Filed On 10/1/99 · SEC File 1-05828 · Accession Number 1036050-99-1996
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10/01/99 Carpenter Technology Corp DEFR14A 3:276 1036050
Revised Definitive Proxy Solicitation Material · Schedule 14A
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| REVISED DEFINITIVE PROXY STATEMENT-HTML FILE |
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
¨
Preliminary Proxy Statement
¨
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CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
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x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to (S)
240.14a-11(c) or (S) 240.14a-12
Carpenter Technology Corporation
(Name of Registrant as Specified In
Its Charter)
Carpenter Technology Corporation
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x
No fee required.
¨
Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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(1) Title of
each class of securities to which transaction applies:
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(2)
Aggregate number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed
maximum aggregate value of transaction:
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¨
Fee paid previously with preliminary materials.
¨
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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(1) Amount
Previously Paid:
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(2) Form,
Schedule or Registration Statement No.:
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Notes:
| [LOGO OF CARPENTER
TECHNOLOGY]
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To Our Stockholders:
It is our pleasure to invite you to attend the 1999
Annual Meeting of Stockholders of Carpenter Technology Corporation,
to be held at 4:00 p.m. on October 25, 1999. The meeting will be
held at The Inn At Reading, located in Wyomissing, Pennsylvania. The
doors of the ballroom will open at 3:00 p.m.
Business scheduled for the meeting includes the
election of five directors and approval of the appointment of
PricewaterhouseCoopers LLP as Carpenter’s independent public
accountants for fiscal 2000. Information concerning these matters is
included in the Notice of Annual Meeting and Proxy Statement. Also,
at the meeting, I will review with you Carpenter’s operations
during the past year and respond to questions.
If you plan to attend the meeting, please bring the
Admission Ticket located on the bottom half of your proxy card with
you. If your shares are held in the name of a broker, bank or other
nominee, and you wish to attend the meeting, you should obtain a
letter from your broker, bank or other nominee indicating that you
are the beneficial owner of a stated number of shares of stock as of
the record date, August 31, 1999.
If you do not attend the meeting, you may vote over
the internet, by telephone or by returning your proxy card. To
ensure proper representation of your shares at the meeting, please
follow the instructions at the Vote by Net website address on your
proxy card or follow the instructions that you will be given after
dialing the toll-free number on your proxy card. You may also mark
your proxy card, then sign, date and return it at your earliest
convenience.
I look forward to seeing you at the meeting.
Sincerely,
Chairman and
Chief Executive Officer
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[LOGO OF CARPENTER TECHNOLOGY]
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Notice of Annual Meeting of Stockholders
on
CARPENTER TECHNOLOGY CORPORATION will hold its 1999 Annual Meeting
of Stockholders at The Inn At Reading in Wyomissing, Pennsylvania on
Monday, October 25, 1999 at 4:00 p.m. We will vote on the following
matters:
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(1)
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The
election of five directors;
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(2)
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Approval of independent accountants for the fiscal year ending
June 30, 2000; and
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(3)
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Any
other business that is properly presented at the meeting
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Only
stockholders who were record owners at the close of business on
August 31, 1999 may vote at the meeting. A list of those
stockholders will be available at the meeting and also during the 10
days before the meeting, at the office of the Corporate Secretary,
1047 North Park Road, Wyomissing, Pennsylvania.
Regardless of the number of shares that you own, it is important
that your shares be represented at the meeting. You are encouraged
to take advantage of the easy and cost-effective internet and
telephone voting that Carpenter offers. To vote over the internet,
go to the Vote by Net website address on your proxy card and follow
the instructions. To vote by telephone, simply dial the toll-free
number on your enclosed proxy card. You may also vote by completing
and signing the proxy card and returning it in the enclosed postage
pre-paid envelope as soon as you can.
You
are cordially invited to attend the meeting. A map showing the
location of The Inn At Reading appears at the end of the Proxy
Statement. Please note that the access to The Inn At Reading from
Route 422 has been closed. If you plan to attend the meeting,
please use the Admission Ticket attached to your proxy card. Of
course, you may attend the meeting without an Admission Ticket, upon
proper identification.
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By Order of the
Board of Directors,
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General Counsel
and Secretary
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[LOGO OF CARPENTER TECHNOLOGY]
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This
Proxy Statement is furnished in connection with the solicitation of
proxies for the Annual Meeting of Stockholders on October 25, 1999
and any adjournment thereof. Carpenter’s Annual Report to
Stockholders, including financial statements, is being mailed along
with this Notice and Proxy Statement, but is not incorporated as
part of the Proxy Statement and is not to be considered part of the
proxy solicitation material. These materials are being sent to
stockholders on or about September 23, 1999.
Why Proxies are Being Solicited
Carpenter’s Board of Directors is soliciting proxies so every
stockholder will have an opportunity to vote at the meeting, whether
or not the stockholder attends the meeting in person. You are being
asked to vote on two proposals:
Ÿ
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The
election of 5 directors to three year terms which will expire in
2002; and
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Approval of the appointment of PricewaterhouseCoopers LLP as
Carpenter’s independent accountants for the fiscal year
ending June 30, 2000.
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Carpenter will pay the cost of preparing, assembling and mailing of
the Notice of Annual Meeting, Proxy Statement and proxy card.
Directors, officers and regular employees of Carpenter may solicit
proxies in person or by telephone without additional compensation.
D. F. King will also solicit proxies on behalf of Carpenter at a
cost of approximately $4,500. Carpenter will reimburse brokerage
houses and other nominees for their expenses in forwarding proxy
material to beneficial owners of Carpenter stock.
Stockholders who were record owners at the close of business on
August 31, 1999 may vote at the meeting. On August 31, 1999, there
were 21,929,887 shares of Carpenter common stock issued and
outstanding and entitled to vote. Each share of common stock is
entitled to one vote. There were also 422.8 shares of Carpenter’
s series A convertible preferred stock held by the trustee of the
Carpenter Employee Stock Ownership Plan (“ESOP”). Under
the ESOP, each share of preferred stock is convertible into at least
2,000 shares of common stock, with the equivalent of 1.3 votes for
each share of common stock, subject to anti-dilution adjustments and
to limitations under applicable securities laws and stock exchange
regulations. The preferred stock votes together with the common
stock as a single class on all matters submitted to holders of
common stock.
Each
participant in the ESOP, the Savings Plan of Carpenter Technology
Corporation (“Savings Plan”) and subsidiary benefit plans
which offer Carpenter stock as an investment may direct the trustee
of each plan how to vote the shares credited to the participant’
s account. The trustee will vote any shares for which no direction
is received, or shares in the ESOP that have not yet been allocated
to participating employees’ accounts, in the same proportion
and manner as the directed shares.
You
may vote in one of four ways:
Vote Over the Internet
For
the first time this year, you may vote your Carpenter shares over
the internet. To vote over the internet, go to the Vote by Net
website address stated on your proxy card. Enter the three-digit
Voter Control number from your proxy card and enter the last four
digits of your social security number. Mark your selections and
then, click on “Vote Your Proxy” to cast your vote.
Vote by Telephone
To
access the telephone voting system, just dial toll-free,
1-877-779-8683, and follow the telephone instructions. The telephone
instructions will lead you through the voting process.
Internet and telephone voting will provide the proxies the same
authority to vote your shares as if you returned your proxy card.
Return Your Proxy Card
You
may vote by signing and returning your proxy card. The proxy holders
will vote your shares according to your directions. If you sign and
return your proxy card without specifying choices, your shares will
be voted as recommended by the Board of Directors. If you wish to
give a proxy to someone other than those designated on the proxy
card, you may do so by crossing out the names of the designated
proxies and inserting the name of another person. The person
representing you should then present your signed proxy card at the
meeting.
Vote by Ballot at the Meeting
You
may also attend the meeting and vote by a ballot that you will
receive at the meeting. The Admission Ticket to the meeting is
attached to your proxy card.
