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LOGO CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET READING, PA 19601
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Notice of Annual Meeting of Stockholders to be held October 24, 1994
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To the Stockholders of CARPENTER TECHNOLOGY CORPORATION:
NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of the
Stockholders of CARPENTER TECHNOLOGY CORPORATION will be held at the
Muhlenberg Township Senior High School Auditorium, Laureldale (north of
the city of Reading), Pennsylvania, on Monday, October 24, 1994, at 4
p.m., local time, for the purpose of:
(1) Electing four directors (Proposal No. 1);
(2) Approving the appointment of independent accountants of the
Corporation for the fiscal year ending June 30, 1995 (Proposal No.
2);
(3) Transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on September 1,
1994, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting. A list of stockholders will be
available at the time and place of the meeting and, during the 10 days
prior to the meeting, at the office of the Corporate Secretary, 101 West
Bern Street, Reading, Pennsylvania.
It is important that your shares be represented at the meeting
regardless of the number of shares that you own. Please complete and sign
the enclosed proxy card, which is being solicited by the Board of
Directors of the Corporation, and return it in the enclosed postage
pre-paid envelope as soon as you can.
If you plan to attend the meeting, please check the box on the proxy
card so that an admission card may be sent to you. You may, of course,
attend the meeting without an admission card upon proper identification.
A proxy statement for your additional information is attached to this
notice.
You are cordially invited to attend the meeting. A map showing the
location of the Muhlenberg Township Senior High School appears at the end
of the proxy statement.
Respectfully,
JOHN R. WELTY
Secretary
Dated: September 29, 1994
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LOGO CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET READING, PA 19601
September 29, 1994
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PROXY STATEMENT
General Information
This proxy statement is furnished in connection with the solicitation
of proxies to be used at the annual meeting of stockholders to be held on
October 24, 1994, and at any adjournment thereof. The Corporation's annual
report to stockholders, including financial statements, accompanies this
notice and proxy statement, but is not incorporated as part of the proxy
statement and is not to be regarded as part of the proxy solicitation
material.
Proxies are solicited by the Board of Directors of the Corporation in
order to provide every stockholder an opportunity to vote on all matters
scheduled to come before the meeting, whether or not he or she attends the
meeting in person. When the enclosed proxy card is returned properly
signed, the shares represented thereby will be voted by the proxy holders
named on the card in accordance with the stockholder's directions. You are
urged to specify your choices by marking the appropriate boxes on the
enclosed proxy card. If the proxy is signed and returned without
specifying choices, the shares will be voted as recommended by the Board
of Directors. A stockholder giving a proxy may revoke it at any time
before it is voted at the meeting by filing with the Corporate Secretary
an instrument revoking it, or by a duly executed proxy bearing a later
date. If you do attend, you may, if you wish, vote by ballot at the
meeting, thereby canceling any proxy vote previously given.
If a stockholder wishes to give a proxy to someone other than those
designated on the proxy card, he or she may do so by crossing out the
names of the designated proxies and by then inserting the name of another
person(s). The signed proxy card should be presented at the meeting by the
person(s) representing the stockholder.
On September 1, 1994, there were 8,152,965 shares of common stock
issued and outstanding, each of which is entitled to one vote. There were
also 459.731 shares of the Corporation series A convertible preferred
stock held by the trustee of the Corporation's Employee Stock Ownership
Plan (ESOP). Each share of preferred stock is convertible, at the
trustee's option, into 1,000 shares of common stock and has the equivalent
of 1.3 votes per share of common stock, subject to antidilution
adjustments and to limitations under applicable securities laws and stock
exchange regulations. The preferred stock votes together with the common
stock as a single class on all matters upon which the common stock is
entitled to vote. The shares of preferred stock allocated to a
participant's account are voted as the participant directs, and the shares
of preferred stock not allocated to ESOP participants' accounts are voted
by the trustee in the same proportion as the allocated shares of preferred
stock are voted.
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The holders of a majority of the outstanding shares must be present in
person or by proxy at the annual meeting in order to constitute a quorum
for the purpose of transacting business at the meeting. Except for the
election of directors, the affirmative vote of the holders of a majority
of the outstanding shares of common stock present in person or by proxy at
the meeting and entitled to vote on the proposals is required to ratify
and approve the proposals. Directors are elected by a plurality of the
votes cast by written ballot. Abstentions are counted in tabulations of
the votes cast by stockholders on the proposals and will have the effect
of a negative vote. Brokers who hold shares in street name for customers
have the authority to vote only on certain routine matters in the absence
of instruction from the beneficial owners. A broker non-vote occurs when
the broker does not have the authority to vote on a particular proposal.
Under applicable Delaware law, broker non-votes will not be counted for
purposes of determining whether any proposal has been approved.
The Board of Directors believes that as of September 1, 1994, the
following entity owned more than 5% of the Corporation's issued and
outstanding shares of common stock:
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned of Class
------------------------------------ ------------------- --------
State Street Bank and Trust Company 1,146,056 shares (1) 14%
P.O. Box 1389
Boston, Massachusetts 02104-1389
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1) State Street Bank and Trust Company has advised the Corporation that,
acting as trustee for various collective investment funds for employee
benefit plans and other index accounts, it had sole voting power with
respect to 148,900 shares of common stock; sole dispositive power with
respect to 173,000 shares of common stock; and sole voting power and
sole dispositive power with respect to 2,800 shares of common stock
held in personal trust accounts; acting as trustee for the
Corporation's Savings Plan, it had shared voting power and shared
dispositive power with respect to 361,625 shares of common stock; and
acting as trustee for the Corporation's Employee Stock Ownership Plan
(ESOP), it had shared voting power and shared dispositive power with
respect to 459,731 shares of common stock, representing the amount of
common stock that would be held if the shares of series A convertible
preferred stock actually held were converted into common stock using
the ratio of one preferred share equal to 1,000 shares of common stock.
Except as discussed above, the Board of Directors and management is not
aware of any other person or entity who holds beneficially more than 5% of
the outstanding common stock of the Corporation.
Solicitation of proxies is made on behalf of the Board of Directors of
the Corporation, and the cost of preparing, assembling, and mailing the
notice of annual meeting, proxy statement, and form of proxy will be borne
by the Corporation. In addition to the use of the mail, proxies may be
solicited by directors, officers and regular employees of the Corporation,
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without additional compensation, in person or by telephone or telegraph.
Solicitation of proxies may also be made on behalf of the Corporation by
D. F. King & Co., Inc. at a cost of approximately $4,500. The Corporation
will reimburse brokerage houses and other nominees for their expenses in
forwarding proxy material to beneficial owners of the Corporation's stock.
Board of Directors
The Corporation's Board of Directors held 12 meetings during fiscal
year 1994. All of the directors attended more than 75% of the meetings of
the Board of Directors and the Committees of the Board of Directors on
which they served, except Mylle Bell Mangum whose absences occurred
because of unavoidable business circumstances.
No director who is an employee of the Corporation is compensated as a
member of the Board or any Committee of the Board. Compensation for
non-employee directors consists of an annual retainer of $18,000 and a
$1,000 fee, plus travel expenses, where appropriate, for each Board
meeting attended and a $800 fee for each Committee meeting attended. Each
Committee Chairperson receives an additional annual retainer of $2,200.
Committees of the Board
The standing Committees of the Board of Directors are the Audit,
Corporate Governance, Compensation and Stock Option, and Finance
Committees.
The Audit Committee recommends the independent accountants to conduct
the annual audit of the books and accounts of the Corporation, and reviews
the adequacy of the Corporation's financial reporting, accounting systems
and controls. The Audit Committee also evaluates the Corporation's
internal and external auditing procedures and its environmental compliance
program. During fiscal year 1994, the Audit Committee, which currently
consists of Messrs. Garr, Chairman; Bennett; Draeger; Humphrey; Miller,
Jr. and Ms. Mangum, held 3 meetings.
