SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Amendment No. #1
Amendment to Current Report on Form 8-K dated
February 28, 1997, and filed March 27, 1997.
CARPENTER TECHNOLOGY CORPORATION
----------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 1-5828 23-0458500
- ------------------------- ----------- ------------------
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
101 West Bern Street, Reading, Pennsylvania 19612-4662
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610)208-2000
<PAGE>
The undersigned registrant hereby amends the following item of
its Current Report on Form 8-K dated February 28, 1997, and filed
March 27, 1997, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Dynamet Incorporated
(1) Report of Independent Accountants
(2) Balance Sheet as of December 31, 1996
(3) Statement of Income and Retained Earnings -
Year Ended December 31, 1996
(4) Statement of Cash Flows -
Year Ended December 31, 1996
(5) Notes to Financial Statements
(b) Pro Forma Financial Information (unaudited) to reflect
the registrant's acquisition of Dynamet Incorporated.
(1) Pro Forma Condensed Consolidated Balance Sheet as
of December 31, 1996
(2) Pro Forma Condensed Consolidated Statements of
Income for the Year Ended June 30, 1996 and the
Six Months Ended December 31, 1996
(c) Exhibits
--------
Number Exhibit
------ -------
23 Consent of Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements 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: May 13, 1997
<PAGE>
Dynamet Incorporated
Financial Statements
December 31, 1996
<PAGE>
Dynamet Incorporated
Financial Statements
December 31, 1996
Table of Contents
_________________________________________________________________
Page
Report of Independent Accountants 1
Financial Statements:
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5
<PAGE>
Report of Independent Accountants
To the Shareholders and the
Board of Directors of
Dynamet Incorporated
In our opinion, the accompanying balance sheet and the related
statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position
of Dynamet Incorporated ("Dynamet") at December 31, 1996, and the
results of its operations and its cash flows for the year in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of Dynamet's
management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the
opinion expressed above.
As described in Note 1, on February 28, 1997, the shareholders of
Dynamet sold all their shares of common stock to Carpenter
Technology Corporation. In connection with and prior to the
transaction, Dynamet made substantial distributions to its
shareholders during 1997.
s/Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
March 3, 1997
<PAGE>
Dynamet Incorporated
Balance Sheet
December 31, 1996
_________________________________________________________________
(in thousands of dollars)
1996
Assets
Current assets:
Cash and cash equivalents $ 4,338
Receivables (Note 9) 16,885
Inventories (Note 4) 13,798
Assets held for sale, net of liabilities (Note 1) 3,541
Assets held for distribution (Note 1) 4,424
Other current assets 1,126
-------
Total current assets 44,112
Properties, net (Note 5) 16,192
Other noncurrent assets (Note 6) 234
-------
$60,538
=======
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt (Note 8) $ 1,041
Short-term borrowings (Note 7) 4,000
Accounts payable 6,875
Accrued employee benefits (Note 10) 2,045
Other current liabilities 845
-------
Total current liabilities 14,806
Other noncurrent liabilities (Note 10) 600
Contingent liabilities (Note 13)
-------
15,406
-------
Shareholders' equity (Note 1):
Common stock, $5 par value; 10,000,000 shares
authorized; 305,616 shares issued and
outstanding 1,528
Capital in excess of par value 4,456
Retained earnings 39,148
-------
45,132
-------
$60,538
=======
The accompanying notes are an integral part of these financial statements.
