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 fiscal year ended December 31, 2002
Commission File Number 1-5828
DYNAMET INCORPORATED DEFINED CONTRIBUTION PLAN
(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, PA 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
DYNAMET INCORPORATED DEFINED CONTRIBUTION 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 Plan
Benefits December 31, 2002 and 2001
- Common/Collective trusts with PNC Bank:
Investment Contract Fund
Aggressive Profile Fund
- Mutual Funds with PNC Bank:
Balanced Fund
Index Equity Fund
Large Cap Growth Equity Fund
Intermediate Government Fund
International Equity Fund
Small Cap Value Equity Fund
Carpenter Technology Common Stock Fund
Participant Loan Fund 4
Statements of Changes in Net Assets Available
For Plan Benefits for the year ended: December 31, 2002
- Common/Collective trusts with PNC Bank:
Investment Contract Fund
Aggressive Profile Fund
- Mutual Funds with PNC Bank:
Balanced Fund
Index Equity Fund
Large Cap Growth Equity Fund
Intermediate Government Fund
International Equity Fund
Small Cap Value Equity Fund
Carpenter Technology Common Stock Funds
Participant Loan Fund 5
Notes to Financial Statements 6-11
**Note** Schedules required by 29 CFR 2520.103.10 of the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under ERISA have been omitted as they are not
applicable.
2
Report of Independent Auditors
To the Participants and Administrator of the
Dynamet Incorporated Defined Contribution Plan
In our opinion, the accompanying statements of net assets
available for benefits and the related statement of changes in
net assets available for benefits present fairly, in all
material respects, the net assets available for benefits of the
Dynamet Incorporated Defined Contribution Plan (the "Plan") at
December 31, 2002 and 2001, and the changes in net assets
available for benefits for the year ended December 31, 2002 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.
As discussed in Note 1, effective December 31, 2002, the Plan
was merged with and into the Savings Plan of Carpenter
Technology Corporation.
June 10, 2003 /s/ PricewaterhouseCoopers LLP
3
Dynamet Incorporated
Defined Contribution Plan
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
(in thousands of dollars)
Investments, at estimated fair value
Common/Collective trusts with PNC Bank
Investment Contract Fund* $ - $ 1,786
Aggressive Profile Fund - 472
- 2,258
Investments, at quoted market value
Mutual funds with PNC Bank
Intermediate Government Bond Fund - 7
BlackRock Balanced Fund* - 3,845
BlackRock Large Cap Growth Equity Fund* - 2,231
BlackRock Index Equity Fund* - 3,754
BlackRock International Equity Fund - 260
BlackRock Small Cap Value Equity Fund - 688
BlackRock Intermediate Government Bond
Fund* - 726
- 11,511
Carpenter Technology Common Stock Fund - 278
Participant Loan Fund - 207
- 11,996
Net assets available for benefits $ - $14,254
*Individual investments that represent 5 percent or more of the
net assets available for benefits.
The accompanying notes are an integral part
of these financial statements.
4
Dynamet Incorporated
Defined Contribution Plan
Statement of Net Assets Available for Benefits
December 31, 2002
(in thousands of dollars)
Additions
Investment income
Interest and dividends $ 275
Less: Investment expenses (13)
262
Contributions
Participants 458
Employer 751
1,209
Total additions 1,471
Deductions
Net depreciation in the value of investments at
estimated fair value 2,124
Net depreciation in the value of investments at
quoted market value 567
Benefits paid to participants 2,614
Administrative expenses 30
Total deductions 5,335
Transfer to other plan (Note 1) (10,390)
Net decrease (14,254)
Net assets available for benefits
Beginning of year 14,254
End of year $ -
The accompanying notes are an integral part
of these financial statements.
5
1. Description of the Plan
The following brief description of the Dynamet Incorporated
Defined Contribution Plan (the "Plan") is provided for
general information purposes only. Participants should
refer to the Summary Plan Description for a more complete
description of the Plan's provisions.
The plan administrator is Dynamet Incorporated ("Dynamet").
The Trustee and Plan Custodian is PNC Bank.
General
The Plan is a defined contribution plan covering salaried
and, effective January 1999, non-union hourly employees of
Dynamet, not covered by a collective bargaining agreement.
In February 1997, Dynamet became a wholly owned subsidiary
of Carpenter Technology Corporation ("CTC").
Effective July 1, 2001, certain domestic Dynamet employees
became employees of Carpenter Power Products ("CPP"), a
wholly owned subsidiary of CTC. These employees remained
participants in the Plan. All domestic CPP employees not
covered by a collective bargaining agreement may become
participants in the Plan upon completion of the eligibility
requirements of the Plan.
All full-time and part-time employees not participating in
another Dynamet pension plan are eligible to participate
upon the completion of one year of credited service as
defined in the Plan Agreement and upon attainment of age 21.
The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"), as
amended.
Amendments
Effective January 1, 2002, under authorization by the
Economic Growth and Tax Relief Reconciliation Act of 2001,
the maximum annual elective deferral was increased from
15 percent to 35 percent. Additionally, plans from which an
eligible rollover will be accepted will include all non-CTC
plans qualified under Sections 401(a), 403(b), and 457 of
the Internal Revenue Code of 1986, as amended ("IRC").
6
The Plan has also been amended to remove and nullify all
distributions with an annuity starting date that is on or
after January 1, 2003.
