Form 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
Commission File Number 1-5828
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
(Full title of the plan)
CARPENTER TECHNOLOGY CORPORATION
(Name of issuer of the securities held
pursuant to the plan)
1047 N. Park Rd.
Wyomissing, Pennsylvania 19610-1339
(Address of principal executive
office of the issuer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Carpenter
Technology Corporation has duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
(Name of Plan)
Date July 14, 1999 By /s/ G. Walton Cottrell
-------------------------- ---------------------------------
G. Walton Cottrell
Senior Vice President - Finance and
Chief Financial Officer
Financial Statements and Exhibits
- ---------------------------------
(a) Financial Statements
The financial statements filed as part of this report are listed in
the Index to Financial Statements included herein.
(b) Exhibits
(1) Consent of Independent Accountants
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
FORM 11-K ANNUAL REPORT
Form 11-K
Pages
---------
Report of Independent Accountants 5
Financial Statements:
Statement of Net Assets Available for Benefits
December 31, 1998 and 1997
- Participant Directed:
Stable Principal Fund, Vanguard Wellington Fund,
Vanguard Windsor II, Vanguard Index 500 Fund,
Vanguard U.S. Growth Fund, American Century Fund,
Neuberger & Berman Equity Trust,
Carpenter Technology Stock Fund, and
Participant Loans 6
Statement of Changes in Net Assets Available for
Benefits for the years ended December 31, 1998 and 1997
- Participant Directed:
Stable Principal Fund, Vanguard Wellington Fund,
Vanguard Windsor II, Vanguard Index 500 Fund,
Vanguard U.S. Growth Fund, American Century Fund,
Neuberger & Berman Equity Trust,
Carpenter Technology Stock Fund, and
Participant Loans 7-8
Notes to Financial Statements 9-13
Supplemental Schedules:
Assets Held for Investment as of December 31, 1998 14
Reportable Transactions for the year ended
December 31, 1998 15
Report of Independent Accountants
To the Participants and Administrator of
the Retirement Plan of Talley Metals
Technology, Inc.:
In our opinion, the accompanying statement of net assets
available for benefits and the related statement of changes in
net assets available for benefits present fairly, in all
material respects, the net assets available for benefits of the
Retirement Plan of Talley Metals Technology, Inc. (the Plan) at
December 31, 1998, and the changes in net assets available for
benefits for the year then ended, in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in
accordance with 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
audits provide a reasonable basis for the opinion expressed
above.
Our audits were conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental schedules of Assets Held for Investment Purposes
and Reportable Transactions are presented for the purpose of
additional analysis and are not a required part of the basic
financial statements but are supplementary information required
by the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act
of 1974. The fund information in the statements of net assets
available for benefits and the statements of changes in net
assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets
available for benefits and changes in net assets available for
benefits of each fund. These supplemental schedules and fund
information are the responsibility of the Plan's management.
The supplemental schedules and fund information have been
subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic
financial statements taken as a whole.
July 9, 1999
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
RETIREMENT PLAN OF TALLEY METALS TECHNOLOGY, INC.
Statements of Net Assets Available for Benefits
as of December 31, 1998 and 1997
1997
ASSETS 1998 (Unaudited)
---- ----
Investments, at fair value $ 6,007,477 $ 1,930,538
Employer contributions receivable - 485,022
------------- -------------
Total Assets 6,007,477 2,415,560
------------- -------------
Net assets available for benefits $ 6,007,477 $ 2,415,560
============= =============
The accompanying notes are an integral
part of the financial statements.
RETIREMENT PLAN OF TALLEY METALS TECHNOLOGY, INC.