The Corporate Governance Committee reviews and recommends any action
proposed with respect to changes in the Corporate Charter or By-Laws, and
any stockholder proposals unless such review is otherwise assigned by the
Board. The Corporate Governance Committee also reviews and recommends to
the Board the size, composition and committee structure of the Board, as
well as nominees to the Board of Directors to fill vacancies on the Board.
The Corporate Governance Committee considers the performance of
incumbent directors in determining whether to recommend them to the Board
as nominees for reelection. The Committee met 5 times during fiscal year
1994. Members of the Corporate Governance Committee currently are Messrs.
Kay, Chairman; Bennett; Evarts; Hudson, Jr.; and Humphrey.
The Corporate Governance Committee will consider sound and meritorious
nomination suggestions from stockholders. All letters of recommendation
for nomination should be sent to the Corporate Secretary at the
Corporation's headquarters within 15 days after the mailing of this proxy
statement. Such stockholder's notice to the Secretary shall set forth (a)
as to each person whom the stockholder proposes to nominate for election
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or reelection as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of capital
stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant
to Schedule 14A under the Securities Exchange Act of 1934, as amended; and
(b) as to the stockholder giving the notice (i) the name and record
address of the stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish
other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as director of
the Corporation. No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set
forth herewith. A signed statement from the person recommended for
nomination should accompany the letter of recommendation indicating that
he or she consents to be considered as a nominee.
The Compensation and Stock Option Committee reviews and recommends
actions to the Board of Directors on such matters as salary and other
compensation of officers and the administration of certain benefit plans.
The Compensation and Stock Option Committee also has the authority to
administer, grant and award stock and stock options under the
Corporation's incentive equity plans. The Committee held 3 meetings during
fiscal year 1994. Current members of the Committee are Messrs. Miller,
Jr., Chairman; Draeger; Garr; Langenberg and Ms. Mangum.
The Finance Committee reviews and recommends certain actions to the
Board of Directors relating primarily to the Corporation's capital
structure, pension fund asset management and dividend policy. The
Committee met 3 times during fiscal year 1994. Current members of the
Committee are Messrs. Langenberg, Chairman; Cardy; Evarts; Hudson, Jr.;
Kay and Roedel.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors consist of 12 directors serving
in three classes, the respective terms of which expire alternately over a
three-year period.
Unless otherwise specified by the stockholders, the shares represented
by the proxies will be voted for the four nominees for directors listed
below. Dr. C. McCollister Evarts, William J. Hudson, Jr., Mylle Bell
Mangum and Paul R. Roedel are nominated for terms which will expire at the
1997 Annual Meeting of Stockholders. Each nominee for director has
consented to their nomination as a director and, so far as the Board and
management are aware, will serve as a director if elected. The names and
biographical summaries of the four persons who have been nominated to
stand for election at the 1994 Annual Meeting of Stockholders and the
remaining eight directors whose terms are continuing appear below.
The Board of Directors recommends that you vote FOR the election of
Ms. Mangum, Messrs. Hudson, Jr., Roedel and Dr. Evarts.
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Nominees - Term to Expire 1994
PHOTO
DR. C. MCCOLLISTER EVARTS Director Since 1990
Senior Vice President for Health Affairs, Dean, College of Medicine,
and Professor of Orthopaedics, The Pennsylvania State University, College
of Medicine and University Hospitals, The Milton S. Hershey Medical
Center.
Dr. Evarts, age 63, received a bachelor's degree in zoology from Colgate
University, and a medical degree from the University of Rochester School
of Medicine and Dentistry. He served his internship and residency at the
University of Rochester Strong Memorial Hospital. He served as medical
officer on the U.S.S. Antietam, and Orthopaedic Ward Medical Officer at
the Great Lakes United States Naval Hospital. Before coming to The
Pennsylvania State University, Dr. Evarts was professor and chairman of
the Department of Orthopaedics and vice president for development at the
University of Rochester School of Medicine and Dentistry. His special area
of interest and expertise is adult reconstructive surgery. He has
published over 185 scientific articles and is editor of a 2nd edition,
five-volume text. Dr. Evarts is a member of many orthopaedic
organizations. Also, he is a member of the Association of Academic Health
Centers, the Association of American Medical Colleges, Society of Medical
Administrators, and serves on the board of directors for the National
Association of Biomedical Research, the Hershey Trust, the Harrisburg
Symphony, and the Hershey Bank. He is also a member of the board of
managers of the Milton Hershey School, and is a member of a Health Care
Advisory Committee for the United States Congress. He is currently a
member of the Corporation's Finance and Corporate Governance Committees.
PHOTO
WILLIAM J. HUDSON, JR. Director Since 1992
Chief Executive Officer and President and Director, AMP Incorporated.
Mr. Hudson, age 60, has a bachelor of electrical engineering and a
master's certificate in electrical engineering from Cornell University. He
also has earned credit toward a masters in business administration at
Drexel University. Mr. Hudson joined AMP Incorporated in 1961. He has held
a variety of management positions in the U.S. operations and was a vice
president, Asian/Pacific for eight years before becoming executive vice
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president, international in 1991, and elected Chief Executive Officer and
President in 1992. He has served on numerous community and professional
organizations, is a director of Harrisburg Hospital and is currently a
director of AMP Incorporated. Mr. Hudson currently serves on the
Corporation's Finance and Corporate Governance Committees.
PHOTO
MYLLE BELL MANGUM Director Since 1993
Executive Vice President, Strategic Management, Holiday Inn Worldwide.
Ms. Mangum, age 46, graduated from Emory University with a bachelor of
science degree. Following graduation, she taught gifted children in the
North Syracuse, New York school system until 1972. Ms. Mangum then joined
General Electric Corporation and held a variety of management positions.
She was with General Electric Corporation for 12 years before joining
BellSouth as general manager of systems operation. Ms. Mangum was the
first president of BellSouth International and served until October 1986,
when she was promoted to director of corporate planning for BellSouth
Corporation in Atlanta. Ms. Mangum joined Holiday Inn Worldwide in August
1992, as executive vice president, strategic management. She serves on
numerous professional organizations and currently serves on the Board of
Trustees for Piedmont College. Ms. Mangum is a member of the Corporation's
Audit Committee and Compensation and Stock Option Committee.
PHOTO
PAUL R. ROEDEL Director Since 1973
Director and Retired Chairman of the Board and Chief Executive
Officer, Carpenter Technology Corporation.
Mr. Roedel, age 67, received a bachelor's degree in accounting from Rider
College. After joining the Corporation upon his graduation, Mr. Roedel
served in numerous capacities, becoming controller in 1965, treasurer in
1972, vice president - finance and treasurer in 1973, executive vice
president in 1975, president and chief operating officer in 1979,
president and chief executive officer in 1981, and chairman of the board
and chief executive officer in 1987 until his retirement on June 30, 1992.
In addition to his numerous community activities, Mr. Roedel serves as a
director of Meridian Bancorp, Inc., General Public Utilities Corporation
and P. H. Glatfelter Company. He is chair of the board of trustees of
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Gettysburg College. Mr. Roedel currently serves as a member of the
Corporation's Finance Committee.
Although the Board of Directors and management do not contemplate that
any of the nominees will be unable to serve, in the event that prior to
the meeting any of the nominees becomes unable to serve because of special
circumstances, the shares of stock represented by the proxies will be
voted for the election of a nominee who shall be designated by the Board.
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The following are the other directors whose terms continue after this
year's meeting, as indicated:
Term to Expire 1995
PHOTO
ROBERT W. CARDY Director Since 1990
Chairman of the Board, President, Chief Executive Officer and
Director, Carpenter Technology Corporation.
Mr. Cardy, age 58, received a bachelor's degree in industrial management
from the University of Cincinnati. He came to Carpenter with prior
experience at the Delco Products Division of General Motors Corporation,
where he was a systems analyst. After joining the Corporation in 1962, Mr.
