CARPENTER TECHNOLOGY CORP (Form: 10-K, Received: 08/24/2011 16:45:29)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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.)

P.O. Box 14662 Reading, 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:


Common Stock, $5 Par Value		New York Stock Exchange
Title of each class		Name of each exchange on which registered

Securities registered pursuant to 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes x No ¨

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. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the registrants’ voting common stock held by non-affiliates at December 31, 2010 was $1,758,969,270, based on the closing price per share of the registrant’s common stock on that date of $40.24 as reported on the New York Stock Exchange.

As of August 12, 2011, 44,166,401 shares of the registrant’s common stock were outstanding

DOCUMENTS INCORPORATED BY REFERENCE

Selected portions of the Company’s fiscal year 2011 definitive Proxy Statement are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS


			Page Number
PART I

	Item 1	Business	2 - 7
	Item 1A	Risk Factors	7 - 14
	Item 1B	Unresolved Staff Comments	14
	Item 2	Properties	14
	Item 3	Legal Proceedings	14
	Item 4	[Removed and Reserved]	14

PART II

	Item 5	Market for Registrant’s Common Equity and Related Stockholder Matters	15 - 16
	Item 6	Selected Financial Data	17
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18 - 42

	Forward-Looking Statements		42

	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	42 - 43
		Future Outlook	43
	Item 8	Financial Statements and Supplementary Data	44 - 93
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	94
	Item 9A	Controls and Procedures	94
	Item 9B	Other Information	94

PART III

	Item 10	Directors and Executive Officers of the Registrant	95 - 96
	Item 11	Executive Compensation	96
	Item 12	Security Ownership of Certain Beneficial Owners and Management	97
	Item 13	Certain Relationships, Related Transactions and Director Independence	97
	Item 14	Principal Accountant Fees and Services	97

PART IV	Item 15	Exhibits, Financial Statement Schedules	98 - 102

SIGNATURES			103 - 104

SCHEDULE II		Valuation and Qualifying Accounts	105

PART I

Item 1.

Business

(a)

General Development of Business:

Carpenter Technology Corporation, incorporated in 1904, is engaged in the manufacturing, fabrication and distribution of specialty metals. As used throughout this report, unless the context requires otherwise, the terms “Carpenter”, the “Company”, “Registrant”, “Issuer”, “we” and “our” refer to Carpenter Technology Corporation.

(b)

Financial Information About Segments:

We are organized in three reportable business segments: Advanced Metals Operations, Premium Alloys Operations, and Emerging Ventures. See Note 20 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)

General:

We develop, manufacture and distribute cast/wrought and powder metal stainless steels and special alloys including high temperature alloys, controlled expansion alloys, ultra high strength alloys, implantable alloys, tool and die steels and other specialty metals, as well as cast/wrought titanium alloys. We provide material solutions to the ever-changing needs of the aerospace, industrial, energy, medical, consumer products and automotive industries.

In June 2011 we entered into a definitive merger agreement with Latrobe Specialty Metals, Inc. (“Latrobe”) whereby we will acquire Latrobe in a transaction valued at the time at approximately $558 million. In the transaction, 8.1 million shares of Carpenter stock, subject to certain adjustments, will be issued to the current owners. We will also pay $170 million in cash to eliminate Latrobe debt at closing and reimburse certain transaction costs. The transaction is subject to customary closing conditions and regulatory approvals. Closing is expected to occur during the first half of fiscal year 2012.

In December 2010, we acquired Amega West Services LLC (“Amega West”). Amega West offers precision machined down-hole drilling tools and services that include nonmag drill collars, stabilizers, measurement while drilling (“MWD”) and logging while drilling (“LWD”) housings, subs, tool rentals, and welding and repair.

In June 2011, we acquired Oilfield Alloys Pte. Ltd. (“Oilfield Alloys”) which will become part of Amega West operations. Based in Singapore, Oilfield Alloys manufactures and distributes directional drilling equipment in the Asia-Pacific region.

On August 24, 2011, we announced that we plan to construct a new 400,000 square foot state-of-the-art manufacturing facility in response to strong customer demand for premium products primarily in the fast-growing aerospace and energy industries. We expect that the new facility will ultimately be capable of producing approximately 27,000 tons per year of additional premium product and be operational in approximately 30 months. The facility is expected to be built on one of several greenfield sites currently under consideration at a total cost of approximately $500 million. The new facility will include forge, remelting and associated finishing and testing capabilities and will play a key role in further developing our capabilities in the production of our premium products.

Reportable Segments

Our Advanced Metals Operations (“AMO”) segment includes the manufacturing and distribution of high temperature and high strength metal alloys, stainless steels, and titanium in the form of small bars and rods, wire, narrow strip and powder. Products in this segment typically go through more finishing operations, such as rolling, turning, grinding, drawing, and atomization, than products in our PAO segment (as described below). Also, sales in the AMO segment are spread across many end-use markets, including the aerospace, industrial, consumer, automotive, and medical industries. AMO products are sold under the Carpenter, Dynamet, Talley, Carpenter Powder Products and Aceros Fortuna brand names.

Our Premium Alloys Operations (“PAO”) segment includes the manufacturing and distribution of high temperature and high strength metal alloys and stainless steels in the form of ingots, billets, large bars and hollows. Also, the PAO segment includes conversion processing of metal for other specialty metals companies. A significant portion of PAO sales are to customers in the aerospace and energy industries. Much of PAO sales are to forging companies that further shape, mill, and finish the metals into more specific dimensions. All such sales are made under the Carpenter brand name.

The Emerging Ventures segment currently includes the operations of the recently completed acquisitions of Amega West and Oilfield Alloys. The sales of Amega West are to customers in the energy end use market.

(2)

Classes of Products:

Our major classes of products are:

Special alloys –

Our special alloys are used in critical components such as rings, discs and fasteners and include heat resistant alloys that range from slight modifications of stainless steels to complex nickel and cobalt base alloys as well as alloys for electronic, magnetic and electrical applications with controlled thermal expansion characteristics, or high electrical resistivity or special magnetic characteristics.

Stainless steels –

Our stainless products include a broad range of corrosion resistant alloys including conventional stainless steels and many proprietary grades for special applications.

Titanium products –

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

(3)

Raw Materials:

Our business depends on continued delivery of critical raw materials for our day-to-day operations. These raw materials include nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap containing iron and nickel. Some of the sources of these raw materials, many of which are international, could be subject to potential interruptions of supply as a result of political events, labor unrest or other reasons. These potential interruptions could cause material shortages and affect availability and price. We have arrangements with certain vendors to provide consigned materials at our manufacturing facilities available for our consumption as necessary.

We have long-term relationships with major suppliers who provide availability of material at competitive prices. Purchase prices of certain raw materials have historically been volatile. We use pricing surcharges, indexing mechanisms, base price adjustments and raw material forward contracts to reduce the impact of increased costs for the most significant of these materials. There can be delays between the time of the increase in the price of raw materials and the realization of the benefits of such mechanisms or actions that could have a short-term impact on our results and could affect the comparability of our results from period to period.

(4)

Patents and Licenses:

We own a number of United States and international patents and have granted licenses under some of them. In addition, certain products that we produce are covered by patents held or owned by other companies from whom licenses have been obtained. The duration of a patent issued in the United States is between 14 and 20 years from the date of filing a patent application or issuance of the patents. The duration of patents issued outside of the United States vary from country to country. Generally, patent licenses are structured to match the duration of the underlying patent. Although these patents and licenses are believed to be of value, we do not consider our business to be materially dependent upon any single such item or related group of such items.

(5)

Seasonality of Business:

Our sales are normally influenced by seasonal factors. Historically, our sales in the first two fiscal quarters (the respective three months ending September 30 and December 31) are typically the lowest – principally because of annual plant vacation and maintenance shutdowns by us as well as by many of our customers. However, the timing of major changes in the general economy or the markets for certain products can alter this historical pattern.

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


Quarter Ended	2011			2010			2009
September 30,		21	%		19	%		30	%
December 31,		22			22			27
March 31,		28			28			24
June 30,		29			31			19

		100	%		100	%		100	%

(6)

Customers:

On a consolidated basis, we are not dependent upon a single customer, or a very few customers, such that the loss of any one or more particular customers would have a materially adverse effect on our consolidated statement of operations. One customer, Precision Castparts Corporation (“Precision Castparts”), accounted for 10 percent of our net sales during fiscal years 2011 and 2010. The sales to Precision Castparts represent an aggregation of sales to several independently managed Precision Castparts subsidiaries. There were no significant individual customer sales that accounted for more than 10 percent of our net sales during fiscal year 2009. See Note 20 to our consolidated financial statements included in Item 8 “Financial Statements and Supplementary Data” for additional information.

(7)

Backlog:

As of June 30, 2011, we had a backlog of orders, believed to be firm, of approximately $623 million, substantially all of which is expected to be shipped within fiscal year 2012. Our backlog as of June 30, 2010 was approximately $351 million.

(8)

Competition:

Our business is highly competitive. We supply materials to a wide variety of end-use market sectors and compete with various companies depending on end-use market, product or geography. We are leaders in specialty materials for critical applications with over 120 years of metallurgical and manufacturing expertise. A significant portion of the products we produce are highly engineered materials for demanding applications. There are a limited number of companies producing one or more similar products that we consider our major competitors for our high value products used in demanding applications, particularly in our aerospace and energy end-use markets. These products are generally required to meet complex customer product specifications and often require the materials to be qualified prior to supplying the customer orders. Our experience, technical capabilities, product offerings and research and development efforts that we have in our niche markets represent barriers to existing and potential competitors.

For other products, there are several dozen smaller producing companies and converting companies that are also competitors as well as several hundred independent distributors of products similar to those distributed by us. Additionally, numerous foreign companies produce 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 products.

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 certain foreign producers. Certain foreign governments through direct and indirect subsidies have often supported such pricing practices. Because of the unfair trade practices and the resulting injury, we have joined with other domestic producers of specialty metals in the filing of trade actions against foreign producers as well as lobbying various government agencies for the creation of laws and regulations to eliminate the competitive benefits realized by the unfair trade practices. These proposals are aimed at tax and regulatory reform needed to provide incentives to domestic producers and disincentives for foreign producers to import products into the United States unfairly. We will continue to monitor developments related to what we consider unfairly traded imports from foreign competitors and develop appropriate actions in response.

Under the provisions of the Continued Dumping and Subsidy Offset Act of 2000 (the “Act”), which was signed into law on October 28, 2000, we have received distributions from the United States Customs Service (“Customs”). Under the Act, Customs established special accounts for funds to be distributed annually to eligible domestic producers. The special accounts are sourced with duties collected by Customs on pre-existing anti-dumping or countervailing duty orders. We have received distributions under the Act totaling $2.0 million, $5.7 million and $6.1 million in fiscal years 2011, 2010 and 2009, respectively. We do not believe that we will receive any additional significant distributions as the Act has expired.

