results of operations or cash flows.
19. Business Segments and Geographic Data
Carpenter is organized on a product basis and managed in three segments: Specialty Alloys, Titanium Alloys and Engineered Products. For the following segment reporting, the Specialty Alloys and Titanium Alloys segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers, distribution methods, and economic characteristics.
Specialty Metals includes the manufacture and distribution of stainless, titanium, high temperature, electronic, tool and other alloys in bar, wire, rod, and strip forms. Sales are distributed both directly from producing plants and from Carpenters distribution network.
Engineered Products includes structural ceramic products, ceramic cores for the casting industry, metal-injection molded products, tubular metal products for nuclear and aerospace applications, custom shaped bar and ultra hard wear materials.
Effective July 1, 1999, management changed the basis for measuring the business segments profits to exclude the costs of all corporate functions and the pension credit from the Specialty Metals segment, to transfer the Mexican operations from the Engineered Products segment to the Specialty Metals segment, to allocate certain corporate costs to the business segments, and to show separately both the unallocated corporate costs and the pension credit. All segment data for fiscal 1999 and 1998 have been restated to reflect the current segment reporting structure.
The accounting policies of both reportable segments are the same as those described in the Summary of Significant Accounting Policies. Carpenter evaluates segment performance based upon income before interest and income taxes (EBIT) and return on assets after the allocation of certain corporate costs. Sales between the segments are generally made at market-related prices.
The pension credit represents the income relating to Carpenters overfunded defined benefit pension plans. None of the pension credit is allocated to the business segments. The corporate costs primarily represent the unallocated portion of the operating costs of the finance, information services, law and human resource departments and corporate management staff. Corporate assets are primarily cash and cash equivalents, prepaid pension costs, certain assets held for sale, corporate-owned life insurance, other investments and corporate operating assets.
Carpenter's sales are not materially dependent on a single customer or a small group of customers.
Geographic Data
(in millions) | 2000 |
1999 |
1998 |
Net Sales (a) | |||
United States | $ 888.7 |
$ 851.9 |
$ 997.1 |
Europe | 101.8 |
101.4 |
91.7 |
Mexico | 49.8 |
43.8 |
45.6 |
Canada | 22.3 |
16.3 |
17.4 |
Asia Pacific | 19.8 |
12.2 |
11.8 |
Other | 13.4 |
11.1 |
13.1 |
Consolidated |
$1,095.8 |
$1,036.7 |
$1,176.7 |
Long-lived assets: | |||
United States | $1,216.2 |
$1,139.5 |
$1,027.3 |
Europe | 22.0 |
12.8 |
4.8 |
Mexico | 11.7 |
14.2 |
14.8 |
Canada | 0.8 |
0.9 |
0.4 |
Asia Pacific | 0.2 |
0.2 |
1.1 |
Other | 12.0 |
17.5 |
5.0 |
Consolidated | $1,262.9 |
$1,185.1 |
$1,053.4 |
(a)
Segment Data
(in millions) | 2000 |
1999 |
1998 |
|
Net Sales: | ||||
Specialty Metals | $ 968.0 |
$ 923.8 |
$1,075.5 |
|
Engineered Products | 130.8 |
114.9 |
102.5 |
|
Intersegment | (3.0) |
(2.0) |
(1.3) |
|
Consolidated net sales | $1,095.8 |
$1,036.7 |
$1,176.7 |
|
Income Before Income Taxes: | ||||
Specialty Metals | $ 84.3 |
$ 70.5 |
(a) |
$ 158.8 |
Engineered Products | 7.1 |
2.0 |
5.5 |
|
Pension credit | 45.7 |
36.1 |
23.6 |
|
Corporate costs | (26.3) |
(26.1) |
(25.3) |
|
Consolidated EBIT | 110.8 |
82.5 |
162.6 |
|
Interest expense | (33.4) |
(29.3) |
(29.0) |
|
Interest income | 2.5 |
2.6 |
3.3 |
|
Consolidated
income before income taxes |
|
|
|
|
Total Assets: | ||||
Specialty Metals | $1,357.4 |
$ 1,272.5 |
$1,211.8 |
|
Engineered Products | 124.4 |
115.7 |
107.6 |
|
Corporate assets | 264.1 |
219.6 |
379.5 |
|
Consolidated total assets | $1,745.9 |
$1,607.8 |
$1,698.9 |
|
Depreciation: | ||||
Specialty Metals | $ 42.8 |
$ 43.8 |
$ 40.2 |
|
Engineered Products | 6.1 |
5.2 |
3.9 |
|
Corporate | 4.2 |
2.8 |
2.7 |
|
Consolidated depreciation | $ 53.1 |
$ 51.8 |
$ 46.8 |
|
Amortization of
Intangible Assets: |
||||
Specialty Metals | $ 11.7 |
$ 10.9 |
$ 8.8 |
|
Engineered Products | 2.4 |
1.8 |
1.5 |
|
Corporate | 1.1 |
1.2 |
1.1 |
|
Consolidated amortization | $ 15.2 |
$ 13.9 |
$ 11.4 |
|
Capital Expenditures,
Including Software: |
||||
Specialty Metals | $ 84.7 |
$ 137.0 |
$ 83.7 |
|
Engineered Products | 7.8 |
10.0 |
9.9 |
|
Corporate | 12.5 |
6.1 |
5.9 |
|
Consolidated
capital expenditures, including software |
|
|
|
(a)
Includes special charge of $14.2 million for salaried work force reduction and
Quarterly Financial Data (Unaudited)
Quarterly sales and earnings results are usually influenced by seasonal factors. The first fiscal quarter (three months ending September 30) is typically the lowest because of annual plant vacation and maintenance shutdowns in this period by Carpenter and by many of its customers. This seasonal pattern can be disrupted by economic cycles or special accounting adjustments.
(dollars and shares in millions, except per share amounts) | First Quarter |
Second Quarter |
Third Quarter(a) |
Fourth Quarter |
Results of Operations | ||||
Fiscal 2000 | ||||
Net sales | $ 238.6 |
$ 250.8 |
$ 298.1 |
$ 308.3 |
Gross profits | $ 62.8 |
$ 62.1 |
$ 75.0 |
$ 79.4 |
Net income | $ 10.2 |
$ 12.7 |
$ 11.9 |
$ 18.5 |
Fiscal 1999 | ||||
Net sales | $ 250.3 |
$ 248.7 |
$ 271.8 |
$ 265.9 |
Gross profits | $ 66.7 |
$ 65.6 |
$ 63.9 |
$ 68.5 |
Net income | $ 12.2 |
$ 12.2 |
$ 1.2 |
$ 11.5 |
Earnings per common share | ||||
Fiscal 2000 | ||||
Basic earnings | $ .45 |
$ .56 |
$ .53 |
$ .81 |
Diluted earnings | $ .44 |
$ .55 |
$ .52 |
$ .80 |
Fiscal 1999 | ||||
Basic earnings | $ .52 |
$ .54 |
$ .04 |
$ .51 |
Diluted earnings | $ .51 |
$ .53 |
$ .04 |
$ .50 |
Weighted average
common shares outstanding |
||||
Fiscal 2000 | ||||
Basic | 21.9 |
21.9 |
22.0 |
22.0 |
Diluted | 22.7 |
22.8 |
22.8 |
22.8 |
Fiscal 1999 | ||||
Basic | 22.7 |
22.0 |
21.9 |
21.9 |
Diluted | 23.7 |
22.9 |
22.8 |
22.8 |
(a)
Fiscal 1999 includes a special charge of $14.2 million ($8.5 million after-tax or $.37 per
diluted share) related to a salaried work force reduction and a reconfiguration of the U.S.
distribution network.
