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 year ended December 31, 2002
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)
2 Meridian Drive
Treeview Corporate Center
Wyomissing, Pennsylvania 19610
(Address of principal executive
office of the issuer)
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
23 Consent of Independent Accountants
99.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350
99.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350
1
RETIREMENT PLAN OF TALLEY METALS TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
FORM 11-K ANNUAL REPORT
Form 11-K
Pages
Report of Independent Auditors 3
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2002 and 2001 4
Statements of Changes in Net Assets Available
for Benefits for the years ended December 31,
2002 and 2001 5
Notes to Financial Statements 6-10
2
Report of Independent Auditors
To the Participants and Administrator of the Retirement Plan of
Talley Metals Technology, Inc.:
In our opinion, the accompanying statements of net assets
available for benefits and the related statements 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, 2002 and 2001, and the changes in its net assets
available for benefits for the years then ended in conformity
with accounting principles generally accepted in the United
States of America. 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 auditing standards generally accepted in the
United States of America, 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 our opinion.
As discussed in Note 1, effective December 31, 2002, the Plan
was merged with and into the Savings Plan of Carpenter
Technology Corporation.
June 13, 2003 /s/ PricewaterhouseCoopers LLP
3
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
as of December 31, 2002 and 2001
(dollars in thousands)
ASSETS 2002 2001
Investments, at fair value $ - $6,289
Receivables:
Investment income receivable - 19
Contributions - salary deferral - 14
Contributions - company - 15
Total receivables - 48
Total assets - 6,337
LIABILITIES
Liability for investment purchases - 20
Total liabilities - 20
Net assets available for benefits $ - $6,317
The accompanying notes are an integral part of these financial
statements.
4
RETIREMENT PLAN OF
TALLEY METALS TECHNOLOGY, INC.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
for the years ended December 31, 2002 and 2001
(dollars in thousands)
2002 2001
Additions to net assets attributed to:
Investment income:
Interest and Dividends $ 204 $ 223
Net depreciation in fair value of investments (811) (431)
(607) (208)
Contributions:
Employer 452 582
Participant 221 338
Rollover 1 3
674 923
Total additions 67 715
Deductions from net assets attributed to:
Benefits paid to participants 537 1,250
Administrative expenses 5 3
Transfer to Savings Plan of Carpenter
Technology Corp. 5,842 -
Total deductions 6,384 1,253
Net (decrease) (6,317) (538)
Net assets available for benefits:
Beginning of year 6,317 6,855
End of year $ - $6,317
The accompanying notes are an integral part of these financial
statements.
5
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. (except for
salaried exempt employees who, effective July 1, 2001,
became participants in the Savings Plan of Carpenter
Technology Corporation), who have one year of service and
are age eighteen or older. The Plan is subject to
provisions of the Employee Retirement Income Security Act of
1974 (ERISA), as amended. Prior to June 1, 1998, the Plan
had been designed as a money purchase pension plan. Any
contributions made prior to that date and earnings on those
contributions will be subject to the terms of those plan
documents.
Plan Merger:
Effective December 31, 2002, the Plan merged with and into
the Savings Plan of Carpenter Technology Corporation
("Savings Plan"). Pursuant to the merger, participants with
assets having a fair market value of $5,842,000 at the time
of the merger became part of the Savings Plan. The Plan's
participants underwent changes to their benefits under the
Savings Plan. For additional information regarding these
changes, participants should refer to the Plan document for
the Savings Plan.
6
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 5% 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 the
participant's total earnings that a participant contributes
to the Plan. Participants who are age 50 or older may make
"catch-up contributions," which are additional pretax
contributions. Participants may also contribute amounts
representing distributions from other qualified defined
benefit or defined contribution plans.
Participants may direct all contributions in one or more of
the investment options in 5% increments as directed by the
participants based on their personal investment goals. The
Plan currently offers seven mutual funds, a fixed income
fund, and the stock of Carpenter Technology Corporation.
