SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission file number 1-5828
CARPENTER TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 23-0458500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 West Bern Street, Reading, Pennsylvania 19612-4662
(Address of principal executive offices) (Zip Code)
610-208-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange
(Title of each class) on which registered)
- --------------------- ----------------------
Common stock, par value $5 per share......New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pur-
suant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of August 30, 1996, 16,617,647 shares of Common Stock of
Carpenter Technology Corporation were outstanding and the
aggregate market value of such Common Stock held by nonaffiliates
(based upon its closing transaction price on the Composite Tape
on such date) was $560,845,586.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information from the
1996 definitive Proxy Statement.
The Exhibit Index appears on pages E-1 to E-6.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business:
Carpenter Technology Corporation, incorporated in
1904, is engaged in the manufacture, fabrication, and
distribution of specialty metals and engineered
products. There were no significant changes in the
form of organization or mode of conducting business of
Carpenter Technology Corporation (hereinafter called
the Company) during the year ended June 30, 1996,
except for the transactions described below:
On November 9, 1995, the Company acquired the net
assets of Green Bay Supply Co., Inc., for $10.8 million in
cash, including acquisition costs. Green Bay is a master
distributor which purchases specialty metal products
globally and resells them to independent distributors in the
United States. The acquisition of Green Bay enabled the
Company to continue to serve some commodity-oriented markets
while expanding its distribution channels. This investment
was accounted for using the purchase method of accounting.
On October 26, 1995, the Company acquired all of the
outstanding shares of Parmatech Corporation in exchange for
120,786 shares of treasury common stock with a fair value of
$4.5 million and paid acquisition costs. Parmatech
manufactures complex, net or near-net shape parts from a
powder metal slurry using an injection molding process. The
acquisition of Parmatech gave the Company an entry into
metal injection molding of various parts. This investment
was accounted for using the purchase method of accounting.
(b) Financial Information About Industry Segments:
The Company is primarily engaged in one business
segment - the manufacture, fabrication and distribution of
specialty metals. Additionally, the Company manufactures
certain engineered products. The engineered products
operations are not significant for separate presentation as
a segment.
(c) Narrative Description of Business:
(1) Products:
The Company processes basic raw materials such as
chromium, nickel, iron scrap and other metal alloying
elements through various melting, hot forming and cold
working facilities to produce finished products in the
form of billet, bar, rod, wire, narrow strip, special
shapes, and hollow forms in many sizes and finishes and
produces certain fabricated metal products. Sales of
finished products include:
<PAGE>
STAINLESS STEELS -
A broad range of corrosion resistant alloys
including conventional stainless steels and many
proprietary grades for special applications.
SPECIAL ALLOYS -
Other special purpose alloys used in critical
components such as bearings and fasteners. Heat
resistant alloys that range from slight
modifications of the stainless steels to complex
nickel and cobalt base alloys. Alloys for
electronic, magnetic and electrical applications
with controlled thermal expansion characteristics,
or high electrical resistivity or special magnetic
characteristics. Fabrication of special stainless
steels and zirconium base alloys into tubular
products for the aircraft industry and nuclear
reactors.
TOOL AND OTHER STEEL -
Tool and die steels which are extremely hard
alloys used for tooling and other wear-resisting
components in metalworking operations such as
stamping, extrusion and machining. Other steel
includes carbon steels purchased for distribution
and other miscellaneous products.
ENGINEERED PRODUCTS -
The Company manufactures certain engineered
products, including structural ceramics, metal
injection molded products and ultra-hard wear
parts.
The products of the Company are sold primarily in
the United States and principally through its own sales
organization with service centers and sales offices
located in many of the major cities of the country.
Sales outside of the United States, including export
sales, were $96.5 million, $74.7 million and $67.1
million in fiscal 1996, 1995 and 1994, respectively.
(2) Classes of Products:
The approximate percentage of the Company's
consolidated net sales contributed by the major classes
of products for the last three fiscal years are as
follows:
1996 1995 1994
---- ---- ----
Stainless Steel 58% 56% 60%
Special Alloys 32% 33% 29%
Tool and Other Steel 7% 8% 11%
Engineered Products 3% 3% -
---- ---- ----
100% 100% 100%
==== ==== ====
<PAGE>
(3) Raw Materials:
The Company depends on continued delivery of
critical raw materials for its day-to-day operations.
These raw materials are nickel, ferrochrome, cobalt,
molybdenum, manganese and scrap, both alloy and steel.
Some of these raw materials sources are located in
countries subject to potential interruptions of supply.
These potential interruptions could cause material
shortages and affect the availability and price.
The Company is in a strong raw material position
because of its long-term relationships with major
suppliers. These suppliers provide availability of
material and competitive prices for these key raw
materials. The Company has also established and
maintains raw material inventory at appropriate levels
at the Reading plant.
(4) Patents and Licenses:
The Company owns a number of United States and
foreign patents and has granted licenses under some or
all of them. Certain of the products produced by the
Company are covered by patents of other companies from
whom licenses have been obtained. The Company does not
consider its business to be materially dependent upon
any patent or patent rights.
(5) Seasonality of Business:
The Company's sales and earnings results are
normally influenced by seasonal factors. The first
fiscal quarter (three months ending September 30) is
typically the lowest - chiefly because of annual plant
vacation and maintenance shutdowns in this period by
the Company as well as by many of its customers. The
timing of major changes in the general economy can
alter this pattern, but over the longer time frame, the
historical patterns generally prevail. The chart below
shows the percent of net sales by quarters for the past
three fiscal years:
1996 1995 1994
---- ---- ----
Quarter Ended September 30 21% 20% 21%
Quarter Ended December 31 24% 23% 23%
Quarter Ended March 31 27% 28% 28%
Quarter Ended June 30 28% 29% 28%
---- ---- ----
100% 100% 100%
==== ==== ====
<PAGE>
(6) Customers:
The Company is not dependent upon a single
customer, or a very few customers, to the extent that
the loss of any one or more would have a materially
adverse effect on the Company.
(7) Backlog:
As of August 31, 1996, the Company had a backlog
of orders, believed to be firm, of approximately $230.3
million, substantially all of which is expected to be
shipped within the current fiscal year. The backlog as
of August 31, 1995 was approximately $231.0 million.
(8) Competition:
The business of the Company is highly competitive.
It supplies materials to a wide variety of end-use and
geographic market segments, none of which consumes more
than about 20 percent of the Company's output, and
competes with various companies depending on end-use
segment, product or geography. There are 14 domestic
companies producing one or more similar specialty metal
products that are considered to be major competitors to
the Company in one or more product segments. The
Company also competes directly with several hundred
independent distributors of products similar to those
distributed by Carpenter's wholly owned distribution
system. Additionally, numerous foreign producers
import into the United States various specialty metal
products similar to those produced by the Company.
Furthermore, a number of different products may, in
certain instances, be substituted for the Company's
finished product.
Imports of foreign specialty steels have long been
a concern to the domestic steel industry because of the
potential for unfair pricing by foreign producers.
Such pricing practices have usually been supported by
foreign governments through direct and indirect
subsidies.
Because of these unfair trade practices, the
Company has been aggressive in filing trade actions
against foreign producers who have dumped their
specialty steel products into the United States. These
actions have been successful and have resulted in
dumping duties being assessed against imports of
stainless steel bar and stainless steel rod from
certain countries.
<PAGE>
In February 1995, the International Trade
Commission (ITC) ruled that the domestic industry had
been injured by dumped stainless steel bar imports from
Brazil, India, Japan and Spain. As a result, the U.S.
Department of Commerce issued antidumping orders for
the collection of additional duties on all imports of
stainless steel bar from the four countries, at the
following rates:
Brazil - 19.43%
India - 3.87% to 21.02%
Japan - 61.47%
Spain - 7.74% to 62.85%
This ruling was the result of an antidumping petition
which the Company had filed in conjunction with six
other domestic producers in December 1993.
Previously, in January 1994, the U.S. Department
of Commerce had issued antidumping orders for the
collection of additional duties against all imports of
stainless steel rod from Brazil, France and India, at
the following rates:
Brazil - 24.6% to 26.5%
France - 24.59%
India - 48.8%
In September 1996, the duty rate for stainless rod imports
from France was reduced by the Commerce Department to 10.06%,
retroactive to August 1993.
The antidumping orders on stainless steel bar and
stainless steel rod will continue in effect until the
year 2000, unless further extended.
In a related matter, negotiations have begun
between the U.S. government and the European Commission
(EC) for a Multilateral Specialty Steel Agreement
(MSSA). The objective of the MSSA would be to reduce
unfair trade in specialty steel products by estab-
lishing international commitments and disciplines aimed
at eliminating subsidies and other trade-distortive
practices. The baseline for negotiations is an
agreement on principles and provisions developed over
the past year between the Specialty Steel Industry of
North America and the European steel industry group
known as Eurofer. The U.S. government hopes to expand
the scope of the current negotiations with the EC to
also include other countries and to cover basic carbon
steel products as well.
(9) Research, Product and Process Development:
The Company's expenditures for company-sponsored
research and development were approximately $13.8
million, $12.3 million and $13.6 million in fiscal
1996, 1995 and 1994, respectively.
<PAGE>
(10) Environmental Regulations:
The Company is subject to various stringent
federal, state, and local environmental laws and
regulations. The liability for future environmental
remediation costs is evaluated by management on a
quarterly basis. Liabilities are recognized for
remedial activities, including remediation
investigation and feasibility study costs, when the
cleanup is probable and the cost can be reasonably
estimated. Recoveries of expenditures are recognized
as a receivable when they are estimable and probable.
For further information on environmental remediation,
see the Commitments and Contingencies section included
in Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note
17 to the consolidated financial statements included in
Item 8 "Financial Statements and Supplementary Data".
The costs of maintaining and operating environ-
mental control equipment were about $7.4 million and
$7.3 million for fiscal 1996 and 1995, respectively.
The capital expenditures for environmental control
equipment were $.4 million and $.5 million for fiscal
1996 and 1995, respectively. The Company anticipates
spending approximately $26.5 million on major domestic
environmental capital projects over the next five
fiscal years. Due to the possibility of unanticipated
factual or regulatory developments, the amount of
future capital expenditures may vary.
(11) Employees:
As of August 31, 1996, the Company and its affiliates
had 4,452 full-time employees.
Item 2. Properties
The locations of the Company's principal specialty metals
manufacturing and fabrication plants are: Reading, Pennsylvania;
Orangeburg, South Carolina; and San Diego, California. The
Reading and Orangeburg plants are owned in fee. The San Diego
plant is owned, but the land is leased.
The Reading plant has an annual practical melting capacity
of approximately 207,000 ingot tons of its normal product mix.
The annual tons shipped will be considerably less than the tons
melted due to finishing losses. During the years ended June 30,
1996 and 1995, the plant operated at approximately 93 percent and
87 percent, respectively, of its melting capacity.
The Company also operates sales offices and distribution and
service centers, most of which are owned, at 36 locations in 14
states and 8 foreign countries.
<PAGE>
The plants, service centers and offices of the Company have
been acquired at various times over many years. There is an
active maintenance program to keep facilities in good condition.
In addition, the Company has had an active capital spending
program to replace equipment as needed to keep it technologically
competitive on a world-wide basis. The Company believes its
facilities are in good condition and suitable for its business
needs.
Item 3. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries is a party or to which any
of their properties is subject. There are no material
proceedings to which any Director, Officer, or affiliate of the
Company, or any owner of more than five percent of any class of
voting securities of the Company, or any associate of any
Director, Officer, affiliate, or security holder of the Company,
is a party adverse to the Company or has a material interest
adverse to the interest of the Company or its subsidiaries.
There is no administrative or judicial proceeding arising under
any Federal, State or local provisions regulating the discharge
of materials into the environment or primarily for the purpose of
protecting the environment that (1) is material to the business
or financial condition of the Company (2) involves a claim for
damages, potential monetary sanctions or capital expenditures
exceeding ten percent of the current assets of the Company or (3)
includes a governmental authority as a party and involves
potential monetary sanctions in excess of $100,000.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
Listed below are the names of corporate executive officers
as of fiscal year end, and all persons chosen to become executive
officers, including those required to be listed as executive officers
for Securities and Exchange Commission purposes, each of whom assumes
office after the annual meeting of the Board of Directors which
immediately follows the Annual Meeting of Shareholders. All of the
corporate officers listed below have held responsible positions with
the registrant for more than five years except for Robert W. Lodge,
and except for Dennis M. Draeger.
<PAGE>
Mr. Lodge served as Vice President of Human Resources for
Johnson Matthey, Inc. from 1988 to 1991 and in various
assignments in industrial relations and human resources with
Rockwell International Corporation from 1977 to 1988. There is
no family relationship between any of the officers.
Mr. Draeger, who was a director of the Company since 1992,
resigned as a member of the Board of Directors as of June 30, 1996.
Mr. Draeger assumed his duties as Senior Vice President - Steel
Division for the company effective July 1, 1996. Prior to that
he was President of Worldwide Floor Products Operations for
Armstrong World Industries, Inc. since 1994 and he became Group
Vice President for Armstrong in 1988.
Assumed
Present
Name Age Positions Position
- ---- --- --------- --------
Robert W. Cardy 60 Chairman, President &
Chief Executive Officer July 1992
Director November 1990
G. Walton Cottrell 56 Senior Vice President -
Finance & Chief
Financial Officer January 1993
Dennis M. Draeger 55 Senior Vice President -
Steel Division July 1996
Nicholas F. Fiore 56 Senior Vice President -
Engineered Products January 1993
Robert W. Lodge 53 Vice President -
Human Resources September 1991
John R. Welty 47 Vice President,
General Counsel &
Secretary January 1993
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Common stock of the Company is listed on the New York Stock
Exchange. The ticker symbol is CRS. Here are the high and low
market prices of the Company's stock for the past two fiscal
years:
Quarter Ended: 1996 1995
- -------------------------------------------------------------------
High Low High Low
September 30 $41-3/16 $33-7/8 $32-13/16 $29
December 31 $44 $37-5/8 $31-5/8 $26-9/16
March 31 $42 $35-5/8 $29-1/4 $26-5/8
June 30 $40-1/8 $32 $34-1/16 $27-3/4
- -------------------------------------------------------------------
$44 $32 $34-1/16 $26-9/16
The Company has paid quarterly cash dividends on its common
stock for 90 consecutive years. The quarterly dividend rate was
$.33 per share, $.30 per share and $.30 per share for fiscal
1996, 1995 and 1994, respectively.
The Company had 5,908 common shareholders of record as of
August 30, 1996. The balance of the information required by this
item is disclosed in Note 10 to the consolidated financial
statements included in Item 8 "Financial Statements and
Supplementary Data".
<PAGE>
Item 6. Selected Financial Data
Five-Year Financial Summary
Dollar amounts in thousands, except per share data
(years ended June 30)
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------
Summary of Operations
Net Sales $865,324 $757,532 $628,795 $576,248 $570,200
Income before extra-
ordinary charges &
cumulative effect
of changes in
accounting
principles $ 60,148 $ 47,492 $ 38,289 $ 26,534 $ 14,884
Extraordinary charges,
net of income taxes $ - $ - $ (2,039) $ - $ (1,238)
Cumulative effect of
changes in accounting
principles, net of
income taxes $ - $ - $ - $(74,676) $ -
Net income (loss) $ 60,148 $ 47,492 $ 36,250 $(48,142) $ 13,646
Financial Position
at Year-End
Total assets $911,971 $831,775 $729,911 $699,565 $714,752
Long-term debt, net $188,024 $194,762 $158,070 $189,895 $196,604
Per Share Data
Primary:
Income before extra-
ordinary charges &
cumulative effect
of changes in
accounting
principles $ 3.51 $ 2.81 $ 2.28 $ 1.55 $ .81
Net income (loss) $ 3.51 $ 2.81 $ 2.15 $ (3.11) $ .74
Fully Diluted:
Income before extra-
ordinary charges &
cumulative effect
of changes in
accounting
principles $ 3.38 $ 2.70 $ 2.20 $ 1.51 $ .81
Net income (loss) $ 3.38 $ 2.70 $ 2.08 $ (2.88) $ .74
Cash dividends-common $ 1.32 $ 1.20 $ 1.20 $ 1.20 $ 1.20
See Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for discussion of factors that affect the
comparability of the "Selected Financial Data".
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion of Operations
Summary
Net sales and earnings trends for the past three fiscal years are
summarized below:
(in millions - except per share) 1996 1995 1994
- -------------------------------- ----------------------
Net sales $865.3 $757.5 $628.8
Net income $ 60.1 $ 47.5 $ 36.3
Primary earnings per share $ 3.51 $ 2.81 $ 2.15
Sales and earnings increased in each of the past two years as a
result of a strong market for specialty metals, selling price
increases, an improved product mix, cost reduction efforts, and
improved asset utilization. The sales and earnings results in
fiscal 1996 were records for the Company.
Fiscal 1994 results were adversely affected by an extraordinary
charge for debt retirement as described in Note 8 to the
consolidated financial statements.
The chart below shows net sales by product line for the past
three fiscal years:
(in millions) 1996 1995 1994
- ------------- ----------------------------------------
Sales % Sales % Sales %
----------------------------------------
Stainless steel $496.9 58 $424.7 56 $375.0 60
Special alloys 276.3 32 249.0 33 182.4 29
Tool and other steel 62.8 7 61.2 8 71.4 11
Engineered products 29.3 3 22.6 3 - -
----------------------------------------
Total $865.3 100 $757.5 100 $628.8 100
========================================
The following table is the approximate breakdown of sales by
end-use markets:
Years Ended June 30 1996 1995 1994
- ------------------- ------------------------
Aerospace 15% 13% 11%
Motor vehicles and equipment 13 14 15
Metal producing and distribution 11 9 8
Electrical and electronic equipment 10 12 12
General industrial equipment 10 10 11
Fabricated metal products 7 7 7
Power generation and distribution 7 7 8
Chemical and petroleum processing 6 5 5
Metal working equipment 5 6 7
Consumer durables 4 5 4
Instruments and controls 4 4 4
Housing and construction 3 3 3
Miscellaneous 5 5 5
------------------------
100% 100% 100%
========================
<PAGE>
Results of Operations - Fiscal 1996 Versus Fiscal 1995
Sales were $865.3 million in fiscal 1996, a 14 percent increase
from the $757.5 million level in fiscal 1995. The sales
improvement was primarily due to higher unit prices and a shift
toward higher alloyed products in the Steel Division. Unit volume
of Steel Division products was slightly higher than a year ago.
Demand for specialty steel products has been at a high level,
especially in automotive, aerospace, and chemical and petroleum
processing related products. Unit selling prices for specialty
steel shipments increased by an average of 8 percent to offset
higher labor and other costs and to restore profit margins which
had eroded in prior years. A raw material surcharge was
established in fiscal 1995 to offset sharply rising raw material
costs. The product mix shifted toward more premium-melted
products and away from certain commodity-priced products.
Approximately 12 percent of the increase in sales was from the
inclusion, in fiscal 1996, of Green Bay Supply Co., Inc., a
specialty metals master distributor which was acquired in
November 1995, and Parmatech Corporation, a metal injection
molded parts business which was acquired in October 1995.
Cost of sales as a percentage of sales was 74 percent in both
years. Higher raw material, labor and other costs were offset by
increased selling prices.
Raw material costs per unit purchased increased by 11 percent
during fiscal 1996 versus the year-earlier costs as a result of
increases in the cost of nickel (9 percent), chromium (22
percent) and cobalt (6 percent). Also, in both fiscal years, the
Company purchased at a premium semi-finished and finished
products to supplement internal capacity.
Labor costs per hour for Steel Division production and
maintenance employees were up by 4 percent principally as a
result of a base wage increase in July 1995 and higher profit
sharing payments partially offset by lower medical and pension
costs.
Natural gas costs per unit consumed decreased by 2 percent versus
fiscal 1995 costs, and electricity costs per unit decreased by 3
percent.
Selling and administrative expenses fell to 13 percent of net
sales versus 14 percent last year, primarily because these costs
tend to change less rapidly than sales. Costs were higher by $9.6
million primarily because of increased usage of outside services,
additional travel costs and costs of acquired companies.
Interest expense increased by $4.4 million in fiscal 1996 versus
fiscal 1995, principally as a result of lower capitalized
interest and a higher level of debt.
<PAGE>
Equity in losses of the Walsin-CarTech joint venture increased to
$7.0 million in fiscal 1996 versus a loss of $3.0 million last
year. Lower sales volume, reduced selling prices and lower
production levels were the primary reasons for the increased
loss. The current year loss was partially offset by a pre-tax
gain of $2.7 million on the sale of a portion of the Company's
interest in the joint venture. The gain is included in other
income on the consolidated statement of income (described in Note
4 to the consolidated financial statements).
Income taxes as a percent of pre-tax income (effective tax rate)
increased to 37 percent in fiscal 1996 from 36 percent a year
earlier. A reconciliation of the effective tax rate to the
federal statutory rate is presented in Note 16 to the
consolidated financial statements.
Results of Operations - Fiscal 1995 Versus Fiscal 1994
Sales were $757.5 million in fiscal 1995, a 20 percent increase
from the $628.8 million level in fiscal 1994. The sales
improvement was primarily due to an 8 percent increase in volume
and higher unit prices in the Steel Division. Demand for
specialty steel products has been at a high level since
January 1994, especially in automotive, equipment and
aerospace-related markets. Unit selling prices for specialty
steel shipments increased by an average of 7 percent to offset
higher labor and supply costs, and a surcharge was established to
offset sharply rising raw material costs. Also, the product mix
shifted toward more premium-melted products.
Approximately 18 percent of the increase in sales was from the
inclusion, in fiscal 1995, of Certech, Inc., and its affiliates,
a ceramics business which was acquired in July 1994 (described in
Note 3 to the consolidated financial statements).
Cost of sales as a percentage of sales increased to 74 percent
versus 73 percent in fiscal 1994 because fiscal 1994 was
favorably affected by reductions in inventories valued using the
LIFO method. The LIFO method values inventory reductions at
historical costs which were lower than current costs. This
favorable effect on costs, before taxes and profit sharing
impacts, was $24.9 million in fiscal 1994. There were no LIFO
accounting effects in fiscal 1995.