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Vanguard Vanguard Neuberger Carpenter
Stable Vanguard Equity Windsor Vanguard Vanguard American & Technology
Principal Wellington Income II Index 500 U.S. Century Berman Corp.Stock
Fund Fund Fund Fund Fund Growth Fund Genesis Fund Loans Total
--------- ---------- --------- --------- --------- --------- -------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Investment
income:
Net appreciation
(depreciation)
in market value
of investments $ - $ 16,131 $ 16,946 $ 42,449 $ 187,974 $120,034 $ 571 $ (4,138) $ (15,078) $ - $ 364,889
Interest and
dividends 78,201 13,396 6,707 19,228 7,542 2,920 44 - - 233 128,271
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Net
investment
income 78,201 29,527 23,653 61,677 195,516 122,954 615 (4,138) (15,078) 233 483,160
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Employer
contributions 469,999 45,862 31,289 103,380 154,916 64,893 3,928 5,202 17,312 - 896,781
Participant
contributions 181,817 21,152 14,047 57,419 82,337 35,082 2,667 3,556 18,159 - 416,582
Transfers from
Talley Savings
Plus 679,154 222,181 161,347 417,656 402,540 203,704 - - - - 2,086,582
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Total
contributions 1,330,970 289,195 206,683 578,455 639,793 303,679 6,595 8,758 35,471 - 3,399,589
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Total
additions 1,409,171 318,722 230,336 640,132 835,309 426,633 7,210 4,620 20,393 233 3,892,759
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Deductions:
Benefits paid to
participants 124,340 315 7,959 316 16,275 16,817 - - - - 166,022
Transfer to
Waterbury
Independence
Plan 124,362 3,336 4,972 133 131 130 - - - - 133,064
Administration
fees 887 40 39 158 442 115 - 25 50 - 1,756
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Total
deductions 249,589 3,691 12,970 607 16,848 17,062 - 25 50 - 300,842
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Interfund transfers (299,465) (53,134) (39,583) (34,631) 81,360 44,647 6,241 65,594 189,322 39,649 -
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
Net increase 860,117 261,897 177,783 604,894 899,821 454,218 13,451 70,189 209,665 39,882 3,591,917
Net assets available
for benefits:
Beginning of year 1,087,289 185,411 122,060 393,245 446,510 181,045 - - - - 2,415,560
---------- -------- -------- -------- ---------- -------- ------- --------- --------- ------- ----------
End of year $1,947,406 $447,308 $299,843 $998,139 $1,346,331 $635,263 $13,451 $ 70,189 $ 209,665 $39,882 $6,007,477
========== ======== ======== ======== ========== ======== ======= ========= ========= ======= ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
RETIREMENT PLAN OF TALLEY METALS TECHNOLOGY, INC.
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Vanguard
Stable Vanguard Equity Vanguard Vanguard Vanguard
Principal Wellington Income Windsor II Index 500 US Growth
Fund Fund Fund Fund Fund Fund Total
---------- ---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Investment income:
Net appreciation
in market value
of investments $ - $ 7,961 $ 8,963 $ 25,481 $ 33,426 $ 8,970 $ 84,801
Interest and dividends 68,341 5,615 2,941 8,731 10,595 4,858 101,081
---------- ---------- --------- --------- ---------- --------- ----------
68,341 13,576 11,904 34,212 44,021 13,828 185,882
Employer contributions 295,330 32,434 23,366 65,469 79,870 32,182 528,651
---------- ---------- --------- --------- ---------- --------- ----------
Total additions 363,671 46,010 35,270 99,681 123,891 46,010 714,533
Deductions:
Benefits paid to
participants 78,162 - - 2,294 90 2,326 82,872
Return of forfeitures 30,966 1,247 1,309 1,290 6,718 2,099 43,629
---------- ---------- --------- --------- ----------- -------- ----------
Total deductions 109,128 1,247 1,309 3,584 6,808 4,425 126,501
---------- ---------- --------- --------- ----------- -------- ----------
Interfund transfers (994,782) 140,648 88,099 297,148 329,427 139,460 -
---------- ---------- --------- --------- ----------- -------- ----------
Net increase/
(decrease) (740,239) 185,411 122,060 393,245 446,510 181,045 588,032
Net assets available for
benefits:
Beginning of year 1,827,528 - - - - - 1,827,528
---------- ---------- --------- --------- ----------- -------- ----------
End of year $1,087,289 $ 185,411 $ 122,060 $ 393,245 $ 446,510 $181,045 $2,415,560
========== ========== ========= ========= =========== ======== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
Notes to Financial Statements
1. Description of Plan:
The following brief description of the Retirement Plan of
Talley Metals Technology, Inc. (the Plan) is provided for
general information purposes only. Participants should refer
to the Plan document for more complete information.
General:
The Plan is a defined contribution plan covering all employees
of Talley Metals Technology, Inc. and AMCAN, Inc. (the
Company) who have one year of service and are age eighteen or
older. It is subject to provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). Prior to June 1, 1998,
the Plan had been designed as a money purchase pension plan.
Any contributions made prior to that date will be subject to
the terms of those plan documents.
The Company was acquired on February 19, 1998 by Carpenter
Technology Corporation (Carpenter) as a result of Carpenter's acquisition
of Talley Industries, Inc. During 1998, funds were transferred from the
Talley Savings Plus Plan, which has been terminated. In addition, funds
were transferred from the Plan to the Waterbury Independence Plan for the
participants who are employees of Waterbury Companies, Inc. - Louisiana
facility. These employees are no longer eligible participants in the
Plan.
Contributions:
Each participant may, at their discretion, contribute between
1% and 15% of their compensation through elective deferrals.
The Company makes annual Guaranteed Contributions to the Plan
on behalf of participants. The amount of such contributions
is five percent of each participant's earnings during the
calendar year. In addition, the employer also makes a
matching contribution of 100% of the first 3% of a
participant's contribution.