Participant's Accounts:
Participant accounts are maintained and updated by the
recordkeeper, Marshall & Ilsley (M&I), which also acts as
the trustee. Each participant's account is credited with
the participant's contributions and allocations of (a) the
Company's contributions and (b) Plan earnings, and is
charged with an allocation of administrative expenses.
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.
Vesting:
Participants are 100% vested in all contributions.
Participant Loans:
Loans are available to participants who are active employees
of the Company. Participants are subject to certain
7
restrictions on their number of loans, amount and terms of
repayment. Interest is charged at the prime rate for
commercial lenders at the time the loan is initiated, plus
one percent. Loan repayments must be made under a level
amortization schedule through regular payroll deductions,
and payment in full is required at the time of the
participant's separation.
Payment of Benefits:
Separated employees are entitled to full distribution of all
amounts credited to their accounts. Payments will be paid
out in a lump sum or under a variety of annuity forms
available for election by the participant.
2. Summary of Significant Accounting Policies:
A. The financial statements of the Plan are prepared under
the accrual method of accounting.
B. The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America 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.
C. The Plan's investments are stated at fair value. Quoted
market prices are used to value investments. The
investment in the M&I Stable Principal Fund is stated at
contract value, which represents contributions made
under the contract, plus earnings, less participant
withdrawals and administrative expenses. Shares of
registered investment companies are valued at quoted
market prices, which generally represent the net asset
values of shares held by the Plan at year end.
Participant loans are valued at their outstanding
balances, which approximates fair value. Purchases and
sales of investments are recorded on a trade-date basis.
Gain or loss on sales of investments is based on average
cost. Dividend income is recorded on the ex-dividend
date. Income from other investments is recorded as
earned on an accrual basis.
8
D. The net appreciation (depreciation) in the fair value of
investments in the statements of changes in net assets
available for benefits consists of realized gains or
losses and unrealized appreciation (depreciation) on
investments.
E. Benefits are recorded when paid.
F. Investments are exposed to various risks, such as
interest rate, market and credit risks. Due to the level
of risk associated with certain investments and the
level of uncertainty related to changes in the value of
investments, it is reasonably possible that changes in
these risks in the near term could materially affect the
amounts reported in the statement of net assets
available for benefits and the statement of changes in
net assets available for benefits.
3. Investments:
The following presents investments that represent 5 percent
or more of the Plan's net assets.
(in thousands)
at December 31
2002 2001
M&I Stable Principal Fund $ - $2,745
Carpenter Technology Corporation Stock Fund $ - $ 747
Vanguard Index 500 Fund $ - $ 679
Vanguard Windsor II Fund $ - $ 579
Vanguard Wellington Fund $ - $ 385
Vanguard U.S. Growth Fund $ - $ 357
Loan Fund $ - $ 361
During 2002 and 2001, the Plan's investments (including gains
and losses on investments bought and sold, as well as held
during the year) depreciated in value by $811,000 and $431,000
respectively, as follows:
(in thousands)
2002 2001
Mutual funds $ (499) $ (440)
Common stock (312) 9
$ (811) $ (431)
9
4. Tax Status of the Plan:
The Internal Revenue Service has determined and informed the
Company by letter dated December 20, 1999, that the Plan and
related trust as of June 1, 1998 are designed in accordance
with applicable sections of the Internal Revenue Code (IRC)
Although the Plan has been amended since receiving the
determination letter, the Plan administrator believes that
the Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC.
5. Administrative Expenses:
The participants are assessed a fee for loan originations.
In addition, investment income is shown net of investment
management fees. All other expenses are paid by the
Company.
6. Plan Termination:
The Company has the right under the Plan to discontinue or
change its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
7. Related Party Transactions:
Certain Plan investments are shares of a fixed income fund
managed by M&I. M&I is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in-
interest. Loan origination fees paid by plan participants
to M&I for the years ended December 31, 2002 and 2001 were
$5,000 and $3,000 respectively.
10
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: June 30, 2003 By /s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice President - Finance
and Chief Financial Officer
11
EXHIBIT INDEX
Exhibit Number
23 Consent of Independent Accountants
99.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350
99.2 Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350
12
06/30/03/SL1 362163v2/02110.081