Cardy served in numerous capacities, becoming general sales manager in
1977, division vice president - commercial in 1979, vice president -
commercial in 1982, vice president - sales and marketing in 1987,
executive vice president in 1989, president and chief operating officer on
November 1, 1990, and chairman of the board, president and chief executive
officer on July 1, 1992. In addition to his numerous community activities,
Mr. Cardy serves as a director of Meridian Bancorp, Inc., the Reading
Hospital & Medical Center, Berks County Chamber of Commerce and
Pennsylvania Business Roundtable. Mr. Cardy serves on the Corporation's
Finance Committee.
PHOTO
ARTHUR E. HUMPHREY Director Since 1980
Director Biotechnology Institute, Pennsylvania State University.
Provost Emeritus, Lehigh University.
Dr. Humphrey, age 66, received a bachelor's and a master's degrees in
chemical engineering from the University of Idaho, a doctorate degree in
chemical engineering from Columbia University and a master's degree in
food technology from the Massachusetts Institute of Technology. He held
various teaching positions at the University of Pennsylvania beginning in
1953 and became dean of the School of Engineering and Applied Science in
1972. From 1980 to 1986, Dr. Humphrey served as vice president and provost
of Lehigh University and in 1986, became a T. L. Diamond professor of
chemical engineering and director of the Center for Molecular Bioscience
and Biotechnology at Lehigh. He assumed his present position in July 1992.
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He is past president of the American Institute of Chemical Engineers, and
past director of the United Engineering Trust of New York. From 1971 to
1975 he served as director of the New Brunswick Scientific Co.; and from
1975 to 1980, he was technical director of ABEC, Inc. He serves as a
consultant to Hoffman LaRoche and to Merck, Inc. He has also served on the
Scientific Advisory Boards of Repap Technologies, Inc. and Biochem
Technology, Inc. Dr. Humphrey is the co- author of a number of technical
books, is the holder of four U.S. Patents, and is a member of the National
Academy of Engineering, the American Institute of Chemical Engineers, the
American Chemical Society and the American Society of Microbiology. Dr.
Humphrey has been a Fulbright lecturer in Japan and Australia and has
received other scientific awards. He currently serves on the Corporation's
Corporate Governance and Audit Committees.
PHOTO
EDWARD W. KAY Director Since 1989
Retired Co-Chairman and Chief Operating Officer, Ernst & Whinney, now
in practice as Ernst & Young.
Mr. Kay, age 66, graduated from the University of Pittsburgh with a
bachelor of science degree. Following his graduation, he joined Ernst &
Ernst (predecessor to Ernst & Whinney), a public accounting firm, where he
held numerous positions, including managing partner of the Pittsburgh
office in 1966 and vice chairman and regional managing partner of the
Mid-Atlantic Region in 1978. He served as co-chairman and chief operating
officer of Ernst & Whinney from 1984 to 1988, when he retired from active
service. He also serves as a director of Constellation Holdings, Inc. and
Meridian International Center. Mr. Kay is chairman of the Corporation's
Corporate Governance Committee and a member of the Finance Committee.
PHOTO
FREDERICK C. LANGENBERG Director Since 1981
Director and Retired Chairman of the Board and Chief Executive
Officer, The Interlake Corporation.
Dr. Langenberg, age 67, graduated from Lehigh University with bachelor of
science and master of science degrees in metallurgical engineering in 1950
and 1951, respectively. He received a Ph.D. degree from The Pennsylvania
State University in metallurgical engineering in 1955 and took additional
courses at Massachusetts Institute of Technology and Carnegie-Mellon
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University. Dr. Langenberg joined Interlake, Inc. (predecessor of The
Interlake Corporation) in April 1979 as president and chief operating
officer, became chief executive officer in 1982, was elected chairman of
the board in October 1983, and also serves as a director of that
corporation. He retired as chairman and chief executive officer in April
1991. From July 1975 until his employment with Interlake, Dr. Langenberg
served as president and director of the American Iron and Steel Institute.
Dr. Langenberg also serves as a director of Peoples Energy Corporation,
The Interlake Corporation, Dietrich Industries and as a Trustee of
Piedmont College. He currently serves as chairman of the Corporation's
Finance Committee and as a member of the Corporation's Compensation and
Stock Option Committee.
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Term to Expire 1996
PHOTO
MARCUS C. BENNETT Director Since 1993
Vice President and Chief Financial Officer and Director, Martin
Marietta Corporation.
Mr. Bennett, age 58, graduated from Georgia Institute of Technology with a
bachelor of science in industrial management. Following his graduation, he
joined Martin Marietta Corporation and advanced through various
engineering and finance positions. Mr. Bennett was appointed treasurer of
the Aerospace Company in January of 1977, then in 1983 he was promoted to
vice president business management, with responsibility for contracts and
finance. He was appointed in 1983 chairman of International Laser Systems
and to the Board of International Light Metals Corporation (both former
majority owned subsidiaries of Martin Marietta). Mr. Bennett was elected
corporate vice president of finance in February 1984 and named chief
financial officer in July 1988. In addition, he is the current chairman of
Orlando Central Park Inc. and Chesapeake Park, Inc. wholly owned
subsidiaries of Martin Marietta. Currently, Mr. Bennett serves on the
board of directors of Martin Marietta. He also serves on the board of
directors for the Private Sector Counsel and is a member of their CFO task
force; and he is a member of MAPI Finance Council, Financial Executive
Institute and The Economic Club of Washington. Mr. Bennett is a member of
the Corporation's Audit Committee and Corporate Governance Committee.
PHOTO
DENNIS M. DRAEGER Director Since 1992
Group Vice President, Worldwide Floor Products Operations for
Armstrong World Industries, Inc.
Mr. Draeger, age 53, graduated from Ohio State University with a bachelor
of science degree in business. Following his graduation, he joined
Armstrong World Industries, Inc., and advanced through various sales and
marketing positions. Mr. Draeger was elected vice president and general
sales manager of the floor division in 1983 and elected to his current
position in 1988. He currently serves on the board of directors of the
Boys Club & Girls Club of Lancaster. Mr. Draeger is a member of the
Corporation's Audit Committee and Compensation and Stock Option Committee.
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PHOTO
CARL R. GARR Director Since 1977
Director and Retired Chairman of the Board and Chief Executive
Officer, Bank of Pennsylvania.
Dr. Garr, age 67, received a bachelor of science degree from Kent State
University in physics and received a master's degree and doctorate degree
from Case Institute of Technology in physics and metallurgical
engineering, respectively. From 1984 to 1987, Dr. Garr was president and
chief executive officer of The Polymer Corporation, then an affiliate of
Chesebrough-Pond's Inc. He also served as vice president of
Chesebrough-Pond's Inc. from 1984 to 1986. The Polymer Corporation, now a
unit of DSM International, a Dutch corporation, is a producer of
engineering plastics. From 1982 to 1984, Dr. Garr was president and chief
executive officer of Empire Steel Castings, Inc., a producer of alloy
steel castings primarily for the pump and valve industries. Previously,
Dr. Garr held a number of positions with ACF Industries, Inc., a
manufacturer of transportation, energy related and industrial equipment,
including vice president - research and development in 1968; director,
president and chief executive officer of The Polymer Corporation, then an
affiliate of ACF, in 1970, and vice president from 1976 to 1982. He
currently serves as chairman of the Corporation's Audit Committee and
serves on the Compensation and Stock Option Committee.
PHOTO
MARLIN MILLER, JR. Director Since 1989
President, Chief Executive Officer and Director, Arrow International,
Inc.
Mr. Miller, age 62, graduated from Alfred University with a bachelor of
science degree in ceramic engineering and received a master's degree in
business administration from Harvard Business School. He served as a
finance officer in the United States Army from 1956 to 1959. In 1959, he
joined Glen-Gery Corporation, a building products company, where he served
as executive vice president and as a director. In 1972, he joined Connors
Investor Services, Inc., an investment management firm. Mr. Miller founded
Arrow International, Inc. in 1975. Arrow is a leading producer of medical
devices for critical care medicine. He is currently also a director of
Arrow International, Inc., Core States Financial Corporation, Hamilton
Bank, and Connors Investor Services. He serves as a member of the board of
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trustees of Alfred University and of the Reading Hospital and Medical
Center. Mr. Miller is chairman of the Corporation's Compensation and Stock
Option Committee and a member of the Audit Committee.