Raw material costs per unit purchased increased by 34 percent
during fiscal 1995 versus the year-earlier costs as a result of
large increases in the cost of nickel (42 percent), cobalt (52
percent) and molybdenum (77 percent). Also, in fiscal 1995,
the Company purchased at a premium semi-finished and finished
products to supplement internal capacity.
<PAGE>
Labor costs for Steel Division production and maintenance
employees were up by 6 percent as a result of a base wage
increase in July 1994 and higher overtime and profit sharing
payments.
Natural gas costs per unit consumed decreased by 10 percent
versus fiscal 1994 costs, but electricity costs per unit
increased by 3 percent.
Selling and administrative expenses increased by $10.7 million
during fiscal 1995 due chiefly to the inclusion of Certech costs
in fiscal 1995 and increased salaried employment and severance
costs.
Interest expense was lower by $1.0 million in fiscal 1995
principally because of reduced interest rates due to the
retirement of the 12-7/8% debentures in March 1994.
Equity in losses of the Walsin-CarTech joint venture, which
became operational in January 1995, (described in Note 4 to the
consolidated financial statements) increased by $2.1 million in
fiscal 1995. Prior to that date, pre-operating costs were
deferred by the joint venture.
Income taxes as a percent of pre-tax income (effective tax rate)
decreased to 36 percent in fiscal 1995 from 39 percent a year
earlier primarily because of retroactive deferred tax effects of
an increase in the statutory federal rate in fiscal 1994. Both
years' tax rates were favorably affected by non-recurring
adjustments of deferred state taxes for changes in tax laws. A
reconciliation of the effective tax rate to the federal statutory
rate is presented in Note 16 to the consolidated financial
statements.
Management's Discussion of Cash Flow and Financial Condition
Cash Flow
Cash flow from operations was very strong over the past three
fiscal years despite working capital needs to support growth in
sales.
Inventories, excluding amounts acquired through purchases of
businesses, increased $59.6 million and $29.5 million in fiscal
1996 and 1995, respectively, due to higher sales levels of the
Steel Division. Inventories had been reduced in fiscal 1994 as a
result of the Company's continuous improvement process to reduce
lead times while still maintaining a high customer service level.
Accounts receivable, excluding amounts relating to acquisitions,
increased $14.8 million and $21.8 million in fiscal 1996 and
1995, respectively, as a result of increased fourth quarter sales
each year. The average days sales outstanding at the end of
fiscal 1996 was comparable to that of the past two fiscal years.
<PAGE>
Capital expenditures of $48.6 million, $36.9 million and $26.6
million in fiscal 1996, 1995 and 1994, respectively, were
concentrated in the Company's Reading, Pennsylvania plant and
were used for normal replacements, modernization and incremental
capability. In fiscal 1996, the Company announced approval of
$125 million for major capital projects including a 20-ton vacuum
induction melting furnace, two vacuum arc remelting furnaces, a
narrow strip finishing facility, a bar finishing cell and a major
rebuild of its 3,000-ton press. Approximately $12 million was
spent on these projects during fiscal 1996.
During fiscal 1996, the Company acquired the businesses of Green
Bay Supply Co., Inc. and Parmatech Corporation. During fiscal
year 1995, the Company acquired Certech, Inc., and an affiliated
company and in fiscal 1994 acquired Aceros Fortuna, S.A. de C.V.,
and affiliated companies. Fiscal 1996 and 1995 also include other
less significant acquisitions. The cost of these acquisitions
totaled $48.7 million in cash and $7.7 million in common stock.
Details of these transactions are included in Note 3 to the
consolidated financial statements.
During fiscal 1996, the Company sold a portion of its interest in
Walsin-CarTech Specialty Steel Corporation, reducing its
ownership interest from 19 percent to 5 percent. The Company
received $32.7 million in cash from the sale which resulted in a
$2.7 million pre-tax gain. Details of this transaction are
included in Note 4 to the consolidated financial statements.
During fiscal 1995, $80.0 million of medium-term notes were
issued with a 7.4% average interest rate, and a portion of the
proceeds were used to retire borrowings under credit
arrangements. Details of debt and financing arrangements are
provided in Note 8 to the consolidated financial statements.
On March 1, 1994, the Company retired at a premium the entire
outstanding principal amount of $55.3 million of its 12-7/8%
debentures. The funding for this retirement came from the
Company's credit facilities.
The dividend payout rate on common stock was increased to $1.32
per share for fiscal 1996 versus $1.20 for fiscal 1995 and 1994.
The dividend rate increase was a result of the strong cash flows
from improved performance, and indicates the Company's confidence
in its future. The preferred stock dividend was maintained at
$5,362.50 per share in each of the past three fiscal years. Total
dividend payments were $23.3 million, $21.0 million and $20.8
million in fiscal 1996, 1995 and 1994, respectively.
<PAGE>
Financial Condition
During the past three fiscal years, the Company maintained the
ability to provide adequate cash to meet its needs through strong
cash flow from operations, management of working capital and its
flexibility to use outside sources of financing to supplement
internally generated funds.
The Company ended fiscal 1996 in a sound liquidity position, with
current assets exceeding current liabilities by $152.5 million (a
ratio of 1.9 to 1). This favorable ratio is conservatively stated
because certain inventories are valued $161.9 million less than
the current cost as a result of using the LIFO method. Total debt
at June 30, 1996, was $214.0 million, or 35.3 percent of total
capital, including deferred taxes, versus 39.5 percent of total
capital, including deferred taxes, at June 30, 1995.
Financing is available under a $150.0 million financing
arrangement with a number of banks, providing for $125.0 million
of revolving credit to January 1998 and lines of credit of $25.0
million.
At June 30, 1996, the Company had $20.0 million of medium-term
debt securities available for issuance under a Shelf Registration
on file with the Securities and Exchange Commission.
In summary, the Company believes that its present financial
resources, both from internal and external sources, are adequate
to meet its foreseeable short-term and long-term liquidity needs.
Commitments and Contingencies
Environmental
The Company has environmental liabilities at some of its owned
operating facilities, and has been designated as a potentially
responsible party ("PRP") with respect to certain superfund waste
disposal sites. Additionally, the Company has been notified that
it may be a PRP with respect to other superfund sites as to which
no proceedings have been instituted against the Company. Neither
the exact amount of cleanup costs nor the final method of their
allocation among all designated PRPs at these superfund sites
has been determined. The estimated range of the reasonably
possible costs of remediation at the Company-owned operating
facilities and the superfund sites is between $8.0 million and
$18.0 million. The Company has accrued for environmental remediation
costs, including remediation investigation and feasibility study
costs, which represent management's best estimate of the probable and
reasonably estimable remediation costs. The estimated range of the
anticipated recoveries for environmental costs is between $4.0 million
and $8.0 million. Recoveries of expenditures are recognized as a
receivable when they are estimable and probable. Additional details
are provided in Note 17 to the consolidated financial statements. The
Company does not anticipate that its financial position will be
materially affected by additional environmental remediation costs,
although quarterly or annual operating results could be materially
affected by future developments.
<PAGE>
Other
The Company is also defending various claims and legal actions,
and is subject to commitments and contingencies which are common
to its operations. The Company provides for costs relating to
these matters when a loss is probable and the amount is
reasonably estimable. Additional details are provided in Note 17
to the consolidated financial statements. While it is not
feasible to determine the outcome of these matters, in the
opinion of management, any total ultimate liability will not have
a material effect on the Company's financial position or results
of operations and cash flows.
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
Page
----
Consolidated Financial Statements:
Report of Independent Accountants 20
Consolidated Statement of Income for the
Years Ended June 30, 1996, 1995 and 1994 21
Consolidated Statement of Cash Flows for the
Years Ended June 30, 1996, 1995 and 1994 22
Consolidated Balance Sheet as of
June 30, 1996 and 1995 23
Consolidated Statement of Changes in
Shareholders' Equity for the Years Ended
June 30, 1996, 1995 and 1994 24-25
Notes to Consolidated Financial Statements 26-47
Supplementary Data:
Quarterly Financial Data (Unaudited) 48
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Carpenter Technology Corporation:
We have audited the accompanying consolidated balance sheet of
Carpenter Technology Corporation and subsidiaries as of June 30,
1996 and 1995, and the related consolidated statements of income,
cash flows and changes in shareholders' equity for each of the
three years in the period ended June 30, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Carpenter Technology Corporation and
subsidiaries as of June 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles.
s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 29, 1996
<PAGE>
Consolidated Statement of Income
Carpenter Technology Corporation
for the years ended June 30, 1996, 1995 and 1994
(in thousands, except
per share data) 1996 1995 1994
- --------------------- ----------------------------
Net sales $865,324 $757,532 $628,795
----------------------------
Costs and expenses:
Cost of sales 636,783 564,169 457,473
Selling and administrative
expenses 112,893 103,269 92,525
Interest expense 18,935 14,542 15,521
Equity in loss of joint venture 7,025 3,000 910
Other income, net (5,482) (2,019) (362)
----------------------------
770,154 682,961 566,067
----------------------------
Income before income taxes
and extraordinary charge 95,170 74,571 62,728
Income taxes 35,022 27,079 24,439
----------------------------
Income before extraordinary charge 60,148 47,492 38,289
Extraordinary charge - premium on
retirement of long-term debt,
net of income taxes - - (2,039)
----------------------------
Net income $ 60,148 $ 47,492 $ 36,250
============================
Primary earnings per common share:
Income before extraordinary
charge $ 3.51 $ 2.81 $ 2.28
Extraordinary charge - - (.13)
----------------------------
Earnings per common share $ 3.51 $ 2.81 $ 2.15
============================
Weighted average common shares
outstanding 16,677 16,327 16,130
============================
Fully-diluted earnings
per common share:
Income before extraordinary
charge $ 3.38 $ 2.70 $ 2.20
Extraordinary charge - - (.12)
----------------------------
Earnings per common share $ 3.38 $ 2.70 $ 2.08
============================
Weighted average common
shares outstanding 17,604 17,309 17,086
============================
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statement of Cash Flows
Carpenter Technology Corporation
for the years ended June 30, 1996, 1995 and 1994
(in thousands) 1996 1995 1994
- -------------- ----------------------------
OPERATIONS
Net income $ 60,148 $ 47,492 $ 36,250
Adjustments to reconcile net income
to net cash provided from operations:
Depreciation and amortization 35,226 32,479 29,887
Deferred income taxes 4,527 3,314 4,057
Prepaid pension cost (10,292) (7,933) (11,563)
Equity in loss of joint venture 7,025 3,000 910
Gain on sale of partial interest
in joint venture (2,650) - -
Extraordinary charge - - 2,039
Changes in working capital and other,
net of acquisitions:
Receivables (14,754) (21,819) (1,889)
Inventories (59,619) (29,480) 16,907
Accounts payable 21,265 15,111 10,480
Accrued current liabilities 16,244 6,800 1,984
Other, net (7,083) (5,177) 10,404
----------------------------
Net cash provided from operations 50,037 43,787 99,466
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of plant and equipment (48,621) (36,945) (26,604)
Disposals of plant and equipment 2,060 1,424 3,144
Acquisitions of businesses, net of cash received (13,301) (13,032) (22,323)
Investment in joint venture - (2,060) (49,196)
Proceeds from sale of partial
interest in joint venture 32,672 - -
----------------------------
Net cash used for investing activities (27,190) (50,613) (94,979)
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES
Provided by (payments on) short-term debt (1,884) 20,145 (2,794)
Proceeds from issuance of long-term debt - 80,000 45,851
Payments on long-term debt (9,023) (55,736) (71,271)
Dividends paid (23,306) (21,045) (20,824)
Proceeds from issuance of common stock 4,590 1,745 4,245
Payments to acquire treasury stock - (3,002) -
----------------------------
Net cash provided from (used for)
financing activities (29,623) 22,107 (44,793)
- -------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (185) (565) (112)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,961) 14,716 (40,418)
Cash and cash equivalents at beginning of year 20,120 5,404 45,822
----------------------------
Cash and cash equivalents at end of year $ 13,159 $ 20,120 $ 5,404
===============================================================================
SUPPLEMENTAL DATA:
Cash paid during the year for:
Interest payments, net of amounts capitalized $ 17,900 $ 15,441 $ 17,592
Income tax payments, net of refunds $ 20,942 $ 17,692 $ 18,066
Non-cash investing activities:
Treasury stock issued for business acquisitions $ 4,500 $ 3,200 $ -
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheet
Carpenter Technology Corporation
June 30, 1996 and 1995
(in thousands, except share data) 1996 1995
- --------------------------------- -------------------
ASSETS
Current assets:
Cash and cash equivalents $ 13,159 $ 20,120
Accounts receivable, net of
allowance for doubtful accounts
($1,249 and $1,034) 137,103 118,848
Inventories 160,452 91,383
Deferred income taxes 2,113 1,827
Other current assets 11,643 8,251
------------------
Total current assets 324,470 240,429
Property, plant and equipment, net 419,472 403,580
Prepaid pension cost 91,474 81,182
Investment in joint venture 9,760 49,085
Goodwill, net 18,792 15,701
Other assets 48,003 41,798
------------------
Total assets $911,971 $831,775
==================
LIABILITIES
Current liabilities:
Short-term debt $ 18,964 $ 20,145
Accounts payable 75,811 51,162
Accrued compensation 26,088 21,457
Accrued income taxes 13,656 5,442
Other accrued liabilities 30,446 28,684
Current portion of long-term debt 7,010 7,286
------------------
Total current liabilities 171,975 134,176
Long-term debt, net of current portion 188,024 194,762
Accrued postretirement benefits 137,738 140,855
Deferred income taxes 84,460 78,415
Other liabilities and deferred income 20,697 19,622
SHAREHOLDERS' EQUITY
Preferred stock - authorized
2,000,000 shares 28,581 28,825
Common stock - authorized
50,000,000 shares 97,729 96,690
Capital in excess of par value -
common stock 13,498 6,801
Reinvested earnings 267,956 231,114
Common stock in treasury, at cost (64,483) (67,002)
Deferred compensation (22,830) (25,461)
Foreign currency translation adjustments (11,374) (7,022)
------------------
Total shareholders' equity 309,077 263,945
------------------
Total liabilities and shareholders' equity $911,971 $831,775
==================
See accompanying notes to consolidated financial statements.
<TABLE>
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
Carpenter Technology Corporation
for the years ended June 30, 1996, 1995 and 1994
<CAPTION>
Common Stock
Preferred -----------------
Stock Par Capital in
(in thousands, except Par Value Value Excess of Reinvested Treasury
share and per share data) of $5 of $5 Par Value Earnings Stock
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Balances at June 30, 1993 $ 29,128 $ 47,542 $ 46,131 $189,241 $(66,150)
Distributions to ESOP (99) 1 11
Stock options exercised, net
of 10,308 shares exchanged 437 3,808
Restricted shares issued, net 81 900
Net income 36,250
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,606)
Common, $2.40 per share (19,218)
Reduction of ESOP note
Accrued compensation
Translation adjustments
Other 32
Balances at June 30, 1994 29,029 48,061 50,882 204,667 (66,150)
Distributions to ESOP (204) 1 9
Stock options exercised, net
of 133 shares exchanged 176 1,569
Restricted shares issued, net 107 1,238 (28)
Shares purchased (3,002)
Shares issued to acquire
business 1,022 2,178
Net income 47,492
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,599)
Common, $2.40 per share (19,446)
Reduction of ESOP note
Accrued compensation
Translation adjustments
Other 426
Effects of 2-for-1 common
stock split 48,345 (48,345)
Balances at June 30, 1995 28,825 96,690 6,801 231,114 (67,002)
Distributions to ESOP (244) 36 206
Stock options exercised, net
of 41,010 shares exchanged 1,003 3,587
Restricted shares cancelled (138)
Shares issued to acquire
business 1,843 2,657
Net income 60,148
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,572)
Common, $1.32 per share (21,734)
Reduction of ESOP note
Accrued compensation
Translation adjustments, net
Other 1,061
Balances at June 30, 1996 $ 28,581 $ 97,729 $ 13,498 $267,956 $(64,483)
=============================================
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
Carpenter Technology Corporation
for the years ended June 30, 1996, 1995 and 1994
<CAPTION>
Share Data
----------------------------------------------
Foreign Total Common Shares
Deferred Currency Share- Preferred -----------------------------------
Compen- Translation holders' Shares Net
sation Adjustments Equity Issued Issued Treasury Outstanding
<S> <C> <C> <C> <C> <C> <C>
------------------------------ ----------------------------------------------
Balances at June 30, 1993 $(27,431) $ - $218,461 461.2 9,508,355 (1,522,584) 7,985,771
Distributions to ESOP (87) (1.3) 215 215
Stock options exercised, net
of 10,308 shares exchanged 4,245 87,351 87,351
Restricted shares issued, net (981) - 16,260 (20) 16,240
Net income 36,250
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,606)
Common, $2.40 per share (19,218)
Reduction of ESOP note 941 941
Accrued compensation 1,085 1,085
Translation adjustments (959) (959)
Other 32
Balances at June 30, 1994 (26,386) (959) 239,144 459.9 9,612,181 (1,522,604) 8,089,577
Distributions to ESOP (194) (3.2) 179 179
Stock options exercised, net
of 133 shares exchanged 1,745 35,272 35,272
Restricted shares issued, net (1,317) - 21,350 (500) 20,850
Shares purchased (3,002) (53,124) (53,124)
Shares issued to acquire
business 3,200 53,124 53,124
Net income 47,492
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,599)
Common, $2.40 per share (19,446)
Reduction of ESOP note 1,071 1,071
Accrued compensation 1,171 1,171
Translation adjustments (6,063) (6,063)
Other 426
Effects of 2-for-1 common
stock split - 9,668,982 (1,523,104) 8,145,878
Balances at June 30, 1995 (25,461) (7,022) 263,945 456.7 19,337,964 (3,046,208) 16,291,756
Distributions to ESOP (2) (3.6) 7,251 7,251
Stock options exercised, net
of 41,010 shares exchanged 4,590 200,536 200,536
Restricted shares cancelled 138 - (4,652) (4,652)
Shares issued to acquire
business 4,500 120,786 120,786
Net income 60,148
Cash dividends:
Preferred, $5,362.50 per
share, net of income taxes (1,572)
Common, $1.32 per share (21,734)
Reduction of ESOP note 1,209 1,209
Accrued compensation 1,284 1,284
Translation adjustments, net (4,352) (4,352)
Other 1,061
Balances at June 30, 1996 $(22,830) $(11,374) $309,077 453.1 19,545,751 (2,930,074) 16,615,677
================================================================================
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
__________
1. Summary of Significant Accounting Policies
Description of Business - The Company is primarily engaged
in one business segment - the manufacture, fabrication and
distribution of specialty metals. Sales of finished products
include stainless steels, special alloys and tool steels in
the forms of bar, rod, wire and strip. Additionally, the
Company manufactures certain engineered products including
structural ceramics, metal injection molded products and
ultra-hard wear parts. The engineered products are not a
significant part of the business and therefore are not
presented as a separate business segment.
The products of the Company are sold primarily in the United
States and principally through its own sales organization,
with service centers and sales offices located in many of
the major cities of the country.
Basis of Consolidation - The consolidated financial
statements include the accounts of the Company and all
majority-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated. The equity method
of accounting is used when the Company has a 20%-50%
interest in other entities and for investments in corporate
joint ventures. Under the equity method, the original
investment is recorded at cost and adjusted by the Company's
share of undistributed earnings or losses of the entity. All
other investments are carried at cost.
Cash Equivalents - Cash equivalents consist of highly liquid
instruments with maturities at the time of acquisition of
three months or less. Cash equivalents are stated at cost,
which approximates market.
Inventories - Inventories are valued at the lower of cost or
market. Cost for inventories is principally determined by
the Last-In, First-Out (LIFO) method. The Company also uses
the First-In, First-Out (FIFO) and average cost methods.
Depreciation - Depreciation for financial reporting purposes
is computed by the straight-line method. This method
allocates depreciation equally over the estimated useful
lives of the assets. Depreciation for income tax purposes is
computed using accelerated methods.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Goodwill - Goodwill, representing the excess of the purchase
price over the estimated fair value of the net assets of
companies acquired to date, is being amortized on a
straight-line basis over periods not to exceed 20 years, the
estimated life of the goodwill. The Company's policy is to
record an impairment loss against the goodwill in the period
when it is determined that the carrying amount of the asset
may not be recoverable. This determination includes
evaluation of factors such as current market value, future
asset utilization, business climate and future cash flows
expected to result from the use of the net assets.
Environmental Expenditures - Environmental expenditures that
pertain to current operations or to future revenues are
expensed or capitalized consistent with the Company's
capitalization policy. Expenditures that result from the
remediation of an existing condition caused by past
operations and that do not contribute to current or future
revenues are expensed. Liabilities are recognized for
remedial activities, including remediation investigation and
feasibility study costs, when the cleanup is probable and
the cost can be reasonably estimated. Recoveries of
expenditures are recognized as a receivable when they are
estimable and probable.
Foreign Currency Translation - Assets and liabilities of
foreign operations, where the functional currency is the
local currency, are translated into U.S. dollars at the
fiscal year end exchange rate. Revenues and expenses are
translated using average exchange rates prevailing during
the year. The related translation adjustments are recorded
as cumulative translation adjustments, a separate component
of shareholders' equity. Foreign currency exchange gains and
losses are included in net income. Realized and unrealized
foreign currency exchange gains and losses for the years
presented were not material.
Futures Contracts and Commodity Price Swaps - In connection
with the anticipated purchase of raw materials for certain
fixed-price sales arrangements, the Company enters into
futures contracts and commodity price swaps to reduce the
risk of cost increases. These futures contracts and
commodity price swaps are accounted for as hedges, and,
accordingly, unrealized gains and losses are deferred and
included in cost of sales in the periods when the purchases
are made.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Earnings per Common Share - Primary earnings per common
share are computed by dividing net income (less preferred
dividends, net of tax benefits) by the weighted average
number of common shares and common share equivalents
outstanding during the period. On a fully-diluted basis,
both net earnings and shares outstanding are adjusted to
assume the conversion of the convertible preferred stock.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Accounting Pronouncements - The Financial Accounting
Standards Board issued Statement of Financial Accounting
Standard ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
of," and SFAS 123, "Accounting for Stock-Based Compensation"
which become effective for fiscal years beginning after
December 15, 1995. The Company will adopt these statements
effective July 1, 1996. SFAS 121 establishes criteria for
recognizing, measuring and disclosing impairments of
long-lived assets, identifiable intangibles and goodwill.