(9)

Research, Product and Process Development:

Our expenditures for company-sponsored research and development were $18.9 million, $17.8 million and $15.4 million in fiscal years 2011, 2010 and 2009, respectively. We believe that our ability to be an innovator in special material development and manufacturing processes has been and will continue to be an important factor in the success of the Company. Our strong commitment to developing continuous streams of new products to meet customers’ needs has been supported by increased research and development resources and investments over the last several years and by actively acquiring game changing technologies. Our worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements and has lead to the establishment of worldwide partnerships for materials and process development and innovation. We believe that the alloys under development will redefine our business in the future.

(10)

Environmental Regulations:

We are subject to various stringent federal, state, local and international 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 the notes to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data.”

Our costs of maintaining and operating environmental control equipment were $12.7 million, $10.7 million and $12.6 million for fiscal years 2011, 2010 and 2009, respectively. The capital expenditures for environmental control equipment were $0.4 million, $0.1 million and $0.4 million for fiscal years 2011, 2010 and 2009, respectively. We anticipate spending approximately $2.1 million on major domestic environmental capital projects over the next five fiscal years. This includes approximately $0.9 million in fiscal year 2012 and fiscal year 2013. 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, 2011, our total workforce consisted of approximately 3,500 employees, which included approximately 100 production employees in Washington, Pennsylvania who are covered under a collective bargaining agreement which expires on August 31, 2013.

(d)

Financial information about foreign and domestic operations and export sales:

Sales outside of the United States, including export sales, were $511.4 million, $369.1 million and $477.0 million in fiscal years 2011, 2010 and 2009, respectively. Long lived assets held outside of the United States were $16.1 million and $6.0 million as of June 30, 2011 and 2010.

For further information on domestic and international sales, see Note 20 to our consolidated financial statements included in Item 8 “Financial Statements and Supplementary Data”.

(e)

Available Information:

Our Board of Directors has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers of Carpenter Technology Corporation, which is also applicable to our other executive officers. There were no waivers of the Code of Ethics in fiscal year 2011. The Code of Ethics and any information regarding any waivers of the Code of Ethics are disclosed on Carpenter’s website at www.cartech.com . Our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (“SEC”). Our website and the content contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and other information regarding issuers that file electronically. Such information can be accessed through the Internet at www.sec.gov.

Item 1A.

Risk Factors

There are inherent risks and uncertainties associated with all businesses that could adversely affect operating performances or financial conditions. The following discussion outlines the risks and uncertainties that management believes are the most material to our business. However, these are not the only risks or uncertainties that could affect our business. Certain risks are associated specifically with our business, industry or customer base, while others have a broader effect.

The demand for certain products we produce may be cyclical.

Demand in our end-use markets, including companies in the aerospace, industrial supply, consumer, automotive, medical and energy markets, can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain. As a result, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period.

A significant portion of our sales represents products sold to customers in the commercial aerospace and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives.

The commercial aerospace market is historically cyclical due to both external and internal market factors. These factors include general economic conditions, airline profitability, consumer demand for air travel, varying fuel and labor costs, price competition, and international and domestic political conditions such as military conflict and the threat of terrorism. The length and degree of cyclical fluctuation can be influenced by any one or combination of these factors and therefore are difficult to predict with certainty. A downturn in the commercial aerospace industry would adversely affect the demand for our products and/or the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected.

The energy market has also been historically cyclical, principally as a result of volatile oil prices that impact demand for our products. Our future success requires us to, among other things, expand in key international energy markets by successfully adding to our customer base, distribution channels and product portfolio. The volatility of oil prices and other factors that contribute to the cyclicality of the energy market will impact our ability to expand successfully in this area. If we are not able to be

successful in this regard, our results of operations, business and financial condition could be adversely affected.

Failure to complete the Merger with Latrobe could negatively impact our stock price and our future business and financial results.

Consummation of the proposed Merger with Latrobe is subject to certain conditions, including, among others:

•

the adoption of the Merger Agreement by the shareholders of Latrobe;

•

the absence of any law or order prohibiting the Merger;

•

the expiration or termination of the applicable Hart-Scott-Rodino Act waiting period; and

•

subject to certain exceptions, the accuracy of representations and warranties and material compliance with covenants.

Third parties, such as governmental agencies, may impose conditions on the consummation, or require changes to the terms, of the proposed Merger. Any such conditions or changes could have the effect of preventing the consummation of the proposed Merger. If the proposed Merger is not completed for any reason, our ongoing business and financial results may be adversely affected and we will be subject to a number of risks, including the following:

•

we will be required to pay certain costs relating to the proposed Merger, whether or not the proposed Merger is completed; and

•

matters relating to the proposed Merger (including integration planning) may require substantial commitments of time and resources by our management, whether or not the proposed Merger is completed, which could otherwise have been devoted to other opportunities that may have been beneficial to us.

We may also be subject to litigation related to any failure to complete the proposed Merger. If the proposed Merger is not completed, these risks may materialize and may adversely affect our business, financial results and financial condition, which may cause the value of your investment to decline. We cannot provide any assurance that the proposed Merger will be completed, that there will not be a delay in the completion of the proposed Merger or that all or any of the anticipated benefits of the proposed Merger will be obtained.

The anticipated benefits of the proposed Merger with Latrobe may not be fully realized and may take longer to realize than expected.

The proposed Merger involves the integration of Latrobe’s operations with our existing operations, and there are uncertainties inherent in such an integration. We will be required to devote significant management attention and resources to integrating Latrobe’s operations. Delays, unexpected difficulties in the integration process or failure to retain key management personnel could adversely affect our business, financial results and financial condition. Even if we are able to integrate Latrobe’s operations successfully, this integration may not result in the realization of the full benefits of synergies, cost savings and operational efficiencies that we expect or the achievement of these benefits within a reasonable period of time.

In addition, we may have not discovered during the due diligence process, and we may not discover prior to closing, all known and unknown factors regarding Latrobe that could produce unintended and unexpected consequences for us. Undiscovered factors could cause us to incur potentially material financial liabilities, and prevent us from achieving the expected benefits from the proposed Merger within our desired time frames, if at all.

We will incur significant transaction and merger-related costs in connection with the proposed Merger with Latrobe.

We will incur significant costs in connection with the proposed Merger. We expect that the substantial majority of these costs will be non-recurring expenses related to the proposed Merger such as facilities and systems consolidation costs. We may incur additional costs to maintain employee morale and to retain key employees. We may also incur substantial transaction fees and costs related to the formulation of integration plans.

Any significant delay or inability to successfully expand our operations in a timely and cost effective manner could materially adversely affect our business, financial condition and results of operations.

We are undertaking several large capital expansion projects in the near-term such as our recently announced expansion of our Reading facility targeting premium remelt, forge finishing and annealing operations. We are also considering longer term projects associated with the next major increment of our premium products capability, including our announced plans to build a $500 million state-of-the-art manufacturing facility focused on premium products. These projects place a significant demand on management and operational resources. Our success in expanding our operations in a cost effective manner will depend upon numerous factors including the ability of management to ensure the necessary resources are in place to properly execute this project on time and in accordance with planned costs, the ability of key suppliers to deliver the necessary equipment according to schedule and our ability to implement these project with minimal impacts to our existing operations. If we are not able to achieve the anticipated results from our capital expansion projects, or if we incur unanticipated excess costs, our results of operations and financial position may be materially adversely affected.

Periods of reduced demand and excess supply as well as the availability of substitute lower cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful.

Additional worldwide capacity and reduced demand for our products could significantly impact future worldwide pricing which would adversely impact our results of operations and financial condition. In addition, continued availability of lower cost, substitute materials may also cause significant fluctuations in future results as our customers opt for a lower cost alternative.

We change prices on our products as we deem necessary. In addition to the above general competitive impact, other market conditions and various economic factors beyond our control can adversely affect the timing of our pricing actions. The effects of any pricing actions may be delayed due to long manufacturing lead times or the terms of existing contracts. There is no guarantee that the pricing actions we implement will be effective in maintaining the Company’s profit margin levels.

We rely on third parties to supply certain raw materials that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand.

Costs of certain critical raw material, such as nickel, cobalt, chromium, manganese, molybdenum, titanium, iron, and scrap containing iron and nickel have been volatile due to factors beyond our control. We are able to mitigate most of the adverse impact of rising raw material costs through raw material surcharges, indices to customers and raw material forward contracts, but changes in business conditions could adversely affect our ability to recover rapid increases in raw material costs and may adversely affect our results of operations.

In addition, the availability of these critical raw materials is subject to factors that are not in our control. In some cases, these critical raw materials are purchased from suppliers operating in countries

that may be subject to unstable political and economic conditions. At any given time, we may be unable to obtain an adequate supply of these critical raw materials on a timely basis, at prices and other terms acceptable to us, or at all.

If suppliers increase the price of critical raw materials or are unwilling or unable to meet our demand, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to customers and accepted customer orders for products prior to purchasing necessary raw materials, or have existing contracts, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials to our customers.

The manufacture of some of our products is a complex process and requires long lead times. As a result, we may experience delays or shortages in the supply of raw materials. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation.

We provide benefits to active and retired employees throughout most of our Company, most of which are not covered by insurance; and thus, our financial condition can be adversely affected if our investment returns are insufficient to meet these obligations.

We have obligations to provide substantial benefits to active and current employees, and most of the associated costs are paid by the Company and are not covered by insurance. In addition, certain employees are covered by defined benefit pension plans, with the majority of our plans covering employees in the United States. Many domestic and international competitors do not provide defined benefit plans and/or retiree health care plans, and other international competitors operate in jurisdictions with government sponsored health care plans that may offer them a cost advantage. We currently expect to make approximately $28 million in required contributions to our US defined benefit pension plan during fiscal year 2012. A decline in the value of plan investments in the future, an increase in costs or liabilities, unfavorable changes in laws or regulations that govern pension plan funding or the impacts of underfunded plans acquired in connection with the consummation of the Latrobe merger could materially change the timing and amount of required pension funding. A requirement to fund pension contributions in the future could have a material adverse effect on our results of operations and financial condition.

The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create the potential exposure to significant liabilities.

The nature of our manufacturing business subjects our operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. We have used, and currently use and manufacture, substantial quantities of substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although we implement controls and procedures designed to reduce continuing risk of adverse impacts and health and safety issues, we could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations, non-compliance or liabilities under these regulatory regimes required at our facilities.

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 or similar waste disposal sites and other third party owned 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. From time-to-time, we are a party to lawsuits and other proceedings involving alleged violations of, or liabilities arising from, environmental laws.