If You Change Your Mind After Voting
You
can revoke your proxy at any time before it is voted. You can write
to the Corporate Secretary stating that you wish to revoke your
proxy and that you need another proxy card. More simply, you can
vote again, either over the internet or by telephone. Your last vote
is the vote that will be counted. If you attend the meeting, you may
vote by ballot and thereby, cancel any previous proxy vote.
Holders of a majority of the outstanding shares must be present in
person or by proxy at the Annual Meeting to constitute a quorum so
that business may be conducted. Carpenter’s By-Laws and
Delaware law govern the vote needed to approve the proposals.
Directors are elected by a plurality of the votes cast. A majority
of the votes cast must approve the appointment of independent
accountants.
Abstentions and votes withheld are counted towards the quorum but
are not included in the vote count for election of the directors or
approval of the independent accountants. Because only routine
matters (election of directors and approval of independent
accountants) are described in this Proxy Statement, brokers have
discretionary voting authority under the rules of the New York Stock
Exchange. Thus, there will be no broker non-votes on these matters.
Stockholder Nominations to the Board of Directors
The
Corporate Governance Committee will consider sound and meritorious
nomination suggestions from stockholders. Under Carpenter’s
By-Laws, all letters of recommendation for nomination at the 2000
Annual Meeting of Stockholders must be received by the Corporate
Secretary at Carpenter’s headquarters on or before August 26,
2000, but not sooner than July 27, 2000. Your notice
to the Secretary should contain your name, address and number of
shares of Carpenter stock beneficially owned, in addition to the
following information:
Ÿ
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As
to each person whom you propose to nominate for election or
reelection as a director:
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(i)
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name, age, business address and residence address;
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(ii)
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principal occupation or employment;
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(iii)
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number of shares of Carpenter stock beneficially owned by the
person; and
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(iv)
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any
other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Schedule 14A under the proxy rules.
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A
signed statement from the person recommended for nomination
indicating that he or she consents to be considered as a nominee.
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Carpenter may require any proposed nominee to furnish other
information reasonably necessary to determine the person’s
eligibility to serve as a director of Carpenter. Only individuals
nominated in accordance with Carpenter’s By-Laws and applicable
law are eligible for election as a director.
2000 Stockholder Proposals
If
you wish to include a proposal in the Proxy Statement for the 2000
Annual Meeting of Stockholders, your written proposal must be
received by Carpenter no later than May 26, 2000. The proposal
should be mailed by certified mail, return receipt requested, and
must comply in all respects with applicable rules and regulations of
the Securities and Exchange Commission, the laws of the state of
Delaware and Carpenter’s By-Laws. Stockholder proposals may be
mailed to the Corporate Secretary, Carpenter Technology Corporation,
1047 North Park Road Wyomissing, PA 19610-1339.
Under
Carpenter’s By-Laws, stockholder proposals that are not
included in the proxy materials may be presented at the 2000 Annual
Meeting of Stockholders only if they meet the above requirements and
the Corporate Secretary is notified in writing of the proposals by
August 26, 2000, but no earlier than July 27, 2000. For each matter
that you wish to bring before the meeting, provide the following
information:
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(i)
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a
brief description of the business and the reason for bringing it
to the meeting;
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(ii)
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your name and record address;
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(iii) the number
of shares of Carpenter stock which you own; and
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(iv)
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any
material interest (such as financial or personal interest) that
you have in this matter.
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Ownership of Carpenter Stock by Certain Beneficial Owners
Listed below are the only individuals and entity known by Carpenter
to own more than 5% of the common stock as of August 31, 1999:
Name and
Address of Beneficial Owner
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Number of Shares
Beneficially Owned
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Percent
of Class
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| Mr. & Mrs.
Peter C. Rossin
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2,387,494
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(1)
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10.9
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%
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| 1500 Oliver
Building
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| Pittsburgh, PA
15222
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| State Street Bank
and Trust Company
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2,740,936
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(2)
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12.0
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%
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| P.O. Box 1389
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| Boston, MA 02104
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(1)
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These shares are subject to a standstill agreement between
Carpenter and the Rossins. This agreement was entered into when
Carpenter purchased Dynamet Incorporated in 1997. The standstill
agreement provides certain limitations on the Rossins’
ability to buy or sell the common stock, solicit proxies,
participate in a tender offer, business combination or
restructuring of voting securities affecting Carpenter and on the
Rossins’ ability to seek control of or influence Carpenter’
s Board or Management. In addition, the standstill agreement
provides that the Board will recommend the election, as a director
of Carpenter, of Mr. Rossin or another person that he and the
other former Dynamet shareholders designate, if the person is
reasonably acceptable to the Board. The standstill agreement
expires in 2007, unless terminated earlier because of a change in
control of Carpenter or a reduction of the voting power of the
former Dynamet shareholders below 5% of Carpenter’s shares.
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(2)
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Acting as trustee for various collective investment funds for
employee benefit plans, other index accounts, and various personal
trusts, State Street Bank and Trust Company has voting and
investment power over these shares as follows:
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Sole voting power:
156,114
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Sole investment power: 157,714
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Shared voting and investment power: 2,583,222 including 845,690
shares of common stock if the shares of series A convertible
preferred stock actually held in the ESOP were converted into
common stock using the ratio of one preferred share equal to 2,000
shares of common stock.
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Ownership of Carpenter Stock by Directors and Officers
The
following table shows the ownership of Carpenter common stock as of
August 31, 1999, by each director, Carpenter’s five most highly
compensated executive officers (the “Named Executive Officers
”) and the directors and officers as a group. Except as noted,
the directors and officers have sole voting and investment power
over these shares of common stock.
Director and Officer
Stock Ownership
Name
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Number of
Shares
Beneficially
Owned
(1)
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Director
Stock
Units
(2)
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Total
Shares and
Units
Beneficially
Owned
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Percent of
Outstanding
Shares
(3)
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| Bennett, M. C.
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10,068
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1,106
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11,174
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| Cardy, R. W.
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134,665
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—
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134,665
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(4),(5)
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.6
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| Dietrich, W. S.
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11,244
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962
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12,206
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| Draeger, D. M.
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64,000
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—
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64,000
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(4)
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.3
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| Evarts, C. M.
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15,550
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2,133
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17,683
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| Fitzpatrick, J. M.
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6,301
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551
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6,852
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| Hudson, W. J.
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12,332
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1,814
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14,146
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| Lawless, R. J.
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6,351
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533
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6,884
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| Miller, M.
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16,085
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1,875
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17,960
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| Pokelwaldt, R. N.
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5,160
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358
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5,518
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| Rossin, P. C.
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2,278,650
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1,230
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2,279,880
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(5),(6)
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10.4
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| Turner, K. C.
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9,776
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705
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10,481
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| Wolfe, K. L.
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11,250
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807
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12,057
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| Cottrell, G. W.
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64,244
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—
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64,244
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(4)
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.3
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| Fiore, N. F.
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61,449
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—
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61,449
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(4)
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.3
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| Welty, J. R.
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35,552
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—
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35,552
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(4),(5)
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.2
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| All directors and
officers as a group (25 in all)
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2,985,643
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12,074
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2,997,717
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12.6
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(1)
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The
amounts include the following shares of common stock that the
individuals have the right to acquire by exercising outstanding
stock options within 60 days after August 31, 1999:
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| M. C.
Bennett
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8,000
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| R. W.Cardy
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71,700
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| G. W. Cottrell
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55,860
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| W. S. Dietrich
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8,000
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| D. M. Draeger
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42,100
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| C. M. Evarts
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14,000
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| N. F. Fiore
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55,553
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| J. M. Fitzpatrick
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5,000
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| W. J. Hudson
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8,000
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| R. J. Lawless
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4,000
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| M. Miller
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15,000
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| R. N. Pokelwaldt
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4,000
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| K. C. Turner
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8,502
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| J. R. Welty
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25,380
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| K. L. Wolfe
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10,000
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| All directors and
officers as a group
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494,395
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(2)
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These stock units convert to an equivalent number of shares of
common stock upon the director’s retirement or termination of
service due to disability. Because of the standstill agreement
with Carpenter, the value of Mr. Rossin’s stock units will be
paid in cash. The value of the stock units tracks the value of the
common stock but the units have no voting rights.