The Company does not expect that the adoption of SFAS 121
will have a material effect on its financial position or
results of operations. SFAS 123 allows entities to choose
between a new fair value based method of accounting for
stock-based compensation and the current method of
accounting prescribed by Accounting Principles Board Opinion
25 (APB 25). Entities electing to continue using APB 25 must
make pro forma disclosures of net income and earnings per
share as if the fair market value method of accounting had
been applied. The Company expects to continue accounting for
stock-based compensation in accordance with APB 25. The pro
forma effect for fiscal 1996 has not yet been determined.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Company-Owned Life Insurance Program - The Company has a
company-owned life insurance program covering essentially
all of the U.S.-based employees. At June 30, 1996 and 1995,
the cash surrender values, $81.4 million and $54.4 million,
and the insurance policy loans, $80.7 million and $53.9
million, respectively, were netted and included in other
assets on the consolidated balance sheet. The purpose of the
program is to provide cash to fund employee benefit
obligations and for other corporate purposes.
Reclassifications - Certain reclassifications of prior
years' amounts have been made to conform with the current
year's presentation.
2. Two-for-One Common Stock Split
On August 10, 1995, the Board of Directors of the Company
declared a two-for-one common stock split which was
distributed to shareholders of record on September 1, 1995.
The par value of common shares remained at $5 per share.
The effect of the stock split has been retroactively
reflected as of June 30, 1995, in the consolidated balance
sheet and statement of changes in shareholders' equity, but
activity for fiscal 1995 and prior periods was not restated
in those statements. All references to the number of common
shares and per share amounts elsewhere in the consolidated
financial statements and related footnotes have been
restated to reflect the effect of the split for all periods
presented.
3. Acquisitions of Businesses
During the past three fiscal years, the Company acquired the
entities described below, which were accounted for by the
purchase method of accounting:
On November 9, 1995, the Company acquired the net
assets of Green Bay Supply Co., Inc., for $10.8 million
in cash, including acquisition costs. Green Bay is a
master distributor which purchases specialty metal
products globally and resells them to independent
distributors in the United States. The purchase price
approximates the fair value of the assets acquired.
<PAGE>
3. Acquisitions of Businesses (continued)
On October 26, 1995, the Company acquired all of the
outstanding shares of Parmatech Corporation in exchange
for 120,786 shares of treasury common stock with a fair
value of $4.5 million and paid acquisition costs.
Parmatech manufactures complex, net or near-net shape
parts from a powder metal slurry using an injection
molding process. The excess of purchase price over the
fair values of the net assets acquired was $4.1 million
and has been recorded as goodwill, which is being
amortized on a straight-line basis over 20 years.
On July 22, 1994, the Company acquired all of the
outstanding shares of Certech, Inc., and an affiliated
company, for $16.7 million, including acquisition
costs, comprised of $13.5 million in cash and 106,248
shares of treasury common stock. Certech manufactures a
broad line of complex injection molded ceramics parts.
The excess of purchase price over the fair values of
the net assets acquired was $8.2 million and has been
recorded as goodwill, which is being amortized on a
straight-line basis over 20 years.
On July 28, 1993, the Company acquired all of the
outstanding shares of Aceros Fortuna, S.A. de C.V., a
Mexican steel distribution company, and two affiliated
companies for cash of $20.4 million, paid $2.5 million
for agreements not to compete and paid acquisition
costs. In addition, the Company acquired equipment from
an affiliated company in Mexico for $5.1 million. The
excess of the purchase price over the fair values of
the net assets acquired was $8.2 million and has been
recorded as goodwill, which is being amortized on a
straight-line basis over 20 years.
Fiscal 1996 and 1995 also include other acquisitions
which are immaterial.
<PAGE>
3. Acquisitions of Businesses (continued)
The purchase prices have been allocated to the assets
purchased and the liabilities assumed based upon the fair
values on the dates of acquisition, as follows:
(in thousands) 1996 1995 1994
-------------- ---------------------------
Working capital, other
than cash $ 9,457 $ 1,894 $ 6,552
Property, plant and
equipment 4,612 10,200 6,634
Other assets 2,158 1,740 2,661
Goodwill 4,094 8,154 8,213
Noncurrent liabilities (2,520) (5,756) (1,737)
---------------------------
Purchase price, net of
cash received $17,801 $16,232 $22,323
===========================
The operating results of these acquired businesses have been
included in the consolidated statement of income from the
dates of acquisition. On the basis of a pro forma
consolidation of the results of operations as if the
acquisitions in fiscal 1996 and 1995 had taken place at the
beginning of fiscal 1995, consolidated net sales would have
been $879.8 million for fiscal 1996, and $793.3 million for
fiscal 1995. Consolidated pro forma net income and earnings
per share would not have been materially different from the
reported amounts for fiscal 1996 and 1995. Such pro forma
amounts are not necessarily indicative of what the actual
consolidated results of operations might have been if the
acquisitions had been effective at the beginning of fiscal
1995.
4. Investment in Joint Venture
The Company's investment in Walsin-CarTech Specialty Steel
Corporation, a corporate joint venture in Taiwan with Walsin
Lihwa Corporation, was $9.8 million at June 30, 1996 and
$49.1 million at June 30, 1995. This investment is being
accounted for using the equity method of accounting. The
investment account has been increased for interest costs
capitalized during the pre-operating period and acquisition
costs. As these costs are amortized, the investment account
is reduced. The Company's share of the joint venture's
foreign currency translation adjustments is reflected in
both the investment account and shareholders' equity on the
consolidated balance sheet.
<PAGE>
4. Investment in Joint Venture (continued)
From inception on September 2, 1993 through March 19, 1996,
the Company owned a 19 percent interest in the joint
venture, which became operational in January 1995. On March
19, 1996, the Company sold a portion of its interest in the
joint venture to Walsin Lihwa Corporation, reducing its
ownership interest to 5 percent. The Company received $32.7
million in cash from the sale which resulted in a $2.7
million pre-tax gain, which is included in other income on
the consolidated statement of income. Additionally, Walsin
Lihwa may acquire the Company's remaining 5 percent interest
for the original purchase cost, plus interest at any time
prior to March 19, 1998. Walsin Lihwa holds the right of
first refusal should the Company seek to sell its remaining
interest in the joint venture.
A separate agreement also provides for the Company to
provide marketing and technical assistance to the joint
venture in exchange for an initial lump sum royalty payment
of $10.0 million, received in October 1993, and continuing
royalties based on sales of stainless steel over the 10-year
term of the agreement. The initial lump sum royalty has been
deferred and is being recognized as income over the term of
the agreement.
In addition, the joint venture and the Company have a
distribution agreement establishing the Company as a
distributor of the joint venture's products in North,
Central and South America.
5. Inventories
June 30
(in thousands) 1996 1995
-------------- ------------------
Finished and purchased products $129,184 $ 92,930
Work in process 134,751 110,468
Raw materials and supplies 58,388 41,602
------------------
Total at current cost 322,323 245,000
------------------
Less excess of current cost
over LIFO values 161,871 153,617
------------------
$160,452 $ 91,383
==================
<PAGE>
5. Inventories (continued)
Current cost of LIFO-valued inventories was $280.1 million
at June 30, 1996 and $219.7 million at June 30, 1995.
Reductions in LIFO-valued inventories resulted in an
increase in income before the extraordinary charge of
approximately $12.1 million or $.75 per share in the year
ended June 30, 1994. There were no LIFO accounting effects
in the years ended June 30, 1996 and 1995.
6. Property, Plant and Equipment
June 30
(in thousands) 1996 1995
-------------- ------------------
Land $ 7,374 $ 7,222
Buildings and building equipment 154,871 151,151
Machinery and equipment 620,153 594,579
Construction in progress 27,299 10,803
------------------
Total at cost 809,697 763,755
------------------
Less accumulated depreciation
and amortization 390,225 360,175
------------------
$419,472 $403,580
==================
The estimated useful lives are principally 45 years for
buildings and 20 years for machinery and equipment. The
ranges are as follows:
Estimated Useful Lives
Buildings and building equipment:
Land improvements 20 years
Buildings and equipment 20 to 45 years
Machinery and equipment:
Machinery and equipment 5 to 20 years
Autos and trucks 3 to 6 years
Office furniture and equipment 3 to 10 years
For the years ended June 30, 1996, 1995 and 1994, depreciation expense
was $33.7 million, $31.2 million and $29.0 million, respectively.
<PAGE>
7. Other Accrued Liabilities
June 30
(in thousands) 1996 1995
-------------- ------------------
Medical expenses $ 10,690 $ 10,645
Interest 5,557 4,872
Environmental costs 1,298 1,593
Other 12,901 11,574
------------------
$ 30,446 $ 28,684
==================
8. Debt Arrangements
During fiscal 1995, the Company issued $80.0 million of
medium-term debt securities with a 7.38% average interest
rate under a Form S-3 registration statement ("Shelf
Registration") on file with the Securities and Exchange
Commission. The proceeds were used to retire borrowings
under credit arrangements. At June 30, 1996, the Company had
an additional $20.0 million of medium-term debt securities
available for issuance under the Shelf Registration.
The Company has a $150.0 million financing arrangement with
a number of banks, providing for the availability of $125.0
million of revolving credit to January 1998 and lines of
credit of $25.0 million. Interest is based on short-term
market rates or competitive bids. At June 30, 1996, there
were no borrowings outstanding under the revolving credit
agreement, $9.0 million outstanding under the lines of
credit and an additional $10.0 million of short-term debt
outstanding consisting of commercial paper.
For the years ended June 30, 1996, 1995 and 1994, interest
cost totaled $19.3 million, $17.8 million and $19.6 million,
of which $.4 million, $3.3 million and $4.1 million,
respectively, was capitalized.
<PAGE>
8. Debt Arrangements (continued)
The weighted average interest rates for short-term
borrowings during fiscal 1996 and 1995 were 6.0% and 6.1%,
respectively.
Long-term debt outstanding at June 30, 1996 and 1995,
consists of the following:
(in thousands) 1996 1995
-------------- ------------------
9% Sinking fund debentures due 2022;
sinking fund requirements are
$5.0 million annually from 2003 to 2021 $ 99,559 $ 99,542
Medium-term notes at 6.78% to 7.80%
due from 1998 to 2005 80,000 80,000
10.45% Senior notes, series B,
due in annual installments of
$3.0 million through 1999 9,000 12,000
9.4% Notes due in annual installments
of $3.6 million through 1997 3,571 7,143
Capitalized lease obligations at
7.6% to 10.1% due in installments
through 2006 2,233 2,351
Other 671 1,012
------------------
Total 195,034 202,048
------------------
Less amounts due within one year 7,010 7,286
------------------
$188,024 $194,762
==================
Aggregate maturities of long-term debt for the four years
subsequent to June 30, 1997 are $3.3 million in fiscal 1998,
$13.3 million in fiscal 1999, $15.2 million in fiscal 2000,
and $10.1 million in fiscal 2001.
During fiscal 1994, the Company used proceeds from the
revolving credit facilities to retire at a premium $55.3
million of its 12-7/8% debentures originally due in 2014.
This retirement resulted in an extraordinary charge after
taxes of $2.0 million including unamortized discount and
issue costs, or $.13 per share. Although the funding for the
retirement originally came from the Company's credit
facilities, it was replaced with the medium-term debt
securities described earlier.
The Company's financing arrangements contain restrictions
which, among other things, limit the aggregate amount of the
Company's dividends. Reinvested earnings available for
dividends at June 30, 1996, were approximately $132.8
million.
<PAGE>
9. Financial Instruments
The Company's financial instrument portfolio is comprised of
cash and cash equivalents, raw material futures contracts
and commodity price swaps, company-owned life insurance, and
short- and long-term debt instruments.
The carrying amounts for cash, cash equivalents, and
short-term debt approximate their fair values due to the
short maturities of these instruments. The carrying amount
for company-owned life insurance is based on cash surrender
values determined by the insurance carriers.
The fair value of long-term debt as of June 30, 1996 and
1995, determined by using current interest rates and market
values of similar issues, was approximately $205.5 million
and $208.7 million, respectively.
The fair value of raw material futures contracts and
commodity price swaps is based on quoted market prices for
these instruments. At June 30, 1996 and 1995, the Company
had entered into contracts hedging future commodity
purchases of approximately $21.6 million and $9.1 million,
respectively. The fair market value of these contracts was
$20.3 million and $12.2 million, respectively.
10. Common Stock Purchase Rights
The Company has issued one common stock purchase right
("Right") for every outstanding share of common stock.
Except as otherwise provided in the Rights Agreement, the
Rights will become exercisable and separate Rights
certificates will be distributed to the shareholders: (1) 10
days following the acquisition of 20 percent or more of the
Company's common stock, (2) 10 business days (or such later
date as the Board may determine) following the commencement
of a tender or exchange offer for 20 percent or more of the
Company's common stock, or (3) 10 days after the Company's
Board of Directors determines that a holder of 15 percent or
more of the Company's shares has an interest adverse to
those of the Company or its shareholders (an "adverse
person"). Upon distribution, each Right would then entitle a
holder to buy from the Company one newly issued share of its
common stock for an exercise price of $145. After
distribution, upon: (1) any person acquiring 20 percent of
the outstanding stock (other than pursuant to a fair offer
as determined by the Board), (2) a 20 percent holder
engaging in certain self-dealing transactions, (3) the
determination of an adverse person, or (4) certain mergers
or similar transactions between the Company and holder of 20
<PAGE>
10. Common Stock Purchase Rights (continued)
percent or more of the Company's common stock, each Right
(other than those held by the acquiring party) entitles the
holder to purchase shares of common stock of either the
acquiring company or the Company (depending on the
circumstances) having a market value equal to twice the
exercise price of the Right. The Rights may be redeemed by
the Company for $.025 per Right at any time before they
become exercisable. In fiscal 1996 the Rights Agreement was
extended by the Board of Directors to June 26, 2006.
11. Stock-Based Compensation
The Company has three stock-based compensation plans for
officers and key employees: a 1993 plan, a 1982 plan and a
1977 plan.
1993 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 determine the
terms and conditions of each grant. In fiscal 1996, the plan
was amended, subject to Shareholder approval, to provide for
performance share awards. As of June 30, 1996 and 1995,
1,530,303 and 10,186 shares, respectively, were reserved for
options and share awards which may be granted under this
plan.
Stock option grants 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.
Restricted stock awards vest equally at the end of each year
of employment for the five-year period from the date of
grant. When the restricted shares are issued, deferred
compensation is recorded in the shareholders' equity section
of the consolidated balance sheet. The deferred compensation
is charged to expense over the vesting period. During fiscal
1996, 1995 and 1994, $.6 million, $.3 million and $.2
million, respectively, were charged to expense for vested
restricted shares.
<PAGE>
11. Stock-Based Compensation (continued)
Performance share awards are earned only if the Company
achieves certain performance levels over a three-year
period. The awards are payable in shares of common stock and
expensed over the three-year performance period. In June
1996, 18,400 performance share awards were granted
contingent on performance over the next three fiscal years.
There was no charge to expense for these awards in fiscal
1996.
1982 and 1977 Plans:
The 1982 plan expired in June 1992; however, all outstanding
unexpired options granted prior to that date remain in
effect. Under the 1982 and 1977 plans, options are granted
at the market value on the date of grant, and are
exercisable after one year of employment following the date
of grant. Under the 1982 plan, options granted since August
9, 1990 expire ten years after grant, while options granted
prior to that date have expired. Options granted under the
1977 plan expire ten years after grant. At June 30, 1996 and
1995, 164,620 and 284,720 shares, respectively, were
reserved for options which may be granted under the 1977
plan.
The Company also has a stock option plan which provides for
the granting of stock options to non-employee Directors.
Options are granted at the market value on the date of the
grant and are exercisable after one year of Board service
following the date of grant. Options expire ten years after
the date of grant. At June 30, 1996 and 1995, 157,000 and
89,000 shares, respectively, were reserved for options which
may be granted under this plan.
<PAGE>
11. Stock-Based Compensation (continued)
A summary of the option activity under all plans for the
past three years follows:
Number of Option Price
Shares per Share
-----------------------
Balance June 30, 1993 786,070 $19.00-$27.06
Granted 136,760 $26.88-$30.19
Exercised (195,318) $19.00-$25.75
Cancelled (3,160) $24.12-$27.06
-----------------------
Balance June 30, 1994 724,352 $19.00-$30.19
Granted 144,000 $28.32-$32.56
Exercised (70,810) $22.38-$30.19
Cancelled (3,390) $24.12-$30.19
-----------------------
Balance June 30, 1995 794,152 $19.00-$32.56
Granted 270,500 $33.00-$39.12
Exercised (241,546) $19.00-$30.19
Cancelled (9,600) $28.32-$32.56
-----------------------
Balance June 30, 1996 813,506 $19.00-$39.12
=======================
At June 30, 1996, 543,006 of the 813,506 options outstanding
were exercisable. Of the options outstanding at June 30,
1996, 428,830 relate to the 1993 plan, 146,574 relate to the
1982 plan, 154,580 relate to the 1977 plan and 83,522 relate
to the plan for non-employee Directors. No adjustments to
income are made with respect to options granted or exercised
under the plans.
12. Pension Plans
The Company has several noncontributory defined benefit pension
plans, which cover a majority of its employees. The benefits are
based primarily upon employees' years of service and average
earnings prior to retirement. The Company's funding policy for
the domestic plans is to contribute, at a minimum, amounts
sufficient to meet ERISA requirements. Plan assets are held in
trust, and consist primarily of publicly traded common stocks and
fixed income instruments.
<PAGE>
12. Pension Plans (continued)
Net pension credits included the following components:
(in thousands) 1996 1995 1994
-------------- ----------------------------
Service cost of benefits earned $ 11,439 $ 9,852 $ 9,891
Interest cost on projected
benefit obligation 28,852 27,255 25,576
Return on plan assets:
Actual (96,868) (83,917) (8,351)
Deferred gain (loss) 50,363 42,733 (34,297)
Net amortization and deferral (2,240) (2,727) (3,304)
----------------------------
Net pension credits $ (8,454) $ (6,804) $(10,485)
============================
Principal actuarial assumptions:
Discount rate 7.5% 8.0% 7.5%
Long-term rate of compensation
increase 4.5% 4.5% 4.5%
Long-term rate of return on
plan assets 9.0% 9.0% 9.0%
The .5% discount rate changes decreased the pension credit
by $.8 million in fiscal 1996 and increased the pension
credit by $.7 million in fiscal 1995.
The funded status of these plans at June 30, 1996 and 1995
is summarized as follows:
Overfunded Plans Underfunded Plans
(in thousands) 1996 1995 1996 1995
-------------- --------------------------------------
Plan assets at fair value $598,648 $527,009 $ 1,888 $ 1,378
--------------------------------------
Actuarial present value of
benefit obligations:
Vested 310,648 271,332 9,006 7,214
Non-vested 60,433 55,694 397 332
--------------------------------------
Accumulated benefit obligation 371,081 327,026 9,403 7,546
Effect of future com-
pensation increases 64,531 58,225 3,248 3,393
--------------------------------------
Projected benefit obligation 435,612 385,251 12,651 10,939
--------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation $163,036 $141,758 $(10,763) $ (9,561)
Unrecognized net (gain) loss -
experience different from
assumptions (90,990) (47,565) 3,527 3,008
Unrecognized transition
(asset) obligation (14,491) (17,387) 417 463
Unrecognized prior service cost 33,919 4,376 294 717
--------------------------------------
Prepaid (accrued) pension cost $ 91,474 $ 81,182 $ (6,525) $ (5,373)
======================================
Principal actuarial assumptions:
Discount rate 7.5% 7.5% 8.1% 7.1%
Long-term rate of
compensation increase 4.5% 4.5% 6.8% 6.0%
<PAGE>
12. Pension Plans (continued)
The actuarial present value of the projected benefit
obligation is computed assuming the continuing existence of
the plans. The obligation to fund these plans would be
substantially higher than the accumulated benefit obligation
if the plans were terminated.
In fiscal 1996, the domestic pension plans were amended to
provide an improved pension formula for participants and a
pension increase for participants who retired before January
1, 1992. These amendments increased the prior service cost
as of June 30, 1996 by $29.9 million.
The underfunded plans include the pension plan of the
Company's Mexican operations and several supplemental
retirement plans for certain key employees and outside
directors. During fiscal 1995, the Company established a
company-owned life insurance program covering certain key
employees and outside directors. The purpose of the program
is to provide for the Company's obligation under the
supplemental retirement plans. As of June 30, 1996 and 1995,
the cash surrender value of $4.2 million and $2.0 million,
respectively, was included in other assets on the
consolidated balance sheet.
The Company also maintains defined contribution pension and
savings plans for substantially all domestic employees. The
Company contributions were $4.8 million in fiscal 1996, $4.5
million in fiscal 1995 and $3.7 million in fiscal 1994.
There were 1,357,110 common shares reserved for issuance
under the savings plans at June 30, 1996.
<PAGE>
13. Postretirement Medical and Life Insurance Benefits
In addition to pension plan benefits, the Company provides
health care and life insurance benefits for a majority of
its retired employees and covered dependents. Eligible
employees receive these benefits upon normal retirement.
Expense of postretirement medical and life insurance
benefits consisted of the following components:
(in thousands) 1996 1995 1994
------------- ----------------------------
Service cost of benefits earned $ 2,317 $ 2,287 $ 2,803
Interest cost on accumulated
postretirement benefit obligation 9,767 10,317 10,622
Return on plan assets:
Actual (4,548) (6,023) 370
Deferred gain (loss) 2,274 4,675 (1,341)
Net amortization and deferral (1,575) (1,031) -
----------------------------
Postretirement medical and
life insurance benefits expense $ 8,235 $ 10,225 $ 12,454
============================
Principal actuarial assumptions:
Discount rate 7.5% 8.0% 7.5%
Return on plan assets 9.0% 9.0% 9.0%
Trend rate - beginning* 10.0% 11.0% 12.0%
Trend rate - ultimate 6.0% 6.0% 6.0%
*Declines 1% per year to the ultimate rate.