<PAGE>
Dynamet Incorporated
Statement of Income and Retained Earnings
Year Ended December 31, 1996
_________________________________________________________________
(in thousands of dollars)
1996
Net sales $100,416
--------
Costs and expenses:
Cost of sales 61,883
Selling, administrative and general expenses 8,826
Depreciation 2,712
--------
73,421
--------
Income from continuing operations
before income taxes 26,995
Provision for income taxes (Note 3) 143
--------
Income from continuing operations 26,852
--------
Discontinued operations (Note 1):
Loss from discontinued operations (2,195)
Loss on disposal of discontinued operations (2,028)
--------
Net income 22,629
Retained earnings, beginning of year 29,975
Distributions to shareholders (Note 1) (13,456)
--------
Retained earnings, end of year $ 39,148
========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Dynamet Incorporated
Statement of Cash Flows
Year Ended December 31, 1996
_________________________________________________________________
(in thousands of dollars)
1996
Cash flows from operating activities:
Net income $ 22,629
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on disposal of discontinued operations 2,028
Depreciation 2,712
Net change in working capital (Note 14) (5,194)
Assets held for sale - net change in
working capital and noncash charges 1,450
Assets held for distribution - net 47
Other, net (35)
--------
Net cash provided by operating activities 23,637
--------
Cash flows from investing activities:
Additions to properties (2,800)
Proceeds from disposition of properties 29
Purchases of properties and advances to affiliate,
later held for sale (808)
Purchases of properties later held for distribution (3,571)
--------
Net cash used in investing activities (7,150)
--------
Cash flows from financing activities:
Repayments of line of credit (3,000)
Borrowing under term loan 4,000
Repayments of long-term debt (418)
Cash distributions to shareholders (13,010)
--------
Net cash used in financing activities (12,428)
--------
Net increase in cash and cash equivalents 4,059
Cash and cash equivalents at beginning of period 279
--------
Cash and cash equivalents at end of period $ 4,338
========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
1. Transactions With Carpenter and Discontinued Operations
On February 28, 1997, the shareholders (Shareholders) of
Dynamet Incorporated (Dynamet) sold all their shares of
common stock to Carpenter Technology Corporation (Carpenter),
pursuant to an Agreement and Plan of Merger (the Agreement)
dated January 6, 1997. Accordingly, Dynamet then became a
wholly owned subsidiary of Carpenter. Concurrently, a
Shareholder, the President of Dynamet, purchased the assets
of Dynamet's Forged Products Division (FPD) and Dynamet's
investment in all of the outstanding preferred stock of an
affiliate, Stelkast Incorporated (Stelkast). As a result,
FPD has been reported as discontinued operations in the
accompanying financial statements. Stelkast is engaged in
operations related to those of FPD and Dynamet's investment
has been considered part of the same segment for discontinued
operations reporting. The price for the purchase of the assets
of FPD (principally receivables, inventories and properties)
and the Stelkast preferred stock was $2,600,000 plus the buyer's
assumption of liabilities (principally accounts payable and
accrued expenses) and a note for $941,000, the amount of debt
associated with the FPD facility as of February 28, 1997.
These assets and the associated liabilities have been classified
on the balance sheet, in their aggregate net realizable amount as
of December 31, 1996, as "Assets Held for Sale, Net of Liabilities."
A provision of $495,900 for 1997 operating losses through February
is recorded in other current liabilities. The difference between
the historical cost of the net assets/liabilities and the proceeds
from the sale and the provision for 1997 operating losses has been
recorded in the income statement as a "Loss on Disposal of
Discontinued Operations." In 1996, FPD had sales of approximately
$5,400,000.
Under the terms of the Agreement, Dynamet is permitted to distribute
to the Shareholders the S Corporation "Accumulated Adjustment Account"
(AAA). The AAA is estimated to be $15,450,000 as of December 31, 1996,
all of which was distributed prior to February 28, 1997. As part of
these distributions, Dynamet distributed certain noncash items to or
on behalf of the Shareholders. The aggregate historical cost of these
assets as of December 31, 1996, has been classified on the balance
sheet as "Assets Held for Distribution." These assets consist
principally of a corporate aircraft, certain of the collateral
assignment agreements on Shareholder life insurance policies, and
other investments. The life insurance agreements have been written
down by $446,000 to cash surrender value as the policies were
distributed to related-party trusts or canceled with Dynamet
realizing the cash surrender value in 1997. The write-down was
treated as distributions to Shareholders in 1996. Additions to the
AAA in 1997 through February 28 (primarily from income between
January 1, 1997 and February 28, 1997) will be distributed after
February 28, 1997.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
2. Nature of the Business
Dynamet's continuing operations consist primarily of metal
processing of mill products and powder products for
aerospace, medical and industrial applications. Sales of
mill products approximated 94 percent and sales of powdered
products approximated 6 percent of total sales for the year
ended December 31, 1996. Because of the overall
significance of mill products, Dynamet is considered to
operate in one dominant segment.
3. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposit accounts
and other cash equivalents with original maturities of
3 months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method of
inventory valuation.