When our liability is probable and we can reasonably estimate our costs, we record environmental liabilities in our financial statements. However, in many cases, we are not able to determine whether we are liable, or if liability is probable, in order to reasonably estimate the loss or range of loss which could result from such environmental liabilities. Estimates of our liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number and financial condition of other PRP’s, as well as the extent of their responsibility for the remediation. We adjust our accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on our results of operations in a given period, but we cannot reliably predict the amounts of such future adjustments. Future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on our financial condition or results of operations.

Our manufacturing processes, and the manufacturing processes of many of our suppliers and customers, are energy intensive and generate carbon dioxide and other “Greenhouse Gases”, and pending legislation or regulation of Greenhouse Gases, if enacted or adopted in an onerous form, could have a material adverse impact on our results of operations, financial condition and cash flows.

Political and scientific debates related to the impacts of emissions of greenhouse gases on the global climate are prevalent. Regulation or some form of legislation aimed at reducing the greenhouse gas emissions is currently being considered both in the United States and globally. As a specialty alloy manufacturer, we will be affected, both directly and indirectly, if proposed climate change legislation, such as use of a “cap and trade”, is enacted. Such legislation could have a material adverse impact on our results of operations, financial condition and cash flows.

Product liability and product quality claims could adversely affect our operating results.

We produce ultra high-strength, high temperature and corrosion-resistant alloys designed for our customers’ demanding applications particularly in our aerospace, energy and medical end use markets. Failure of the materials that are included in our customers’ applications could give rise to substantial product liability claims. There can be no assurance that our insurance coverage will be adequate or continue to be available on terms acceptable to us. We have a complex manufacturing process necessary to meet our customers’ stringent product specifications. We are also required to adhere to various third party quality certifications and perform sufficient internal quality reviews to ensure compliance with established standards. If we fail to meet the customer specifications for their products, we may be subject to product quality costs and claims. These costs are generally not insured. The impacts of product liability and quality claims could have a material adverse impact on the results of our operations, financial condition and cash flows.

Our business subjects us to risks of litigation claims, as a routine matter, and this risk increases the potential for a loss that might not be covered by insurance.

Litigation claims relate to the conduct of our currently and formerly owned businesses, including claims pertaining to product liability, commercial disputes, employment actions, employee benefits, compliance with domestic and federal laws, personal injury and tax issues. Due to the uncertainties of litigation, we can give no assurance that we will prevail on claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. The outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to us. The resolution in any reporting period of one or more of these matters could have a material adverse effect on our results of operations for that period. We can give no assurance that any other matters brought in the future will not have a material effect on our financial condition, liquidity or results of operations.

A small number of our workforce is covered by a collective bargaining agreement and union attempts to organize our other employees may cause work interruptions or stoppages.

Approximately 100 production employees at our Dynamet business unit located in Washington, PA are covered by a collective bargaining agreement. This agreement expires in August 2013. There can be no assurance that we will succeed in concluding collective bargaining agreements with the unions to replace those that expire. From time to time, the employees at our primary manufacturing facility in Reading, Pennsylvania, participate in election campaigns or union organizing attempts. There is no guarantee that future organization attempts will not result in union representation.

Our manufacturing processes are complex and depend upon critical, high cost equipment for which there may be only limited or no production alternatives.

It is possible that we could experience prolonged periods of reduced production due to unplanned equipment failures, and we could incur significant repair or replacement costs in the event of those failures. It is also possible that operations could be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, accidents and severe weather conditions. We must make regular, substantial capital investments and changes to our manufacturing processes to lower production costs, improve productivity, manufacture new or improved products and remain competitive. We may not be in a position to take advantage of business opportunities or respond to competitive pressures if we fail to update, replace or make additions to our equipment or our manufacturing processes in a timely manner. The cost to repair or replace much of our equipment or facilities would be significant. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary capital expenditures in the future.

A significant portion of our manufacturing and production facilities are located in Reading, Pennsylvania, which increases our exposure to significant disruption to our business as a result of unforeseeable developments in a single geographic area.

It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around our manufacturing facilities in Reading, Pennsylvania. As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered. Our financial condition and results of our operations could be materially adversely affected.

We rely on third parties to supply energy consumed at each of our energy-intensive production facilities.

The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, has affected and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition.

We consider acquisition, joint ventures and other business combination opportunities, as well as possible business unit dispositions, as part of our overall business strategy, which opportunities involve uncertainties and potential risks that we cannot predict or anticipate fully.

From time-to-time, management holds discussions with management of other companies to explore such aforementioned opportunities. As a result, the relative makeup of the businesses comprising our Company is subject to change. Acquisitions, joint ventures and other business combinations involve various inherent risks. Such risks include difficulties in integrating the operations, technologies, products and personnel of the acquired companies, diversion of management’s attention from existing operations, difficulties in entering markets in which we have limited or no direct prior experience, dependence on unfamiliar supply chains, insufficient revenues to offset increased expenses associated with acquisitions, loss of key employees of the acquired companies, inaccurate assessment of undisclosed liabilities, difficulties in realizing projected efficiencies, synergies and cost savings, and increases in our debt or limitation on our ability to access additional capital when needed.

Our business may be impacted by external factors that we may not be able to control.

War, civil conflict, terrorism, natural disasters and public health issues including domestic or international pandemic have caused and could cause damage or disruption to domestic or international commerce by creating economic or political uncertainties. Additionally, the volatility in the financial markets, as we have experienced recently following the concerns about the S&P’s downgrade of the United States’ credit rating, the European debt crisis and fears of a new U.S. recession, could negatively impact our business. These events could result in a decrease in demand for our products, make it difficult or impossible to deliver orders to customers or receive materials from suppliers, affect the availability or pricing of energy sources or result in other severe consequences that may or may not be predictable. As a result, our business, financial condition and results of operations could be materially adversely affected.

We believe that international sales, which are associated with various risks, will continue to account for a significant percentage of our future revenues.

Risks associated with international sales include without limitation: political and economic instability, including weak conditions in the world’s economies; difficulty in collecting accounts receivable; unstable or unenforced export controls; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in tax laws and tariffs; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on international sales when converted into dollars). In addition, we will need to invest in building our capabilities and infrastructure to meet our international growth goals. Any of these factors could materially adversely affect our results for the period in which they occur.

We value most of our inventory using the LIFO method, which could be repealed resulting in adverse affects on our cash flows and financial condition.

The cost of our inventories is primarily determined using the Last-In First-Out (“LIFO”) method. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials and other costs may have been incurred at significantly different values due to the length of time of our production cycle. Generally in a period of rising prices, LIFO recognizes higher costs of goods sold, which both reduces current income and assigns a lower value to the year-end inventory. Recent proposals have been initiated aimed at repealing the election to use the LIFO method for income tax purposes. According to these proposals, generally taxpayers that currently use the LIFO method would be required to revalue their LIFO inventory to its first-in, first-out (“FIFO”) value. As of June 30, 2011, if the FIFO method of inventory had been used instead of the LIFO method, our inventories would have been about $355 million higher. This increase in inventory would result in a one time increase in taxable income which would be

taken into account over the following several taxable years. The repeal of LIFO could result in a substantial tax liability which could adversely impact our cash flows and financial condition.

We depend on the retention of key personnel.

Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive management team, management, metallurgists and production positions. The loss of key personnel could adversely affect our ability to perform until suitable replacements are found.

We depend on our IT infrastructure to support the current and future information requirements of our operations.

Management relies on IT infrastructure, including hardware, network, software, people and processes, to provide useful information to support assessments and conclusions about operating performance. Our inability to produce relevant and/or reliable measures of operating performance in an efficient, cost-effective and well-controlled fashion may have significant negative impacts on our future operations.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

The locations of our primary manufacturing plants are: Reading, Pennsylvania; Hartsville, South Carolina; Washington, Pennsylvania; Orangeburg, South Carolina; Bridgeville, Pennsylvania; Orwigsburg, Pennsylvania; Clearwater, Florida; Elyria, Ohio; Woonsocket, Rhode Island; and Torshalla, Sweden. The Reading, Hartsville, Washington, Orangeburg, Bridgeville, Orwigsburg, Elyria, Woonsocket and Torshalla plants are owned. The Clearwater plant is owned, but the land is leased. Two administrative buildings in Torshalla are leased.

The Amega West operations include leased rental warehouses and service centers located in Houston, Texas; Oklahoma City, Oklahoma; Casper, Wyoming; Lafayette, Louisiana; West Alexander, Pennsylvania; Nisku Alberta, Canada and Singapore. The primary manufacturing facility in Tyler, Texas is owned.

Our corporate offices, located in Wyomissing, Pennsylvania, are leased.

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 were acquired or leased at various times over several years. There is an active maintenance program to ensure a safe operating environment and 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

From time-to-time, we are a party to lawsuits and other proceedings involving alleged violations of, or liabilities arising from, environmental laws. 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 or similar waste disposal sites and other third party owned 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. 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 our financial position, results of operations or cash flows over the long-term. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.

In June 2002, we were named as a defendant in a lawsuit filed by a group of plaintiffs in the District Court for the Eastern District of Pennsylvania titled Boarhead Farm Agreement Group v. Advanced Environmental Technology Corporation et. al. (since amended to include the individual members). The suit alleges that we and the other named defendants contributed to damages caused at Boarhead Farms, a Superfund site located in Bridgeton, Pennsylvania. The Boarhead Farms site was the home of a now defunct chemical and waste hauling company that we and many other companies engaged to dispose of certain wastes during the 1970’s. The plaintiff group was individually named as PRP’s for the Boarhead site in the EPA’s “Record of Decision” in November 1998. Their June 2002 lawsuit against various defendants, including Carpenter, sought contributions for a portion of costs incurred for various site cleanup activities as well as contributions to future cleanup efforts. The suit went to trial in June 2008. Prior to trial, all of the named co-defendants, except for Carpenter, reached an out of court settlement with the plaintiffs. We denied the claims made by the plaintiff group. On August 18, 2008, the Court awarded the plaintiffs judgment against us for 80 percent of the plaintiffs’ past costs of remediating the site, including prejudgment interest from June 18, 2002 to January 1, 2008, and held us liable for 80 percent of future costs of the cleanup activities at the site. We appealed the Court’s decision and oral arguments took place before the United States Court of Appeals for the Third Circuit on December 17, 2009. On April 12, 2010, the Court of Appeals for the Third Circuit vacated the previous judgment by the District Court and remanded the case for further proceedings. As of June 30, 2011 and June 30, 2010, we recorded a liability related to this case of $21.8 million. On July 19, 2011, we entered into a settlement agreement providing for a dismissal of the lawsuit against us and a complete release in our favor by all parties to the litigation, in exchange for a payment by us of $21.8 million. On August 16, 2011, the settlement was Approved by the Court.