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(3)
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Ownership is rounded to nearest 0.1% and is less than 0.1% except
where stated. Stock units are not included in the calculation of
ownership percentage.
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(4)
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The
amounts include the following shares of common stock held in the
Savings Plan and the ESOP (if the preferred stock actually held in
the ESOP were converted into common stock using the ratio of one
preferred share equal to 2,000 shares of common stock):
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| R. W. Cardy
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18,784
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| G. W. Cottrell
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3,240
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| D. M. Draeger
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3,448
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| N. F. Fiore
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136
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| All officers as a
group
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72,837
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(5)
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Voting and investment power is shared with respect to the
following shares of common stock:
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| R. W.Cardy
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21,160
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| G. W. Cottrell
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327
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| P. C. Rossin
|
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2,278,650
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| J. R. Welty
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|
236
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| All director and
officers as a group
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2,330,697
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(6)
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Mr.
Rossin’s shares are subject to a standstill agreement with
Carpenter. See footnote 1 on page 3.
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PROPOSAL NO. 1
Carpenter’s Board of Directors consists of 13 directors serving
in three classes. Each class of directors serves for a period of
three years. The term of office of one class of directors expires
each year at the annual meeting.
Messrs. Bennett, Dietrich, Draeger, Fitzpatrick and Miller are
nominated for election at the 1999 Annual Meeting of Stockholders.
If elected, their terms will expire at the October, 2002 Annual
Meeting. The biographical summaries of the nominees and the
remaining eight directors whose terms are continuing appear below.
Unless otherwise directed by the stockholders, the shares
represented by the proxies will be voted for the five nominees. Each
nominee has consented to be nominated as a director and as far as
the Board and Management are aware, will serve as a director if
elected.
The Board of Directors recommends that you vote FOR the election of
Messrs. Bennett, Dietrich, Draeger, Fitzpatrick and Miller.
Nominees — Terms to Expire 2002
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[Photo of Bennett]
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M
ARCUS
C. BENNETT
, age 63, retired as Executive Vice President and Chief
Financial Officer of Lockheed Martin Corporation in January 1999;
he had held these positions since 1988. Mr. Bennett joined Martin
Marietta Corporation in 1959 and held various administrative and
finance positions with Martin Marietta and Lockheed Martin
Corporation. He is a Director of Lockheed Martin Corporation,
COMSAT Corporation, Martin Marietta Materials, Inc. and the
Private Sector Council. In addition, he is a member of the Georgia
Tech Advisory Board. Mr. Bennett has been a Director of Carpenter
since 1993, chairs the Audit Committee and serves on the Corporate
Governance Committee.
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|
[Photo of Dietrich II]
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W
ILLIAM
S. DIETRICH
II, age 61, is Chairman of the Board, Dietrich Industries,
Inc. and President, Mallard Fund, Inc. Mr. Dietrich served as
President of Dietrich Industries, Inc., from 1968 to 1998.
Dietrich Industries, a subsidiary of Worthington Industries, Inc.,
is a manufacturer of metal framing for commercial and residential
construction markets. Mr. Dietrich serves on the Board of
Directors of Worthington Industries, Inc. He is an active
community leader, serving on 11 boards in western Pennsylvania,
including the Greater Pittsburgh Chamber of Commerce, the
Allegheny Conference on Community Development, the University of
Pittsburgh and the Pittsburgh Ballet Theater. Mr. Dietrich has
been a Director of Carpenter since 1996, chairs the Corporate
Governance Committee and is a member of the Human Resources
Committee.
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| [Photo of
Draeger]
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D
ENNIS
M. DRAEGER
, age 58, was elected President and Chief Operating Officer and
Director of Carpenter Technology Corporation effective June 1,
1999. He had been Executive Vice President of Carpenter since
July, 1998 and a Director of Carpenter from 1992 until June 1996.
Mr. Draeger assumed the duties of Senior Vice President—
Specialty Alloys Operations for Carpenter in July 1996, when he
resigned from Carpenter’s Board of Directors. Previously, he
had been President of Worldwide Floor Products Operations for
Armstrong World Industries, Inc. since 1994 and he became Group
Vice President for Armstrong in 1988. Mr. Draeger is a member of
the Finance Committee.
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| [Photo of
Fitzpatrick]
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J. MICHAEL
FITZPATRICK
, age 52, is President and Chief Operating Officer and Director of
Rohm and Haas. From 1995 through 1998, Dr. Fitzpatrick served as
Vice President and Chief Technology Officer at Rohm and Haas. He
had been elected Vice President and Director of Research in 1993.
Dr. Fitzpatrick is a member of The Scientific Advisory Board of
Ampersand Ventures, Vice Chairman of the Pennsylvania Division of
the American Cancer Society and a member of the Board of Trustees
of the Franklin Institute. Dr. Fitzpatrick has been a Director of
Carpenter since January, 1997 and is a member of the Audit
Committee and Corporate Governance Committee.
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| [Photo of Miller]
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M
ARLIN
MILLER
, JR
. , age 67, is Chairman and Chief Executive Officer and
Director, Arrow International, Inc. Mr. Miller founded Arrow
International, Inc. in 1975. Arrow is located in Reading,
Pennsylvania, and is a leading producer of medical devices for
critical care medicine. He serves on the Board of Trustees of
Alfred University and on the Board of Directors of the Reading
Hospital & Medical Center. Mr. Miller has been a Director of
Carpenter since 1989 and serves as a member of the Audit Committee
and Human Resources Committee.
|
The
Board of Directors and Management do not believe that any of the
nominees will be unable to serve. If, before the meeting, any
nominee becomes unable to serve because of special circumstances,
the shares of stock represented by the proxies may be voted for the
election of a nominee designated by the Board.
Incumbent Directors to Continue in Office
The
following are the other directors whose terms continue after this
year’s meeting, as indicated:
Terms to Expire 2000
|
[Photo of Evarts]
|
|
D
R
. C. MC
COLLISTER
EVARTS,
age 68, is Chief Executive Officer, Senior Vice President for Health
Affairs, Dean, College of Medicine, and Professor of Orthopaedics,
The Pennsylvania State University, College of Medicine and
University Hospitals, The Milton S. Hershey Medical Center. He has
held these positions since 1987. He is Chief Academic Officer and
Senior Vice President for Clinical Operations, The Milton S.
Hershey Medical Center of the Pennsylvania State Geisinger Health
System. He is past Chair of the Board of Directors of the
Association of Academic Health Centers, a member of the
Association of American Medical Colleges and a member of the
National Academy of Sciences Institute of Medicine. He serves on
the Board of Directors of Hershey Foods Corporation, Hershey Trust
Company, M.S. Hershey Foundation, the Board of Managers of Milton
Hershey School, Capital Region Health Futures Project, the Capital
Region Economic Development Corporation, and the Lehigh Valley
Hospital. Dr. Evarts has been a Director of Carpenter since 1990,
chairs the Human Resources Committee and is a member of the
Finance Committee.
|
|
[Photo of Hudson]
|
|
W
ILLIAM
J. HUDSON
, JR
. , age 65, retired as Vice Chairman and Director, AMP
Incorporated in April, 1999. Mr. Hudson joined AMP Incorporated in
1961 and held a variety of management positions, becoming
Executive Vice President, International in 1991, a Director in
1992, and was elected Chief Executive Officer and President in
1993, positions he held until 1998. He also serves as Chairman of
the Pacific Basin Economic Council, Vice Chairman of the National
Association of Manufacturers and a member of the Executive
Committee of the U.S. Council of International Business.
