SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)

For the fiscal year ended June 30, 2003

Commission file number 1-5828

CARPENTER TECHNOLOGY CORPORATION

(Exact name of Registrant as specified in its Charter)

Delaware		23-0458500
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2 Meridian Blvd., Wyomissing, Pennsylvania		19610
(Address of principal executive offices)		(Zip Code)

610-208-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)		(Name of each exchange on which registered)
Common stock, par value $5 per share		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act). Yes ý No o

As of August 29, 2003, 22,382,492 shares of Common Stock of Carpenter Technology Corporation were outstanding. The aggregate market value of Common Stock held only by non-affiliates was $462,529,625 (based upon its closing transaction price on the Composite Tape on August 29, 2003).

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference certain information from the 2003 definitive Proxy Statement.

The Exhibit Index appears on pages E-1 to E-5.

TABLE OF CONTENTS

			Page Number
PART I

	Item 1	Business	3 - 8

	Item 2	Properties	9

	Item 3	Legal Proceedings	9

	Item 4	Submission of Matters to a Vote of Security Holders	10

	Item 4a	Executive Officers of the Registrant	10 – 11

PART II

	Item 5	Market for Registrant’s Common Stock and Related Stockholder Matters	12

	Item 6	Selected Financial Data	13 – 14

	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15 – 29

	Forward-looking Statements		30

	Item 7a	Quantitative and Qualitative Disclosures about Market Risk	30

	Item 8	Financial Statements and Supplementary Data	31 – 71

	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	71

	Item 9a	Controls and Procedures	71

PART III
	Item 10	Directors and Executive Officers of the Registrant	72

	Item 11	Executive Compensation	72

	Item 12	Security Ownership of Certain Beneficial Owners and Management	72

	Item 13	Certain Relationships and Related Transactions	72

	Item 14	Principal Accounting Fees and Services	72

PART IV

	Item 15	Exhibits, Financial Statement Schedules and Reports on Form 8-K	73 – 74

SIGNATURES			75 – 76

SCHEDULE II		Valuation and Qualifying Accounts	77

EXHIBIT INDEX			E-1 - E-5

PART I

Item 1 . Business

(a) General Development of Business:

Carpenter Technology Corporation (“Carpenter”), incorporated in 1904, is engaged in the manufacturing, fabrication, and distribution of specialty metals and engineered products. We made no significant changes in the form of our organization or mode of conducting business during the year ended June 30, 2003.

(b) Financial Information About Segments:

We are organized in the following business units: Specialty Alloys Operations, Dynamet, Carpenter Powder Products, and Engineered Products. For segment reporting, the Specialty Alloys Operations, Dynamet, and Carpenter Powder Products segments have been aggregated into one reportable segment, Specialty Metals, because of the similarities in products, processes, customers, distribution methods and economic characteristics. See note 19 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” for additional segment reporting information.

(c) Narrative Description of Business:

(1) Products:

We primarily process basic raw materials such as chromium, nickel, titanium, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire, narrow strip, special shapes, and hollow forms in many sizes and finishes. We also produce certain metal powders and fabricated metal products. In addition, ceramic products are produced from various raw materials using molding, heating and other processes.

Our Specialty Metals segment includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Specialty Metals sales are distributed directly from our production plants and distribution network as well as through independent distributors.

Our Engineered Products segment includes the manufacture and sale of structural ceramic products, ceramic cores for the investment casting industry, tubular metal products for nuclear and aerospace applications and custom shaped bar.

Our major classes of products are:

Stainless steels -

A broad range of corrosion resistant alloys including conventional stainless steels and many proprietary grades for special applications.

Special alloys -

Other special purpose alloys used in critical components such as bearings and fasteners. Heat resistant alloys that range from slight modifications of the stainless steels to complex nickel and cobalt base alloys. Alloys for electronic, magnetic and electrical applications with controlled thermal expansion characteristics, or high electrical resistivity or special magnetic characteristics. Fabrication of special stainless steels and zirconium base alloys into tubular products for the aircraft industry and nuclear reactors.

Ceramics and other materials -

Certain engineered products, including ceramic cores for investment castings ranging from small simple configurations to large complex shapes and structural ceramic components, precision welded tubular products, as well as drawn solid tubular shapes.

Titanium products -

A corrosion resistant, highly specialized metal with a combination of high strength and low density. Most common uses are in aircraft, medical devices, sporting equipment and chemical and petroleum processing.

Tool and other steel -

Tool and die steels, which are extremely hard metal alloys, used for tooling and other wear-resisting components in metalworking operations such as stamping, extrusion and machining. Other steels include carbon and alloy steels purchased for distribution and other miscellaneous products.

(2) Classes of Products:

The amounts and percentages of our net sales contributed by our major classes of products for the last three fiscal years are summarized in the following table:

($ in millions)	2003				2002				2001
Stainless steels	$	392.8	45	%	$	395.7	40	%	$	569.4	43	%
Special alloys	291.7		33	%	367.9		38	%	466.7		36	%
Ceramics and other materials	83.2		10	%	94.0		10	%	132.4		10	%
Titanium products	66.6		8	%	82.5		8	%	92.7		7	%
Tool and other steels	36.8		4	%	37.0		4	%	62.9		4	%
Total net sales	$	871.1	100	%	$	977.1	100	%	$	1,324.1	100	%

Effective July 1, 2000, we changed our method of accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements.” For most of our sales, the standard terms of sale included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except for certain foreign units, revenue cannot be recognized until title passes to the

customer, which in our case was when payment was received. This bulletin was adopted prospectively, and therefore did not result in a restatement of any results reported prior to July 1, 2000.

On April 1, 2001, we changed our terms of sale so that revenue is recognized when product is shipped, in accordance with our historical practice. Therefore, our results for the quarter ended June 30, 2001 included revenues from shipments made in the quarter as well as collections on prior sales. The combined effect of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million and income before cumulative effect of accounting change by $14.1 million, net of $9.4 million of tax. The cumulative effect recorded on July 1, 2000 of this change in accounting principle was a charge of $14.1 million after taxes, or $0.62 per diluted share.

(3) Raw Materials:

Our Specialty Metals segment depends on continued delivery of critical raw materials for its day-to-day operations. These raw materials include nickel, ferrochrome, cobalt, molybdenum, titanium, manganese and scrap. Some of these raw materials sources could be subject to potential interruptions of supply as a result of the country in which they are located, labor unrest or other reasons. These potential interruptions could cause material shortages and affect the availability and price.

We maintain long-term relationships with major suppliers. These suppliers provide availability of material and competitive prices for these key raw materials to help us maintain the appropriate levels of raw materials.

(4) Patents and Licenses:

We own a number of United States and foreign patents and have granted licenses under some of them. Certain of our products are covered by patents of other companies from whom licenses have been obtained. We do not consider our business to be materially dependent upon any patent or patent rights.

(5) Seasonality of Business:

Our sales and operational results are normally influenced by seasonal factors. The first fiscal quarter (three months ending September 30) is typically the lowest - principally because of annual plant vacation and maintenance shutdowns in this period by us as well as by many of our customers. The second half of the fiscal year is typically stronger than the first half. However, the timing of major changes in both the general economy and the markets for our products, as occurred in fiscal 2002, can alter this pattern. The tragic events of September 11, 2001 and the corresponding effects on many economic drivers, as well as weaker demand, especially in the aerospace and power generation markets, and a leaner product mix contributed to net sales being much lower than normal in the fourth quarter of fiscal 2002 (three months ended June 30). Over the longer time frame, the historical patterns generally prevail.

The chart below summarizes the percent of net sales by quarter for the past three fiscal years:

Quarter Ended	2003		2002		2001(1)
September 30	25	%	26	%	22	%
December 31	24	%	25	%	22	%
March 31	27	%	26	%	23	%
June 30	24	%	23	%	33	%
	100	%	100	%	100	%

(1) Refer to previous discussion of SAB 101 included in Item 1(c)(2) Classes of Products.

(6) Customers:

On a consolidated basis, we are not dependent upon a single customer, or a very few customers, to the extent that the loss of any one or more would have a materially adverse effect on our consolidated statement of operations. Of the total fiscal 2003 sales of our Engineered Products segment (see note 19 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” for further segment discussion), approximately 14% of segment sales were to one customer and 12% of segment sales were to a second customer. There were no other significant individual customer sales volumes during fiscal year 2002 or 2001.

(7) Backlog:

As of June 30, 2003 we had a backlog of orders, believed to be firm, of approximately $165 million, substantially all of which is expected to be shipped within the current fiscal year. Our backlog as of June 30, 2002 was approximately $190 million. Our backlogs have become less indicative of future sales levels due to shifting product mixes and changing customer re-ordering practices.

(8) Competition:

Our business is highly competitive. We supply materials to a wide variety of end-use market sectors, none of which consumes more than 30 percent of our output, and compete with various companies depending on end-use sector, product or geography.

There are approximately 10 domestic companies producing one or more similar specialty metal products that are considered to be major competitors to the specialty metals operations in one or more product sectors. There are several dozen smaller producing companies and converting companies in the United States who are competitors. We also compete directly with several hundred independent distributors of products similar to those distributed by us. Additionally, numerous foreign producers export into the United States various specialty metal products similar to those produced by us. Furthermore, a

number of different products may, in certain instances, be substituted for our finished product.

Imports of foreign specialty steels, particularly stainless steels, have long been a concern to the domestic steel industry because of the potential for unfair pricing by foreign producers. Such pricing practices have usually been supported by foreign governments through direct and indirect subsidies. These unfair trade practices have resulted in high import penetration into the U.S. stainless steel markets, with calendar year 2002 levels at about 42% for stainless bar, 65% for stainless rod and 55% for stainless wire.

Because of the unfair trade practices and the resulting injury, we have joined with other domestic producers in the filing of trade actions against foreign producers who have dumped their stainless steel products into the United States. As a result of these actions, the U.S. Department of Commerce issued antidumping orders for the collection of dumping duties on imports of stainless bar from Brazil, India, Japan and Spain at rates ranging up to 63% of their value and on imports of stainless rod from Brazil, France and India at rates ranging up to 49% of their value. Those orders will continue in effect until January 2006 and July 2005, respectively.

Additional antidumping orders are in place with regard to imports of stainless rod from Italy, Japan, Korea, Spain, Sweden and Taiwan at rates ranging up to 34% of their value. Countervailing duty orders are also in place against stainless rod imports from Italy. These orders were established in 1998 and will continue in effect until September 2003. New antidumping orders were issued in March 2002 against imports of stainless bar from France, Germany, Italy, Korea and the United Kingdom and will continue in effect until March 2007.

In a related matter, President George W. Bush announced in June 2001 the implementation of a three-part multilateral initiative on steel. The first part consisted of the initiation with the International Trade Commission (ITC) of a Section 201 trade action against imports of selected steel products, including several specialty steel products. This action led to the imposition of additional tariffs for a period of three years against imports of stainless bar, rod and wire from most of the steel producing countries of the world. The other two parts included the initiation of multilateral negotiations to reduce excess world steel capacity and to eliminate government subsidies and other trade distortive practices.

As part of the Section 201 trade relief, a midterm review conducted by the ITC is required to monitor/investigate the developments with respect to the domestic industry to make a positive adjustment to import competition. The President may then take action to reduce, modify, terminate or maintain the relief any time , after taking into account the Commission’s report.

On July 7, 2003, the World Trade Organization (WTO) determined that the safeguard measures were not consistent with the Uruguay round agreement. The United States has filed an appeal to the Appellate Body of the WTO. On January 8, 2003, the WTO found that the United States’ use of countervailing duties is not consistent with the Uruguay round agreements.

This WTO ruling may lead to the elimination of countervailing duties on imports from selected countries.

(9) Research, Product and Process Development:

Our expenditures for company-sponsored research and development were $11.7 million, $12.9 million and $14.7 million in fiscal 2003, 2002 and 2001, respectively.

(10) Environmental Regulations:

We are subject to various stringent federal, state, local and foreign environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Management evaluates the liability for future environmental remediation costs on a quarterly basis. We accrue amounts for environmental remediation costs representing management’s best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 12 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Our costs of maintaining and operating environmental control equipment were $5.4 million, $5.1 million and $6.1 million for fiscal 2003, 2002 and 2001, respectively. The capital expenditures for environmental control equipment were $0.3 million, $0.4 million and $1.3 million for fiscal 2003, 2002 and 2001, respectively. We anticipate spending approximately $0.8 million on major domestic environmental capital projects over the next five fiscal years. This includes approximately $0.5 million in fiscal 2004 and $0.2 million in fiscal 2005. Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates.

(11) Employees:

As of June 30, 2003, our total workforce was 4,384 employees, including 275 on indefinite furlough.

(d) Financial information about foreign and domestic operations and export sales:

Sales outside of the United States, including export sales, were $217.9 million, $249.1 million and $244.2 million in fiscal 2003, 2002 and 2001, respectively.

For further information on domestic and foreign sales, see note 19 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Item 2. Properties

The primary locations of our specialty metals manufacturing plants are: Reading, Pennsylvania; Hartsville, South Carolina; Washington, Pennsylvania; Orangeburg, South Carolina; Bridgeville, Pennsylvania; Orwigsburg, Pennsylvania; Clearwater, Florida and Crawley, England. The Reading, Hartsville, Washington, Orangeburg, Bridgeville, Orwigsburg and Crawley plants are owned. The Clearwater plant is owned, but the land is leased.

The primary locations of our engineered products manufacturing operations are: Wood-Ridge, New Jersey; Wilkes-Barre, Pennsylvania; Twinsburg, Ohio; Auburn, California; El Cajon, California; Palmer, Massachusetts; Corby, England; Quertaro, Mexico and Monash, Australia. The El Cajon, Corby and Quertaro plants are owned, while the other locations are leased. The land at the El Cajon plant is leased.

The Reading plant has an annual practical melting capacity of approximately 231,000 ingot tons of its normal product mix. The annual tons shipped will be considerably less than the tons melted due to processing losses and finishing operations. During the years ended June 30, 2003 and 2002, the plant operated at approximately 69 percent and 67 percent, respectively, of its melting capacity.

The Talley Metals plant in Hartsville, South Carolina has an annual hot rolling capacity of approximately 78,500 tons. The annual tons shipped will be less than the tons hot rolled due to processing losses and finishing operations. During the years ended June 30, 2003 and 2002, the plant operated at approximately 63 percent and 57 percent, respectively, of its hot rolling capacity.

We also operate regional customer service and distribution centers, most of which are leased, at various locations in several states and foreign countries.

Our plants, customer service centers, and distribution centers have been acquired or leased at various times over several years. There is an active maintenance program to keep facilities in good condition. In addition, we have had an active capital spending program to replace equipment as needed to keep it technologically competitive on a world-wide-basis. We believe our facilities are in good condition and suitable for our business needs.

Item 3. Legal Proceedings

Pending legal proceedings involve ordinary routine litigation incidental to our business. There are no material proceedings to which any of our Directors, Officers, or affiliates, or any owners of more than five percent of any class of our voting securities, or any associate of any of our Directors, Officers, affiliates, or security holders, is a party adverse to us or has a material interest adverse to our interests or those of our subsidiaries. There is no administrative or judicial proceeding arising under any Federal, State or local provisions regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that (1) is material to our business or financial condition (2) involves a claim for damages, potential monetary sanctions or capital expenditures exceeding ten percent of our current assets or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2003.

Item 4a. Executive Officers of the Registrant

Listed below are the names of our corporate executive officers as of June 30, 2003, including those required to be listed as executive officers for Securities and Exchange Commission purposes, each of whom assumes office after the annual organization meeting of the Board of Directors which immediately follows the Annual Meeting of Stockholders. All of the corporate officers listed below have held responsible positions with the registrant for more than five years except for Terrence E. Geremski, who joined Carpenter January 29, 2001.

Robert J. Torcolini, previously President and Chief Operating Officer, succeeded Dennis M. Draeger as Chairman, President and Chief Executive Officer effective July 1, 2003. Mr. Torcolini had been President and Chief Operating Officer and Director, since July 1, 2002, Senior Vice President - Engineered Products Operations, since January 31, 2000, President of Dynamet, Incorporated, a subsidiary of Carpenter since February 28, 1997 and was Vice President - Manufacturing Operations - Specialty Alloys Operations from January 29, 1993 through February 27, 1997. Mr. Draeger retired after seven years of service on June 30, 2003. The transition was pursuant to Carpenter’s previously announced Chief Executive Officer succession plan.

Terrence E. Geremski was elected Senior Vice President-Finance and Chief Financial Officer effective January 29, 2001. Mr. Geremski previously served as Executive Vice President and Chief Financial Officer and as a director of Guilford Mills, Inc., Greensboro, NC. He was employed by Guilford Mills in various financial positions from 1992 through August 2000, with the most current position held being Executive Vice President and Chief Financial Officer. Mr. Geremski’s experience also includes Dayton Walther Corp., Dayton, Ohio; Varity Corp. (formerly Massey-Ferguson), Toronto, Ontario and Buffalo, NY; and Morris Bean & Co., Yellow Springs, Ohio. He began his career with Price Waterhouse in Chicago. Guilford Mills filed for reorganization under Chapter 11 of the federal bankruptcy laws on March 13, 2002, and emerged from its bankruptcy proceeding on October 4, 2002.

David A. Christiansen was elected Vice President, General Counsel and Secretary effective November 1, 2002. Prior to that, Mr. Christiansen held the following positions within Carpenter: associate general counsel and assistant secretary from April, 1996 through November 1, 2002; senior staff attorney and assistant secretary from April, 1993 through April, 1996.

Robert W. Lodge was elected Vice President – Human Resources, September 23, 1991. Mr. Lodge previously served as Vice President, Human Resources – North America at Johnson-Matthey, Inc. from 1988 through 1991.

Michael L. Shor was elected Senior Vice President - Specialty Alloys Operations, effective January 31, 2000. Prior to that, Mr. Shor held the following positions within Specialty Alloys Operations: Vice President - Manufacturing Operations from March 3, 1997 through January 30, 2000; General Manager - Global Marketing and Product Services from July 13, 1995 through March 2, 1997; and General Manager - Marketing from October 1, 1994 through July 12, 1995.

Name	Age	Positions	Assumed Present Position

Robert J. Torcolini	52	Chairman, President and Chief Executive Officer Director	July 2003

David A. Christiansen	48	Vice President, General Counsel & Secretary	November 2002

Terrence E. Geremski	56	Senior Vice President - Finance & Chief Financial Officer	January 2001

Robert W. Lodge	60	Vice President - Human Resources	September 1991

Michael L. Shor	44	Senior Vice President - Specialty Alloys Operations	January 2000

PART II

Item 5. Market for the Registrant’s Common Stock and Related Stockholder Matters

Our common stock is listed on the New York Stock Exchange and traded under the symbol “CRS”. The following table sets forth, for the periods indicated, the high and low sale prices for our common stock as reported by the New York Stock Exchange.

	2003				2002
Quarter Ended:	High		Low		High		Low
September 30	$	28.29	$	13.00	$	29.90	$	19.83

December 31	$	14.25	$	10.26	$	27.37	$	21.26

March 31	$	12.65	$	9.59	$	29.20	$	21.90

June 30	$	16.76	$	10.25	$	30.55	$	25.90

Annual	$	28.29	$	9.59	$	30.55	$	19.83

The range of our common stock price from July 1, 2003 to September 8, 2003 was $14.85 to $22.52. The closing price of the common stock was $22.52 on September 8, 2003.

We have paid quarterly cash dividends on our common stock for 97 consecutive years. In October 2002, the Board of Directors reduced the quarterly dividend paid on shares of our common stock from $0.33 per share to $0.0825 per share. We paid a quarterly dividend of $0.33 per share of common stock during the first quarter of fiscal 2003 and a dividend of $0.0825 per share of common stock during the second, third and fourth quarters. The quarterly dividend rate was $0.33 per share for the 2002 and 2001 fiscal years.

As of August 29, 2003, there were 4,930 common stockholders of record. Information relating to certain common stock purchase rights issued by us is disclosed in note 14 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Certain information relating to securities authorized for issuance under our equity compensation plans is disclosed in note 15 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Item 6. Selected Financial Data

Five-Year Financial Summary
Dollar amounts in millions, except per share data
(years ended June 30)

	2003 (a)			2002 (b)			2001 (c)			2000		1999 (d)
Summary of Operations
Net sales	$	871.1		$	977.1		$	1,324.1		$	1,109.1	$	1,049.3

(Loss) Income before cumulative effect of accounting changes	$	(10.9	)	$	(6.0	)	$	35.2		$	53.3	$	37.1
Cumulative effect of accounting changes, (net of $9.4 million tax in fiscal 2001)	—			(112.3		)	(14.1		)	—		—
Net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1		$	53.3	$	37.1

Financial Position at Year-End
Total assets	$	1,399.9		$	1,479.5		$	1,691.5		$	1,745.9	$	1,607.8

Long-term obligations, net of current portion (including convertible preferred stock)	$	396.7		$	400.2		$	352.3		$	378.3	$	381.8

Per Share Data
Net (Loss) earnings:
Basic
(Loss) earnings before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.52		$	2.35	$	1.61
Cumulative effect of accounting changes	—			(5.06		)	(0.64		)	—		—
Net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88		$	2.35	$	1.61

Diluted
(Loss) earnings before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.50		$	2.31	$	1.58
Cumulative effect of accounting changes	—			(5.06		)	(0.62		)	—		—
Net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88		$	2.31	$	1.58

Cash dividends-common	$	0.5775		$	1.32		$	1.32		$	1.32	$	1.32

(a) Fiscal 2003 includes a special charge of $30.6 million related principally to workforce reduction, pension plan curtailment loss, loss on early retirement of debt and writedown of certain assets. See note 3 to the consolidated financial statements included in Item 8. “Financial Statements and Supplemental Data”.

(b) Fiscal 2002 reflects the adoption of SFAS 142 (Goodwill and Other Intangible Assets) effective July 1, 2001. See note 1 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

(c) Fiscal 2001 reflects the adoption of SAB 101 (Revenue Recognition in Financial Statements) effective July 1, 2000. See note 1 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”. In addition, fiscal 2001 includes a special charge of $37.6 million related principally to the realignment of Specialty Alloys Operations, planned divestitures of certain Engineered Products Group businesses and a loss on the disposal of the Bridgeport, Connecticut site. See note 3 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

(d) Fiscal 1999 includes a special charge of $14.2 million related to a salaried workforce reduction and a reconfiguration of the U.S. distribution network.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of factors that affect the comparability of the “Selected Financial Data”.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The critical accounting policies affecting our more significant judgments and estimates used in the preparation of our consolidated financial statements are shown on pages 25 and 26.

