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
DYNAMET INCORPORATED DEFINED CONTRIBUTION PLAN
(Full Title of the Plan)
CARPENTER TECHNOLOGY CORPORATION
(Name of issuer of the securities held
Pursuant to the plan)
1047 North Park Road
Wyomissing, PA 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.
DYNAMET INCORPORATED
DEFINED CONTRIBUTION PLAN
(Name of Plan)
Date: __________________ By: ____________________________________
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
DYNAMET INCORPORATED DEFINED CONTRIBUTION PLAN
INDEX TO FINANCIAL STATEMENTS
FORM 11-K ANNUAL REPORT
- -----------------------------------------------------------------------------
Form 11-K
Pages
---------
Report of Independent Accountants 5
Financial Statements:
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
- Common/Collective trusts with PNC Bank:
Investment Contract Fund
Aggressive Profile Fund
- Mutual Funds with PNC Bank:
Balanced Fund
Index Equity Fund
Large Cap Growth Equity Fund
Intermediate Government Fund
International Equity Fund
Small Cap Value Equity Fund
Carpenter Technology Common Stock Fund
Participant Loan Fund 6
Statements of Changes in Net Assets Available for Plan Benefits for
the years ended December 31, 1998 and 1997
- Common/Collective trusts with PNC Bank:
Investment Contract Fund
Aggressive Profile Fund
- Mutual Funds with PNC Bank:
Balanced Fund
Index Equity Fund
Large Cap Growth Equity Fund
Intermediate Government Fund
International Equity Fund
Small Cap Value Equity Fund
Carpenter Technology Common Stock Fund
Participant Loan Fund 7
Notes to Financial Statements 8-11
Supplemental Schedules:
Assets Held For Investment Purposes as of December 31, 1998 12
Reportable Transactions for the year ended December 31, 1998 13
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Carpenter Technology Corporation on Form S-8 (number 2-83780) of our report
dated June 2, 1999 on our audits of the financial statements of the Dynamet
Incorporated Defined Contribution Plan as of December 31, 1998 and 1997,
which report is included in this Annual Report on Form 11-K.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Dated: June 29, 1999
Report of Independent Accountants
To the Participants and Administrator of the
Dynamet Incorporated Defined Contribution Plan
We have audited the accompanying statement of assets available for benefits
(modified cash basis) of the Dynamet Incorporated Defined Contribution Plan
(the Plan) as of December 31, 1998 and 1997, and the related statement of
changes in assets available for benefits (modified cash basis) for the year
ended December 31, 1998. 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 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.
As described in Note 2, these financial statements and supplemental schedules
were prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than generally accepted accounting
principles. In our report dated July 20, 1998 (except for Note 9 which
was as of August 3, 1998), we were unable to, and did not, express an opinion
on the 1997 financial statements because, at the instruction of the
Plan Administrator, we did not perform any auditing procedures with respect
to the information summarized in Note 3. In conjunction with our audit of
the 1998 financial statements, the Plan Administrator instructed us to
perform, and we did perform, an audit of the 1997 financial statements in
accordance with generally accepted auditing standards. Accordingly, we
are now able to express an opinion on the 1997 financial statements.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets available for benefits of the Plan as of
December 31, 1998 and 1997, and changes in assets available for benefits for
the year ended December 31, 1998, on the basis of accounting described
in Note 2.
To the Participants and Administrator of the
Dynamet Incorporated Defined Contribution Plan
continued...
Our audits were performed 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. These supplemental
schedules are the responsibility of the Plan's management. The Fund
Information in the statement of changes in assets available for benefits is
presented for purposes of additional analysis rather than to present the
changes in assets available for plan benefits of each fund. 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.
June 2, 1999
Dynamet Incorporated
Defined Contribution Plan
Statement of Assets Available for Plan Benefits
December 31, 1998 and 1997
- -----------------------------------------------------------------------------
(in thousands of dollars)
1998 1997
Investments, at estimated fair value -
Common/collective trusts with PNC Bank:
Investment Contract Fund $1,689 $1,366
Aggressive Profile Fund 309 347
------- -------
1,998 1,713
------- -------
Investments, at quoted market value -
Mutual funds with PNC Bank:
Balanced Fund 3,925 3,014
Index Equity Fund 3,507 2,657
Large Cap Growth Equity Fund 3,049 2,097
Intermediate Government Fund 478 583
International Equity Fund 125 138
Small Cap Value Equity Fund 249 309
Carpenter Technology Common Stock Fund 34 -
Participant Loan Fund 60 -
------- ------
11,427 8,798
------- ------
Assets available for Plan benefits $13,425 $10,511
======= =======
The accompanying notes are in integral part of these financial statements.
