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
THE SAVINGS PLAN
FOR AFFILIATES
(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
THE SAVINGS PLAN FOR AFFILIATES
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
2
Report of Independent Auditors
To the Participants and Administrator of the Savings Plan for
Affiliates:
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 for Affiliates (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.
As discussed in Note 1, effective December 31, 2002, the Plan
was merged with and into the Savings Plan of Carpenter
Technology Corporation.
June 13, 2003 /s/ PricewaterhouseCoopers LLP
3
THE SAVINGS PLAN FOR AFFILIATES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
as of December 31, 2002 and 2001
(dollars in thousands)
ASSETS 2002 2001
Investments, at fair value $ - $9,175
Receivables:
Investment income receivable - 9
Contributions - salary deferral - 26
Contributions - company - 23
Total receivables - 58
Total assets - 9,233
LIABILITIES
Accrued administration expenses - 23
Total liabilities - 23
Net assets available for benefits $ - $9,210
The accompanying notes are an integral part of these financial
statements.
4
THE SAVINGS PLAN FOR AFFILIATES
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:
Dividends $ 139 $ 181
Interest 33 41
Net depreciation in fair value of
investments (1,386) (667)
(1,214) (445)
Contributions:
Salary deferral 734 914
Company 602 763
Rollover 3 56
1,339 1,733
Total additions 125 1,288
Deductions from net assets attributed to:
Benefits paid to participants 1,241 1,233
Administrative expenses 43 75
Transfer to Savings Plan of Carpenter
Technology Corp. 8,051 -
Total deductions 9,335 1,308
Net (decrease) (9,210) (20)
Net assets available for benefits:
Beginning of year 9,210 9,230
End of year $ - $9,210
The accompanying notes are an integral part of these financial
statements.
5
THE SAVINGS PLAN FOR AFFILIATES
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan:
The following description of the Savings Plan for Affiliates
(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 defined contribution plan which covers
substantially all domestic employees of Certech, Inc.,
Carpenter Advanced Ceramics, Inc. (Crafts Technology and
Z-Tech Divisions), Parmatech Corporation, Rathbone Precision
Metals and Shalmet Corporation (except for salaried exempt
employees who, effective July 1, 2001, became participants
in the Savings Plan of Carpenter Technology Corporation),
all of which are affiliates of Carpenter Technology
Corporation, who have attained the age of 21 years and have
completed at least one year of service of at least 1,000
hours. Plan participation commences on the first day of the
month following attainment of eligibility requirements. The
Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended.
Plan Merger:
Effective December 31, 2002, the Plan merged with and into
the Savings Plan of Carpenter Technology Corporation
("Savings Plan"). Pursuant to the merger, participants with
assets having a fair market value of $8,051,000 at the time
of the merger became part of the Savings Plan. The Plan's
participants underwent changes to their benefits under the
Savings Plan. For additional information regarding these
changes, participants should refer to the Plan document for
the Savings Plan.
6
Contributions:
Each year, participants may contribute up to 17 percent of
annual compensation on a pretax basis (known as salary
deferral contributions), as defined by the Plan.
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 plans (known as rollover
contributions). The Company contributes an amount equal to
two percent of each employee's total compensation for each
pay period, and provides a matching contribution equal to 50
percent of the portion of the participant's salary deferral
which does not exceed four percent of the participant's
total compensation for each pay period (collectively known
as company contributions). Contributions are subject to
certain limitations.
Participant Accounts:
The following four accounts are maintained for each
participant and are credited with the applicable
contributions, earnings on funds invested, forfeitures of
terminated participants' nonvested accounts, and are charged
with an allocation of Plan administrative expenses. The
contributions to these accounts are participant directed:
- Employer Qualified Non-Elective Contribution Account -
credited with company non-matching contributions
- Employer Matching Account - credited with company
matching contributions
- Employee 401(K) Account - credited with salary deferral
contributions
- Rollover Monies Account - credited with rollover
contributions
Vesting:
Qualified non-elective contributions, salary deferral
contributions, rollover monies, and the Plan earnings
thereon, are 100 percent vested and nonforfeitable. Vesting
in the Company's matching contributions is based upon years
of continuous service, and a participant is 100 percent
vested after three years of service, contingent upon
7
completing at least 1,000 hours of service for each Plan
year.
Investment Funds:
The Plan maintains eleven investment funds. Each
participant may designate separately the investment fund or
funds in which the accounts are to be invested.
Participant Loans:
Loans may be made to participants in an amount equal to 50
percent of the value of the vested interest in his or her
account or $50,000, whichever is less. The minimum amount
of the loan shall be $1,000. Interest is charged at a rate
which is 1% over the published prime rate for commercial
lenders at the time the loan is initiated. Loan repayments
are required for each pay period over a period not to exceed
five years. A participant may have only one loan
outstanding at any time.
Forfeited Accounts:
Forfeitures during the year of the Company's matching
contributions are held in an account in the Vista Premier
U.S. Government Money Market Fund until allocated at each
year end to all eligible participants in proportion to each
such participant's compensation for the plan year.
Forfeitures were $10,000 and $7,000 in 2002 and 2001,
respectively, and the balance in the forfeiture account was
zero at December 31, 2002 and December 31, 2001.
Benefits Paid to Participants:
Benefits paid to participants include distributions and
withdrawals. Participants are entitled to a distribution
equal to the value of the vested interest in his or her
account upon separation from service, occurrence of a total
and permanent or qualifying disability, or after the age of
59-1/2. Upon separation, a participant may elect to defer
such distribution, provided the account balance is at least
$5,000. The distribution of benefits to all separated
participants must begin no later than April 1 of the year
after the participant retires or, in the case of a 5% owner
of Carpenter Technology Corporation common stock, the date
8
of separation. Upon attainment of age 59-1/2, participants
may make withdrawals from any accounts which are 100 percent
vested without limitation. Hardship withdrawals, subject to
certain restrictions, are permitted from any accounts which
are 100 percent vested. Benefits paid to participants are
in cash except those which consist of investments in the
Carpenter Technology Stock Fund, which can be made in shares
of Carpenter Technology Corporation common stock or cash, at
the participant's option. Payments will be paid out in a
lump sum or under a variety of annuity forms available for
election by the participant.
Administrative Expenses:
Independent accountants' fees are paid by the Company. All
other fees 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. In the event of termination or partial
termination of the Plan, or discontinuance of contributions
by the Company, the rights of all participants to amounts
credited to their accounts shall be nonforfeitable.
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
9
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.
D. The net appreciation (depreciation) in the fair value of
investments in the statement of changes in net assets
available for benefits consists of the 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
Mutual Funds: 2002 2001
Investment Company of America Fund $ - $1,993
Federated Mid-Cap Fund $ - $1,677
PNC Investment Contract Fund $ - $1,493
BlackRock Intermediate Government Bond Fund $ - $ 877
BlackRock Balanced Fund $ - $ 868
Carpenter Technology Corporation common stock $ - $1,139
Loan Fund $ - $ 474
10
The Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year,
(depreciated) in value by ($1,386,000) and ($667,000) in 2002
and 2001, respectively, as follows:
(in thousands)
2002 2001
Mutual funds $ (849) $ (388)
Common stock (537) (279)
$(1,386) $ (667)
4. Tax Status:
The Internal Revenue Service has determined and informed the
Company by letter dated December 20, 1999, that the Plan and
related trust as of January 28, 1999 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 mutual funds managed
by PNC. PNC 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
of PNC for the years ended December 31, 2002 and 2001 were
$43,000 and $75,000, respectively.
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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.
THE SAVINGS PLAN FOR AFFILIATES
(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