Previously, he was a member of the Board of Governors of the
National Electrical Manufacturers Association, the Business
Roundtable and was a Presidential Appointee to the Advisory
Council on U.S. Trade Policy. He is a Director of The Goodyear
Tire & Rubber Company and Keithley Instruments, Inc. Mr.
Hudson has been a Director of Carpenter since 1992 and serves as a
member of the Audit Committee and Finance Committee.
|
|
[Photo of Rossin]
|
|
P
ETER
C. ROSSIN
, age 75, is the former Chairman, Chief Executive Officer and
founder of Dynamet Incorporated. Before founding Dynamet in 1967,
Mr. Rossin held various production and operations positions at
Crucible Steel Corporation, Fansteel Metallurgical Corporation,
and Cyclops Corporation. He has been a Director of Carpenter since
1997 and is a member of the Audit Committee and Human Resources
Committee.
|
| [Photo of Wolfe]
|
|
K
ENNETH
L. WOLFE
, age 60, is Chairman of the Board, Chief Executive Officer and
Director, Hershey Foods Corporation. Mr. Wolfe was elected
President and Chief Operating Officer in 1985, positions he held
through 1993. He was elected Vice President, Finance and Chief
Financial Officer of the Corporation in 1981, and Senior Vice
President, Chief Financial Officer and Director in 1984. He serves
as a Director of Bausch & Lomb Inc., the Hershey Trust Company
and is a member of the Board of Managers, Milton Hershey School.
Mr. Wolfe has been a Director of Carpenter since 1995, chairs the
Finance Committee and is a member of the Human Resources Committee.
|
Terms to Expire 2001
| [Photo of
Cardy]
|
|
R
OBERT
W. CARDY
, age 63, is Chairman and Chief Executive Officer and Director
of Carpenter Technology Corporation. Mr. Cardy joined Carpenter in
1962 and held a variety of management positions, becoming
Executive Vice President in 1989, President and Chief Operating
Officer in 1990, and Chairman of the Board, President and Chief
Executive Officer in 1992. He also serves as Director of the
Reading Hospital & Medical Center, United Way of Berks County,
and a member of the Executive Committee of the Pennsylvania
Business Roundtable. Mr. Cardy has been a Director of Carpenter
since 1990 and is a member of the Finance Committee.
|
| [Photo of
Lawless]
|
|
R
OBERT
J. LAWLESS
, age 52, is Chairman, President and Chief Executive Officer and
Director, McCormick & Company, Incorporated. Mr. Lawless had
been serving as President and Chief Operating Officer since
January 1996. He served as Executive Vice President and Chief
Operating Officer from 1995. Mr. Lawless serves as a member of the
Board of Directors of the United Way of Central Maryland, the
Greater Baltimore Committee, Kennedy Kreiger Institute and the
Grocery Manufacturers of America, Inc., and serves on the Junior
Achievement of Central Maryland Executive Council. Mr. Lawless has
been a Director of Carpenter since April 1997 and serves on the
Corporate Governance Committee and Finance Committee.
|
| [Photo of
Pokelwaldt]
|
|
R
OBERT
N. POKELWALDT
, age 62, is Chairman and Chief Executive Officer and a Director
of York International Corporation. He became Chairman and Chief
Executive Officer in 1993. He had been named President and Chief
Executive Officer in 1991 after serving as President and Chief
Operating Officer since 1990. Mr. Pokelwaldt joined Applied
Systems Worldwide, a division of York International, as Vice
President in 1988. Mr. Pokelwaldt also serves as a Director of
Mohawk Industries, Inc. and A.O. Smith Corporation. Mr. Pokelwaldt
has been a Director of Carpenter since June 1998 and is a member
of the Audit Committee and Human Resources Committee.
|
|
[Photo of Turner]
|
|
K
ATHRYN
C. TURNER
, age 52, is Chairperson and Chief Executive Officer of Standard
Technology, Inc. Ms. Turner founded Standard Technology, Inc., an
engineering and manufacturing firm in 1985. Standard Technology,
Inc. is headquartered in Rockville, Maryland, with offices in
Northern Virginia and Jacksonville, Florida. Ms. Turner was
appointed to the President’s Export Council in 1994 and also
serves as a Director of COMSAT Corporation and Phillips Petroleum
Company. She is actively involved in both the Urban League and The
Boy Scouts. Ms. Turner has been a Director of Carpenter since 1994
and is a member of the Corporate Governance Committee and Finance
Committee.
|
|
There is no family
relationship between any of the directors or nominees.
Other Information About the Board of Directors
The
Board of Directors held 11 meetings during fiscal year 1999. In
addition, there were 14 Committee meetings. The average attendance
for Carpenter’s directors at these meetings was 93%.
The
Board of Directors has four standing Committees: Audit, Corporate
Governance, Human Resources and Finance. No member of the Audit,
Corporate Governance or Human Resources Committee may be an employee
or former employee of Carpenter.
BOARD COMMITTEES
|
| Committee And
Members
|
|
Selected
Functions of the Committee
|
|
1999 Meetings
|
|
| Audit
Committee
|
|
|
|
|
| Marcus C. Bennett,
Chairman
|
Ÿ
|
Reviews adequacy
of Carpenter’s financial reporting,
accounting systems and controls
|
|
3
|
|
|
J. Michael
Fitzpatrick
William J. Hudson, Jr.
|
Ÿ
|
Recommends
independent accountants for financial
audits
|
|
|
Marlin Miller, Jr.
Robert N. Pokelwaldt
Peter C. Rossin
|
Ÿ
|
Evaluates Carpenter
’s internal and external auditing
procedures and security of data processing systems
|
|
|
|
|
Ÿ
|
Evaluates
environmental compliance program
|
|
|
|
|
Ÿ
|
Maintains direct
line of communication with independent
accountants and Manager-Internal Audit
|
|
|
| |
|
Corporate
Governance
Committee
|
|
|
|
|
William S.
Dietrich II,
Chairman
|
Ÿ
|
Reviews and
recommends proposed changes to the
Restated Certificate of Incorporation and By-Laws
|
|
4
|
Marcus C. Bennett
J. Michael Fitzpatrick
Robert J. Lawless
Kathryn C. Turner
|
Ÿ
|
Reviews
stockholder proposals
|
|
|
|
|
Ÿ
|
Recommends Board
size, composition and committee
structure
|
|
|
|
|
Ÿ
|
Reviews and
evaluates nominees for election or re-
election to the Board and to the Committees
|
|
|
|
|
Ÿ
|
Maintains
guidelines for directors’ duties and obligations
|
|
|
| |
|
Human Resources
Committee
|
|
|
|
|
C. McCollister
Evarts,
Chairman
|
Ÿ
|
Reviews and recommends to the Board the salary of CEO
and other executive officers, approves salary and other
compensation of other officers
|
|
5
|
|
William S.
Dietrich II
Marlin Miller, Jr.
Robert N. Pokelwaldt
Peter C. Rossin
Kenneth L. Wolfe
|
Ÿ
|
Oversees
Carpenter’s various benefit plans
|
|
|
|
|
Ÿ
|
Reviews
officers’ succession plans
|
|
|
|
|
Ÿ
|
Administers
stock and stock option plans
|
|
|
|
|
Ÿ
|
Reviews
Carpenter’s progress on: equal opportunity
matters, employee health and safety, and worker’s
compensation costs
|
|
|
| |
|
|
Finance Committee
|
|
|
|
|
|
Kenneth L. Wolfe, Chairman
|
Ÿ
|
Reviews and recommends actions to the Board relating to
Carpenter’s capital structure, pension fund asset
management and dividend policy
|
|
2
|
Robert W. Cardy
Dennis M. Draeger
C. McCollister Evarts
William J. Hudson, Jr.