In addition, from time to time, we are a party to certain routine claims and legal actions and other contingent liabilities incident to the normal course of business which pertain to litigation, product claims, commercial disputes, employment actions, employee benefits, compliance with domestic and foreign laws, personal injury claims and tax issues. Based on information currently available, the ultimate resolution of our known contingencies, individually or in the aggregate and including the matters described in Note 12 to the consolidated financial statements in this Form 10-K, is not expected to have a material adverse effect on our financial position, liquidity, or results of operations. However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to our financial position, results of operations or cash flows in a particular future quarter or year.

See the “Contingencies” section included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and the “Contingencies and Commitments” section included in Note 12 to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data”, included in this Form 10-K, the contents of which are incorporated by reference to this Item 3.

Item 4. [Removed and Reserved]

PART II

Item 5.

Market for the Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities

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


	Fiscal Year 2011				Fiscal Year 2010
Quarter Ended:	High		Low		High		Low
September 30,	$	38.11	$	30.58	$	25.66	$	16.87

December 31,	$	41.90	$	34.30	$	27.90	$	20.83

March 31,	$	44.94	$	38.78	$	36.60	$	26.54

June 30,	$	57.68	$	40.69	$	42.52	$	32.83


Annual	$	57.68	$	30.58	$	42.52	$	16.87

The range of our common stock price on the NYSE from July 1, 2011 to August 12, 2011 was $43.97 to $58.18. The closing price of the common stock was $48.98 on August 12, 2011.

We have paid quarterly cash dividends on our common stock for over 100 consecutive years. We paid a quarterly dividend of $0.18 per common share during each quarter of fiscal years 2011 and 2010.

As of August 12, 2011, there were 2,928 common stockholders of record.

Cumulative Total Stockholder Return

The graph below compares the cumulative total stockholder return on our common stock to the cumulative total return of the S&P MidCap Index and our Peer Group for each of the last five fiscal years ended June 30, 2011. The cumulative total return assumes an investment of $100 on June 30, 2006 and the reinvestment of any dividends during the period. The S&P MidCap 400 Index is the most widely used index for mid-sized companies. The companies in our Peer Group are: AK Steel Holding Corp., Allegheny Technologies, Inc., Daido Steel Company Limited, Gloria Material Technology Corp., Haynes International Inc., Kennametal Inc., Parker-Hannifin Corp., Precision Industries Castparts Corp., Reliance Steel and Aluminum Company, RTI International Metals Inc., Sandvik AB, Schmolz + Bichenbach AG, Steel Dynamics Inc., The Timken Company, Titanium Metals Corp., Universal Stainless & Alloy Products, Voestalpine AG. The total stockholder return for the Peer Group is weighted according to the respective issuer’s stock market capitalization at the beginning of each period.

LOGO


	6/06		6/07		6/08		6/09		6/10		6/11

Carpenter Technology Corporation		100.00		113.82		77.06		37.99		61.61		110.28
S&P Midcap 400		100.00		118.51		109.81		79.04		98.74		137.63
Peer Group		100.00		158.80		142.64		75.90		99.70		155.09

Item 6.

Selected Financial Data

Five-Year Financial Summary

In millions, except per share data

(Fiscal years ended June 30,)


	2011		2010		2009 ^(a)		2008 ^(b)		2007
Summary of Operations:
Net sales	$	1,675.1	$	1,198.6	$	1,362.3	$	1,953.5	$	1,839.0
Operating income		96.4		11.7		64.0		293.6		304.4
Income from continuing operations		71.7		2.1		47.9		200.5		215.2
Income from discontinued operations, net		—		—		—		77.2		12.0

Net income	$	71.7	$	2.1	$	47.9	$	277.7	$	227.2

Net income attributable to Carpenter	$	71.0	$	2.1	$	47.9	$	277.7	$	227.2


Financial Position at Year-End:
Cash and cash equivalents	$	492.5	$	265.4	$	340.1	$	403.3	$	300.8
Marketable securities, current	$	30.5	$	105.2	$	15.0	$	5.3	$	372.7
Total assets	$	1,991.9	$	1,583.2	$	1,497.4	$	1,712.2	$	2,025.7

Long-term obligations, net of current portion (including convertible preferred stock)	$	407.8	$	259.6	$	258.6	$	276.7	$	299.5
Per Common Share:
Net earnings:
Basic
Continuing operations	$	1.59	$	0.04	$	1.08	$	4.11	$	4.16
Discontinued operations	$	—	$	—	$	—	$	1.59	$	0.24

	$	1.59	$	0.04	$	1.08	$	5.70	$	4.40

Diluted
Continuing operations	$	1.59	$	0.04	$	1.08	$	4.11	$	4.09
Discontinued operations	$	—	$	—	$	—	$	1.58	$	0.23

	$	1.59	$	0.04	$	1.08	$	5.69	$	4.32


Cash dividend-common	$	0.72	$	0.72	$	0.72	$	0.63	$	0.4875


Weighted Average Common Shares Outstanding:
Basic		44.1		43.9		43.9		48.5		51.5

Diluted		44.7		44.4		44.2		48.7		52.5

(a)	Fiscal year 2009 included $9.4 million of restructuring charges related to the shutdown and closure of our U.K. metal strip manufacturing operations. See Note 2 in the Notes to the Consolidated Financial Statements included in Item 8 “Financial Statements and Supplementary Data” of this report.

(b)	Fiscal year 2008 included a $109.6 million pre-tax gain on the sale of our ceramics and metals shapes businesses. The results of operations of the divested business units prior to the divestitures are presented as discontinued operations.

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

Background and General

Our discussions below in this Item 7 should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this annual report on Form 10-K.

We are engaged in the manufacturing, fabrication, and distribution of specialty metals. We primarily process basic raw materials such as nickel, cobalt, titanium, manganese, chromium, molybdenum, 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 and narrow strip in many sizes and finishes. We also produce certain metal powders. Our sales are distributed directly from our production plants and distribution network as well as through independent distributors. Unlike many other specialty steel producers, we operate our own worldwide network of service/distribution centers. These service centers, located in the United States, Canada, Mexico, Europe and Asia allow us to work more closely with customers and to offer various just-in-time stocking programs.

In December 2010, we acquired Amega West Services LLC (“Amega West”) for $54 million, including assumed debt of $12 million. Amega West offers precision machined down-hole drilling tools and services that include nonmag drill collars, stabilizers, MWD and LWD housings, subs, tool rentals, and welding and repair.

In June 2011, we acquired Oilfield Alloys Pte. Ltd. (“Oilfield Alloys”) for $5 million, which will become part of the Amega West operations. Based in Singapore, Oilfield Alloys manufactures and distributes directional drilling equipment in the Asia-Pacific region.

As part of our overall business strategy, we have sought out and considered opportunities related to strategic acquisitions and joint collaborations aimed at broadening our offering to the marketplace. We have participated with other companies to explore potential terms and structure of such opportunities and we expect that we will continue to evaluate these opportunities.

Business Trends

Selected financial results for the past three fiscal years are summarized below:


	Fiscal Year
($ in millions, except per share data)	2011			2010		2009
Net sales	$	1,675.1		$	1,198.6	$	1,362.3

Net sales excluding surcharges ⁽¹⁾	$	1,231.1		$	921.7	$	1,055.2

Operating income excluding pension earnings, interest and deferrals (“pension EID”) expense and restructuring costs ⁽¹⁾	$	131.6		$	49.6	$	73.5

Net income	$	71.7		$	2.1	$	47.9

Diluted earnings per share	$	1.59		$	0.04	$	1.08

Net pension expense per diluted share ⁽¹⁾	$	0.84		$	0.85	$	0.27

Purchases of property, equipment and software	$	79.6		$	44.2	$	116.3

Free cash flow ⁽¹⁾	$	(88.9	)	$	40.1	$	11.2

Pounds sold (in thousands) ⁽²⁾		216,834			172,974		167,040

⁽¹⁾	See the section “Non-GAAP Financial Measures” below for further discussion of these financial measures.

⁽²⁾	Includes specialty and titanium alloys, stainless steel and powder materials

Our sales are across a diversified list of end-use markets. The table below summarizes our estimated sales by market over the past three fiscal years.


	Fiscal Year
($ in millions)	2011				2010				2009
Aerospace	$	685.8	41	%	$	529.0	44	%	$	582.9	43	%
Industrial		380.6	23			262.6	22			310.4	23
Energy		196.0	12			79.8	7			152.0	11
Consumer		151.4	9			117.5	10			104.3	8
Automotive		138.8	8			102.3	8			99.2	7
Medical		122.5	7			107.4	9			113.5	8

Total net sales	$	1,675.1	100	%	$	1,198.6	100	%	$	1,362.3	100	%

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


	Fiscal Year
($ in millions)	2011				2010				2009
Special alloys	$	841.8	51	%	$	637.8	54	%	$	694.6	51	%
Stainless steels		610.5	36			398.3	33			460.1	34
Titanium products		140.7	8			112.4	9			141.4	10
Other materials		82.1	5			50.1	4			66.2	5

Total net sales	$	1,675.1	100	%	$	1,198.6	100	%	$	1,362.3	100	%

Impact of Raw Material Prices and Product Mix

We value most of our inventory utilizing the last-in, first-out (“LIFO”) inventory costing methodology. Under the LIFO inventory costing method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the acquisition of the raw materials to the sale of the processed finished goods to the customers. In a period of rising raw material costs, the LIFO inventory valuation normally results in higher costs of sales. Conversely, in a period of decreasing raw material costs, the LIFO inventory valuation normally results in lower costs of sales.

The volatility of the costs of raw materials has impacted our operations over the past several years. We, and others in our industry, generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs. Generally, the formula used to calculate a surcharge is based on published prices of the respective raw materials for the previous month which correlates to the prices we pay for our raw material purchases. However, a portion of our surcharges to customers may be calculated using a different surcharge formula or may be based on the raw material prices at the time of order, which creates a lag between surcharge revenue and corresponding raw material costs recognized in costs of sales. The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report.

A portion of our business consists of sales to customers under firm price sales arrangements. Firm price sales arrangements involve a risk of profit margin fluctuations, particularly when raw material prices are volatile. In order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the related products sold. Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), the Company may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis. Gains or losses associated with commodity forward contracts are reclassified to earnings/loss when earnings are impacted by the hedged transaction. Because we value most of our inventory under the LIFO costing methodology, the gains and/or losses associated with commodity forward contracts may not impact the same period that the firm price sales arrangements revenue is recognized, and comparisons of gross profit from period to period may be impacted. These firm price sales arrangements are expected to continue as we look to strengthen our long-term customer relationships by expanding, renewing and in certain cases extending to a longer term, our customer long-term arrangements.

