-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UNP1YNfbHBC8SY9On21S5tWsRZqyAtQyps4oRJemqOkPAUZ3xHnUYn6TVM7l2kWY 98zYF6XJvCGM/xTQ2M8ulQ== 0000017843-98-000080.txt : 19981116 0000017843-98-000080.hdr.sgml : 19981116 ACCESSION NUMBER: 0000017843-98-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARPENTER TECHNOLOGY CORP CENTRAL INDEX KEY: 0000017843 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 230458500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05828 FILM NUMBER: 98746653 BUSINESS ADDRESS: STREET 1: 101 WEST BERN ST CITY: READING STATE: PA ZIP: 19601 BUSINESS PHONE: 2152082000 MAIL ADDRESS: STREET 1: 101 WEST BERN ST CITY: READING STATE: PA ZIP: 19601 10-Q 1 SEPT 30, 1998 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-5828 CARPENTER TECHNOLOGY CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 23-0458500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 West Bern Street, Reading, Pennsylvania 19612-4662 (Address of principal executive offices) (Zip Code) 610-208-2000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 30, 1998. Common stock, $5 par value 21,918,272 Class Number of shares outstanding The Exhibit Index appears on page E-1. CARPENTER TECHNOLOGY CORPORATION FORM 10-Q INDEX Page ---- Part I FINANCIAL INFORMATION Consolidated Balance Sheet September 30, 1998 (Unaudited) and June 30, 1998..................................... 3 & 4 Consolidated Statement of Income (Unaudited) for the Three Months Ended September 30, 1998 and 1997........ 5 Consolidated Statement of Cash Flows (Unaudited) for the Three Months Ended September 30, 1998 and 1997........ 6 Consolidated Statement of Comprehensive Income (Unaudited) for the Three Months Ended September 30, 1998 and 1997........................... 7 Notes to Consolidated Financial Statements.............. 8-12 Management's Discussion and Analysis of Financial Condition and Results of Operations................... 13-15 Forward-looking Statements.............................. 16 Part II OTHER INFORMATION................................ 17-19 Exhibit Index............................................. E-1 PART I CARPENTER TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEET (Page 1 of 2) September 30, 1998 and June 30, 1998 (in millions, except share data) September 30 June 30 1998 1998 ------------ -------- (Unaudited) ASSETS - ------ Current assets: Cash and cash equivalents $ 12.2 $ 52.4 Accounts receivable, net 147.0 177.0 Inventories 290.4 267.1 Net assets held for sale 110.5 130.2 Other current assets 19.3 18.8 -------- -------- Total current assets 579.4 645.5 Property, plant and equipment, at cost 1,154.8 1,104.8 Less accumulated depreciation and amortization 473.4 460.7 -------- -------- 681.4 644.1 Prepaid pension cost 146.8 138.0 Goodwill, net 169.6 171.8 Other assets 96.3 99.5 -------- -------- Total assets $1,673.5 $1,698.9 ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEET (Page 2 of 2) September 30, 1998 and June 30, 1998 (in millions, except share data) September 30 June 30 LIABILITIES 1998 1998 - ----------- ------------ -------- (Unaudited) Current liabilities: Short-term debt $ 132.2 $ 119.8 Accounts payable 80.0 80.5 Accrued compensation 20.4 35.0 Accrued income taxes 8.0 - Deferred income taxes 19.3 24.8 Other accrued liabilities 44.9 52.7 Current portion of long-term debt 51.0 36.3 -------- -------- Total current liabilities 355.8 349.1 Long-term debt, net of current portion 355.7 370.7 Accrued postretirement benefits 132.6 132.8 Deferred income taxes 144.3 142.9 Other liabilities 43.5 43.9 SHAREHOLDERS' EQUITY - -------------------- Preferred stock - $5 par value, authorized 2,000,000 shares; issued 438.6 shares at September 30, 1998 and 441.1 shares at June 30, 1998 27.7 27.8 Common stock at $5 par value - authorized 50,000,000 shares at September 30, 1998 and June 30, 1998; issued 23,020,631 shares at September 30, 1998 and 22,995,036 shares at June 30, 1998 115.2 115.0 Capital in excess of par value - common stock 190.8 190.0 Reinvested earnings 363.4 359.1 Common stock in treasury, at cost - 794,587 shares at September 30, 1998 and 147,920 shares at June 30, 1998 (27.1) (3.4) Deferred compensation (17.2) (17.8) Foreign currency translation adjustments (11.2) (11.2) -------- -------- Total shareholders' equity 641.6 659.5 -------- -------- Total liabilities and shareholders' equity $1,673.5 $1,698.9 ========= ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited) for the three months ended September 30, 1998 and 1997 (in millions, except per share data) 1998 1997 ---- ---- Net sales $250.3 $249.5 ------ ------ Costs and expenses: Cost of sales 183.6 179.4 Selling and administrative expenses 40.1 36.2 Interest expense 6.5 5.9 Other expense, net .5 .1 ------ ------ 230.7 221.6 ------ ------ Income before income taxes 19.6 27.9 Income taxes 7.4 10.8 ------ ------ Net income $ 12.2 $ 17.1 ====== ====== Earnings per common share: Basic $ .52 $ .86 ====== ====== Diluted $ .51 $ .82 ====== ====== Weighted average common shares outstanding: Basic 22.7 19.5 ====== ====== Diluted 23.7 20.7 ====== ====== Dividends per common share $ .33 $ .33 ====== ====== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) for the three months ended September 30, 1998 and 1997 (in millions) 1998 1997 ---- ---- OPERATIONS Net income $ 12.2 $ 17.1 Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization 15.7 12.8 Deferred income taxes ( 4.1) 1.4 Prepaid pension costs ( 8.8) (5.5) Loss on disposal of assets .1 .4 Changes in working capital and other, net of acquisitions: Receivables 30.0 17.0 Inventories (23.3) (21.5) Accounts payable ( .5) ( .5) Accrued current liabilities (14.4) (10.2) Other, net 1.9 (7.9) ------ ------ Net cash provided from operations 8.8 3.1 ------ ------ INVESTING ACTIVITIES Purchases of plant and equipment (50.2) (22.3) Proceeds from disposals of plant and equipment - .2 Proceeds from net assets held for sale 19.7 - Acquisitions of businesses, net of cash received - (18.1) ------ ------ Net cash used for investing activities (30.5) (40.2) ------ ------ FINANCING ACTIVITIES Net change in short-term debt 12.4 ( .3) Proceeds from issuance of long-term debt - 40.0 Payments on long-term debt (.3) ( .1) Payments to acquire treasury stock (23.7) - Dividends paid ( 7.9) ( 6.8) Proceeds from issuance of common stock 1.0 1.3 ------ ------ Net cash provided from (used for) financing activities (18.5) 34.1 ------ ------ DECREASE IN CASH AND CASH EQUIVALENTS (40.2) (3.0) Cash and cash equivalents at beginning of period 52.4 18.6 ------ ------ Cash and cash equivalents at end of period $ 12.2 $ 15.6 ====== ====== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) for the three months ended September 30, 1998 and 1997 (in millions) 1998 1997 ---- ---- Net income $ 12.2 $ 17.1 Foreign currency translation, net of tax - (.4) ------ ------ Comprehensive income $ 12.2 $ 16.7 ====== ====== See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending June 30, 1999. The June 30, 1998 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes included in Carpenter's 1998 Annual Report on Form 10-K. 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. Certain reclassifications of prior year's amounts have been made to conform with the current year's presentation. 2. Earnings Per Common Share ------------------------- In December 1997, Carpenter adopted SFAS No. 128, "Earnings per Share," which replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued ------------------------------------------ 2. Earnings Per Common Share, continued ------------------------- The calculations of earnings per share are as follows: (in millions, except Three Months per share data) 1998 ------------------- Basic Diluted ------- ------- Net income $ 12.2 $ 12.2 Dividends accrued on convertible preferred stock, net of tax benefits (.4) - Assumed shortfall between common and preferred dividend - (.2) ------ ------ Earnings available for common shareholders $ 11.8 $ 12.0 ====== ====== Weighted average number of common shares outstanding 22.7 22.7 Assumed conversion of preferred shares - .9 Effect of shares issuable under stock option plans - .1 ------ ------ Adjusted weighted average common shares 22.7 23.7 ====== ====== Earnings per share $ 0.52 $ 0.51 ====== ====== Three Months 1997 ------------------- Basic Diluted ------- ------- Net income $ 17.1 $ 17.1 Dividends accrued on convertible preferred stock, net of tax benefits (.4) - Assumed shortfall between common and preferred dividend - (.2) ------ ------ Earnings available for common shareholders $ 16.7 $ 16.9 ====== ====== Weighted average number of common shares outstanding 19.5 19.5 Assumed conversion of preferred shares - .9 Effect of shares issuable under stock option plans - .3 ------ ------ Adjusted weighted average common shares 19.5 20.7 ====== ====== Earnings per share $ 0.86 $ 0.82 ====== ====== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued ------------------------------------------ 3. Inventories ----------- September 30 June 30 1998 1998 ------------ ------- (in millions) Finished and purchased products $179.6 $169.1 Work in process 185.2 183.3 Raw materials and supplies 56.5 46.2 ------ ------ Total at current cost 421.3 398.6 Excess of current cost over LIFO values 130.9 131.5 ------ ------ Inventory per Balance Sheet $290.4 $267.1 ====== ====== The current cost of LIFO-valued inventories was $373.5 million at September 30, 1998 and $352.2 million at June 30, 1998. 