Item 9. Disagreements on Accounting and Financial Disclosure
Not Applicable
Item 10. Directors and Executive Officers of the Registrant
The information required as to directors is incorporated herein by reference to the 2000 definitive Proxy Statement under the caption "Election of Directors."
Information concerning Carpenter's executive officers appears in Part I of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the 2000 definitive Proxy Statement under the caption "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the 2000 definitive Proxy Statement under the captions "Ownership of Carpenter Stock by Certain Beneficial Owners" and "Ownership of Carpenter Stock by Directors and Officers."
Item 13. Certain Relationships and Related Transactions
Not applicable
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents Filed as Part of this Report:
(1) The following consolidated financial statement schedule should be read in conjunction with the consolidated financial statements (see Item 8. Financial Statements):
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required information is contained in the consolidated financial statements or notes thereto.
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors of
Carpenter Technology Corporation:
Our audits of the consolidated financial statements referred to in our report dated July 27, 2000, appearing in the June 30, 2000 Annual Report to Shareholders of Carpenter Technology Corporation also included an audit of the Financial Statement Schedule listed in Item 14(a)(1) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
July 27, 2000
(2) The following documents are filed as exhibits:
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
3. Articles of Incorporation and By-Laws of the
Company
4. Instruments Defining the Rights of Security
Holders, Including Indentures
10. Material Contracts
12. Computation of Ratios of Earnings to Fixed Charges
23. Consent of Experts and Counsel
24. Powers of Attorney
27. Financial Data Schedule
99. Additional Exhibits
(b) Reports on Form 8-K:
Not Applicable
Pursuant to the requirements of Section 13 or 15(d) 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.
CARPENTER TECHNOLOGY CORPORATION
By s/G. Walton Cottrell
G. Walton
Cottrell
Sr. Vice President - Finance
&
Chief Financial
Officer
Date: September 26, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
s/Robert W.
Cardy Robert W. Cardy |
Chairman and Chief
Executive Officer and Director (Principal Executive Officer) |
September 26, 2000 |
s/Dennis M.
Draeger Dennis M. Draeger |
President and Chief Operating Officer and Director | September 26, 2000 |
s/G. Walton
Cottrell G. Walton Cottrell |
Sr. Vice President - Finance & Chief Financial Officer | September 26, 2000 |
s/Edward B.
Bruno Edward B. Bruno |
Vice President and Corporate Controller (Principal Accounting Officer) | September 26, 2000 |
*
Marcus C. Bennett |
Director |
September 26, 2000 |
*
William S. Dietrich II |
Director |
September 26, 2000 |
*
C. McCollister Evarts, M.D. |
Director |
September 26, 2000 |
*
J. Michael Fitzpatrick |
Director |
September 26, 2000 |
*
William J. Hudson, Jr. |
Director |
September 26, 2000 |
*
Robert J. Lawless |
Director |
September 26, 2000 |
*
Marlin Miller, Jr. |
Director |
September 26, 2000 |
*
Robert N. Pokelwaldt |
Director |
September 26, 2000 |
*
Peter C. Rossin |
Director |
September 26, 2000 |
*
Kathryn C. Turner |
Director |
September 26, 2000 |
*
Kenneth L. Wolfe |
Director |
September 26, 2000 |
Original Powers of Attorney authorizing John R. Welty to sign this Report on behalf of: Marcus C. Bennett, William S. Dietrich II, C. McCollister Evarts, M.D., J. Michael Fitzpatrick, William J. Hudson, Jr., Robert J. Lawless, Marlin Miller, Jr., Robert N. Pokelwaldt, Peter C. Rossin, Kathryn C. Turner and Kenneth L. Wolfe are being filed with the Securities and Exchange Commission.
*By s/John R.
Welty
John R.
Welty
Attorney-in-fact
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Column A | Column B | Column C | Column D | Column E | |
Additions | |||||
Description |
Balance at Beginning of Period |
Charged to Costs & Expenses |
Charged to Other Accounts(1) |
Deductions(2) |
Balance at End of Period |
Year ended June 30, 2000 |
|||||
Allowance
for doubtful accounts receivable |
$ 1.9 |
$ 1.0 |
$ 0.1 |
$(0.8) |
$ 2.2 |
Year ended June 30, 1999 |
|||||
Allowance
for doubtful accounts receivable |
$ 1.9 |
$ 0.8 |
$ 0.1 |
$(0.9) |
$ 1.9 |
Year ended June 30, 1998 |
|||||
Allowance
for doubtful accounts receivable |
$ 1.4 |
$ 0.7 |
$ 0.4 |
$(0.6) |
$ 1.9 |
(1)
Includes beginning balances of acquired businesses and recoveries of accounts(2)
Doubtful accounts written off.
MANAGEMENT AND OFFICERS CAPITAL APPRECIATION PLAN,
AN INCENTIVE STOCK OPTION PLAN
ADOPTED MAY 12, 1977
(As Amended August 9, 1990)
1. Purpose.
The purposes of this Plan are to attract, retain and motivate key employees of Carpenter Technology Corporation and its wholly owned subsidiaries ("the Corporation"), to encourage stock ownership by such employees by providing them with a means to acquire a proprietary interest or to increase their proprietary interest in the Corporation's success and to provide a greater community of interest between such employees and the Corporation's stockholders.
2. Administration.
The Board of Directors ("the Board") shall be responsible for the operation of the Plan. It shall be authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations and to appoint such agents as it deems appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan or the options or stock appreciation rights granted hereunder as it deems necessary or advisable. Any questions of interpretation as determined by the Board shall be final and binding upon all persons. The Board may delegate these powers to the Compensation and Stock Option Committee of the Board, consisting of at least three Directors not participating in the Plan.
3. Participants.
Participants in the Plan will consist of such officers or key employees of the Corporation as the Board in its sole discretion may, from time to time, designate. The Board's designation of a participant at any time to receive benefits under the Plan shall not obligate it to designate such person to receive benefits at any other time. The Board shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of options and rights granted hereunder.