There is no family relationship between any of the directors or
nominees.
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Security Ownership of Directors and Officers
The following table sets forth information regarding beneficial
ownership as of September 1, 1994, of the Corporation's common stock of
each director, the Corporation's five most highly compensated officers and
the directors and officers as a group.
Amount and Nature of
Beneficial Ownership (1)
<TABLE>
<CAPTION>
Aggregate Number Percent of
of Shares Outstanding
Name Beneficially Owned (2)(3) Shares (4)
---- ------------------------ ------------
<S> <C> <C>
Bennett, M.C. .............................................. 1,700
Cardy, R.W.................................................. 34,155 (a) .4
Draeger, D.M. .............................................. 2,100
Evarts, C.M. ............................................... 3,100
Garr, C.R. ................................................. 4,050
Hudson, W.J., Jr. .......................................... 2,200
Humphrey, A.E. ............................................. 3,300
Kay, E.W. .................................................. 3,500
Langenberg, F.C. ........................................... 6,000 (b)
Mangum, M. Bell............................................. 1,635
Miller, M., Jr. ............................................ 3,400
Roedel, P.R. ............................................... 56,101 (c) .7
Bristol, D.C................................................ 19,763 (a) .2
Cottrell, G.W............................................... 15,635 (a) .2
Fiore, N.F.................................................. 12,504 (a) .2
Weiler, R.J................................................. 15,756 (a) .2
All directors and officers as a group (22 in all)........... 226,384 2.8
</TABLE>
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(1) Excludes fractional shares owned under the Corporation's Dividend
Reinvestment Plan.
(2) The amounts include common shares which are subject to outstanding
stock options, exercisable within 60 days of September 1, 1994, as
follows: P.R. Roedel, 27,270 shares; R.W. Cardy, 24,850 shares; D.C.
Bristol, 14,620 shares; G.W. Cottrell, 13,320 shares; R.J. Weiler,
12,820 shares; N.F. Fiore, 11,090 shares; C.R. Garr, M. Miller, Jr.,
3,000 shares each; A.E. Humphrey 2,800 shares; C.M. Evarts, E.W. Kay,
F.C. Langenberg, 2,500 shares each; D.M. Draeger, 1,600 shares; M.C.
Bennett, M. Bell Mangum, 1,500 shares each; W.J. Hudson, Jr., 500
shares; and directors and officers as a group 158,640 shares.
(3) The amount shown for all officers as a group represent 196 shares
held under the Employee Stock Ownership Plan (ESOP), representing the
equivalent amount of common stock if the amounts of the ESOP
preferred stock actually held were converted into common stock using
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the ratio of one preferred share equal to 1,000 shares of common
stock.
(4) Less than 0.1% except where indicated.
(a) Share ownership for Messrs. Bristol, Cardy, Cottrell, Fiore and
Weiler respectively include 1,229, 447, 554, 5 and 75 shares held
under the Carpenter Technology Savings Plan. Share ownership also
includes 19 shares for each individual held under the Employee Stock
Ownership Plan (ESOP), representing the equivalent amount of common
stock if the amounts of the ESOP preferred stock actually held were
converted into common stock using the ratio of one preferred share
equal to 1,000 shares of common stock.
(b) Share ownership shown for Mr. Langenberg includes 1,000 shares held
by Mrs. Jane Langenberg.
(c) Share ownership shown for Mr. Roedel includes 5,422 shares held under
the Carpenter Technology Savings Plan.
The Revenue Reconciliation Act of 1993 limits the annual deduction
that a publicly held corporation may take for certain types of
compensation paid or accrued with respect to certain executives to $1
million per year per executive for taxable years beginning after December
31, 1993. The Corporation does not believe that compensation paid
currently to its executives is affected by such limitation.
15
<PAGE>
<PAGE> 17
Executive Compensation
The following table sets forth certain information concerning the
compensation paid by the Corporation during the fiscal years ended June
30, 1994, 1993 and 1992 to the Corporation's chief executive officer and
each of the Corporation's four other most highly compensated officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ ---------------------------------
Awards Payouts All
---------------------- -------- Other
Re- Securities Compen-
Name and Other stricted Underlying sation
Principal Fiscal Salary Bonus Annual Stock $ Options/ LTIP ($)
Position Year $ $ Comp. $ (1) SARS # $ (2)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Cardy 1994 347,596 189,440 0 105,053 6,960 0 6,658
Chairman, President, 1993 324,424 123,281 0 125,029 7,700 0 7,916
and CEO 1992 247,115 7,661 0 0 8,670 0
Donald C. Bristol 1994 227,834 98,880 0 45,885 3,040 0 6,854
Senior Vice President 1993 192,213 52,974 0 61,703 3,800 0 5,766
Steel Division 1992 170,443 5,284 0 0 3,670 0
G. Walton Cottrell 1994 178,000 67,284 0 33,206 2,140 0 5,340
Senior Vice President 1993 170,308 42,691 0 40,594 2,500 0 5,109
Finance & CFO 1992 162,277 5,031 0 0 3,670 0
Nicholas F. Fiore 1994 172,354 65,150 0 38,640 2,510 0 5,171
Senior Vice President 1993 164,077 41,203 0 40,594 2,500 0 4,922
Strategic Businesses 1992 151,539 4,698 0 0 3,670 0
Richard J. Weiler 1994 159,237 51,433 0 24,150 1,600 0 4,805
Vice President 1993 153,924 35,403 0 27,063 2,000 0 4,618
Sales & Marketing 1992 145,674 4,516 0 0 3,670 0
Steel Division
</TABLE>
----------
(1) 4,090 common shares awarded in the aggregate to the named officers on
June 29, 1994, valued at $60.375 per share. 5,450 common shares
awarded in the aggregate to the named officers on June 22, 1993,
valued at $54.125 per shares. At the end of fiscal year 1994, Messrs.
Cardy, Bristol, Cottrell, Fiore and Weiler respectively held 4,050,
1,900, 1,300, 1,390 and 900 shares of restricted stock valued at
$241,988, $113,525, $77,675, $83,053 and $53,775 based on the June
30, 1994 closing price of $59.75. Shares are scheduled to vest at 20%
per year over five years. Dividends on all stock awards are paid at
the same rate as paid to all stockholders.
16
<PAGE>
<PAGE> 18
(2) In accordance with SEC provisions, amounts of All Other Compensation
are excluded for the Corporation's 1992 Fiscal Year. Amounts of All
Other Compensation are amounts contributed for Fiscal 1994 and 1993
for the named officers under the Corporation's Savings Plan.
Any officer or director may elect to defer a portion or all of his or
her compensation, subject to the terms of the Corporation's deferred
compensation plans. Deferral may be, at the participant's election, until
the officer's or director's termination of services, their attainment of
age 62, or the date of his or her death. Amounts deferred will earn
interest and are payable in 10 or 15 annual installments or in a lump sum,
at the participant's election.
Compensation and Stock Option Committee Report
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is composed entirely of non-management directors, and
the Committee is responsible for the establishment and oversight of the
Corporation's executive compensation and equity compensation programs.
Compensation Philosophy
The Corporation executive compensation programs are designed to
fulfill the following objectives:
- Attract, retain, and motivate highly effective executives
- Reward sustained corporate, functional, and/or individual
performance with an appropriate base salary and incentive
opportunity
- Increase management ownership in the Corporation
- Link executive reward with stockholder value and profitability
- Communicate the Corporation's goals through performance measures
linked to pay that focus executives on achievement of business
objectives.
Each year, the Committee conducts a review of the Corporation's
executive compensation program for appropriateness and competitiveness.
There are three components of executive compensation reviewed by the
Committee: base salary, annual incentive awards, and long-term incentive
awards. The combination of these programs produces total direct
compensation.
The Corporation's compensation philosophy is to pay at market
competitive levels for achieving planned performance. Market comparisons
include general industry, metals companies, and a select group of capital
intensive companies that are approximately the same size as the
Corporation. More emphasis is placed on general industry than the steel
industry. The market comparator group is a representative sample of
organizations used in the performance graph but is not identical due to
limitations on available data.