Management’s Discussion of Operations

Net sales and earnings trends for the past three fiscal years are summarized below:

(in millions, except per share data)	2003			2002			2001

Net sales	$	871.1		$	977.1		$	1,324.1
Net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1

Diluted (loss) earnings per share	$	(0.56	)	$	(5.41	)	$	0.88

Adoption of Statement of Financial Accounting Standards (SFAS) No. 142 in Fiscal 2002

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, “Goodwill and Other Intangible Assets” which primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, and are tested for impairment at least annually. We adopted SFAS 142 in fiscal 2002, and recognized an impairment charge.

The $112.3 million impairment charge or $5.06 per diluted share was recognized in the Specialty Metals segment. This non-cash, non-operating charge was recognized as a cumulative effect of an accounting change as of the beginning of fiscal 2002. The fair value of the reporting units was estimated on July 1, 2001 based upon discounted cash flow analyses and the use of market multiples. This charge was necessary because the fair value of certain reporting units was less than their carrying value. The goodwill stemmed from our acquisitions of several specialty metals companies between 1993 and 1998. During the 18 -24 months prior to July 1, 2001, sales by the acquired companies to several end-use markets had experienced downturns due to general economic conditions and some were further impacted by the continuing high level of low priced imports.

We conducted our annual impairment review of goodwill during the fourth quarter of fiscal 2003 and 2002 and determined that there was no additional goodwill impairment. See note 6 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Adoption of SAB 101 in Fiscal 2001

Effective July 1, 2000, we changed our method of accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements.” For most of our sales, the standard terms of sale included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except at certain foreign subsidiaries, revenue cannot be recognized until title passes to the customer, which in our case

was when payment was received. This bulletin was adopted prospectively, and therefore did not result in a restatement of any results reported prior to July 1, 2000.

Special Charges Recorded in Fiscal 2003 and 2001

During fiscal 2003, we incurred a special charge of $30.6 million before taxes. Of this amount, $14.2 million was incurred during the first fiscal quarter, $12.8 million was incurred during the second fiscal quarter and $3.6 million was incurred during the fourth fiscal quarter. The first half actions were taken as part of our strategy to reduce costs and improve operational effectiveness. The fourth quarter charge was related primarily to the early redemption of debt.

During the fourth fiscal quarter of 2001, we incurred a special charge of $37.6 million before taxes. The special charge incurred during the fourth fiscal quarter related principally to the realignment of Specialty Alloys Operations, planned divestitures of certain Engineered Products Group businesses and a loss on the disposal of the Bridgeport, Connecticut site.

See note 3 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Comparative Information for Fiscal 2003, 2002 and 2001

The chart below shows our net sales by major product class for the past three fiscal years:

($ in millions)	2003				2002				2001

Stainless steels	$	392.8	45	%	$	395.7	40	%	$	569.4	43	%
Special alloys	291.7		33	%	367.9		38	%	466.7		36	%
Ceramics and other materials	83.2		10	%	94.0		10	%	132.4		10	%
Titanium products	66.6		8	%	82.5		8	%	92.7		7	%
Tool and other steels	36.8		4	%	37.0		4	%	62.9		4	%
Total net sales	$	871.1	100	%	$	977.1	100	%	$	1,324.1	100	%

Results of Operations - Fiscal 2003 compared to Fiscal 2002

Overview

Our net loss for fiscal 2003 was $10.9 million or $0.56 per diluted share versus a net loss of $118.3 million or $5.41 per diluted share for fiscal 2002. The fiscal 2002 net loss before the cumulative effect of the accounting change for goodwill (which was $112.3 million or $5.06 per diluted share and is discussed in footnote 6 to the consolidated financial statements included in Item 8. “Financial Statements and Supplemental Data”) was $6.0 million or $0.35 per diluted share.

We improved profitability in fiscal 2003 through cost reduction efforts, productivity and manufacturing improvements and continued to generate significant free cash flow, despite challenging economic conditions in many of the markets that we serve, including two of our key markets – aerospace and power generation.

In fiscal 2003, we generated $80.2 million of free cash flow in addition to the $79.6 million generated during fiscal 2002. Our efforts to improve working capital management by reducing inventories by $8.2 million and accelerate the collection of accounts receivable, the reduction in capital spending to $8.5 million, a decrease in our dividend and the receipt of $8.5 million cash from the sales of two small business units contributed to the high level of cash generated and the corresponding improved liquidity. Consequently, total net debt decreased $77.8 million in fiscal 2003 to a level of $356.3 million or 42.7 percent of capital.

Net Sales

Net sales for fiscal 2003 were $871.1 million or a decrease of 10.8 percent from $977.1 million in fiscal 2002. The $106.0 million decrease in net sales was chiefly due to reduced demand for certain high temperature alloys, titanium alloys and ceramic products primarily due to lower build rates of commercial aircraft and industrial gas turbines. Demand for these materials was further affected by inventory adjustments within their respective supply chains. Partially offsetting the decline in these markets were volume increases for stainless steel sold to customers serving several consumer and industrial markets. Despite increased stainless volumes from a year ago, sales were adversely affected by a shift in product mix towards lower value materials. In addition, sales were adversely effected by excess global stainless steel capacity which continued to place downward pressure on pricing.

International sales decreased 13 percent to $217.9 million from the prior year. Details of sales by geographical region for the past three fiscal years are presented in note 19 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Gross Profit

The gross profit of 17.6 percent for fiscal 2003 was better than last year’s 16.7 percent. This increase was primarily due to better manufacturing efficiencies and lower costs. In addition, last year was negatively impacted by higher LIFO inventory layer liquidations at increased costs and inefficiencies caused by operating at lower levels. These factors were partially offset by the reduced shipment levels of higher value products sold to the aerospace and power generation markets, increased sales of lower valued stainless wire and rod products, sustained pricing pressures on stainless products and a reduced net pension credit.

Selling and Administrative Expenses

Selling and administrative expenses decreased to $118.8 million or 13.6 percent of net sales versus $142.1 million or 14.5 percent of net sales a year ago. The $23.3 million, or 16.4 percent, decrease was primarily due to a reduction in salary expense and benefits ($9.8 million), lower professional fees and outside services ($4.9 million) and lower depreciation and amortization expense ($2.5 million), partially offset by the reduced net pension credit ($5.7 million).

Interest Expense

Interest expense of $31.0 million was lower than last year by $3.6 million due to reduced debt levels and lower interest rates.

Other Income, Net

Other income, net was $3.8 million in fiscal 2003 versus $0.5 million in fiscal 2002. Fiscal 2003 included the receipt of $2.8 million of tariffs from the U.S. Customs Department under the “Dumping and Subsidy Offset Act of 2001”, $1.8 million of interest income, a $1.1 million loss on writedowns and disposals of property, plant and equipment and $0.7 million in reserves related to former Talley Industries subsidiaries. Fiscal 2002 included a $4.4 million loss on writedowns and disposals of property, plant and equipment, the receipt of $3.5 million of tariffs and $2.0 million of interest income.

Income Taxes

Our effective tax rate (income tax expense or benefit as a percent of income or loss before taxes) for fiscal 2003 was a benefit of 52.4 percent as compared to a benefit of 54.9 percent last year. The current year rate is more favorable than our statutory rate of 35 percent principally because it includes a $2.3 million favorable adjustment relating to research and development credits. The fiscal 2002 rate was favorably impacted by $1.6 million in research and development credits. See note 17 to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” for a reconciliation of the statutory federal tax rate to the effective tax rates.

Business Segment Results (See note 19 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”):

Specialty Metals Segment

Net sales for fiscal 2003 for this segment, which aggregates the Specialty Alloys Operations (SAO), Dynamet, and Carpenter Powder Products (CPP), were $760.2 million or $90.6 million (10.6 percent) lower than the $850.8 million for fiscal 2002. SAO sales decreased 10 percent from a year ago due to a weaker sales mix and reduced selling prices. Decreased shipment levels of higher value special alloys and sustained pricing pressures caused by the availability of low priced stainless steel products adversely impacted sales. Volume was marginally higher than last year due mainly to increased sales of lower value stainless wire and rod products. Dynamet’s sales decreased 22 percent in fiscal 2003 versus a year ago. The decline in sales was due primarily to lower volumes sold to the aerospace market. CPP’s sales were eight percent higher than a year ago due primarily to new customer sales and increased sales in Europe.

Income for the Specialty Metals segment was $38.8 million for fiscal 2003, which was $25.9 million higher than a year ago. The increase reflected improved operating efficiencies, lower costs and the effects on segment income of a more modest level of inventory reduction versus a year ago.

Engineered Products Segment

Net sales for this segment for fiscal 2003 were $113.3 million as compared to $128.5 million for the same period a year ago. This group of companies was largely affected by the slowdown in the aerospace and power generation markets. Approximately $10 million of the decline in sales was due to the divestiture of certain businesses.

Income for the Engineered Products segment for fiscal 2003 was $10.9 million versus $10.5 million a year ago. The increase in segment income, despite the lower sales volume and increased quality and environmental reserves, primarily reflects the benefit of cost savings initiatives.

Net Pension Credit:

The net pension credit represents income relating to our overfunded defined benefit pension plan (“GRP Plan”) less an expense for other post retirement benefit plans and other underfunded defined benefit pension plans. The net pension credit was $3.4 million for fiscal 2003 versus $17.1 million last year. The lower level of the net pension credit versus the prior year was due primarily to the equity markets’ investment losses on the pension and post retirement plan assets. The excess of plan assets over the projected benefit obligation of the GRP Plan was $28.5 million, $175.8 million and $308.5 million at June 30, 2003, 2002 and 2001, respectively.

Results of Operations - Fiscal 2002 compared to Fiscal 2001

Overview

Our net loss for fiscal 2002 was $118.3 million or $5.41 per diluted share versus net income of $21.1 million or $0.88 per diluted share for fiscal 2001. Our net loss before the cumulative effect of the accounting change for goodwill (which is $112.3 million or $5.06 per diluted share and is discussed in footnote 6 to our consolidated financial statements included in Item 8. “Financial Statements and Supplemental Data”) was $6.0 million or $0.35 per diluted share.

Fiscal 2002 was a very challenging year due to a recession in the U.S. manufacturing sector, which was further compounded by our customers’ inventory reduction efforts. Sales volumes were further dampened by the continuing high level of low-priced stainless steel imports and a decline in aerospace and power generation markets.

In fiscal 2002, we generated $79.6 million of free cash flow. Our efforts to improve working capital management contributed to the high level of cash generated and the corresponding improved liquidity. Such efforts included a reduction in inventories by $51.2 million through the enhancement of our order management systems and improvements in our production processes, our efforts to accelerate the collection of accounts receivable, our efforts to reduce capital spending by $23.8 million from fiscal 2001, and the receipt of $3.0

million cash from the sales of two small business units. Consequently, our total net debt decreased $80.8 million in fiscal 2002 to a level of $434.1 million or 46.1 percent of capital.

Net Sales

We reported net sales for fiscal 2002 of $977.1 million compared to $1.3 billion in fiscal 2001. Of the $347.0 million, or 26.2 percent, decrease in net sales, $178.0 million was due to lower shipment levels throughout fiscal 2002 primarily because of the manufacturing recession and the effects on the economy of the tragic events of September 11 ^th , especially during the second half of fiscal 2002 and $138.0 million was due to the combined effect of SAB 101 and the change in terms of sale during 2001. Our Specialty Metals segment experienced most of our volume decrease as a result of lower stainless steel shipments caused by weaker demand in the automotive, industrial and consumer markets, due in part to a high level of imports of bar, rod and wire. Additionally, there were lower special alloy shipments due primarily to reduced demand from the aerospace and power generation markets.

Unit selling price decreases coupled with a leaner product mix, especially during the second half of fiscal 2002, accounted for approximately $31.0 million of our revenue decrease.

International sales increased 2 percent to $249.1 million from the prior year, particularly in Europe. Details of sales by geographical region for the past three fiscal years are presented in note 19 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Gross Profit

Our fiscal 2002 gross profit of 16.7 percent was lower than the fiscal 2001 gross profit of 21.6 percent. This decrease was primarily due to lower production levels, LIFO inventory layer liquidations at higher costs ($9.0 million) and inefficiencies caused by operating at lower levels (approximately $6.0 million), the shift to a less profitable product mix, and a reduced net pension credit ($20.4 million). These negatives were partially offset by lower raw material costs and lower labor and benefit costs due to approximately 350 fewer workers in Specialty Alloys Operations.

Selling and Administrative Expenses

Selling and administrative expenses of $142.1 million were down $11.6 million compared to fiscal 2001. The decrease was principally due to the elimination of goodwill amortization of $6.7 million in fiscal 2002 pursuant to our adoption of SFAS 142 and a $4.7 million reduction in salary expense and fringe benefits. However, selling and administrative expenses as a percent of sales increased to 14.5 percent in fiscal 2002 from 13.0 percent in fiscal 2001.

Interest Expense

Interest expense decreased $5.7 million to $34.6 million in fiscal 2002 compared to fiscal 2001 due to lower debt levels and lower interest rates on debt.

Other Income, Net

Other income, net was $0.5 million in fiscal 2002 versus $2.3 million in fiscal 2001. Fiscal 2002 included a $4.4 million loss on writedowns and disposals of property, plant and equipment ($3.7 million occurred in the fourth quarter), the receipt of $3.5 million of tariffs in

December 2001 from the U.S. Customs Department under the “Dumping and Subsidy Offset Act of 2001” and $2.0 million of interest income. Fiscal 2001 included $1.9 million of gains on the disposal of warehouses, $1.9 million writedown to the market valuation of investments in life insurance policies, and $2.6 million of interest income.

Income Taxes

Our effective tax rate (income tax expense or benefit as a percent of income or loss before taxes) for fiscal 2002 was a benefit of 54.9 percent versus an expense of 39.7 percent for fiscal 2001. The fiscal 2002 rate is more favorable than our statutory rate of 35 percent principally because it includes a $1.6 million favorable adjustment relating to research and development credits. The fiscal 2001 rate is negatively impacted by the special charge taken to writedown certain operating assets including non-tax deductible goodwill. See note 17 to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” for a reconciliation of the statutory federal tax rates to the effective tax rates.

Business Segment Results (See note 19 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”):

Specialty Metals Segment

Net sales for fiscal 2002 for this segment, which aggregates the Specialty Alloys Operations (SAO), Dynamet, and Carpenter Powder Products (CPP), were $850.8 million or $317.8 million (27.2 percent) lower than the $1.2 billion for fiscal 2001. SAO sales decreased by 27 percent due to lower stainless steel shipments caused by: (1) weaker demand in the automotive, industrial and consumer markets, (2) a high level of imports of bar, rod and wire, and (3) the combined effect of SAB 101 and the change in terms of sale during 2001 ($128.3). Additionally, there were lower special alloy shipments due primarily to reduced demand from the aerospace and power generation markets during the second half of fiscal 2002. Dynamet’s sales increased 1 percent from the same period a year ago, benefiting from strong demand for medical products and improved pricing during the first half of fiscal 2002. CPP’s sales declined 32 percent from the same period a year ago primarily because of lower tool steel sales due to weak demand in the automotive market as well as a high level of imports.

Income for our Specialty Metals segment was $12.9 million, which was $85.9 million lower than fiscal year 2001’s $98.8 million. This decrease was due primarily to SAO’s lower shipment levels, lower production levels, LIFO inventory layer liquidations at higher costs ($9.0 million), inefficiencies caused by operating at lower levels (approximately $6.0 million), the shift to a less profitable product mix, and due to the combined effect of SAB 101 and the change in terms of sale during 2001 ($20.6 million). These negative factors were partially offset by lower raw material costs, lower labor and benefit costs due to approximately 500 fewer workers and the elimination of goodwill amortization pursuant to our adoption of SFAS 142 ($5.6 million).

Engineered Products Segment

Net sales for this segment were $128.5 million in fiscal 2002, a decrease of $28.4 million or 18.1 percent from $156.9 million in fiscal 2001. The two EPG business units that were sold in fiscal 2002 accounted for $5.9 million of the year to year reduction. The balance of the reduction was primarily attributable to weaker demand for aerospace, power generation and automotive-related products, weaker demand for certain telecommunication products because of the

general industry slowdown and due to the combined effect of SAB 101 and the change in terms of sale during 2001 ($9.7 million). Partially offsetting those factors, EPG experienced stronger demand in the nuclear fuel channels and various consumer product markets. Income was $10.5 million in fiscal 2002 compared to $15.7 million in fiscal 2001. Lower labor and benefit costs due to approximately 300 fewer employees and the elimination of goodwill amortization pursuant to the adoption of SFAS 142 ($1.1 million) during fiscal 2002 partially offset the net sales revenue decline, $3.0 million of which was attributable to the combined effect of SAB 101 and the change in terms of sale during 2001.

Net Pension Credit:

The net pension credit represents the income relating to our overfunded defined benefit pension plan (“GRP Plan”) less an expense for our post retirement benefit plans and other underfunded defined benefit pension plans. The net pension credit was $17.1 million for fiscal 2002 versus $40.3 million in fiscal 2001. The lower level of the net pension was due primarily to the equity markets’ investment losses during fiscal 2001. The excess of plan assets over the projected benefit obligation of the GRP Plan was $175.8 million at June 30, 2002.

Management’s Discussion of Cash Flow and Financial Condition

During fiscal 2003 and the prior two fiscal years, we maintained the ability to provide cash to meet our needs through cash flow from operations, management of working capital and the flexibility to use outside sources of financing to supplement internally generated funds.

Our cash from operations was $92.2 million for fiscal 2003 and $143.7 million a year ago. Inventories were $8.2 million lower in fiscal 2003 than a year ago. From their peak in December 2000, inventories are now $122 million lower. The days sales outstanding, including receivables outstanding under a receivables purchase facility, was reduced to 54 days in fiscal 2003 from 56 days a year ago.

Capital expenditures for plant, equipment and software were $8.5 million during fiscal 2003 versus $26.7 million for fiscal 2002.

As part of our debt refinancing strategy designed to enhance liquidity, we entered into a series of financing arrangements. In August 2001, we issued $100 million of 10-year medium-term notes with a coupon of 7.625%. We used the net proceeds from the sale of the notes to reduce the outstanding principal amount under our short-term revolving credit agreements.

In November 2001, we entered into a $125 million five-year unsecured credit facility (“Committed Facility”) and a $75 million 364-day unsecured credit facility (“364-day Facility”). Borrowings under each of the facilities accrue at either a base rate or LIBOR plus applicable margin. The facilities contain two financial covenants, a debt-to-capital test and an EBITDA-to-interest coverage test. At June 30, 2003, we had approximately $165 million available under our various credit facilities.

In December 2001, Carpenter and CRS Funding Corp., a wholly owned consolidated Special Purpose Entity, entered into a $75 million three-year accounts receivable purchase facility (“Purchase Facility”) with an independent financial institution. In March 2003, we reduced this facility to $50 million.

Funds obtained under the Committed Facility, 364-day Facility and the Purchase Facility will be used for general corporate purposes. Our ability to borrow under the Committed Facility and 364-Day Facility are governed by covenants, while the ability to sell receivables under the Purchase Facility are governed by certain receivable performance ratios. Our ability to obtain funds under each of these facilities is not contingent upon us maintaining a minimum debt rating. The applicable margin on borrowings under the Committed Facility and 364-Day Facility, however, is determined by our debt rating. The Committed Facility, 364-Day Facility and the Purchase Facility replaced other credit facilities that were to mature between November 2001 and February 2002.

On September 3, 2002, we and our lenders amended our $125 million, five-year Committed Facility. The amendment reduced the minimum coverage under the EBITDA-to-interest covenant for the trailing four quarter periods ending September 30, 2002, December 31, 2002 and March 31, 2003. Thereafter, the covenant reverted to the original terms under the Committed Facility.

Also on September 3, 2002, we entered into a $75 million, 364-day unsecured credit facility which replaced the expiring 364-day Facility. The terms and conditions of the new 364-day facility are essentially the same as those contained in our amended $125 million Committed Facility.

In May 2003, Carpenter issued $100 million of 10-year senior unsecured notes with a coupon of 6.625%. Proceeds from the sale of the notes were used to redeem approximately $90 million of Carpenter’s 9% debentures due 2022. The refinancing eliminates a mandatory sinking fund requirement of $5 million annually between 2003 and 2021. The debentures were callable at a price of 103.82% plus accrued interest through the redemption date. The remaining proceeds were used for general corporate purposes. In connection with the early redemption, a special charge of $4.5 million was recorded, including unamortized discount and debt issuance costs.

Based upon our current cash position and expected future liquidity needs, we did not renew the 364-day facility which expired on September 3, 2003. We are in the process of increasing the Committed Facility from $125 million to at least $150 million.

For the years ended June 30, 2003, 2002 and 2001, interest cost totaled $31.1 million, $34.9 million and $41.1 million, of which $0.1 million, $0.3 million and $0.8 million, respectively, were capitalized as part of the cost of plant, equipment and software.

In the aggregate, we can borrow approximately $165.0 million under the above facilities as of June 30, 2003.

A component of our debt refinancing strategy is to maintain a certain level of floating rate debt relative to our fixed rate debt. In order to achieve this targeted level, we use interest rate swaps. These instruments will obligate us to pay a swap counterparty either a floating rate of interest in return for us receiving a fixed rate of interest or obligate us to pay a fixed rate of interest in return for us receiving a floating rate of interest. At June 30, 2003 and 2002, we had entered into interest rate swaps with a notional principal amount of $86.0 million and $62.5 million, respectively.

As a result of our efforts to improve our working capital management, total net debt decreased $77.8 million in fiscal 2003 to $356.3 million or 42.7 percent of capital, versus

$434.1 million or 46.1 percent of capital at June 30, 2002. Management believes that the presentation of net debt provides useful information to investors regarding our financial condition because cash is expected to be used for debt repayment. We expect to utilize free cash flow primarily to reduce outstanding debt, to the extent that it is available to pay down, to achieve our targeted debt to capital ratio of approximately 35%.

We believe that our present financial resources, both from internal and external sources, and without the increase to the Committed Facility, will be adequate to meet our foreseeable short-term and long-term liquidity needs.

Non-GAAP Financial Measures

The following tables provide additional information regarding certain non-GAAP financial measures. Our definitions and calculations of these items may not necessarily be the same as those used by other companies.