Robert J. Lawless
Kathryn C. Turner
|
|
|
|
|
|
Director Compensation Program
No director who is an employee of Carpenter is
compensated as a member of the Board or as a member of any
Committee of the Board. Compensation for non-employee
directors consists of an annual retainer of $20,000 and a
$1,000 fee, plus travel expenses, where appropriate, for each
Board meeting attended and a fee of $800 for each Committee
meeting attended. Each Committee Chairperson receives an
additional annual retainer of $3,000. Non-employee directors
are also provided stock based compensation opportunities as
described below.
The director compensation program was revised in 1997 to
ensure that the program is fully competitive, highly
performance oriented, and linked more closely to Carpenter
’s performance and stockholder returns. Directors, along
with officers of Carpenter, are subject to share ownership
guidelines that encourage the accumulation of a specified
number of shares over a period of three years.
Each non-employee who joins the Board is granted an
option to purchase 2,000 shares of common stock. In addition,
following each annual meeting, each non-employee director is
granted an option to purchase 2,000 shares. These options
permit the director, after one year of service following the
grant, to purchase shares of common stock at the stock’s
fair market value on the date of grant. The options expire ten
years from the date of grant.
At least 50% of the $20,000 annual retainer for Board
service is paid in stock units that convert to an equivalent
number of shares of common stock following retirement or
termination of service due to disability. The value of these
stock units will vary depending on the fair market value of
the shares. At the director’s election, the remaining 50%
of the retainer is paid in cash or deferred and paid in either
cash or shares of stock at the time of distribution.
Non-employee directors have an opportunity to earn a
target performance share award. The target share award is
reviewed annually and is currently set at 200 shares. The
actual number of performance shares awarded to each director
is tied to Carpenter’s fiscal year return on equity (
“ROE”) relative to the S&P 500’s average
ROE for the preceding calendar year. If Carpenter’s
actual ROE is less than 85% of the average S&P 500’s
ROE, no performance shares will be awarded. The number of
performance shares awarded will be greater or lesser than the
target share award, based upon actual ROE measurements and,
assuming the 85% threshold is achieved. Performance shares are
awarded after completion of the fiscal year. Due to his
standstill agreement with Carpenter, Mr. Peter C. Rossin does
not participate in any stock or option program; instead, he
receives a comparable amount in cash. There were no
performance shares awarded for fiscal 1999.
Human Resources Committee Report
The Human Resources Committee of the Board of Directors
is composed entirely of nonmanagement directors. The Committee
is responsible for the establishment and oversight of Carpenter
’s executive compensation programs.
Compensation Philosophy
Carpenter’s executive compensation programs are
designed to fulfill the following objectives:
|
—Attract, retain, and motivate highly effective
executives.
|
|
—Link executive reward with enhanced stockholder value
and profitability.
|
|
—Reward sustained corporate, functional, and/or
individual performance with an appropriate base salary and
incentive opportunity.
|
|
—Link pay to Carpenter’s financial performance and
the achievement of Carpenter’s strategic business
objectives.
|
|
—Stimulate and sustain significant management ownership
in Carpenter.
|
This philosophy remains unchanged in 1999 and continues
to serve as the foundation for executive compensation policy
and program application.
Carpenter targets pay at market competitive (median)
levels for achievement of expected levels of performance.
During fiscal 1999, the Committee worked with an outside
consulting firm to conduct an extensive review of the
competitiveness of the executive compensation program. The
analysis compared Carpenter’s pay levels to the pay
levels of a comparator group made up of general industrial and
capital goods manufacturers of similar size. These comparators
were selected to reflect the Corporation’s labor pool for
executive talent rather than Carpenter’s competitors.
On an overall basis, Carpenter’s pay opportunities
approximate market median levels. Actual compensation is
positioned within the range of market norms. The nature and
magnitude of pay varies for each Named Executive Officer.
Base Salary
In general, base salaries are targeted at market 50th
percentile levels and are adjusted by the Committee to
recognize each individual’s responsibility, experience
and value to the organization. In fiscal year 1999, base
salary ranges were adjusted by 2% to reflect competitive
market movement. Base salary ranges were not adjusted for
fiscal year 2000. As a result of difficult business
conditions, no merit increases or salary adjustments are
planned for fiscal year 2000 for executive, corporate and
divisional officers of the Company. As a group, the Named
Executive Officers’ base salaries rest slightly below the
market 50th percentile (when adjusted for company size
differences).
Annual Incentives
The Executive Annual Compensation Plan (“EACP”
) provides short-term variable compensation for the Named
Executive Officers and other eligible executives with payments
based on combinations of corporate and business unit financial
performance and, to a lesser extent, based on individual
contributions. For fiscal year 1999, the Committee established
return on equity (“ROE”), return on assets (“ROA
”) and earnings before interest and income taxes (“
EBIT”) targets and a threshold performance level before
any payment would be made. Given the Corporation’s actual
performance in relation to target, no EACP awards were earned
in 1999. At targeted levels of performance, 80% of each award
would be tied to financial results and 20% would be tied to
individual performance. For purposes of EACP administration,
corporate financial performance is defined by ROE, whereas,
unit financial performance is characterized by return on
assets or controllable EBIT. Threshold levels of financial
results must be attained to earn awards under the Plan. The
EACP provides the Committee with the flexibility to adjust
awards for other material factors influencing performance.
Long-Term Incentives
Carpenter continues to deliver a significant portion of
an executive’s total pay opportunity in the form of
long-term incentive compensation. Long-term incentives are
viewed to be a key program element given the Committee’s
desire to reinforce connections between sustainable financial
performance, shareholder value creation and executive pay.
Long-term incentive awards include grants of nonqualified
stock options and performance shares. The 1999 stock option
awards were issued with exercise prices equal to the fair
market value of the underlying shares. The basic provisions of
the Stock-Based Incentive Compensation Plan for Officers and
Key Employees (the “Plan”) also provide participants
with the opportunity to earn shares of common stock at the
conclusion of a three-year performance period. All performance
share awards are contingent on the Corporation’s ROE
achievement measured relative to the performance of the
Standard & Poors (“S&P”) 500 Index.
Performance equal to that of the S&P 500 yields a target
grant of shares; performance greater than the S&P 500
generates a larger grant; and performance lower than the S&
P 500 generates a smaller grant with the potential for no
grant if performance fails to reach a threshold level.
Participants were issued common stock under the
performance share provisions of the Plan for the 1999
transaction period. The 1999 transaction period is the
three-year performance cycle beginning July 1, 1996 and ending
June 30, 1999. Carpenter’s three-year average ROE was
13.7% compared to the ROE performance of the S&P 500 Index
of 16.2%. Although Carpenter’s performance was slightly
below the threshold level, the Board, in light of Management
’s cost containment efforts, awarded the participants 80%
of their target awards.
Because the performance share provisions of the Plan are
being reviewed, as of the date of this report, there were no
awards of performance share opportunities for the three-year
period beginning July 1, 1999 and ending June 30, 2002.
The magnitude of stock option grants and performance
share opportunities is reviewed annually. Based on a review
conducted by an outside consulting firm, long-term incentive
grant guidelines remained largely unchanged in 1999. The award
guidelines were made effective June 25, 1998 for stock options
and performance share opportunities granted on or after this
date. Although competitive practices influence long-term
incentive grant guidelines, actual grants can be increased or
decreased based on the Committee’s assessment of Carpenter
’s performance, individual contribution, and other
relevant factors, such as marketplace trends.
Stock Ownership Guidelines
Carpenter introduced stock ownership guidelines in 1997
to further its objective of increasing management’s
ownership stake. Over time, executives are expected to achieve
and maintain ownership of certain amounts of common stock. The
Chief Executive Officer and Chief Operating Officer are
expected to own 3 times their base salary in Carpenter stock.