The .5% discount rate changes increased expense $.7 million in
fiscal 1996 and decreased expense $.8 million in fiscal 1995.
<PAGE>
13. Postretirement Medical and Life Insurance Benefits (continued)
The funded status of the postretirement medical and life
insurance benefit plans at June 30, 1996 and 1995, is
summarized as follows:
(in thousands) 1996 1995
-------------- ------------------
Accumulated postretirement
benefit obligation (APBO):
Retirees $ 90,669 $ 83,879
Fully eligible active
plan participants 24,751 20,702
Other active plan participants 28,968 28,555
------------------
Total APBO 144,388 133,136
Plan assets at fair value 33,624 24,586
------------------
APBO in excess of plan assets 110,764 108,550
Unrecognized net gain 35,074 38,477
Unrecognized prior service cost (2,111) (1,441)
------------------
Accrued postretirement benefits $143,727 $145,586
==================
Principal actuarial assumptions:
Discount rate 7.5% 7.5%
Trend rate - beginning* 9.0% 10.0%
Trend rate - ultimate 6.0% 6.0%
*Declines 1% per year to the ultimate rate.
The health-care cost trend rate assumption has a significant
effect on the amounts reported. If the assumed health-care
cost trend rate was increased by 1 percent, the APBO at June
30, 1996 would increase by $18.0 million and the
postretirement benefit expense for fiscal 1996 would have
increased by $1.7 million.
The Company has been voluntarily contributing amounts into a
Voluntary Employee Trust Fund (VEBA) since fiscal 1992. Plan
assets are invested in trust-owned life insurance.
<PAGE>
14. Employee Stock Ownership Program
The Company has a leveraged employee stock ownership plan
("ESOP") to assist a majority of its employees with their
future retiree medical obligations. The Company issued 461.5
shares of convertible preferred stock at $65,000 per share
to the ESOP in exchange for a $30.0 million 15-year, 9.345%
note which is included in the shareholders' equity section
of the consolidated balance sheet as deferred compensation.
The preferred stock is recorded net of related issuance
costs.
Principal and interest obligations on the note are satisfied
by the ESOP as the Company makes contributions to the ESOP
and dividends are paid on the preferred stock. As payments
are made on the note, shares of preferred stock are
allocated to participating employees' accounts within the
ESOP. The Company contributed $1.3 million in fiscal 1996,
$1.1 million in fiscal 1995 and $.9 million in fiscal 1994
to the ESOP. Compensation expense related to the plan was
$2.0 million in fiscal 1996 and 1995 and $2.1 million in
fiscal 1994.
As of June 30, 1996, the ESOP held 453.1 shares of the
convertible preferred stock, consisting of 116.1 allocated
shares and 337.0 unallocated shares. Each preferred share is
convertible into 2,000 shares of common stock. There are
906,109 common shares reserved for issuance under the ESOP
at June 30, 1996. The shares of preferred stock pay a
cumulative annual dividend of $5,362.50 per share, are
entitled to vote together with the common stock as a single
class and have 2,600 votes per share. The stock is
redeemable at the Company's option at any time after
September 5, 1996 at an initial price of $67,600 per share,
declining to $65,000 per share by 2001.
15. Supplemental Data
(in thousands) 1996 1995 1994
-------------- ----------------------------
Research and development $ 13,825 $ 12,302 $ 13,597
Repairs and maintenance $ 53,369 $ 49,305 $ 42,862
<PAGE>
16. Income Taxes
Provisions for income taxes consisted of the following:
(in thousands) 1996 1995 1994
-------------- ----------------------------
Current:
Federal $ 28,057 $ 20,117 $ 18,040
State 2,018 2,488 798
Foreign 420 1,160 1,544
Deferred:
Federal 3,589 4,332 4,937
State (211) (1,437) (128)
Foreign 1,149 419 (752)
----------------------------
$ 35,022 $ 27,079 $ 24,439
============================
The following is a reconciliation of the statutory federal
income tax rate to the actual effective income tax rate:
(% of pre-tax income) 1996 1995 1994
--------------------- -------------------------
Federal tax rate 35.0% 35.0% 35.0%
Increase (decrease) in
taxes resulting from:
State income taxes, net
of federal tax benefit 2.0 4.1 1.7
Federal and state tax
rate changes (0.5) (2.0) 1.4
Other, net 0.3 (0.8) 0.9
-------------------------
Effective tax rate 36.8% 36.3% 39.0%
=========================
Deferred taxes are recorded based upon temporary differences
between financial statement and tax bases of assets and
liabilities. The following deferred tax liabilities and
assets were recorded as of June 30, 1996 and 1995:
(in thousands) 1996 1995
------------- ------------------
Deferred tax liabilities:
Depreciation and amortization $110,906 $110,921
Prepaid pensions 30,659 26,578
Other 14,614 15,755
------------------
Total deferred tax liabilities 156,179 153,254
------------------
Deferred tax assets:
Postretirement provisions 54,557 56,000
Other reserve provisions 20,576 21,168
Valuation allowance (1,301) (502)
------------------
Total deferred tax assets 73,832 76,666
------------------
Net deferred tax liability $ 82,347 $ 76,588
==================
<PAGE>
16. Income Taxes (continued)
The change in the valuation allowance in fiscal 1996 relates
to pre-acquisition net operating loss carryforwards of an
acquired company.
17. Commitments and Contingencies
Environmental
The Company is subject to various stringent federal, state
and local environmental laws and regulations. The liability
for future environmental remediation costs is evaluated by
management on a quarterly basis. The Company accrues amounts
for environmental remediation costs which represent
management's best estimate of the probable and reasonably
estimable costs relating to environmental remediation. For
the year ended June 30, 1996, no expense was recognized, but
for the years ended June 30, 1995 and 1994, $1.0 million and
$1.2 million, respectively, were charged to operations for
environmental remediation costs. The liability recorded for
environmental cleanup costs, including remediation
investigation and feasibility study costs remaining at June
30, 1996 and 1995, was $5.6 million and $5.9 million,
respectively.
In June 1996, the Company entered into a partial settlement
of litigation relating to insurance coverages for certain
superfund sites and recognized income of $4.1 million. The
amounts receivable for recoveries from this settlement and
from potentially responsible parties ("PRPs") at June 30,
1996 and 1995, were $4.2 million and $1.2 million,
respectively.
Estimates of the amount and timing of future costs of
environmental remediation requirements are necessarily
imprecise because of the continuing evolution of
environmental laws and regulatory requirements, the
availability and application of technology and the
identification of presently unknown remediation sites and
the allocation of costs among the PRPs. Based upon
information presently available, such future costs are not
expected to have a material effect on the Company's
competitive or financial position. However, such costs could
be material to results of operations in a particular future
quarter or year.
<PAGE>
17. Commitments and Contingencies (continued)
Other
The Company is also defending various claims and legal
actions, and is subject to commitments and contingencies
which are common to its operations. The Company provides for
costs relating to these matters when a loss is probable and
the amount is reasonably estimable. The effect of the
outcome of these matters on the Company's future results of
operations and liquidity cannot be predicted because any
such effect depends on future results of operations and the
amount and timing (both as to recording future charges to
operations and cash expenditures) of the resolution of such
matters. While it is not feasible to determine the outcome
of these matters, in the opinion of management, any total
ultimate liability will not have a material effect on the
Company's financial position or results of operations and
cash flows.
<PAGE>
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited)
Quarterly sales and earnings results are usually influenced
by seasonal factors. The first fiscal quarter (three months
ending September 30) is typically the lowest because of annual
plant vacation and maintenance shutdowns in this period by
Carpenter and by many of our customers. This seasonal pattern
can be disrupted by major economic cycles or special accounting
adjustments.
(dollars in thousands-
except per share First Second Third Fourth Fiscal
amounts) Quarter Quarter Quarter Quarter(1) Year
- ---------------------------------------------------------------------------
Results of Operations
Fiscal 1996
Net sales $184,469 $210,126 $233,274 $237,455 $865,324
Gross profits $ 48,264 $ 52,897 $ 58,699 $ 68,681 $228,541
Net income $ 11,906 $ 12,293 $ 14,726 $ 21,223 $ 60,148
- --------------------------------------------------------------------------
Fiscal 1995
Net sales $156,084 $172,400 $211,636 $217,412 $757,532
Gross profits $ 34,516 $ 44,483 $ 57,535 $ 56,829 $193,363
Net income $ 4,932 $ 9,827 $ 15,363 $ 17,370 $ 47,492
- --------------------------------------------------------------------------
Per Common Share
Fiscal 1996
Primary earnings $ .70 $ .71 $ .86 $ 1.24 $ 3.51
Fully-diluted
earnings $ .67 $ .69 $ .83 $ 1.19 $ 3.38
- --------------------------------------------------------------------------
Fiscal 1995
Primary earnings $ .28 $ .58 $ .91 $ 1.04 $ 2.81
Fully-diluted
earnings $ .27 $ .56 $ .89 $ .98 $ 2.70
- --------------------------------------------------------------------------
(1) Changes in Pennsylvania income tax laws resulted in increases to
net income of $1.5 million, or $.09 per share, during the fourth
quarter of fiscal 1995.
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
Not Applicable
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required as to directors is incorporated herein by
reference to the "Election of Directors" section of the 1996 definitive
Proxy Statement.
Information concerning the Company's executive officers appears in
Part I of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this item is incorporated herein by
reference from the 1996 definitive Proxy Statement under the "Election
of Directors" section.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The security ownership of directors and officers as a group is
described in the 1996 definitive Proxy Statement under "Security Ownership
of Directors and Officers" section. Such information is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference from the 1996 definitive Proxy Statement under the "Election
of Directors" section.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents Filed as Part of this Report:
(1) The following consolidated financial statement schedule
should be read in conjunction with the consolidated
financial statements (see Item 8. Financial Statements):
Report of Independent Accountants
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or the required information is contained in the
consolidated financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF CARPENTER TECHNOLOGY CORPORATION
Our report on the consolidated financial statements of
Carpenter Technology Corporation and subsidiaries is included on
page 20 of the 1996 Annual Report on Form 10-K. In connection
with our audits of such financial statements, we have also
audited the related financial statement schedule listed in Item
14(a) of this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 29, 1996
<PAGE>
(2) The following documents are filed as exhibits:
3. Articles of Incorporation and By-Laws of the Company
4. Instruments Defining the Rights of Security Holders,
Including Indentures
10. Material Contracts
11. Statement re Computation of Per Share Earnings
12. Statement re Computation of Ratios
23. Consent of Experts and Counsel
24. Powers of Attorney
27. Financial Data Schedule
99. Additional Exhibits
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated
May 3, 1996 with respect to the amendment and extension of
the Rights Agreements described in Exhibit 4B of the
Exhibit Index.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CARPENTER TECHNOLOGY CORPORATION
By s/G. Walton Cottrell
G. Walton Cottrell
Sr. Vice President - Finance &
Chief Financial Officer
Date: September 26, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed by the following persons on
behalf of the registrant in the capacities and on the dates
indicated.
s/Robert W. Cardy Chairman, President & September 26, 1996
- ---------------------- Chief Executive Officer
Robert W. Cardy and Director (Principal
Executive Officer)
s/G. Walton Cottrell Sr. Vice President - September 26, 1996
- ---------------------- Finance & Chief
G. Walton Cottrell Financial Officer
s/Edward B. Bruno Controller (Principal September 26, 1996
- ---------------------- Accounting Officer)
Edward B. Bruno
* Director September 26, 1996
- ----------------------
Marcus C. Bennett
* Director September 26, 1996
- ----------------------
William S. Dietrich II
* Director September 26, 1996
- ----------------------
C. McCollister Evarts, M.D.
* Director September 26, 1996
- ----------------------
Carl R. Garr
<PAGE>
* Director September 26, 1996
- ----------------------
William J. Hudson, Jr.
* Director September 26, 1996
- ----------------------
Arthur E. Humphrey
* Director September 26, 1996
- ----------------------
Edward W. Kay
* Director September 26, 1996
- ----------------------
Frederick C. Langenberg
* Director September 26, 1996
- ----------------------
Marlin Miller, Jr.
* Director September 26, 1996
- ----------------------
Paul R. Roedel
* Director September 26, 1996
- ----------------------
Kathryn C. Turner
* Director September 26, 1996
- ----------------------
Kenneth L. Wolfe
Original Powers of Attorney authorizing John R. Welty to sign
this Report on behalf of: Marcus C. Bennett, William S.
Dietrich II, C. McCollister Evarts, M.D., Carl R. Garr,
William J. Hudson, Jr., Arthur E. Humphrey, Edward W. Kay,
Frederick C. Langenberg, Marlin Miller, Jr., Paul R. Roedel,
Kathryn C. Turner, Kenneth L. Wolfe, are being filed with the
Securities and Exchange Commission.
*By s/John R. Welty
-------------------
John R. Welty
Attorney-in-fact
<PAGE>
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Balance Additions
at Beg- Charged Charged Balance
inning to to at End
of Costs & Other Deduc- of
Description Period Expenses Accts(1) tions(2) Period
- ----------- ------ -------- ----- ----- ------
Year ended
June 30, 1996:
Allowance for doubtful
accounts receivable $1,034 $ 440 $ 472 $ (697) $1,249
Year ended
June 30, 1995:
Allowance for doubtful
accounts receivable $ 619 $ 578 $ 338 $ (501) $1,034
Year ended
June 30, 1994:
Allowance for doubtful
accounts receivable $ 500 $ 470 $ 316 $ (667) $ 619
(1) Includes beginning balances of acquired businesses and
recoveries of accounts previously written off, net of
collection expenses.
(2) Doubtful accounts written off.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Title Page
- ----------- ----- ----
3. Articles of Incorporation and By-Laws
A. Restated Certificate of Incorporation
is incorporated herein by reference
to Exhibit 3A of the Company's 1987
Annual Report on Form 10-K.
B. By-Laws, amended as of October 24, 1994.
4. Instruments Defining Rights of Security
Holders, Including Indentures
A. Restated Certificate of Incorporation
and By-Laws set forth in Exhibit Nos.
3A and 3B, above.
B. Rights Agreement relating to Rights
distributed to holders of the Company's
Stock, amended as of April 23, 1996, is
incorporated by reference to the
Company's Current Report on Form 8-K
filed May 3, 1996.
C. Agreement to furnish to the Securities
and Exchange Commission upon request a
copy of the Note Agreement relating to
the Company's 9.40% Notes Due October 30,
1996 is incorporated herein by
reference to Exhibit 4E of the Company's
1987 Annual Report on Form 10-K.
D. Certificate of Designation, Preferences and
Rights of the Series A Convertible Preferred
Stock is incorporated herein by reference to
Exhibit No. 3.1 to the Company's Form 8-K
Current Report dated September 6, 1991.
E. Indenture related to the Company's
$100,000,000 of 9.0% Sinking Fund Debentures
due 2022 is incorporated herein by reference
to Exhibit No. 4A to the Company's Form 10-Q
Quarterly Report for the quarter ended
March 31, 1992.
<PAGE>
F. The Company's Registration Statement No.
33-51613, as filed on Form S-3 on January 6,
1994, with respect to its Medium Term Note
Program for issuance of unsecured debt up
to $100,000,000 and the Prospectus and
Prospectus Supplement, both dated and filed
June 14, 1994, with respect thereto are
incorporated by reference.
G. Indenture dated January 12, 1994, between
the Company and Morgan Guaranty Trust Company
of New York, as Trustee, related to the
Company's $100,000,000 of unsecured medium
term notes registered under Registration No.
33-51613 is incorporated by reference to the
Company's Report on Form 10-Q for the
quarterly period ended December 31, 1993.
H. The Company's Registration Statement No.
33-54045 as filed on Form S-8 on June 8,
1994, with respect to its Stock-Based
Incentive Compensation Plan is incorporated
by reference.
I. Pricing Supplements Nos. 1 and 2, dated
August 8, 1994, as filed on August 9, 1994,
to Registration No. 33-51613 with respect
to issuance of $15,000,000 of debt under the
Company's $100,000,000 Medium Term Note
Program is incorporated by reference.
J. Pricing Supplements Nos. 3 and 4, dated
September 12, 1994, as filed on September 13,
1994 to Registration No. 33-51613 with
respect to issuance of $15,000,000 of debt
under the Company's $100,000,000 Medium Term
Note Program is incorporated by reference.
K. Pricing Supplement No. 5 dated September 21,
1994 as filed on September 22, 1994 to
Registration No. 33-51613 with respect to the
issuance of $10,000,000 of debt under the
Company's $100,000,000 Medium Term Note
Program is incorporated by reference.
L. Pricing Supplement No. 6 dated October 5,
1994 as filed on October 6, 1994 to
Registration No. 33-51613 with respect to
issuance of $10,000,000 of debt under the
Company's $100,000,000 Medium Term Note
Program is incorporated by reference.
<PAGE>
M. Pricing Supplements Nos. 7 and 8 dated
June 15, 1995 as filed on June 19, 1995
to Registration No. 33-51613 with respect
to issuance of $30,000,000 of debt under
the Company's $100,000,000 Medium Term
Note Program is incorporated by reference.
10. Material Contracts
A. Supplemental Retirement Plan for E-7
Executive Officers, amended as of April 23,
1996, in the form attached hereto.
B. Management and Officers Capital Appre-
ciation Plan, an Incentive Stock Option
Plan, amended as of August 9, 1990, is
incorporated herein by reference to
Exhibit No. 10B to the Company's 1990
Annual Report on Form 10-K.
C. Incentive Stock Option Plan for Officers
and Key Employees, amended as of August 9,
1990, is incorporated herein by reference
to Exhibit No. 10C to the Company's 1990
Annual Report on Form 10-K.
D. Directors Retirement Plan is incorporated
herein by reference to Exhibit No. 10E to
the Company's 1983 Annual Report on Form 10-K.
E. Deferred Compensation Plan for Nonmanage- E-15
ment Directors of Carpenter Technology
Corporation, amended as of December 7,
1995, in the form attached hereto.
F. Deferred Compensation Plan for Corporate E-24
and Division Officers of Carpenter
Technology Corporation, amended as of
December 7, 1995, in the form attached
hereto.
G. Executive Annual Compensation Plan is
incorporated herein by reference to
Exhibit No. 10G to the Company's 1990
Annual Report on Form 10-K.
H. Non-Qualified Stock Option Plan For
Non-Employee Directors amended as of
October 23, 1995, is incorporated
herein by reference to Exhibit No. 10H
to the Company's 1990 Annual Report on
Form 10-K and the 1995 Proxy Statement.
<PAGE>
I. Officers' Supplemental Retirement Plan
of Carpenter Technology Corporation is
incorporated herein by reference to Exhibit
10I to the Company's 1990 Annual Report on
Form 10-K.
J. Trust Agreement between the Company and the
Chase Manhattan Bank, N.A. dated September 11,
1990 relating, in part, to the Supplemental
Retirement Plan for Executive Officers,
Deferred Compensation Plan for Corporate and
Division Officers of Carpenter Technology
Corporation and the Officers' Supplemental
Retirement Plan of Carpenter Technology
Corporation, set forth in Exhibits Nos. 10A,
10F and 10I, above is incorporated herein by
reference to Exhibit No. 10J to the Company's
1990 Annual Report on Form 10-K.
K. Carpenter Technology Corporation Employee
Stock Ownership Plan, effective as of
September 6, 1991, is incorporated herein
by reference to Exhibit No. 10.1 to the
Company's Form 8-K Current Report dated
September 6, 1991.
L. Carpenter Technology Corporation Employee
Stock Ownership Plan Trust Agreement dated
September 6, 1991, between the Company and
State Street Bank and Trust Company, not
in its individual capacity, but solely in
its capacity as the Trustee, is incorporated
herein by reference to Exhibit No. 10.2 to
the Company's Form 8-K Current Report dated
September 6, 1991.
M. Stock Purchase Agreement dated September 6,
1991, between the Company and State Street
Bank and Trust Company, not in its indivi-
dual capacity, but solely in its capacity
as the Trustee, is incorporated herein by
reference to Exhibit No. 10.3 to the
Company's Form 8-K Current Report dated
September 6, 1991.
N. Stock Subscription and Investment Agreement
and related letter agreement, both dated
April 8, 1993, between Walsin Lihwa
Corporation and the Company are incorporated
by reference to Exhibit 1 of the Company's
Current Report on Form 8-K, dated April 7,
1993.
<PAGE>
O. Indemnification Agreements, entered into
between the Company and each of the
directors and the following executive
officers: Robert W. Cardy, Dennis M.
Draeger, G. Walton Cottrell, Nicholas F.
Fiore, Robert W. Lodge and John R. Welty
are incorporated by reference to the form
attached to the Company's 1993 Form 10-K.
P. Stock-Based Incentive Compensation Plan
for Officers and Key Employees, amended as
of June 27, 1996, is incorporated herein
by reference to Appendix A to the 1996
Proxy Statement.
Q. Stock Purchase Agreement dated July 28, 1993,
between Carpenter Technology Corporation,
Carpenter Investments, Inc. and the share-
holders of Aceros Fortuna, S.A. de C.V. and
Movilidad Moderna, S.A. de C.V. with respect
to the purchase of all the capital stock of
Aceros Fortuna and Movilidad Moderna is
incorporated by reference to Exhibit 1 to the
Company's Form 8-K Current Report dated
July 28, 1993.
R. Distribution Agreement dated January 12,
1994 among the Company, CS First Boston
Corporation and J. P. Morgan Securities
Inc. is incorporated by reference to
Exhibit 1 to the Company's Registration
Statement No. 33-51613.