FREE CASH FLOW

	Year Ended June 30
	2003			2002			2001
Net cash provided from operations	$	92.2		$	143.7		$	118.6
Net cash provided from (used for) investing activities	2.5			(23.1		)	(35.2		)
Net change in accounts receivable purchase facility	—			(10.0		)	—
Dividends paid	(14.5		)	(31.0		)	(30.7		)
Free cash flow	$	80.2		$	79.6		$	52.7

Management believes that the presentation of free cash flow provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses and has chosen to apply to debt repayment.

NET DEBT

	June 30, 2003			June 30, 2002
Short-term debt	$	17.1		$	16.8
Current portion of long-term debt	0.1			50.2
Long-term debt, net of current portion	378.9			375.8
Total Debt	$	396.1		$	442.8
Accounts receivable purchase facility	10.0			10.0
Cash	(53.5		)	(18.7		)
Checks not cleared	3.7			—
Net Debt	$	356.3		$	434.1

Management believes that the presentation of net debt provides useful information to investors regarding our financial condition because accumulated cash is expected to be used for debt repayment until a targeted debt to capital ratio is achieved.

Critical Accounting Policies and Estimates :

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates, including those related to bad debts, customer claims, inventories, goodwill, intangible assets, income taxes, restructuring, pensions and other postretirement benefits, contingencies and litigation, environmental liabilities, and derivative instruments and hedging activities.

We believe the following are our critical accounting policies impacting the preparation of our consolidated financial statements:

We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of our customers to make required payments. We perform ongoing credit evaluation on our customers. Should the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories are stated at the lower of cost or market. The cost of inventories is determined primarily using the last-in, first-out (LIFO) method. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between our cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory writedowns may be required.

Our prepaid pension asset on the balance sheet is primarily a result of the overfunded status of Carpenter’s GRP Plan and the historical recording of pension credits on our consolidated statement of operations. The amount of the pension credit or expense, which is determined annually, is based upon the value of the assets in the pension trust at the beginning of the fiscal year as well as actuarial assumptions, such as discount rate and long-term rate of return on plan assets. The assumed long-term rate of return on pension plan assets is reviewed at each year end based on the plan’s investment policies, an analysis of the historical returns of the capital markets, and current interest rates. The plan’s current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income. The discount rate for the U.S. plan is determined by reference to Moody’s AA corporate bond index. The fluctuations in stock and bond markets could cause actual investment results to be significantly different from those assumed, and, therefore, significantly impact the valuation of the assets in our pension trust. Changes in actuarial assumptions could significantly impact the accounting for the pension assets and liabilities. In fiscal 2004 the pension credit will change to a pension expense. If the assumed long-term rate of return on plan assets was changed by 1 percent, the net pension expense would change by approximately $6.8 million. If the discount rate was changed by 0.25 percent, the net pension expense would change by approximately $1.9 million.

Long-lived assets are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through estimated future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon estimated future discounted cash flows. We evaluate long-

lived assets for impairment by individual business unit. Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment.

Goodwill is not amortized, but instead is tested for impairment, at least annually. Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. The fair value is estimated based upon discounted cash flow analysis and the use of market multiples. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit’s goodwill to its implied fair value.

Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenter’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. Estimated liabilities are not discounted to present value, but estimated assets are measured on a discounted basis.

Our current risk management strategies include the use of derivative instruments to reduce certain risks. The critical strategies include: (1) the use of commodity options to fix the price of a portion of anticipated future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities, and (2) the use of foreign currency forwards and options to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro and Pound Sterling, in order to offset the effect of changes in exchange rates. These derivatives have been designated as cash flow hedges and unrealized net gains and losses are recorded in the accumulated other comprehensive income (loss) component of stockholders’ equity. We evaluate all derivative instruments each quarter to determine that they are highly effective. Any ineffectiveness is recorded in our consolidated statement of operations. If the anticipated future transactions are no longer expected to occur, unrealized gains and losses on the related hedges would be reclassified to the consolidated statement of operations.

Contractual Cash Obligations

At June 30, 2003, we had the following contractual cash obligations and other commercial commitments and contingencies:

(in millions)	Total		Fiscal 2004		Fiscal 2005		Fiscal 2006		Fiscal 2007		Fiscal 2008		Thereafter

Long-term debt	$	378.9	$	0.1	$	40.3	$	1.6	$	0.3	$	33.3	$	303.3
Operating leases	33.8		7.8		6.6		5.4		4.5		3.9		5.6
Purchase commitments	90.6		90.6		—		—		—		—		—

Total contractual cash obligations	$	503.3	$	98.5	$	46.9	$	7.0	$	4.8	$	37.2	$	308.9

We have entered into purchase commitments primarily for various key raw materials at market related prices, all made in the normal course of business. The purchase commitments

covered by these agreements aggregate approximately $90.6 million, all of which relates to fiscal 2004.

In addition, we had $10.6 million of outstanding letters of credit as of June 30, 2003.

Market Sensitive Instruments and Risk Management

We use derivative financial instruments to reduce certain types of financial risk. Raw material cost fluctuations for our Specialty Metals Segment are normally offset by selling price adjustments, primarily through the use of surcharge mechanisms and base price adjustments. Firm price sales contracts involve a risk of profit margin decline in the event of raw material increases. We reduce this risk on certain raw materials by entering into commodity forward contracts and commodity price swaps on a portion of our requirements, which are effective hedges of the risk.

We use forwards and options to fix the price of a portion of anticipated future purchases of certain energy to offset the effects of changes in the costs of these commodities.

Fluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our foreign operations. Foreign currency forward contracts are used to hedge certain foreign exchange risk.

All hedging strategies are reviewed and approved by senior financial management before being implemented. Senior financial management has established policies regarding the use of derivative instruments that prohibit the use of speculative or leveraged derivatives. Market valuations are performed at least quarterly to monitor the effectiveness of our risk management programs.

The status of our financial instruments as of June 30, 2003, is provided in note 9 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”. Assuming on June 30, 2003 (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, our results of operations would not have been materially affected, (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, our results of operations would not have been materially affected, (c) a 10 percent increase in our annual interest rate on short-term debt, our results of operations would not have been materially affected, and (d) a 10 percent decrease in the market value of investments in corporate-owned life insurance would result in a decrease of investment income of $2.7 million after tax.

Contingencies

Environmental

We are subject to various stringent federal, state, local and foreign environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect our costs of operations, compliance costs to date have not been material. We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a potentially responsible party (“PRP”) with respect to certain third-party Superfund waste disposal sites. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have

been instituted against us. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. We accrue amounts for environmental remediation costs that represent management’s best estimate of the probable and reasonably estimable costs related to environmental remediation. During fiscal 2003, an additional $1.75 million was accrued for one of our current operating facilities and for a manufacturing site of a former subsidiary of Talley Industries, Inc. Also related to the former Talley subsidiary site, a $2.25 million other asset was recorded as the fair value of land received as part of the settlement in a bankruptcy proceeding of a claim under an indemnification agreement. No other accruals were made during fiscal 2003 or 2002. For fiscal 2001, the liability for environmental remediation costs was increased by $0.6 million, which was included in cost of sales. The liabilities recorded for environmental remediation costs at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities remaining at June 30, 2003, 2002 and 2001, were $6.8 million, $5.8 million and $8.0 million, respectively. The estimated range at June 30, 2003 of the reasonably possible future costs of remediation at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities is between $6.8 million and $11.3 million.

Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRP’s. Based upon information currently available, such future costs are not expected to have a material effect on Carpenter’s financial position, results of operations or cash flows. However, such costs could be material to Carpenter’s financial position, results of operations or cash flows in a particular future quarter or year.

Other

We are also defending various claims and legal actions, and are subject to contingencies that are common to our operations. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that any total ultimate liability will not have a material effect on our financial position or results of operations and cash flows.

Future Outlook

Although economic conditions may remain challenging in fiscal 2004, we expect that our cost reduction and manufacturing improvement initiatives will continue to benefit our operating performance. Based on current market conditions and excluding the non-cash pension expense, we expect that operating performance will continue to show improved year-over-year comparisons for the fiscal year ending June 30, 2004. The operating improvement will be driven primarily by the cost reduction initiatives, as sales growth is expected to be modest due to the depressed aerospace and power generation markets.

In fiscal 2004, our net pension credit will change to an expense. The net pension expense, which was actuarially determined on June 30, will be $18 million. This will be a

non-cash item, as the company is not required to make a cash contribution to its defined benefit pension plan. The fiscal 2004 net pension expense primarily results from the accumulated effect of investment losses from more than two years of declining stock market returns. The stock market performance coupled with the low interest rate environment resulted in a change of actuarial assumptions. The changes included a reduction in the expected rate of return to 8.5% from 10.0% and a lowering of the discount rate to 6.0% from 7.25%, both of which had the effect of increasing the company’s net pension expense.

Forward-looking Statements

This Form 10-K contains various “Forward-looking Statements” pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements, which represent our expectations or beliefs concerning various future events, include statements concerning future revenues and continued growth in various market segments. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in this Form 10-K. They include but are not limited to: 1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, power generation, automotive, industrial and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to ensure adequate supplies of raw materials and to recoup increased costs of electricity, natural gas, and raw materials, such as nickel, through increased prices and surcharges; 3) domestic and foreign excess manufacturing capacity for certain metals that Carpenter produces; 4) fluctuations in currency exchange rates, resulting in increased competition and downward pricing pressure on certain Carpenter products; 5) the degree of success of government trade actions; 6) fluctuations in stock markets which could impact the valuation of the assets in Carpenter’s pension trusts and the accounting for pension assets; 7) the potential cost advantages that new competitors or competitors who have reorganized through bankruptcy may have; 8) the transfer of manufacturing capacity from the United States to foreign countries; and 9) the consolidation of customers and suppliers. Any of these factors could have an adverse and/or fluctuating effect on our results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We undertake no obligation to update or revise any forward-looking statements.

Item 7a . Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is incorporated herein by reference to Item 7 of this Annual Report on Form 10-K under the caption “Market Sensitive Instruments and Risk Management”.

Item 8 . Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary Data

	Page

Consolidated Financial Statements:

Responsibilities for Financial Reporting and Internal Control	32

Report of Independent Auditors	33

Consolidated Statement of Operations for the Years Ended June 30, 2003, 2002 and 2001	34

Consolidated Statement of Cash Flows for the Years Ended June 30, 2003, 2002 and 2001	35

Consolidated Balance Sheet as of June 30, 2003 and 2002	36

Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended June 30, 2003, 2002 and 2001	37-38

Consolidated Statement of Comprehensive Income (Loss) for the Years Ended June 30, 2003, 2002 and 2001	38

Notes to Consolidated Financial Statements	39-69

Supplementary Data:

Quarterly Financial Data (Unaudited)	70-71

Responsibilities for Financial Reporting and Internal Control

Carpenter’s financial statements included in this Annual Report on Form 10-K were prepared by management, which is responsible for their integrity and objectivity. The statements were prepared in conformity with generally accepted accounting principles in the United States of America and, as such, include amounts based on management’s best judgments and estimates. Financial information elsewhere in this Annual Report is consistent with that in the financial statements.

Carpenter maintains a strong system of internal controls, supported by a code of conduct, designed to provide reasonable assurance that assets are safeguarded and transactions are properly executed and recorded for the preparation of financial information. There are limits in all systems of internal controls, based on recognition that the cost of the system should not exceed the benefits to be derived. We believe Carpenter’s system of internal controls provides this appropriate balance. The system of internal controls and compliances are continually monitored by Carpenter’s internal audit staff.

The consolidated financial statements in this annual report have been audited by PricewaterhouseCoopers LLP, Independent Auditors, engaged by the Audit/Finance Committee of the Board of Directors. Their report appears on the next page.

The Audit/Finance Committee of the Board of Directors, composed of independent directors who are neither current nor former employees of Carpenter, meets regularly with management, Carpenter’s internal auditors and our independent auditors to consider audit results and to discuss significant internal control, auditing and financial reporting matters. Both the independent auditors and internal auditors have unrestricted access to the Audit/Finance Committee.

/s/ Robert J. Torcolini
Robert J. Torcolini
Chairman, President and Chief Executive Officer

/s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice President - Finance and Chief Financial Officer

Report of Independent Auditors

To the Board of Directors and

Stockholders of Carpenter Technology Corporation:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of comprehensive income (loss), of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Carpenter Technology Corporation and its subsidiaries at June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’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 the opinion expressed above.

As discussed in note 1 to the consolidated financial statements, on July 1, 2001, Carpenter adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

September 3, 2003

Consolidated Statement of Operations

Carpenter Technology Corporation

For the years ended June 30, 2003, 2002 and 2001

(in millions, except per share data)	2003			2002			2001

Net sales	$	871.1		$	977.1		$	1,324.1

Cost of sales	717.4			814.2			1,038.0
Gross profit	$	153.7		$	162.9		$	286.1

Selling and administrative expenses	118.8			142.1			153.7
Special charge	30.6			—			36.0
Interest expense	31.0			34.6			40.3
Other income, net	(3.8		)	(0.5		)	(2.3		)

(Loss) income before income taxes and cumulative effect of accounting changes	(22.9		)	(13.3		)	58.4
Income tax (benefit) expense	(12.0		)	(7.3		)	23.2

(Loss) income before cumulative effect of accounting changes	(10.9		)	(6.0		)	35.2

Cumulative effect of accounting changes, net of $9.4 million tax benefit in fiscal 2001	—			(112.3		)	(14.1		)

Net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1

Net (loss) earnings per common share:

Basic:
(Loss) earnings before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.52
Cumulative effect of accounting changes	—			(5.06		)	(0.64		)
Net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88

Diluted:
(Loss) earnings before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.50
Cumulative effect of accounting changes	—			(5.06		)	(0.62		)
Net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88

See accompanying notes to consolidated financial statements.

Consolidated Statement of Cash Flows

Carpenter Technology Corporation

For the years ended June 30, 2003, 2002 and 2001

(in millions)	2003			2002			2001

OPERATIONS
Net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1
Adjustments to reconcile net (loss) income to net cash provided from operations:
Depreciation	53.3			56.5			55.6
Amortization	10.7			11.2			16.9
Goodwill impairment charge	—			112.3			—
Deferred income taxes	(14.7		)	9.2			11.1
Net pension credit	(3.4		)	(17.1		)	(40.3		)
Net loss (gain) on asset disposals	0.2			4.4			(1.5		)
Special charge (non-cash)	24.6			—			37.6
Changes in assets and liabilities:
Receivables	18.7			50.5			(7.2		)
Net change in accounts receivable purchase facility	—			10.0			—
Inventories	8.2			51.2			27.8
Other current assets	9.8			(10.2		)	1.1
Accounts payable	(11.7		)	(5.5		)	(15.0		)
Accrued current liabilities	(2.2		)	(3.1		)	2.2
Income tax refund	18.3			9.0			11.1
Other, net	(8.7		)	(16.4		)	(1.9		)
Net cash provided from operations	92.2			143.7			118.6
INVESTING ACTIVITIES
Purchases of plant, equipment and software	(8.5		)	(26.7		)	(50.5		)
Proceeds from disposals of plant and equipment	2.5			0.6			15.3
Proceeds from sales of businesses	8.5			3.0			—
Net cash provided from (used for) investing activities	2.5			(23.1		)	(35.2		)
FINANCING ACTIVITIES
Net change in short-term debt	(1.7		)	(154.4		)	(49.3		)
Net proceeds from issuance of long-term debt	98.0			98.3			—
Payments on long-term debt	(145.8		)	(25.6		)	(10.6		)
Checks not cleared	3.7			—			—
Dividends paid	(14.5		)	(31.0		)	(30.7		)
Proceeds from issuance of common stock	—			3.0			5.5
Net cash used for financing activities	(60.3		)	(109.7		)	(85.1		)
Effect of exchange rate changes on cash and cash equivalents	0.4			—			—
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	34.8			10.9			(1.7		)
Cash and cash equivalents at beginning of year	18.7			7.8			9.5
Cash and cash equivalents at end of year	$	53.5		$	18.7		$	7.8

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheet

Carpenter Technology Corporation

June 30, 2003 and 2002

(in millions, except share data)	2003			2002
ASSETS
Current assets:
Cash and cash equivalents	$	53.5		$	18.7
Accounts receivable, net of allowance for doubtful accounts of $3.2 and $2.6 at June 30, 2003 and 2002, respectively	113.8			133.7
Inventories	180.9			190.0
Other current assets	21.1			33.5
Total current assets	369.3			375.9
Property, plant and equipment, net	651.7			713.1
Prepaid pension cost	253.7			255.9
Goodwill	46.3			46.3
Trademarks and trade names, net	25.4			26.4
Other assets	53.5			61.9
Total assets	$	1,399.9		$	1,479.5

LIABILITIES
Current liabilities:
Short-term debt	$	17.1		$	16.8
Current portion of long-term debt	0.1			50.2
Accounts payable	68.2			76.8
Accrued liabilities	60.2			61.1
Deferred income taxes	4.3			5.9
Total current liabilities	149.9			210.8
Long-term debt, net of current portion	378.9			375.8
Accrued postretirement benefits	182.4			167.8
Deferred income taxes	166.7			182.3
Other liabilities	47.4			34.5
Total liabilities	925.3			971.2

STOCKHOLDERS’ EQUITY
Convertible preferred stock - authorized 2,000,000 shares	10.2			24.4
Common stock – authorized 100,000,000 shares; issued 23,451,719 shares and 23,450,019 shares at June 30, 2003 and 2002, respectively	117.3			117.3
Capital in excess of par value – common stock	199.8			200.1
Reinvested earnings	203.7			229.0
Common stock in treasury (1,114,849 shares and 1,104,295 shares at June 30, 2003 and 2002, respectively), at cost	(38.3		)	(38.3		)
Deferred compensation	(3.8		)	(11.7		)
Accumulated other comprehensive loss	(14.3		)	(12.5		)
Total stockholders’ equity	474.6			508.3
Total liabilities and stockholders’ equity	$	1,399.9		$	1,479.5

See accompanying notes to consolidated financial statements.

Consolidated Statement of Changes in Stockholders’ Equity

Carpenter Technology Corporation

For the years ended June 30, 2003, 2002 and 2001

				Common Stock
(in millions, except per share data)	Convertible Preferred Stock Par Value of $5			Par Value of $5		Capital in Excess of Par Value			Reinvested Earnings			Common Stock in Treasury			Deferred Compen- sation			Accumulated Other Comp. Loss			Total Stock- holders’ Equity

Balances at June 30, 2000	$	26.0		$	115.4	$	192.2		$	388.0		$	(38.4	)	$	(14.1	)	$	(15.5	)	$	653.6
Net income									21.1												21.1
Cash dividends:
Common @ $1.32 per share									(29.1		)										(29.1		)
Preferred @ $5,362.50 per share									(1.6		)										(1.6		)
Stock options exercised				0.8		3.1															3.9
Other	(0.6		)	0.1		1.4									1.0			(1.2		)	0.7
Balances at June 30, 2001	$	25.4		$	116.3	$	196.7		$	378.4		$	(38.4	)	$	(13.1	)	$	(16.7	)	$	648.6
Net (loss)									(118.3		)										(118.3		)
Cash dividends:
Common @ $1.32 per share									(29.2		)										(29.2		)
Preferred @ $5,362.50 per share									(1.9		)										(1.9		)
Stock options exercised				0.7		2.3															3.0
Other	(1.0		)	0.3		1.1						0.1			1.4			4.2			6.1
Balances at June 30, 2002	$	24.4		$	117.3	$	200.1		$	229.0		$	(38.3	)	$	(11.7	)	$	(12.5	)	$	508.3
Net (loss)									(10.9		)										(10.9		)
Cash dividends:
Common @ $0.5775 per share									(12.8		)										(12.8		)
Preferred @ $5,362.50 per share									(1.6		)										(1.6		)
Stock options exercised																					—
Minimum pension liability, net of tax																		(1.5		)	(1.5		)
Record guarantee by Carpenter in non-current liabilities	(12.0		)												4.4						(7.6		)
Other	(2.2		)			(0.3		)							3.5			(0.3		)	0.7
Balances at June 30, 2003	$	10.2		$	117.3	$	199.8		$	203.7		$	(38.3	)	$	(3.8	)	$	(14.3	)	$	474.6

See accompanying notes to consolidated financial statements.

Consolidated Statement of Changes in Stockholders’ Equity (continued)

Carpenter Technology Corporation

For the years ended June 30, 2003, 2002 and 2001

			Common Shares
	Preferred Shares Issued		Issued	Treasury		Net Outstanding
Balances at June 30, 2000	413.1		23,071,635	(1,107,200	)	21,964,435
Stock options exercised			154,230			154,230

Other	(9.1	)	41,654	(1,047	)	40,607
Balances at June 30, 2001	404.0		23,267,519	(1,108,247	)	22,159,272
Stock options exercised			144,900			144,900

Other	(15.6	)	37,600	3,952		41,552
Balances at June 30, 2002	388.4		23,450,019	(1,104,295	)	22,345,724
Stock options exercised			1,200			1,200

Other	(34.8	)	500	(10,554	)	(10,054	)
Balances at June 30, 2003	353.6		23,451,719	(1,114,849	)	22,336,870

Consolidated Statement of Comprehensive (Loss) Income

Carpenter Technology Corporation

For the years ended June 30, 2003, 2002 and 2001

(in millions)	2003			2002			2001
Net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1
Cumulative effect of change in accounting principle for derivatives and hedging activities (SFAS 133), net of tax	—			—			0.8
Net (losses) gains on derivative instruments, net of tax	(2.4		)	4.0			(2.3		)
Minimum pension liability, net of tax	(1.5		)	—			—
Unrealized loss on investment, net of tax	—			—			(0.1		)
Foreign currency translation, net of tax	2.1			0.2			0.4
Comprehensive (loss) income	$	(12.7	)	$	(114.1	)	$	19.9

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Consolidation - The consolidated financial statements include the accounts of Carpenter and all majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. Investments in companies in which Carpenter exercises significant influence, but which it does not control (generally a 20 to 50 percent ownership interest), are accounted for on the equity method of accounting and Carpenter’s share of their income or loss is included in other income, net in the consolidated statement of operations.

Revenue Recognition - Revenue, net of related discounts and allowances, is recognized when product is shipped and title and risk of loss has transferred to the customer.

Freight and Handling Fees and Costs - Freight and handling costs billed separately to customers are included as part of sales, and freight and handling costs expensed are included as part of cost of sales on the consolidated statement of operations.