Senior Vice Presidents and Vice Presidents are expected to own
1.5 times their base salary in Carpenter stock and other
covered executives are expected to own Carpenter stock in the
amount of their base salary. The primary intent of these
guidelines is to significantly increase the extent to which
each executive’s personal wealth is directly linked to
the performance of Carpenter’s common stock. During 1999,
beneficial share ownership of this group of executives
increased 42% over 1998 ownership levels. Furthermore,
ownership levels have increased 120% since ownership
guidelines were first introduced in 1997.
Policy with Respect to the $1 Million Deduction
Limit
Section 162(m) of the Internal Revenue Code generally
limits the corporate tax deduction for compensation paid to
certain individuals, including the Named Executive Officers to
$1 million, unless certain requirements are met. Carpenter
’s long-term incentive arrangements have been structured
to conform with Internal Revenue Code guidelines for
performance-based compensation and, as such, should generally
preserve the deductibility of these amounts. The Committee
will continue to monitor the potential deductibility of other
components of the Corporation’s pay package.
CEO Compensation
The Committee recommends and the full Board of Directors
sets the salary of the CEO, as well as the other Executive
Officers. The Board accepted the Committee’s
recommendation relating to Mr. Cardy’s salary.
In 1999, Mr. Cardy guided Carpenter through a
challenging year. Net sales were $1.0 billion, down 12% from
the prior year. Management responded with a number of cost
containment measures,
including a salaried workforce reduction which resulted in a
special charge of $14.2 million. Net income before the special
charge was $45.6 million compared to $84 million in 1998.
Diluted earnings per share before the special charge decreased
to $1.95, a decrease of 49% compared with $3.84 for 1998.
In 1999, an outside consulting firm completed a detailed
competitive analysis of compensation for the Chief Executive
Officer. Results indicated that the CEO’s total
compensation was slightly below the 50th percentile level.
Shortfalls were attributed primarily to base salary and target
bonus amounts. After reviewing Carpenter’s business
results, the Board decided, upon recommendation of the
Committee, that there would be no adjustment to the CEO’s
base salary for fiscal 2000.
Base Salary
Based on findings from the external review of executive
compensation and the recommendation of the Committee, the
Board decided that Mr. Cardy would not receive a merit
increase and his base salary will remain at $540,000 for
fiscal year 2000.
Annual Incentives
Although significant actions were taken in 1999 to
reposition the business for the future, Mr. Cardy did not earn
an award under the terms of the annual incentive plan.
Long-Term Incentives
During fiscal 1999, the Committee approved a grant to
Mr. Cardy of 77,900 nonqualified stock options. These options
will vest fully one year after the date of grant. Mr. Cardy
also received an award of 1,146 shares under the performance
share provisions of the stock-based incentive plan. This award
of shares reflects Carpenter’s ROE performance relative
to the S&P 500 over a three-year period ending June 30,
1999. The size of these awards was based upon predetermined
Carpenter award guidelines and upon assessments of Mr. Cardy
’s individual performance. Overall, the expected economic
value of the CEO’s long-term incentive opportunities, as
calculated by application of the Black-Scholes option pricing
model, exceeds the 50th percentile of the comparator group.
This comparator group is made up of general industrial and
capital goods manufacturers of similar size.
SUBMITTED BY THE HUMAN RESOURCES COMMITTEE OF
THE BOARD OF DIRECTORS
Dr. C. McCollister Evarts, Chairman
William S. Dietrich II
Marlin Miller, Jr.
Robert N. Pokelwaldt
Peter C. Rossin
Kenneth L. Wolfe
The following table contains information concerning the
compensation paid by Carpenter for services rendered during
the fiscal years ended June 30, 1999, 1998 and 1997 to
Carpenter’s Chief Executive Officer and each of the other
Named Executive Officers.
Summary Compensation Table
| |
Annual
Compensation(1)
|
Long Term Compensation
|
|
| |
|
Awards
|
Payouts
|
All Other
Compensation(5)
$
|
| |
|
|
|
Name and
Principal
Position
|
Fiscal
Year
|
Base
Salary
$
|
Bonus
$
|
Restricted
Stock(2),(3)
$
|
Securities
Underlying
Options
#
|
LTIP(4)
$
|
|
| Robert W. Cardy
|
1999
|
536,926
|
0
|
0
|
77,900
|
32,762
|
16,480
|
| Chairman and Chief
|
1998
|
510,154
|
500,000
|
0
|
41,700
|
72,008
|
15,252
|
| Executive Officer
|
1997
|
451,585
|
165,732
|
0
|
30,000
|
65,560
|
4,500
|
|
| Dennis M. Draeger
|
1999
|
356,923
|
0
|
484,695
|
36,600
|
16,766
|
11,076
|
| President and Chief
|
1998
|
318,462
|
186,937
|
0
|
18,000
|
36,833
|
9,554
|
| Operating Officer
|
1997
|
294,231
|
104,452
|
0
|
15,000
|
33,535
|
8,827
|
|
| G. Walton
Cottrell
|
1999
|
228,216
|
0
|
0
|
21,600
|
11,425
|
7,217
|
| Senior Vice
President
|
1998
|
217,296
|
122,120
|
0
|
10,600
|
25,125
|
6,273
|
| Finance &
CFO
|
1997
|
212,679
|
54,658
|
0
|
18,000
|
22,875
|
4,703
|
|
| Nicolas F. Fiore
|
1999
|
218,882
|
0
|
0
|
15,300
|
11,425
|
6,938
|
| Senior Vice President
|
1998
|
209,827
|
114,985
|
0
|
8,200
|
25,125
|
6,055
|
| Engineered
|
1997
|
200,014
|
116,608
|
0
|
6,900
|
22,875
|
4,633
|
| Products Group
|
|
|
|
|
|
|
|
|
| John R. Welty
|
1999
|
185,576
|
0
|
0
|
13,000
|
5,341
|
5,912
|
| Vice President,
|
1998
|
172,708
|
86,181
|
0
|
6,100
|
11,708
|
6,213
|
| General Counsel
|
1997
|
163,524
|
35,922
|
0
|
5,000
|
10,660
|
4,649
|
| and Secretary
|
|
|
|
|
|
|
|
|
|
(1)
|
|
There is no “Other Annual
Compensation” to report and this column has been
omitted pursuant to SEC rules.
|
|
(2)
|
|
Only Mr. Draeger was awarded restricted
stock in fiscal 1999. The value reported in the table is
based on the closing price on the date the stock was
granted. At the end of the fiscal year, Mr. Draeger’s
restricted stock was valued at $428,400, based on the June
30, 1999 closing price of $28.56. This stock will vest in
2004. Mr. Draeger does not receive dividends on this
restricted stock. No awards of restricted stock were made
during fiscal 1997 and 1998.
|
|
(3)
|
|
In 1995, 6,350 shares of restricted stock
were awarded in the aggregate to the Named Executive
Officers at $32.56 per share. These shares were to vest over
a period of five years. At the end of fiscal year 1999,
Messrs. Cardy, Cottrell, Fiore, and Welty held 800; 184; 180;
and 106 shares, respectively of restricted stock valued at
$22,848; $5,255; $5,141; and $3,027 based on the June
30, 1999 closing price. The remainder of the 1995 awards
will vest in 2000. Dividends are paid on these awards of
restricted stock at the same rate as paid to all
stockholders.
|
|
(4)
|
|
This column reports the cash value earned
in performance shares following each fiscal year. The number
of shares awarded depends on the average ROE over a
three-year period relative to the performance of the S&P
500. Although Carpenter’s ROE was slightly below the
threshold level for the 1999 payout, in light of Management
’s cost containment efforts, the Board awarded 80% of
the target awards.
|
(5)
|
These are amounts contributed by
Carpenter for fiscal 1999, 1998, and 1997 for the Named
Executive Officers under the Savings Plan, the Deferred
Compensation Plan for Officers and Key Employees and the
ESOP. Due to the timing of contributions on a fiscal year
basis, some of the amounts contributed under the Savings
Plan exceed the IRS calendar year limit. For fiscal 1999,
these contributions were as follows:
|
| Cardy
— $4,800
|
Draeger
— $5,169
|
Cottrell
— $4,922
|
Fiore —
$4,919
|
Welty —
$4,939
|
|
Deferred Compensation Plan:
|
|
Cardy — $11,307
|
Draeger — $5,534
|
Cottrell — $1,922
|
Fiore — $1,646
|
Welty — $600
|
|
ESOP: 11 units of
preferred stock were allocated to each of the accounts of
Messrs. Cardy, Cottrell, Draeger, Fiore and Welty. As of
December 31, 1998, each unit was valued at $33.94.
|
Stock Options
The following table shows as to the Named Executive
Officers, certain information concerning stock options granted
as of the end of fiscal year 1999. While Carpenter’s
stock-based incentive plan permits the granting of stock
appreciation rights (SARs), there were no SARs granted in
fiscal year 1999 and there are no SARs outstanding at this
time.