Assets Held for Sale
Assets held for sale consist of assets, net of liabilities,
acquired or assumed by Dynamet's President in 1997. They
are valued at the agreed upon purchase price and have been
accounted for as discontinued operations.
Assets Held for Distribution
Assets held for distribution consist of assets distributed
in 1997 to or on behalf of the Shareholders as part of
S Corporation cash distributions.
Properties
Properties are recorded at cost. Maintenance and repair
costs are expensed as incurred; renewals and betterments
that extend the physical or economic life of an asset are
capitalized.
Depreciation is determined on a straight-line basis over the
estimated useful lives of the properties for financial
reporting purposes and on accelerated methods for tax
purposes. Depreciation for the rod and bar mill is adjusted
based on the level of production.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
Income Taxes
Dynamet is an S Corporation, and income or loss is not taxed
at the corporate level; instead, it is passed through
directly to the Shareholders. The provision for income
taxes represents taxes currently payable to states in which
S Corporation status was not elected, less a reversal of
federal taxes accrued in years prior to electing
S Corporation status. As of December 31, 1996 the aggregate
net amounts reported for Dynamet's assets and liabilities
and their aggregate net tax bases are approximately the
same.
Use of Estimates
Generally accepted accounting principles require management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at year end and the
reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
4. Inventories
Dynamet generally produces inventory to customer
specifications. If LIFO inventories to be used in
continuing operations had been valued at their replacement
cost, they would have been higher by $8,160,000 and
$2,353,000 at December 31, 1996 and 1995, respectively. At
December 31, 1996, inventories consisted of the following:
(in thousands of dollars)
Raw material $ 3,190
Work-in-process 9,064
Finished goods 1,544
--------
$ 13,798
========
5. Properties
December 31,
(in thousands of dollars) 1996
Land and improvements $ 1,461
Buildings and improvements 9,555
Equipment and fixtures 33,839
Construction work-in-progress 1,204
--------
46,059
Less - Accumulated depreciation (29,867)
---- --------
$ 16,192
========
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
6. Other Noncurrent Assets
December 31,
(in thousands of dollars) 1996
Management life insurance $ 215
Other 19
---------
$ 234
=========
Management life insurance includes premiums advanced on
behalf of certain employees for life insurance policies.
Dynamet has a secured interest in the policies up to the
full amount of premiums advanced.
7. Lines of Credit
Dynamet had unsecured demand lines of credit with two banks.
At December 31, 1996, there were no borrowings under these
lines. In 1997, prior to the Shareholders selling their
stock to Carpenter, Dynamet temporarily borrowed under these
lines of credit, primarily for distributions to
Shareholders. Subsequent to the sale of common stock, the
borrowings were repaid by Carpenter and the lines of credit
were terminated.
In 1996, Dynamet entered into a $4,000,000 term loan with a
bank. In early February 1997, the term loan was repaid by
Dynamet.
Current Portion of Long-Term Debt
December 31,
(in thousands of dollars) 1996
Industrial Revenue Bonds $ 202
Pennsylvania Industrial
Development Authority loans 552
Other 287
--------
$ 1,041
========
The industrial revenue bonds are variable rate demand bonds
and require payments based on a varying percentage of the
prime rate. The percentage of prime is determined based on
the market for the bonds. During the year ended
December 31, 1996, the interest rate averaged 3.6 percent.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
The Pennsylvania Industrial Development Authority and other
loans were repaid by Dynamet subsequent to the Shareholders
selling their stock to Carpenter.
As part of the Agreement, prior to closing, Dynamet received
a note from Dynamet's President for the amount of the debt
associated with the FPD facility as of February 28, 1997.
9. Major Customers
During the year ended December 31, 1996, Dynamet had sales
to two customers that, in the aggregate, approximated
29 percent of net sales. Additionally, at December 31,
1996, Dynamet had outstanding receivables with two customers
in the aerospace industry that, in the aggregate,
approximated 26 percent of total accounts receivable.
10. Employee Retirement Plans
Dynamet has defined contribution retirement plans covering
certain nonbargaining unit employees. The amount of the
contributions to the plans is at Dynamet's discretion.
Dynamet is also a participant in a multiemployer pension
plan on behalf of union employees. Total expense for the
plans was $873,400 for the year ended December 31, 1996.