17
<PAGE>
<PAGE> 19
Beginning in fiscal year 1993, senior executives had a greater
proportion of their total direct compensation at risk in the form of
annual and long-term incentives. Long-term incentives may consist of stock
options, restricted stock and stock appreciation rights, with guidelines
tied to executive performance, position level and/or continuing
employment. Stock ownership is encouraged to create a true ownership view
and to further align executive and stockholder interests.
Base Salary
Base salaries are administered on the basis of performance, with pay
falling within a range determined through market comparisons as described
earlier. Actual base salary as well as increases are based on incumbent
performance, experience, and reference to competitive rates for jobs with
comparable content. Base salary ranges were adjusted by 3% for fiscal year
1995 to reflect competitive market movement. Actual base salary
adjustments for executives varied based on performance, job content, and
pay position within the range. As a group, the named officers were
approximately at 95% of base salary market rate (midpoint).
Annual Incentives
The Corporation's executive annual incentive awards include two plans:
the Profit Sharing Plan and the Executive Annual Compensation Plan.
The Profit Sharing Plan of the Corporation allows all eligible
employees to share proportionally in the profits of the Corporation's
Steel Division. The Profit Sharing Plan covers all permanent employees,
except those with the Special Products Division, those in locations
outside the United States, and certain warehouse system employees. Profit
Sharing payments are based on Steel Division performance during the fiscal
year and are paid quarterly based on year-to-date Steel Division pretax
profits and base pay. A profit pool is established equal to 10% of the
first $40 million earned year-to-date in Steel Division pretax profit,
plus 20% of the profit above $40 million. The profit pool is divided by
the total base pay paid year-to-date to participants to arrive at the
profit sharing percentage. Amounts paid to participants are determined by
multiplying their base pay by the profit sharing percentage. Payments made
for prior quarters of the fiscal year are deducted from the result to
determine the amount of the current quarterly payment to each participant.
The amount paid for fiscal year 1994 to all eligible employees was 10% of
base pay. For executive compensation purposes, The Profit Sharing Plan is
targeted at a 10% payout for plan performance. The amounts paid under this
Plan to the named officers for fiscal year 1994 are included in the
Summary Compensation Table.
The Executive Annual Compensation Plan provides variable compensation
for designated executives with payments based on corporate financial
performance and individual performance. For fiscal year 1994, the
Committee established a return on equity objective of 15.6% and the target
performance threshold level before any payout was made was 12.5%. The
Corporation achieved a 16.3% return on equity in fiscal 1994 and the
amounts paid under the Executive Annual Compensation Plan to the named
officers for fiscal year 1994 are included in the Summary Compensation
Table.
18
<PAGE>
<PAGE> 20
For fiscal year 1994, the Profit Sharing Plan and the Executive Annual
Compensation Plan compensated the named officer group at approximately
100% of the annual incentive market rate.
For fiscal year 1995, the Executive Annual Compensation Plan will be
based on a 16.9% target return on equity performance with a threshold at
80% of target. Return on equity will be calculated excluding the impact of
the start-up of Walsin-CarTech Specialty Steel Corporation, the
Corporation's 19% owned joint venture in Taiwan. The Executive Annual
Compensation Plan targets for payouts to executives vary in percentage to
produce target total cash compensation at market for planned performance.
Corporate performance determines 80% of the total Executive Annual
Compensation Plan performance and individual performance determines the
remaining 20%. Personal performance is measured against strategic personal
performance goals. The Plan provides the flexibility to grant personal
Executive Annual Compensation Plan awards if the financial threshold is
not achieved (subject to full Board approval).
Long-Term Incentives
The Corporation uses equity-based long-term incentives to ensure a
significant portion of total direct compensation is linked to stockholder
value. By emphasizing equity ownership, the Corporation provides an added
linkage between executive and stockholder interests.
The Corporation's Long-Term Incentive Plan includes restricted stock,
stock appreciation rights, and both non-qualified stock options and
incentive stock options. Stock options provide executives with incentive
for long-term strategy design and implementation to increase stockholder
equity value. Restricted stock provides executives with a vehicle for
increasing stock ownership. Stock appreciation rights provide incentives
for increasing equity value without the need to issue additional shares.
Grant guidelines provide present values at market competitive levels
as discussed earlier in this section. In determining market values, the
Corporation used data from a national survey that calculates present value
of long-term incentives using a capital asset pricing model. The
Black-Scholes model was used as a secondary reference. Grant guidelines
split present values equally between stock options and restricted stock,
using an equivalency ratio of four option shares to one restricted share.
There were no grants of stock appreciation rights.
For stock awards in fiscal 1994, grant guidelines were based on a
percentage of salary ranging from 60 to 150 percent of salary depending on
salary grade classification and performance without regard to prior
grants. Stock options vest 100% in one year. Restricted shares vest 20%
per year over five years and carry dividend equivalents until vested.
Personal performance is measured against strategic personal performance
goals (including, for example, expansion into new markets and products).
The Committee decides on the grant guidelines for each fiscal year, and
awards specific grants. Non-qualified stock options have been used instead
of incentive stock options so that the Corporation is entitled to a tax
deduction upon exercise by the executive.
19
<PAGE>
<PAGE> 21
CEO Compensation
The CEO's compensation package is consistent with the spirit and
objectives of the Corporation's executive compensation program as follows:
Base Salary
As defined earlier, base salaries are administered on the basis of
performance. Under Mr. Cardy's leadership, the Corporation made
significant improvements in operating performance. Earnings per share
increased to $4.30 in 1994 from $3.11 in 1993, before a one-time
charge for the effects of changes in accounting principles, an
increase of 38%, while return on equity increased to 16.3% in 1994
from 12.6% in 1993. Net income rose 37% to $36.3 million in 1994 from
$26.5 million in 1993, before the one-time charge for the effects of
changes in accounting principles. In addition to improved financial
performance, Mr. Cardy also directed a number of strategic actions
(including expansion into foreign markets and new areas of product
development) to position the Corporation for future growth. As a
result, for fiscal year 1995, Mr. Cardy's annual base salary has been
increased by 7.7% to $377,000, effective August 1, 1994, and
represents 89% of market rate (midpoint) as described earlier.
Annual Incentives
The CEO received a $34,760 Profit Sharing Plan payout (10% of
base). This is the same percentage of base salary payout all eligible
employees received.
The CEO received a $154,680 payout from the Executive Annual
Compensation Plan determined through return on equity and personal
performance.
Long-Term Incentives
The disclosed long-term grant is made under the Stock-Based
Incentive Compensation Plan for Officers and Key Employees. The CEO
grant includes 6,960 shares of non-qualified options, and 1,740 shares
of restricted stock. The non-qualified options vest 100% after one
year. The restricted stock shares vest 20% per year over a five-year
period and carry dividend equivalents. This grant is within the
guidelines for the CEO position (150% of base).
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE
CORPORATION'S BOARD OF DIRECTORS
Marlin Miller, Jr., Chair
Dennis M. Draeger
Carl R. Garr
Frederick C. Langenberg
Mylle Bell Mangum
20
<PAGE>
<PAGE> 22
Stockholder Return Performance Presentation
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on the Corporation's common stock
against the cumulative total return of the S&P Composite - 500 Stock Index
and the Peer Group Index for the period of five years commencing June,
1989 and ending June, 1994.
Stockholder Return Performance Table
----------------------------------------------------------------------------
| RETURN TO STOCKHOLDERS |
| CARPENTER TECHNOLOGY CORP. |
| JUNE 30, 1989 TO JUNE 30, 1994 |
| |
| 180 | |
| | |
| 160 | |
| D | |
| 140 | |
| O | @ @ @|
| 120 | @ $|
| L | @ $ |
| 100 $*@ $ $ |
| L | * $ * * |
| 80 | * *|
| A | |
| 60 | |
| R | |
| 40 | |
| S | |
| 20 | |
| | |
| 0 |------------|------------|------------|------------|------------|
| 1989 1990 1991 1992 1993 1994
$ = Carpenter Technology * = Peer Group @ = S & P 500
-----------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
Carpenter Technology 100 114.219 107.667 113.972 133.360 151.835
Peer Group 100 100.164 82.310 105.199 126.750 116.645
S & P 500 100 116.390 124.992 141.686 160.916 163.221
-----------------------------------------------------------------------------
The Peer Group includes the following companies:
Allegheny Ludlum Slater Industries
A. M. Castle The Timken Company
Armco, Inc.