Stock Option Grants In Fiscal Year 1999
Individual Grants
(1)
|
Name
|
|
Number of
Securities
Underlying
Options
Granted
|
|
% of
Total
Options
Granted to
Employees in
Fiscal Year
|
|
Exercise
Or Base
Price
($/SH)
|
|
Expiration
Date
|
|
Grant Date
Present
Value(2)
|
|
| Robert W. Cardy
|
77,900
|
13.7
%
|
$28.44
|
06/24/2009
|
$437,019
|
|
| Dennis M. Draeger
|
36,600
|
6.4
%
|
$28.44
|
06/24/2009
|
$205,326
|
|
| G. Walton Cottrell
|
21,600
|
3.8
%
|
$28.44
|
06/24/2009
|
$121,176
|
|
| Nicholas F. Fiore
|
15,300
|
2.7
%
|
$28.44
|
06/24/2009
|
$85,833
|
|
| John R. Welty
|
13,000
|
2.3
%
|
$28.44
|
06/24/2009
|
$72,930
|
|
(1)
|
Options are granted at the market value
on the date of grant, are exercisable after one year of
employment following the date of grant, and will expire no
more than ten years after the date of grant.
|
(2)
|
Based on the Black-Scholes option
pricing model adapted for use in valuing officer stock
options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that
there is no assurance the value realized by an executive
will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on
certain assumptions for stock price volatility, risk-free
interest rates, and future dividend yield. Specifically,
the Black-Scholes valuation employed the following factors;
risk-free rate of return of 5.81% based upon the five year
Treasury rates as of grant date, dividend yield of 4.64%
based upon the annualized value of the quarterly dividend
preceding the option grant date, exercise term of five
years, stock price volatility of 25.5% based upon the
variance in daily stock price changes for the five years
preceding the option grant date, and that no adjustments
have been made for transferability or risk of option
forfeiture.
|
Stock Option Exercises and Fiscal Year End
Holdings
|
|
|
|
|
|
|
|
Number of
Securities
Underlying Unexercised
Options at
Fiscal Year End
|
|
Value of Unexercised
In-The-Money
Options at
Fiscal Year End(1)
|
|
| Name
|
|
Shares
Acquired on
Exercise (#)
|
|
Value
Realized
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
| Robert W.
Cardy
|
|
0
|
|
0
|
|
71,700
|
|
77,900
|
|
$
0
|
|
$0
|
|
| Dennis M.
Draeger
|
|
0
|
|
0
|
|
42,100
|
|
36,600
|
|
$0
|
|
$0
|
|
| G. Walton
Cottrell
|
|
0
|
|
0
|
|
55,860
|
|
21,600
|
|
$52,000
|
|
$0
|
|
| Nicholas
F. Fiore
|
|
0
|
|
0
|
|
55,553
|
|
15,300
|
|
$63,750
|
|
$0
|
|
| John R.
Welty
|
|
0
|
|
0
|
|
25,380
|
|
13,000
|
|
$3,900
|
|
$0
|
|
(1)
|
Based on the June 30,
1999 closing price of $28.56 per share of common stock.
|
Savings Plan of Carpenter
Technology Corporation
The Savings Plan is a profit
sharing plan established pursuant to Sections 401(a) and
401(k) of the Internal Revenue Code. Carpenter
contributes to the Plan 3% of the base pay of each
eligible employee, including officers. Carpenter’s
contribution is invested, as the employee selects, into
one or more pre-established investment funds. If Carpenter
’s contribution for an employee under the Savings
Plan is limited by the Internal Revenue Code, the
employee will receive these lost Savings Plan
contributions under the Deferred Compensation Plan for
Officers and Key Employees. In addition, an employee may
authorize Carpenter to make salary deferral
contributions, limited to 17% of total pay. Amounts in
the Summary Compensation Table include amounts deferred.
Employee Stock Ownership Plan
The Carpenter Technology
Corporation Employee Stock Ownership Plan (ESOP) was
established in 1991. The trustee of the ESOP, State
Street Bank and Trust Company, purchased 461.5384615
shares of series A convertible preferred stock from
Carpenter at a price of $65,000 per share, or an
aggregate purchase price of approximately $30 million,
for a fifteen year note issued by the trustee to
Carpenter and a small amount of cash.
Each share of preferred stock is
convertible, at the trustee’s option, into at least
2,000 shares of common stock at a conversion price of
$32.50 per share of common stock. The preferred shares
are divided into 2,000 equal units. Each eligible
employee was allocated one unit on the effective date of
the ESOP, September 6, 1991. Additional units are
allocated to employees as the loan is repaid. Generally,
only those employees actively employed on the last day of
the plan year, December 31, will receive an allocation
for that year. The funds used by the ESOP to repay the
loan come from contributions by Carpenter and dividends
on the ESOP shares.
Special Severance Agreements
Carpenter entered into Special
Severance Agreements dated April 3, 1995 with Robert W.
Cardy, G. Walton Cottrell, Nicholas F. Fiore and John R.
Welty, and dated August 8, 1996 with Dennis M. Draeger.
Under these Agreements, if the officer’s employment
is terminated following a “change in control”
of Carpenter, he will receive his full salary and all
bonuses, pension and other benefits through the
termination date. In addition, if the termination is by
Carpenter, other than for cause, or by the officer for
good reason, the officer will receive a lump sum payment
equal to two years’ salary, bonus and pension
benefits and the value of all outstanding options and
restricted stock, whether or not then vested. The Special
Severance Agreements continue until December 31, 1999 and
automatically renew for additional one-year periods,
subject to termination upon appropriate notice.
Retirement Benefits
The General Retirement Plan for
Employees of Carpenter Technology Corporation provides
retirement benefits to employees, including the Named
Executive Officers, at age 65 (with five years of
service), or as early as age 55 (with ten years of
service); or at any age with 30 years of service. Such
benefits are based on either: (1) a fixed monthly rate
for each year of service; or (2) the product of 1.3%
times each of the first 20 years of service, plus 1.4%
times each year of service over 20, multiplied by the
individual’s highest average earnings. This average
must be from a consecutive five-year period during the
last ten years of service that ends on the individual
’s retirement anniversary. For pension purposes,
earnings include all salaries, bonuses, and extra
compensation. As of June 30, 1999, the years of service
credited under the Plan for the Named Executive Officers
were as follows: Mr. Cardy, 36 years; Mr. Draeger, 3
years; Mr. Cottrell, 10 years; Dr. Fiore, 9 years; and
Mr. Welty, 23 years.
Carpenter has two plans, the
Benefit Equalization Plan and the Earnings Adjustment
Plan, for those participants in the General Retirement
Plan whose benefits are reduced by limitations of the
Internal Revenue Code. These two plans will restore
amounts lost under the General Retirement Plan because of
Code limitations. In general, benefits under these plans
are subject to the same rules as the General Retirement
Plan.