S. Special Severance Agreements entered
into between the Company and each of
the following executive officers:
Robert W. Cardy, Dennis M. Draeger,
G. Walton Cottrell, Nicholas F. Fiore,
Robert W. Lodge, and John R. Welty
are incorporated herein by reference
to the form attached to the Company's
1995 Form 10-K.
T. Trust Agreement between the Company E-34
and the Chase Manhattan Bank, N.A.
dated December 7, 1990, relating in
part to the Directors Retirement Plan
and the Deferred Compensation Plan for
Nonmanagement Directors set forth in
Exhibits 10D and 10E above in the form
attached hereto.
<PAGE>
11. Statement re Computation of Per Share E-53
Earnings
12. Statement re Computations of Ratios E-55
23. Consent of Experts and Counsel E-56
Consent of Independent Accountants
24. Powers of Attorney E-57
Powers of Attorney in favor of
G. Walton Cottrell or John R. Welty.
27. Financial Data Schedule E-72
99. Additional Exhibits
1996 Proxy Statement, submitted to the
SEC via Edgar on September 25, 1996
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
CARPENTER TECHNOLOGY CORPORATION
EFFECTIVE DECEMBER 13, 1979
AS AMENDED APRIL 23, 1996
E-7
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
CARPENTER TECHNOLOGY CORPORATION
Effective December 13, 1979
As Amended April 23, 1996
1. Purpose
-------
The purpose of this Plan is to attract, retain and motivate
designated employees of Carpenter Technology Corporation
(the "Corporation") who are Participants in the Plan by
providing supplemental pension and death benefits to enhance
their economic security during their active careers with the
Corporation and in Retirement.
2. Definitions
-----------
(A) "Annual Base Formula Retirement Benefit" shall mean the annual
benefit computed to measure total annual retirement income after
normal Retirement age, as provided in Section 6.
(B) "Annual Supplemental Retirement Benefit" shall mean the
annual benefit to be paid from the Plan, as provided in
Section 7, and shall be paid in accordance with the
provisions of Section 5.
(C) "Board" shall mean the Board of Directors of Carpenter
Technology Corporation.
(D) "Consecutive Five-Year Calculation Period" shall mean
any of the periods of five consecutive calculation
years created under the definition of "average monthly
earnings" found in the General Retirement Plan.
(E) "Disabled" shall mean totally disabled as described in, and
which results in, the Participant's eligibility to receive
benefits under the Corporation's Long Term Disability Plan.
(F) "Former Participant" shall mean any person who has
previously been a Participant in this Plan and was
either (i) a Participant for at least three years or
(ii) an employee of the Company for at least ten years.
(G) "General Retirement Plan" shall mean the Corporation's
"General Retirement Plan for Employees of Carpenter
Technology Corporation" as in effect on the last date
of a Participant's employment with the Corporation as a
participant under the General Retirement Plan.
(H) "Participant" shall mean any person included in the Plan,
as provided in Section 3 and shall also mean a Former
Participant except as otherwise provided in Section 6.
E-8
<PAGE>
(I) "Plan" shall mean the Supplemental Retirement Plan for
Executives of Carpenter Technology Corporation.
(J) "Retirement" shall mean the date of retirement as
defined in the General Retirement Plan.
(K) "Spouse" shall mean the Participant's spouse as defined
in section 4.5(a)(1) of the General Retirement Plan.
3. Participants
------------
Participants in the Plan will consist of such employees of
the Corporation as the Board in its sole discretion may from
time to time designate. Participation in the Plan will
terminate only
(A) upon termination of employment of a Participant for any
reason other than Retirement under conditions where
benefits are payable under Section 7 (except that a
Former Participant shall be eligible to receive any
previously accrued benefit under this Plan), or
(B) when further participation is canceled by the Board (except
that a Former Participant shall be eligible to receive any
previously accrued benefit under this Plan), or
(C) when a Participant performs services for the Corporation
solely as an independent contractor or consultant (except
that such Participant shall continue to receive any
previously accrued benefit under this Plan), or
(D) notwithstanding anything to the contrary contained in (A),
(B) or (C) above, when a Participant competes with the
Corporation as provided in the Supplemental Retirement
Agreement referenced in Section 4 hereof, (in which case
no further payments will be made under the Plan).
4. Supplemental Retirement Agreement
---------------------------------
Each Participant, as a condition precedent to becoming a
Participant, will enter into an agreement with the
Corporation, in a form supplied by and satisfactory to the
Corporation, which will, inter alia,
(A) set forth the provisions of the benefits of this Plan,
(B) permit the Corporation, in its sole discretion, to
insure the Participant's life under an individual life
insurance policy in which the Corporation is the owner
and beneficiary at no cost to the Participant, and
(C) contain a noncompetition provision.
E-9
<PAGE>
5. Benefits
--------
(A) Each Participant who shall retire under the conditions set
forth in Section 7 will receive an Annual Supplemental
Retirement Benefit paid from the general assets of the
Corporation for a period of fifteen years commencing as
provided herein. Such benefit will be paid in consecutive
quarter yearly payments on the first business day of January,
April, July and October (hereinafter individually referred to
as the "Quarterly Payment Date") for the immediately
preceding calendar quarters ended, December 31, March 31,
June 30 and September 30, respectively. The initial payment
shall be made on the first Quarterly Payment Date following
the Participant's Retirement, or, at the election of a
Disabled Participant, commencing upon any subsequent
Quarterly Payment Date which occurs while the Participant
remains Disabled, but in no event later than the Quarterly
Payment Date following the earlier of the Participant's
cessation of disability or the attainment of age 65.
Proration shall be made for a short calendar quarter and
calculated on a 90 day per quarter basis.
(B) In the event of the death of a Participant after Retirement
and before the entire number of said quarterly payments have
been paid, such remaining unpaid quarterly payments will be
paid to the last beneficiary designated in writing by the
Participant to, and received by, the Pension Board or, in the
absence or failure of any such designation or the designated
beneficiary fails to survive for the said fifteen year period,
to the surviving Spouse of the Participant, or in the absence
of such Spouse, to the Participant's estate. In the event the
designated beneficiary fails to survive and the Participant's
Spouse does not survive for the said fifteen years, the Pension
Board may elect to make a lump sum payment of the unpaid amount
to the Participant's estate, or the Spouse's estate, or the
beneficiary's estate, as the Pension Board may determine in its
sole discretion to be fair and equitable, said lump sum payment
being the present value of the remaining payments, determined in
accordance with the average rate of interest published by the
Pension Benefit Guaranty Corporation for immediate annuities for
the 36 months immediately preceding the date of such payment.
E-10
<PAGE>
(C) In the event of the death of a Participant before Retirement when
the Participant would have been eligible to receive retirement
benefits under either Section 7(A) or 7(B), the Normal or Early
Supplemental Retirement Benefit to which the Participant would
have been entitled had he retired on the date of his death will
be paid to the last beneficiary designated in writing by the
Participant to, and received by, the Pension Board or, in the
absence or failure of any such designation or the designated
beneficiary fails to survive for the said fifteen year period, to
the surviving Spouse of the Participant, or, in the absence of
such Spouse, to the Participant's estate. Such benefit will be
determined as of the date of death of the Participant and will be
paid in accordance with the payment procedures in Section 5(A).
In the event the designated beneficiary fails to survive and the
Participant's Spouse does not survive for the said fifteen years,
the Pension Board may elect to make a lump sum payment of the
unpaid amount to the Participant's estate, or the Spouse's estate,
or the beneficiary's estate, as the Pension Board may determine in
its sole discretion to be fair and equitable, said lump sum pay-
ment being the present value of the remaining payments, determined
in accordance with the average rate of interest published by the
Pension Benefit Guaranty Corporation for immediate annuities for
the 36 months immediately preceding the date of such payment.
(D) No benefit payable under this Plan shall be subject in any way to
alienation, sale, transfer, assignment, pledge, attachment,
garnishment, execution, or encumbrance of any kind, and any
attempt to accomplish the same shall be void and of no effect.
6. Annual Base Formula Retirement Benefit
--------------------------------------
The Annual Base Formula Retirement Benefit shall be calculated at the
date of Retirement or in the case of a Former Participant at the
termination of participation and will be equal to
(A) the Participant's or Former Participant's average annual earnings
calculated by multiplying the "average monthly earnings" (as
determined for pension purposes under the General Retirement Plan)
by 12 (or in the event the Participant or Former Participant has
insufficient service to create a Consecutive Five-Year Calculation
Period, the average annual earnings calculated from such years of
service and fractions thereof, rounded to the nearest month) [in
either event, if the Participant had eligible compensation reduced
under the General Retirement Plan to comply with section 401(a)(17)
of the Internal Revenue Code of 1986, and the regulations there-
under, as amended, or has deferred compensation under any deferred
compensation plan of the Corporation, other than any deferred
compensation previously included in the definition of "earnings"
contained in the General Retirement Plan, such deferred and/or
reduced compensation shall be added, for the sole purpose of
determining the benefit under this Section, to the Participant's
earnings in the year the Participant would have been credited with
such earnings under the General Retirement Plan but for such
deferral and/or reduction],
E-11
<PAGE>
(B) multiplied by a percentage which is
(l) five percent for each year of service, or fraction thereof,
with the Corporation up to a maximum of ten years, that an
individual has been designated a Participant in this Plan
subsequent to December 13, 1979, plus
(2) (with respect to Participants and Former Participants who
became Participants before October 1, 1988) two percent for
each other year of service or fraction thereof with the
Corporation, or its subsidiaries; or
(3) (with respect to Participants and Former Participants who
became Participants on or after October 1, 1988 and retire
prior to January 1, 1997) 1.26 percent for each other year
of service or fraction thereof with the Corporation, or its
subsidiaries; or
(4) (with respect to Participants and Former Participants who
became Participants on or after October 1, 1988 and retire
after December 31, 1996) 1.3 percent for each year of
service up to 20 years and 1.4 percent for each additional
year of service or fraction thereof with the Corporation, or
its subsidiaries;
provided, however, that the aggregate of the percentages of this
Subparagraph 6(B) shall not exceed the sum of 60% plus one-quarter
percent per year for each year or fraction thereof for such
service exceeding 30 years,
(C) reduced by the sum of the following (such reduction to commence and
be fixed as of the respective calculation dates hereinafter stated):
(l) the Participant's accrued pension benefits calculated to be
payable from any other defined benefit pension plans (including
but not limited to the General Retirement Plan, the Benefit
Equalization Plan, the Earnings Adjustment Plan, the Officers'
Supplemental Retirement Plan, and any pension plans from other
prior employment) as of the respective date or dates of earliest
entitlement or, if later, the date of retirement under such
pension plans, before any actuarial reduction for option
election; provided, however, that any such reduction shall not
include the portion of any other pension benefit resulting from
the Participant's express contribution, nor any benefits attri-
butable to a defined contribution entitlement and
(2) the amount of the Primary Social Security Retirement Benefit
calculated to be payable as of the date of earliest entitlement
or, if later, the date of Retirement hereunder.
E-12
<PAGE>
7. Annual Supplemental Retirement Benefits
---------------------------------------
(A) Normal Retirement.
(1) A Participant shall receive upon Retirement a
Normal Supplemental Retirement Benefit if he has
attained (a) age 62 or older with five or more
years of service with the Corporation or its
subsidiaries, or (b) thirty years of service with
the Corporation or its subsidiaries.
(2) The amount of such benefit will be the Annual Base Formula
Retirement Benefit, as set forth in Section 6.
(B) Early Retirement.
(1) In the event of Retirement before attainment of
eligibility for Normal Retirement, a Participant
shall receive an Early Supplemental Retirement
benefit if he is then vested under the General
Retirement Plan.
(2) The amount of such benefit will be equal to the
Annual Base Formula Retirement Benefit, as set
forth in Section 6(A) and 6(B), reduced to its
equivalent actuarial value from age 62 to the date
of initial payment to the Participant based on the
average rate of interest published by the Pension
Benefit Guaranty Corporation for immediate
annuities for the immediately preceding 36 months,
and subsequently adjusted for any further
reduction required under Section 6(C).
(C) Mutual Consent Retirement.
(1) A Participant shall receive upon Retirement
hereunder with fifteen or more years' service with
the Corporation or its subsidiaries, a Mutual
Consent Retirement if: (a) he is entitled to
retire under the General Retirement Plan, and (b)
both the Participant and the Corporation agree
that his Retirement under this Plan would be
mutually beneficial.
(2) The amount of such benefit will be the Annual Base
Formula Retirement Benefit, as set forth in
Section 6.
(D) Notwithstanding anything to the contrary contained in
this Plan, no Participant, Spouse or other beneficiary
may become entitled to benefits under this Plan without
the Participant or Former Participant first completing
five consecutive years of service with the Corporation
or its subsidiaries, unless otherwise provided in
writing and expressly authorized by Board approval.
E-13
<PAGE>
8. General Provisions
------------------
(A) The administration of this Plan shall be by the Pension
Board appointed by the Board under the provisions of
the General Retirement Plan. Any interpretation of
this Plan shall be by the Compensation and Stock Option
Committee of the Board.
(B) The benefits provided by this Plan will be paid from
the general assets of the Corporation or otherwise as
the Board may from time to time determine.
(C) The Board reserves the right at any time to modify or
amend in whole or in part any or all of the provisions
of the Plan, subject to the provisions of the
Supplemental Retirement Agreement between the
Corporation and each Participant.
E-14
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-MANAGEMENT DIRECTORS
-------------------------------------------------------
This is the Carpenter Technology Corporation Deferred Compensation
Plan for Non-Management Directors, effective January 1, 1995, established
by Carpenter Technology Corporation and its subsidiaries expressly included
herein to provide its non-employee directors with an additional method of
planning for their retirement. The Plan is intended to be an unfunded plan
maintained for the purpose of providing deferred compensation to the
non-employee directors of Carpenter Technology Corporation.
ARTICLE I - DEFINITIONS
------------------------
The following words and phrases as used herein have the following
meanings unless the context plainly requires a different meaning:
1.1 Account means the total amount credited to the bookkeeping
-------
accounts in which a Participant's Contributions are maintained, including
earnings thereon.
1.2 Beneficiary means the person that the Participant designates to
-----------
receive any unpaid portion of the Participant's Account should the
Participant's death occur before the Participant receives the entire
balance to the credit of such Participant's Account. If the Participant
does not designate a beneficiary, his Beneficiary shall be his spouse if
he is married at the time of his death, or his estate if he is unmarried
at the time of his death.
1.3 Board of Directors means the board of directors of
------------------
Carpenter Technology Corporation.
1.4 Code means the Internal Revenue Code of 1986, as amended.
----
1.5 Compensation means all amounts that a Director receives in
------------
payment for serving on the Board of Directors. Notwithstanding the
preceding sentence, Compensation shall not include amounts identified
by the Corporation as expense allowances or reimbursements.
1.6 Contribution means an amount deferred under the Plan pursuant
------------
to a Participant's election under Article IV and credited to a Participant's
Account. No money or other assets will actually be contributed to such
Accounts.
<PAGE>
1.7 Corporation means the Carpenter Technology Corporation.
-----------
1.8 Director means an individual who serves on the Board of
--------
Directors or on the board of directors of any subsidiary that the
Board of Directors of Carpenter Technology Corporation designates
to participate in the Plan. A list of the subsidiaries currently
designated to participate in the Plan is attached hereto as
Appendix A.
1.9 Effective Date means January 1, 1995.
--------------
1.10 Five-Year Medium Term Note Borrowing Rate means the
-----------------------------------------
Corporation's Five-Year Medium Term Note Borrowing Rate, as
provided by one of the Corporation's investment bankers for any
such medium term note that would have been issued on November 15
(or the next business day thereafter if November 15 is not a
business day) of each Plan Year.
1.11 Participant means a Director who elects to participate in the
-----------
Plan pursuant to Section 2.2.
1.12 Pension Board means the Pension Board appointed pursuant to
-------------
the General Retirement Plan for Employees of Carpenter Technology
Corporation, as constituted from time to time.
1.13 Plan means the Carpenter Technology Corporation Deferred
----
Compensation Plan for Non-Management Directors, as may be amended from
time to time.
1.14 Plan Administrator means the Pension Board.
------------------
1.15 Plan Year means the 12-month period beginning January 1 and
---------
ending December 31.
<PAGE>
ARTICLE II - PARTICIPATION
--------------------------
2.1 Eligibility to Participate. All Directors who are neither current
--------------------------
nor past employees of the Corporation or any of its subsidiaries are eligible
to participate in the Plan.
2.2 Participation. Any Director who elects to participate in the
-------------
Plan shall become a Participant in the Plan immediately upon enrolling as
a Participant by the method required by the Plan Administrator. An
individual shall remain a Participant under the Plan until all amounts
credited to the Participant's Account have been distributed to the
Participant or the Participant's Beneficiary.
ARTICLE III - VESTING
---------------------
Participants are always fully vested in all amounts credited to their
Accounts.
ARTICLE IV - CONTRIBUTIONS
--------------------------
4.1 Eligibility to Receive Contributions. Subject to Section 5.4.2,
------------------------------------
a Participant may receive Contributions in each Plan Year that the
Participant is a Director and is not an employee of the Corporation.
4.2 Contributions. A Participant may elect to defer up to 100% of
-------------
the Participant's Compensation and to have the Corporation make a
Contribution of that amount to the Participant's Account under the Plan.
4.3 Elections.
---------
4.3.1 Frequency and Timing of Elections. Elections may be
---------------------------------
made once each Plan Year and they may not be modified during the Plan Year.
The Participant must make an election by December 15 of a Plan Year for it
to take effect for the next Plan Year. However, for the initial Plan Year
beginning January 1, 1995, elections must be made by January 31, 1995, and
they will be effective as of February 1, 1995.
4.3.2 Duration of Elections. Elections to receive
---------------------
Contributions under this Article IV expire at the end of each Plan Year for
which the election was made.
<PAGE>
4.3.3 Restriction on Elections. Elections to receive
------------------------
Contributions may be in the form of a whole percentage or in $1 increments.
4.4 Earnings. All amounts credited to a Participant's Account shall
--------
be credited with earnings at a rate equal to the Five-Year Medium Term Note
Borrowing Rate, established as of November 15 (or the next business day
thereafter if November 15 is not a business day) of the prior Plan Year.
For the first Plan Year, the rate is 8.25%. The Pension Board shall
communicate to all Directors the Five-Year Medium Term Note Borrowing Rate
for the next Plan Year no later than November 30 of the current Plan Year.
Earnings on Contributions shall begin to accrue on the date that such
Contributions would have been paid to the Participant but for an election
to defer under this Article IV. Earnings shall be compounded semi-annually
on each January 1 and July 1. In addition, any distribution not made on
either January 1 or July 1 shall have earnings compounded as of the date of
distribution.
ARTICLE V - DISTRIBUTIONS
-------------------------
5.1 Payment of Distributions. All distributions shall, at the
------------------------
Company's discretion, be made directly out of the Corporation's general
assets or from the Carpenter Technology Corporation Non-Qualified Benefits
Trust for Directors.
5.2 Form of Distributions. A Participant may receive distributions
---------------------
in one of the following manners, which the Participant shall elect on the
initial enrollment form.
5.2.1 A lump sum distribution of the Participant's
entire Account;
5.2.2 Ten annual installments, with the distribution each
year equal to the product resulting from multiplying the then current
Account balance by a fraction. The numerator of the fraction is always
one, and the denominator of the fraction is ten for the first distribution
and is reduced by one for each subsequent distribution;
5.2.3 Fifteen annual installments, with the distribution
each year equal to the product resulting from multiplying the then current
Account balance by a fraction. The numerator of the fraction is always one,
and the denominator of the fraction is fifteen for the first distribution
and is reduced by one for each subsequent distribution; or
5.2.4 On a schedule that is the same as that used for payments
made to the Participant under the Carpenter Technology Corporation Director
Retirement Plan.
<PAGE>
5.3 Timing of Distributions. Participants shall elect on their
-----------------------
initial enrollment forms when distributions of their Accounts will begin,
which shall either be a specific date or event. At any point prior to a
year in which a distribution of any or all of a Participant's Account is
scheduled for distribution pursuant to this Article V, the Participant
shall have the option to further defer all or part of the scheduled
distribution to a later year. A scheduled distribution or portion
thereof may, however, be further deferred only once.
5.4 Accelerated Distributions. Subject to the following forfeiture
-------------------------
and suspension provisions, a Participant may elect to receive a
distribution of all or a portion of his Account prior to the date or
dates originally elected under Section 5.3 as long as such distribution
is at least $5,000.
5.4.1 Forfeiture of Earnings. A Participant shall forfeit
----------------------
any earnings attributable to the amount distributed pursuant to
Section 5.4 that accrued during the six-month period ending on the date
of the distribution. The amount of forfeited earnings shall be calculated
using the highest interest rate that was in effect during the six-month
period. If, however, the actual earnings credited to a Participant's
Account are less than the amount determined in the immediately preceding
sentence, no amount beyond the actual earnings shall be forfeited. Any
amounts forfeited under this Section shall not be distributed or allocated
to any other Account in the Plan and shall be forfeited to the Corporation.
5.4.2 Suspension of Participation. If a Participant
---------------------------
elects to accelerate a distribution under Section 5.4, he will not be
entitled to receive any Contributions under the Plan for the Plan Year
immediately following the Plan Year in which the Participant elected to
accelerate a distribution. Any election made to receive Contributions
for a Plan Year in which participation is suspended shall be disregarded.
5.5 Termination of Service. Upon termination of service as a
----------------------
Director, a Participant, or the Beneficiary if the termination of
service is caused by the Participant's death, shall have the following
options with respect to the distribution of the Participant's Account:
5.5.1 Reaffirm Current Election. The Participant or
-------------------------
Beneficiary may elect to reaffirm the Participant's election under
Section 5.3 that was in effect at the time of the Participant's
termination; or
5.5.2 Request a New Election. The Participant or
----------------------
Beneficiary may elect a new distribution option available under
Section 5.2, subject to the Corporation's consent.
<PAGE>
ARTICLE VI - PLAN ADMINISTRATION
--------------------------------
6.1 General. The Plan shall be administered by the Pension Board,
-------
which is the Plan Administrator.
6.2 Responsibilities and Reports. The Plan Administrator may
----------------------------
pursuant to a written resolution allocate among one or more of its
members specific responsibilities under the Plan and the Plan
Administrator may name other persons to carry out such responsibilities.
