CARPENTER TECHNOLOGY CORP — Annual Report 2002

Jun 20, 2002

11-K 1 talley.htm RETIREMENT PLAN OF TALLEY Carpenter Technology Corp. 12/31/01 TALLEY 11-K

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, 2001

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 June
20, 2002	By	/s/ Terrence E.
Geremski Terrence E. Geremski 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: | |
| Statements
of Net Assets Available for Benefits as of December 31, 2001 and 2000 | 6 |
| Statements
of Changes in Net Assets Available for Benefits for the years ended December 31, 2001 and 2000 | 7 |
| Notes
to Financial Statements | 8-11 |
| Supplemental Schedule: | |
| Schedule
of Assets (Held at End of Year) | 12 |
| Consent of Independent Accountants | 13 |

| Report of Independent
Accountants |
| --- |
| 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, 2001 and 2000, and the
changes in 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. |
| Our audits were conducted for
the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the
basic financial statements but is 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. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole. |
| PricewaterhouseCoopers LLP Philadelphia, PA May 17, 2002 |

| RETIREMENT
PLAN OF TALLEY METALS TECHNOLOGY, INC. | | |
| --- | --- | --- |
| STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS as of December 31, 2001 and 2000 (dollars in thousands) | | |
| ASSETS | 2001 | 2000 |
| Investments, at fair value | $ 6,289 | $ 6,843 |
| Receivables: | | |
| Investment
income receivable | 19 | 12 |
| Contributions
- salary deferral | 14 | - |
| Contributions
- company | 15 | - |
| Total
receivables | 48 | 12 |
| Total assets | 6,337 | 6,855 |
| LIABILITIES | | |
| Liability for investment purchases | 20 | - |
| Total
liabilities | 20 | - |
| Net assets available for benefits | $ 6,317 | $ 6,855 |
| The
accompanying notes are an integral part of these financial statements. | | |

| RETIREMENT
PLAN OF TALLEY METALS TECHNOLOGY, INC. | | |
| --- | --- | --- |
| STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS for the years ended December 31, 2001 and 2000 (dollars in thousands) | | |
| | 2001 | 2000 |
| Additions to net
assets attributed to: | | |
| Investment income: | | |
| Interest and
Dividends | $ 223 | $ 200 |
| Contributions: | | |
| Employer | 582 | 659 |
| Participant | 338 | 469 |
| Rollover | 3 | 217 |
| | 923 | 1,345 |
| Total
additions | 1,146 | 1,545 |
| Deductions from net assets attributed
to: | | |
| Net depreciation in fair value of
investments | 431 | 165 |
| Benefits paid to participants | 1,250 | 1,188 |
| Administrative expenses | 3 | 5 |
| Total
deductions | 1,684 | 1,358 |
| Net
(decrease) increase | (538) | 187 |
| Net assets available
for benefits: | | |
| Beginning
of year | 6,855 | 6,668 |
| End
of year | $ 6,317 | $ 6,855 |
| The
accompanying notes are an integral part of these 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. (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). 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. |
| | 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 may also contribute amounts representing contributions
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 contribution, the Company's contributions and an allocation of Plan investment earnings. |

	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 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 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:
	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 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. The investment in the other trust funds are stated at their fair value, based on the current market values of the underlying assets of the funds, or as determined by the trustee. Purchases and sales of invest- ments are reflected 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.

| | D. — E. | The net appreciation (depreciation) in the fair value of investments in the statement of changes in net assets available for benefits consists of realized gains or losses and unrealized appreciation (depreciation) on investments. — 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. (Shares and dollars in thousands) | | |
| | | at
December 31 | |
| | | 2001 | 2000 |
| | M&I Stable Principal
Fund, 2,745 and 2,489 units, respectively | $ 2,745 | $ 2,489 |
| | Carpenter Technology
Corporation Stock Fund, 25 units | $ 747 | $
- |
| | Vanguard Index 500 Fund,
6 and 10 units, respectively | $ 679 | $ 1,198 |
| | Vanguard Windsor II Fund,
23 and 24 units, respectively | $ 579 | $ 656 |
| | Vanguard Wellington Fund,
14 and 14 units, respectively | $ 385 | $ 400 |
| | Vanguard U.S. Growth
Fund, 19 and 29 units, respectively | $ 357 | $ 794 |
| | Loan Fund, 361 units | $ 361 | $
- |
| | During 2001 and 2000, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $431,000 and $165,000 respectively, as follows: | | |
| | | (in thousands) | |
| | | 2001 | 2000 |
| | Mutual funds | $ (440) | $ (300) |
| | Common stock | 9 | 135 |
| | | $ (431) | $ (165) |

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 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 and the Plan's tax counsel believe the 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 mutual funds 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, 2001 and 2000 were $3,000 and $5,000 respectively.

| Schedule H,
line 4i - Schedule of Assets (Held at End of Year) Retirement Plan of Talley Metals Technology, Inc. as of December 31, 2001 — (A) | (B) Identity of issue, borrower, lessor or similar party | (C) Description of investment, including maturity date, rate of interest, collateral, par or maturity value | (E) Current Value |
| --- | --- | --- | --- |
| * | M&I Stable Principal Fund | Fixed income funds | $ 2,745,383 |
| * | Carpenter Technology Corporation Stock Fund | Corporate common stock | $ 747,311 |
| | Vanguard Index Trust (500 Portfolio) | Mutual fund | $ 679,405 |
| | Vanguard Windsor II Fund | Mutual fund | $ 578,811 |
| | Vanguard Wellington Fund | Mutual fund | $ 385,343 |
| | Vanguard U.S. Growth Portfolio | Mutual fund | $ 356,973 |
| | Vanguard Equity Income Fund | Mutual fund | $ 242,475 |
| | Neuberger & Berman Genesis Trust | Mutual fund | $ 145,135 |
| | American Century Fund | Mutual fund | $ 46,675 |
| | Cash | Interest Bearing Cash | $ 49 |
| | Participant Loans | Loans to Participants - interest
rate range 6.00% to 10.5%, no loans due past 12/14/2006 | $ 361,425 |
| *
Party-in-Interest | | | |

| CONSENT OF INDEPENDENT
ACCOUNTANTS |
| --- |
| We
hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (number 333-55667) of Carpenter Technology Corporation of our report dated May 17, 2002 relating to the financial statements of the Retirement Plan of Talley Metals Technology, Inc., which appears in this Form 11-K. |
| PricewaterhouseCoopers LLP Philadelphia, PA June 20, 2002 |

Last Updated on 6/12/02 By U00954