4. Common Stock Repurchase Program ------------------------------- On August 6, 1998, Carpenter rescinded the 1989 stock repurchase program and approved a new stock repurchase program for up to 1.2 million, or 5 percent, of the outstanding shares of Carpenter's common stock. The shares may be purchased over time and held as treasury shares. As of September 30, 1998, Carpenter had repurchased .6 million shares under this program at a total cost of $23.3 million. In addition, treasury shares purchased increased by $.4 million as a result of employee benefit plans. 5. Authorized Shares of Common Stock --------------------------------- On October 26, 1998, the stockholders of Carpenter voted to approve an amendment to Carpenter's Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 50 million to 100 million shares. 6. Net Assets Held for Sale ------------------------ Carpenter intends to sell the businesses in the government products and services and industrial products segments of Talley Industries, Inc. ("Talley"). The sales are expected to be completed by December 1998. The expected net proceeds of these sales and the cash flows of these businesses until they are sold less an allocation of interest expense for the holding period were allocated to net assets held for sale in the allocation of the Talley purchase price. Any difference between the actual and expected amounts will result in an adjustment of goodwill unless there is a difference caused by a post-acquisition event. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued ------------------------------------------ 6. Net Assets Held for Sale, continued ------------------------ Activity from June 30, 1998 to September 30, 1998 in the net assets held for sale follows: (in millions) Balance June 30, 1998 $130.2 Net cash funded by Carpenter 5.1 Interest allocated 2.3 Proceeds from sales of businesses (27.1) ------ Balance September 30, 1998 $110.5 ====== 7. Commitments and Contingencies - Environmental --------------------------------------------- Carpenter accrues amounts for environmental remediation costs which represent management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For the three months ended September 30, 1998, no amounts were charged to operations for environmental remediation costs. The liability recorded for environmental remediation costs remaining at September 30, 1998 was $10 million. The estimated range of the reasonably possible future costs of remediation at Carpenter-owned operating facilities and superfund sites is between $10 million and $14 million. During the first quarter of fiscal 1999, approximately $1.5 million of cash was received under settlements of litigation relating to insurance coverages for certain superfund sites, leaving the remaining discounted receivable for recoveries from these settlements at September 30, 1998 at approximately $.7 million. 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 Carpenter's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued ------------------------------------------ 8. Accounting Pronouncements ------------------------- The FASB has issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which will be effective beginning in the fourth quarter of Carpenter's fiscal year 1999. SFAS No. 131 establishes standards for methods by which public business enterprises report information about operating segments in annual financial statements and requires them to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Carpenter has not determined the full impact of this standard on its future financial disclosures. The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which will be effective for Carpenter's fiscal year 2000. This standard requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives will be recorded each period in current earnings or comprehensive income. Carpenter anticipates that, due to its limited use of derivative instruments, the adoption of SFAS No. 133 will not have a significant effect on Carpenter's future results of operations or financial position. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- Net income for the quarter ended September 30, 1998 was $12.2 million, a 29% decrease compared to $17.1 million for the same quarter last year. Diluted earnings per share were $.51 for the quarter compared to $.82 per share for the prior year quarter. The decrease was primarily attributable to lower unit sales volume and reduced operating levels for the core Specialty Alloys and Dynamet operations. The diluted earnings per share decrease was also attributable to the increase in common shares outstanding as a result of the December 1997 acquisition of Talley Industries, Inc. Net sales were $250.3 million, a slight increase from $249.5 million in the same period last year. Excluding the sales of businesses acquired since last year's first quarter, sales decreased 31%, primarily as a result of a 14% decrease in core Specialty Alloys unit volume and a 17% decrease in Dynamet sales. The lower sales were a result of the strike against General Motors, excess inventory in the aerospace industry supply chain, softness in some industrial markets, and reduced drilling activity in the oil exploration markets. Sales outside of the United States increased by 9% to $39.9 million, of which $11.3 million was exported by domestic operations. Cost of sales as a percent of net sales increased to 73% from 72% during last year's first quarter primarily because of lower production levels in the core Specialty Alloys and Dynamet operations. The favorable effects of lower raw material and environmental remediation costs and increased pension credits partially offset these negative items. Selling and administrative costs were higher by $3.9 million primarily due to the inclusion of costs of newly-acquired companies. Interest expense was higher by $.7 million chiefly due to the increased debt level required to finance the business acquisitions made during the prior fiscal year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS, continued ------------------------- Cash Flow and Financial Condition: - --------------------------------- During the three months ended September 30, 1998, Carpenter's cash and cash equivalents decreased by $40.2 million, as shown in the Consolidated Statement of Cash Flows. Net cash provided from operating activities for the September 30, 1998 quarter was $8.8 million. Accounts receivable and current liabilities decreased due to normal seasonal trends. Inventories increased by $23.3 million primarily due to lower than expected sales. Investing activities consumed $30.5 million in cash during the first three months of fiscal 1999. Capital expenditures remained at planned levels as Carpenter continues its capital expenditure program to invest for future business requirements, including manufacturing capacity. As of September 30, 1998, the total approved capital improvement projects in excess of $1 million was approximately $259 million of which approximately $96 million has been spent. These projects are to upgrade and increase production capabilities, reduce costs of production, increase the throughput and quality of existing facilities, and make environmental improvements. The major projects include modernization of the strip finishing facility ($87 million), a new 4500 ton forging press ($42 million), four new vacuum arc remelt furnaces ($22 million), and bar finishing equipment ($22 million). On October 26, 1998, the Board approved $114 million of additional capital projects. These projects are to modernize the melting facilities ($70 million), and expand manufacturing capacity at the Talley Metals plant in Hartsville, SC ($44 million). Total capital expenditures anticipated for fiscal 1999 are approximately $170 million of which $50.2 million was spent as of September 30, 1998. For fiscal years 2000, 2001 and 2002, Carpenter anticipates capital expenditures of approximately $190 million, $115 million, and $90 million, respectively. The sales of businesses formerly owned by Talley (net assets held for sale) provided $19.7 million of cash before taxes. As of September 30, 1998, the remaining net cash expected to be received on the disposition of these businesses was $110.5 million before income taxes and is shown as net assets held for sale in the consolidated balance sheet. These cash proceeds are expected to be received by December 1998 and will be used to repay short-term debt. Details are included in the notes to the consolidated financial statements. Financing activities included cash payments of $23.7 million for the purchase of Carpenter common stock under the stock repurchase program, which is discussed in the notes to the consolidated financial statements. Total debt increased by $12.1 million since June 30, 1998 to a level of $538.9 million or 40.1% of total capital employed, including deferred taxes. Current year borrowings were in the form of short-term debt. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS, continued ------------------------- Cash Flow and Financial Condition: continued - --------------------------------- At September 30, 1998, Carpenter was in a sound liquidity position, with current assets exceeding current liabilities by $223.6 million (a ratio of 1.6 to 1). This favorable ratio is conservatively stated because certain inventories are valued $130.9 million less than the current cost as a result of using the LIFO method. Carpenter believes that its present financial resources, both from internal and external resources, including the anticipated proceeds from the sales of the remaining Talley segments, will be adequate to meet its foreseeable short-term and long-term liquidity needs. Year 2000 Issues: - ---------------- Carpenter, its suppliers and customers are heavily reliant upon computer systems for many aspects of their businesses. The calendar year 2000 will make many current computerized systems ineffective and will require corrections or replacements before January 1, 2000. This situation ("Year 2000 Issues") could have a material adverse effect upon Carpenter if not adequately remedied by Carpenter, its suppliers and customers on a timely basis. Reference Carpenter's June 30, 1998 Form 10-K for details on its status regarding Year 2000 Issues. The costs charged to income and estimated future costs to remediate Carpenter's Year 2000 Issues have not changed significantly since June 30, 1998. Carpenter believes that its internal systems will be Year 2000 compliant in all material respects by December 1999. Forward-looking Statements -------------------------- This Form 10-Q contains various "Forward-looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Such 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 conditions; 2) the impact of inventory adjustments in Carpenter's aerospace customer base; 3) 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; 4) the level of export sales impacted by political and economic instability, 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; 5) the general economic and financial market conditions and other uncertainties which affect Carpenter generally and may specifically affect the sales of the remaining companies which comprise the industrial products and government products and services business segments of Talley Industries, Inc.; 6) the effects on operations of changes in U.S. and foreign governmental laws and public policy, including environmental regulations; and 7) the ability of Carpenter's suppliers and customers to correct or replace their computer systems for Year 2000 Issues. 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. PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. ------------------------- There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of their properties is subject or which is known by the Company to be contemplated by governmental authorities. There are no material proceedings to which any Director, Officer, or affiliate of the Company, or any owner of more than five percent of any class of voting securities of the Company, or any associate of any Director, Officer, affiliate, or security holder of the Company, is a party adverse to the Company or has a material interest adverse to the interest of the Company 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 the Company, (2) involves a claim for damages, potential sanctions or capital expenditures exceeding ten percent of the current assets of the Company 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 ------------------------------------------------------------ a., b. On October 26, 1998, at the 1998 Annual Meeting, stockholders of Carpenter elected the following Directors to a three-year term which will expire at the 2001 Annual Meeting of Stockholders: Robert W. Cardy, Robert J. Lawless, Robert N. Pokelwaldt and Kathryn C. Turner. Voting for these Directors was as follows: For Against/ Abstention/Broker Withheld Non-Vote Robert W. Cardy 20,988,291 176,549 N/A Robert J. Lawless 20,991,016 173,824 N/A Robert N. Pokelwaldt 20,904,316 260,524 N/A Kathryn C. Turner 20,991,635 173,205 N/A The following are the other Directors whose term continued following the 1998 Annual Meeting: Marcus C. Bennett, William S. Dietrich II, J. Michael Fitzpatrick, Dr. C. McCollister Evarts, William J. Hudson, Marlin Miller, Jr., Peter C. Rossin and Kenneth L. Wolfe. c. Stockholders also approved the appointment of PricewaterhouseCoopers