4. Types of Benefits.
Benefits under the Plan may be granted in (a) non-qualified stock options ("options" or individually an "option") which are intended to be nonstatutory options not qualifying under Section 422 or any other section of the Internal Revenue Code, and (b) stock appreciation rights, each as described below.
5. Shares Reserved Under the Plan.
(a) Subject to the provisions of Section 11, the maximum aggregate number of shares which may be made available for options hereunder is 400,000 shares of common stock of the Corporation and no more than 40,000 shares of said 400,000 shares shall be optioned to any one individual. The shares involved in the unexercised portion of any terminated or expired option or stock appreciation right under the Plan may again be subject to options under the Plan. Such shares may be either authorized and unissued shares, or issued shares reacquired by the Corporation.
6. Options.
Options may be granted by the Board from time to time, subject to the following provisions:
(a) Each option granted under this Plan shall become exercisable by the optionee only after the optionee has completed one year of employment immediately following the date the option is granted, as determined by the Board (the "date of grant"), and shall expire ten years from the date of grant. Exercise of any or all prior existing options shall not be required.
(b) The option price per share of an option shall be determined by the Board but shall not be less than the fair market value of the Corporation's stock on the date of grant. For the purpose of this Plan, the term "fair market value" shall mean the closing price of Carpenter Technology Corporation common stock on the New York Stock Exchange on the date in question, or, in the absence of a closing price on such date, then the closing price on the last trading day preceding the date of grant, as reflected on the consolidated tape of New York Stock Exchange issues.
(c) No option under this Plan may be transferable by the optionee except by will or the laws of descent and distribution. In the event of the death of the optionee more than one year after the date of grant and not more than three months after the termination of the optionee's employment by the Corporation, the option may be transferred to the optionee's personal representative, heirs or legatees ("transferee") and may be exercised by the transferee before the earlier of (i) the expiration of one year from the date of the death of the optionee or (ii) the expiration of 10 years from the date of grant. In the event of the retirement of an optionee, an option may be exercised prior to its expiration during the five year period beginning with the date of retirement; provided, however, that in the event of a retiree's death during such five year period, unexercised options may be exercised by the transferee before the earlier of either items (i) or (ii) of this Section 6(c). In all other cases of termination of employment of an optionee, the option, if otherwise exercisable by the optionee at the time of such termination, may be exercised within three months after such termination.
Notwithstanding anything in the Plan to the contrary, in the event an optionee's employment with the Corporation is terminated for "cause", the Board (or if the Board has delegated its authority, the Compensation and Stock Option Committee) may, in its sole discretion, cancel each unexercised option awarded to such terminated optionee effective upon the termination. For purposes of this Section, a termination for "cause" shall mean termination of an optionee's employment with the Corporation which results from either (a) the optionee committing an Intolerable Offense (as defined in the Corporation's Personnel Practices and Policies as in effect on the date of termination) or (b) the operation of the Corporation's Corrective Performance System (as set forth in the Corporation's Personnel Procedures and Policies as in effect on the date of termination).
(d) Each option shall be exercisable for the full amount or any part thereof, including a partial exercise from time to time. All shares purchased under options shall be paid for in full at the time of purchase. Exercised options may be paid for with cash or stock of the Corporation which has been held by the optionee for a period of at least six months, the value of which shall be the fair market value on the date of exercise of the options, as determined in Section 6(b) of the Plan.
7. Stock Appreciation Rights.
(a) Stock appreciation rights may be granted from time to time by the Board upon such terms and conditions as it may prescribe. The Board shall grant one stock appreciation right for every option share granted hereunder prior to August 9, 1990. The Board may in its discretion grant no more than one stock appreciation right for every option share granted hereunder on or subsequent to August 9, 1990. A stock appreciation right shall be exercisable only with exercise and surrender of the related option or portion thereof and shall entitle the optionee to receive the excess of the fair market value of the shares of the common stock for which the right is exercised on the date of such exercise over the option price under the related option. Such excess is hereafter called "the spread".
(b) A stock appreciation right shall be exercisable only to the extent and at the same time that the related option is exercised.
(c) Upon the exercise of a stock appreciation right, the Corporation shall give to the optionee an amount equivalent to the spread (less any applicable withholding taxes) in cash, or in shares of the Corporation's common stock, or a combination of both, as the Board shall determine. Such determination may be made at the time of the granting of the stock appreciation right. The shares may consist either in whole or in part of authorized and unissued shares or issued shares reacquired by the Corporation. The payment of the stock appreciation right spread in shares of common stock will correspondingly reduce the number of shares reserved under Section 5. No fractional shares of common stock shall be issued and the Board shall determine whether cash shall be given in lieu of such fractional share or whether such fractional share shall be eliminated.
(d) A stock appreciation right shall terminate and may no longer be exercised upon the termination or expiration of the related option.
(e) Income attributable to the exercise of a stock appreciation right shall not be included in the calculation of pension or other benefits payable at any time by reason of the optionee's employment by the Corporation.
(f) No stock appreciation right shall be transferable by the optionee except as provided in Section 6(c) of this Plan.
8. Valuation Date.
The options granted hereunder shall be valued for Federal income tax purposes on the date said options are exercised and the optionee, by accepting the option, agrees not to elect to value said options for tax purposes at any other date, including, without limitation, the date of grant.
9. Adjustment Provisions.
If the Corporation shall at any time change the number of issued shares of common stock without new consideration to the Corporation (such as by stock dividends, stock splits or stock combinations), the total number of shares reserved for issuance under this Plan and the number of shares covered by each outstanding benefit shall be adjusted so that the aggregate consideration payable to the Corporation and the value of each benefit shall not be changed. In the event of a merger or consolidation of the Corporation, the Board shall make such adjustments with respect to options or take such other action as it deems necessary or appropriate to equitably reflect such merger or consolidation including, without limitation, the substitution of new options, the termination of existing options or the acceleration of the right to exercise. Appropriate adjustments shall be made by the Board in the terms of stock appreciation rights to reflect the foregoing changes.
10. Change in Control.
(a) Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Corporation (i) each Option shall become immediately exercisable and (ii) each stock appreciation right shall be fully exercisable for the sixty-day period immediately following the Change in Control of the Corporation using the Change in Control Price instead of the fair market value to determine the amount payable upon the exercise of such stock appreciation right.
(b) For purposes of this Plan, a "Change in Control of the Corporation" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the date this Section was adopted as an amendment to the Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (D) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets.
(c) For purposes of this Plan, Change in Control Price shall mean the higher of (i) the highest price paid per share of Corporation common stock in any transaction constituting a Change in Control or (ii) the highest fair market value per share of Corporation common stock as reported in the Wall Street Journal at any time during the sixty-day period preceding the Change in Control.