We produce hundreds of grades of materials, with a wide range of pricing and profit levels depending on the grade. In addition, our product mix within a period is subject to the fluctuating order patterns of our customers as well as decisions we may make on participation in certain products based on available capacity including the impacts of capacity commitments we may have under existing customer agreements. While we expect to see positive contribution from a more favorable product mix in our margin performance over time, the impact by period may fluctuate, and period-to-period comparisons may vary.

Net Pension Expense

Net pension expense, as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. Net pension expense is recorded in accounts that are included in both the cost of sales and selling, general and administrative expenses lines of our statements of income. The following is a summary of the classification of net pension expense included in our statements of income during fiscal years 2011, 2010 and 2009:


	Fiscal Year
($ in millions)	2011		2010		2009
Cost of sales	$	45.8	$	44.6	$	12.0
Selling, general and administrative expenses		15.0		16.7		8.6
Pension settlement charges included in restructuring charges		—		—		4.4

Net pension expense	$	60.8	$	61.3	$	25.0

Net pension expense is determined annually based on beginning of year balances, and is recorded ratably throughout the fiscal year, unless a significant re-measurement event occurs. The following is a summary of the components of net pension expense during fiscal year 2011, 2010 and 2009:


	Fiscal Year
($ in millions)	2011		2010		2009
Service cost	$	25.6	$	23.3	$	20.2
Pension earnings, interest and deferrals		35.2		38.0		0.4
Pension settlement charges included in restructuring charges		—		—		4.4

Net pension expense	$	60.8	$	61.3	$	25.0

The service cost component of net pension expense represents the estimated cost of future pension liabilities earned associated with active employees. The pension earnings, interest and deferrals expense is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs. Pension earnings, interest and deferrals expenses is impacted by the financial markets and increased significantly during fiscal year 2010 principally due to the decline in market value of the securities held by the plans as of June 30, 2009.

Operating Performance Overview

Fiscal year 2011 results reflect the benefits of strong, sustained demand across all our end use markets. We have made progress during fiscal year 2011 in the following important areas:

•

We worked to strengthen customer relationships, expanded our market share in key segments and negotiated to expand key long-term agreements. We increased our volume output by 25 percent and made fundamental improvements to our profit per pound performance as a result of pricing and mix management actions.

•

We positioned the business for continued success by addressing current and future capacity needs to support customer demand by completing several key acquisitions and collaborations. We also announced several capacity expansion projects. At the same time, we strengthened our capital structure to ensure we can fund future growth need.

Results of Operations – Fiscal Year 2011 Compared to Fiscal Year 2010

For fiscal year 2011, we reported net income attributable to Carpenter of $71.0 million, or $1.59 per diluted share, compared with net income attributable to Carpenter of $2.1 million, or $0.04 per diluted share, a year earlier. Our fiscal year 2011 results reflect a trend of improving revenues and profit throughout the fiscal year driven by increased demand across all our end-use markets as well as the benefits of our pricing and mix management efforts, particularly in the second half of fiscal year 2011.

Net Sales

Net sales for fiscal year 2011 were $1,675.1 million, which was a 40 percent increase from fiscal year 2010. Excluding surcharge revenues, sales were $1,231.1million, an increase of 34 percent from a year earlier on 25 percent higher volume.

Geographically, sales outside the United States increased 39 percent from a year ago to $511.4 million. International sales remained fairly consistent as a percentage of our total net sales, representing 31 percent for fiscal years 2011 and 2010.

Sales by End-Use Markets

We sell to customers across diversified end-use markets. During fiscal year 2011, we changed the manner in which sales are classified by end-use market so that we could better evaluate our sales results from period to period. In order to make the discussion of net sales by end-use market meaningful, we have reclassified the fiscal year 2010 sales by end-use market balances to conform to the fiscal year 2011 presentation. Although we are not organized to report other than sales by end-use market, the following table includes comparative information for our estimated net sales by principal end-use markets which we believe is helpful supplemental information in analyzing the performance of the business from period to period:


	Fiscal Year				$		%
($ in millions)	2011		2010		Increase		Increase
Aerospace	$	685.8	$	529.0	$	156.8		30	%
Industrial		380.6		262.6		118.0		45
Energy		196.0		79.8		116.2		146
Consumer		151.4		117.5		33.9		29
Automotive		138.8		102.3		36.5		36
Medical		122.5		107.4		15.1		14

Total net sales	$	1,675.1	$	1,198.6	$	476.5		40	%

The following table includes comparative information for our estimated net sales by the same principal end-use markets, but excluding surcharge revenues:


	Fiscal Year				$		%
($ in millions)	2011		2010		Increase		Increase
Aerospace	$	502.3	$	404.0	$	98.3		24	%
Industrial		262.0		196.5		65.5		33
Energy		156.7		64.1		92.6		144
Consumer		107.2		87.4		19.8		23
Automotive		98.1		80.3		17.8		22
Medical		104.8		89.4		15.4		17

Total net sales excluding surcharge revenues	$	1,231.1	$	921.7	$	309.4		34	%

Sales to the aerospace market increased 30 percent from fiscal year 2010 to $685.8 million. Excluding surcharge revenue, such sales increased 24 percent on 23 percent higher shipment volume. Aerospace results reflect continuing strong demand for engine components driven by high build rates.

Industrial market sales increased 45 percent from fiscal year 2010 to $380.6 million. Adjusted for surcharge revenue, such sales increased approximately 33 percent while volumes increased 25 percent. The results reflect the impact of mix management and pricing actions as well as demand growth for higher value materials for fittings. In addition, powder metal sales used for tool steel products were up significantly.

Sales to the energy market of $196.0 million reflected a 146 percent increase from the fiscal year 2010. Excluding surcharge revenue, such sales increased 144 percent on 94 percent higher shipment volume. The results reflect a significant increase in the oil and gas segment due in part to increases in directional drilling activity, the Amega West acquisition and higher pricing. In addition, increased demand for materials used in industrial gas turbines contributed to the growth.

Sales to the consumer market increased 29 percent to $151.4 million from a year ago. Adjusted for surcharge revenue, such sales increased 23 percent with shipment volume higher by 15 percent. Revenue grew faster than volume as the growing global demand for higher value materials used in sporting goods applications outpaced sales of lower value materials used in housing. Mix management efforts and pricing actions are having a considerable positive impact on the consumer market sales.

Automotive market sales increased 36 percent from the fiscal year 2010 to $138.8 million. Excluding surcharge revenue, such sales increased 22 percent on 17 percent higher shipment volume. The revenue growth is attributable to mix management efforts that caused increased participation in higher value turbo charger and fuel system components, with a corresponding reduction in lower value products. These efforts are expected to better position us to participate in the trend toward premium stainless and high-temp alloys used in the next generation technologies that support higher fuel economy.

Sales to the medical market increased 14 percent to $122.5 million from a year ago. Adjusted for surcharge revenue, such sales increased 17 percent, on 8 percent higher volume. The results reflect increased demand particularly in our high-end stainless products.

Sales by Product Class

The following table includes comparative information for our net sales by major product class:


	Fiscal Year				$		%
($ in millions)	2011		2010		Increase		Increase
Special alloys	$	841.8	$	637.8	$	204.0		32	%
Stainless steels		610.5		398.3		212.2		53
Titanium products		140.7		112.4		28.3		25
Other materials		82.1		50.1		32.0		64

Total net sales	$	1,675.1	$	1,198.6		476.5		40	%

The following table includes comparative information for our net sales by the same major product class, but excluding surcharge revenues:


	Fiscal Year				$		%
($ in millions)	2011		2010		Increase		Increase
Special alloys	$	548.2	$	449.6	$	98.6		22	%
Stainless steels		466.1		311.7		154.4		50
Titanium products		140.7		112.4		28.3		25
Other materials		76.1		48.0		28.1		59

Total net sales excluding surcharge revenues	$	1,231.1	$	921.7	$	309.4		34	%

Sales of special alloys products increased 32 percent in fiscal year 2011 as compared with a year ago to $841.8 million. Excluding surcharge revenue, sales increased 22 percent on a 17 percent increase in shipment volume. The sales results principally reflect the increase in demand from the higher value aerospace and energy market products.

Sales of stainless steels increased 53 percent as compared with a year ago. Excluding surcharge revenues, such sales increased by 50 percent on a 28 percent higher shipment volume. The results reflect increased demand in materials used in the automotive, industrial and consumer markets as well as the impacts of pricing and mix management actions.

Sales of titanium products increased 25 percent as compared with a year ago on 24 percent higher shipment volume. The results reflect the impact of increased demand for titanium products used in the aerospace and medical end-use markets.

Gross Profit

Gross profit in fiscal year 2011 increased to $249.0 million, or 14.9 percent of net sales (20.2 percent of net sales excluding surcharges), from $144.8 million, or 12.1 percent of net sales (15.7 percent of net sales excluding surcharges), a year ago. The results primarily reflect the higher volumes in fiscal year 2011, an improved product mix, price increases and better operating performance.

Our surcharge mechanism is structured to recover increases in raw material costs, although generally with a lag effect. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharges on gross margin for fiscal years 2011 and 2010. See the section “Non-GAAP Financial Measures” below for further discussion of these financial metrics.


	Fiscal Year
($ in millions)	2011			2010
Net sales	$	1,675.1		$	1,198.6
Less: surcharge revenue		444.0			276.9

Net sales excluding surcharges	$	1,231.1		$	921.7


Gross profit	$	249.0		$	144.8


Gross margin		14.9	%		12.1	%


Gross margin excluding dilutive effect of surcharges		20.2	%		15.7	%

Selling, General and Administrative Expenses

Selling, general and administrative expenses in fiscal year 2011 were $149.5 million, or 8.9 percent of net sales (12.1 percent of net sales excluding surcharges), compared to $133.1 million, or 11.1 percent of net sales (14.4 percent of net sales excluding surcharges), in fiscal year 2010. The increase in fiscal year 2011 is principally related to higher compensation costs associated with increased headcount and the addition of Amega West overhead costs.

Acquisition Related Costs

During fiscal year 2011, we incurred $3.1 million of acquisition related costs associated with the Latrobe and Amega West acquisitions. These costs consist primarily of fees paid to financial, legal and other professional advisors in connection with the acquisition activities.

Operating Income

Our operating income in fiscal year 2011 increased to $96.4 million as compared with $11.7 million in fiscal year 2010.

Operating income has been significantly impacted by our pension earnings, interest and deferrals (“pension EID”) portion of our net pension expense, which may be volatile based on conditions in the financial markets. The following presents our operating income and operating margin, in each case excluding the impact of surcharges on net sales and excluding the impacts of pension EID expense from operating income. We present and discuss these financial measures because management believes removing the impact of volatile charges provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section “Non-GAAP Financial Measures” below for further discussion of these financial measures.