Overhaul Costs - Major maintenance costs incurred during scheduled plant shutdowns are capitalized when incurred and amortized over the period until the next scheduled shutdown, which is generally within the same fiscal year.

Research and Development - Research and development expenditures, which amounted to $11.7, $12.9 and $14.7 million in fiscal 2003, 2002 and 2001, respectively, are expensed as incurred and reported in selling and administrative expenses in the Consolidated Statement of Operations. Substantially all development costs are related to developing new products or designing significant improvements to existing products.

Cash Equivalents - Cash equivalents consist of highly liquid instruments with maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost, which approximates market.

Inventories - Inventories are valued at the lower of cost or market. Cost for inventories is principally determined by the Last-In, First-Out (LIFO) method. Carpenter also uses the First-In, First-Out (FIFO) and average cost methods.

Fixed Assets and Depreciation - Fixed assets are stated at historical cost less accumulated depreciation. Depreciation for financial reporting purposes is computed by the straight-line method over the estimated useful lives of the assets. Depreciation for income tax purposes is computed using accelerated methods. Upon disposal, assets and related depreciation are removed from the accounts and the differences between the net amounts and proceeds from disposal are included in other income, net in the consolidated statement of operations.

Computer Software and Amortization - Computer software is included in other assets on the consolidated balance sheet, and is amortized for financial reporting

purposes on a straight-line basis over the respective estimated useful lives, ranging principally from 3 to 10 years.

Goodwill – Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, is stated at cost.

Trademarks and Trade Names - The costs of trademarks and trade names are amortized on a straight-line basis over the 30 year estimated useful life of these finite-lived assets.

Impairment of Long-Lived Assets - Long-lived assets, including property, plant and equipment and intangible assets subject to amortization, are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon discounted future cash flows.

Environmental Expenditures - Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenter’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. Estimated liabilities are not discounted to present value, but estimated assets are measured on a discounted basis.

Derivative Financial Instruments – All derivative instruments are recorded on the balance sheet at their fair value and changes in fair value are recorded each period in current earnings or comprehensive income. Carpenter enters into derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Additionally, Carpenter utilizes interest rate swaps to convert floating rate debt to fixed rate, or to convert fixed rate debt to floating rate.

Foreign Currency Translation - Assets and liabilities of most foreign operations are translated at exchange rates in effect at year-end, and their income statements are translated at the average monthly exchange rates prevailing during the year. Translation gains and losses are recorded each period in other comprehensive income (loss) until the foreign entity is sold or liquidated.

Deferred Income Taxes – Deferred income taxes are recognized by applying enacted statutory tax rates, applicable to future years, to temporary differences between the tax bases and financial statement carrying values of Carpenter’s assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than not to be realized.

Earnings per Share – Basic earnings per share is calculated by dividing net earnings available to common shareholders by the weighted average number of shares outstanding for the period. Diluted earnings per share is calculated by dividing net earnings by the weighted average number of shares outstanding for the period, adjusted for the effect of an assumed exercise of all dilutive stock options at the end of the period.

Litigation – Periodically, Carpenter and its subsidiaries are parties to lawsuits arising out of the normal course of business. Carpenter records liabilities when a loss is probable and can be reasonably estimated. These estimates are based on an analysis made by internal and external legal counsel considering information known at the time.

Stock-Based Compensation - As of June 30, 2003, Carpenter has three stock-based employee compensation plans, which are described in detail in Note 15. Carpenter accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations. No stock-based employee compensation cost is reflected in net (loss) income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net (loss) income and (loss) earnings per share if Carpenter had applied the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

(in millions, except per share data)	2003			2002			2001

Net (loss) income as reported	$	(10.9	)	$	(118.3	)	$	21.1
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect	(1.1		)	(2.7		)	(0.8		)
Pro forma net (loss) income	$	(12.0	)	$	(121.0	)	$	20.3

(Loss) earnings per share:
Basic – as reported	$	(0.56	)	$	(5.41	)	$	0.88
Basic – pro forma	$	(0.61	)	$	(5.53	)	$	0.84

Diluted – as reported	$	(0.56	)	$	(5.41	)	$	0.88
Diluted – pro forma	$	(0.61	)	$	(5.53	)	$	0.84

These pro forma adjustments were calculated using the Black-Scholes option pricing model to value all stock options granted since July 1, 1996. A summary of the assumptions and data used in these calculations follows:

	2003			2002			2001

Weighted average exercise price of options exercisable	$	31.41		$	33.67		$	33.65
Weighted average fair value per share of options	$	3.08		$	5.15		$	7.09
Fair value assumptions:
Risk-free interest rate	2.7		%	4.3		%	4.9		%
Expected volatility	34.0		%	36.1		%	32.7		%
Expected life of options	5 years			5 years			5 years
Expected dividends	2.9		%	5.9		%	4.4		%

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications - Certain reclassifications of prior years’ amounts have been made to conform with the current year’s presentation.

Accounting Changes - In June 2001, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” which primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, and are tested for impairment at least annually. Carpenter elected early implementation of SFAS 142 in fiscal 2002. Carpenter recorded a charge of $112.3 million ($5.06 per diluted share) to reduce the carrying value of its goodwill as of the beginning of fiscal 2002. The charge is reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations. For additional discussion on the impact of adopting SFAS 142, see Note 6 to the consolidated financial statements.

Effective July 1, 2000, Carpenter changed its method of accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements”. Carpenter’s standard terms of sale for most of its sales included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except for certain foreign subsidiaries, revenue cannot be recognized until title passes to the customer, which in Carpenter’s case was when payment was received.

On April 1, 2001, Carpenter changed its terms of sale to eliminate the retention of a security interest; so that revenue is recognized when product is shipped. The combined

effect of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million and income before cumulative effect of accounting change by $14.1 million, net of $9.4 million of tax.

New Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others”. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Carpenter adopted the initial recognition and initial measurement provisions effective January 1, 2003 and adopted the disclosure requirements of FIN 45 during the six months ended December 31, 2002. The adoption of FIN 45 had no material affect on the Company’s results of operations, financial position or cash flows.

In January 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 148 (SFAS 148), “Accounting for Stock-Based Compensation – Transition and Disclosure” which amends SFAS 123, “Accounting for Stock-Based Compensation”. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Carpenter adopted the disclosure requirements effective January 1, 2003. The adoption of SFAS 148 had no material affect on the Company’s results of operations, financial position or cash flows.

In April 2003, the FASB issued SFAS No. 149 (SFAS 149), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, for the hedging activities within the scope of SFAS 133. The standard is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30. The guidance, with certain exceptions, is to be applied prospectively. The Company does not believe that the adoption of SFAS 149 will have a material impact on its results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150 (SFAS 150), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The Company does not believe that the adoption of SFAS 150 will have a material effect on its consolidated results of operations or financial position.

2. Earnings (Loss) Per Common Share

The calculations of earnings (loss) per share for the years ended June 30, 2003, 2002 and 2001 are shown below. No calculations are presented for the diluted losses per share for fiscal 2003 or 2002 since the assumed conversion of preferred shares and the assumed exercise of stock options would be anti-dilutive.

(in millions, except per share data)	2003			2002			2001
Basic EPS:
(Loss) income before cumulative effect of accounting changes	$	(10.9	)	$	(6.0	)	$	35.2
Dividends accrued on convertible preferred stock, net of tax benefits	(1.6		)	(1.8		)	(1.7		)
(Loss) earnings available to common stockholders	(12.5		)	(7.8		)	33.5
Cumulative effect of accounting changes	—			(112.3		)	(14.1		)
Net (loss) income available for common stockholders	$	(12.5	)	$	(120.1	)	$	19.4
Weighted average common shares outstanding	22.3			22.2			22.0
(Loss) earnings per share before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.52
Cumulative effect of accounting changes per share	—			(5.06		)	(0.64		)
Basic net (loss) earnings per share	$	(0.56	)	$	(5.41	)	$	0.88

Diluted EPS:
Income before cumulative effect of accounting change							$	35.2
Assumed shortfall between common and preferred dividends							(0.7		)
Earnings available for common stockholders							34.5
Cumulative effect of accounting change							(14.1		)
Net income available for common stockholders							$	20.4
Weighted average common shares outstanding							22.0
Assumed conversion of preferred shares							0.8
Effect of shares issuable under stock option plans							0.1
Adjusted weighted average common shares							22.9
(Loss) earnings per share before cumulative effect of accounting changes	$	(0.56	)	$	(0.35	)	$	1.50
Cumulative effect of accounting changes per share	—			(5.06		)	(0.62		)
Diluted net (loss) earnings per share	$	(0.56	)	$	(5.41	)	$	0.88

In fiscal 2001, 1.4 million stock options were excluded from the computation of diluted earnings per share because the exercise prices of the then outstanding options were above the average market price for the related periods.

3. Special Charge

Fiscal Year 2003

During fiscal 2003, Carpenter incurred a special charge of $30.6 million before taxes. These charges were incurred as part of the Company’s strategy to reduce costs and improve operational effectiveness. The components of this special charge are indicated below.

(in millions)	Cash		Non-Cash		Total

Reductions in workforce	$	2.5	$	14.9	$	17.4
Pension plan curtailment loss	—		6.7		6.7
Loss on early retirement of debt	3.5		1.0		4.5
Writedown of certain assets	—		2.0		2.0
Special charge	$	6.0	$	24.6	$	30.6

• Reductions in workforce: This item represents the elimination of approximately 500 salaried and hourly positions, which were substantially complete as of December 31, 2002. The charge of $17.4 million consisted primarily of various personnel-related costs to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $14.9 million of the charge will be paid from the Company’s qualified pension plan and did not impact the Company’s operating cash flow and is, therefore, considered non-cash. This portion of the special charge reduced prepaid pension cost on the consolidated balance sheet.

• Curtailment loss of $6.7 million: This item is related to the effects of the above workforce reduction on the qualified pension plan. The curtailment loss is comprised of increases to the projected benefit obligations and a recognition of related prior service costs. As a result of this charge, prepaid pension cost on the consolidated balance sheet has been correspondingly reduced by $6.7 million.

• Loss on early redemption of debt: In May 2003, Carpenter issued $100 million of 10-year senior unsecured notes with a coupon of 6.625%. Proceeds from the sale of the notes were used to redeem approximately $90 million of Carpenter’s 9% debentures due 2022, which had a mandatory sinking fund requirement of $5 million annually between 2003 and 2021. The debentures were callable at a price of 103.82% plus accrued interest through the redemption date. The remaining proceeds were used for general corporate purposes. In connection with the early redemption, a special charge of $4.5 million was recorded including approximately $1.0 million related to the recognition of unamortized discount and issue costs.

• Writedown of $2.0 million of certain assets reclassified as held-for-sale: Assets held-for-sale are included with other current assets on the consolidated balance sheet and are included in Corporate Assets in the segment data. Prior to the writedown, the net book value of these assets was $5.2 million. Primarily all of these assets were sold during fiscal year 2003. As of September 30, 2002, depreciation on these assets ceased.

Fiscal Year 2001

During the fourth quarter of fiscal 2001, Carpenter incurred a special charge of $37.6 million before taxes that was recognized in the consolidated statement of operations as a separate $36.0 million special charge, an addition to cost of sales of $1.2 million as a result of a writedown of inventory and an addition to selling and administrative expenses of $0.4 million due to a writedown of accounts receivable. The components of this special charge are indicated below.

(in millions)	Cash		Non-Cash		Total

Writedown of certain Engineered Products Group assets
Long-lived assets	$	—	$	15.7	$	15.7
Inventory	—		1.2		1.2
Other current and non-current assets	—		1.0		1.0
Exit costs	—		1.0		1.0
Accounts receivable	—		0.4		0.4
Reductions in workforce	2.3		6.8		9.1
Writeoff of Specialty Alloys Operations construction in progress	—		1.7		1.7
Bridgeport settlement agreement	—		7.5		7.5
Special charge	$	2.3	$	35.3	$	37.6

• Due to the pending divestiture of four Engineered Products Group (EPG) business units that were considered non-strategic, the Company recorded a charge of $19.3 million, consisting of $15.7 million in writedowns of long-lived assets, $1.2 million in writedowns of inventory, $0.4 million in writedowns of accounts receivable, $1.0 million in writedowns of other current and non current assets, and $1.0 million for related exit costs. The $15.7 million writedown of long-lived assets consisted of machinery and equipment - $9.2 million (book value prior to writedown of $12.7 million), buildings - $2.1 million (book value prior to writedown of $2.5 million), land - $0.3 million (book value prior to writedown of $0.3 million), and goodwill - $4.1 million (book value prior to writedown of $4.1 million). The book value of other current and non current assets prior to the writedown was $1.1 million. These business units had combined fiscal 2001 annual sales and a net operating loss (before the special charge) of $25.0 million and $3.0 million, respectively. Operating results of these EPG business units were immaterial for fiscal years 2003 and 2002. As of June 30, 2003, all four of the EPG business units have been sold—one in October 2001, the second in January 2002 and the remaining two during fiscal year 2003.

• Carpenter implemented a reduction in its workforce of approximately 100 salaried positions as a result of the realignment of Specialty Alloys Operations (SAO) and Corporate staff. As of June 30, 2002, this workforce reduction was complete. The charge of $9.1 million consisted primarily of various personnel-related costs to cover severance payments, enhanced pension benefits, medical coverage and related items. Of this charge, $6.8 million will be paid from the qualified pension plan and, accordingly, this portion of the special charge reduced prepaid pension cost on the consolidated

balance sheet. There was also a $1.7 million charge to writeoff certain SAO construction in progress due to the decision in the fourth quarter of fiscal 2001 to discontinue a capital project.

• Carpenter incurred a non-cash charge of $7.5 million before taxes as a result of a May 2001 settlement agreement reached with the City of Bridgeport, Connecticut and the Bridgeport Port Authority in connection with the disposal of Carpenter’s former steel mill property in Bridgeport. Under the settlement agreement, Carpenter received $9.25 million and retained responsibility for an existing oil deposit on the property, except to the extent the oil deposit is disturbed by the City of Bridgeport or the Bridgeport Port Authority or a third party acting on their behalf to develop the site.

The major components of the fiscal 2003 and fiscal 2001 special charges and the remaining outstanding balances at June 30, 2003, 2002 and 2001 are as follows:

	Termination Benefits			Curtailment Loss			Early Debt Retirement Costs			Asset Writedowns			Total

Special Charge	$	9.1		$	—		$	—		$	28.5		$	37.6
Transfers against assets	(6.8		)	—			—			(28.5		)	(35.3		)
June 30, 2001	2.3			—			—			—			2.3

Payments	(2.3		)	—			—			—			(2.3		)
June 30, 2002	—			—			—			—			—

Special Charge	17.4			6.7			4.5			2.0			30.6
Payments	(2.5		)	—			(3.5		)	—			(6.0		)
Transfers against assets	(14.9		)	(6.7		)	(1.0		)	(2.0		)	(24.6		)
June 30, 2003	$	—		$	—		$	—		$	—		$	—

4. Inventories

	June 30
(in millions)	2003		2002
Raw materials and supplies	$	30.7	$	29.1
Work in process	87.3		90.1
Finished and purchased products	62.9		70.8
	$	180.9	$	190.0

If the first-in, first-out method of inventory had been used instead of the LIFO method, inventories would have been $118.6 and $109.0 million higher as of June 30, 2003 and 2002, respectively. Current cost of LIFO-valued inventories was $249.9 million at June 30, 2003 and $233.9 million at June 30, 2002. The reductions in LIFO-valued inventories increased cost of sales by $0.4 million and $9.0 million before taxes during fiscal 2003 and 2002, respectively. In fiscal 2001, the reductions in LIFO-valued inventories decreased cost of sales by $0.7 million before taxes.

5. Property, Plant and Equipment

	June 30
(in millions)	2003		2002
Land	$	6.4	$	7.5
Buildings and building equipment	234.5		236.3
Machinery and equipment	1,096.8		1,102.2
Construction in progress	5.9		8.9
Total at cost	1,343.6		1,354.9
Less accumulated depreciation and amortization	691.9		641.8
	$	651.7	$	713.1

The estimated useful lives of depreciable assets are as follows:

Land improvements		20 years
Buildings and building equipment		20 – 45 years
Machinery and equipment		5 – 30 years
Autos and trucks		3 – 6 years
Office furniture and equipment		3 – 10 years

6. Goodwill and Trademarks and Tradenames, Net

Goodwill

In connection with Carpenter’s adoption of SFAS 142 on July 1, 2001, Carpenter reviewed the classification of its goodwill and other intangible assets, reassessed the useful lives previously assigned to other intangible assets, and discontinued amortization of goodwill. Carpenter also tested goodwill for impairment by comparing fair values of the reporting units to their carrying values as of July 1, 2001. As a result of this comparison, a $112.3 million impairment charge was recorded as of July 1, 2001.

Carpenter conducted its annual impairment review during the fourth quarter of 2003 and 2002 and determined that there was no additional goodwill impairment.

The changes in the carrying amount of goodwill by reportable segment for the years ended June 30, 2003 and 2002 are as follows:

(in millions)	Specialty Metals Segment			Engineered Products Segment		Total

Balance as of June 30, 2001	$	150.0		$	11.7	$	161.7

Decrease due to a change in estimate relating to the realization of certain tax assets for a previously acquired company	(2.8		)	—		(2.8		)

Impairment charge	(112.3		)	—		(112.3		)

Other	(0.3		)	—		(0.3		)

Balance as of June 30, 2002	$	34.6		$	11.7	$	46.3

Balance as of June 30, 2003	$	34.6		$	11.7	$	46.3

The $112.3 million transitional impairment charge or $5.06 per diluted share was recognized as a cumulative effect of an accounting change as of the beginning of fiscal 2002. Fair value of the reporting units was estimated on July 1, 2001 based upon discounted cash flow analyses and the use of market multiples. The fair value of certain reporting units was less than their carrying value.

Also, effective July 1, 2001 goodwill was no longer amortized. The total amount of goodwill amortization recorded by Carpenter in fiscal 2001 was $6.7 million. Had amortization not been recorded for any period presented, net income and earnings per share would have been as follows.

(in millions, except per share data)	2003			2002			2001

Reported net (loss) income	$	(10.9	)	$	(118.3	)	$	21.1
Add back: Goodwill amortization	—			—			6.7
Adjusted net (loss) income	$	(10.9	)	$	(118.3	)	$	27.8

Basic (loss) earnings per share:
Reported net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88
Goodwill amortization	—			—			0.29
Adjusted net (loss) earnings	$	(0.56	)	$	(5.41	)	$	1.17

Diluted (loss) earnings per share:
Reported net (loss) earnings	$	(0.56	)	$	(5.41	)	$	0.88
Goodwill amortization	—			—			0.28
Adjusted net (loss) earnings	$	(0.56	)	$	(5.41	)	$	1.16

Trademarks and Tradenames, Net

	June 30,
	2003		2002
	(in millions)
Trademarks and tradenames, at cost	$	32.0	$	32.0
Less accumulated amortization	6.6		5.6
Trademarks and tradenames, net	$	25.4	$	26.4

Carpenter recorded $1.0 million of amortization expense in fiscal years 2003, 2002 and 2001. The estimated annual amortization expense for each of the succeeding five fiscal years is $1.0 million.

7. Debt

As part of Carpenter’s debt refinancing strategy designed to enhance liquidity, Carpenter entered into a series of financing arrangements during fiscal 2002. In August 2001, Carpenter issued $100 million of 10-year medium-term notes with a coupon of 7.625%. Carpenter used the proceeds from the sale of the notes to reduce the outstanding principal amount under its short-term revolving credit agreements.

In November 2001, Carpenter entered into a $125 million five-year unsecured credit facility (“Committed Facility”) and a $75 million 364-day unsecured credit facility (“364-day Facility”). Borrowings under each of the facilities accrue at either a base rate or LIBOR plus applicable margin. The facilities contain two financial covenants, a debt-to-capital test and an EBITDA-to-interest coverage test. At June 30, 2003, the Company had no amounts outstanding under its Committed Facility, and $10.6 million of outstanding letters of credit. At June 30, 2003, the Company had $17.0 million outstanding on its 364-day Facility.

On September 3, 2002, Carpenter and its lenders amended the Committed Facility. The amendment reduced the minimum coverage under the EBITDA-to-interest covenant for the trailing four quarterly periods ended September 30, 2002, December 31, 2002 and March 31, 2003. Thereafter, the covenant reverted to the original terms under the Committed Facility.

Also on September 3, 2002, the Company entered into a $75 million, 364-day unsecured credit facility which replaced the expiring 364-day Facility. The terms and conditions of the new 364-day facility are essentially the same as those contained in the Company’s amended Committed Facility.

million was recorded, including unamortized discount and debt issuance costs. In addition, Carpenter paid $1.1 million in fees associated with the debt issuance.

Based upon its current cash position and expected future liquidity needs, Carpenter did not renew the 364-day facility which expired on September 3, 2003.

The weighted average interest rates for short-term borrowings during fiscal 2003, 2002 and 2001 were 5.7 percent, 3.3 percent and 6.2 percent, respectively.

Long-term debt outstanding at June 30, 2003 and 2002, consists of the following:

	June 30
(in millions)	2003		2002
Senior unsecured notes, 6.625% due May 2013	$	99.1	$	—
Medium-term notes, Series B at 6.28% to 7.10% due from April 2003 to 2018 (face value of $152.0 million at June 30, 2003)	156.6		198.0
9% Sinking fund debentures due 2022, callable beginning in March 2002 at 104.2%	—		99.7
Medium-term notes, Series C at 7.625% due 2011 (face value of $99.5 million at June 30, 2003)	101.9		99.5
Medium-term notes, Series A at 6.95% due June 2005	20.0		20.0
Other	1.4		8.8
Total	379.0		426.0
Less amounts due within one year	0.1		50.2
Long-term debt, net of current portion	378.9		$	375.8

A portion of the Series B and C notes are associated with the fixed to floating interest rate swaps. Therefore, the carrying value of the debt has been adjusted to reflect the underlying value of the swaps in accordance with fair value hedge accounting (see note 9).

Aggregate maturities of long-term debt for the four years subsequent to June 30, 2004, are $40.3 million in fiscal 2005, $1.6 million in fiscal 2006, $0.3 million in fiscal 2007 and $33.3 million in fiscal 2008.