During 1997, Guaranteed Contributions of the Company were
invested in a Master Trust managed and administered by the
trustee, M&I Marshall & Ilsley Trust Company of Arizona (M&I).
The Master Trust invested in M&I Stable Principal Fund, which
invested in Guaranteed Investment Contracts, which guarantee the
principal of the investment and a specified rate of return thereon.
Participants may now direct all contributions in one or more of the
following investment options in five percent increments as directed
by the participants based on their personal investment goals:
Notes to Financial Statements, Continued
1. Description of Plan, continued:
Contributions, continued:
M&I Stable Principal Fund - Funds are invested in
guaranteed investment contracts of fixed interest rate with
insurance companies, banks or federally insured institutions.
Vanguard Wellington Fund - Funds are invested in a
diversified portfolio of stocks and bonds to provide a
combination of long-term growth and income.
Vanguard Equity Income Fund - Funds are invested in a
broadly diversified portfolio of stocks of large,
established companies that pay higher than average
dividends to provide income and modest long-term growth.
Vanguard Windsor II Fund - Funds are invested in a broadly
diversified portfolio of large, established companies
believed to be undervalued relative to their current prices
to provide long-term growth and modest dividend income.
Vanguard Index Trust (500 Portfolio) - Funds are invested
in the same stocks that are in the Standard & Poor's 500
Composite Stock Price Index (S&P 500) to provide long-term
growth by attempting to match the performance and risk
characteristics of the unmanaged S&P 500 Index, a broad
measure of the U.S. stock market.
Vanguard U.S. Growth Portfolio - Funds are invested in a
portfolio of large, established companies that have good
growth records, strong market positions and have exhibited
long-term financial strength to provide potential long-term
growth with dividends.
American Century Fund - Holds equity securities of foreign companies
in developed countries that exhibit accelerating growth.
Neuberger & Berman Genesis Trust - Holds primarily stocks of
companies with small market capitalizations (up to $1.5 billion at the
time of the portfolio's investment) which are selling at attractive
prices, with a history of solid performance and a proven management
team.
Carpenter Technology Corporation Stock Fund - Consists of
investments in Carpenter Technology common stock, with a small portion
of the fund invested in a money market fund to provide liquidity
requirements of daily valuation.
Participant Accounts:
Participant accounts are maintained and updated by the
recordkeeper, M&I, which also acts as the trustee. Each participant's
account is credited with the participant's contribution, the Company's
contributions and an allocation of Plan investment earnings.
Notes to Financial Statements, Continued
1. Description of Plan, continued:
Vesting:
Participants are 100% vested in all contributions.
Payment of Benefits:
On termination of service due to death, disability,
retirement, a participant is entitled to full distribution of
all amounts credited to his or her account. For termination
of service due to other reasons, a participant is entitled to
the amount credited to his or her account. Payments will be
paid out in a lump sum or under a variety of annuity forms
available for election by the participant. Benefit payments
are recorded upon distribution.
2. Summary of Significant Accounting Policies:
The following are the significant accounting policies followed
by the Plan:
Basis of Accounting:
The accompanying financial statements are prepared on the
accrual method of accounting.
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 reported
amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Valuation of Investments:
Investments in securities held by the trustee or Vanguard
Investments are traded on national securities exchanges and
are valued at the last reported sales price on the last
business day of each calendar month.
The Plan's Guaranteed Investment Contract is valued at
contract value. Contract value represents contributions made
under terms of the contract, plus interest at the contract
rate, less funds used to purchase annuities. Funds which have
been used to purchase annuities (that is, an insurance company
is obligated to pay the related pension benefits) are excluded
from the Plan's assets. At contract termination, the market
value of the contract would differ from the carrying value.