Dynamet Incorporated
Defined Contribution Plan
Statement of Changes in Assets Available for Plan Benefits w/ Fund Information
December 31, 1998 and 1997
<TABLE>
<CAPTION>
(in thousands of dollars)
PNC PNC Carpenter
PNC PNC PNC Large Cap PNC PNC Sm Cap Tech
Invest Aggress PNC Index Growth Inter- Intern'l Value Common Participant
Contract Profile Bal'd Equity Equity Mediate Equity Equity Stock Loan
Fund Fund Fund Fund Fund GovFund Fund Fund Fund Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Additions to assets attributed to:
Investment income:
Net appreciation/depreciation
in fair value of investments $ 102 $ 51 $ 457 $ 733 $ 624 $ 8 $ 7 $ (59) $ (3) $ - $1,920
Interest and dividends - 1 219 36 219 33 14 13 - 2 537
-----------------------------------------------------------------------------------------
102 52 676 769 843 41 21 (46) (3) 2 2,457
Less - Investment expenses (9) - - - - - - - - - (9)
-----------------------------------------------------------------------------------------
93 52 676 769 843 41 21 (46) (3) 2 2,448
-----------------------------------------------------------------------------------------
Contributions:
Participants 7 9 39 50 50 9 4 13 2 - 183
Employer 84 67 248 225 240 34 17 55 10 - 980
Other - Rollover - 3 1 1 3 - - - 1 - 9
-----------------------------------------------------------------------------------------
91 79 288 276 293 43 21 68 13 - 1,172
-----------------------------------------------------------------------------------------
Total additions 184 131 964 1,045 1,136 84 42 22 10 2 3,620
-----------------------------------------------------------------------------------------
Deductions:
Deductions from assets
attributed to:
Benefits paid to participants 179 21 35 257 23 179 - 22 - - 716
-----------------------------------------------------------------------------------------
Total deductions 179 21 35 257 23 179 - 22 - - 716
-----------------------------------------------------------------------------------------
Net increase prior to interfund
transfers 5 110 929 788 1,113 (95) 42 - 10 2 2,904
Transfers, net 318 (148) (18) 62 (161) (10) (55) (60) 24 58 10
-----------------------------------------------------------------------------------------
Net increase(decrease) 323 (38) 911 850 952 (105) (13) (60) 34 60 2,914
Assets available for plan benefits:
Beginning of year 1,366 347 3,014 2,657 2,097 583 138 309 - - 10,511
-----------------------------------------------------------------------------------------
End of year $1,689 $309 $3,925 $3,507 $3,049 $478 $125 $249 $34 $60 $13,425
=========================================================================================
Percentage of total at end of year 12.6% 2.3% 29.2% 26.1% 22.7% 3.6% 0.9% 1.9% 0.3% 0.4% 100.0%
</TABLE>
The accompanying notes are an integral part of these financial statements.
Dynamet Incorporated
Defined Contribution Plan
December 31, 1998 and 1997
Notes to Financial Statements
- -----------------------------------------------------------------------------
1. Description of the Plan
The following brief description of the Dynamet Incorporated Defined
Contribution Plan (the Plan) is provided for general information
purposes only. Participants should refer to the Summary Plan
Description for a more complete description of the Plan's provisions.
The Plan Administrator is Dynamet Incorporated (Dynamet). The
Trustee and Plan Custodian is PNC Bank.
General
The Plan is a defined contribution plan covering salaried employees
of Dynamet. In February 1997, the shareholders of Dynamet sold all
of their shares of common stock to Carpenter Technology Corporation
(CTC), and Dynamet became a wholly-owned subsidiary of CTC.
All full-time and, effective July 1, 1998, part-time salaried
employees not participating in another Dynamet pension plan are
eligible to participate upon the completion of one year of credited
service as defined in the Plan Agreement and upon attainment of age
21. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 as amended (ERISA).