8. Accounts Receivable Purchase Facility

In December 2001, Carpenter entered into a $75 million three-year accounts receivable purchase facility (“Purchase Facility”) with an independent financial institution. In March 2003, Carpenter reduced this facility to $50 million. Pursuant to the terms of the Purchase Facility, Carpenter sells a participating interest in certain accounts receivable to the independent financial institution. These transactions are treated as sales under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”.

During 2002, Carpenter sold a participating interest of $10.0 million to the independent financial institution. Carpenter used the cash received from the sale to pay down debt. Total fiscal 2003 and 2002 expenses relating to the Purchase Facility were $0.3 million and $0.4 million, respectively.

9. Financial Instruments

The carrying amounts and estimated fair values of Carpenter’s financial instruments were as follows:

	June 30
	2003						2002
(in millions)	Carrying Value			Fair Value			Carrying Value			Fair Value
Cash and cash equivalents	$	53.5		$	53.5		$	18.7		$	18.7
Company-owned life insurance	$	20.5		$	20.5		$	26.8		$	26.8
Short-term debt	$	17.1		$	17.1		$	16.8		$	16.8
Long-term debt	$	379.0		$	388.7		$	426.0		$	430.0

Commodity forwards and options	$	5.4		$	5.4		$	8.0		$	8.0
Foreign currency forwards and options	$	(2.0	)	$	(2.0	)	$	(2.6	)	$	(2.6	)
Interest rate swaps and Treasury locks	$	6.5		$	6.5		$	0.6		$	0.6

The carrying amounts for cash, cash equivalents and short-term debt approximate their fair values due to the short-term maturities of these instruments. The carrying amount for company-owned life insurance reflects cash surrender values based upon the market values of underlying securities.

The fair values of long-term debt as of June 30, 2003 and 2002 were determined by using current interest rates.

The Company formally documents all relationships between its hedging instruments and hedged items, as well as its risk management objective and strategy for establishing various hedge relationships. The Company formally assesses, both at the inception of the hedge and on an on-going basis, whether each derivative instrument is highly effective in offsetting changes in the fair values or cash flows of hedged items.

Carpenter’s current risk management strategies include the use of derivative instruments to reduce certain risks. These strategies are:

• The use of commodity forwards and options to fix the price of a portion of anticipated future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities.

• The use of foreign currency forwards and options to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro and Pound Sterling, in order to offset the effect of changes in exchange rates.

• The use of foreign currency forwards and options to hedge certain foreign currency denominated intercompany receivables, primarily in Euro and Pound Sterling, to offset the effect on earnings of changes in exchange rates until these receivables are collected.

• The use of interest rate swaps to maintain a certain level of floating rate debt relative to fixed rate debt.

The Company has designated commodity forwards and options, foreign currency forwards and options and floating to fixed interest rate swaps as cash flow hedges of anticipated commodity transactions, anticipated foreign exchange transactions and scheduled interest payments, respectively. Fair values for outstanding derivative instruments that are designated as cash flow hedges are accumulated in other comprehensive income in stockholders’ equity. The fair values are released to earnings when the related hedged items impact earnings. Amounts reclassified to the consolidated statement of operations are included in cost of sales (commodity hedges), interest expense (interest rate swaps) and sales (foreign currency hedges). If an anticipated transaction is no longer expected to occur, unrealized gains and losses on the related hedge are reclassified to the consolidated statement of operations. No amounts were reclassified to earnings during 2003 and 2001. During 2002, net gains of $0.2 million were reclassified from other comprehensive income to earnings for anticipated purchase transactions that were no longer expected to occur. The changes in other accumulated other comprehensive income associated with derivative hedging activities during the year ended June 30, 2003, 2002 and 2001 were as follows:

	2003			2002			2001
Balance at July 1	$	2.5		$	(1.5	)	$	—
Cumulative adjustment to adopt SFAS 133	—			—			0.8
Current period changes in fair value, net of tax	4.3			3.0			(0.3		)
Reclassifications to earnings, net of tax	(6.8		)	1.0			(2.0		)
Balance at June 30	$	—		$	2.5		$	(1.5	)

The company has designated fixed to floating interest rate swaps as fair value hedges. Accordingly, the changes in the fair value of these instruments are immediately recorded in earnings. The mark-to-market values of both the fair value hedging instruments and the underlying debt obligations are recorded as equal and offsetting gains and losses in the interest expense component of the statement of operations. The fair value of the Company’s interest rate swap agreements classified as fair value hedges was $7.0 million at June 30, 2003 and are included in other assets on the consolidated balance sheet. All existing fair value hedges are highly effective. As a result, there is no impact to earnings due to hedge ineffectiveness.

The hedges of intercompany receivables denominated in foreign currencies do not qualify for hedge accounting; therefore the hedges are marked to market on a quarterly basis and any gains or losses are recorded within other income on the consolidated statement of operations. All unrealized gains or losses on intercompany

receivables denominated in foreign currencies are recorded in other income, net each quarter.

Cash flow and fair value hedges at June 30, 2003 have various settlement dates, the latest of which is an August 2011 interest rate swap. Most of the interest rate swaps contain a put feature whereby the Company can put the swap back to the counterparty or the counterparty can put the swap back to the Company on the fifth anniversary date of the interest rate swap.

During the year ended June 30, 2002, unrealized net gains totaling $1.1 million after taxes were recorded in other comprehensive income (loss), and $2.9 million of expenses (net of tax benefits) were reclassified from other comprehensive income (loss) to the consolidated statement of operations including $0.2 million of net gains for anticipated raw material purchase transactions which were no longer expected to occur. Any ineffectiveness is recorded in the consolidated statement of operations. The ineffectiveness for existing derivative instruments for the years ended June 30, 2003, 2002 and 2001 was immaterial.

As of June 30, 2003, $0.05 million after taxes of net gains from derivative instruments was included in accumulated other comprehensive income (loss) of which $1.1 million after taxes is expected to be reclassified to the consolidated statement of operations within one year.

Carpenter is exposed to credit risk related to its financial instruments in the event of non-performance by the counterparties. Carpenter does not generally require collateral or other security to support these financial instruments. However, the counterparties to these transactions are major financial institutions deemed credit worthy by Carpenter. Carpenter does not anticipate non-performance by the counterparties.

10. Accrued Liabilities

	June 30
(in millions)	2003		2002
Compensation	$	13.5	$	16.3
Employee benefits	13.3		12.6
Income taxes	6.1		—
Interest	5.4		8.6
Derivative financial instruments	2.4		3.2
Taxes, other than income	2.4		2.1
Environmental costs	2.0		1.4
Other	15.1		16.9
	$	60.2	$	61.1

11. Pension and Other Postretirement Benefits

Carpenter provides several noncontributory defined benefit pension plans and postretirement benefit plans to certain of its employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans.

	Pension Plans						Other Postretirement Plans
(in millions)	2003			2002			2003			2002
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	602.9		$	602.5		$	206.8		$	189.6
Service cost	14.5			15.4			2.4			2.4
Interest cost	42.2			43.3			15.1			13.6
Benefits paid	(62.3		)	(44.6		)	(10.7		)	(13.9		)
Actuarial loss	98.2			3.7			47.8			27.0
Plan curtailment	5.6			—			2.3			—
Special termination benefits (a)	14.7			(0.8		)	0.2			—
Plan amendments	2.8			(16.6		)	(59.6		)	(11.9		)
Projected benefit obligation at end of year	$	718.6		$	602.9		$	204.3		$	206.8
Change in plan assets
Fair value of plan assets at beginning of year	$	754.4		$	886.5		$	36.9		$	55.0
Actual return on plan assets	26.8			(90.2		)	(1.7		)	(4.2		)
Benefits paid from plan assets	(62.3		)	(44.6		)	(10.7		)	(13.9		)
Contributions	2.6			2.7			—			—
Fair value of plan assets at end of year	$	721.5		$	754.4		$	24.5		$	36.9
Funded status of the plans	$	2.9		$	151.5		$	(179.8	)	$	(169.9	)
Unrecognized net loss	221.5			76.8			72.1			20.4
Unrecognized prior service cost (benefit)	8.1			6.4			(74.7		)	(18.6		)
Unrecognized transition obligation	0.1			0.1			—			—
Prepaid (accrued) benefit cost	$	232.6		$	234.8		$	(182.4	)	$	(168.1	)
Principal actuarial assumptions at June 30:
Discount rate	6.0		%	7.25		%	6.0		%	7.25		%
Long-term rate of compensation increase	3.5		%	4.0		%	—			—
Long-term rate of return on plan assets	8.5		%	10.0		%	8.5		%	10.0		%

(a) Benefits provided to employees terminated as a result of a reduction in hourly and salaried work force. See note 3 to the consolidated financial statements.

11. Pension and Other Postretirement Benefits (continued)

Pension and other postretirement plans included the following net credits and costs components:

	Pension Plans									Other Postretirement Plans
(in millions)	2003			2002			2001			2003			2002			2001

Service cost	$	14.5		$	15.4		$	16.0		$	2.4		$	2.4		$	2.6
Interest cost	42.2			43.3			43.4			15.1			13.6			13.5
Expected return on plan assets	(73.8		)	(87.3		)	(90.9		)	(3.0		)	(4.9		)	(7.6		)
Amortization of net gain	0.1			(1.3		)	(13.8		)	0.4			—			(2.5		)
Amortization of prior service cost (benefit)	0.6			2.7			2.6			(1.9		)	(1.0		)	(0.7		)
Amortization of transition asset	—			—			(2.9		)	—			—			—
Net (credit) cost	$	(16.4	)	$	(27.2	)	$	(45.6	)	$	13.0		$	10.1		$	5.3

For segment reporting (see note 19 to the consolidated financial statements), Carpenter reports separately the net pension credit which represents the income relating to Carpenter’s overfunded defined benefit pension plan less an expense for the post retirement benefit plans and other underfunded defined benefit pension plans.

Pension Plans

Carpenter has several underfunded plans that are included in the data presented above. As of June 30, 2003 and 2002, the projected benefit obligation of the underfunded plans was $26.7 million and $25.9 million, the total fair value of assets was $1.2 million and $1.6 million, and the accumulated benefit obligation was $24.6 million and $23.5 million, respectively.

Carpenter also maintains defined contribution pension and savings plans for substantially all domestic employees. Company contributions were $5.5 million in fiscal 2003, $7.2 million in fiscal 2002 and $7.4 million in fiscal 2001. There were 1,437,110 common shares reserved for issuance under the savings plans at June 30, 2003.

Other Postretirement Plans

The postretirement benefit plans consist of health care and life insurance plans. Beginning in June 1999, retired employees benefit payments are being paid by a Voluntary Employee Benefit Association (VEBA). Prior to 2002, Carpenter contributed discretionary amounts, which have not exceeded the amount deductible for tax purposes, into the VEBA. Plan assets are invested in trust-owned life insurance, which is invested in equity, fixed income and money market securities. In 2003, the Company amended its post retirement medical plan to increase the deductible and coinsurance amounts and increase the retiree contributions required to purchase the medical coverage.

The assumed health care cost trend rate for fiscal 2004 is 10%, declining 2.5% per year to an ultimate rate of 5%, and is 7% for fiscal 2003 and 2002. The health care cost trend rate has a significant effect on the amounts reported. If the assumed health care cost trend rate was increased by 1 percent, the accumulated projected benefit obligation at June 30, 2003 would have increased by $12.9 million and the postretirement benefit expense for fiscal 2003 would have increased by $1.2 million. If the assumed health care cost trend rate was decreased by 1%, the accumulated projected benefit obligation at June 30, 2003 would have decreased by $12.2 million and the postretirement benefit expense for fiscal 2003 would have decreased by $1.1 million.

12. Contingencies and Commitments

Environmental

Carpenter is subject to various federal, state, local and foreign environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect the costs of Carpenter’s operations, compliance costs to date have not been material. Carpenter has environmental remediation liabilities at some of its owned operating facilities and has been designated as a potentially responsible party (“PRP”) with respect to certain third-party Superfund waste disposal sites and other third party owned sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental remediation costs that represent management’s best estimate of the probable and reasonably estimable costs related to environmental remediation. During fiscal 2003, an additional $1.75 million was accrued for one of our current operating facilities and for a manufacturing site of a former subsidiary of Talley Industries, Inc. Also related to the former Talley subsidiary site, a $2.25 million other asset was recorded as the fair value of land received as part of the settlement in a bankruptcy proceeding of a claim under an indemnification agreement. No other accruals were made during fiscal 2003 or 2002. For fiscal 2001, the liability for environmental remediation costs was increased by $0.6 million, which was included in cost of sales. The liabilities recorded for environmental remediation costs at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities remaining at June 30, 2003, 2002 and 2001, were $6.8 million, $5.8 million and $8.0 million, respectively. The estimated range at June 30, 2003 of the reasonably possible future costs of remediation at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities is between $6.8 million and $11.3 million.

Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRP’s. Based upon information currently available, such future

costs are not expected to have a material effect on Carpenter’s financial position, results of operations or cash flows. However, such costs could be material to Carpenter’s financial position, results of operations or cash flows in a particular future quarter or year.

Guarantees/Indemnification Obligations

In connection with the divestitures of several previously owned companies, Carpenter undertook certain indemnification obligations as part of the definitive agreements for sale of those businesses. The indemnification obligations relate to Carpenter’s covenants, representations and warranties under the sale agreements, potential liability for operations of the businesses prior to the sale and other similar matters. The indemnification obligations are subject to conditions and limitations that are normal in agreements of this type. Further, certain of the indemnification obligations may be limited or barred by a monetary cap or a time limitation. However, other indemnifications are not subject to a monetary cap, therefore, we are unable to estimate the maximum potential future liability under the indemnity provisions of these agreements. The obligation to provide indemnification will normally arise only after the indemnified party makes a claim subject to review by Carpenter and in compliance with applicable procedures with respect to the method and timeliness of notice. Recourse may be available in limited situations against third parties from whom Carpenter purchased the businesses. As of June 30, 2003 there is approximately $2.0 million recorded related to these indemnifications.

Other

Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its operations. The effect of the outcome of these matters on Carpenter’s future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that the total eventual liability will not ultimately have a material effect on Carpenter’s financial position, results of operations or cash flows.

Carpenter has entered into purchase agreements primarily for various key raw materials at market related prices, all made in the normal course of business. The purchase commitments covered by these agreements aggregate approximately $90.6 million, all of which relates to fiscal 2004.

13. Operating Leases

Carpenter leases certain facilities and equipment under operating leases. Total rent expense was $11.4 million (net of sub-lease rental receipts), $12.0 million and $12.6 million for the fiscal years ended June 30, 2003, 2002 and 2001, respectively.

Future minimum payments (net of sub-lease rental receipts) for noncancelable operating leases in effect at June 30, 2003 are: $7.8 million in fiscal 2004; $6.6 million in fiscal 2005, $5.4 million in fiscal 2006; $4.5 million in fiscal 2007; $3.9 million in fiscal 2008; and $5.6 million thereafter.

14. Common Stock Purchase Rights

Under a common stock Rights Agreement amended as of June 12, 2000, Carpenter has issued one common stock purchase right (“Right”) for every outstanding share of common stock. Except as otherwise provided in the Rights Agreement, the Rights will become exercisable and separate Rights certificates will be distributed to the stockholders: (1) 10 days following the acquisition of 20 percent or more of Carpenter’s common stock, (2) 10 business days (or such later date as the Board of Directors may determine) following the commencement of a tender or exchange offer for 20 percent or more of Carpenter’s common stock, or (3) 10 days after Carpenter’s Board of Directors determines that a holder of 15 percent or more of Carpenter’s shares has an interest adverse to those of Carpenter or its stockholders (an “adverse person”). Upon distribution, each Right would then entitle a holder to buy from Carpenter one newly issued share of its common stock for an exercise price of $145.

After distribution, upon: (1) any person acquiring 20 percent of the outstanding stock (other than pursuant to a fair offer as determined by the Board of Directors), (2) a 20 percent holder engaging in certain self-dealing transactions, (3) the determination of an adverse person, or (4) certain mergers or similar transactions between Carpenter and holder of 20 percent or more of Carpenter’s common stock, each Right (other than those held by the acquiring party) entitles the holder to purchase shares of common stock of either the acquiring company or Carpenter (depending on the circumstances) having a market value equal to twice the exercise price of the Right. The Rights may be redeemed by Carpenter for $.025 per Right at any time before they become exercisable. The Rights Agreement expires on June 26, 2006.

15. Stock-Based Compensation

Carpenter has three stock-based compensation plans for officers and key employees: a 1993 plan, a 1982 plan and a 1977 plan.

1993 Plan:

The 1993 plan provides that the Board of Directors may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and performance share awards, and determine the terms and conditions of each grant. In fiscal 1998, the plan was amended to provide the Chief Executive Officer with limited authority to grant stock options and restricted stock. In October, 2000, the stockholders authorized an additional 1,800,000 shares to the plan for share awards. As of June 30, 2003 and 2002, 630,113 and 851,103 shares, respectively, were reserved for options and share awards which may be granted under this plan.

Stock option grants under this plan must be at no less than market value on the date of grant, are exercisable generally after one year of employment following the date of grant, and will in all cases expire no more than ten years after the date of grant. In 2003, the options granted by the Board become exercisable in equal annual increments over a three-year period.

Restricted stock awards outstanding vest from the date of grant to periods ranging principally from two to five years from the date of grant. When restricted shares are issued, deferred compensation is determined, and charged to expense over the vesting period. During fiscal 2003, 2002 and 2001, $1.5 million, $0.5 million and $0.2 million, respectively, were charged to expense for vested restricted shares.

Performance share awards are earned only if Carpenter achieves certain performance levels over a three-year period. The awards are payable at the discretion of the Board of Directors in either shares of common stock or cash and expensed over the three-year performance period. Fiscal 2002 and 2001 included $0.3 million in each year for reversals of prior years’ accruals relating to performance shares. There were no reversals in fiscal 2003.

1982 Plan:

Under the 1982 plan, options were granted at the market value on the date of grant, were exercisable after one year of employment following the date of grant and expire ten years after grant. Since the 1982 Plan expired in June 1992, no options are outstanding.

1977 Plan:

Under the 1977 plan, which is still in effect, 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 expire ten years after grant. At June 30, 2003 and 2002, 33,060 shares and 23,660 shares, respectively, were reserved for options which may be granted under the 1977 plan.

Carpenter has a stock-based compensation plan that provides for the granting of stock options and other market-based units to non-employee Directors. Options are granted at the market value on the date of the grant and are exercisable after one year of Board service following the date of grant. Options expire ten years after the date of grant. At June 30, 2003 and 2002, 138,659 and 209,000 shares, respectively, were reserved for options which may be granted under this plan.

Option Activity:

	Number of Shares		Weighted Average Exercise Price
Balance at June 30, 2000	2,076,284		$	32.99
Granted	495,400		29.92
Exercised	(154,230	)	24.79
Cancelled	(77,377	)	33.68
Balance at June 30, 2001	2,340,077		$	32.86
Granted	633,300		23.31
Exercised	(144,900	)	21.15
Cancelled	(32,780	)	32.25
Balance at June 30, 2002	2,795,697		$	31.33
Granted	448,500		15.71
Exercised	(1,200	)	19.69
Cancelled	(161,810	)	29.46
Balance at June 30, 2003	3,081,187		$	29.13

Outstanding and Exercisable Options:

Exercise Price Range	Number Outstanding at 06/30/03	Weighted Average Remaining Life	Weighted Average Exercise Price		Number Exercisable at 06/30/03	Weighted Average Exercise Price
$ 19 - $30	1,776,602	7.99	$	22.58	1,328,102	$	24.89
$ 30 - $40	783,485	5.54	31.55		783,485	31.55
$ 40 - $51	521,100	4.53	47.84		521,100	47.83
	3,081,187		$	29.13	2,632,687	$	31.41

Of the options outstanding at June 30, 2003, 2,341,985 relate to the 1993 plan, 130,200 relate to the 1977 plan and 609,200 relate to the plan for non-employee Directors.

16. Employee Stock Ownership Plan

Carpenter has a leveraged employee stock ownership plan (“ESOP”). Carpenter issued 461.5 shares of convertible preferred stock in fiscal 1992 at $65,000 per share to the ESOP in exchange for a $30.0 million, 15-year 9.345% note which is included in the stockholders’ equity section of the consolidated balance sheet as deferred compensation. The preferred stock is recorded net of related issuance costs.

Principal and interest obligations on the note are satisfied by the ESOP as Carpenter makes contributions to the ESOP and dividends are paid on the preferred stock. As payments are made on the note, shares of preferred stock are allocated to participating employees’ accounts within the ESOP. Carpenter contributed $1.9 million in fiscal 2003, $1.8 million in fiscal 2002 and $1.7 million in fiscal 2001 to the ESOP. Compensation expense related to the plan was $1.3 million in fiscal 2003, $1.4 million in fiscal 2002 and $1.5 million in fiscal 2001.

As of June 30, 2003, the ESOP held 353.6 shares of the convertible preferred stock, consisting of 230.9 allocated shares and 122.7 unallocated shares. Each preferred share is convertible into at least 2,000 shares of common stock. There are 707,229 common shares reserved for issuance under the ESOP at June 30, 2003. The shares of preferred stock pay a cumulative annual dividend of $5,362.50 per share, are entitled to vote together with the common stock as a single class and have 2,600 votes per share. To the extent permitted by the ESOP and its trustee, the stock is redeemable at Carpenter’s option at $65,000 per share.

As a provision of the ESOP, participants are guaranteed a common share price of $32.50 per share upon conversion. At June 30, 2003, $7.6 million was included in other noncurrent liabilities representing the amount that the actual common stock share value is below the guaranteed conversion share value. The $7.6 million was comprised of a reduction in convertible preferred stock of $12.0 million offset by a reduction in deferred compensation of $4.4 million.

17. Income Taxes

Provision (benefit) for income taxes consisted of the following:

(in millions)	2003			2002			2001
Current:
Federal	$	(0.2	)	$	(18.1	)	$	6.0
State	0.3			(1.0		)	2.4
Foreign	2.6			2.6			3.7
Deferred:
Federal	(12.8		)	7.2			11.2
State	(1.9		)	2.0			(0.1		)
Foreign	—			—			—
	$	(12.0	)	$	(7.3	)	$	23.2

The operating loss generated in fiscal 2003 was carried back to prior years, and the tax benefit was recorded as a current asset on the consolidated balance sheet. The fiscal 2001 income tax benefit resulting from recording the cumulative effect on prior years due to the SAB 101 accounting change was $9.4 million.