Plan Merger
On December 31, 2002, the Plan merged into the Savings Plan
of Carpenter Technology Corporation ("CTC Savings Plan"),
sponsored by the parent company, CTC. Employees currently
participating in the Dynamet Incorporated Defined
Contribution Plan automatically became participants in the
CTC Savings Plan and are entitled to receive accrued
benefits immediately after the merger that are at least
equal to their accrued benefits under the Plan immediately
prior to the effective date of the merger. Plan assets
totaling $10,390,000 were transferred to the CTC Savings
Plan on January 2, 2003. Effective with the Plan merger,
participants will no longer receive the 6 percent Dynamet
profit-sharing contribution.
Contributions
The Plan permits participants to contribute up to 35 percent
of their pre-tax annual compensation, subject to IRS
limitations. Participants may also contribute amounts
representing distributions from other qualified defined
benefit or defined contribution plans. Dynamet will
contribute an amount equal to 6 percent of participants'
eligible compensation and will match participant
contributions up to the first 4 percent.
Participant Accounts
Each participant's account is credited with the
participant's contribution and allocations of (a) the
Company's contribution and, (b) Plan earnings. Allocations
are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's
vested account.
Vesting
Prior to July 1, 1998, participants vested 20 percent after
3 years, 40 percent after 4 years, 60 percent after 5 years,
80 percent after 6 years, and 100 percent after 7 years.
7
Participants also became 100 percent vested upon total and
permanent disability or death. Effective July 1, 1998,
participants fully vest immediately, and all active
participants as of that date became fully vested.
Investment Options
Upon enrollment in the Plan, a participant may direct
contributions in 1 percent increments in any of nine
investment options. As a result of the share class change
implemented by PNC Bank, effective November 2001, any monies
invested in the previously offered BlackRock "service class"
funds were automatically moved to their respective BlackRock
"investor A class" replacement funds.
Available investment options are as follows:
Carpenter Technology Corporation Common Stock Fund
PNC Bank managed mutual fund accounts
BlackRock Balanced Fund
BlackRock Index Equity Fund
BlackRock Large Cap Growth Equity Fund
BlackRock International Equity Fund
BlackRock Intermediate Government Bond Fund
BlackRock Small Cap Value Equity Fund
PNC Bank Investment Contract Fund
PNC Bank Aggressive Profile Fund
Participants may change their investment options daily.
Participant Loan Fund
Participants may borrow from their account a minimum of
$1,000 up to a maximum amount equal to the lesser of $50,000
or 50 percent of their account balance. Loan transactions
are treated as a transfer (from) to the investment fund(s)
(to) from the Participant Loan Fund. Loan terms are
generally 60 months; however, participants may repay their
entire balance at any time. The loans are secured by the
balance in the participant's account and bear interest at a
fixed rate based on the prime rate plus 1 percent at the
time the loans are made. Principal and interest are paid
ratably through payroll deductions.
8
Payment of Benefits
Participants or their beneficiaries are entitled to benefits
in the form of an annuity or lump-sum distribution, equal to
the vested amount in their accounts upon retirement, total
and permanent disability, death, or termination of service.
Forfeited Accounts
At December 31, 2002, there were no forfeited nonvested
accounts. At December 31, 2001, forfeited nonvested
accounts totaled $32,766 as a result of non-vested
participants terminated prior to July 1, 1998. These
accounts were allocated, in accordance with the Plan, to
active participants accounts on an annual basis after the
nonvested participant has been terminated for a five-year
period. As a result of the Plan's merger with the CTC
Savings Plan during 2002, all remaining forfeitures were
reallocated to participants' accounts.
2. Summary of Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared on the
modified cash basis of accounting; consequently, investment
income and contributions and the related assets are recorded
when received rather than when earned, and investment
expenses and the related payables are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with
the basis of accounting described herein 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 these estimates.
Risks and Uncertainties
Investment securities are exposed to various risks, such as
interest rate, market and credit risks. Due to the level of
risk associated with certain investment securities and the
level of uncertainty related to changes in the value of
investment securities, it is at least reasonably possible
9
that changes in risks in the near term could materially
affect participants' account balances and the amounts
reported in the statements of net assets available for
benefits and the statement of changes in net assets
available for benefits.
Investment Valuation
Investments in common/collective trusts are valued at
estimated fair value as reported to the Plan by the Plan
Custodian. Investments in mutual funds and the common stock
of Carpenter Technology Corporation are valued at quoted
market prices which represent the net asset value of shares
held by the Plan at year-end. Purchases and sales of
investments are reflected on a trade-date basis. Gain or
loss on sales of investments is based on average cost.
Payments of Benefits
Benefits are recorded when paid.
Expenses
Administrative expenses are paid by the Plan.
3. Related-Party Transactions
Certain Plan investments are shares of mutual funds issued
BlackRock, a subsidiary of PNC Bank. PNC Bank is the
trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest. Fees paid by the
Plan for investment management services amounted to $13,552
for the year ended December 31, 2002.
Shares of CTC common stock were purchased and sold through
the open market during 2002.
4. Tax Status
The Internal Revenue Service has determined and informed
Dynamet by letter dated December 20, 1999, that the Plan as
of October 10, 1999 is designed in accordance with
applicable sections of the IRC. Although the Plan has been
amended since receiving the determination letter, the plan
administrator believes that the Plan is designed and is
10
currently being operated in compliance with the applicable
requirements of the IRC.
5. Plan Termination
Although it has not expressed any intent to do so, Dynamet
has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan subject
to the provisions of ERISA. In the event of Plan
termination, funds will be distributed in accordance with
the Plan's provisions.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Carpenter Technology Corporation has duly caused this
annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
DYNAMET INCORPORATED
DEFINED CONTRIBUTION PLAN
(Name of Plan)
Date: June 30, 2003 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice President -
Finance and
Chief Financial Officer
12
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
13