Dynamet maintains supplemental executive retirement
arrangements for certain key employees. Dynamet has accrued
the estimated liability for these arrangements; the related
expense was $308,955 in 1996.
11. Contributions
Dynamet made contributions to a private foundation, certain
trustees of which were Shareholders. Contributions have
been made at the discretion of the Shareholders and amounted
to $500,000 in 1996. Subsequent to the sale of the
Shareholders' stock to Carpenter, this foundation will no
longer be affiliated with Dynamet and Dynamet will not make
future contributions to this foundation.
12. Related-Party Transactions
Dynamet owned, and sold to the President (Note 1), all of
the preferred stock of Stelkast. Two trusts of which
Shareholders are trustees own all of Stelkast's common
stock.
FPD sales of titanium products to Stelkast totaled $564,000
in 1996. At December 31, 1996, FPD receivables from
Stelkast were $520,000. During 1996, Dynamet increased its
investment in Stelkast through the funding of salary,
benefits and other operational expenses totaling $708,000.
The receivables from Stelkast and the 1996 increase in the
investment in Stelkast have been fully reserved for as a
component of the loss from discontinued operations.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
13. Contingent Liabilities
During 1996, Dynamet acquired titanium from a material
supplier (the Supplier), which the Supplier had produced
from titanium scrap contaminated with tungsten, potentially
rendering it out of specification and unfit for use in
aerospace applications.
Dynamet processed some of the material and shipped some to
Dynamet customers. When the problem was discovered, some of
the material was in Dynamet's inventory, some was being
processed at Dynamet's customers and some was shipped by
Dynamet's customers to their customers. Accordingly, the
Supplier, Dynamet and its customers are in the process of
determining which portion of the material is suitable for
use. One major aerospace user has indicated that the
material at one major customer is acceptable.
Dynamet and its customers are incurring expense in
identifying and evaluating the material. In addition, any
material not suitable for use has costs associated with the
material and the processing of the material. The aggregate
amount of these costs has not been determined at this time.
However, Dynamet does not believe these costs will have a
material impact on Dynamet's financial statements.
Dynamet management believes that the Supplier is liable to
Dynamet and to Dynamet's customers for the damages suffered
by reason of the Supplier shipping impure titanium. In
verbal and written communications between Dynamet and the
Supplier, the Supplier's senior management acknowledges its
liability for the costs associated with the material that is
ultimately determined not to be useable for its intended
purposes. The Supplier is cooperating with Dynamet and
Dynamet's customers to evaluate the material and to arrange
for its recall, if necessary.
Since considerable work remains to be done to determine the
portion of the material that is not fit for use and to
quantify the damages to Dynamet and its customers, no
liabilities to customers or claims against the Supplier have
been recorded in the financial statements. Dynamet recorded
1996 sales of $2.4 million of this material and has
$1.3 million (at purchased cost) remaining in inventory.
<PAGE>
Dynamet Incorporated
December 31, 1996
Notes to Financial Statement
- ------------------------------------------------------------------------------
14. Supplemental Disclosures of Cash Flow Information
December 31,
(in thousands of dollars) 1996
Net cash flow from changes in
working capital:
Increase in receivables $ (5,312)
Increase in inventories (2,758)
Increase in accounts payable 5,022
Other, net (2,146)
--------
Net cash used for changes in
working capital other than
cash and cash equivalents $ (5,194)
========
Supplemental disclosure of
cash flow information -
Cash paid during the year for:
Interest and debt expense $ 288
========
Income taxes $ 663
========
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated
financial information reflects the acquisition on February 28,
1997, by Carpenter Technology Corporation (the "Company" or
"Carpenter") of the outstanding common stock of Dynamet
Incorporated ("Dynamet") for an aggregate purchase price
approximating $151 million, including costs.
The unaudited Pro Forma Condensed Consolidated Balance Sheet
reflects the acquisition as if it had occurred on December 31,
1996. The unaudited Pro Forma Condensed Consolidated Statements
of Income for the year ended June 30, 1996 and the six months
ended December 31, 1996 reflect the acquisition as if it had
occurred at the beginning of the year ended June 30, 1996. The
pro forma information is based on the historical financial
statements of the Company and Dynamet after giving effect to the
acquisition using the purchase method of accounting and
assumptions and adjustments deemed appropriate by the Company,
certain of which are described in the accompanying notes to the
pro forma financial statements. The Pro Forma Condensed
Consolidated Statements of Income do not include the results of
operations of Dynamet's Forge Products Division and investment in
Stelkast Incorporated which were accounted for as discontinued
operations in Dynamet's historical financial data. (see Note d to
the pro forma condensed consolidated financial information).