as independent public accountants for Carpenter for fiscal 1999 and adopted an amendment to the Company's Restated Certificate of Incorporation which increased the number of authorized shares of Common Stock from 50,000,000 to 100,000,000. The voting on these matters was as follows: For Against/ Abstention/Broker Withheld Non-Vote Appointment of PricewaterhouseCoopers 21,013,299 80,877 N/A Amendment to Restated Certificate of Incorporation 19,313,567 1,736,512 Abstentions - 114,761 Non-Votes - 0 Item 6. Exhibits and Reports on Form 8-K. ----------------------------------------- a. The following documents are filed as exhibits: 3. Restated Certificate of Incorporation, as amended by vote of stockholders on October 26, 1998. 27. Financial Data Schedule b. The Company filed the following Reports on Form 8-K for events occurring during the quarter of the fiscal year covered by this Report: Reports on Form 8-K: A Current Report on Form 8-K, dated August 6, 1998, was filed on behalf of Carpenter on August 21, 1998. The Form 8-K was filed to report the common stock repurchase program, and covered Item 5, Other Events. No financial statements were filed with this Report. Items 2, 3, and 5 are omitted as the answer is negative or the items are not applicable. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARPENTER TECHNOLOGY CORPORATION (Registrant) Date: November 13, 1998 s/G. Walton Cottrell ------------------- -------------------------------- G. Walton Cottrell Sr. Vice President - Finance and Chief Financial Officer EX-99 2 EXHIBIT INDEX EXHIBIT INDEX ------------- Exhibit No. Title Page - ----------- ----- ---- 3. Restated Certificate of Incorporation, as amended by vote of stockholders on October 26, 1998 E-2 to E-5 27. Financial Data Schedule. E-6 E-1 EX-3 3 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3 RESTATED CERTIFICATE OF INCORPORATION OF CARPENTER TECHNOLOGY CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware ("General Corporation Law"), Hereby certifies as follows: 1. The name of the corporation is Carpenter Technology Corporation. The date of filing its original Certificate of Incorporation with the Secretary of State was October 3, 1968 and on August 13, 1987, the Certificate of Incorporation was restated. 2. On October 26, 1998, an amendment to Article 4 of the Corporation's Restated Certificate of Incorporation which increased the number of authorized shares of Common Stock, par value $5 per share, to 100,000,000 was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law at the 1998 Annual Meeting of Stockholders of the Corporation, held upon notice in accordance with Section 222 of the General Corporation Law. 3. This Restated Certificate of Incorporation restates and integrates and in accordance with the approval of the stockholders on October 26, 1998, further amends the Restated Certificate of Incorporation such that the initial paragraph of Article 4 reads as follows: The Corporation shall have authority to issue 102,000,000 shares of stock, consisting of 2,000,000 shares of Series Preferred Stock, par value $5 per share, and 100,000,000 shares of Common Stock, par value $5 per share. 4. The text of the Restated Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full: 1. The name of the Corporation is Carpenter Technology Corporation. 2. The address of the Corporation's registered office in Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The Corporation Trust Company is the Corporation's registered agent at that address. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. 4. The Corporation shall have authority to issue 102,000,000 shares of stock, consisting of 2,000,000 shares of Series Preferred Stock, par value $5 per share, and 100,000,000 shares of Common Stock, par value $5 per share. The Board of Directors may authorize the issuance from time to time of the Series Preferred Stock in one or more series and with such designations, preferences, relative, participating, optional and other special rights, and qualifications, limitations or restrictions (which may differ with respect to each series) as the Board may fix by resolution. Without limiting the foregoing, the Board of Directors is expressly authorized to fix, with respect to each such series, the dividend rate and whether or not dividends shall be cumulative, the voting powers, if any, and the conversion rights, if any. Except as otherwise provided by law, or in this Restated Certificate of Incorporation as amended from time to time, or in the resolutions of the Board of Directors relating to any series of the