The following is a reconciliation of the United States statutory federal income tax rate to the actual effective income tax rate:

(% of pre-tax (loss) income)	2003		2002		2001
Statutory federal income tax rate	(35.0	)%	(35.0	)%	35.0	%
Research and development credits	(10.0	)	(12.0	)	—
State income taxes, net of federal tax benefit	(6.1	)	4.1		3.3
Foreign tax differential	0.5		3.0		(0.2	)
Nontaxable income	(1.2	)	(14.7	)	(2.8	)
Goodwill amortization	—		—		5.1
Goodwill writedown	—		—		4.1
Settlement of prior years’ tax issues	—		—		(4.8	)
Other, net	(0.6	)	(0.3	)	—
Effective income tax rate	(52.4	)%	(54.9	)%	39.7	%

Deferred taxes are recorded based upon temporary differences between financial statement and tax bases of assets and liabilities. The following deferred tax liabilities and assets were recorded as of June 30, 2003 and 2002:

(in millions)	2003			2002
Deferred tax liabilities:
Depreciation	$	180.9		$	172.3
Prepaid pension cost	104.2			96.6
Intangible assets	7.8			10.8
Inventories	8.4			11.5
Other	3.1			9.5
Total deferred tax liabilities	$	304.4		$	300.7

Deferred tax assets:
Postretirement provisions	$	68.3		$	67.0
Net operating loss carryforwards	28.2			6.6
Other reserve provisions	22.3			34.1
Tax credit carryforwards	18.2			6.8
Valuation allowance	(3.6		)	(2.0		)
Total deferred tax assets	$	133.4		$	112.5

Net deferred tax liability	$	171.0		$	188.2

As of June 30, 2003 and 2002, subsidiaries of the Company had available tax net operating losses that can be carried forward to future years. The $28.2 million net operating loss caryforward in 2003 expires in 2022. Of the $6.6 million net operating loss carryforward in 2002, $3.1 million expires in 2017 and the remaining $3.5 million is attributable to a foreign subsidiary that has an unlimited carry forward period. The tax credit carryforward in 2003 consists of $15.9 million of Alternative Minimum Tax credits, which can be carried forward indefinitely, and $2.3 million of Research and Development credits. The tax credit carryforward in 2002 represents Alternative Minimum Tax credits, which can be carried forward indefinitely.

At June 30, 2003, no provision has been made for U.S. federal and state income taxes on approximately $40.0 of foreign earnings, which are expected to be reinvested indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes including any adjustment for foreign tax credit, state income taxes, and withholding taxes payable to the various foreign countries.

18. Other Income, Net

Other (income) expense, net consists of the following:

(in millions)	2003			2002			2001

Continued dumping and subsidy offset	$	(2.8	)	$	(3.5	)	$	—
Interest income	(1.8		)	(2.0		)	(2.6		)
Loss (gain) on writedowns and disposal of property, plant and equipment	1.1			4.4			(1.5		)
Gain on sale of businesses	(0.9		)	—			—
Foreign exchange loss	0.5			1.1			0.2
Writedown to market value of investments in life insurance policies	0.2			0.2			1.9
Other	(0.1		)	(0.7		)	(0.3		)
	$	(3.8	)	$	(0.5	)	$	(2.3	)

19. Business Segments, Geographic and Product Data

Carpenter is organized in the following business units: Specialty Alloys Operations, Dynamet, Carpenter Powder Products, and Engineered Products. For segment reporting, the Specialty Alloys Operations, Dynamet, and Carpenter Powder Products operating segments have been aggregated into one reportable segment, Specialty Metals, because of the similarities in products, processes, customers, distribution methods and economic characteristics.

Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Specialty Metals sales are distributed directly from Carpenter’s production plants and its distribution network and through independent distributors.

Engineered Products includes structural ceramic products, ceramic cores for the casting industry, tubular metal products for nuclear and aerospace applications and custom shaped bar.

The accounting policies of both reportable segments are the same as those described in the Summary of Significant Accounting Policies.

The net pension credit represents the income relating to Carpenter’s overfunded defined benefit pension plan less the expense for the post retirement benefit plans and the other underfunded defined benefit pension plans. The net pension credit relates predominantly to the Specialty Metals segment. The corporate costs primarily represent the unallocated portion of the operating costs of the finance, law and human resource departments as well as the corporate management staff. The special charge is discussed in detail in note 3. Of the total 2003 special charge, approximately $20.3, $1.0 and $4.8 million relate to the Specialty Metals segment, Engineering Products segment and Corporate, respectively. In addition, $4.5 million relates to the premium on early retirement of debt. Other income, net, is described in note 18. Corporate assets are primarily domestic cash and cash equivalents, prepaid pension cost, corporate-owned life insurance and corporate plant, equipment and software.

On a consolidated basis, Carpenter’s sales are not materially dependent on a single customer or a small group of customers. Of the total sales of our Engineered Products segment, approximately 14% of segment sales were to one customer and 12% of sales were to a second customer. There were no other significant individual customer sales volumes during fiscal years 2002 and 2001.

Geographic Data

(in millions)	2003		2002		2001
Net sales: (a)
United States	$	653.2	$	728.0	$	1,079.9
Europe	111.1		142.2		130.9
Mexico	43.7		45.3		52.6
Canada	17.4		20.3		21.4
Asia Pacific	33.8		26.3		24.0
Other	11.9		15.0		15.3
Consolidated net sales	$	871.1	$	977.1	$	1,324.1
Long-lived assets:
United States	$	996.0	$	1,066.5	$	1,181.9
Europe	17.9		18.0		23.9
Mexico	4.6		6.6		14.1
Canada	0.3		0.4		0.7
Asia Pacific	10.1		10.4		10.4
Other	1.4		1.7		1.4
Consolidated long-lived assets	$	1,030.3	$	1,103.6	$	1,232.4

(a) Net sales are attributed to countries based on the location of the customer.

Product Data

(in millions)	2003		2002		2001
Stainless steels	$	392.8	$	395.7	$	569.4
Special alloys	291.7		367.9		466.7
Ceramics and other materials	83.2		94.0		132.4
Titanium products	66.6		82.5		92.7
Tool and other steels	36.8		37.0		62.9
Total net sales	$	871.1	$	977.1	$	1,324.1

Segment Data

(in millions)	2003			2002			2001
Net Sales:
Specialty Metals	$	760.2		$	850.8		$	1,168.6
Engineered Products	113.3			128.5			156.9
Intersegment	(2.4		)	(2.2		)	(1.4		)
Consolidated net sales	$	871.1		$	977.1		$	1,324.1
Operating Results:
Specialty Metals	$	38.8		$	12.9		$	98.8
Engineered Products	10.9			10.5			15.7
Net pension credit	3.4			17.1			40.3
Corporate costs	(18.2		)	(19.7		)	(20.8		)
Interest expense	(31.0		)	(34.6		)	(40.3		)
Special charge	(30.6		)	—			(37.6		)
Other income, net	3.8			0.5			2.3
Consolidated (loss) income before income taxes and cumulative effect of accounting changes	$	(22.9	)	$	(13.3	)	$	58.4
Total Assets:
Specialty Metals	$	990.7		$	1,057.7		$	1,310.2
Engineered Products	74.5			90.4			102.2
Corporate	334.7			331.4			279.1
Consolidated total assets	$	1,399.9		$	1,479.5		$	1,691.5
Depreciation:
Specialty Metals	$	46.4		$	48.1		$	45.1
Engineered Products	4.8			4.9			6.4
Corporate	2.1			3.5			4.1
Consolidated depreciation	$	53.3		$	56.5		$	55.6
Amortization:
Specialty Metals	$	9.4		$	9.6	(a)	$	13.5
Engineered Products	0.5			0.8		(a)	2.3
Corporate	0.8			0.8		(a)	1.1
Consolidated amortization	$	10.7		$	11.2	(a)	$	16.9
Capital Expenditures, Including Software:
Specialty Metals	$	7.1		$	21.1		$	40.6
Engineered Products	1.3			3.9			8.2
Corporate	0.1			1.7			1.7
Consolidated capital expenditures, including software	$	8.5		$	26.7		$	50.5

(a) Pursuant to SFAS 142, effective July 1, 2001, goodwill is no longer being amortized. Total fiscal 2001 goodwill amortization was $6.7 million; $5.6 million related to Specialty Metals, while $1.1 million related to Engineered Products. See note 6 to the consolidated financial statements.

20. Divestitures

During 2003, Carpenter sold the last two of the four Engineered Product Group (EPG) business units that it had previously announced would be divested. Proceeds of $8.5 million exceeded the carrying value by approximately $0.9 million. The operating results of these businesses were included in the EPG segment prior to the disposal. The $0.9 million gain on sale is included within other (income) expense, net on the consolidated statement of operations.

21. Supplemental Data

The following are additional required disclosures and other material items:

(in millions)	2003			2002			2001
Cost Data:
Repairs and maintenance costs	$	45.5		$	52.2		$	59.8

Cash Flow Data:
Cash paid during the year for:
Interest payments, net of amounts capitalized	$	33.0		$	32.3		$	39.8
Income tax refunds, net	$	5.9		$	6.1		$	2.8

Accumulated Other Comprehensive Loss:
Foreign currency translation adjustment	$	(12.8	)	$	(15.0	)	$	(15.1	)
Minimum pension liability adjustment	(1.5		)	—			—
Net unrealized gains (losses) on derivatives	—			2.5			(1.6		)
	$	(14.3	)	$	(12.5	)	$	(16.7	)

SUPPLEMENTARY DATA

Quarterly Financial Data (Unaudited)

Quarterly sales and earnings results are usually influenced by seasonal factors. The first fiscal quarter (three months ending September 30) is typically the lowest because of annual plant vacation and maintenance shutdowns in this period by Carpenter and by many of its customers. This seasonal pattern can be disrupted by economic cycles or special accounting adjustments. The second half of the fiscal year is typically stronger than the first half.

(dollars and shares in millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Results of Operations
Fiscal 2003
Net sales	$	213.8		$	210.2		$	234.6		$	212.5

Gross profits	$	33.6		$	35.9		$	35.9		$	48.3

Net (loss) income	$	(10.9	)	$	(7.1	)	$	1.7		$	5.4

Fiscal 2002 (a)
Net sales	$	251.1		$	248.2		$	250.2		$	227.6

Gross profits	$	52.8		$	46.6		$	28.0		$	35.5

Income (loss) before cumulative effect of accounting change	$	5.9		$	3.5		$	(10.5	)	$	(4.9	)

Cumulative effect of accounting change	(112.3		)	—			—			—
Net (loss) income	$	(106.4	)	$	3.5		$	(10.5	)	$	(4.9	)

Earnings per common share
Fiscal 2003

Basic (loss) earnings	$	(0.51	)	$	(0.34	)	$	0.06		$	0.23

Diluted (loss) earnings	$	(0.51	)	$	(0.34	)	$	0.06		$	0.23

Fiscal 2002 (a)
Basic:
Earnings (loss) before cumulative effect of accounting change	$	0.24		$	0.14		$	(0.49	)	$	(0.24	)
Cumulative effect of accounting change	(5.06		)	—			—			—
Net (loss) earnings	$	(4.82	)	$	0.14		$	(0.49	)	$	(0.24	)

Diluted:
Earnings (loss) before cumulative effect of accounting change	$	0.24		$	0.14		$	(0.49	)	$	(0.24	)
Cumulative effect of accounting change	(5.06		)	—			—			—
Net (loss) earnings	$	(4.82	)	$	0.14		$	(0.49	)	$	(0.24	)

Weighted average common shares outstanding (in millions)
Fiscal 2003
Basic	22.3			22.3			22.4			22.4
Diluted	22.3			22.3			22.4			23.1
Fiscal 2002
Basic	22.2			22.2			22.2			22.3
Diluted	23.0			23.0			22.2			22.3

(a) The first quarter of fiscal 2002 includes a cumulative effect of an accounting change relating to goodwill impairment of $112.3 million or $5.06 per diluted share. See note 6 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable

Item 9a . Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2003. There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2003, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

Item 10 . Directors and Executive Officers of the Registrant

The information required as to directors is incorporated herein by reference to the fiscal 2003 definitive Proxy Statement under the caption “Election of Directors.”

Information concerning Carpenter’s executive officers appears in Part I of this Annual Report on Form 10-K.

Information concerning Carpenter's Code of Ethics for the Chief Executive Officer and Senior Financial Officers of Carpenter Technology Corporation is incorporated by reference to the fiscal 2003 definitive Proxy Statement under the caption “Miscellaneous”.

Item 11 . Executive Compensation

The information required by this item is incorporated herein by reference to the fiscal 2003 definitive Proxy Statement under the caption “Executive Compensation.”

Item 12 . Security Ownership of Certain Beneficial Owners and Management

The information required by this item is incorporated herein by reference to the fiscal 2003 definitive Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management.”

Item 13 . Certain Relationships and Related Transactions

Not applicable

Item 14 . Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the fiscal 2003 definitive Proxy Statement under the caption “Approval of Appointment of Independent Accountants”.

PART IV

Item 15 . Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Documents Filed as Part of this Report:

(1) The following consolidated financial statement schedule should be read in conjunction with the consolidated financial statements (see Item 8. “Financial Statements and Supplementary Data”):

Report of Independent Auditors on Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is contained in the consolidated financial statements or notes thereto.

Report of Independent Auditors on
Financial Statement Schedule

To the Board of Directors of
Carpenter Technology Corporation:

Our audits of the consolidated financial statements referred to in our report dated September 3, 2003, appearing herein also included an audit of the financial statement schedule listed in Item 15(a)(1) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 3, 2003

(2) The following documents are filed as exhibits:

3. Articles of Incorporation and By-Laws

4. Instruments Defining the Rights of Security

Holders, Including Indentures

10. Material Contracts

12. Computation of Ratios of Earnings to Fixed Charges (unaudited)

21. Subsidiaries of the Registrant

23. Consent of Experts and Counsel

24. Powers of Attorney

31. Rule 13a-14(a)/15d-14(a) Certifications

32. Section 1350 Certifications

99. Additional Exhibits

(b) Reports on Form 8-K:

Current reports on Form 8-K were filed on behalf of Carpenter on April 22, 2003, April 25, 2003 and May 19, 2003. The Reports were dated April 22, 2003, April 25, 2003 and May 19, 2003, respectively. The April 22, 2003 Report covered Item 7, Financial Statements and Exhibits and Item 9, Regulation FD Disclosure and included Carpenter’s press release discussing third quarter results as an Exhibit. The April 25, 2003 Report covered Item 5, Other Events regarding the retirement of Dennis Draeger as Chairman and Chief Executive Officer and the election of Robert J. Torcolini as Chairman, President and Chief Executive Officer, all effective July 1, 2003. No financial statements were filed with the April 25, 2003 Report. The May 19, 2003 Report covered Item 7, Financial Statements and Exhibits and Item 9, Regulation FD Disclosure and included Carpenter’s press release discussing the private placement of $100 million of 10-year senior unsecured notes as an Exhibit.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CARPENTER TECHNOLOGY CORPORATION


	By	/s/ Terrence E. Geremski
		Terrence E. Geremski
		Senior Vice President - Finance & Chief Financial Officer

Date: September 12, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

/s/Robert J. Torcolini	Chairman, President and Chief Executive Officer and Director (Principal Executive Officer)	September 12, 2003
Robert J. Torcolini

/s/Terrence E. Geremski	Senior Vice President - Finance & Chief Financial Officer	September 12, 2003
Terrence E. Geremski

/s/Richard D. Chamberlain	Vice President and Corporate Controller (Principal Accounting Officer)	September 12, 2003
Richard D. Chamberlain

*
Carl G. Anderson, Jr.	Director	September 12, 2003

*	Director	September 12, 2003
J. Michael Fitzpatrick

*	Director	September 12, 2003
Marillyn A. Hewson

*	Director	September 12, 2003
William J. Hudson, Jr.

*	Director	September 12, 2003
Robert J. Lawless

*	Director	September 12, 2003
Robert N. Pokelwaldt

*	Director	September 12, 2003
Gregory A. Pratt

*	Director	September 12, 2003
Kathryn C. Turner

*	Director	September 12, 2003
Stephen M. Ward, Jr.

*	Director	September 12, 2003
Kenneth L. Wolfe

Original Powers of Attorney authorizing David A. Christiansen or Terrence E. Geremski to sign this Report on behalf of: J. Michael Fitzpatrick, Marillyn A. Hewson, William J. Hudson, Jr., Robert J. Lawless, Robert N. Pokelwaldt, Gregory A. Pratt, Kathryn C. Turner, Stephen M. Ward, Jr., Kenneth L. Wolfe, Robert J. Torcolini and Carl G. Anderson, Jr. are being filed with the Securities and Exchange Commission.

	*By	/s/David A. Christiansen
		David A. Christiansen
		Attorney-in-fact

CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES

SCHEDULE II . VALUATION AND QUALIFYING ACCOUNTS

(in millions)

Column A	Column B		Column C					Column D			Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs & Expenses		Charged to Other Accounts			Deductions			Balance at End of Period
Year ended June 30, 2003

Allowance for doubtful accounts receivable	$	2.6	$	1.6	$	—		$	(1.0	)	$	3.2
Deferred tax valuation allowance	$	2.0	$	1.6	$	—		$	—		$	3.6
Inventory obsolescence/ slow moving reserve	$	11.0	$	—	$	—		$	(0.3	)	$	10.7

Year ended June 30, 2002

Allowance for doubtful accounts receivable	$	2.3	$	2.6	$	—		$	(2.3	)	$	2.6
Deferred tax valuation allowance	$	3.9	$	1.5	$	(3.1	)	$	(0.3	)	$	2.0
Inventory obsolescence/slow moving reserve	$	8.5	$	3.7	$	—		$	(1.2	)	$	11.0

Year ended June 30, 2001

Allowance for doubtful accounts receivable	$	2.2	$	0.8	$	0.4		$	(1.1	)	$	2.3
Deferred tax valuation allowance	$	4.2	$	—	$	(0.3	)	$	—		$	3.9
Inventory obsolescence/slow moving reserve	$	6.0	$	4.1	$	—		$	(1.6	)	$	8.5

EXHIBIT INDEX

Exhibit No.		Title

3.		Articles of Incorporation and By-Laws

A.		Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3 of Carpenter’s Form 10-Q Quarterly Report for the quarter ended September 30, 1998.

B.		By-Laws, amended as of October 22, 2001, are incorporated herein by reference to Exhibit 3B to Carpenter’s 10-Q Quarterly Report for the quarter ended September 30, 2001.

4.		Instruments Defining Rights of Security Holders, Including Indentures

A.		Restated Certificate of Incorporation and By-Laws set forth in Exhibit Nos. 3A and 3B, above.

B.		Rights Agreement relating to Rights distributed to holders of Carpenter’s Stock, amended as of June 12, 2000, is incorporated herein by reference to Exhibit 4B of Carpenter’s 2001 Annual Report on Form 10-K.

C.		Carpenter’s Registration Statement No. 333-44757, as filed on Form S-3 on January 22, 1998, and amended on February 13, 1998, with respect to issuance of Common Stock and unsecured debt is incorporated herein by reference.

D.		Prospectus, dated February 13, 1998 and Prospectus Supplement, dated March 31, 1998, File No. 333-44757, with respect to issuance of $198,000,000 of Medium Term Notes are incorporated by reference.

E.		Indenture dated as of January 12, 1994, between Carpenter and U.S. Bank Trust National Association, formerly known as First Trust of New York, National Association, as successor Trustee to Morgan Guaranty Trust Company of New York, related to Carpenter’s i) $100,000,000 of unsecured medium term notes registered on Registration Statement No. 33-51613 and ii) $198,000,000 of unsecured medium term notes registered on Registration Statement No. 333-44757 is incorporated by reference to Exhibit 4(c) to Carpenter’s Form S-3 (File No. 33-51613) filed January 6, 1994.

F.		Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B are incorporated by reference to Exhibit 20 to Carpenter’s Current Report on Form 8-K (SEC File No. 001-05828) filed on April 15, 1998.

E-1

G.		Pricing Supplements No. 1 through 25 dated and filed from April 2, 1998 to June 11, 1998, supplements to Prospectus dated February 13, 1998 and Prospectus Supplement dated March 31, 1998, File No. 333-44757 with respect to issuance of $198,000,000 of Medium Term Notes are incorporated herein by reference.

H.		Carpenter’s Registration Statement No. 333-71518 as filed on Form S-4 on October 12, 2001, and amended on November 29, 2001, with respect to an offer to exchange $100,000,000 of Medium Term Notes is incorporated herein by reference.

I.		First Supplemental Indenture dated May 22, 2003, between Carpenter and U.S. Bank National Trust Association (formerly known as First Trust of New York, as successor Trustee to Morgan Guaranty Trust Company of New York) related to Carpenter’s issuance of $100,000,000 principal amount of its 6.625% Senior Notes due 2013 is attached as an Exhibit to this Annual Report on Form 10-K.

J.		Exchange and Registration Rights Agreement dated May 22, 2003, between Carpenter and Wachovia Securities as the initial purchaser of $100,000,000 principal amount of Carpenter’s 6.625% Senior Notes due 2013 is attached as an Exhibit to this Annual Report on Form 10-K.

K.		Form of Global Security with respect to the issuance by Carpenter and purchase by Wachovia Securities of $100,000,000 principal amount of Carpenter’s 6.625% Senior Notes due 2013 is attached as an Exhibit to this Annual Report on Form 10-K,

10.		Material Contracts

A.		Agreement and Plan of Merger dated January 6, 1997, by and among Dynamet Incorporated, Stockholders of Dynamet Incorporated and Carpenter is incorporated herein by reference to Exhibit 10A of Carpenter’s 2002 Annual Report on Form 10-K.

B.		Supplemental Retirement Plan for Executive Officers, amended as of January 1, 2001, is incorporated herein by reference to Exhibit 10B of Carpenter’s 2001 Annual Report on Form 10-K.

C.		Management and Officers Capital Appreciation Plan, an Incentive Stock Option Plan, amended as of April 26, 2001, is incorporated herein by reference to Exhibit 10C of Carpenter’s 2001 Annual Report on Form 10-K.

E-2

D.		Incentive Stock Option Plan for Officers and Key Employees, amended as of August 9, 1990, is incorporated herein by reference to Exhibit 10D to Carpenter’s 2000 Annual Report on Form 10-K.