Notes to Financial Statements, Continued
3. Investments:
The fair value of investments at December 31, 1998 are:
M&I Stable Principal Fund $1,947,406
Vanguard Wellington Fund 447,308
Vanguard Equity Income Fund 299,843
Vanguard Windsor II Fund 998,139
Vanguard Index 500 Fund 1,346,331
Vanguard U.S. Growth Fund 635,263
American Century Mutual Fund 13,451
Neuberger & Berman Genesis Trust 70,189
Carpenter Technology
Corporation Common Stock Fund 209,665
Loans 39,882
----------
Total Investments $6,007,477
==========
During 1997, the assets of certain Talley Industries, Inc. and
its subsidiaries' defined contribution retirement plans were
maintained in a consolidated pension trust, administered by a
trustee. Each plan was allocated a portion of revenues,
expenses and year-end assets by the trustee, determined by the
market value of the assets held by the Plan at the end of the
period. At December 31, 1997, the Plan's interest in the net
assets of the Master Trust was approximately 13%. The
investments of the Defined Contribution Master Trust at
December 31, 1997 were as follows:
Master Plan's
Trust Allocated
----------- Portion at
Market Market
Value Value
----------- ----------
M&I Stable Principal Fund $ 9,451,203 $ 893,054
Equity Fund 199,270 -
Fidelity Puritan Fund 1,237,225 -
Fidelity Mutual Beacon Fund 1,519,209 -
Fidelity Spartan Equity Fund 738,702 -
Fidelity Adv. High Yield Fund 87,563 -
Money Market Fund 65,485 -
Marshall Lg. Cap. Growth &
Income Fund 602,135 -
Janus Fund 117,564 -
Vanguard Wellington Fund 138,524 138,524
Vanguard Equity Income Fund 87,021 87,021
Vanguard Windsor II Fund 277,889 277,889
Vanguard Index 500 Fund 366,779 366,779
Vanguard U.S. Growth Fund 167,270 167,271
----------- ----------
Total Investments $15,055,839 $1,930,538
=========== ==========
Notes to Financial Statements, Continued
4. Certification of Financial Information:
Investment information for the year ended December 31, 1997
included in the accompanying financial statements and
supplemental schedules was certified by the trustee, M&I,
as complete and accurate. This information includes
investments, at fair value, and investment income.
5. Tax Status of the Plan:
The Internal Revenue Service has determined and informed the
Company by a letter dated September 5, 1995, that the Plan is
qualified and that the trust established under the Plan is tax-
exempt, under the appropriate sections of the Code. The Plan
has been amended since receiving the determination letter.
However, the Plan administrator and the Plan's tax counsel
believe that the Plan is currently designed and being operated
in compliance with the applicable requirements of the Code.
Therefore, they believe that the Plan was qualified and the
related trust was tax-exempt as of the financial statement
date.
6. Administrative Expenses:
The participants are assessed a fee for loan originations and
lump sum distributions. In addition, investment income is
shown net of investment management fees. All other expenses
are paid by the Company.
7. Plan Termination:
Although it has not expressed any intent to do so, the Company
has the right under the Plan to discontinue its contributions
at any time and to terminate the Plan subject to the
provisions of ERISA.
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
Item 27(a) - Schedule of Assets Held for Investment Purposes
as of December 31, 1998
Description of Current
Identity of Issuer Investment Cost Value
- ------------------------------ ------------------ ---------- ----------
*M&I Stable Principal Fund Fixed income funds $1,947,406 $1,947,406
Vanguard Wellington Fund Mutual fund 467,463 447,308
Vanguard Equity Income Fund Mutual fund 285,361 299,843
Vanguard Windsor II Fund Mutual fund 1,025,485 998,139
Vanguard Index Trust
(500 Portfolio) Mutual fund 1,154,480 1,346,331
Vanguard U.S. Growth
Portfolio Mutual fund 562,318 635,263
American Century Fund Mutual fund 13,113 13,451
Neuberger & Berman Genesis
Trust Mutual fund 69,002 70,189
*Carpenter Technology
Corporation Stock Fund Mutual fund 216,735 209,665
Participant Loans
(Interest Rate 9.5%) - 39,882
---------- ----------
Total investments $5,741,363 $6,007,477
========== ==========
*Party-in-interest
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
Item 27(d) - Schedule of Reportable (5%) Transactions
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Number of Cost of Selling Cost of Realized
Description Transactions Purchase Price Asset Gain/(Loss)
- --------------------------- -------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Marshall and Ilsley Stable
Principal Fund Purchases 73 $1,213,632 - - -
Sales 68 - $ 734,177 $ 734,177 -
Vanguard Wellington Fund Purchases 15 159,690 - - -
Sales 18 - 148,018 111,057 $ 36,961
Vanguard Equity Income Fund Purchases 13 84,285 - - -
Sales 6 - 99,382 91,258 8,124
Vanguard Windsor II Fund Purchases 46 376,023 - - -
Sales 283 - 307,812 232,139 75,673
Vanguard Index Trust 500
Portfolio Purchases 17 677,370 - - -
Sales 165 - 400,128 374,133 25,995
Vanguard U. S. Growth
Portfolio Purchases 41 372,964 - - -
Sales 9 - 233,951 183,505 50,446
Neuberger & Berman
Genesis Trust Purchases 1 153,721 - - -
Sales 26 - 79,394 84,719 (5,325)
Carpenter Technology
Corporation Stock Fund Purchases 805 336,771 - - -
Sales 5 - 112,078 120,036 (7,958)
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Carpenter Technology Corporation on Form S-8 (number 333-
55667) of our report dated July 9, 1999 on our audit of the
financial statements of the Retirement Plan of Talley Metals
Technology, Inc. as of December 31, 1998 and for the year then
ended, which report is included in this Annual Report on Form 11-K.
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
July 14, 1999