	Fiscal Year
($ in millions)	2011			2010
Net sales	$	1,675.1		$	1,198.6
Less: surcharge revenue		444.0			276.9

Net sales excluding surcharges	$	1,231.1		$	921.7


Operating income	$	96.4		$	11.7
Add back: Pension EID expense		35.2			37.9

Operating income excluding pension EID expense	$	131.6		$	49.6


Operating margin excluding surcharges and pension EID expense		10.7	%		5.4	%

In addition to the impact of the surcharge mechanism and pension EID expense, fluctuations in raw material prices (combined with fluctuations in inventory levels) and the lag effect of the surcharge mechanism have impacted our operating income from year to year. We estimate that the effect of such combined fluctuations negatively impacted our operating margin by approximately 60 basis points during fiscal year 2011 and negatively impacted our operating margin by approximately 150 basis points during fiscal year 2010.

Interest Expense

Fiscal year 2011 interest expense of $17.1 million compared from $17.8 million in fiscal year 2010. Interest on substantially all of our debt was at a fixed rate. We have used interest rate swaps to achieve a level of floating rate debt to fixed rate debt where appropriate. Fiscal year 2011 interest expense includes net gains from interest rate swaps of $2.8 million as compared with net gains from the interest rate swaps of $2.4 million in fiscal year 2010. The decrease in interest expense, excluding the gains on the interest swaps, is attributable to reductions in outstanding debt offset by decrease in the amount of interest capitalized associated with ongoing construction projects during fiscal year 2011.

Other Income, Net

Other income for fiscal year 2011 was $8.5 million as compared with $10.8 million a year ago. The decrease principally reflected less receipts from the “Continued Dumping and Subsidy Offset Act of 2000” offset by favorable market return on company owned life insurance and higher equity in earnings from our joint ventures.

Income Taxes

Our effective tax rate (income tax expense as a percent of income before taxes) for fiscal year 2011 was 18.3 percent as compared to 55.3 percent in fiscal year 2010. The fiscal year 2011 tax rate was lower than the statutory rate of 35 percent, primarily due to benefits associated with foreign source income, the domestic manufacturing deduction and the research and development credit.

The fiscal year 2010 tax rate was higher than the statutory rate of 35 percent, primarily due to the following items. We recorded an income tax expense charge in the amount of $5.9 million to reduce the value of the Company’s deferred tax asset previously established for anticipated retiree health care liabilities. Offsetting this amount, there was a reduction in income tax expense in the amount of $3.2 million due to the reversal of certain unrecognized tax benefits as a result of the completion of certain tax examinations. Our lower taxable income level also resulted in our permanent book to tax differences having a more significant impact on the effective tax rate.

See Note 18 to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” for a full reconciliation of the statutory federal tax rate to the effective tax rates.

Business Segment Results

Summary information about our operating results on a segment basis is set forth below. For more detailed segment information, see Note 20 to the consolidated financial statements included in Item 8. - “Financial Statements and Supplementary Data.”

The following tables include selected information by business segment:


	Fiscal Year									%
($ in millions)	2011			2010			Increase			Increase
Advanced Metals Operations	$	1,141.1		$	853.0			288.1			34	%
Premium Alloys Operations		533.0			348.3			184.7			53
Emerging Ventures		35.3			—			35.3			N/A
Intersegment		(34.3	)		(2.7	)		(31.6	)		N/A

Total net sales	$	1,675.1		$	1,198.6		$	476.5			40	%


	Fiscal Year									%
($ in millions)	2011			2010			Increase			Increase
Advanced Metals Operations	$	858.3		$	675.4			182.9			27
Premium Alloys Operations		369.8			249.0			120.8			49
Emerging Ventures		35.3			—			35.3			N/A
Intersegment		(32.3	)		(2.7	)		(29.6	)		N/A

Total net sales excluding surcharge revenues	$	1,231.1		$	921.7		$	309.4			34	%


	Fiscal Year									%
(Pounds sold, in thousands)	2011			2010			Increase			Increase

Advanced Metals Operations		171,502			142,008			29,494.0			21
Premium Alloys Operations		47,572			30,966			16,606.0			54
Intersegment		(2,240	)		—			(2,240.0	)		N/A

Consolidated pounds sold		216,834			172,974		$	43,860.0			25	%

Advanced Metals Operations Segment

Net sales in fiscal year 2011 for the AMO segment were $1,141.1 million, as compared with $853.0 million in fiscal year 2010. Excluding surcharge revenues, sales increased 27 percent on a 21 percent increase in volume from a year ago. The results reflect increased shipment volumes due to higher demand combined with the impacts of pricing actions.

Operating income for the AMO segment in fiscal year 2011 was $62.3 million, or 5.5 percent of net sales (7.3 percent of net sales excluding surcharge revenues), compared to $11.8 million, or 1.4 percent of net sales (1.7 percent of net sales excluding surcharge revenues), a year ago. The increase in operating income reflects the impacts of higher volumes, pricing actions and a favorable shift in product mix.

Premium Alloys Operations Segment

Net sales for fiscal year 2011 for the PAO segment increased 53 percent to $533.0 million as compared with $348.3 million for fiscal year 2010. Excluding surcharge revenues, net sales increased 49 percent on 54 percent higher shipment volumes. Both the sales and shipment volume increases were due to increased demand, particularly in our energy and aerospace end use markets.

Operating income for the PAO segment for fiscal year 2011 was $110.2 million, or 20.7 percent of net sales (29.8 percent of net sales excluding surcharge revenues), as compared with $71.2 million, or 20.4 percent of net sales (28.6 percent of net sales excluding surcharge revenues) for fiscal year 2010. The increase in operating income principally reflects the higher shipment volume particularly in high value applications used in the aerospace and energy markets.

Emerging Ventures

The Emerging Ventures segment includes the results of the Amega West business that we acquired in December 2010. Net sales for fiscal year 2011 for the Emerging Ventures segment were $35.3 million and operating income was $3.9 million during fiscal year 2011.

Results of Operations – Fiscal Year 2010 Compared to Fiscal Year 2009

For fiscal year 2010, we reported net income of $2.1 million, or $0.04 per diluted share, compared with income of $47.9 million, or $1.08 per diluted share, a year earlier. Our fiscal year 2010 results reflect a trend of improving revenues and profit throughout the fiscal year. For fiscal year 2010 lower revenues and the impacts of an unfavorable shift in product mix have been offset by cost improvement initiatives. In addition, as discussed above, our net income results reflect the $36.3 million increase in our net pension expense in fiscal year 2010.

Net Sales

Net sales for fiscal year 2010 were $1,198.6 million, which was a 12 percent decrease from fiscal year 2009. Excluding surcharge revenues, sales were 13 percent lower than fiscal year 2009 on 3 percent higher volume.

Geographically, sales outside the United States decreased 21 percent from fiscal year 2009 to $377.8 million. International sales remained fairly consistent as a percentage of our total net sales, representing 31 percent and 35 percent for fiscal year 2010 and fiscal year 2009, respectively.

Sales by End-Use Markets

We sell to customers across diversified end-use markets. The following table includes comparative information for our estimated net sales by principal end-use markets:


					$			%
	Fiscal Year				Increase			Increase
($ in millions)	2010		2009		(Decrease)			(Decrease)
Aerospace	$	529.0	$	582.9	$	(53.9	)		(9	)%
Industrial		262.6		310.4		(47.8	)		(15	)
Consumer		117.5		104.3		13.2			13
Medical		107.4		113.5		(6.1	)		(5	)
Automotive		102.3		99.2		3.1			3
Energy		79.8		152.0		(72.2	)		(48	)

Total net sales	$	1,198.6	$	1,362.3	$	(163.7	)		(12	)%

The following table includes comparative information for our estimated net sales by the same principal end-use markets, but excluding surcharge revenues:


					$			%
	Fiscal Year				Increase			Increase
($ in millions)	2010		2009		(Decrease)			(Decrease)
Aerospace	$	404.0	$	450.0	$	(46.0	)		(10	)%
Industrial		196.5		228.4		(31.9	)		(14	)
Consumer		87.4		79.1		8.3			10
Medical		89.4		94.7		(5.3	)		(6	)
Automotive		80.3		76.3		4.0			5
Energy		64.1		126.7		(62.6	)		(49	)

Total net sales excluding surcharge revenues	$	921.7	$	1,055.2	$	(133.5	)		(13	)%

Sales to the aerospace market decreased 9 percent from fiscal year 2009 to $529.0 million. Excluding surcharge revenue, such sales decreased 10 percent on 8 percent lower shipment volume. The sales decline reflects lower airplane build levels, reductions of inventory in the supply chain and a less favorable mix of products.

Industrial market sales decreased 15 percent from fiscal year 2009 to $262.9 million. Adjusted for surcharge revenue, such sales decreased approximately 14 percent while volumes increased 6 percent. The results reflect the higher demand for lower value products sold primarily through distributors.

Sales to the consumer market increased 13 percent to $117.5 million from fiscal year 2009. Adjusted for surcharge revenue, such sales increased 10 percent with shipment volume higher by 24 percent. The results reflect increased demand in all segments along with an unfavorable shift in product mix.

Sales to the medical market decreased 5 percent to $107.4 million from fiscal year 2009. Adjusted for surcharge revenue, such sales decreased 6 percent, while volumes increased 7 percent. The shipment volume increase reflects the impact of an increase in demand for stainless steel materials used in medical implants and gains in market share with key customers, while the revenue decline is attributable to lower raw material costs for titanium and a less favorable mix of products.

Automotive market sales increased 3 percent from the fiscal year 2009 to $102.3 million. Excluding surcharge revenue, such sales increased 5 percent on 40 percent higher shipment volume. The results reflect higher volumes associated with a steady upswing in demand from the same period last year coupled with an unfavorable shift in product mix. Our objective is to increase our participation with long-standing customers to provide higher value components for engine applications.

Sales to the energy market of $79.8 million reflected a 48 percent decrease from fiscal year 2009. Excluding surcharge revenue, such sales decreased 49 percent on 48 percent lower shipment volume. The sales results reflect the impacts of excess inventories in the supply chain, as a result of significantly lower oil and gas drilling along with sluggish demand for high-capacity industrial gas turbines. We are continuing to focus on diversifying our customer base, market segments served and product offerings in the broader energy market. We think that the energy market has the potential to be our fastest growing market.