11. Amendment, Modification and Termination of the Plan.
The Board, at any time, may terminate, and at any time and from time to time, and in any respect, may amend or modify, the Plan; provided, however, that no such action by the Board, without approval of the stockholders, may (a) increase the total amount of common stock which may be purchased under options granted under the Plan or the maximum number of shares of common stock for which options may be granted under the Plan to any one individual, except as contemplated in Section 9, (b) permit options to be granted at less than fair market value, (c) permit any person while a member of the committee contemplated in Section 2 to be eligible to receive or hold an option or stock appreciation right under the Plan or (d) change the manner of computing the spread upon the exercise of a stock appreciation right.
12. Effective Date of the Plan.
The Plan shall become effective upon approval by the Board; provided, however, that the Plan shall be submitted for ratification by the stockholders at the Annual Meeting to be held on November 7, 1977, and if not ratified shall be of no force and effect. All options and stock appreciation rights granted prior to such Annual Meeting shall be granted subject to ratification of the Plan by the stockholders of the Corporation at such Meeting and no option shall be exercisable before such ratification.
STK15.10
Exhibit No. |
Title |
Page |
|
2. | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession | ||
A. | Agreement and Plan of Merger among Carpenter Technology Corporation, Score Acquisition Corp. and Talley Industries, Inc. dated September 25, 1997 is incorporated herein by reference to Exhibit (c)(1) to Schedule 14d-1 relating to Talley Industries, Inc. filed on October 2, 1997 by Carpenter and Score Acquisition Corp. | ||
3. | Articles of Incorporation and By-Laws | ||
A. | Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3 of Carpenter's Form 10-Q Quarterly Report for the quarter ended September 30, 1998. | ||
B. | By-Laws, amended as of December 5, 1996, are incorporated herein by reference to Exhibit 3B of Carpenter's 1996 Annual Report on Form 10-K and to Exhibit 3 of Carpenter's Form 10-Q Quarterly Report for the quarter ended December 31, 1996. | ||
4. | Instruments Defining Rights of Security Holders, Including Indentures | ||
A. | Restated Certificate of Incorporation and By-Laws set forth in Exhibit Nos. 3A and 3B, above. | ||
B. | Rights Agreement relating to Rights distributed to holders of Carpenter's Stock, amended as of April 23, 1996, is incorporated by reference to Carpenter's Current Report on Form 8-K filed May 3, 1996. | ||
C. | Carpenter's Registration Statement No. 333-44757, as filed on Form S-3 on January 22, 1998, and amended on February 13, 1998, with respect to issuance of Common Stock and unsecured debt is incorporated herein by reference. | ||
D. | Prospectus, dated February 13, 1998 and Prospectus Supplement, dated March 31, 1998, File No. 333-44757, with respect to issuance of $198,000,000 of Medium Term Notes are incorporated by reference. | ||
E. | Indenture dated as of January 12, 1994, between Carpenter and U.S. Bank Trust National Association, formerly known as First Trust of New York, National Association, as successor Trustee to Morgan Guaranty Trust Company of New York, related to Carpenter's i) $100,000,000 of unsecured medium term notes registered on Registration Statement No. 33-51613 and ii) $198,000,000 of unsecured medium term notes registered on Registration Statement No. 333-44757 is incorporated by reference to Exhibit 4(c) to Carpenter's Form S-3 filed January 6, 1994. | ||
F. | Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B are incorporated by reference to Exhibit 20 to Carpenter's Current Report on Form 8-K filed on April 15, 1998. | ||
G. | Pricing Supplements No. 1 through 25 dated and filed from April 2, 1998 to June 11, 1998, supplements to Prospectus dated February 13, 1998 and Prospectus Supplement dated March 31, 1998, File No. 333-44757 with respect to issuance of $198,000,000 of Medium Term Notes are incorporated herein by reference. | ||
10. | Material Contracts | ||
A. | Agreement and Plan of Merger dated January 6, 1997, by and among Dynamet Incorporated, Shareholders of Dynamet Incorporated and Carpenter is incorporated herein by reference to Exhibit 1 to Carpenter's Current Report on Form 8-K filed on March 27, 1997. | ||
B. | Supplemental Retirement Plan for Executive Officers, amended as of April 23, 1996, is incorporated herein by reference to Exhibit No. 10A to Carpenter's 1996 Annual Report on Form 10-K. | ||
C. | Management and Officers Capital
Appreciation Plan, an Incentive Stock Option Plan, amended as of August 9, 1990, is attached as an Exhibit to this Annual Report on Form 10-K. |
||
D. | Incentive Stock Option Plan for
Officers and Key Employees, amended as of August 9, 1990, is attached as an Exhibit to this Annual Report on Form 10-K. |
||
E. | Deferred Compensation Plan for Non-management Directors of Carpenter Technology Corporation, amended as of December 7, 1995, is incorporated herein by reference to Exhibit No. 10E to Carpenter's 1996 Annual Report on Form 10-K. | ||
F. | Deferred Compensation Plan for Corporate and Division Officers of Carpenter Technology Corporation, amended as of April 1, 1997, is incorporated by reference to Exhibit E-9 to Carpenter's 1997 Annual Report on Form 10-K. | ||
G. | Executive Annual Compensation Plan, amended as of July 1, 1997 is incorporated by reference to Exhibit E-20 to Carpenter's 1997 Annual Report on Form 10-K. | ||
H. | Non-Qualified Stock Option Plan For Non-Employee Directors, as amended, is incorporated herein by reference to Appendix A of Carpenter's 1997 Proxy Statement. | ||
I. | Officers' Supplemental Retirement
Plan of Carpenter Technology Corporation is attached as an Exhibit to this Annual Report
on Form 10-K. |
||
J. | Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated September 11, 1990 as amended and restated on May 1, 1997, relating in part to the Supplemental Retirement Plan for Executive Officers, Deferred Compensation Plan for Corporate and Division Officers and the Officers' Supplemental Retirement Plan of Carpenter Technology Corporation is incorporated by reference to Exhibit E-28 to Carpenter's 1997 Annual Report on Form 10-K. | ||
K. | Form of Indemnification Agreement, entered into between Carpenter and each of the directors and the following executive officers: Robert W. Cardy, Dennis M. Draeger, G. Walton Cottrell, Robert W. Lodge, Michael L. Shor, Robert J. Torcolini and John R. Welty is attached as an Exhibit to this Annual Report on Form 10-K. | ||
L. | Stock-Based Incentive Compensation Plan for Officers and Key Employees, amended as of June 27, 1996, is incorporated herein by reference to Appendix A to the 1996 Proxy Statement. | ||
M. | Form of amended and restated Special Severance Agreement entered into between Carpenter and each of the following executive officers: Robert W. Cardy, Michael L. Shor and Robert J. Torcolini is attached as an Exhibit to this Annual Report on Form 10-K. | ||
N. | Form of amended and
restated Special Severance Agreement entered into between Carpenter and each of the following executive officers: Dennis M. Draeger, G. Walton Cottrell, Robert W. Lodge and John R. Welty is attached as an Exhibit to this Annual Report on Form 10-K. |
||
O. | Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated December 7, 1990 as amended and restated on May 1, 1997, relating in part to the Directors' Retirement Plan and the Deferred Compensation Plan for Non-management Directors, is incorporated by reference to Exhibit E-83 to Carpenter's 1997 Annual Report on Form 10-K. | ||
12. | Computations of Ratios of Earnings to Fixed Charges | E-5 | |
23. | Consent of Experts and Counsel Consent of Independent Accountants |
E-6 | |
24 | Powers of Attorney Powers of Attorney in favor of G. Walton Cottrell or John R. Welty. |
E-7 | |
27. | Financial Data Schedule | E-15 | |
99. | Additional Exhibits Agreement to Furnish Debt Instruments |
E-16 |
INCENTIVE STOCK OPTION PLAN FOR
OFFICERS AND KEY EMPLOYEES
ADOPTED JUNE 10, 1982
(As Amended August 9, 1990)