The Peer Group consists of a number of publicly traded companies which
have some similarity to the Corporation. In particular, the Peer Group
companies are all involved in the distribution and/or manufacture of
specialty metal products in the United States and each Peer Group company
has a division or unit which competes with the corporation.
21
<PAGE>
<PAGE> 23
The Total Stockholder Return assumes reinvestment of dividends and the
total return of each company included in the S&P 500 Index and the Peer
Group has been weighted in accordance with the corporation's market
capitalization as of the end of each respective period. The weighting was
accomplished by (1) calculating the year-end market capitalization for
each company based on the closing stock price and outstanding shares; (2)
determining the percentage that each such market capitalization represents
against the total of such market capitalizations for all companies
included in the Index or the Peer Group as the case may be; and (3)
multiplying the percentage determined in (2) above by the total
stockholder return of the company in question for each respective period.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Based solely upon the Corporation's review of copies of such reports
furnished to it and upon representations by persons required to file
reports under Section 16(a), to the Corporation's knowledge, all of the
Section 16(a) filing requirements applicable to such person with respect
to fiscal year 1994 were complied with.
Retirement Benefits
The General Retirement Plan of the Corporation, as amended, provides
for retirement benefits for employees, including officers, at the age of
65 (with 5 years service), or as early as age 55 (with 15 years service);
or at any age with 30 years service. Pensions are based on the number of
years of service, or on the product of 1.26% times the number of years of
service multiplied by the individual's average earnings during the greater
of either (1) the eight highest earnings years or (2) the five highest
consecutive earnings years, of the last 12 years of continuous service
prior to retirement. For pension purposes individual earnings include all
salaries, bonuses, and extra compensation. As of June 30, 1994, the years
of service credited under the Plan were as follows: Mr. Bristol, 19.8
years; Mr. Cardy, 31.9 years; Mr. Cottrell, 5.3 years; Dr. Fiore, 4.3
years; and Mr. Weiler, 35.6 years. All funds required for the payment of
benefits under the Plan are provided by the Corporation and these funds
may be paid into one or more pension trusts.
The Corporation has established two retirement plans, the Benefit
Equalization Plan and the Earnings Adjustment Plan, for those participants
in the General Retirement Plan for whom benefits are reduced by reason of
the limitations imposed under Section 415 and/or Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended. The Plans will pay the
difference between the amount payable to the participant under the General
Retirement Plan and the amount which the participant would have been paid
but for the Section 415 and/or Section 401(a)(17) limitations. In general,
benefits under these Plans are subject to the same terms and conditions as
the benefits payable to the participant under the General Retirement Plan.
Employees who have been designated by the Board of Directors as
participants are entitled to receive benefits under the Supplemental
Retirement Plan for Executives. Participants or their beneficiaries are
entitled to receive an annual supplemental retirement benefit for 15 years
commencing in the month following the month in which retirement occurs,
or, at the election of a disabled participant, commencing at a later
22
<PAGE>
<PAGE> 24
specified date. In the event of the death of the participant before
retirement but subsequent to the attainment of eligibility for a Normal
Retirement or Early Retirement benefit under the Supplemental Retirement
Plan for Executives, the benefit will be paid to the participant's
beneficiary for the said 15-year period. The benefit is calculated so that
following retirement, participants may receive General Retirement Plan
benefits, Benefit Equalization Plan benefits, Earnings Adjustment Plan
benefits, Primary Social Security benefits, pension benefits from any
prior employment and supplemental retirement benefits, the aggregate of
which will be equivalent to 60% of the participant's earnings (calculated
in the same manner as the General Retirement Plan) if retirement takes
place upon the participant's attaining 30 years' service with the
Corporation. However, Mr. Cottrell's benefits are calculated without
regard to pension benefits from prior employment. Messrs. Bristol, Cardy,
Cottrell, Fiore and Weiler have been designated participants in the Plan.
The Officers' Supplemental Retirement Plan of the Corporation provides
supplemental pension benefits to certain Corporate and Division officers
who qualify for benefits under the General Retirement Plan and for whom
benefits under the General Retirement Plan are reduced by reason of
amounts deferred pursuant to the Deferred Compensation Plan. The Officers'
Supplemental Retirement Plan will pay the difference between the amount
payable (prior to application of Internal Revenue Code limitations) to the
participant under the General Retirement Plan and the amount which the
participant would have been paid by disregarding the above-mentioned
deferred compensation. Benefits under this Plan are subject to the same
terms and conditions as the benefits payable to the participant under the
General Retirement Plan.
The following table illustrates the total annual retirement benefits
payable under the retirement plans described in this section. All such
retirement plans are payable for the life of the participant and, if
applicable, the life of a survivor with the exception of the Supplemental
Retirement Plan for Executives which is payable for 15 years certain.
<TABLE>
<CAPTION>
Average Annual
Earnings for the Annual Gross Pension Benefits
Applicable Years of for Years of Service Shown (1)
Service Period --------------------------------------------------------
Preceding Retirement 15 Years 20 Years 25 Years 30 Years 35 Years
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 ............... $ 70,375 $ 75,000 $ 75,000 $ 75,000 $ 76,563
150,000 ............... 84,450 90,000 90,000 90,000 91,875
175,000 ............... 98,525 105,000 105,000 105,000 107,188
200,000 ............... 112,600 120,000 120,000 120,000 122,500
250,000 ............... 140,750 150,000 150,000 150,000 153,125
300,000 ............... 168,900 180,000 180,000 180,000 183,750
350,000 ............... 197,050 210,000 210,000 210,000 214,375
400,000 ............... 225,200 240,000 240,000 240,000 245,000
450,000 ............... 253,350 270,000 270,000 270,000 275,625
500,000 ............... 281,500 300,000 300,000 300,000 306,250
</TABLE>
23
<PAGE>
<PAGE> 25
----------
(1) Amounts payable under the General Retirement Plan that exceed the
maximum permitted by the Internal Revenue Code are paid under the
Benefit Equalization Plan and/or the Earnings Adjustment Plan. A
pension based on the amount of any deferred compensation is paid
under the Officer's Supplemental Retirement Plan.
The Corporation has established a retirement plan for directors who
have at least three years of service with the Corporation as a director
and who are not entitled to receive benefits under any other pension plan
of the Corporation. The Plan provides an annual benefit equal to the basic
director annual retainer fee in effect at the time of the director's
departure from the Board. This benefit, payable only during the lifetime
of the participant, continues for a period equal to the amount of time the
director was an active director up to a maximum of ten years, during which
period the participant will be available to the Chief Executive Officer
for consultation.
Trust agreements have been established by the Corporation with Chase
Manhattan Bank (as trustee) to assure the satisfaction of the obligations
of the Corporation under the non-qualified retirement benefit and defined
compensation plans previously described, to present and future
participants, including the named officers and to assure the satisfaction
of the obligations of the Corporation to present and future participants
under the Director Retirement Plan and the Deferred Compensation Plan for
Non-Management Directors of Carpenter Technology Corporation. The
Corporation makes contributions at such times and in such amounts as the
Corporation may determine to be appropriate to enable the trusts to
accumulate assets to pay all, or any part, as determined by the
Corporation, of the benefits payable under the Plans.
Carpenter Technology Corporation Savings Plan
The Savings Plan is a profit sharing plan established pursuant to
Sections 401(a) and 401(k) of the Internal Revenue Code. Under this Plan,
the Corporation contributes 3% of the base pay of each eligible employee,
including officers, to a trustee for investment into one or more
pre-established investment funds as the participant may choose. In
addition, a participant may authorize the Corporation to make further
salary deferral contributions, limited to the lesser of $9,240 ($8,994 in
calendar 1993) or 17% of total pay. Amounts in the Summary Compensation
Table include such amounts deferred. Participants may also invest up to
17% of total compensation pursuant to the provisions of Section 401(a).