Series Preferred Stock, the holders of the Common Stock shall possess full voting power for the election of directors and for all other purposes, and each holder of record of shares of the Common Stock shall be entitled to one vote for each share so held. 5. The Board of Directors shall have the power to make, alter or repeal the By-Laws of the Corporation, subject to any voting requirements contained in the By-Laws. 6. The Board of Directors shall be divided into three classes, each class to be as nearly equal in number as possible and to have the number provided in the By-Laws. The term of office of the first class shall expire at the first annual meeting of stockholders after the incorporation of the Corporation, that of the second class at the second annual meeting after said incorporation, and that of the third class at the third annual meeting after said incorporation. At each annual meeting the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting. 7. (a) The liability of the Corporation's Directors to the Corporation or its stockholders shall be eliminated to the fullest extent permitted by Section 102 (b) (7) of the General Corporation Law of the State of Delaware, as amended from time to time. (b) The Corporation shall indemnify, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as amended from time to time, all persons that such section grants the Corporation the power to indemnify. 8. The affirmative vote of the holders of four-fifths of the outstanding shares of the capital stock of the Corporation entitled to vote shall be required (a) for the adoption of any agreement for the merger or consolidation of the Corporation with or into any other corporation, and (b) to authorize any sale, lease or exchange of all or substantially all of the assets of the Corporation to or with, or any sale, lease or exchange to or with the Corporation (in exchange for its securities in a transaction for which stockholder approval is required by law or any agreement between the Corporation and any national securities exchange) of any assets of, any other corporation, person or other entity, if (as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon) such other corporation, person or entity referred to in clause (a) or clause (b), above, is the beneficial owner, directly or indirectly, of more than 10% of any class of capital stock of the Corporation. For the purposes hereof any corporation, person or other entity shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation, (i) which it has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, or (ii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (i), above), by any other corporation, person or entity with which it has any agreement, arrangement or understanding with respect to the acquisition, holding, voting or disposition of stock of the Corporation, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934. 9. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. 10. Notwithstanding any other provisions of the Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of four-fifths or more of the outstanding shares of the capital stock of the Corporation entitled to vote shall be required to amend or repeal, or adopt any provisions inconsistent with, Articles 6, 8 and 9, and this Article 10, of this Restated Certificate of Incorporation. 11. The Carpenter Steel Company is the incorporator and its mailing address is 101 West Bern Street, Reading, Pennsylvania 19603. 5. This Restated Certificate of Incorporation was duly adopted by the Board of Directors on October 26, 1998, in accordance with Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said CARPENTER TECHNOLOGY CORPORATION has caused this certificate to be signed by Robert W. Cardy, its Chairman of the Board, President and Chief Executive Officer, and attested by John R. Welty, its Vice President, General Counsel and Secretary, this 26th day of October, 1998. CARPENTER TECHNOLOGY CORPORATION By /s/Robert W. Cardy ---------------------------- Robert W. Cardy Chairman of the Board, President and Chief Executive Officer ATTEST: By /s/John R. Welty ------------------------- John R. Welty Vice President, General Counsel and Secretary EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000,000 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 12 0 147 0 290 579 1155 473 1674 340 371 0 28 115 499 1674 250 250 184 184 1 0 7 20 7 12 0 0 0 12 .52 .51 Represents long-term debt, net of current portion Represents Basic Earnings per Share as required under SFAS No. 128
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