11-K 1 r11k.txt Form 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 2002 Commission File Number 1-5828 SAVINGS PLAN OF CARPENTER TECHNOLOGY CORPORATION (Full title of the plan) CARPENTER TECHNOLOGY CORPORATION (Name of issuer of the securities held pursuant to the plan) 2 Meridian Drive Treeview Corporate Center Wyomissing, Pennsylvania 19610 (Address of principal executive office of the issuer) Financial Statements and Exhibits (a) Financial Statements The financial statements filed as part of this report are listed in the Index to Financial Statements included herein. (b) Exhibits 23 Consent of Independent Accountants 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 1 CARPENTER TECHNOLOGY CORPORATION SAVINGS PLAN INDEX TO FINANCIAL STATEMENTS FORM 11-K ANNUAL REPORT Form 11-K Pages Report of Independent Auditors 3 Financial Statements: Statements of Net Assets Available for Benefits as of December 31, 2002 and 2001 4 Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2002 and 2001 5 Notes to Financial Statements 6-11 Supplemental Schedule: Schedule of Assets (Held at End of Year) 12 2 Report of Independent Auditors To the Participants and Administrator of the Savings Plan of Carpenter Technology Corporation: In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Savings Plan of Carpenter Technology Corporation (the "Plan") at December 31, 2002 and 2001, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. June 13, 2003 /s/ PricewaterhouseCoopers LLP 3 SAVINGS PLAN OF CARPENTER TECHNOLOGY CORPORATION STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS as of December 31, 2002 and 2001 (dollars in thousands) ASSETS 2002 2001 Investments, at fair value $250,305 $275,715 Cash 502 - Receivables: Investment income receivable 1,291 426 Receivable for securities sold 1,247 - Miscellaneous receivables - 1 Total receivables 2,538 427 Total assets 253,345 276,142 LIABILITIES Accrued administration expenses 181 205 Payable for securities purchased 210 - Total liabilities 391 205 Net assets available for benefits $252,954 $275,937 The accompanying notes are an integral part of these financial statements. 4 SAVINGS PLAN OF CARPENTER TECHNOLOGY CORPORATION STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS for the years ended December 31, 2002 and 2001 (dollars in thousands) 2002 2001 Additions to net assets attributed to: Investment income: Interest $ 5,547 $ 6,147 Dividends 3,270 3,092 Net depreciation in fair value of investments (47,924) (32,536) (39,107) (23,297) Contributions: Salary deferral 7,935 9,124 Participant 1,780 2,142 Rollover 271 958 Company basic 4,063 4,683 14,049 16,907 Transfers from merged plans (Note 1) 27,801 - Total additions 2,743 (6,390) Deductions from net assets attributed to: Benefits paid to participants 25,343 21,087 Administrative expenses 383 911 Total deductions 25,726 21,998 Net decrease (22,983) (28,388) Net assets available for benefits: Beginning of year 275,937 304,325 End of year $252,954 $275,937 The accompanying notes are an integral part of these financial statements. 5 SAVINGS PLAN OF CARPENTER TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 1. Description of Plan: The following description of the Savings Plan of Carpenter Technology Corporation (the "Plan") provides only general information. A more comprehensive description of the Plan's provisions can be found in the Plan document, which is available to participants upon request from Carpenter Technology Corporation or any participating affiliate (collectively referred to as the "Company"). General: The Plan is a profit-sharing and stock bonus plan which covers substantially all domestic employees of the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Effective January 1, 2002, Mellon Trust replaced State Street Bank as Trustee and Mellon HR Solutions replaced Hewitt Associates as Recordkeeper of the Plan. Also, effective in January 2002, the Carpenter Stock Fund within the Plan was converted to an Employee Stock Ownership Plan (ESOP). Plan Merger: Effective December 31, 2002, four of the Company's qualified defined contribution plans (Dynamet Inc. Defined Contribution Plan, The Savings Plan for Affiliates, Retirement Plan of Talley Metals Technology, Inc., and ICI Ceramics, Inc. Employee Savings & Retirement Plan) merged with and into the Plan. Pursuant to the merger, participants in the other plans, with assets having a fair market value of $27,801,000 at the time of the merger, became part of the Plan. 6 Contributions: Each year, participants