1. Purpose.
The purposes of this Plan are to attract, retain and motivate key employees of Carpenter Technology Corporation and its wholly owned subsidiaries ("the Corporation"), to encourage stock ownership by such employees by providing them with a means to acquire a proprietary interest or to increase their proprietary interest in the Corporation's success and to provide a greater community of interest between such employees and the Corporation's stockholders.
2. Administration.
The Board of Directors ("the Board") shall be responsible for the operation of the Plan. It shall be authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations and to appoint such agents as it deems appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan or the options granted hereunder as it deems necessary or advisable. Any questions of interpretation as determined by the Board shall be final and binding upon all persons. The Board may delegate these powers to the Compensation and Stock Option Committee of the Board, consisting of at least three Directors not participating in the Plan.
3. Participants.
The class of employees eligible to receive options under the Plan shall be limited to officers and key employees of the Corporation. Participants in the Plan will consist of such officers or key employees as the Board in its sole discretion may, from time to time, designate. The Board's designation of a participant at any time to receive benefits under the Plan shall not obligate it to designate such person to receive benefits at any other time. The Board shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of options granted hereunder.
4. Types of Benefits.
Benefits under the Plan will be granted in stock options ("options" or individually an "option") which are intended to be options qualifying under Section 422A of the Internal Revenue Code as described below.
5. Shares Reserved Under the Plan.
Subject to the provisions of Section 7, the maximum aggregate number of shares which may be made available for options under this Plan is 400,000 shares of common stock of the Corporation. The shares involved in the unexercised portion of any terminated or expired option under the Plan may again be subject to options under the Plan. Such shares may be either authorized and unissued shares, or issued shares reacquired by the Corporation.
6. Options.
Options may be granted by the Board from time to time, subject to the following provisions:
(a) Each option granted under this Plan shall become exercisable by the optionee only after the optionee has completed one year of employment immediately following the date the option is granted, as determined by the Board (the "date of grant"). Each option granted prior to August 9, 1990, shall expire five years from the date of grant. All other options shall expire ten years from the date of grant provided, however, that if the stockholders fail to approve a ten year term, all such other options shall expire five years from the date of grant.
(b) The option price per share of an option shall be determined by the Board but shall not be less than the fair market value of a share of the Corporation's stock on the date of grant unless the recipient of the option at the time of such grant owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Corporation in which case the option price shall not be less than one hundred ten percent (110%) of such fair market value. For the purpose of this Plan, the term "fair market value" shall mean the closing price of Carpenter Technology Corporation common stock on the New York Stock Exchange on the date in question, or, in the absence of a closing price on such date, then the closing price on the last trading day preceding the date of grant, as reflected on the consolidated tape of New York Stock Exchange-Composite Transactions.
(c) No option under this Plan may be transferable by the optionee except by will or the laws of descent and distribution and no option may be exercised during the lifetime of an optionee, except by that optionee. In the event of the death of the optionee more than one year after the date of grant and not more than three months after the termination of the optionee's employment by the Corporation, the option may be transferred to the optionee's personal representative, heirs or legatees ("transferee") and may be exercised by the transferee before the earlier of (i) the expiration of one year from the date of the death of the optionee or (ii) (A) with respect to options granted prior to August 9, 1990, the expiration of five years from the date of grant and (B) with respect to all other options, the expiration of ten years from the date of grant provided, however, that if the stockholders fail to approve a ten year term, the expiration of five years from the date of grant. In the event of an optionee's retirement, an option may be exercised prior to its expiration during the five year period (one year period in the event of a retirement due to "disability" (within the meaning of Section 105(d)(4) of the Internal Revenue Code)) beginning with the date of retirement; provided, however, that in the event of a retiree's death during such five year period (one year period in the event of a retirement due to "disability"), unexercised options may be exercised by the transferee before the earlier of either items (i) or (ii) of this Section 6(c). In all other cases of termination of employment of an optionee, the option, if otherwise exercisable by the optionee at the time of such termination, may only be exercised within three months after such termination. Notwithstanding anything in the Plan to the contrary, in the event an optionee's employment with the Corporation is terminated for "cause", the Board (or if the Board has delegated its authority, the Compensation and Stock Option Committee) may, in its sole discretion, cancel each unexercised option awarded on or after August 9, 1990, to such terminated optionee effective upon the termination. For purposes of this Section, a termination for "cause" shall mean termination of an optionee's employment with the Corporation which results from either (a) the optionee committing an Intolerable Offense (as defined in the Corporation's Personnel Practices and Policies as in effect on the date of termination) or (b) the operation of the Corporation's Corrective Performance System (as set forth in the Corporation's Personnel Practices and Policies as in effect on the date of termination).
(d) Each option shall be exercisable for the full amount or any part thereof, including a partial exercise from time to time; provided, however, that in no event shall any stock option granted after December 31, 1986 become first exercisable in any one year in excess of $100,000 of the fair market value (determined as of the time the option is granted). All shares purchased under option shall be paid for in full at the time of purchase. Exercised options may be paid for with cash or stock of the Corporation, the value of which shall be the fair market value on the date of the exercise of the options, as determined in Section 6(b) of this Plan, provided, however, that no option granted on or after August 9, 1990, may be exercised utilizing stock of the Corporation unless such shares have been held by an optionee for a period of at least six months.
7. Adjustment Provisions.
If the Corporation shall at any time change the number of issued shares of common stock without new consideration to the Corporation (such as by stock dividends, stock splits, stock combinations, stock exchanges or recapitalization), the total number of shares reserved for issuance under this Plan and the number of shares covered by each outstanding option shall be adjusted so that the aggregate consideration payable to the Corporation and the value of each option shall not be changed. In the event of a merger, reorganization, acquisition, consolidation, divestiture, sale or exchange of assets of the Corporation, or similar event, the Board shall make such adjustments with respect to options or take such other action as it determines to be appropriate and such determination shall be conclusive.