The Plan Administrator shall be entitled to rely conclusively upon all
tables, valuations, certificates, opinions and reports that are furnished
by any actuary, accountant, controller, counsel, investment banker or
other person who is employed or engaged for such purposes.
6.3 Governing Law. This Plan shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania, to the
extent not preempted by federal law.
ARTICLE VII - CLAIMS PROCEDURE
------------------------------
7.1 Plan Interpretation. The Human Resources Committee of the
-------------------
Board of Directors shall have the authority and responsibility to
interpret and construe the Plan and to decide all questions arising
thereunder, including without limitation, questions of eligibility for
participation, eligibility for Contributions, the amount of Account
balances, and the timing of the distribution thereof, and shall have
the authority to deviate from the literal terms of the Plan to the
extent it shall determine to be necessary or appropriate to operate
the Plan in compliance with the provisions of applicable law.
Notwithstanding the above, a member of the Human Resources
Committee shall not take any part in decisions regarding his
participation in the Plan.
<PAGE>
7.2 Denial of Claim for Benefits. Any denial by the Human Resources
----------------------------
Committee of any claim for benefits under the Plan by a Participant or
Beneficiary shall be stated in writing by the Human Resources Committee
and delivered or mailed to the Participant or Beneficiary. The Human
Resources Committee shall furnish the claimant with notice of the decision
not later than 90 days after receipt of the claim, unless special circum-
stances require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination of
the initial 90 day period. In no event shall such extension exceed a
period of 90 days from the end of such initial period. The extension
notice shall indicate the special circumstances requiring an extension of
time and the date by which the Human Resources Committee expects to render
the final decision. The notice of the Human Resources Committee's decision
shall be written in a manner calculated to be understood by the claimant
and shall include (i) the specific reasons for thedenial, including, where
appropriate, references to the Plan, (ii) any additional information
necessary to perfect the claim with an explanation of why the information
is necessary, and (iii) an explanation of the procedure for perfecting the
claim.
7.3 Appeal of Denial. The claimant shall have 60 days after receipt
----------------
of written notification of denial of his or her claim in which to file a
written appeal with the Human Resources Committee. As a part of any such
appeal, the claimant may submit issues and comments in writing and shall,
on request, be afforded an opportunity to review any documents pertinent
to the perfection of his or her claim. The Human Resources Committee
shall render a written decision on the claimant's appeal ordinarily within
60 days of receipt of notice thereof but, in no case, later than 120 days.
ARTICLE VIII - FUNDING
----------------------
8.1 Funding. The Corporation shall not segregate or hold separately
-------
from its general assets any amounts credited to the Accounts, and shall be
under no obligation whatsoever to fund in advance any amounts under the
Plan, including Contributions and earnings thereon.
8.2 Insolvency. In the event that the Corporation becomes insolvent,
----------
all Participants and Beneficiaries shall be treated as general, unsecured
creditors of the Corporation with respect to any amounts credited to the
Accounts under the Plan.
<PAGE>
ARTICLE IX - AMENDMENT AND TERMINATION
--------------------------------------
9.1 Reservation of Rights. The Corporation reserves the right to
---------------------
amend or terminate the Plan at any time by action of the Board of
Directors. Notwithstanding the foregoing, no such amendment or
termination shall reduce the balance of any Participant's Account as of
the date of such amendment or termination.
9.2 Funding upon Termination. Upon a complete termination of the
------------------------
Plan, the Corporation shall contribute to the Carpenter Technology
Corporation Non-Qualified Benefits Trust for Directors an amount equal
to the aggregate of all amounts credited to Participants' Accounts as
of the date of such termination. If the Carpenter Technology
Corporation Non-Qualified Benefits Trust for Directors does not exist
at the time the Plan is terminated, the Corporation shall create an
irrevocable grantor trust to which it will contribute such amounts.
This newly created trust shall be designed to ensure that Participants
will not be subject to taxation on amounts contributed to and held under
the trust on their behalf before the amounts are distributed.
9.3 Survival of Accounts and Elections. Notwithstanding
----------------------------------
any termination of the Plan, the trustee of the trust to which
amounts are contributed under Section 9.2 shall maintain the
Accounts for Participants in the same manner as under this Plan
and all elections for distributions under Article V of the Plan
shall survive the termination and remain in effect.
ARTICLE X - MISCELLANEOUS
-------------------------
10.1 Limited Purpose of Plan. The establishment or
-----------------------
existence of the Plan shall not confer upon any individual the
right to be continued as a Director.
10.2 Non-alienation. No amounts payable under the Plan
--------------
shall be subject in any manner to anticipation, assignment, or
voluntary or involuntary alienation.
10.3 Facility of Payment. If the Plan Administrator, in its
-------------------
sole discretion, deems a Participant or Beneficiary who is
eligible to receive any payment hereunder to be incompetent to
receive the same by reason of age, illness or any infirmity or
incapacity of any kind, the Plan Administrator may direct the
Corporation to apply such payment directly for the benefit of
such person, or to make payment to any person selected by the
Plan Administrator to disburse the same for the benefit of the
Participant or Beneficiary. Payments made pursuant to this
Section 10.3 shall operate as a discharge, to the extent thereof,
of all liabilities of the Corporation and the Plan Administrator
to the person for whose benefit the payments are made.
<PAGE>
To record the adoption of the Plan, the Carpenter Technology
Corporation has caused its authorized officers to affix its
corporate name and seal this 20th day of December, 1995.
[CORPORATE SEAL] CARPENTER TECHNOLOGY CORPORATION
Attest: By: s/Robert W. Lodge
--------------------- -------------------------------
Secretary Robert W. Lodge
Title: Vice President - Human &
------------------------
Administrative Services
-----------------------
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-MANAGEMENT DIRECTORS
-------------------------------------------------------
APPENDIX A
PARTICIPATING SUBSIDIARIES
--------------------------
None
As of January 1, 1995
<PAGE>
DEFERRED COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES OF
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
This is the Deferred Compensation Plan for Officers and Key
Employees of Carpenter Technology Corporation, effective January
1, 1995, established by Carpenter Technology Corporation and its
subsidiaries expressly included herein to provide its senior
executives with an additional method of planning for their
retirement. The Plan is intended to be an "unfunded" plan
maintained for the purpose of providing deferred compensation for
a select group of management or highly compensated employees for
purposes of Title I of the Employee Retirement Income Security
Act of 1974.
ARTICLE I - DEFINITIONS
-----------------------
The following words and phrases as used herein have the
following meanings unless the context plainly requires a
different meaning:
1.1 Account means the total amount credited to the
-------
bookkeeping accounts in which a Participant's Contributions are
maintained, including earnings thereon. The Accounts will
consist of subaccounts for each type of Contribution made under
Article IV, as the Plan Administrator deems necessary.
1.2 Beneficiary means the person that the Participant
-----------
designates to receive any unpaid portion of the Participant's
Account should the Participant's death occur before the
Participant receives the entire balance to the credit of such
Participant's Account. If the Participant does not designate a
beneficiary, his Beneficiary shall be his spouse if he is married
at the time of his death, or his estate if he is unmarried at the
time of his death.
1.3 Board of Directors means the board of directors of
------------------
Carpenter Technology Corporation or the Human Resources Committee
thereof (including any successor committee performing similar
duties).
1.4 Code means the Internal Revenue Code of 1986, as
----
amended.
<PAGE>
1.5 Compensation means all amounts that are treated as
------------
wages for Federal income tax withholding under Section 3401(a) of
the Code for the Plan Year plus amounts that would be paid to the
Employee during the year but for the Employee's election under a
cash or deferred arrangement described in Section 401(k) of the
Code or a cafeteria plan described in Section 125 of the Code.
Notwithstanding the preceding sentence, Compensation shall not
include:
1.5.1 bonuses or other amounts payable under the
Annual Extra Compensation Plan, the Executive Annual Compensation
Plan, and the Quarterly Profit Sharing Program;
1.5.2 contributions by the Employer to this or any
other plan or plans for the benefit of its employees, except as
otherwise expressly provided in this Section 1.6; or
1.5.3 amounts identified by the Employer as expense
allowances or reimbursements regardless of whether such amounts
are treated as wages under the Code.
1.6 Contribution means an amount deferred under the Plan
------------
pursuant to a Participant's election under Article IV and
credited to a Participant's Account. No money or other assets
will actually be contributed to such Accounts.
1.7 Effective Date means January 1, 1995.
--------------
1.8 Employee means an individual who is employed by the
--------
Employer.
1.9 Employer means the Carpenter Technology Corporation and
--------
any subsidiary that the Board of Directors designates as an
Employer. A list of the subsidiaries currently designated as an
Employer is attached hereto as Appendix A.
1.10 Executive Annual Compensation Plan means the Carpenter
----------------------------------
Technology Corporation Executive Annual Compensation Plan, as may
be amended from time to time.
1.11 Five-Year Medium Term Note Borrowing Rate means the
-----------------------------------------
Employer's Five-Year Medium Term Note Borrowing Rate, as provided
by one of the Employer's investment bankers for any such medium
term note that would have been issued on November 15 (or the next
business day thereafter if November 15 is not a business day) of
each Plan Year.
1.12 Participant means a Senior Executive who elects to
-----------
participate in the Plan pursuant to Section 2.2.
<PAGE>
1.13 Pension Board means the Pension Board appointed
-------------
pursuant to the General Retirement Plan for Employees of
Carpenter Technology Corporation, as constituted from time to
time.
1.14 Plan means the Deferred Compensation Plan for Officers
----
and Key Employees of Carpenter Technology Corporation, as may be
amended from time to time.
1.15 Plan Administrator means the Pension Board.
------------------
1.16 Plan Year means the 12-month period beginning January 1
---------
and ending December 31.
1.17 Quarterly Profit Sharing Program means the Carpenter
--------------------------------
Technology Corporation Quarterly Profit Sharing Program, as may
be amended from time to time.
1.18 Senior Executive means an Employee who is classified as
----------------
"exempt" under the Fair Labor Standards Act of 1938, as amended,
and whose salary grade is at least 19, or any other Employee who
the Board expressly designates as a Senior Executive.
1.19 Special Products Division Extra Compensation Plans
--------------------------------------------------
means the Profit Sharing Plan for Special Products Division
Employees, as may be amended from time to time; the Management
Bonus Plan for Special Products Division Employees, as may be
amended from time to time; and, prior to July 1, 1995, the
Carpenter Technology Corporation Annual Extra Compensation Plan
for Special Products Division Management Employees.
ARTICLE II - PARTICIPATION
--------------------------
2.1 Eligibility to Participate. All Senior Executives are
--------------------------
eligible to participate in the Plan.
2.2 Participation. Any Senior Executive who elects to
-------------
participate in the Plan shall become a Participant in the Plan
immediately upon enrolling as a Participant by the method
required by the Plan Administrator. An individual shall remain a
Participant under the Plan until all amounts credited to the
Participant's Account have been distributed to the Participant or
the Participant's Beneficiary.
<PAGE>
ARTICLE III - VESTING
---------------------
Participants are always fully vested in all amounts credited
to their Accounts.
ARTICLE IV - CONTRIBUTIONS
--------------------------
4.1 Eligibility to Receive Contributions. Subject to
------------------------------------
Section 5.4.2, a Participant may receive Contributions in each
Plan Year that the Participant is a Senior Executive.
4.2 Salary Deferral Contributions. A Participant may elect
-----------------------------
to defer up to 25% of the Participant's Compensation and to have
the Employer make a Contribution of that amount to the
Participant's Account under the Plan.
4.3 Profit Sharing Deferral Contributions. A Participant
-------------------------------------
may elect to defer up to 100% of the amount the Participant is
eligible to receive under the Quarterly Profit Sharing Program in
any Plan Year and to have the Employer make a Contribution of
that amount to the Participant's Account under the Plan.
4.4 Annual Executive Compensation Deferral Contributions.
----------------------------------------------------
A Participant may elect to defer up to 100% of the amounts the
Participant is eligible to receive under the Executive Annual
Compensation Plan or the Special Products Division Extra
Compensation Plans in any Plan Year and to have the Employer make
a Contribution of that amount to the Participant's Account under
the Plan.
4.5 Other Deferral Contributions. A Participant may elect
----------------------------
to defer up to 100% of the amount the Participant is eligible to
receive under any compensation plan that the Board designates a
compensation plan for purposes of this Section 4.5, and to have
the Employer make a Contribution of that amount to the
Participant's Account under the Plan.
<PAGE>
4.6 Elections.
---------
4.6.1 Frequency and Timing of Elections. Elections
---------------------------------
may be made once each Plan Year and they may not be modified
during the Plan Year. For Salary Deferral Contributions, Profit
Sharing Deferral Contributions and Other Deferral Contributions,
described in Sections 4.2, 4.3 and 4.5 respectively, the
Participant must make an election by December 15 of a Plan Year
for it to take effect for the next Plan Year. However, for the
initial Plan Year beginning January 1, 1995, elections must be
made by January 31, 1995, and they will be effective as of March
1, 1995. For Annual Executive Compensation Deferral
Contributions described in Section 4.4, the Participant must make
an election by March 31 of the fiscal year for which the award is
based.
4.6.2 Duration of Elections. Elections to receive
---------------------
Contributions under this Article IV expire at the end of the Plan
Year for which the election was made.
4.6.3 Restriction on Elections. Elections to
------------------------
receive Contributions may be in the form of a whole percentage or
in $1 increments.
4.7 Earnings. All amounts credited to a Participant's
--------
Account shall be credited with earnings at a rate equal to the
Five-Year Medium Term Note Borrowing Rate, established as of
November 15 (or the next business day thereafter if November 15
is not a business day) of the prior Plan Year. For the first
Plan Year, the rate is 8.25%. The Pension Board shall
communicate to all Senior Executives the Five-Year Medium Term
Note Borrowing Rate for the next Plan Year no later than November
30 of the current Plan Year. Earnings on Contributions shall
begin to accrue on the date that such Contributions would have
been paid to the Participant but for an election to defer under
this Article IV. Earnings shall be compounded semi-annually on
each January 1 and July 1. In addition, any distribution not
made on either January 1 or July 1 shall have earnings compounded
as of the date of distribution.
ARTICLE V - DISTRIBUTIONS
-------------------------
5.1 Payment of Distributions. All distributions shall, at
------------------------
the Employer's discretion, be made directly out of the Employer's
general assets or from the Carpenter Technology Corporation Non-
Qualified Employee Benefits Trust.
<PAGE>
5.2 Form of Distributions. A Participant may receive
---------------------
distributions in one of the following manners, which the
Participant shall elect on the initial enrollment forms. A
Participant may elect to receive distributions from each
subaccount in different manners and at different times.
5.2.1 A lump sum distribution of the Participant's
entire Account;
5.2.2 Ten annual installments, with the
distribution each year equal to the product resulting from
multiplying the then current Account balance by a fraction. The
numerator of the fraction is always one, and the denominator of
the fraction is ten for the first distribution and is reduced by
one for each subsequent distribution; or
5.2.3 Fifteen annual installments, with the
distribution each year equal to the product resulting from
multiplying the then current Account balance by a fraction. The
numerator of the fraction is always one, and the denominator of
the fraction is fifteen for the first distribution and is reduced
by one for each subsequent distribution.
5.3 Timing of Distributions. Participants shall elect on
-----------------------
their initial enrollment forms when distributions of their
Accounts will begin, which shall either be a specific date or
event. At any point prior to a year in which a distribution of
any or all of a Participant's Account is scheduled for
distribution pursuant to this Article V, the Participant shall
have the option to further defer all or part of the scheduled
distribution to a later year. A scheduled distribution or
portion thereof may, however, be further deferred only once.
5.4 Accelerated Distributions. Subject to the following
-------------------------
forfeiture and suspension provisions, a Participant may elect to
receive a distribution of all or a portion of his Account prior
to the date or dates originally elected under Section 5.3, as
long as such distribution is at least $5,000.
5.4.1 Forfeiture of Earnings. A Participant shall
----------------------
forfeit any earnings attributable to the amount distributed
pursuant to Section 5.4 that accrued during the six-month period
ending on the date of the distribution. The amount of forfeited
earnings shall be calculated using the highest interest rate that
was in effect during the six-month period. If, however, the
actual earnings credited to a Participant's Account are less than
the amount determined in the immediately preceding sentence, no
amount beyond the actual earnings shall be forfeited. Any
amounts forfeited under this Section shall not be distributed or
allocated to any other Account in the Plan and shall be forfeited
to the Employer.
<PAGE>
5.4.2 Suspension of Participation. If a
---------------------------
Participant elects to accelerate a distribution under Section
5.4, he will not be entitled to receive any Contributions under
the Plan for the Plan Year immediately following the Plan Year in
which the Participant elected to accelerate a distribution. Any
election made to receive Contributions for a Plan Year in which
participation is suspended shall be disregarded.
5.5 Termination of Employment. Upon termination of
-------------------------
employment, a Participant, or the Beneficiary if the termination
is caused by the Participant's death, shall have the following
options with respect to the distribution of the Participant's
Account:
5.5.1 Reaffirm Current Election. The Participant
-------------------------
or Beneficiary may elect to reaffirm the Participant's election
under Section 5.3 that was in effect at the time of the
Participant's termination; or
5.5.2 Request a New Election. The Participant or
----------------------
Beneficiary may elect a new distribution option available under
Section 5.2, subject to the Employer's consent.
ARTICLE VI - PLAN ADMINISTRATION
--------------------------------
6.1 General. The Plan shall be administered by the Pension
-------
Board, which is the Plan Administrator.
6.2 Responsibilities and Reports. The Plan Administrator
----------------------------
may, pursuant to a written resolution, allocate among one or more
of its members specific responsibilities under the Plan, and the
Plan Administrator may name other persons to carry out such
responsibilities. The Plan Administrator shall be entitled to
rely conclusively upon all tables, valuations, certificates,
opinions and reports that are furnished by any actuary,
accountant, controller, counsel, investment banker or other
person who is employed or engaged for such purposes.
6.3 Governing Law. This Plan shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of
Pennsylvania, to the extent not preempted by federal law.
ARTICLE VII - CLAIMS PROCEDURE
-------------------------------
7.1 Plan Interpretation. The Human Resources Committee of
-------------------
the Board of Directors shall have the authority and
responsibility to interpret and construe the Plan and to decide
all questions arising thereunder, including, without limitation,
questions of eligibility for participation, eligibility for
Contributions, the amount of Account balances, and the timing of
the distribution thereof, and shall have the authority to deviate
from the literal terms of the Plan to the extent it shall
determine to be necessary or appropriate to operate the Plan in
compliance with the provisions of applicable law.
Notwithstanding the above, a member of the Human Resources
Committee shall not take any part in decisions regarding his
participation in the Plan.
7.2 Denial of Claim for Benefits. Any denial by the Human
----------------------------
Resources Committee of any claim for benefits under the Plan by a
Participant or Beneficiary shall be stated in writing by the
Human Resources Committee and delivered or mailed to the
Participant or Beneficiary. The Human Resources Committee shall
furnish the claimant with notice of the decision not later than
90 days after receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the claimant prior to the
termination of the initial 90 day period. In no event shall such
extension exceed a period of 90 days from the end of such initial
period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by
which the Human Resources Committee expects to render the final
decision. The notice of the Human Resources Committee's decision
shall be written in a manner calculated to be understood by the
claimant and shall include (i) the specific reasons for the
denial, including, where appropriate, references to the Plan,
(ii) any additional information necessary to perfect the claim
with an explanation of why the information is necessary, and
(iii) an explanation of the procedure for perfecting the claim.
7.3 Appeal of Denial. The claimant shall have 60 days
----------------
after receipt of written notification of denial of his or her
claim in which to file a written appeal with the Human Resources
Committee. As a part of any such appeal, the claimant may submit
issues and comments in writing and shall, on request, be afforded
an opportunity to review any documents pertinent to the
perfection of his or her claim. The Human Resources Committee
shall render a written decision on the claimant's appeal
ordinarily within 60 days of receipt of notice thereof but, in no
case, later than 120 days.
<PAGE>
ARTICLE VIII - FUNDING
----------------------
8.1 Funding. The Employer shall not segregate or hold
-------
separately from its general assets any amounts credited to the
Accounts, and shall be under no obligation whatsoever to fund in
advance any amounts under the Plan, including Contributions and
earnings thereon.
8.2 Insolvency. In the event that the Employer becomes
----------
insolvent, all Participants and Beneficiaries shall be treated as
general, unsecured creditors of the Employer with respect to any
amounts credited to the Accounts under the Plan.
ARTICLE IX - AMENDMENT AND TERMINATION
--------------------------------------
9.1 Reservation of Rights. The Employer reserves the right
---------------------
to amend or terminate the Plan at any time by action of the Board
of Directors. Notwithstanding the foregoing, no such amendment
or termination shall reduce the balance of any Participant's
Account as of the date of such amendment or termination.
9.2 Funding upon Termination. Upon a complete termination
------------------------
of the Plan, the Employer shall contribute to the Carpenter
Technology Corporation Non-Qualified Employee Benefits Trust an
amount equal to the aggregate of all amounts credited to
Participants' Accounts as of the date of such termination. If
the Carpenter Technology Corporation Non-Qualified Employee
Benefits Trust does not exist at the time the Plan is terminated,
the Employer shall create an irrevocable grantor trust to which
it will contribute such amounts. This newly created trust shall
be designed to ensure that Participants will not be subject to
taxation on amounts contributed to and held under the trust on
their behalf before the amounts are distributed.
9.3 Survival of Accounts and Elections. Notwithstanding
----------------------------------
any termination of the Plan, the trustee of the trust to which
amounts are contributed under Section 9.2 shall maintain the
Accounts for Participants in the same manner as under this Plan
and all elections for distributions under Article V of the Plan
shall survive the termination and remain in effect.
<PAGE>
ARTICLE X - MISCELLANEOUS
-------------------------
10.1 Limited Purpose of Plan. The establishment or
-----------------------
existence of the Plan shall not confer upon any individual the
right to be continued as an Employee. The Employer expressly
reserves the right to discharge any Employee whenever in its
judgment its best interests so require.
10.2 Non-alienation. No amounts payable under the Plan
--------------
shall be subject in any manner to anticipation, assignment, or
voluntary or involuntary alienation.