The maximum combined allowable savings rate for a participant may not
exceed 17% of total pay.
Withdrawals of contributions and earnings from the Savings Plan may be
made at the participant's discretion from funds invested under the
provisions of Section 401(a); or, in the event of hardship or attainment
of age 59-1/2, from funds invested under the provision of Section 401(k).
Other distributions may occur following separation from service or the
occurrence of a permanent disability. In addition, loans to a participant
from his or her Section 401(k) fund are available.
24
<PAGE>
<PAGE> 26
Employee Stock Ownership Plan
The Carpenter Technology Corporation Employee Stock Ownership Plan
(ESOP) was established on September 6, 1991. The trustee of the ESOP,
State Street Bank and Trust Company, purchased 461.5384615 shares of
series A convertible preferred stock from the Corporation at a price of
$65,000 per share, or an aggregate purchase price of approximately $30
million, for a fifteen year note issued by the trustee to the Corporation
and a small amount of cash.
The shares of series A convertible preferred stock have a liquidation
preference of $65,000 per share, plus any accrued and unpaid dividends.
Dividends on the preferred stock are paid annually and accrue quarterly at
the rate of the higher of (1) $1,340.625 per share of preferred stock or
(2) the dividends paid for such quarter on the number of shares of common
stock into which the share of preferred stock is convertible. At the time
of issuance, each share of preferred stock was convertible, at the
trustee's option, into 1,000 shares of common stock at a conversion price
of $65.00 per share of common stock. The conversion price (and the
conversion ratio) will be adjusted to reflect stock splits, stock
dividends, combinations, reclassifications, certain distributions of
rights or warrants and certain other issuances of stock or stock
repurchases with respect to the common stock. The preferred stock votes
together with the common stock as a single class on matters upon which the
common stock is entitled to vote and has the equivalent of 1.3 votes per
share of the common stock into which it is convertible, subject to
antidilution adjustments and to limitations under applicable securities
laws and stock exchange regulations. The ESOP preferred shares are divided
into units, representing a fraction (initially 1/1000) of each convertible
preferred share. Each ESOP unit was initially convertible into one whole
share of common stock. On the effective date of the ESOP, September 6,
1991, an initial unit allocation was made to each eligible employee.
Additional units are allocated among employees as the loan is repaid.
Generally, only those employees who are actively employed with the
Corporation on the last day of the Plan year, December 31, will receive an
allocation in respect of such plan year. The funds used by the ESOP to
repay the ESOP loan are acquired from contributions by the Corporation and
dividends on the shares held by the ESOP.
ESOP participants are fully vested in their accounts after five years
of employment with the Corporation. Any participants who terminate
employment with the Corporation after vesting are guaranteed the greater
of the floor redemption value or the current equivalent common share price
of the units. Participants who terminate employment before vesting forfeit
their accounts and their units are reallocated to remaining ESOP
participants' accounts. During fiscal 1994, 8.9197 units of ESOP preferred
stock were allocated (this includes dividends) to each of the accounts of
Messrs. Bristol, Cardy, Cottrell, Fiore and Weiler.
Stock Options
The Corporation had three incentive stock option plans in effect
during the fiscal year, i.e., the Stock-Based Incentive Compensation Plan
for Officers and Key Employees, adopted at the 1993 Annual Meeting by the
25
<PAGE>
<PAGE> 27
stockholders (the "1993 Plan"), the Incentive Stock Option Plan for
Officers and Key Employees, adopted in June 1982 (the "1982 Plan"), and
the Management and Officers Capital Appreciation Plan adopted in May 1977
(the "1977 Plan"). The 1993 Plan provides that the Board of Directors
may grant incentive stock options, non-qualified stock options, stock
appreciation rights and restricted stock, and will determine the terms and
conditions of each grant. Options granted 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. Incentive stock options granted
during the ten-year term of the Plan may not exceed 500,000 shares plus
any shares cancelled or expired. The number of shares available annually
for awards under this Plan is limited to one percent of the common shares
outstanding at the end of the preceding fiscal year plus shares available,
but not awarded, during the preceding two years and any shares or options
forfeited, expired or terminated. The restricted stock awarded vests
equally at the end of each year of employment during the five-year period
from the date of grant. As of June 30, 1994 and 1993, 10,582 and 7,864
shares, respectively, were reserved for options and restricted stock which
may be granted under this Plan.
The 1982 Plan automatically expired in June 1992, in accordance with
its terms, i.e., ten years after its adoption on June 10, 1982. However,
all outstanding, unexpired options granted under the 1982 Plan prior to
its termination remain in effect in accordance with their terms. Under the
1982 and 1977 Plans, options are granted at the market value of the
Corporation's common stock on the date of grant, and are exercisable after
one year of employment following the date of grant. Options granted under
the 1982 Plan expire five years after grant if granted prior to August 9,
1990, and all the options granted since that date expire ten years after
grant. Options granted under the 1977 Plan expire ten years after grant.
At June 30, 1994, and 1993, 142,360 shares were reserved for options which
may be granted under the 1977 Plan.
All three Plans contain change in control provisions which provide
that, in the event of a change in control of the Corporation, previously
granted stock options vest and become immediately exercisable and, for the
1993 Plan, for any remaining restrictions on restricted stock shall
immediately lapse, and each SAR then outstanding shall be fully
exercisable for the sixty-day period immediately following the occurrence
of the Change in Control Event using the Change in Control Price to
determine the spread.
The following table shows as to the named officers, certain
information with respect to stock options and stock appreciation rights
granted as of the end of fiscal year 1994. Each stock appreciation right
entitles the holder to receive a payment in cash or the Corporation's
common stock, upon the exercise of the underlying stock option, in an
amount equivalent to the excess of the market value over the option price
of the Corporation's common stock at the date exercised. The method of
payment of stock appreciation rights is determined by the Board of
Directors at the time of grant. There are currently no stock appreciation
rights outstanding.
26
<PAGE>
<PAGE> 28
STOCK OPTIONS / SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------------------------------------------------
Number of % of
Securities Total Options Exercise
Underlying SAR's Granted to or Base
Options/SARs Employees in Price Expiration Grant Date
Name Granted (1) Fiscal Year ($/SH) Date Present Value (2)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert W. Cardy .............. 6,960 11.4% $60.375 06/29/2004 $79,420
Donald C. Bristol ............ 3,040 5.0% $60.375 06/29/2004 $34,689
G. Walton Cottrell ........... 2,140 3.5% $60.375 06/29/2004 $24,419
Nicholas F. Fiore ............ 2,510 4.1% $60.375 06/29/2004 $28,641
Richard J. Weiler ............ 1,600 2.6% $60.375 06/29/2004 $18,257
</TABLE>
----------
(1) Options granted 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.
(2) Based on the Black-Scholes option pricing model adapted for use in
valuing officer stock options. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is
no assurance the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. The estimated values
under that model are based on arbitrary assumptions as to variables
such as stock price volatility, interest rates, and future dividend
yield. Specifically, the Black-Scholes evaluation employed the
following factors: risk-free rate of return of 7.1% based upon the
ten year T-Bill rate as of the grant date, dividend yield of 6.3%
based upon the average annual dividend payout for the prior two years
(from grant date), exercise term of ten years, stock price volatility
of 30.4% based upon the quarterly stock price for the prior three
years (from grant date), no adjustment has been made for
transferability or risk of forfeiture of the options.