8. Change in Control
(a) Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Corporation, the rights under Section 6(a) shall become immediately exercisable.
(b) For purposes of this Plan, a "Change in Control of the Corporation" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the date this Section was adopted as an amendment to the Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (D) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets.
9. Amendment, Modification and Termination of the Plan.
The Board, at any time, may terminate, and at any time and from time to time, and in any respect, may amend or modify, the Plan; provided, however, that no such action by the Board, without approval of the stockholders, may (a) increase the total amount of common stock which may be purchased under options granted under the Plan or the maximum number of shares of common stock for which options may be granted under the Plan to any one individual, except as contemplated in Section 7, (b) permit options to be granted at less than fair market value, or (c) permit any person while a member of the committee contemplated in Section 2 to be eligible to receive or hold an option under the Plan. The Plan shall automatically terminate ten years after the earlier of (i) the date the Plan is adopted, or (ii) the date the Plan is approved by Stockholders.
10. Effective Date of the Plan.
The Plan shall become effective upon approval by the Board; provided, however, that the Plan shall be submitted for ratification by the stockholders at the Annual Meeting to be held on November 1, 1982, and if not ratified shall be of no force and effect and all options previously granted hereunder shall be null and void.
STK7.10A
OFFICERS' SUPPLEMENTAL RETIREMENT PLAN OF
CARPENTER TECHNOLOGY CORPORATION
Restated December 9, 1993
INTRODUCTION
This Officers' Supplemental Retirement Plan has been authorized by the Board of Directors of Carpenter Technology Corporation to be applicable effective January 1, 1983 to pay supplemental pension benefits to certain Corporate and Division Officers of the Company who qualify for benefits under the General Retirement Plan for Employees of Carpenter Technology Corporation.
All benefits payable under this Plan shall be paid out of the general assets of the Company.
Article I - Definitions
1.01 "Benefits" shall mean the supplemental retirement benefits payable pursuant to this Plan.
1.02 "Company" shall mean Carpenter Technology Corporation.
1.03 "Earnings" shall mean "earnings" as determined under the General Retirement Plan but also including any amounts deferred pursuant to the Deferred Compensation Plan for Corporate and Division Officers of Carpenter Technology Corporation.
1.04 "Effective Date" shall mean January 1, 1983.
1.05 "General Retirement Plan" or "GRP" shall mean the Corporation's "General Retirement Plan for Employees of Carpenter Technology Corporation" as in effect on the last date of a Participant's employment with the Corporation as a participant under the General Retirement Plan.
1.06 "Adjusted GRP Benefit" shall mean the gross amount of benefits payable to or on account of the Participant as calculated under the General Retirement Plan (disregarding any reduction in the amount of benefits under the General Retirement Plan attributable to any provision therein incorporating limitations imposed by Section 415 of the Internal Revenue Code of 1986, and the regulations thereunder, as amended).
1.07 "Officer" shall mean any person who is an Executive Officer or other Corporate or Division Officer of the Company.
1.08
"Participant" shall mean any person included in
the participation of the Plan as provided in
Article 2.
1.09 "Pension Board" shall mean the Pension Board as defined in the General Retirement Plan.
1.10 "Plan" shall mean the Officers' Supplemental Retirement Plan of Carpenter Technology Corporation, as described herein or as hereafter amended.
Article 2 - Participation
2.01 Every Officer who is a Participant in the Deferred Compensation Plan for Corporate and Division Officers shall become a Participant in the Plan simultaneously with participation in the Deferred Compensation Plan.
2.02 An Officer's participation in the Plan shall terminate if his employment with the Company terminates unless at that time the Participant is entitled to a pension pursuant to the General Retirement Plan.
2.03 A Participant shall become entitled to a Benefit hereunder only upon retirement, death or other termination of employment with the Company and provided a benefit is payable to or on his account under the General Retirement Plan.
Article 3 - Amount and Payment of Benefits
3.01 The Benefits shall be payable by the Company coincident with, and to the same recipient, as shall, in the opinion of the Pension Board, be entitled to receive pension, co-pension, and/or Surviving Spouse benefits under the General Retirement Plan. Any such Benefits shall be payable from the general assets of the Company. The Benefits under this Plan shall be payable under the same terms and conditions as the benefits payable to or on account of a Participant under the General Retirement Plan.
3.02 The amount of any Benefits payable to or on account of a Participant pursuant to this Plan shall, before any modification necessary to conform to the provisions of Section 3.01, be equal to:
(a) the Adjusted GRP Benefit (but calculated using Earnings as defined in Section 1.03 herein to modify the definition of "earnings" contained in the General
Retirement Plan), minus(b) the Adjusted GRP Benefit.
3.03 If a Participant is re-employed by the Company after having been retired and receiving a pension or after having terminated his employment with the Company for any other reason, the monthly payments under the Plan shall be discontinued and, upon subsequent retirement or termination of employment with the Company, the Participant's Benefits, if any, under the Plan shall be recomputed in accordance with Sections 3.01 and 3.02 and any Benefit derived therefrom shall again become payable to such Participant in accordance with the provisions of the Plan.
Article 4 - Administration and Claims
4.01 The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Pension Board. The expenses of the Pension Board shall be paid directly by the Company.
4.02 The claims procedures established under the General Retirement Plan shall be utilized herein.
Article 5 - General Provisions
5.01 The establishment of the Plan shall not be construed as conferring any legal rights upon any Officer or other person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any Officer and to treat him without regard to the effect which such treatment might have upon him as a Participant in the Plan.
5.02 The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.
5.03 Subject to any applicable law, no Benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to do shall be void, nor shall any such Benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.
5.04 The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
5.05 The masculine pronoun shall mean the feminine wherever appropriate.
Article 6 - Amendment or Termination
6.01 The Board of Directors of the Company reserves the right to modify or to amend, in whole or in part, or to terminate, this Plan at any time. However, no modification, amendment or termination of the Plan shall adversely affect the right of any Participant to receive the Benefits granted under the Plan by such Board of Directors in respect of such Participant as of the date of modification, amendment or termination.
Article 7 - Binding Effect
7.01 This Plan shall be a binding obligation upon and shall inure to the benefit of the Company, its successors and assigns and the Participants and their beneficiaries, executors, administrators and legal representatives.
PL4.11
11/30/93
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of ________________, between CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), and __________ ____________(the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director or officer of the Company; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies in today's environment;
WHEREAS, the Restated Certificate of Incorporation (the "Charter") and By-laws of the Company require the Company to indemnify its directors and officers to the fullest extent permitted by law and the Indemnitee has been serving and continues to serve as a director or officer of the Company in part in reliance on such Charter and By-laws;
WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner, and Indemnitee's reliance on the aforesaid Charter and By-laws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by such Charter and By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Charter and By-laws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions:
(a) Change in Control: shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13 (d) and 14 (d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Company's assets.