Contributions
Prior to July 1, 1998, only contributions by Dynamet were permitted
to the Plan. Dynamet could contribute up to 15 percent of
compensation (excluding bonuses and other such compensation, if any)
paid to participants for the Plan year. For the year ended
December 31, 1997, 10 percent of eligible compensation was
contributed to the Plan. In addition, for the six months ended
June 30, 1998, Dynamet made a contribution to the Plan equivalent to
10 percent of the eligible compensation for all eligible employees as
of June 30, 1998. This represented the final profit-sharing
contribution prior to implementation of the amended plan provisions.
Effective July 1, 1998, the Plan was amended to permit participants
to contribute up to 15 percent of their pre-tax annual compensation.
Participants may also contribute amounts representing distributions
from other qualified defined benefit or defined contribution plans.
Dynamet will contribute an amount equal to 6 percent of participants'
eligible compensation and will match participant contributions up to
the first 4 percent.
Participant Accounts
Prior to July 1, 1998, each participant's account was credited with
an allocation of Dynamet's contribution, the Plan's investment
earnings and forfeiture of terminated participants' nonvested
accounts. Dynamet's contribution and the forfeiture of terminated
participants' nonvested accounts were allocated to each participant's
account based on the number of units each participant earned in the
current year in the Plan in comparison to total Plan units. Each
participant earned a unit for every $100 of compensation and a unit
for every year of service. Investment income is allocated to each
participant's account based on the participant's account balance and
the actual investment return.
Effective July 1, 1998, each participant's account is credited with
the participant's contribution and allocations of (a) the Company's
contribution and, (b) Plan earnings. Allocations are based on
participant earnings or account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided
from the participant's vested account.
Dynamet Incorporated
Defined Contribution Plan
December 31, 1998 and 1997
Notes to Financial Statements
- -----------------------------------------------------------------------------
Vesting
Prior to July 1, 1998, participants vested 20 percent after 3 years,
40 percent after 4 years, 60 percent after 5 years, 80 percent after
6 years, and 100 percent after 7 years. Participants also became 100
percent vested upon total and permanent disability or death.
Effective July 1, 1998, participants fully vest immediately, and all
active participants as of that date became fully vested.
Investment Options
Upon enrollment in the Plan, a participant may direct contributions
in 1 percent increments in any of nine investment options.
Available investment options are as follows:
Carpenter Technology Corporation Common Stock Fund (effective 7/1/98)
PNC Bank managed mutual fund accounts:
Balanced Fund
Index Equity Fund
Large Cap Growth Equity Fund
Intermediate Government Bond Fund
International Equity Fund
Small Cap Value Equity Fund
PNC Bank Investment Contract Fund
PNC Bank Aggressive Profile Fund
Participants may change their investment options daily.
Participant Notes Receivable
Effective July 1, 1998, participants may borrow from their account a
minimum of $1,000 up to a maximum amount equal to the lesser of
$50,000 or 50 percent of their account balance. Loan transactions
are treated as a transfer (from) to the investment fund(s) (to) from
the Participant Loan Fund. Loan terms range from 1 to 5 years. The
loans are secured by the balance in the participant's account and
bear interest at a fixed rate based on the prime rate plus 1 percent
at the time the loans are made. Principal and interest are paid
ratably through payroll deductions.
Payment of Benefits
Participants or their beneficiaries are entitled to benefits equal
to the vested amount in their accounts upon retirement, total and
permanent disability, death, or termination of service.
2.Summary of Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared on the modified
cash basis of accounting; consequently, investment income and
contributions and the related assets are recognized when received
rather than when earned, and benefit payments and investment expenses
are recognized when paid.
Dynamet Incorporated
Defined Contribution Plan
December 31, 1998 and 1997
Notes to Financial Statements
- -----------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with the basis
of accounting described herein 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 at the date of the financial statements. Actual
results could differ from these estimates.
Investment Valuation
Investments in common/collective trusts are valued at estimated fair
value as reported to the Plan by the Plan Custodian. Investments in
mutual funds and the Carpenter Technology Common Stock Fund are
valued at quoted market prices.
Expenses
Prior to July 1, 1998, administrative expenses of the Plan were paid
by Dynamet. Effective July 1, 1998, administrative expenses are paid
by the Plan.
3.Certified Financial Data
The following is a summary of the Plan's financial information and
data certified by the trustee.