E.		Deferred Compensation Plan for Non-Management Directors of Carpenter Technology Corporation, amended as of December 7, 1995, is incorporated herein by reference to Exhibit 10E of Carpenter’s 2001 Annual Report on Form 10-K.

F.		Deferred Compensation Plan for Corporate and Division Officers of Carpenter Technology Corporation, amended as of January 1, 1998, is incorporated herein by reference to Exhibit 10F of Carpenter’s 2002 Annual Report on Form 10-K.

G.		Executive Annual Compensation Plan, amended as of July 1, 2002 is incorporated herein by reference to Exhibit 10G of Carpenter’s 2002 Annual Report on Form 10-K.

H.		Stock-Based Incentive Compensation Plan For Non-Employee Directors, amended as of April 26, 2001, is incorporated herein by reference to Exhibit 10H to Carpenter’s 2001 Annual Report on Form 10-K.

I.		Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation, restated as of December 9, 1993, is incorporated herein by reference to Exhibit 10I to Carpenter’s 2000 Annual Report on Form 10-K.

J.		Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated September 11, 1990 as amended and restated on May 1, 1997, relating in part to the Supplemental Retirement Plan for Executive Officers, Deferred Compensation Plan for Corporate and Division Officers and the Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation is incorporated herein by reference to Exhibit 10J of Carpenter’s 2002 Annual Report on Form 10-K.

K.		Form of Indemnification Agreement, entered into between Carpenter and each of the directors and the following executive officers: David A. Christiansen, Dennis M. Draeger, Terrence E. Geremski, Robert W. Lodge, Michael L. Shor and Robert J. Torcolini is incorporated herein by reference to Exhibit 10K to Carpenter’s 2000 Annual Report on Form 10-K.

L.		Stock-Based Incentive Compensation Plan for Officers and Key Employees, amended as of June 27, 2002, is incorporated herein by reference to Exhibit 10L of Carpenter’s 2002 Annual Report on Form 10-K.

M.		Carpenter Technology Corporation Change of Control Severance Plan, adopted April 26, 2001, is incorporated herein by reference to Exhibit 10M of Carpenter’s 2001 Annual Report on Form 10-K.

E-3

N.		Form of amended and restated Special Severance Agreement entered into between Carpenter and each of the following executive officers: David A. Christiansen, Terrence E. Geremski, Michael L. Shor and Robert J. Torcolini is incorporated herein by reference to Exhibit 10N of Carpenter’s 2001 Annual Report on Form 10-K.

O.		Second Amendment dated August 21, 2003, to Five-Year Revolving Credit Agreement dated November 20, 2001, among Carpenter and certain of its subsidiaries as Borrowers and Wachovia Bank, National Association (successor to First Union National Bank), JP Morgan and a number of other financial institutions as lenders is attached as an Exhibit to this Annual Report on Form 10-K.

P.		Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated December 7, 1990 as amended and restated on May 1, 1997, relating in part to the Directors’ Retirement Plan and the Deferred Compensation Plan for Non-Management Directors, is incorporated herein by reference to Exhibit 10P of Carpenter’s 2002 Annual Report on Form 10-K.

Q.		Five-Year Revolving Credit Agreement dated as of November 20, 2001 among Carpenter and certain of its subsidiaries as Borrowers and with Wachovia Bank (successor toFirst Union National Bank), JPMorgan Chase Bank and a number of other financial institutions as Lenders is incorporated herein by reference to Exhibit 10i of Carpenter’s Form 10-Q for the quarter ended December 31, 2001.

R.		Amendment dated September 3, 2002, to Five-Year Revolving Credit Agreement dated November 20, 2001 among Carpenter and certain of its subsidiaries as Borrowers and with Wachovia Bank, National Association (successor to First Union National Bank), JP Morgan Chase Bank and a number of other financial institutions as lenders is incorporated herein by reference to Exhibit 10R of Carpenter’s 2002 Annual Report on Form 10-K.

S.		364-Day Revolving Credit Agreement dated as of September 3, 2002 among Carpenter and certain of its subsidiaries as Borrowers with Wachovia Bank, National Association (successor to First Union National Bank), JP Morgan Chase Bank and a number of other financial institutions as lenders is incorporated herein by reference to Exhibit 10T of Carpenter’s 2002 Annual Report on Form 10-K.

T.		Receivables Purchase Agreement dated as of December 20, 2001 among CRS Funding Corp., Carpenter Technology Corporation, Market Street Funding Corporation and PNC Bank, National Association is incorporated herein by reference to Exhibit 10iii of Carpenter’s Form 10-Q for the quarter ended December 31, 2001.

E-4

U.		Purchase and Sale Agreement dated as of December 20, 2001 between Carpenter Technology Corporation and CRS Funding Corp is incorporated herein by reference to Exhibit 10iv of Carpenter’s Form 10-Q for the quarter ended December 31, 2001.

V.		First Amendment to Receivables Purchase Agreement dated March 19, 2003 among CRS Funding Corp, Carpenter Technology Corporation, Market Street Funding Corporation and PNC Bank, National Association is attached as an Exhibit to this Annual Report on Form 10-K.

12.		Computations of Ratios of Earnings to Fixed Charges (unaudited)

21.		Subsidiaries of the Registrant

23.		Consent of Experts and Counsel
		Consent of Independent Accountants

24.		Powers of Attorney
		Powers of Attorney in favor of Terrence E. Geremski or David A. Christiansen

31.		Rule 13a-14(a)/15d-14(a) Certifications
		A. Certification of Robert J. Torcolini
		B. Certification of Terrence E. Geremski

32.		Section 1350 Certifications
		Certifications of Robert J. Torcolini and Terrence E. Geremski

99.		Additional Exhibits
		Agreement to Furnish Debt Instruments

E-5

Exhibit 4I

FIRST SUPPLEMENTAL INDENTURE

This FIRST SUPPLEMENTAL INDENTURE, dated as of May 22, 2003 (this “Supplemental Indenture”), is entered into by and between Carpenter Technology Corporation, a corporation incorporated under the laws of the State of Delaware (the “Company”), and U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association, as successor trustee (the “Trustee”).

W I T N E S S E T H:

WHEREAS, the Company and the Trustee are parties to an Indenture, dated as of January 12, 1994 (the “Indenture”), relating to the issuance from time to time by the Company of its Securities on terms to be specified at the time of issuance;

WHEREAS, the Company proposes to create under the Indenture a new series of Securities;

WHEREAS, Section 3.01 of the Indenture provides that at or prior to the issuance of any Securities within a series, the terms of the series of Securities shall be established by a supplemental indenture or under resolutions of the Board of Directors of the Company; and

WHEREAS, all conditions necessary to authorize the execution and delivery of this Supplemental Indenture and to make it a valid and binding agreement of the Company have been done or performed.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree as follows:

ARTICLE ONE

RELATION TO INDENTURE; DEFINITIONS; RULES OF CONSTRUCTION

SECTION 1.1 Relation to Indenture . This Supplemental Indenture constitutes an integral part of the Indenture.

SECTION 1.2 Definitions . For all purposes of this Supplemental Indenture, the following terms shall have the respective meanings set forth in this Section.

“Comparable Treasury Issue” means the United States Treasury security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes.

“Comparable Treasury Price” means, with respect to any Redemption Date, (i) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations; (ii) if the trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such quotations; or (iii) if only one Reference Treasury Dealer Quotation is received, such quotation.

“Reference Treasury Dealer” means (i) Wachovia Securities, Inc. (or its respective affiliates which are Primary Treasury Dealers), and its successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company may substitute another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer(s) selected by the Company.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third business day preceding such Redemption Date.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

SECTION 1.3 Rules of Construction . For all purposes of this Supplemental Indenture:

(a) capitalized terms used herein without definition shall have the meanings specified in the Indenture;

(b) all references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture;

(c) the terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Supplemental Indenture; and

(d) in the event of a conflict with the definition of terms in the Indenture, the definitions in this Supplemental Indenture shall control.

ARTICLE TWO

THE SECURITIES

There is hereby established a series of Securities pursuant to the Indenture with the following terms:

SECTION 2.1 Title of the Securities . The series of Securities shall be designated the 6.625% Senior Notes due 2013 (the “Notes”).

2 SECTION 2.2 Aggregate Principal Amount . The Notes will be initially issued in an aggregate principal amount of $100,000,000 (not including the Notes authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 304, 305 or 306 of the Indenture); provided that the Company may, without the consent of Holders of the Notes, issue additional Notes having the same ranking and the same interest rate, maturity and other terms as the Notes, which additional Notes will constitute a single series of debt securities under the Indenture.

SECTION 2.3 Maturity Date . The date on which the principal of the Notes is payable is May 15, 2013, subject to the provisions of the Indenture relating to acceleration.

SECTION 2.4 Ranking . The Notes will be unsecured senior debt of the Company and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company.

SECTION 2.5 Interest . The Notes will bear interest from May 22, 2003, or from the most recent interest payment date to which interest has been paid or duly provided for, at a rate of 6.625% per annum, payable semi-annually on May 15 and November 15 of each year, commencing November 15, 2003. The Company will pay interest to the person in whose name a Note is registered at the close of business on the May 1 or November 1 next preceding the interest payment date. The Company will compute interest on the basis of a 360-day year consisting of twelve 30-day months.

SECTION 2.6 Place of Payment for Principal and Interest . The principal of and interest on the Notes will be payable at the office or agency of the Company maintained for that purpose, pursuant to the Indenture, in the City of New York, which shall be initially the corporate trust office of the Trustee; provided, however, that at the option of the Company, such payment of interest may be made by check mailed to the person entitled thereto as provided in the Indenture.

SECTION 2.7 Issuance Price . The purchase price to be paid to the Company for the sale of the Notes pursuant to the terms of the Purchase Agreement, dated as of May 19, 2003, between the Company and Wachovia Securities, Inc., as Initial Purchaser, shall be 98.455% of the principal amount of the Notes and the initial offering price to the public of the Notes shall be 99.944% of the principal amount of the Notes.

SECTION 2.8 Defeasance . The Notes shall be subject to legal defeasance under Section 1302 of the Indenture and to covenant defeasance under Section 1303 of the Indenture.

SECTION 2.9 Form and Dating .

(a) The Notes shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication.

(b) The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Supplemental Indenture, and the Company and the Trustee, by their execution and delivery of this Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Notes conflicts

3 with the express provisions of this Supplemental Indenture, the provisions of this Supplemental Indenture shall govern and be controlling.

(c) The Notes will be issued in the form of a fully-registered global security (the “Global Security”). The Depository Trust Company shall serve as the depository (the “Depository”) for the Global Security. The Global Security will be deposited with, or on behalf of, the Depositary and registered in the name of the Depositary or its nominee. Except as set forth in the Offering Memorandum dated May 19, 2003, the Global Security may be transferred, in whole and not in part, only by the Depositary to its nominee or by its nominee to such Depositary or another nominee of the Depositary or by the Depositary or its nominee to a successor of the Depositary or a nominee of such successor. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 calendar days, the Company will issue Notes in certificated form in exchange for the Global Security. In addition, the Company may at any time determine not to have the Notes represented by a Global Security, and, in such event, will issue Notes in certificated form in exchange for the Global Security. In either instance, an owner of an interest in the Global Security would be entitled to physical delivery of such Notes in certificated form. Notes so issued in certificated form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only.

SECTION 2.10 Optional Redemption . (a) The Notes will be redeemable, in whole or in part, at any time at the option of the Company at a redemption price (the “Redemption Price”) equal to the greater of (i) 100% of the principal amount of the Notes being redeemed; and (ii) as determined by a Reference Treasury Dealer, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed from the redemption date to the maturity date discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus 30 basis points.

(b) Notice of any redemption will be mailed at least 30 days but not more that 60 days before the Redemption Date to each holder of the Notes to be redeemed. Once notice of redemption is mailed, the Notes called for redemption will become due and payable on the redemption date and at the applicable redemption price, plus accrued and unpaid interest to the redemption date. Unless the Company defaults in payment of the Redemption Price, interest will cease to accrue on the Notes or portions thereof called for redemption on and after the Redemption Date.

SECTION 2.11 Execution and Authentication of Notes . The Notes shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents and attested by its Treasurer, one of its Assistant Treasurers, its Secretary, or one of its Assistant Secretaries. The signature of any of these officers on the Notes may be manual or facsimile. At any time and from time to time after the execution and delivery of this First Supplemental Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with an order for the authentication and delivery of such Notes, and the Trustee in accordance with such order shall authenticate and deliver such Notes. Such order may be signed by the Company’s Treasurer, one of its Assistant Treasurers, its Secretary, or one of its Assistant Secretaries

4 ARTICLE THREE

MISCELLANEOUS PROVISIONS

SECTION 3.1 Ratification . The Indenture, as supplemented and amended by this Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.

SECTION 3.2 Governing Law . This Supplemental Indenture shall be governed by, and construed and enforced in accordance with, the laws of the jurisdiction which govern the Indenture and its construction.

SECTION 3.3 Counterparts and Method of Execution . This Supplemental Indenture may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all parties have not signed the same counterpart.

SECTION 3.4 Section Titles . Section titles are for descriptive purposes only and shall not control or alter the meaning of this Supplemental Indenture as set forth in the text.

IN WITNESS WHEREOF, Carpenter Technology Corporation and U.S. Bank Trust National Association have caused this Supplemental Indenture to be duly executed, all as of the day and year first above written.

		Carpenter Technology Corporation


		By:	/s/ Terrence Geremski
		Name:	Terrence Geremski
		Title:	Senior Vice President and Chief Financial Officer


		By:	/s/ Jaime Vasquez
		Name:	Jaime Vasquez
		Title:	Vice President and Treasurer

		U.S. Bank Trust National Association, as Trustee


		By:	/s/ Adam Berman
		Name:	Adam Berman
		Title:	Trust Officer

Exhibit 4J

CARPENTER TECHNOLOGY CORPORATION

$100,000,000 6.625 % Senior Notes Due 2013

EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

May 22, 2003

Wachovia Securities, Inc.
301 South College Street
Charlotte, NC 28288

Ladies and Gentlemen:

Carpenter Technology Corporation, a Delaware corporation (the “ Company ”), has agreed to issue and sell $100,000,000 aggregate principal amount of its 6.625 % Senior Notes Due 2013 (“ Securities ”) to Wachovia Securities, Inc. (the “ Initial Purchaser ”), upon the terms and subject to the conditions set forth in the Purchase Agreement dated as of May 19, 2003 between the Company and the Initial Purchaser (the “ Purchase Agreement ”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement.

In satisfaction of a condition to the obligations of the Initial Purchaser under the Purchase Agreement, the Company agrees with the Initial Purchaser, for the benefit of the holders (including the Initial Purchaser) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the “ Holders ”), as set forth in this Agreement.

1. Registered Exchange Offer . The Company shall (i) prepare and, not later than September 30, 2003, file with the Commission a registration statement (the “ Exchange Offer Registration Statement ”) on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Securities (the “ Registered Exchange Offer ”) to issue and deliver to such Holders, in exchange for the Securities, a like aggregate principal amount of debt securities of the Company (the “ Exchange Securities ”) that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use its reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 150 days after the date of original issuance of the Securities (the “Issue Date”) and the Registered Exchange Offer to be consummated no later than 180 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the “ Exchange Offer Registration Period ”). The Exchange Securities will be issued under the Indenture or an indenture (the “ Exchange Securities Indenture ”) between the Company and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchaser, as trustee (the “ Exchange Securities Trustee ”), such indenture to be identical in all

material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above).

Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder’s business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Initial Purchaser and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an “ Exchanging Dealer ”), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer.

If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the written request of any such Holder, simultaneously with the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the “ Private Exchange ”), a like aggregate principal amount of debt securities of the Company (the “ Private Exchange Securities ”) that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities.

In connection with the Registered Exchange Offer, the Company shall:

(a) mail or cause to be mailed to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders;

(c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York;

(d) permit Holders to withdraw tendered Securities at any time prior to 5:00 P.M., New York City time, on the last business day on which the Registered Exchange Offer shall remain open, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing its election to have such Securities exchanged; and

(e) otherwise comply in all material respects with all laws that are applicable to the Registered Exchange Offer.

As soon as is reasonably practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall:

(a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;

(b) deliver, or cause to be delivered, to the Trustee for cancellation all Securities so accepted for exchange; and

(c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange.

The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all Exchanging Dealers and broker-dealers subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Registered Exchange Offer.

Notwithstanding the provisions of the foregoing paragraph with respect to the period of time during which the Company shall use its reasonable best efforts to enable the use of the prospectus contained in the Exchange Offer Registration Statement, but subject to Section 3(b), the Company may issue a notice that the Exchange Offer Registration Statement is unusable pending the announcement of a material corporate or business transaction and may issue any notice suspending the use of the Exchange Offer Registration Statement that the Company reasonably believes is required under applicable securities laws to be issued.

The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter.

Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date.

Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) it is not acting on behalf of any person who could not truthfully make the foregoing representations and (v) it shall have made such other representations as may be reasonably necessary under applicable Commission rules, regulations or interpretations to render the use of Form S-4 or another appropriate form under the Securities Act available or for the Exchange Offer Registration Statement to be declared effective.

Notwithstanding any other provisions hereof, the Company will use its reasonable best efforts to ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

2. Shelf Registration . If (i) because of any change in law or applicable interpretations thereof by the Commission’s staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 180 days after the Issue Date, or (iii) any Securities tendered pursuant to the Registered Exchange Offer are not exchanged for Exchange Securities within 10 days of being accepted in the Registered Exchange Offer; or (iv) the Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (v) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (vi) any Holder that

participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, then the following provisions shall apply:

(a) The Company shall (i) use its reasonable best efforts to file as promptly as practicable (but in no event more than 45 days after so required or requested pursuant to this Section 2) with the Commission (the “ Shelf Filing Date ”), and (ii) thereafter use its reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a “ Shelf Registration Statement ” and, together with any Exchange Offer Registration Statement, a “ Registration Statement ”). If, after the Company has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 1 above, the Company is required to file and make effective a Shelf Registration Statement solely because the Registered Exchange Offer is not permitted for reasons set forth under clause (i) above, then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (a)(i) of the immediately preceding sentence.

(b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the “ Shelf Registration Period ”). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if the Company voluntarily takes any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is permitted hereunder or the Company reasonably believes such action is required by applicable law. An Exchange Offer Registration Statement pursuant to Section 1 hereof or a Shelf Registration Statement pursuant to Section 2 hereof shall not be deemed to have become effective unless it has been declared effective by the Commission; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other applicable governmental agency or court, such Registration Statement shall be deemed not have been effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

(c) Notwithstanding the provisions of Section 2(b), but subject to Section 3(b), the Company may issue a notice that the Shelf Registration Statement is unusable pending the announcement of a material corporate or business transaction and may issue any notice suspending the use of the Shelf Registration Statement that the Company reasonably believes is required under applicable securities laws to be issued.

(d) Notwithstanding any other provisions hereof, the Company will use its reasonable best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the “ Holders’ Information ”)) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders’ Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(e) In the absence of the events described in clauses (i) through (vi) of the first paragraph of this Section 2, the Company shall not be permitted to discharge its obligations hereunder by means of the filing of a Shelf Registration Statement.

3. Additional Interest . (a) The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company fails to fulfill its obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to September 30, 2003 or the Shelf Registration Statement is not filed with the Commission on or before the Shelf Filing Date, (ii) the Exchange Offer Registration Statement is not declared effective within 150 days after the Issue Date or the Shelf Registration Statement is not declared effective within 90 days of the Shelf Filing Date, (iii) the Registered Exchange Offer is not consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 90 days after the Shelf Filing Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a “ Registration Default ”), the Company will be obligated to pay additional cash interest to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to 0.25% per annum of the principal amount of Transfer Restricted Securities held by such Holder during the first 90-day period following such Registration Default, increasing by an additional 0.25% per annum during each subsequent 90-day period up to a maximum of 1.00% per annum, until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective, (iii) the Registered Exchange Offer is consummated, or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of additional interest will cease. Notwithstanding any other provisions hereof, the Company shall in no event be required to pay additional interest hereunder for more than one Registration Default at any given time. As used herein, the term “ Transfer Restricted Securities ” means (i) each Security until the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii)

each Security or Private Exchange Security until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Security or Private Exchange Security until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3, the Company shall not be required to pay additional interest to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n).

(b) If the Company issues a notice that the Exchange Offer Registration Statement is unusable or has been suspended pursuant to the seventh paragraph of Section 1 or the Shelf Registration Statement is unusable or has been suspended pursuant to Section 2(c), as the case may be, and the number of days in any consecutive twelve-month period for which all such notices are issued and effective exceeds 30 days in the aggregate, then the Company will be obligated to pay additional interest to each Holder of Transfer Restricted Securities, with respect to the first 90-day period following such 30 days, in an amount equal to 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that additional interest continues to accrue, provided that the rate at which such additional interest accrues may in no event exceed 1.00% per annum) of the principal amount in respect of the Securities constituting Transfer Restricted Securities. Upon declaration by the Company that the Exchange Offer Registration Statement or Shelf Registration Statement, as the case may be, is usable after the period of time described in the preceding sentence, the amount of accrual shall cease; provided, however, that if after any such cessation of the accrual of additional interest the Exchange Offer Registration Statement or Shelf Registration Statement again ceases to be usable beyond the period permitted above, additional interest will again accrue pursuant to the foregoing provisions.

(c) The Company shall notify the Trustee and the Paying Agent under the Indenture promptly upon the happening of each and every Registration Default. The Company shall pay the additional interest due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the additional interest then due. The additional interest due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay additional interest shall be deemed to accrue from and including the date of the applicable Registration Default.

(d) The parties hereto agree that the additional interest provided for in this Section 3 constitutes a reasonable estimate of and is intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer

Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement.

4. Registration Procedures . In connection with any Registration Statement, the following provisions shall apply:

(a) The Company shall (i) furnish to the Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchaser may reasonably propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested in writing by the Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement.

(b) The Company shall advise the Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

(i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information;

(iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose;

(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(c) The Company will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement.

(d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

(e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto.

(f) The Company will furnish to the Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

(g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to the Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as the Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by the Initial Purchaser any such Exchanging Dealer or other persons, as applicable, as aforesaid.

(h) Prior to the effective date of any Registration Statement, the Company will use its reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange

Securities covered by such Registration Statement; provided that the Company will not be required to register or qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject.

(i) The Company will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement.

(j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company is required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(k) Not later than the effective date of the applicable Registration Statement, the Company will obtain CUSIP numbers, ISINs and common codes for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company.