(b) Claim: any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether instituted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any claim relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).
(f) Potential Change in Control: shall be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in Control; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the company representing 9.5% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his beneficial ownership of such securities by five percentage points (5%) or more over the percentage so owned by such person; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.
(g) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.
(h) Voting Securities: any securities of the Company which vote generally in the election of directors.
2. Basic Indemnification Arrangment:
(a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable, but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. If so requested by Indemnitee, the Company shall advance (within two business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). Notwithstanding anything in this Agreement to the contrary, except as provided in Section 5 hereof, prior to a Change in Control, Indemnitee shall not be entitled to indemnification or Expense Advances pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless the Board of Directors has authorized or consented to the initiation of such claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed) . If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors and, if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the States of Pennsylvania or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the company and Indemnitee.
3. Change in Control. The Company agrees that, if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or Charter or By-law provision now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
4. Establishment of Trust. In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for, and defending any Claim relating to an Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and all Claims relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid, provided that in no event shall more than $150,000 be required to be deposited in any trust created hereunder in excess of amounts deposited in respect of reasonably anticipated Expenses. The amount or amounts to be deposited in the trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which the Independent Legal Counsel referred to above is involved. The terms of the trust shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the trustee shall advance, within two business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the trust under the circumstances under which the Indemnitee would be required to reimburse the Company under Section ~2(b) of this Agreement) , (iii) the trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement. The trustee shall be a national banking association or trust company chosen by Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement.
5. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within two business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Charter or By-law provision now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii)recovery under any directors' and officers, liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.
7. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.
8. No Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of no contenders, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.
9. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Charter or By-laws or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Charter or By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.
10. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.
11. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
12. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
14. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Charter or By-law provision or otherwise) of the amounts otherwise indemnifiable hereunder.
15. Binding Effect Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the company or of any other enterprise at the Company's request.
16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.
17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement this ___ day of
________, _____.
CARPENTER TECHNOLOGY CORPORATION
By: ______________________________
Name:
Title: Chairman, President, and
Chief Executive Officer
________________________________
Date
Name
Address
RE: Special Severance Agreement
Dear :
Carpenter Technology Corporation (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Companys management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. If you agree, this letter will replace any prior special severance agreement.
In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below.
original or extended term or (ii) a period of twenty-four (24) months beyond the month in which such change in control occurred. Notwithstanding the foregoing, in no event shall the term of this Agreement extend beyond the date that you attain sixty-five years of age.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued employment
shall not constitute consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder, subject to the applicable notice requirements of
Subsection (iv) below.
If this letter sets forth our agreement on the subject matter hereof, kindly sign and
return to the Company the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
By:
Robert W. Cardy Chairman and Chief Executive Officer
Agreed to this ____
of June, 2000.
_____________________________
Name
Date
Name
Address
RE: Special Severance Agreement
Dear Name:
Carpenter Technology Corporation (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Companys management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated. If you agree, this letter will replace any previous special severance agreement.
In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below.
original or extended term or (ii) a period of twenty-four (24) months beyond the month in which such change in control occurred. Notwithstanding the foregoing, in no event shall the term of this Agreement extend beyond the date that you attain sixty-five years of age.
Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder, subject to the applicable notice requirements of Subsection (iv) below.
(G) Notwithstanding any contrary provision of any other agreement between you and the
Company, or of the Supplemental Retirement Plan for Executives of Carpenter Technology
Corporation (the "SERP"), at the time of your termination of service under
Section 4(i) or 4(iii) hereof, provided that you have then attained at least age 50 and
have completed, or within 24 months after the date of the change in control would have
completed, five years of service, you will be considered to have attained the greater of
age 62 or your actual age, and to have completed the greater of five years of service, or
your actual number of years of service, and therefore entitled to retire with an immediate
pension under Section 7(A) of the SERP, and will be entitled to:
(1) the Normal Retirement Benefit payable to you under Section 5 of the SERP, reduced
in accordance with Section 6(C) of the SERP, based on the sum of your actual years of
service, plus, at your election, an additional 24 months, and the greater of your attained
age or age 62. You may elect to receive the additional 24 months of service credit
described in the preceding sentence, by agreeing, within 60 days following your
termination of service under conditions entitling you to the benefits of the Agreement and
this amendment, by agreeing to waive your right to receive the lump sum pension benefit
described in Section 4(iii)(E) of the Agreement. Notwithstanding the provisions of Section
6(C) of the SERP, the reduction provided therein shall be based on the benefits actually
payable to you under the GRP, the Benefit Equalization Plan, the Earnings Adjustment Plan,
the Officers Supplemental Retirement Plan, and your Primary Social Security
Retirement Benefit, beginning when you actually commence receipt of those benefits.
(2) a special supplemental benefit payable to you under the SERP for life equal to the
benefits that would have been payable to you under the Companys General Retirement
Plan (the "GRP") had you attained age 62 and completed the greater of ten years
of service or your actual number of completed years of service, calculated using your
actual number of completed years of service, plus, if you agree to waive your right to
receive the lump sum pension benefit described in Section 4(iii)(E), an additional 24
months of service. This benefit shall be reduced, beginning when you actually commence
receipt of the benefits to which you are entitled under the GRP by the benefit actually
payable to you under the GRP at that time. The benefit payable under this Section
4(iii)(G)(2) will be paid in the same form, and the necessary adjustments computed using
the same actuarial methods and assumptions, as you have elected with respect to your
benefit under the GRP, or if you have failed to make any such election, in the form of an
annuity for your life and, if you are married at the time of your termination of
employment hereunder, 50% of that amount payable to your surviving spouse for her life;
(3) participate in, and receive coverage under, any post-retirement medical and life
insurance benefits sponsored by the Company for executive level employees who retire from
active service, in accordance with the terms of any such plan as in effect during the 90
days preceding the change in control, or as such plans may be subsequently improved. If
the Company determines to amend any such plan in any way that could reasonably be expected
to be adverse to you, or to discontinue any such plan, the Company will pay you an amount
in cash, payable annually in advance, sufficient to enable you, after the payment of any
income or payroll taxes imposed on such amount, to pay the premiums necessary to maintain
in effect, on an individual basis, insurance at least equal to that provided to you by the
Company immediately before any such amendment or termination. Any such insurance shall be
provided by the insurer(s) selected by you, provided that if the Company is able to
procure such coverage at a lower cost from another insurer rated by Moodys rating
service at least equal to the rating of the insurer selected by you, and requiring no more
proof of insurability than the insurer selected by you, you agree you will accept coverage
from that insurer.