Sales by Product Class

The following table includes comparative information for our net sales by major product class:


	Fiscal Year				$			%
($ in millions)	2010		2009		Decrease			Decrease
Special alloys	$	637.8	$	694.6	$	(56.8	)		(8	)%
Stainless steels		398.3		460.1		(61.8	)		(13	)
Titanium products		112.4		141.4		(29.0	)		(21	)
Other materials		50.1		66.2		(16.1	)		(24	)

Total net sales	$	1,198.6	$	1,362.3	$	(163.7	)		(12	)%

The following table includes comparative information for our net sales by the same major product class, but excluding surcharge revenues:


	Fiscal Year				$			%
($ in millions)	2010		2009		Decrease			Decrease
Special alloys	$	449.6	$	499.2	$	(49.6	)		(10	)%
Stainless steels		311.7		349.8		(38.1	)		(11	)
Titanium products		112.4		141.4		(29.0	)		(21	)
Other materials		48.0		64.8		(16.8	)		(26	)

Total net sales excluding surcharge revenues	$	921.7	$	1,055.2	$	(133.5	)		(13	)%

Sales of special alloys products decreased 8 percent in fiscal year 2010 as compared with a year ago to $637.8 million. Excluding surcharge revenue, sales decreased 10 percent on a 5 percent increase in shipment volume. The sales results principally reflect the decline in demand from the higher value aerospace and energy market products.

Sales of stainless steels decreased 13 percent as compared with fiscal year 2009. Excluding surcharge revenues, such sales decreased by 11 percent on a 1 percent higher shipment volume. The results reflect a moderate increase in demand that was more than offset by an unfavorable shift in product mix in materials used in the automotive, industrial and consumer markets.

Sales of titanium products decreased 21 percent as compared with fiscal year 2009 on 8 percent lower shipment volume. The results reflect the impact of significantly lower titanium prices and decreased demand for titanium products used in the aerospace end-use market.

Gross Profit

Gross profit in fiscal year 2010 decreased to $144.8 million, or 12.1 percent of net sales (15.7 percent of net sales excluding surcharges), from $207.2 million, or 15.2 percent of net sales (19.6 percent of net sales excluding surcharges), for fiscal year 2009. The results primarily reflect the favorable impacts of higher volumes and cost savings initiatives in fiscal year 2010 offset by an unfavorable shift in product mix and the higher net pension expense included in costs of sales during fiscal year 2010.

Our surcharge mechanism is structured to recover increases in raw material costs, although generally with a lag effect. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharges on gross margin for fiscal years 2010 and 2009. See the section “Non-GAAP Financial Measures” below for further discussion of these financial metrics.


	Fiscal Year
($ in millions)	2010			2009
Net sales	$	1,198.6		$	1,362.3
Less: surcharge revenue		276.9			307.1

Net sales excluding surcharges	$	921.7		$	1,055.2


Gross profit	$	144.8		$	207.2


Gross margin		12.1	%		15.2	%


Gross margin excluding dilutive effect of surcharges		15.7	%		19.6	%

Selling, General and Administrative Expenses

Selling, general and administrative expenses in fiscal year 2010 were $133.1 million, or 11.1 percent of net sales (14.4 percent of net sales excluding surcharges), compared to $133.8 million, or 9.8 percent of net sales (12.7 percent of net sales excluding surcharges), in fiscal year 2009. Excluding the impact of changes in net pension expense discussed above, expenses decreased by 7 percent over fiscal year 2009.

Restructuring Charges

During fiscal year 2009, we recorded $9.4 million of restructuring charges associated with the closure of our metal strip manufacturing facility in the United Kingdom (“U.K.”). The charges recorded consisted principally of pension settlement charges from the elimination of a U.K. defined benefit pension plan, certain asset write-downs, payments of employee severance costs and other exit costs.

Operating Income

Our operating income in fiscal year 2010 decreased to $11.7 million as compared with $64.0 million in fiscal year 2009. The lower operating income principally reflects lower gross profit levels. The results for fiscal year 2009 included approximately $9.4 million of restructuring charges associated with the closure of a UK facility.

Operating income has been significantly impacted by our pension earnings, interest and deferrals (“pension EID”) portion of our net pension expense, which may be volatile based on conditions in the financial markets. The following presents our operating income and operating margin, in each case excluding the impact of surcharges on net sales and excluding the impacts of pension EID expense and restructuring costs from operating income. We present and discuss these financial measures because management believes removing the impact of volatile and restructuring charges provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section “Non-GAAP Financial Measures” below for further discussion of these financial measures.


	Fiscal Year
($ in millions)	2010			2009
Net sales	$	1,198.6		$	1,362.3
Less: surcharge revenue		276.9			307.1

Net sales excluding surcharges	$	921.7		$	1,055.2


Operating income	$	11.7		$	64.0
Add back: Pension EID expense		37.9			0.1
Add back: Restructuring costs		—			9.4

Operating income excluding pension EID expense	$	49.6		$	73.5


Operating margin excluding surcharges and pension EID expense		5.4	%		7.0	%

In addition to the impact of the surcharge mechanism and pension EID expense, fluctuations in raw material prices (combined with fluctuations in inventory levels) and the lag effect of the surcharge mechanism have impacted our operating income from year to year. We estimate that the effect of such combined fluctuations negatively impacted our operating margin by approximately 150 basis points during fiscal year 2010 and positively impacted our operating margin by approximately points and 110 basis points during fiscal year 2009.

Interest Expense

Fiscal year 2010 interest expense of $17.8 million increased 11 percent from $16.1 million in fiscal year 2009. Interest on substantially all of our debt was at a fixed rate. The increase in interest expense is attributable to the $3.0 million decrease in the amount of interest capitalized associated with ongoing construction projects during fiscal year 2010 as compared with fiscal year 2009 which was offset by the reductions in outstanding debt related to current year repayments.

Other Income, Net

Other income for fiscal year 2010 was $10.8 million as compared with $15.1 million a year ago. The decrease principally reflected lower returns on invested cash balances and less foreign exchange gains in fiscal year 2010 as compared with fiscal year 2009.

Income Taxes

Our effective tax rate (income tax expense as a percent of income before taxes) for fiscal year 2010 was 55.3 percent as compared to 24.0 percent in fiscal year 2009. The fiscal year 2010 tax rate was higher than the statutory rate of 35 percent, primarily due to the following items. We recorded an income tax expense charge in the amount of $5.9 million to reduce the value of the Company’s deferred tax asset previously established for anticipated retiree health care liabilities. Offsetting this amount, there was a reduction in income tax expense in the amount of $3.2 million due to the reversal of certain unrecognized tax benefits as a result of the completion of certain tax examinations. Our lower taxable income level also resulted in our permanent book to tax differences having a more significant impact on the effective tax rate.

The fiscal year 2009 tax rate was lower than the statutory rate of 35 percent, primarily due to the following items. We recorded a reduction in income tax expense in the amount of $3.5 million or 5.6 percent of pre-tax income related to research and development tax credits. In addition, there was a reduction in income tax expense in the amount of $3.3 million or 5.2 percent which was primarily due to the reversal of certain unrecognized tax benefits due to the lapse of certain statutes of limitations. These items were partially offset by an increase in tax expense in the amount of $4.6 million or 7.4 percent related to additional valuation allowance on deferred tax assets for state net operating losses. Our lower taxable income level generated a more significant impact on the effective tax rate for these items.

Business Segment Results

Advanced Metals Operations Segment

Net sales in fiscal year 2010 for the AMO segment were $853.0 million, as compared with $957.4 million in fiscal year 2009. Excluding surcharge revenues, sales decreased 10 percent from a year ago. The fiscal year 2010 net sales reflected an increase in pounds shipped of 8 percent as compared to fiscal year 2009. The results reflects higher demand in the automotive, industrial and consumer markets more than offset by an unfavorable shift in product mix.

Operating income for the AMO segment in fiscal year 2010 was $11.8 million, or 1.4 percent of net sales (1.7 percent of net sales excluding surcharge revenues), compared to $34.1 million, or 3.6 percent of net sales (4.5 percent of net sales excluding surcharge revenues), for fiscal year 2009. The decrease in operating income reflects an unfavorable shift in product mix during fiscal year 2010, as compared to fiscal year 2009. In addition, fiscal year 2009 operating income included the positive impacts of the lag effect of the surcharge mechanism as compared with a negative impact of the lag effect in fiscal year 2010.

Premium Alloys Operations Segment

Net sales for fiscal year 2010 for the PAO segment decreased 16 percent to $348.3 million as compared with $413.2 million for fiscal year 2009. Excluding surcharge revenues, net sales decreased 20 percent on 16 percent lower shipment volumes. Both the sales and shipment volume decreases were due to lower demand, particularly in our energy end use market.

Operating income for the PAO segment for fiscal year 2010 was $71.2 million, or 20.4 percent of net sales (28.6 percent of net sales excluding surcharge revenues), as compared with $76.9 million, or 18.6 percent of net sales (24.7 percent of net sales excluding surcharge revenues) for fiscal year 2009. The decrease in operating income principally reflects the lower shipment volume in the current year as well as an unfavorable shift in product mix. In addition, fiscal year 2009 operating income included negative impacts related to the timing of raw material hedges as compared with no significant impacts from the timing of raw material hedges in fiscal year 2010.

Liquidity and Capital Resources

We have the ability to generate cash to meet our needs through cash flow from operations, management of working capital and the availability of outside sources of financing to supplement internally generated funds. We believe that our cash and cash equivalents and short-term marketable securities of approximately $523 million as of June 30, 2011, together with cash generated from operations and available borrowing capacity of approximately $347 million under our credit facilities, will be sufficient to fund our operating activities, planned capital expenditures, the Latrobe acquisition and other obligations for the foreseeable future.

As of June 30, 2011, we had cash and cash equivalents of approximately $92 million held at various foreign subsidiaries. Our global cash deployment considers, among other things, the geographic location of our subsidiaries’ cash balances, the locations of our anticipated liquidity needs, and the cost to access international cash balances, as necessary. The repatriation of cash from certain foreign subsidiaries could have adverse tax consequences as we may be required to pay and record U.S. income taxes and foreign withholding taxes in various tax jurisdictions on these funds to the extent they were previously considered permanently reinvested.

On June 28, 2011, we issued $250 million of 5.20% senior notes due 2021. We expect to use the net proceeds to repay $100 million in principal amount of the medium term notes, Series C, at 7.625% due August 2011. We intend to use the remaining net proceeds for general corporate purposes, which may include additions to working capital, capital expenditures, repayment of debt, the financing of acquisitions, joint ventures and other business combination opportunities or stock repurchases.

On June 21, 2011, we entered into a new $350 million syndicated credit facility (“Credit Agreement”). This five year Credit Agreement replaced the Company’s previous revolving credit facility, dated as of November 29, 2009, which had been set to expire in November 2012. As of June 30, 2011, we had $3.5 million of issued letters of credit under the revolving credit facility. The balance of the revolving credit facility ($346.5 million) remains available to us. The revolving credit facility contains financial covenants, including maintenance of an interest coverage ratio and a debt-to-capital ratio.