The unaudited pro forma condensed consolidated information does
not purport to be indicative of the Company's financial position
or results of operations had the acquisition actually occurred on
the dates presented nor is it necessarily indicative of the
Company's future financial position or future operating results.
The unaudited pro forma consolidated financial information should
be read in conjunction with the separate audited historical
consolidated financial statements of the Company and the notes
thereto set forth in the Company's 1996 Annual Report on Form
10-K, and the historical consolidated financial statements of
Dynamet and the notes thereto set forth in Item 7(a) of this Form
8-K/A.
<PAGE>
Carpenter Technology Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 1996
(in thousands)
Pro Forma
Carpenter Dynamet Adjustments Pro Forma
---------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,137 $ 4,338 $ (3,542)e $ 12,933
Accounts receivable, net 108,433 16,885 125,318
Inventories 184,693 13,798 19,432 c 217,923
Deferred income taxes 1,250 (1,250)c -
Net assets held for sale 3,541 (3,541)d -
Assets held for
distribution 4,424 (4,424)e -
Other current assets 14,305 1,126 (381)a 16,420
1,100 b
270 d
---------------------------------------------
Total current assets 320,818 44,112 7,664 372,594
Property, plant and
equipment, net 452,857 16,192 21,744 c 490,793
Prepaid pension cost 96,890 96,890
Goodwill, net 18,257 81,040 c 99,297
Other assets 59,576 234 9,200 b 96,681
27,000 c
671 d
---------------------------------------------
Total assets $948,398 $ 60,538 $147,319 $1,156,255
=============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 68,459 $ 4,000 $ 3,800 b $ 81,674
(2,600)d
8,015 e
Accounts payable 56,787 6,875 319 a 63,981
Other current liabilities 59,980 2,890 1,626 b 64,896
400 c
Deferred income taxes - 6,363 c 6,363
Current portion of
long-term debt 3,300 1,041 4,341
---------------------------------------------
Total current liabilities 188,526 14,806 17,923 221,255
Long-term debt, net
of current portion 187,905 50,750 a 238,655
Accrued postretirement benefits 138,185 138,185
Deferred income taxes 88,388 19,387 c 107,775
Other liabilities and
deferred income 24,266 600 4,874 b 29,740
Total shareholders' equity 321,128 45,132 99,517 a 420,645
(15,981)e
(29,151)f
---------------------------------------------
Total liabilities and
shareholders' equity $948,398 $ 60,538 $147,319 $1,156,255
=============================================
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
<PAGE>
Carpenter Technology Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the year ended June 30, 1996
(in thousands, except per share data)
Pro Forma
Carpenter Dynamet Adjustments Pro Forma
---------------------------------------------
Net Sales $865,324 $ 79,810 $ - $945,134
---------------------------------------------
Costs and expenses:
Cost of sales 636,783 50,390 (320)g 686,853
Selling and administrative
expenses 112,893 9,648 3,723 g 128,104
1,840 h
Interest expense 18,935 107 3,859 i 22,901
Equity in loss of joint
venture 7,025 7,025
Other income, net (5,482) (248) (5,730)
---------------------------------------------
Total costs and expenses 770,154 59,897 9,102 839,153
---------------------------------------------
Income from continuing
operations before
income taxes 95,170 19,913 (9,102) 105,981
Income taxes (35,022) (536) (4,869)j (40,427)
---------------------------------------------
Income from continuing
operations $ 60,148 $ 19,377 $(13,971) $ 65,554
=============================================
Primary earnings per
common share from
continuing operations $ 3.51 $ 3.29
=============================================
Fully-diluted earnings
per common share from
continuing operations $ 3.38 $ 3.19
=============================================
Average common shares
outstanding 16,677 2,772 k 19,449
=============================================
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
<PAGE>
Carpenter Technology Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the six months ended December 31, 1996
(in thousands, except per share data)
Pro Forma
Carpenter Dynamet Adjustments Pro Forma
---------------------------------------------
Net Sales $403,416 $ 53,274 $ - $456,690
---------------------------------------------
Costs and expenses:
Cost of sales 300,387 33,787 (185)g 333,989
Selling and administrative
expenses 59,178 5,632 1,784 g 67,514
920 h
Interest expense 8,902 145 1,929 i 10,976