December 31, 1997
(in thousands
of dollars)
Investment at estimated fair value $ 1,713
Investments at quoted market value 8,798
-------
Total investments $10,511
=======
4. Investments
The following is a summary of the number of units or shares on hand
at December 31, 1998 and 1997, of investments held in
common/collective trusts and the Carpenter Technology Common Stock
Fund.
December 31 December 31
1998 1997
-------------- ---------------
Number Number
units/ Unit/ units/ Unit/
shares share shares share
Investment account held value held value
----------------------------------
Common/collective trusts with PNC Bank:
Investment Contract Fund 848,907.86 $ 1.99 729,460.56 $ 1.87
Aggressive Profile Fund 14,574.51 $21.23 18,822.51 $18.41
Carpenter Technology Common
Stock Fund 4,743.47 $7.21 - -
Dynamet Incorporated
Defined Contribution Plan
December 31, 1998 and 1997
Notes to Financial Statements
- -----------------------------------------------------------------------------
5. Qualification of the Plan
The Plan received a favorable determination letter from the Internal
Revenue Service (IRS) dated January 17, 1996. The Plan has since been
amended; however, the Plan Administrator and Plan's tax counsel
believe that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Internal Revenue
Code.
6. Plan Termination
It is the current intention of Dynamet to continue the Plan in
accordance with the Plan's provisions. However, Dynamet reserves the
right to terminate the Plan at any time. In the event the Plan
terminates, funds will be distributed in accordance with the Plan's
provisions.
7. Subsequent Event
Effective January 1, 1999, the Dynamet Incorporated Retirement Plan
for Non-Union Hourly Employees (the Hourly Plan) was merged into the
Plan. In connection with this merger, 43 participants of the Hourly
Plan became participants in the Plan and account balances in the
Hourly Plan of approximately $383,000 were transferred into the Plan.
Dynamet Incorporated
Defined Contribution Plan
Schedule of Assets Held for Investment Purposes - Form 5500, Item 27(a)
December 31, 1998
Additional Information - Schedule I
- ------------------------------------------------------------------------------
Shares Current
Issuer Description and units Cost Value
- ------------------------------------------------------------------------------
* PNC Bank Investment Contract Fund 848,907.86 $1,502,017 $1,688,987
* PNC Bank Aggressive Profile Fund 14,574.51 233,196 309,463
* PNC Bank Balanced Fund 198,050.99 2,877,803 3,925,371
* PNC Bank Index Equity Fund 147,903.99 2,104,036 3,506,804
* PNC Bank Large Cap Growth Equity Fund 145,174.53 2,164,845 3,048,665
* PNC Bank Intermediate Government Fund 46,506.95 467,111 477,626
* PNC Bank International Equity Fund 8,624.49 116,707 125,228
* PNC Bank Small Cap Value Equity Fund 15,472.72 244,892 248,956
* Carpenter Carpenter Technology
Tech Corp Common Stock Fund 4,743.47 37,686 34,206
Participant Interest Rate 1% over prime - 60,194 60,194
Loans
-----------------------
Total $9,808,487 $13,425,500
=======================
*Designates party-in-interest.
Dynamet Incorporated
Defined Contribution Plan
Schedule of Reportable Transactions - Form 5500, Item 27(d)
Year Ended December 31, 1998
Additional Information - Schedule II
- ------------------------------------------------------------------------------
Total Total
No of dollar value dollar value
Party Description trans- of purchases/ of sales/
involved of assets actions trfs in trfs out Net gain
Purchases:
PNC Bank Balanced Fund 32 $ 672,787 - -
PNC Bank Intermediate
Government Fd 35 $ 352,959 - -
PNC Bank Index Equity
Fund 42 $ 996,664 - -
PNC Bank Growth Equity
Fund 37 $1,069,079 - -
PNC Bank Investment
Contract Fund 22 $1,061,961 - -
PNC Bank Small Cap Value
Equity Fund 25 $ 301,710 - -
Sales:
PNC Bank Balanced Fund 25 - $218,340 $ 42,525
PNC Bank Intermediate
Government Fd 15 - $466,599 $ 12,771
PNC Bank Index Equity
Fund 33 - $879,856 $133,295
PNC Bank Growth Equity
Fund 33 - $741,420 $ 25,497
PNC Bank Investment
Contract Fd 36 - $841,440 $ 64,759
PNC Bank Small Cap Value
Equity Fund 27 - $303,460 $(28,165)