may contribute up to 35 percent of annual compensation on a pretax basis (known as salary deferral contributions), and up to 35 percent of annual compensation on an after-tax basis (known as participant contributions), as defined in the Plan. The combined contributions cannot exceed 35 percent of total compensation. Participants who are age 50 or older may make "catch-up contributions," which are additional pretax contributions. Participants may also contribute amounts representing distributions from other qualified defined contribution plans (known as rollovers). The Company contributes an amount equal to three percent of each employee's base pay (known as company basic contributions). Contributions are subject to certain limitations. Participant's Accounts: Several accounts are maintained for each participant which are credited with contributions and Plan net earnings on funds invested within the respective accounts, as follows: - Employee pretax salary deferral account - credited with salary deferral contributions on a before tax basis, which are participant directed; - Employee after tax account - credited with participant contributions after tax, which are participant directed; - Company basic contribution account - Company contributions which are participant directed; - Rollover contribution account - credited with rollover contributions, which are participant directed; - Inter-plan transfer accounts - transfers from other Carpenter Plans, and are participant directed; - Profit sharing account - credited with Company contributions prior to 1988, which were non-participant directed. No further contributions may be made to this account, and participants are able to transfer amounts to other investment funds. 7 - Prior plan money purchase plan account - transferred from the Retirement Plan of Talley Metals and are participant directed and not eligible for loan or withdrawal. Vesting: All contributions and Plan earnings thereon are 100 percent vested and nonforfeitable. Investment Funds: The Plan maintains nineteen investment funds. Each participant may designate separately the investment fund or funds in which their monies are to be invested. Participant Loans: Loans are available from various participant accounts in a particular hierarchy for active employees of the Company. Participants are subject to certain restrictions on their number of loans, amount and terms of repayment. Interest is charged at the prime rate for commercial lenders at the time the loan is initiated, plus one percent. Loan repayments are required with each pay, and payment in full is required at the time of the participant's separation. Benefits Paid to Participants: Benefits paid to participants include participant distributions and withdrawals. Participants are entitled to a lump sum distribution upon separation from service. Upon separation, a participant may elect to defer such distribution, provided the account balance is at least $5,000. The total distribution of benefits to all separated participants must occur by December 31st of the year in which the participant attains age 70-1/2. Hardship and non-hardship in-service withdrawals are permitted subject to certain restrictions. Upon reaching age 59-1/2, the following hierarchy applies to withdrawals: 1) Rollover account, 2) Profit sharing account, 3) Employee pre-tax account, 4) Company basic contribution account, 5) Inter-plan transfer accounts. The Money purchase plan account is not available for 8 withdrawal. Benefits paid to participants are in cash, except that distribution of accounts which consist of investments in the Carpenter Technology Stock Fund shall be made in shares of the Company's common stock or cash, at the participant's option. Administrative Expenses: All fees directly related to the Plan are paid by the Plan. Plan Termination: The Company has the right under the Plan to discontinue or change its contributions at any time and to terminate the Plan subject to the provisions of ERISA and any contractual obligations. 2. Summary of Significant Accounting Policies: A. The financial statements of the Plan are prepared under the accrual method of accounting. B. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. C. The Plan's investments are stated at fair value. Quoted market prices are used to value investments. Shares of registered investment companies are valued at quoted market prices, which generally represent the net asset values of shares held by the Plan at year end. Participant loans are valued at their outstanding balances, which approximates fair value. Purchases and sales of investments are recorded on a trade-date basis. Gain or loss on sales of investments is based on average cost. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on an accrual basis. 9 D. The net appreciation (depreciation) in the fair value of investments in the statements of changes in net assets available for benefits consists of realized gains or losses and unrealized appreciation (depreciation) on investments. E. Benefits are recorded when paid. F. Investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is reasonably possible that changes in these risks in the near term could materially affect the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits. 3. Investments: The following presents investments that represent 5 percent or more of the Plan's net assets. (in thousands) at December 31 2002 2001 Certus Stable Value Fund (2002); and Selection Fund for Employee Trusts of State Street Bank and Trust Company (2001) $85,947 $75,419 American Balanced Fund $16,153 $ - Fidelity Dividend Growth Fund (2002); and Matrix Synthesis Fund for Employee Trusts of State Street Bank and Trust Co. (2001) $45,997 $68,187 Carpenter Technology Stock Fund $19,702 $38,345 Mellon EB DL S&P 500 Index Fund (2002); and BZW Barclay's Equity Index Fund (2001) $19,748 $25,358 Putnam Vista Fund $ - $15,371 10 During 2002 and 2001, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $47,924,000 and $32,536,000, respectively, as follows: 2002 2001 (in thousands) Common stock $(19,043) $(13,413) Registered investment companies (28,881) ( 9,178) Collective trusts - ( 9,945) $(47,924) $(32,536) 4. Tax Status: The Internal Revenue Service has determined and informed the Company by letter dated March 21, 2003, that the Plan and related trust as of February 20, 2002 are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. 5. Related Party Transactions: Certain Plan investments are shares of registered investment companies managed by Mellon Bank. Mellon Bank is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest. Fees paid by the Plan for the investment management services amounted to $375,000, and approximately $422,000 for the years ended December 31, 2002 and 2001, respectively. 11 Schedule H, line 4i - Schedule of Assets (Held at End of Year) Savings Plan of Carpenter Technology Corporation as of December 31, 2002
(A) (B) (C) (E) Identity of issue, Description of investment, Current borrower, lessor or including maturity date Value similar party rate of interest, collateral, par or maturity value * Certus Stable Value Registered Investment Company Fund $ 85,946,616 Fidelity Dividend Registered Investment Company Growth Fund $ 45,997,016 Carpenter Technology Corporate Stocks - Common Corporation $ 19,701,618 * Mellon EB DL Stock Registered Investment Company Index Fund $ 19,747,652 American Balanced Registered Investment Company Fund $ 16,153,315 PIMCO Total Return Registered Investment Company Fund $ 10,531,111 * Dreyfus MidCap Value Registered Investment Company Fund $ 11,217,274 * Dreyfus Government Registered Investment Company Cash Management Fund $ 10,112,071 Dodge & Cox Stock Registered Investment Company Fund $ 7,332,293 American Funds Registered Investment Company EuroPacific Growth Fund $ 5,675,433 Vanguard Small Cap Registered Investment Company Index Fund $ 2,814,334 Managers Special Equity Registered Investment Company Fund $ 901,980 MFS Strategic Growth Registered Investment Company Fund $ 2,166,029 Fidelity Freedom 2020 Registered Investment Company Fund $ 303,158 Fidelity Freedom 2010 Registered Investment Company Fund $ 302,078 Fidelity Freedom Income Registered Investment Company Fund $ 165,506 Fidelity Freedom 2000 Registered Investment Company Fund $ 65,240 Fidelity Freedom 2030 Registered Investment Company Fund $ 25,153 Fidelity Freedom 2040 Registered Investment Company Fund $ 14,285 Participant Loans Loans to Participants - interest rate range 5.25% to 10.5%; no loans due past 12/04/2026 $ 11,133,037 TOTAL $250,305,199
* Party-in-Interest 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Carpenter Technology Corporation has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. SAVINGS PLAN OF CARPENTER TECHNOLOGY CORPORATION (Name of Plan) Date: June 30, 2003 By /s/ Terrence E. Geremski Terrence E. Geremski Senior Vice President - Finance and Chief Financial Officer 13 EXHIBIT INDEX Exhibit Number 23 Consent of Independent Accountants 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 14