10.3 Facility of Payment. If the Plan Administrator, in its
-------------------
sole discretion, deems a Participant or Beneficiary who is
eligible to receive any payment hereunder to be incompetent to
receive the same by reason of age, illness or any infirmity or
incapacity of any kind, the Plan Administrator may direct the
Employer to apply such payment directly for the benefit of such
person, or to make payment to any person selected by the Plan
Administrator to disburse the same for the benefit of the
Participant or Beneficiary. Payments made pursuant to this
Section 10.3 shall operate as a discharge, to the extent thereof,
of all liabilities of the Employer and the Plan Administrator to
the person for whose benefit the payments are made.
To record the adoption of the Plan, the Carpenter Technology
Corporation has caused its authorized officers to affix its
corporate name and seal this 20th day of December, 1995.
[CORPORATE SEAL] CARPENTER TECHNOLOGY CORPORATION
Attest: By: s/Robert W. Lodge
--------------------- ------------------------------
Secretary Robert W. Lodge
Title: Vice President - Human &
------------------------
Administrative Services
-----------------------
<PAGE>
DEFERRED COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES OF
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
APPENDIX A
PARTICIPATING SUBSIDIARIES
-------------------------
None
As of January 1, 1995
<PAGE>
TRUST AGREEMENT
---------------
Carpenter Technology Corporation
Non-Qualified Benefits Trust for Directors
TRUST AGREEMENT effective as of the 7th day of December, 1990,
by and between Carpenter Technology Corporation, a corporation organized under
the laws of the State of Delaware (hereinafter referred to as the "Company"),
and THE CHASE MANHATTAN BANK, N.A., a banking association organized under the
laws of the United States of America (hereinafter referred to as the
"Trustee").
BACKGROUND
----------
The Company maintains the benefit plans listed on Exhibit A hereto
(the "Plans") for the benefit of various of its Directors. The Company
intends to create a trust, to which it will contribute cash, or other property
acceptable to the Trustee, to help the Company meet its obligations under the
Plans, and to assure that, subject to the sufficiency of the Trust Fund,
payments provided for by the Plans are not improperly withheld in the event of
a Change in Control of the Company.
The establishment of this Trust shall not affect the Company's
continuing obligation to make payments under the Plans, except that the
liability shall be reduced to the extent payments are made by the Trustee
hereunder.
The assets of the Trust Fund shall be, and shall remain, subject to the
claims of the Company's general creditors in the event of the Company's
insolvency. Otherwise, the Trust shall be irrevocable until all liabilities
under all Plans have been satisfied, at which time the Trust shall terminate,
and all remaining assets of the Trust Fund shall be returned to the Company.
The Trust is intended to be a "grantor trust" with the result that
the corpus and income of the Trust are treated as assets and income of the
Company pursuant to sections 671 through 679 of the "Code".
The Company intends that the Plans not be deemed funded (within
the meaning of Title I of ERISA) despite the existence of this Trust.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Trustee covenant and agree as follows:
ARTICLE I
DEFINITIONS; ESTABLISHMENT OF TRUST
------------------------------------
Section 1.01 Definitions. Whenever used in this Trust
-----------
Agreement, unless otherwise provided or the context otherwise requires:
(a) "Account" shall mean an account maintained in respect of a
-------
Participant pursuant to Section 4.02.
<PAGE>
(b) "Benefits" shall mean, with respect to each Participant, the
--------
benefits payable to or in respect of that Participant pursuant to the
applicable Plan listed on Exhibit A.
(c) "Change in Control" is defined in Article III.
-----------------
(d) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended from time to time.
(e) "Committee" shall mean the Compensation and Stock Option
---------
Committee of the Company's Board of Directors.
(f) "Company" shall mean Carpenter Technology Corporation or any
-------
successor company by merger, acquisition or otherwise.
(g) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
(h) "Participant" shall mean each person entitled to benefits
-----------
under any Plan, including the beneficiaries pursuant to any Plan.
(i) "Plan" shall mean any plan listed on Exhibit A hereto, as in
----
effect from time to time. "Plans" shall mean all such plans.
(j) "Trust" shall mean the trust established under this Trust
-----
Agreement.
(k) "Trust Agreement" shall mean this trust agreement, as from
---------------
time to time amended.
(l) "Trust Fund" shall mean the trust fund held from time to
----------
time by the Trustee hereunder consisting of all contributions received by the
Trustee together with the investments and reinvestment made therewith and all
net profits and earnings thereon less all payments and charges therefrom.
(m) "Trustee" shall mean The Chase Manhattan Bank, N.A., or its
-------
successor, or an officer, director or employee of such a Trustee exercising
any fiduciary powers under this Trust Agreement; provided, however, that in no
event may any subsidiary or affiliate of the Company or any Participant be
such a successor Trustee.
<PAGE>
Section 1.02 Establishment and Title of the Trust. The Company
------------------------------------
hereby establishes with the Trustee a trust to be known as the "Carpenter
Technology Corporation Non-Qualified Benefits Trust for Directors,"
consisting of such sums of money and other property acceptable to the
Trustee as from time to time may be paid or delivered to the Trustee pursuant
to this Trust Agreement. The Trust Fund shall be held by the Trustee in
trust and shall be dealt with in accordance with the provisions of this
Trust Agreement.
Section 1.03 Acceptance by the Trustee. The Trustee accepts
-------------------------
the Trust established hereunder on the terms and conditions set forth herein
and agrees to perform the duties imposed on it by this Trust Agreement.
ARTICLE II
INVESTMENT AND ADMINISTRATION OF THE TRUST FUND
-----------------------------------------------
Section 2.01 Powers and Duties of the Trustee. In addition
--------------------------------
to every power and discretion conferred upon the Trustee by any other
provision of this Trust Agreement, the Trustee shall have the following
express powers with respect to the Trust Fund:
(a) To make investments and reinvestments of the assets of the
Trust Fund
(i) in direct obligations of the United States of America
or agencies of the United States of America or
obligations unconditionally and fully guaranteed as to
principal and interest by the United States of
America, in each case maturing within three (3) years
or less from the date of acquisition; or
(ii) in negotiable certificates of deposit or bank investment
contracts (in each case maturing within three (3) years
or less from the date of acquisition) issued by a commer-
cial bank, including the Trustee, organized and existing
under the laws of the United States of America or any
state thereof having a combined capital and surplus of
at least $1,000,000,000, and a Moody's senior debt rating
of at least an "A-" or equivalent.
(iii) in money market or similar interest bearing accounts
maintained by the Trustee.
(iv) in any commingled trust fund maintained by the Trustee
for the collective investment of trust funds or any
mutual fund, which invests in portfolios of assets
described in this Section 2.01(a).
(v) notwithstanding Section 2.01(a)(i) and (ii) to the
contrary, any funds contributed during a period in
which a Potential Change in Control exists, shall only
be invested or reinvested in U.S. Treasury instruments
with a maturity not to exceed ninety (90) days, or as
provided in Section 2.01(a)(iii).
<PAGE>
(b) To employ agents, experts and counsel; to delegate
discretionary powers to, and rely upon information and advice furnished by
such agents, experts and counsel, and to pay their reasonable fees and
disbursements as an expense of the trust fund upon obtaining the Company's
prior consent, which shall not be unreasonably denied, and provided further
that such consent shall be deemed to have been given if, within ten business
days of being notified by the Trustee, in writing, of its intention to incur
such expenses, the Company has not objected thereto and provided that Company
consent shall not be required with respect to this Section 2.01(b) if notice
of a Change in Control has been given to the Trustee under Section 3.03; and
(c) From time to time to register any property in the name of
its nominee or in its own name, or to hold it unregistered or in such form
that title shall pass by delivery or to cause the same to be deposited in a
depository or clearing corporation or system established to settle transfers
of securities and to cause such securities to be merged and held in bulk by
the nominee of such depository or clearing corporation or system.
ARTICLE III
CHANGE IN CONTROL
-----------------
Section 3.01 Definition of Change in Control. For purposes
-------------------------------
of this Trust, a "Change in Control" of the Company shall be deemed to have
occurred if
(a) A "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in Section 3.01(a), 3.01(c) or 3.01(d) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 75% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or
<PAGE>
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
Section 3.02 Definition of a Potential Change in Control.
-------------------------------------------
For purposes of this Trust, a "Potential Change in Control" of the Company
shall be deemed to have occurred if
(a) The Company enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Company,
(b) any person (including the Company) publicly announces
an intention to take or to consider taking actions which if consummated
would constitute a change in control of the Company;
(c) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, who is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Company's then outstanding securities,
increases his beneficial ownership of such securities by 5% or more of
the combined voting power of the Company's then outstanding securities
on the effective date of this Agreement; or
(d) the Board of Directors of the Company adopts a
resolution to the effect that, for purposes of this Trust, a "potential
change in control" has occurred. Such a resolution will be provided to
the Trustee in certified form.
Section 3.03 Requirement of Notice. Notwithstanding the
---------------------
definitions in Sections 3.01 and 3.02, no Change in Control or Potential
Change in Control shall be deemed to have occurred for purposes of this Trust
Agreement unless and until the Trustee has actual written notice from the
Company or from any person who was an officer of the Company prior to the
alleged Change in Control or the alleged Potential Change in Control that such
Change in Control or Potential Change in Control has occurred.
<PAGE>
ARTICLE IV
CONTRIBUTIONS
-------------
Section 4.01 Contributions by the Company.
----------------------------
(a) The Company will make contributions hereunder at such times,
and in such amounts, as the Company may determine to be appropriate to enable
the Trust to accumulate assets sufficient to pay all, or any part, as
determined by the Company, of the benefits payable under the Plans.
(b) Upon the occurrence of a Potential Change in Control, the
Company, if it so chooses, will deliver to the Trustee cash and/or marketable
securities having a fair market value in an amount equal to the sum of the
amounts, determined by an actuary selected by the Company, which will be
sufficient to fund fully the Company's obligations to pay to the Participants
the full amount of all Benefits to which they may become entitled pursuant to
the Plans. The actuarial basis employed by such actuary shall include the
following assumptions: no interest will be earned on plan assets; Directors'
fees will increase at the rate of 10% per annum; there will be no change in
the plan; and, a Director will be assumed to terminate at such time as to
maximize his benefits under the Plans but not later than age 70. Any such
contribution shall be identified to the Trustee, by the Company, as a Section
4.01(b) contribution.
(c) In addition to contributions made to the Trust pursuant to
Sections 4.01(a) and 4.01(b), the Company shall deliver to the Trustee any
amounts which the Trustee is required to pay pursuant to Section 6.02.
(d) The Trustee shall be responsible only for contributions actually
received by it hereunder. The Trustee shall have no duty or authority to
ascertain whether any contributions should be made to it or to bring any
action or proceeding to enforce any obligation to make any such contribution.
Section 4.02 Accounts.
--------
(a) Before a Change In Control. The Company shall create a separate
--------------------------
Account for each Participant, cause records to be maintained by the Company,
or retain a separate recordkeeper as the Company's agent, reflecting the
amount, if any, credited to that Participant in accordance with the terms of
the Deferred Compensation Plan for Nonmanagement Directors of Carpenter Tech-
nology Corporation (the "Deferred Compensation Plan"). When a contribution
is made, the Company shall notify the Trustee of the amount of such contribu-
tion allocable to each Participant's Account and/or specific plans. The
Trustee shall not be required to maintain any separate account records, but
shall rely solely upon the information maintained by the Company and the
notice to the Trustee as herein provided. The remainder, (or all thereof if
no allocation is indicated) of such contribution shall not be specifically
allocated to any Plan or any Participant, but shall be available to discharge
the Company's obligations to make benefit payments under any of the Plans in
accordance with the applicable provisions of Article V. The Company shall,
however, provide to the Trustee, with respect to each Plan, at such intervals
as the Company shall determine, but in no event less frequently than annually,
a schedule listing each Participant, each Plan under which that Participant has
accrued a benefit and the amount of such benefit. The Trustee shall have no
responsibility with respect to the determination or accuracy of any such
allocations and/or the accrued benefits due any participant or plan as herein
provided, but shall rely solely upon such information provided to it by the
Company.
<PAGE>
(b) Following a Change In Control. Upon notice to the Trustee
-----------------------------
that a Change in Control has occurred, or that a Potential Change in Control
has occurred and that the Company has invoked the allocation procedures of
this Section 4.02(b), the Trustee, based upon the schedule of such benefits
most recently provided to the Trustee by the Company, shall allocate all of
the Trust Fund's assets as follows: assets shall first be allocated to the
Deferred Compensation Plan portion of each Participant's Account in an amount
equal to each Participant's accrued benefit therein not previously allocated
thereto. In the event that the Trust Fund's assets are insufficient to fully
fund each Participant's accrued benefit under the Deferred Compensation Plan,
the assets shall be allocated ratably to the Participants' Accounts in the
ratio that the accrued benefits in respect of each such Participant under said
Deferred Compensation Plan bear to the total accrued benefits of all such
Participants under said plan. The balance of the assets shall be allocated to
each participant's account in an amount equal to each participant's accrued
benefit under all of the Plans other than the Deferred Compensation Plans. If
the assets of the Trust Fund, after making provision for the Deferred
Compensation Plan, are insufficient to fully fund all of the accrued benefits
of all Participants under all of the other Plans, those assets shall be
allocated ratably to the Participants' Accounts in the ratio that the accrued
benefits in respect of each such Participant under all of such other Plans
bear to the total accrued benefits of all such Participants under all such
other Plans.
Section 4.03 Delivery to the Company. Any Section 4.01(b)
-----------------------
contribution delivered to the Trustee shall be returned to the Company without
interest on the 181st day following (and exclusive of the date of) its receipt
by the Trustee, unless within 180 days following such receipt by the Trustee,
a notice of the "Change in Control" shall have been received by the Trustee
pursuant to Section 3.03. Such 180-day period shall be extended for an
additional 180-day period for any "Potential Change in Control" which occurs
or continues during any initial or extended 180-day period. The Company will
provide the Trustee with written notice of any extension.
Section 4.04 Trustee's Agent. The Trustee shall be entitled
---------------
to retain such actuarial, accounting, legal and other services as it may deem
necessary to accomplish and/or maintain such allocations, payments and/or
Participant Account records as are provided for under Articles IV and V
hereof, and to pay for such services as an expense of the Trust Fund out of
the assets of the Trust Fund, unless promptly paid by the Company.
<PAGE>
ARTICLE V
PAYMENT OF BENEFITS
-------------------
Section 5.01 Payments by Trustee.
-------------------
(a) Prior to a Change In Control. Until such time as Section
----------------------------
5.01(b) applies, all payments to Participants in any of the Plans shall be
made by the Company, as agent for the Trustee, in accordance with the
applicable provisions of the Plans. Upon receipt of written instructions to
the Trustee from the Company of the amount needed to pay such benefits the
Trustee shall promptly disburse such funds to the Company and, upon that
disbursement shall have no further responsibility with respect to such funds
or their application.
(b) Following a Change In Control. Following notice to the
-----------------------------
Trustee that a Change in Control has occurred, and subject to the limitation
of Section 5.01(c), the Trustee shall make payments to Participants and their
beneficiaries from the Trust Fund in accordance with the payment schedule most
recently provided by the Company to the Trustee prior to the occurrence of the
Change in Control; provided, however, that if the Company and a Participant
agree to the substitution of a new payment schedule with respect to such
Participant following the occurrence of a Change in Control, the Trustee shall
instead make payments in accordance with such substitute payment schedule. In
the event that the Company and a Participant (or in the event of his death,
his Beneficiary) disagree as to the amount, form or duration of benefit
payments under a Plan, the Trustee shall continue to make benefit payments
pursuant to the payment schedule most recently provided by the Company prior
to a Change in Control until authorized to make payments under a substitute
schedule by both the Participant (or Beneficiary) and the Company or until the
Trustee receives a final non-appealable order from a court of competent
jurisdiction to alter such benefit payment schedule.
(c) Any amount paid under this Section 5.01 shall be charged by
the Company or the Trustee, as the case may be, against the Account of the
applicable Participant and no payment with respect to an Account shall be made
in excess of the amount credited to such Account.
(d) The Trustee shall not make any payments to Participants or
beneficiaries from the Trust Fund except as provided in this Section 5.01 even
though it may be informed from another source that payments are due under a
Plan. The Trustee shall be fully protected in making payments or omitting to
make payments in accordance with Section 5.01(b).
Section 5.02 Determinations by Committee or Company.
--------------------------------------
(a) If at any time the Company or, if Section 5.01(b) applies, the
Trustee, determines that any amount held in the Trust Fund is includible in
the gross income of a Participant or his beneficiary for federal income tax
purposes prior to payment of such amount from the Trust Fund, the Trustee,
upon notice from the Company or, if Section 5.01(b) applies, upon notice by a
Participant or Beneficiary, in the format provided in Exhibit B, that based on
a (i) change in the tax or revenue laws of the United States of America, (ii)
a published ruling or similar announcement issued by the Internal Revenue
Service, (iii) a regulation issued by the Secretary of the Treasury or his
delegate, (iv) a decision by a court of competent jurisdiction involving the
<PAGE>
Participant or Beneficiary, or (v) a closing agreement made under Code Section
7121 that is approved by the Internal Revenue Service and involves the
Participant or Beneficiary, that Participant or Beneficiary has recognized or
will recognize income for federal income tax purposes with respect to amounts
that are or will be payable to him under the Plans before they are paid to
him, shall pay such amount to such person in the manner directed by the
Committee or by such notice to the Trustee and the Participant's Account shall
be charged, or his accrued benefit reduced, accordingly.
(b) If at any time the Company prior to a Change in Control
determines that the amount allocated to the Account of any Participant exceeds
the amount reasonably expected to be necessary to provide the Benefits payable
in respect of such Participant from such Account, such excess may be
reallocated to the Accounts of other Participants or held as part of the
unallocated Fund, as determined by the Company. If at any time prior to a
Change in Control the Committee determines that the Benefits in respect of all
Participants have been paid in full, the Committee shall so notify the Trustee
in writing.
Section 5.03 Withholding, Returns and Reports.
--------------------------------
(a) Prior to a Change in Control. Prior to a Change in Control,
----------------------------
the Company shall withhold all required federal, state and local taxes from
benefit payments under any of the Plans, and remit those withholdings to the
appropriate taxing authorities. The Company shall also be responsible for the
preparation of all information reports, returns, receipts and other
communications required by Chapter 61 of the Code to be filed with, or
distributed to, any person or governmental entity.
(b) Following a Change in Control. Following a Change in
-----------------------------
Control, the Trustee shall assume the Company's responsibilities under Section
5.03(a) with respect to benefit payments under any of the Plans, and shall
reduce such benefit payments by the amount of any such required withholding.
The Trustee shall remit the net benefit payments to the Participants and shall
pay the required tax withheld to the Company, which shall continue to be
responsible for the preparation and filing of all items required by Chapter 61
of the Code, as enumerated in Section 5.03(a).
(c) The Company and the Trustee shall cooperate with each other
in providing any information reasonably necessary to enable the other to carry
out any of its responsibilities under this Section 5.03.
Section 5.04 Company's Continuing Obligations.
--------------------------------
Notwithstanding any provisions of this Trust Agreement to the contrary, the
Company shall remain obligated to pay the Benefits under the Plan. To the
extent the amount in the Trust Fund is not sufficient to pay any Benefits when
due, the Company shall pay such deficiency directly to the person entitled
thereto. Nothing in this Trust Agreement shall relieve the Company of its
liabilities to pay the Benefits except to the extent such liabilities are met
by the application of Trust Fund assets.
Section 5.05 Company's Income. The Company agrees that all
----------------
income, deductions and credits of the Trust Fund belong to it as owner for
income tax purposes and will be included on the Company's income tax returns
to the extent required by applicable law.
<PAGE>
ARTICLE VI
CONCERNING THE TRUSTEE
----------------------
Section 6.01 Notices to the Trustee. Except as provided in
----------------------
Section 5.02, the Trustee may rely on the authenticity, truth and accuracy of:
(a) any notice, direction, certification, approval or other
writing of the Company, if evidenced by an instrument signed in the name
of the Company by its Chairman, President, any Vice President,
Secretary, Assistant Secretary or Treasurer, and believed in good faith
by it to be genuine;
(b) any notice, direction, certification, approval or other
written, oral or other transmitted form of instruction received by the
Trustee and believed by it in good faith to be genuine and to be sent by
or on behalf of the Committee; or
(c) any copy of a resolution of the Board of Directors of the
Company, if certified by the Secretary or an Assistant Secretary of the
Company under its corporate seal.
(d) The Company shall furnish the Trustee from time to time with
a list of the names and signatures of the officers or other persons
authorized to act under this Section 6.01(a) and (b), or in any other
manner authorized to notify or instruct the Trustee pursuant to the
provisions of this Agreement. Any such list shall be certified by the
Secretary or an Assistant Secretary of the Company, and may be relied
upon by the Trustee until it receives a revised list.
Section 6.02 Expenses of the Trust Fund. The Trustee shall
--------------------------
pay out of the Trust Fund: (a) all brokerage fees and transfer tax expenses
and other expenses incurred in connection with the sale or purchase of
investments; (b) all real and personal property taxes, income taxes and other
taxes of any kind at any time levied or assessed under any present or future
law upon, or with respect to, the Trust Fund or any property included in the
Trust Fund; (c) the Trustee's compensation and expenses as provided in Section
6.03, unless promptly paid by the Company; and (d) unless promptly paid by the
Company, all other reasonable expenses of administering the Trust.
Notwithstanding the foregoing, the Trustee shall, at Company expense and
direction, contest the validity of any taxes in any manner deemed appropriate
by the Company or its counsel, but only if it has received an indemnity bond
or other security satisfactory to it to pay any expenses of such contest;
provided, however, that the Trustee shall have no obligation to contest if it
receives an opinion of counsel of its choice to the effect that there is no
basis in law or fact for such contest. Alternatively, the Company may itself
contest the validity of any such taxes.
Section 6.03 Compensation of the Trustee. The Company will
pay to the Trustee compensation for its services time to time in accordance
with its schedule of fees then in effect for trusts of similar nature, and
will reimburse the Trustee for all reasonable expenses (including attorneys'
fees) incurred by the Trustee in the administration of the Trust.