(l) The Company will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period.

(m) The Company will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner.

(n) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such

Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request.

(o) Each Holder of Transfer Restricted Securities agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to the seventh paragraph of Section 1, Section 2(c) or Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder’s receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the “ Advice ”) by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under the seventh paragraph of Section 1, Section 2(c) or Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the “ Effectiveness Period ”), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required).

(p) In the case of a Shelf Registration Statement, the Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement.

(q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an “ Inspector ”) in connection with such Shelf Registration Statement.

(r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all

customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

5. Registration Expenses . The Company will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchaser and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the “ Special Counsel ”) acting for the Initial Purchaser or Holders in connection therewith.

6. Indemnification . (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by the Initial Purchaser or Exchanging Dealer, as applicable, the Company shall indemnify and hold harmless each Holder (including, without limitation, the Initial Purchaser or any such Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders’ Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private

Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).

(b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders’ Information furnished to the Company, and shall reimburse the Company promptly upon demand for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement.

(c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the

indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement as to an admission of fault, culpability or failure to act by or on behalf of any indemnified party.

7. Contribution . If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the

relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company as set forth in the table on the cover of the Offering Memorandum, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Securities, Exchange Securities or Private Exchange Securities, on the other. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or information supplied by the Company on the one hand or to any Holders’ Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

8. Rules 144 and 144A . For so long as any Transfer Restricted Securities remain outstanding, the Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such Holder’s securities pursuant to Rules 144 and 144A under the Securities Act. The Company covenants that it will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)) or any similar rules or regulations hereafter adopted by the Commission. Upon the written request of any Holder of Transfer Restricted Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

9. Underwritten Registrations . If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

10. Amendments and Waivers . The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement.

11. Notices . All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier or air courier guaranteeing next-day delivery:

(1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to the Initial Purchaser;

(2) if to the Initial Purchaser, initially at its address set forth in the Purchase Agreement; and

(3) if to the Company, initially at the address of the Company set forth in the Purchase Agreement.

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient’s telecopier machine, if sent by telecopier.

12. Successors And Assigns . This Agreement shall be binding upon the Company and its successors and assigns. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such transferee shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, and such transferee shall be entitled to receive the benefits hereof.

13. Counterparts . This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

14. Definition of Terms . For purposes of this Agreement, (a) the term “business day” means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term “subsidiary” has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities Act.

15. Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

16. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

17. Remedies . In the event of a breach by the Company or by any Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company of its obligations under Sections 1 or 2 hereof for which additional interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

18. No Inconsistent Agreements . The Company represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement.

19. No Piggyback on Registrations . Neither the Company nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities.

20. Severability . The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

21. Third Party Beneficiary . The Holders shall be third party beneficiaries to the agreements made hereunder between the Company on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.

[Signature page follows]

Please confirm that the foregoing correctly sets forth the agreement between the Company and the Initial Purchaser.

	Very truly yours,

	CARPENTER TECHNOLOGY CORPORATION

	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: VP/Treasurer

Accepted:

/s/ WACHOVIA SECURITIES, INC.

ANNEX A

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

ANNEX B

Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See “Plan of Distribution”.

ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 20 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.

The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

ANNEX D

o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:
Address:

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

Exhibit 4K

FORM OF GLOBAL SECURITY

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE CITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”) TO CARPENTER TECHNOLOGY CORPORATION (THE “COMPANY”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER PERSON), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH EITHER THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF

RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE COMPANY AND THE TRUSTEE PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

REGISTERED NO.	CUSIP NO.:

		ISIN NO.:

PRINCIPAL AMOUNT: One Hundred Million Dollars ($100,000,000)

CARPENTER TECHNOLOGY CORPORATION

6.625% Senior Note Due 2013

ORIGINAL ISSUE PRICE: 99.944%

ORIGINAL ISSUE DATE: May 22, 2003

INTEREST RATE: 6.625%

STATED MATURITY: May 15, 2013

INTEREST PAYMENT DATES: May 15 and November 15, commencing November 15, 2003

REGULAR RECORD DATES: May 1 and November 1

OTHER PROVISIONS: This Note is redeemable, in whole or in part, at the option of the Company prior to Stated Maturity at a Redemption Price equal to the greater of the following amounts:

• 100% of the principal amount of the Notes being redeemed on the Redemption Date; or

• the sum of the present values of the remaining scheduled payments of principal of and interest on the Notes being redeemed on that Redemption Date (not including any portion of any payments of interest accrued to the Redemption Date) discounted to the Redemption Date on a semiannual basis at the Treasury Rate (as defined below), as determined by the Reference Treasury Dealer (as defined below),

plus 30 basis points, plus, in each case, accrued and unpaid interest on the Notes to the Redemption Date.

Notwithstanding the foregoing, installments of interest on Notes that are due and payable on Interest Payment Dates falling on or prior to a Redemption Date will be payable on the Interest Payment Date to the Holders as of the close of business on the relevant Record Date. The Redemption Price will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

This Note is not repayable at the option of the Holder prior to Stated Maturity.

Exhibit 10O

EXECUTION COPY

SECOND AMENDMENT dated as of August 21, 2003 (this “ Second Amendment ”) to the Five-Year Credit Agreement dated as of November 20, 2001 (as amended through the date hereof, the “ Credit Agreement ”) among CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“ Carpenter ”), CARPENTER TECHNOLOGY (UK) LIMITED, a company organized and existing under the laws of England and Wales (“ Carpenter UK ”), CERTECH INTERNATIONAL LIMITED, a company organized and existing under the laws of England and Wales (“ Certech ”), CARPENTER POWDER PRODUCTS AB, a company organized and existing under the laws of Sweden (“ Carpenter Powder ”), and CARPENTER TECHNOLOGY (EUROPE) S.A., a company organized and existing under the laws of Belgium (“ Carpenter Belgium ”), the banks and other financial institutions from time to time party hereto, and WACHOVIA BANK, NATIONAL ASSOCIATION (successor to First Union National Bank), as Administrative Agent, Issuing Lender and Swingline Lender.

The Borrowers and the Guarantor have requested the Lenders, the Swingline Lender and the Issuing Lender to make certain changes to the Credit Agreement. The parties hereto have agreed, subject to the terms and conditions hereof, to amend the Credit Agreement as provided herein.

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement (the Credit Agreement, as amended by, and together with, this Second Amendment, and as hereinafter amended, modified, extended or restated from time to time, being called the “ Amended Agreement ”).

Accordingly, the parties hereby agree as follows:

SECTION 1. Amendment to Article II of the Credit Agreement . Article II of the Credit Agreement is amended by adding the following section thereto:

“ 2.17 Increase in Commitments .

(a) Provided there exists no Default, upon not less than 15 Business Days prior written notice to the Administrative Agent, or, solely with respect to the initial increase in Commitments requested by Carpenter in accordance with this Section (the “ Initial Increase ”), such prior written notice as is acceptable to the Administrative Agent, Carpenter may, from time to time, request an increase in the Commitments in minimum increments of not less than $10,000,000 and not in excess of $75,000,000 in the aggregate. At the time of sending such notice, Carpenter (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days, or, solely with respect to the Initial Increase, such number of days as is acceptable to the Administrative Agent, from the date of delivery of such notice to the Lenders). Each Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its pro rata share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment. The Administrative Agent shall notify Carpenter and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a

requested increase, Carpenter may also invite additional Eligible Assignees, such Eligible Assignees to be acceptable to the Administrative Agent, to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

(b) If the Commitments are increased in accordance with this Section, the Administrative Agent and Carpenter shall determine the effective date (the “ Increase Effective Date ”), and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrowers and the Lenders of the final allocation of such increase and the Increase Effective Date. As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of the Guarantor and each Borrower dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Person approving or consenting to such increase, and (ii) in the case of the Borrowers, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.17 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 , and (B) no Default exists. The Borrowers shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05 ) to the extent necessary to keep the outstanding Committed Loans ratable with any revised pro rata shares arising from any nonratable increase in the Commitments under this Section.

SECTION 2. Amendment to Article V of the Credit Agreement . Article V of the Credit Agreement is hereby amended by adding the following section thereto:

“ 5.17 Tax Shelter Regulations . The Borrowers do not intend to treat the Loans and/or Letters of Credit as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Borrowers determine to take any action inconsistent with such intention, they will promptly notify the Administrative Agent thereof. If any Borrower so notifies the Administrative Agent, the Borrower acknowledges that one or more of the Lenders may treat its Committed Loans, Competitive Bid Loans and/or its interest in Swing Line Loans and/or Letters of Credit as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation.”

SECTION 3. Amendment to Section 6.01 of the Credit Agreement . Section 6.01 of the Credit Agreement is hereby amended by adding the following clause thereto and re-designating current clause (g) as clause (h):

“(g) Tax Information . Promptly after any Borrower has notified the Administrative Agent of any intention by such Borrower to treat the Loans and/or Letters

of Credit as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor form.”

SECTION 4. Amendment to Section 11.07 . Section 11.07 of the Credit Agreement is hereby amended by adding the following as the ultimate sentence thereof:

“Notwithstanding anything herein to the contrary, “Information” shall not include, and the Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans, Letters of Credit and transactions contemplated hereby.”

SECTION 5. Representations and Warranties . The Borrower hereby represents and warrants to each Lender and the Administrative Agent, as follows:

(a) The representations and warranties set forth in Article V of the Amended Agreement, and in each other Loan Document, are true and correct in all material respects on and as if made on the date hereof and on and as if made on the Second Amendment Effective Date (as hereinafter defined), except to the extent they expressly relate to an earlier date.

(b) No Default or Event of Default has occurred and is continuing.

(c) The execution, delivery and performance by the Borrowers and the Guarantor of this Second Amendment have been duly authorized by the Borrowers and the Guarantor.

(d) This Second Amendment constitutes the legal, valid and binding obligation of the Borrowers and the Guarantor, enforceable against them in accordance with its terms, except to the extent limited by (a) bankruptcy, insolvency, fraudulent conveyance or reorganization laws or by other laws relating to or affecting the enforceability of creditors’ rights generally and by general equitable principles which may limit the right to obtain equitable remedies regardless of whether enforcement is considered in a proceeding of law or equity or (b) any applicable public policy on enforceability of provisions relating to contribution and indemnification.

(e) The execution, delivery and performance by the Borrowers and the Guarantor of this Second Amendment does not (i) violate any provision of law or regulation, or any decree, order, writ or judgment applicable to the Borrowers or the Guarantor or any of their respective properties, (ii) violate any provision of the Borrowers’ or the Guarantor’s Organization Documents, or (iii) result in the breach of or constitute a default under any indenture or other agreement or instrument to which any Borrower or the Guarantor is a party.

SECTION 6. Effectiveness . This Second Amendment shall become effective only upon (i) receipt by the Administrative Agent of duly executed counterparts of this Second Amendment which, when taken together, bear the signatures of the Borrowers, the Guarantor, the Required Lenders and the Administrative Agent and (ii) payment of all fees and expenses required

pursuant to Section 8 of this Second Amendment (the first date upon which each such condition has been satisfied being herein called the “ Second Amendment Effective Date ”).

SECTION 7. APPLICABLE LAW . THIS SECOND AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.

SECTION 8. Fees and Expenses . Carpenter shall pay all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution, delivery and enforcement of this Second Amendment, including, but not limited to, the reasonable fees and disbursements of Mayer, Brown, Rowe & Maw, counsel to the Administrative Agent.

SECTION 9. Counterparts . This Second Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of a signature page to this Second Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Second Amendment.

SECTION 10. Loan Documents . Except as expressly set forth herein, the amendments provided herein shall not by implication or otherwise limit, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Amended Agreement or any other Loan Document, nor shall they constitute a waiver of any Event of Default, nor shall they alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Amended Agreement or any other Loan Document. Each of the amendments provided herein shall apply and be effective only with respect to the provisions of the Amended Agreement specifically referred to by such amendments. Except as expressly amended herein, the Amended Agreement and the other Loan Documents shall continue in full force and effect in accordance with the provisions thereof. As used in the Amended Agreement, the terms “Agreement”, “herein”, “hereinafter”, “hereunder”, “hereto” and words of similar import shall mean, from and after the date hereof, the Amended Agreement.

SECTION 11. Reaffirmation of Guaranty . By its signature below, the Guarantor hereby acknowledges and consents to this Second Amendment and the Credit Agreement as amended hereby, and the terms and provisions hereof. The Guarantor hereby reaffirms the covenants and agreements contained in Article X of the Credit Agreement, including as such covenants and agreements may be modified by this Second Amendment and the transactions contemplated hereby. The Guarantor hereby confirms that each Loan Document to which it is a party is and shall continue to be in full force and effect and the same are hereby ratified and confirmed in all respects, except that upon the effectiveness of this Second Amendment, all references in such Loan Documents to the “Credit Agreement”, “Article X”, “Guaranteed Obligations”, “Loan Documents”, “thereunder”, “thereof”, or words of like import shall mean the Credit Agreement, Article X, the Guaranteed Obligations and the Loan Documents, as the case may be, as in effect and as modified by this Second Amendment.

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed by duly authorized officers, all as of the date first above written.

	CARPENTER TECHNOLOGY CORPORATION, as a Borrower and as Guarantor


	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: Vice President and Treasurer

	CARPENTER TECHNOLOGY (UK) LIMITED, as a Borrower


	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: Attorney-in-Fact

	CERTECH INTERNATIONAL LIMITED, as a Borrower


	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: Attorney-in-Fact

	CARPENTER TECHNOLOGY (EUROPE) S.A., as a Borrower


	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: Attorney-in-Fact

	CARPENTER POWDER PRODUCTS AB, as a Borrower


	By:	/s/ Jaime Vasquez
		Name: Jaime Vasquez
		Title: Attorney-in-Fact

S-1

	WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent


	By:	/s/ Jorge A. Gonzalez
		Name: Jorge A. Gonzalez
		Title: Managing Director

S-2

	WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender


	By:	/s/ Jorge A. Gonzalez
		Name: Jorge A. Gonzalez
		Title: Managing Director

S-3

	JPMORGAN CHASE BANK, as Lender


	By:	/s/ Peter S. Predun
		Name: Peter S. Predun
		Title: Vice President

S-4

	MELLON BANK, N.A., as Lender


	By:	/s/ William M. Feathers
		Name: William M. Feathers
		Title: Vice President

S-5

	PNC BANK, NATIONAL ASSOCIATION, as Lender


	By:	/s/ David B. Gookin
		Name: David B. Gookin
		Title: Managing Director

S-6

	CREDIT SUISSE FIRST BOSTON, as Lender


	By:	/s/ SoVonna Day-Goins
		Name: SoVonna Day-Goins
		Title: Vice President


	By:	/s/ Doreen Welch
		Name: Doreen Welch
		Title: Associate

S-7

	ALLFIRST BANK, as Lender


	By:	/s/ Jennifer L. Uricheck
		Name: Jennifer L. Uricheck
		Title: Assistant Vice President

S-8

Exhibit 10V

[CRS Funding Corporation]

FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

This FIRST AMENDMENT (this “ Amendment ”), dated as of March 19, 2003, is among CRS FUNDING CORPORATION, a Delaware corporation, as seller (the “ Seller ”), CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“ Carpenter ”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “ Servicer ”), MARKET STREET FUNDING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the “ Issuer ”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association (“ PNC ”), as administrator (in such capacity, together with its successors and assigns in such capacity, the “ Administrator ”).

RECITALS

1. The Seller, the Servicer, the Issuer and the Administrator are parties to the Receivables Purchase Agreement, dated as of December 20, 2001 (as amended, supplemented or otherwise modified from time to time, the “ Agreement ”).

2. The Seller, the Servicer, the Issuer and the Administrator desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. Amendments to the Agreement .

(a) The definition of “ Purchase Limit ” set forth in Exhibit I to the Agreement is hereby amended by replacing the amount “$75,000,000” with the amount “$50,000,000”.

SECTION 2. Conditions to Effectiveness .

This Amendment shall become effective as of the date hereof subject to the condition precedent that the Administrator shall have received the following, each duly executed and dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:

(a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the parties hereto; and

(b) such other documents and instruments as the Administrator may reasonably request.

SECTION 3. Effect of Amendment; Ratification . Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all respects, and all of its provisions shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to “the Receivables Purchase Agreement”, “this Agreement”, “hereof”, “herein”, or words of similar effect, in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall not be deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth herein.

SECTION 4. Counterparts . This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

SECTION 5. Governing Law . This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to any otherwise applicable conflict of laws principles.

SECTION 6. Section Headings . The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

[SIGNATURE PAGES TO FOLLOW]

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

CRS FUNDING CORPORATION


By:			/s/ Jaime Vasquez
Name:					Jaime Vasquez
Title:					VP and Treasurer


CARPENTER TECHNOLOGY CORPORATION, as Servicer


By:		/s/ Jaime Vasquez
Name:					Jaime Vasquez
Title:					VP and Treasurer


MARKET STREET FUNDING CORPORATION


By:			/s/ Evelyn Echevarria
Name:				EVELYN ECHEVARRIA
Title:				VICE PRESIDENT


PNC BANK, NATIONAL ASSOCIATION, as Administrator


By:	/s/ John T. Smathers
	Name:					John T. Smathers
	Title:					Vice President

S-1

Exhibit 12

Carpenter Technology Corporation

Computations of Ratios of Earnings to Fixed Charges — unaudited

Five years ended June 30, 2003

(dollars in millions)

	2003			2002			2001			2000			1999
Fixed charges:
Interest costs(a)	$	31.1		$	34.9		$	41.1		$	39.4		$	34.8

Interest component of non-capitalized lease rental expense(b)	3.8			4.0			4.2			3.5			3.2
Total fixed charges	$	34.9		$	38.9		$	45.3		$	42.9		$	38.0

Earnings as defined:
Income (loss) before income taxes and cumulative effect of accounting change	$	(22.9	)	$	(13.3	)	$	58.4		$	79.9		$	55.8

Less income from less-than-fifty- percent-owned entities, and add loss on sale of partial interest in less-than-fifty-percent owned entities	(0.6		)	(0.4		)	(0.3		)	(1.1		)	—

Fixed charges less interest capitalized	34.8			38.6			44.5			36.9			32.5
Amortization of capitalized interest	2.6			2.6			2.5			2.8			2.0
Earnings as defined	$	13.9		$	27.5		$	105.1		$	118.5		$	90.3
Ratio of earnings to fixed charges	0.4x			0.7x			2.3x			2.8x			2.4x

(a) Includes interest capitalized relating to significant construction projects, and amortization of debt discount and debt issue costs.

(b) One-third of rental expense which approximates the interest component of non-capitalized leases.

Exhibit 21

SUBSIDIARY LIST

Doing Business As		State of Incorporation
Talley Industries, Inc.		Delaware
Dynamet Incorporated		Delaware
Carpenter Advanced Ceramics, Inc.		Delaware
Carpenter Special Products Corporation		Delaware
Certech, Inc.		Delaware
CRS Holdings Inc.		Delaware

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 and S-3 (File Nos. 2-83780, 2-81019, 2-60469, 33-42536, 33-65077, 33-54045, 333-40991, 333-43017, 333-55667, 333-55669 and 333-57774) of Carpenter Technology Corporation and its subsidiaries of our reports dated September 3, 2003, relating to the consolidated financial statements and financial statement schedule, which appear in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 12, 2003

Exhibit 24

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint Terrence E. Geremski and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2003, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ J. Michael Fitzpatrick
	J. Michael Fitzpatrick
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Marillyn A. Hewson
	Marillyn A. Hewson
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ William J. Hudson, Jr.
	William J. Hudson, Jr.
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint Terrence E. Geremski and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form l0-K, for the year ended June 30, 2003, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29 ^st day of August, 2003.

	/s/ Robert J. Lawless
	Robert J. Lawless
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Robert N. Pokelwaldt
	Robert N. Pokelwaldt
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Gregory A. Pratt
	Gregory A. Pratt
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Kathryn C. Turner
	Kathryn C. Turner
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Stephen M. Ward, Jr.
	Stephen M. Ward, Jr.
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in her capacity as a Director of Carpenter Technology Corporation, does hereby appoint Terrence E. Geremski and David A. Christiansen or either of them her true and lawful attorneys to execute in her name, place and stead, in her capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2003, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Kenneth L. Wolfe
	Kenneth L. Wolfe
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Robert J. Torcolini
	Robert J. Torcolini
	Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21 ^st day of August, 2003.

	/s/ Carl G. Anderson, Jr.
	Carl G. Anderson, Jr.
	Director

Exhibit 31A

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Terrence E. Geremski, Senior Vice President - Finance & Chief Financial Officer of Carpenter Technology Corporation (the “Registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of the Registrant;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(c) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: September 12, 2003	/s/Terrence E. Geremski
	Terrence E. Geremski, Senior Vice President -
	Finance & Chief Financial Officer

Exhibit 31B

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert J. Torcolini, Chairman, President and Chief Executive Officer of Carpenter Technology Corporation (the “Registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of the Registrant;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: September 12, 2003	/s/Robert J. Torcolini
	Robert J. Torcolini, Chairman, President and
	Chief Executive Officer

Exhibit 32

CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the 10-K Report of Carpenter Technology Corporation (the “Issuer”) on Form 10-K for the year ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Robert J. Torcolini, Chairman, President and Chief Executive Officer of the Issuer, and I, Terrence E. Geremski, Senior Vice President-Finance and Chief Financial Officer of the Issuer, each hereby certify, pursuant to 18 U.S.C. ' 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Periodic Report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and that information contained in the Periodic Report fairly presents, in all material respects, the financial condition and result of operations of the Issuer.

/s/Robert J. Torcolini		/s/Terrence E. Geremski
Robert J. Torcolini		Terrence E. Geremski
Chairman, Present and		Senior Vice President-Finance
Chief Executive Officer		and Chief Financial Officer

Exhibit 99

AGREEMENT TO FURNISH DEBT INSTRUMENTS

Pursuant to Instruction 3(b)(4)(iii) to Item 601 of Regulation S-K, Carpenter has not included as an Exhibit any instrument with respect to long-term debt if the total amount of debt authorized by such instrument does not exceed 10% of the total assets of Carpenter. Carpenter agrees, pursuant to this Instruction, to furnish a copy of any such instrument to the Securities and Exchange Commission upon request of the Commission.

						CARPENTER TECHNOLOGY CORPORATION


						By:	/s/ David A. Christiansen
							David A. Christiansen
							Vice President,
							General Counsel and Secretary