Certain executives, including
Messrs. Cardy, Draeger, Cottrell, Fiore, and Welty, have
been designated by the Board of Directors as participants
under the Supplemental Retirement Plan for Executives.
This supplemental benefit is payable for 15 years,
commencing in the month following retirement (unless a
disabled participant elects a later date). The total
benefits a participant will receive from these retirement
plans, plus primary Social Security and pension benefits
from any prior employment, will be approximately 60% of
the participant’s average earnings (as calculated
under the General Retirement Plan) when retirement occurs
with 30 years service. However, the benefits for Messrs.
Cottrell and Fiore are to be calculated without regard to
pension benefits from prior employment.
The Officers’ Supplemental
Retirement Plan provides supplemental pension benefits to
participants in the Deferred Compensation Plan who have
benefits reduced under the General Retirement Plan
because of amounts deferred under the Deferred
Compensation Plan. The Officers Supplemental Retirement
Plan restores reductions that occur under the General
Retirement Plan as a result of these deferrals without
regard to any limitations of the Internal Revenue Code.
Benefits under this Plan are subject to the same rules as
the General Retirement Plan.
The following table illustrates
the total annual retirement benefits payable under the
retirement plans described in this Section. All of these
retirement plans are payable for the life of the
participant and, if applicable, the life of a survivor,
with the exception of the Supplemental Retirement Plan
for Executives which is payable for 15 years certain.
Average Annual
Earnings for the
Applicable Years
Of Service Period
Preceding Retirement
|
|
Annual Gross Pension Benefits for Years of
Service Shown(1)
|
|
15
Years
|
|
20
Years
|
|
25
Years
|
|
30
Years
|
|
35
Years
|
|
$150,000...
|
|
$84,750
|
|
$90,000
|
|
$90,000
|
|
$90,000
|
|
$91,875
|
|
175,000...
|
|
98,875
|
|
105,000
|
|
105,000
|
|
105,000
|
|
107,188
|
|
200,000...
|
|
113,000
|
|
120,000
|
|
120,000
|
|
120,000
|
|
122,500
|
|
250,000...
|
|
141,250
|
|
150,000
|
|
150,000
|
|
150,000
|
|
153,125
|
|
300,000...
|
|
169,500
|
|
180,000
|
|
180,000
|
|
180,000
|
|
183,750
|
|
400,000...
|
|
226,000
|
|
240,000
|
|
240,000
|
|
240,000
|
|
245,000
|
|
500,000...
|
|
282,500
|
|
300,000
|
|
300,000
|
|
300,000
|
|
306,250
|
|
600,000...
|
|
339,000
|
|
360,000
|
|
360,000
|
|
360,000
|
|
367,500
|
|
700,000...
|
|
395,500
|
|
420,000
|
|
420,000
|
|
420,000
|
|
428,750
|
|
800,000...
|
|
452,000
|
|
480,000
|
|
480,000
|
|
480,000
|
|
490,000
|
|
1,000,000 ...
|
|
565,000
|
|
600,000
|
|
600,000
|
|
600,000
|
|
612,500
|
|
1,500,000 ...
|
|
847,500
|
|
900,000
|
|
900,000
|
|
900,000
|
|
918,750
|
NOTE TO TABLE
(1)
|
Amounts payable under
the General Retirement Plan that exceed the maximum
permitted by the Internal Revenue Code are paid under
the Benefit Equalization Plan and/or the Earnings
Adjustment Plan.
|
Section 16(a) Beneficial Ownership Reporting Compliance
During fiscal year 1999, Mr.
Marlin Miller, a director of Carpenter, inadvertently
failed to timely file a Form 4 report following the
purchase of 300 shares of Carpenter stock by his wife.
Mr. Miller disclaims beneficial ownership of these
shares. Based solely upon Carpenter’s review of
copies of reports furnished to it and upon
representations by persons required to file reports under
Section 16(a), all other persons subject to Section 16(a)
were in compliance during fiscal year 1999.
[Five-Year Graph Appears
Here]
COMPARATIVE ANALYSIS
|
|
|
1994
|
|
1995
|
|
1996
|
|
1997
|
|
1998
|
|
1999
|
|
Carpenter ...
|
|
100
|
|
118.6
|
|
115.4
|
|
171.2
|
|
193.3
|
|
114.6
|
| S&P
500...
|
|
100
|
|
126.0
|
|
158.8
|
|
213.9
|
|
278.3
|
|
341.7
|
| Russell
2000...
|
|
100
|
|
118.0
|
|
144.2
|
|
165.0
|
|
190.3
|
|
190.4
|
| Peer
Group...
|
|
100
|
|
142.2
|
|
160.4
|
|
233.7
|
|
214.2
|
|
198.0
|
Note:
Assumes that the value of
the investment in Carpenter’s common stock, and each
index, was $100 on June 30, 1994, and that all dividends
were reinvested.
The graph above shows for a
five-year period the cumulative total stockholder return
on Carpenter’s common stock compared to the
cumulative total return of the S&P 500 Stock Index,
the Russell 2000 Index® and a peer group of
companies. The Russell 2000 is a broad-based index that
includes smaller market capitalization stocks than the S
&P 500. Carpenter’s stock is included in the
Russell 2000 Index and is not included in the S&P 500
Index. As of the most recent reconstitution of the index,
the average market capitalization of the Russell 2000 was
approximately $526.4 million. Because the composition of
the S&P 500 Index is less comparable to Carpenter
than the Russell 2000 Index, Carpenter intends to solely
use the Russell 2000 Index in future years. As of June
30, 1999, Carpenter’s market capitalization was
approximately $625 million.
The Peer Group Index is comprised
of the following companies: Allegheny Teledyne, A.M.
Castle, Armco, Inc., Slater Industries and The Timkin
Company. These are publicly traded companies involved
currently or for a part of the period shown in the table,
in the distribution and/or manufacture of specialty metal
products in the United States.
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise specified by the
stockholders, the shares of stock represented by the
proxies will be voted for approval of the appointment of
PricewaterhouseCoopers LLP, a firm of independent
accountants, to audit and report upon the financial
statements of Carpenter for fiscal year 2000.
PricewaterhouseCoopers was formed on July 1, 1998 upon
the merger of Coopers & Lybrand L.L.P. and Price
Waterhouse LLP. Coopers & Lybrand L.L.P. had been the
independent accountants of Carpenter since 1918. In the
opinion of the Board of Directors and Management,
PricewaterhouseCoopers is well qualified to act in this
capacity.
Audit services performed by
PricewaterhouseCoopers in fiscal year 1999 included
audits of the financial statements of Carpenter and
certain of the pension and other employee benefit plans
of Carpenter, limited reviews of quarterly financial
statements of Carpenter and other accounting related
matters. Fees and expenses in fiscal year 1999 for these
audit services were $763,000.
A representative of
PricewaterhouseCoopers is expected to be present at the
Annual Meeting. The representative will have the
opportunity to make a statement if he or she desires to
do so and will be available to respond to appropriate
questions. Carpenter has been advised by
PricewaterhouseCoopers that the firm has no financial
interest, direct or indirect, in Carpenter, except its
providing tax counseling, acquisition, auditing, and
independent accounting services during the period stated.
The Board of Directors
recommends that stockholders vote FOR approval of the
appointment of PricewaterhouseCoopers LLP as independent
accountants.
The Board of Directors and
Management know of no matters to be presented at the
meeting other than those set forth in this Proxy
Statement. Carpenter was not notified of any such matters
by August 27, 1999, as determined under its By-Laws, and
accordingly, if any other business is properly brought
before the meeting or any adjournment of the meeting, the
proxy holders will vote on this business according to
their discretion.
By order of the Board of
Directors.
[LOGO OF MAP ILLUSTRATING
DIRECTIONS TO ANNUAL MEETING
OF CARPENTER TECHNOLOGY
CORPORATION AT THE INN AT READING]
Dates Referenced Herein and Documents Incorporated By Reference
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