27
<PAGE>
<PAGE> 29
STOCK OPTION / SAR EXERCISES AND YEAR END HOLDINGS
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs at Options/SARs at
Acquired Fiscal Year End Fiscal Year End (2)
on Exercise Value ---------------------------- -------------------------------
Name (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Cardy .............. 4,020 $28,808 24,850 6,960 $223,263 $ 0
Donald C. Bristol ............ 1,950 $24,619 14,620 3,040 $136,630 $ 0
G. Walton Cottrell ........... 1,940 $21,583 13,320 2,140 $127,578 $ 0
Nicholas F. Fiore ............ 11,090 2,510 $105,098 $ 0
Richard J. Weiler ............ 12,820 1,600 $126,505 $ 0
</TABLE>
----------
(1) Calculated as fair market value at exercise minus exercise price.
(2) Based on June 30, 1994 market closing price of $59.75 per share of
common stock.
The Corporation also has in effect the 1990 Stock Option Plan for
Non-Employee Directors, which was adopted on August 9, 1990, and approved
by the stockholders at the 1990 Annual Meeting. The Plan provides for the
grant by the Corporation of non-qualified options to the directors of the
Corporation who are not otherwise employees of the Corporation to purchase
shares of common stock at not less than the fair market value of the
common stock at the date of the grant. The aggregate number of shares of
common stock which may be issued pursuant to the exercise of options
granted will not exceed 90,000 shares, subject to certain adjustments made
by the Board pursuant to the Plan. On August 9, 1990, each non-employee
director was granted an initial option to purchase 1,000 shares. Any
non-employee director who joins the Board after that date is automatically
granted an option to purchase 1,000 shares. In addition, each non-employee
director is automatically granted an option to acquire 500 shares of
common stock after each annual meeting. Options are exercisable only after
the director has completed one year of service on the Board since the date
of grant, and they expire ten years from the date of the grant unless
sooner exercised or terminated pursuant to the terms of the Plan. There is
a provision in the Plan which provides that, in the event of a change in
control of the Corporation, options previously granted vest and become
immediately exercisable.
28
<PAGE>
<PAGE> 30
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Unless otherwise specified by the stockholders, the shares of stock
represented by the proxies will be voted for the approval of the
appointment of Coopers & Lybrand, a firm of independent accountants, to
audit and report upon the financial statements of the Corporation for
fiscal year 1995. Coopers & Lybrand has been the independent accountants
of the Corporation since 1918 and, in the opinion of the Board of
Directors and management, is well qualified to act in this capacity.
Audit services performed by Coopers & Lybrand in fiscal year 1994
included audits of the financial statements of the Corporation and certain
of the pension and other employee benefit plans of the Corporation,
limited reviews of quarterly financial statements of the Corporation and
other accounting related matters. Fees and expenses in fiscal year 1994
for these audit services were $362,000.
A representative of Coopers & Lybrand is expected to be present at the
annual meeting. The representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond
to appropriate questions. The Corporation has been advised by Coopers &
Lybrand that the firm has no financial interest, direct or indirect, in
the Corporation, except its serving as independent accountants during the
period stated.
The Board of Directors recommends that stockholders vote FOR the approval
of the appointment of Coopers & Lybrand as independent accountants.
1995 Stockholder Proposals
In the event that a stockholder desires to have a proposal included in
the proxy statement for the 1995 Annual Meeting of the Stockholders, the
proposal must be received by the Corporation in writing on or before May
30, 1995, by certified mail, return receipt requested, and must comply in
all respects with applicable rules and regulations of the Securities and
Exchange Commission, the laws of the state of Delaware and the
Corporation's By-Laws relating to such inclusion. Stockholder proposals
may be mailed to the Corporate Secretary, Carpenter Technology
Corporation, 101 West Bern Street, Reading, PA 19601.
OTHER BUSINESS
The Board of Directors and management know of no matters to be
presented at the meeting other than those set forth in this proxy
statement. However, if any other business is properly brought before the
meeting or any adjournment thereof, the proxy holders will vote in regard
thereto according to their discretion insofar as such proxies are not
limited to the contrary.
By order of the Board of Directors.
JOHN R. WELTY
Secretary
29
<PAGE>
<PAGE> 31
(INSERT MAP)
Directions to Site of Annual Meeting of Carpenter Technology Corporation
at Muhlenberg Township Senior High School Auditorium
<PAGE>
<PAGE> 32
CARPENTER TECHNOLOGY CORPORATION
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting October 24, 1994
The undersigned stockholder of Carpenter Technology Corporation
P appoints PAUL R. ROEDEL and JOHN R. WELTY, or either of them,
proxies with full power of substitution, to vote all shares of
R stock which the stockholder would be entitled to vote if present at
the Annual Meeting of Stockholders of CARPENTER TECHNOLOGY
O CORPORATION to be held at the Muhlenberg Township Senior High
School auditorium, Laureldale, Pennsylvania, on Monday, October 24,
X 1994 at 4 p.m., local time, and at any adjournments thereof, with
all powers the stockholder would possess if present. The
Y stockholder hereby revokes any proxies previously given with
respect to such meeting.
Comments: (change of address)
Election of Directors.
Nominees - Term to Expire 1997 -----------------------------
Dr. C. McCollister Evarts, -----------------------------
William J. Hudson, Jr.,
Mylle Bell Mangum and Paul R. Roedel -----------------------------
(If you have written in the
above space, please mark the
corresponding box on the reverse
side of this card.)
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED FOR PROPOSALS 1 AND 2 AND WILL BE
VOTED IN THE DISCRETION OF THE PROXIES ON OTHER MATTERS AS MAY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS CARD ALSO CONSTITUTES VOTING INSTRUCTIONS FOR ANY SHARES HELD FOR THE
STOCKHOLDER IN THE FOLLOWING: CARPENTER TECHNOLOGY CORPORATION'S EMPLOYEE
STOCK OWNERSHIP PLAN, SAVINGS AND STOCK-BASED INCENTIVE COMPENSATION
PLANS. (PLEASE DATE AND SIGN ON REVERSE SIDE)
- - - ------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<PAGE> 33
/X/ Please mark your
votes as in this
example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF
DIRECTORS AND FOR PROPOSAL #2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND PROPOSAL #2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of / / / / / /
Directors. independent
(See Reverse) accountants.
To withhold your vote for 3. In the discretion of the proxies named
any nominee(s), write the herein, the proxies are authorized to
name(s) here: vote upon other matters as are properly
brought before the meeting.
- - - - - - - - - - - - - -
YES NO The signer hereby revokes all proxies
Do you plan / / / / heretofore given by the signer to vote at
to attend the said meeting or any adjournments thereof.
Annual Meeting?
Please sign exactly as name appears
Change of Address / / hereon. Joint owners should each sign.
Comments on Reverse Side / / When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
-------------------------------------------
-------------------------------------------
SIGNATURE(S) DATE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
SERVICES AVAILABLE TO
(LOGO) ASSIST OUR STOCKHOLDERS
Electronic Funds Transfer The Dividend Reinvestment Plan
(DIRECT DEPOSIT) of Dividends offers you three options to increase
your investment in Carpenter
* Dividend monies deposited Technology Corporation Common Stock.
directly into your bank account. Depending on your personal financial
goals, you can enroll in any option
* No worry of lost dividend checks. of the Plan which is administered by
First Chicago Trust Company of New
* Immediate access of dividend York. Carpenter pays all brokerage
money, no mail delays. commissions and administrative costs
for purchases of Carpenter Common
* Verification of dividend receipts Stock under the Plan.
on monthly bank statement.
To obtain an Electronic Funds
Dividend Reinvestment Plan Transfer Authorization form or a
Dividend Reinvestment Plan brochure
* Dividends automatically and Authorization form, please
reinvested to purchase additional contact:
shares of Carpenter Common Stock. Carpenter Shareholder Services
First Chicago Trust Company
* Invest all or only a portion of P.O. Box 2500
your dividends. Jersey City, NJ 07303-2500
* Invest a maximum of $60,000 in Be sure to include a reference to
voluntary cash payments per year. Carpenter in your correspondence.
* Make voluntary cash investments If you prefer, you may call First
as frequently as every month. Chicago at (201) 324-0498 between
9:00 a.m. and 6:00 p.m. Eastern
* Deposit your Carpenter Common Time.
Stock certificates for
safekeeping, free of charge.
<PAGE>