(A) If all, or any portion, of the payments or other benefits provided under any
section of this Agreement, either alone or together with other payments and benefits which
you receive or are entitled to receive from the Company or its affiliates, (whether or not
under an existing plan, arrangement or other agreement) (collectively the
"Payments") would constitute an excess "parachute payment" within the
meaning of section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") and would result in the imposition on you of an excise tax under section
4999 of the Code, (such excise tax, together with any interest and penalties related
thereto, is hereinafter collectively referred to as the "Excise Tax") then, in
addition to any other benefits to which you are entitled under this Agreement, you shall
be entitled to receive an additional payment (a "Gross-Up Payment") in cash, in
an amount such that after payment by you of all taxes (and any interest and penalties
imposed with respect thereto) imposed upon the Gross-Up Payment, including, without
limitation, (1) any income taxes, (2) any payroll taxes, including FICA and FUTA, and any
state or local payroll taxes and (3) any Excise Tax, you retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(B) Unless you and the Company otherwise agree in writing, any determination required
under this Section 4(iv), including without limitation, the amount of the Gross-Up
Payment, shall be computed and made in writing by the independent public accountants
engaged by the Company as its auditors, (the "Accountants"), whose determination
shall be, subject to your reasonable approval of the calculations required under this
Section 4(iv), conclusive and binding upon you and the Company for all purposes. For
purposes of making the calculations required by this Section 4(iv), the Accountants may
rely on reasonable, good faith interpretations concerning the application of section 280G
and section 4999 of the Code. You and the Company shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to make a
determination under this Section 4(iv). The Company shall bear all costs the Accountants
may reasonably incur in connection with any calculations contemplated by this Section
4(iv).
(C) As a result of the uncertainty in the application of section 280G and section 4999
of the Code at the time of the initial determination by the Accountants hereunder, it is
possible that, as a result of Internal Revenue Service examination of your tax returns or
otherwise, (i) an amount of Gross-Up Payment will not have been made by the Company that
should have been made (an "Underpayment") or that (ii) an amount of Gross-Up
Payment that has been made will be determined to have been in excess of the Gross-Up
Payment actually required (an "Overpayment"). In the event that you are required
to make an additional payment of any Excise Tax beyond that originally calculated by the
Accountants, the Accountants shall determine the amount of the Underpayment that has
occurred, taking into account all taxes described in (A) above, and any such Underpayment
shall be promptly paid by the Company to you or to the Internal Revenue Service for your
benefit. In the event that it is finally determined that an Overpayment has occurred, you
agree that you shall promptly, and in any event within 30 days of such determination,
refund the amount of the Overpayment, plus any interest actually paid to you with respect
to the Overpayment, to the Company.
(D) The Company shall have the right with respect to the determination of either an
Underpayment or an Overpayment to require you to appeal the assertion of any Underpayment
or to claim, and sue for, a refund of any Excise Tax paid by you upon any Payment or
Gross-Up Payment, provided that the Company shall promptly following your request, advance
you all expenses, including counsel and accounting fees, that based on advice of your
counsel or accountants, you may reasonably expect to incur in connection with any such
proceeding. You agree that if the total of such advances exceeds the expenses incurred by
you, you will refund the excess to the Company. Alternatively, the Company may undertake
any such proceeding, in which case you agree that you shall cooperate with the Company, as
the Company may reasonably request, in any such proceeding.
If this letter sets forth our agreement on the subject matter hereof, kindly sign and
return to the Company the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
By:
Robert W. Cardy Chairman and Chief Executive Officer
Agreed to this ____
of June, 2000.
_____________________________
Recipient Name
Exhibit 12
Carpenter Technology Corporation
Computations of Ratios of Earnings to Fixed Charges -- unaudited
Five years Ended June 30, 2000
(dollars in millions)
2000 |
1999 |
1998(b) |
1997 |
1996 |
|
Fixed charges: | |||||
Interest costs(a) | $ 39.4 |
$ 34.8 |
$ 31.2 |
$ 22.3 |
$ 19.3 |
Interest
component of non-capitalized lease rental expense(c) |
3.5 |
3.2 |
2.9 |
2.4 |
2.0 |
Total fixed charges |
$ 42.9 |
$ 38.0 |
$ 34.1 |
$ 24.7 |
$ 21.3 |
Earnings as defined: | |||||
Income before income taxes | $ 79.9 |
$ 55.8 |
$136.9 |
$ 97.9 |
$ 95.2 |
Less
income from less-than-fifty- percent-owned entities, and add loss on sale of partial interest in less-than-fifty-percent owned entities |
(1.1) |
0.0 |
3.4 |
1.2 |
4.3 |
Fixed
charges less interest capitalized |
36.9 |
32.5 |
32.0 |
22.3 |
21.0 |
Amortization of capitalized interest | 2.8 |
2.0 |
1.9 |
1.9 |
2.1 |
Earnings as defined | $118.5 |
$ 90.3 |
$174.2 |
$123.3 |
$122.6 |
Ratio of earnings to fixed charges | 2.8x |
2.4x |
5.1x |
5.0x |
5.7x |
(a)
Includes interest capitalized relating to significant construction projects, and(b)
Excludes interest and earnings related to net assets held for sale.(c)
One-third of rental expense which approximates the interest component of
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 and S-3 (File Nos. 2-83780, 2-81019, 2-60469, 33-42536, 33-65077, 33-54045, 333-43017, 333-55667 and 333-55669) of Carpenter Technology Corporation and subsidiaries of our reports dated July 27, 2000, relating to the consolidated financial statements and financial statement schedule, which reports appear in this Form 10-K.
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 26, 2000
Exhibit 99
AGREEMENT TO FURNISH DEBT INSTRUMENTS
Pursuant to Instruction 3(b)(4)(iii) to Item 601 of Regulation S-K, Carpenter has not included as an Exhibit any instrument with respect to long-term debt if the total amount of debt authorized by such instrument does not exceed 10% of the total assets of Carpenter. Carpenter agrees, pursuant to this Instruction, to furnish a copy of any such instrument to the Securities and Exchange Commission upon request of the Commission.
CARPENTER TECHNOLOGY CORPORATION
By s/John R. Welty
John R. Welty
Vice President, General Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
________________________________
Marcus C. Bennett
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or1l5(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
________________________________
William S. Dietrich II
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
________________________________
C. McCollister Evarts, M.D.
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
________________________________
Michael Fitzpatrick
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
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William J. Hudson, Jr.
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
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Robert J. Lawless
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 19th day of September 2000.
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Marlin Miller, Jr.
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section l3 or l5(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
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Robert N. Pokelwaldt
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
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Peter C. Rossin
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 19th day of September 2000.
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Kathryn C. Turner
Director
CARPENTER TECHNOLOGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a Director of Carpenter Technology Corporation does hereby appoint G. Walton Cottrell and John R. Welty or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of l934 on Form l0-K, for the year ended June 30, 2000, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this day of August, 2000.
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Kenneth L. Wolfe
Director