Equity in loss of joint
venture 716 716
Other income, net (1,085) (171) (1,256)
---------------------------------------------
Total costs and expenses 368,098 39,393 4,448 411,939
---------------------------------------------
Income from continuing
operations before
income taxes 35,318 13,881 (4,448) 44,751
Income taxes (13,596) 142 (4,455)j (17,909)
---------------------------------------------
Income from continuing
operations $ 21,722 $ 14,023 $ (8,903) $ 26,842
=============================================
Primary earnings per
common share from
continuing operations $ 1.25 $ 1.34
=============================================
Fully-diluted earnings
per common share from
continuing operations $ 1.20 $ 1.29
=============================================
Average common shares
outstanding 16,719 2,772 k 19,491
=============================================
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
<PAGE>
Carpenter Technology Corporation
Notes to Unaudited Pro Forma
Condensed Consolidated Financial Information
Balance Sheet Adjustments:
- -------------------------
a. Adjustments to reflect the consideration given for the
purchase of Dynamet, consisting of $50.8 million in cash
which was borrowed through available credit facilities, the
issuance of Carpenter common treasury shares with a fair
value of $99.5 million, and $.7 million of acquisition
costs. The borrowings, in the form of short-term debt, were
classified as long-term debt because the Company has the
ability and intent to refinance these borrowings on a long-term
basis in the future.
b. Adjustments to reflect the effects of consulting and
non-competition agreements with certain former
shareholder-officers of Dynamet.
c. Adjustments to reflect the estimated fair value of Dynamet's
net assets, including related deferred income taxes. The
purchase price allocation is based upon preliminary
appraisal values and management estimates and is subject to
reclassifications and adjustments in the future.
d. Adjustment to record the sale of the Forge Products Division
of Dynamet and a related investment in Stelkast Incorporated
immediately after the acquisition in accordance with
provisions of the acquisition agreement.
e. Adjustment to record distributions to the former
shareholders of Dynamet of retained earnings existing as of
December 31, 1996, as provided for in the acquisition
agreement.
f. Adjustment to eliminate the shareholders' equity of Dynamet.
Statements of Income Adjustments:
- --------------------------------
g. Adjustments to provisions for depreciation and amortization
for estimated fair value adjustments related to property,
plant and equipment depreciated over lives ranging from 3 to
30 years on a straight-line basis, and goodwill and other
intangible assets (trademarks and tradenames) amortized over
30 years on a straight-line basis.
h. Additional expenses related to a 5-year non-competition
agreement with a former shareholder of Dynamet.
<PAGE>
Carpenter Technology Corporation
Notes to Unaudited Pro Forma
Condensed Consolidated Financial Information
Statements of Income Adjustments, continued:
- --------------------------------
i. Additional interest expense on borrowings resulting from the
purchase of Dynamet. Interest was assumed at an average
rate of 7.5%, the approximate current borrowing rate of the
Company.
j. Adjustment to record income taxes at a rate of 40% of
Dynamet's historical pre-tax income and the pro forma
adjustments other than amortization of goodwill. Dynamet's
historical income taxes reflected only one state's income
taxes since it was a Subchapter S corporation for federal
and certain state income tax purposes prior to acquisition.
k. Adjustment to reflect the issuance of 2,772,059 shares of
Company common treasury stock as part of the purchase price
of Dynamet.
l. Cost savings benefits from synergies derived from the
acquisition, which may be significant, are not reflected in
the Pro Forma Condensed Consolidated Statements of Income.
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Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 2-83780, 2-81019,
2-60469, 33-42536, 33-65077, 33-54045) and Form S-3
(No. 33-51613) of Carpenter Technology Corporation of our report
dated March 3, 1997 relating to the financial statements of
Dynamet Incorporated, which appears in the Current Report on
Form 8-K/A of Carpenter Technology Corporation dated May 13,
1997.
s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Pittsburgh, Pennsylvania
May 13, 1997
<PAGE>