<PAGE>
Section 6.04 Protection of the Trustee. The Company agrees
-------------------------
to indemnify and hold harmless the Trustee from and against any and all
damages, losses, claims or expenses as incurred (including expenses of
investigation and fees and disbursements of counsel to the Trustee and any
taxes imposed on the Trust Fund or income of the Trust) arising out of or in
connection with the performance by the Trustee of its duties hereunder, except
to the extent that any such damages, losses, claims or expenses result from
the negligence or willful misconduct of the Trustee, its officers, employees
or agents.
Section 6.05 Duties of the Trustee. The Trustee will be
---------------------
under no obligation to perform any duties whatsoever, except such duties as
are specifically set forth as such in this Trust Agreement, and no implied
covenant or obligation will be read into this Trust Agreement against the
Trustee. The Trustee will not be compelled to take any action toward the
execution or enforcement of the Trust or to prosecute or defend any suit in
respect thereof, unless indemnified to its satisfaction against loss, costs,
liability and expense or there are sufficient assets in the Trust Fund to
provide such indemnity; and the Trustee will be under no liability or
obligation to anyone with respect to any failure on the part of the Company to
perform any of its obligations under the Plans. Nothing in this Trust
Agreement should be construed as requiring the Trustee to make any payment in
excess of amounts held in the Trust Fund at the time of such payment.
Section 6.06 Settlement of Accounts of the Trustee. The
-------------------------------------
Trustee shall keep or cause to be kept accurate and detailed records of all
investments, receipts, disbursements and other transactions hereunder. Such
records shall be open to inspection and audit at all reasonable times during
normal business hours by any person designated by the Company. At least
annually, or upon such more frequent intervals, but not more frequent than
monthly, as the Company may direct, the Trustee shall file with the Company a
written statement, listing the investments of the Trust Fund and any
uninvested cash balance thereof, and setting forth all receipts,
disbursements, payments and other transactions respecting the Trust Fund not
included in any such previous statement. Any statement, when approved by the
Company, will be binding and conclusive on the Company; and the Trustee will
thereby be released and discharged from any liability or accountability to the
Company with respect to all matters set forth therein. Omission by the
Company to object in writing to any specific items in any such statement,
which shall be deemed an account stated, within ninety (90) days after its
delivery will constitute approval of the account by the Company. No other
accounts or reports shall be required to be given to the Company, except as
stated herein or except as otherwise agreed to in writing by the Trustee.
Except as provided above, the Trustee shall not be required to file an
accounting, judicial or otherwise.
Section 6.07 Right to Judicial Settlement. Nothing contained
----------------------------
in this Trust Agreement shall be construed as depriving the Trustee of the
right to have a judicial settlement of its accounts, and upon any proceeding
for a judicial settlement of the Trustee's accounts or for instructions the
only necessary party thereto in addition to the Trustee shall be the Company.
<PAGE>
Section 6.08 Resignation or Removal of the Trustee. The
-------------------------------------
Trustee may at any time resign upon sixty (60) days notice in writing to the
Company (which sixty (60) days notice requirement may be waived by agreement
in writing of the Company). Prior to a Change in Control, or a Potential
Change in Control, the Trustee may be removed by the Company upon sixty (60)
days notice in writing to the Trustee (which sixty (60) days notice
requirement may be waived by agreement in writing of the Trustee).
Section 6.09 Appointment of Successor Trustee. In the event
--------------------------------
of the resignation or removal of the Trustee, or in any other event in which
the Trustee ceases to act, a successor trustee may be appointed by the Company
by instrument in writing delivered to and accepted by the successor trustee.
Notice of such appointment will be given by the Company to the retiring
trustee, and the successor trustee will deliver to the retiring trustee an
instrument in writing accepting such appointment. If no appointment of a
successor trustee is made within a reasonable time after such a resignation,
removal or other event, any court of competent jurisdiction may appoint a
successor trustee.
In the event of such resignation, removal or other event, the
retiring trustee or its successors and assigns shall file with the Company a
final statement to which the provisions of Section 6.06 shall apply.
In the event of the appointment of a successor trustee, such
successor trustee will succeed to all the right, title and estate of, and will
be, the Trustee; and the retiring trustee will after the settlement of its
final account as provided for in Section 6.06, and the receipt of any
compensation or expenses due it, deliver the Trust Fund to the successor
trustee together with all such instruments of transfer, conveyance, assignment
and further assurance as the successor trustee may reasonably require. The
retiring trustee will retain a first lien upon the Trust Fund to secure all
amounts due the retiring trustee pursuant to the provisions of this Trust
Agreement. The Company will provide the Trustee with a ratification and
release upon such resignation, removal or other event.
Section 6.10 Merger or Consolidation of the Trustee. Any
--------------------------------------
corporation continuing as the result of any merger or resulting from any
consolidation to which merger or consolidation the Trustee is a party, or any
corporation to which substantially all the business and assets of the Trustee
may be transferred, will be deemed automatically to be continuing as the
Trustee.
<PAGE>
ARTICLE VII
ENFORCEMENT
-----------
Section 7.01 Enforcement of Trust Agreement and Legal
----------------------------------------
Proceedings. The Company shall have the right to enforce any provision of
- -----------
this Trust Agreement in its own name. In any action or proceeding affecting
the Trust, the only necessary parties shall be the Company and the Trustee
and, except as otherwise required by applicable law, no other person shall be
entitled to any notice or service of process. Any judgment entered in such an
action or proceeding shall, to the maximum extent permitted by applicable law,
be binding and conclusive on all persons having or claiming to have any
interest in the Trust.
<PAGE>
ARTICLE VIII
AMENDMENT, REVOCATION AND TERMINATION
-------------------------------------
Section 8.01 Amendment. The Company may from time to time
---------
prior to the occurrence of a Change in Control or a Potential Change in
Control with respect to which the allocation procedures of Section 4.02(b) are
invoked, with the Trustee's consent, amend in writing, in whole or in part,
any or all of the provisions of this Trust Agreement without the consent of
any Participant or any other person; provided, however, that no such amendment
shall increase the duties or obligations or change the compensation of the
Trustee without the Trustee's written consent. This Trust Agreement may not
be amended following a Change in Control nor may it be amended following a
Potential Change in Control with respect to which the allocation procedures of
Section 4.02(b) are invoked unless the resulting allocations are revoked
pursuant to Section 4.03.
Section 8.02 Irrevocability. Subject to section 10.08, the
--------------
Trust shall be irrevocable and, except as otherwise provided in Section 8.03
and Article IX, shall be held for the exclusive purpose of providing the
Benefits to Participants and their beneficiaries and defraying expenses of the
Trust in accordance with the provisions of this Trust Agreement.
Section 8.03 Termination. The Trust shall terminate if the
-----------
Committee provides the Trustee with a written statement to the effect that the
Benefits in respect of all Participants have been paid in full. As soon as
practicable following such event, the Trustee shall settle its final accounts
in accordance with Section 6.06 and, after receipt of any unpaid fees and
expenses, shall distribute the balance of the Trust Fund to the Company,
provided, however, that after a Change in Control, such Committee statement
shall be accompanied by written approvals of the Participants then listed on
the most recent payment schedule provided to the Trustee pursuant to Section
4.02. In the event any such Participant does not approve, Section 5.01(b)
shall apply.
<PAGE>
ARTICLE IX
CLAIMS OF COMPANY'S CREDITORS
-----------------------------
Section 9.01 Insolvency. As used in this Article IX, the
----------
Company shall be deemed to be "Insolvent" if (i) the Company is unable to pay
its debts generally as they come due, or (ii) the Company is subject to a
pending proceeding as a debtor under the federal Bankruptcy Code (or any
successor federal statute). In the event the Company shall be deemed
Insolvent, the assets of the Trust shall be subject to claims of creditors of
the Company (hereinafter referred to as "Bankruptcy Creditors").
Section 9.02 Discontinuance of Benefits. If at any time (i)
--------------------------
the Company or a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, or (ii) the
Trustee is served with any order, process or paper from a court of competent
jurisdiction to the effect that the Company is Insolvent, the Trustee shall
give notice thereof to the Company, shall discontinue payment of Benefits
under this Trust Agreement, shall hold the Trust Fund for the benefit of the
Company's Bankruptcy Creditors, and shall resume payment of Benefits under
this Trust Agreement in accordance with Article V only upon: (a) in the case
of clause (ii) above, the receipt of an order of a court of competent
jurisdiction authorizing or requiring such payment, and (b) in the case of
clause (i) above, receipt of written notice from the Company that the Company
is not Insolvent. The Board of Directors of the Company and the Company's
Treasurer shall further be obligated to give the Trustee prompt written notice
in the event that the Company becomes Insolvent, with the same consequences as
provided in the immediately preceding sentence. If payment of Benefits has
been discontinued pursuant to clause (i) of the second preceding sentence, the
Board of Directors of the Company and the Company's Treasurer shall be
obligated to give the Trustee prompt written notice in the event the Company
is not Insolvent, and such notice from such Board of Directors or Treasurer
shall be treated as notice from the Company for purposes of the second
preceding sentence. The Trustee shall not be liable to anyone in the event
Benefits are discontinued pursuant to this Section 9.02.
If the Trustee discontinues payment of Benefits pursuant to this
Section 9.02 and subsequently resumes such payment, to the extent the Trust
Fund is sufficient for such purpose, the first payment to a Participant
following such discontinuance shall include an aggregate amount equal to the
payments which would have been made to such Participant under this Trust
Agreement but for this Section 9.02, as shall be determined by the Committee
or if Section 5.01(b) applies, by the Trustee. No interest shall be due or
payable with respect to any such payments in arrears.
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
Section 10.01 Successors. This Trust Agreement shall be
----------
binding upon and inure to the benefit of the Company and the Trustee and their
respective successors and assigns.
Section 10.02 Nonalienation. Except insofar as applicable law
-------------
may otherwise require:
(a) no amount payable to or in respect of any Participant at any
time under the Trust shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment,
charge or encumbrance of any kind, and any attempt to so alienate, sell,
transfer, assign, pledge, attach, charge or otherwise encumber any such
amount, whether presently or thereafter payable, shall be void; and
(b) the Trust Fund shall in no manner be liable for or subject to
the debts or liabilities of any Participant.
Section 10.03 Communications.
--------------
(a) Communications to the Company shall be addressed to the
Company at P.O. Box 14662, Reading, PA 19612-4662, Attn. Treasurer, Carpenter
Technology Corporation, provided, however, that upon the Company's written
request, such communications shall be sent to such other address as the
Company may specify.
(b) Communications to the Trustee shall be addressed to its
Trusts and Estates Services Division, U.S. Private Banking, 1211 Avenue of the
Americas, 34th Floor, New York, New York 10036; provided, however, that upon
the Trustee's written request, such communications shall be sent to such other
address as the Trustee may specify.
(c) No communication shall be binding on the Trustee until it is
received by the Trustee, and no communication shall be binding on the Company
until it is received by the Company.
Section 10.04 Headings. Titles to the Sections of this Trust
--------
Agreement are included for convenience only and shall not control the meaning
or interpretation of any provision of this Trust Agreement.
Section 10.05 Third Parties. A third party dealing with the
-------------
Trustee shall not be required to make inquiry as to the authority of the
Trustee to take any action nor be under any obligation to follow the proper
application by the Trustee of the proceeds of sale of any property sold by the
Trustee or to inquire into the validity or propriety of any act of the
Trustee.
<PAGE>
Section 10.06 Governing Law. This Trust Agreement and the
-------------
Trust established hereunder shall be governed by and construed, enforced, and
administered in accordance with the laws of the State of New York and the
Trustee shall be liable to account only in the courts of that state.
Section 10.07 Counterparts. This Trust Agreement may be
------------
executed in any number of counterparts, each of which shall be deemed to be
the original although the others shall not be produced.
Section 10.8 IRS Ruling - Funded Status. The Company intends
--------------------------
to apply to the Internal Revenue Service for a ruling to the effect that this
Trust is a grantor trust within the meaning of section 671, et. seq. of the
Code and that contributions hereunder will not be treated as taxable income to
Plan Participants until distributed to those Participants. If the Company is
unable to obtain a satisfactory ruling to that effect, or if any Plan is
finally determined to be funded within the meaning of Title I of ERISA because
of the existence of this Trust and if a Change in Control has not then
occurred, the Company shall have the right, notwithstanding the provisions of
Article VIII, to further amend or revoke the Trust. If the Trust is revoked,
its assets, after deducting any unpaid fees or expenses due the Trustee, shall
be returned to the Company.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed by
the parties hereto as of the day and year first above written.
Attest: CARPENTER TECHNOLOGY CORPORATION
By: s/John A. Schuler
-----------------------------
Treasurer
Attest: THE CHASE MANHATTAN BANK, N.A.
By: s/William P. Barbeosch
-----------------------------
TRUST3A.AGM
<PAGE>
STATE OF )
)
COUNTY OF )
Personally appeared , of
, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such
and the free act and deed of said company, before me.
Notary Public
STATE OF )
) ss.:
COUNTY OF )
Personally appeared , of
, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such
and the free act and deed of said company, before me.
Notary Public
<PAGE>
EXHIBIT "A"
------------
1. Deferred Compensation Plan For Nonmanagement Directors of Carpenter
Technology Corporation Effective January 1, 1983 Amended as of
December 13, 1984.
2. Carpenter Technology Corporation Director Retirement Plan Adopted June
9, 1983, Efffective August 1, 1981.
<PAGE>
EXHIBIT "B"
-----------
FORM OF NOTICE CONCERNING EARLY TAXATION
----------------------------------------
I, the undersigned Participant (Beneficiary) under the Carpenter Technology
Corporation Non-Qualified Benefits Trust for Directors hereby notify The Chase
Manhattan Bank, N.A., as Trustee, that pursuant to Section 5.02(a) thereof, the
undersigned will recognize income for Federal income tax purposes due to funds
held in said Trust and request payment of all funds held in my account. I do
hereby certify the above to be a true statement and I hereby furnish the
following independent verification of the reasons why I will recognize income
for Federal income tax purposes:
[List below the type of independent verification and enclose a copy of
such verification.]
<PAGE>
Exhibit 11
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PRIMARY EARNINGS PER COMMON SHARE COMPUTATIONS
For the Years Ended June 30, 1996, 1995 and 1994
1996 1995 1994
-------- -------- --------
(in thousands, except per share data)
Net Income for Primary Earnings
- -------------------------------
Per Common Share
----------------
Income before extraordinary charge $ 60,148 $ 47,492 $ 38,289
Dividends accrued on convertible
preferred stock, net of tax
benefits (1,572) (1,599) (1,606)
-------- -------- --------
Income for primary earnings per
common share before extra-
ordinary charge $ 58,576 $ 45,893 $ 36,683
Extraordinary charge, net of
income taxes - - (2,039)
-------- -------- --------
Net income for primary earnings
per common share $ 58,576 $ 45,893 $ 34,644
======== ======== ========
Weighted Average Common Shares
- ------------------------------
Weighted average number of
common shares outstanding 16,537 16,240 16,052
Effect of shares issuable under
the stock option plans 140 87 78
-------- -------- --------
Weighted average common shares 16,677 16,327 16,130
======== ======== ========
Primary Earnings Per Common Share
- ---------------------------------
Primary earnings per common share
before extraordinary charge $ 3.51 $ 2.81 $ 2.28
Extraordinary charge - - (.13)
-------- -------- --------
Primary earnings per common share $ 3.51 $ 2.81 $ 2.15
======== ======== ========
<PAGE>
Exhibit 11
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
FULLY DILUTED EARNINGS PER COMMON SHARE COMPUTATIONS
For the Years Ended June 30, 1996, 1995 and 1994
1996 1995 1994
-------- -------- --------
(in thousands, except per share data)
Net Income for Fully Diluted
- ----------------------------
Earnings Per Common Share
-------------------------
Income before extraordinary charge $ 60,148 $ 47,492 $ 38,289
Shortfall between common and
preferred dividend (644) (705) (699)
-------- -------- --------
Income for fully diluted earnings
per common share before
extraordinary charge 59,504 46,787 37,590
Extraordinary charge, net
of income taxes - - (2,039)
-------- -------- --------
Net income for fully diluted
earnings per common share $ 59,504 $ 46,787 $ 35,551
======== ======== ========
Weighted Average Common Shares
- ------------------------------
Weighted average number of
common shares outstanding 16,537 16,240 16,052
Conversion of preferred shares 909 917 922
Effect of shares issuable
under the stock option plans 158 152 112
-------- -------- --------
Weighted average common shares 17,604 17,309 17,086
======== ======== ========
Fully Diluted Earnings Per
- --------------------------
Common Share
------------
Fully diluted earnings per
common share before
extraordinary charge $ 3.38 $ 2.70 $ 2.20
Extraordinary charge - - (.12)
-------- -------- --------
Fully diluted earnings
per common share $ 3.38 $ 2.70 $ 2.08
======== ======== ========
<PAGE>
Exhibit 12
CARPENTER TECHNOLOGY CORPORATION
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES -- unaudited
Five years Ended June 30, 1996
(dollars in thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Fixed charges:
Interest costs (a) $ 19,275 $ 17,797 $ 19,651 $ 21,759 $ 20,627
Interest component of
non-capitalized lease
rental expense (b) 2,074 2,452 2,522 2,532 2,480
-------- -------- -------- -------- --------
Total fixed charges $ 21,349 $ 20,249 $ 22,173 $ 24,291 $ 23,107
======== ======== ======== ======== ========
Earnings as defined:
Income before income
taxes, extraordinary
charge and cumulative
effect of changes in
accounting principles $ 95,170 $ 74,571 $ 62,728 $ 42,799 $ 22,827
Fixed charges less
interest capitalized 21,009 16,994 18,043 23,126 22,117
Amortization of
capitalized interest 2,074 1,952 1,788 1,725 1,696
-------- -------- -------- -------- --------
Earnings as defined $118,253 $ 93,517 $ 82,559 $ 67,650 $ 46,640
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges 5.5x 4.6x 3.7x 2.8x 2.0x
====== ====== ====== ====== ======
(a) Include interest capitalized relating to significant construction projects
and amortization of debt discount and debt expense.
(b) One-third of rental expense which approximates an interest component of
non-capitalized leases.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Carpenter Technology Corporation and subsidiaries on
Form S-8 and S-3 (File No. 2-83780, 2-81019, 2-60649, 33-42536, 33-51613
and 33-54045) of our reports dated July 29, 1996, on our audits of the
consolidated financial statements and financial statement schedule of
Carpenter Technology Corporation and subsidiaries as of June 30, 1996 and
1995, and for the years ended June 30, 1996, 1995 and 1994, which reports
are included in this Annual Report on Form 10-K.
s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 25, 1996
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 12th day of September, 1996.
s/Marcus C. Bennett
-----------------------------
Marcus C. Bennett
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/William J. Hudson, Jr.
------------------------------
William J. Hudson, Jr.
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/William S. Dietrich, II
------------------------------
William S. Dietrich, II
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned
might or could do in person, the undersigned hereby ratifying and approving
the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Dr. C. McCollister Evarts
------------------------------
Dr. C. McCollister Evarts
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Carl R. Garr
------------------------------
Carl R. Garr
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Arthur E. Humphrey
------------------------------
Arthur E. Humphrey
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Edward W. Kay
------------------------------
Edward W. Kay
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Frederick C. Langenberg
------------------------------
Frederick C. Langenberg
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Marlin Miller, Jr.
------------------------------
Marlin Miller, Jr.
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the
acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 12th day of September, 1996.
s/Paul R. Roedel
------------------------------
Paul R. Roedel
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Kathryn C. Turner
------------------------------
Kathryn C. Turner
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as a Director of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as
Director of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Kenneth L. Wolfe
------------------------------
Kenneth L. Wolfe
Director
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as the Controller of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as the
Controller of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/Edward B. Bruno
------------------------------
Edward B. Bruno
Controller
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as the Treasurer of Carpenter Technology Corporation does hereby appoint
G. Walton Cottrell and John R. Welty or either of them his true and lawful
attorneys to execute in his name, place and stead, in his capacity as the
Treasurer of said Company, the Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form 10-K, for the year ended
June 30, 1996, of said Company, and any and all amendments to said Annual
Report and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said
attorneys shall individually have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever requisite or desirable to be done in the premises, as
fully and to all intents and purposes as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/John A. Schuler
------------------------------
John A. Schuler
Treasurer
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity
as the Chief Financial Officer of Carpenter Technology Corporation does
hereby appoint G. Walton Cottrell and John R. Welty or either of them his
true and lawful attorneys to execute in his name, place and stead, in his
capacity as the Chief Financial Officer of said Company, the Annual Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on
Form 10-K, for the year ended June 30, 1996, of said Company, and any and
all amendments to said Annual Report and all instruments necessary or
incidental in connection therewith and to file the same with the Securities
and Exchange Commission. Said attorneys shall individually have full power
and authority to do and perform in the name and on behalf of the undersigned,
in any and all capacities, every act whatsoever requisite or desirable to be
done in the premises, as fully and to all intents and purposes as the
undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
12th day of September, 1996.
s/G. Walton Cottrell
______________________________
G. Walton Cottrell
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> $13,159
<SECURITIES> $0
<RECEIVABLES> $137,103
<ALLOWANCES> $0
<INVENTORY> $160,452
<CURRENT-ASSETS> $324,470
<PP&E> $809,697
<DEPRECIATION> $390,225
<TOTAL-ASSETS> $911,971
<CURRENT-LIABILITIES> $171,975
<BONDS> $188,024
<COMMON> $97,729
$0
$28,581
<OTHER-SE> $182,767
<TOTAL-LIABILITY-AND-EQUITY> $911,971
<SALES> $865,324
<TOTAL-REVENUES> $865,324
<CGS> $636,783
<TOTAL-COSTS> $636,783
<OTHER-EXPENSES> $1,543
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $18,935
<INCOME-PRETAX> $95,170
<INCOME-TAX> $35,022
<INCOME-CONTINUING> $60,148
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $60,148
<EPS-PRIMARY> $3.51
<EPS-DILUTED> $3.38
</TABLE>