As of June 30, 2011, we were in compliance with all the covenants of the credit facility. The following table shows our actual ratio performance with respect to the financial covenants, as of June 30, 2011:


	Covenant Requirement	Actual Ratio
Consolidated interest coverage	3.25 to 1.00 (minimum)	13.91 to 1.00
Consolidated debt to capital	55% (maximum)	40%

During the fiscal year 2011, our free cash flow, which we define under “Non-GAAP Financial Measures” below, was negative $88.9 million as compared to positive $40.1 million for the same period a year ago. The decrease in free cash flow in fiscal year 2011 as compared with the prior year principally reflects higher net income levels in fiscal year 2011 more than offset by the cash used in the Amega West and Oilfield Alloys acquisitions, increased investments in capital expenditures and higher working capital levels related to strong business growth.

Purchases of property, plant and equipment and software were $79.6 million for fiscal year 2011 as compared with $44.2 million for the prior year.

Dividends for the fiscal year 2011 were $32.1 million, as compared with $31.9 million in the prior year, and were paid at the same quarterly rate of $0.18 per share of common stock in both periods.

For fiscal years 2011, 2010 and 2009, interest cost totaled $17.6 million, $18.8 million, and $20.1 million, respectively, of which $0.5 million, $1.0 million, and $4.0 million, respectively, were capitalized as part of the cost of plant, equipment and software.

Non-GAAP Financial Measures

The following provides 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.

Net Pension Expense Per Diluted Share


	Fiscal Year
($ in millions, except per share data)	2011			2010			2009
Net periodic benefit costs
Pension plans	$	54.0		$	54.3		$	18.3
Other postretirement benefit plans		6.8			7.0			2.3

		60.8			61.3			20.6
Income tax benefit		(23.2	)		(23.7	)		(8.8	)

Net pension expense	$	37.6		$	37.6		$	11.8


Weighted average diluted common shares		44.7			44.4			44.2


Net pension expense per diluted share	$	0.84		$	0.85		$	0.27

Management believes that net pension expense per diluted share is helpful in analyzing the operational performance of the Company from period to period as net pension expense has been volatile due to changes in the financial markets, which may result in significant fluctuations in operating results from year to year.

Net Sales and Gross Margin Excluding Surcharges

This report includes discussions of net sales and gross margin as adjusted to exclude the impact of raw material surcharges, which represent financial measures that have not been determined in accordance with U.S. GAAP. We present and discuss these financial measures because management believes removing the impact of raw material surcharges from net sales and gross margin provides a more consistent basis for comparing results of operations from period to period for the reasons discussed earlier in this report. See our earlier discussion of gross profit for a reconciliation of net sales and gross margin excluding surcharges to net sales as determined in accordance with U.S. GAAP.

Operating Income and Operating Margin Excluding Surcharges, Pension EID Expense and Restructuring Costs

This report includes discussions of operating income and operating margin as adjusted to exclude the impact of raw material surcharges, pension EID expense and restructuring costs, which represent financial measures that have not been determined in accordance with U.S. GAAP. We present and discuss these financial measures because management believes removing the impact of raw material surcharges from net sales provides a more consistent and meaningful basis for comparing results of operations from period to period for the reasons discussed earlier in this report. In addition, management believes that excluding pension earnings, interest and deferrals expense and non-recurring restructuring costs from operating income and operating margin is helpful in analyzing our operating performance particularly as pension EID expense may be volatile due to changes in the financial markets. See our earlier discussion of operating income for a reconciliation of operating income and operating margin excluding pension EID expense and non-recurring restructuring costs to operating income and operating margin determined in accordance with U.S. GAAP.

Free Cash Flow

The following provides a reconciliation of free cash flow, as used in this annual report, to its most directly comparable U.S. GAAP financial measures.


	Fiscal Year
($ in millions)	2011			2010			2009
Net cash provided from operating activities	$	64.2		$	115.2		$	145.5
Purchases of property, equipment and software		(79.6	)		(44.2	)		(116.3	)
Dividends paid		(32.1	)		(31.9	)		(31.5	)
Proceeds from disposals of plant and equipment		1.1			1.0			0.1

Free cash flow excluding impact of sales and acquisition of businesses		(46.4	)		40.1			(2.2	)
Net proceeds from sales of businesses		—			—			13.4
Proceeds received from sale of non-controlling interest		9.1			—			—
Acquisition of equity method investment		(6.2	)		—			—
Acquisition of businesses, net of cash acquired		(45.4	)		—			—

Free cash flow	$	(88.9	)	$	40.1		$	11.2

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. It is management’s current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Free cash flow is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, cash flows calculated in accordance with U.S. GAAP.

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, pensions and other postretirement benefits, contingencies and litigation, environmental liabilities, and derivative instruments and hedging activities.

We believe the following are the critical accounting policies and areas affected by significant judgments and estimates impacting the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts

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 evaluations of our customers and monitor their payment patterns. Should the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. The cost of inventories is primarily determined using the LIFO method. Costs include direct materials, direct labor and applicable manufacturing overhead, and other direct costs. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials and other costs may have been incurred at significantly different values due to the length of time of our production cycle. The prices for many of the raw materials we use have been volatile. Since we value most of our inventory utilizing the LIFO inventory costing methodology, rapid changes in raw material costs have an impact on our operating results. In a period of rising prices, cost of sales expense recognized under LIFO is generally higher than the cash costs incurred to acquire the inventory sold. Conversely, in a period of declining raw material prices, cost of sales recognized under LIFO is generally lower than cash costs incurred to acquire the inventory sold.

Since the LIFO inventory valuation methodology is designed for annual determination, interim estimates of the annual LIFO valuation are required. We recognize the effects of the LIFO inventory valuation method on an interim basis by estimating the expected annual LIFO cost based on cost changes to date. These projections of annual LIFO inventory valuation reserve changes are updated quarterly and are evaluated based upon material, labor and overhead costs.

Pension and Other Postretirement Benefits

The amount of the pension 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 the discount rate and the expected 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 the Bond:Link interest rate model based upon a portfolio of highly rated U.S. corporate bonds with individual bonds that are theoretically purchased to settle the plan’s anticipated cash outflows. 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. If the assumed long-term rate of return on plan assets was changed by 0.25 percent, the net pension expense would change by approximately $1.8 million. If the discount rate was changed by 0.25 percent, the net pension expense would change by approximately $2.0 million.

Long-Lived Assets

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

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 principally upon discounted cash flow analysis and using market multiples for comparable companies as well as recently completed transactions. 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. We tested our goodwill for impairment as of June 30, 2011 and determined that goodwill had not been impaired. If global economic conditions worsen or are prolonged, changes in anticipated discounted cash flows and comparable market multiples could have significant impact on whether or not goodwill is impaired and the amount of impairment.

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.

Income Taxes

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, or differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits (assets) or costs (liabilities) to be recognized when those temporary differences reverse. We evaluate on a quarterly basis whether, based on all available evidence, we believe that our deferred income tax assets will be realizable. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax assets will not be realized. The evaluation includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. Future realization of deferred income tax assets ultimately depends upon the existence of sufficient taxable income within the carryback, carryforward period available under tax law.

Management determines whether a tax position should be recognized in the financial statements by evaluating whether it is more-likely-than-not that the tax position will be sustained upon examination by the tax authorities based upon the technical merits of the position. For those tax positions which should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Interest and penalties on estimated liabilities for uncertain tax positions are recorded as components of the provision for income taxes.

Derivative Financial Instruments

Our current risk management strategies include the use of derivative instruments to reduce certain risks. The critical strategies include: (1) the use of commodity forward contracts 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 forward contracts 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 commodity forwards and foreign currency forwards 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. The unrealized gains or losses are reclassified to the income statement when the hedged transaction affects earnings or if the anticipated transactions were no longer expected to occur. We have used interest rate swaps to maintain a certain level of floating rate debt relative to fixed rate debt. Interest rate swaps have been designated as fair value hedges. Accordingly, the mark-to-market values of both the interest rate swap and the underlying debt obligations were recorded as equal and offsetting gains and losses in the interest expense component of the consolidated statement of income. We have also used forward interest rate swaps to manage the risk of cash flow variability associated with fixed interest debt expected to be issued. We evaluate all derivative instruments each quarter to determine that they are highly effective. Any ineffectiveness is recorded in our consolidated statement of income. We also use foreign currency forward contracts to protect certain short-term asset positions denominated in foreign currency against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other income and expense.

New Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 21, Summary of Significant Accounting Policies, to Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data.”

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the periods presented.

Contractual Obligations

At June 30, 2011, we had the following contractual obligations and other commercial commitments and contingencies:


			Fiscal Year										There-
	Total		2012		2013		2014		2015		2016		after
($ in millions)
Long-term debt ⁽¹⁾	$	506.0	$	100.0	$	101.0	$	—	$	—	$	—	$	305.0
Estimated interest payments ⁽²⁾		161.2		24.5		22.7		16.9		16.9		16.9		63.3
Operating leases		19.8		6.6		4.2		2.8		2.4		1.1		2.7
Pension plan contributions ⁽³⁾		169.1		27.7		46.1		26.6		24.3		15.1		29.3
Accrued post-retirement benefits ⁽⁴⁾		143.8		12.8		13.2		13.7		14.1		14.4		75.6
Purchase obligations ⁽⁵⁾		210.6		175.2		25.2		10.2		—		—		—
Pension benefits ⁽⁶⁾		31.0		3.1		3.1		3.1		3.2		3.3		15.2

Total	$	1,241.5	$	349.9	$	215.5	$	73.3	$	60.9	$	50.8	$	491.1

⁽¹⁾	Refer to Note 9 of Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data.” In addition, we had $3.5 million of outstanding letters of credit as of June 30, 2011.

⁽²⁾	Estimated interest payments for long-term debt were calculated based on the applicable rates and payment dates.

⁽³⁾

Pension plan contributions represent required minimum contributions for the plan year beginning January 1, 2011 and quarterly installment contributions for plan year beginning January 1, 2012. These amounts were calculated based on actuarial valuations as prescribed by pension funding regulations in the United States. Estimated fiscal year contributions have been included through fiscal year 2019. The actual required pension contributions in future periods are dependent on actuarial valuations to be prepared in future periods.

⁽⁴⁾	Postretirement benefits for certain plans are paid from corporate assets. There is no guarantee that future payments will be paid from corporate assets rather than plan assets.

⁽⁵⁾

We have entered into purchase commitments primarily for various key raw materials and equipment purchases at market related prices, all made in the normal course of business. The commitments include both fixed and variable price provisions. We used June 30, 2011 raw material prices for commitments with variable pricing.

⁽⁶⁾	Pension benefits for certain plans are paid from corporate assets. There is no guarantee that future payments will be paid from corporate assets rather than plan assets.

As of June 30, 2011, the noncurrent portion of our income tax liabilities, including accrued interest and penalties related to unrecognized tax benefits was approximately $0.5 million. The settlement period for these income tax liabilities cannot be determined and were therefore excluded from the table above.

Market Sensitive Instruments and Risk Management

See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for discussion of market sensitive instruments and associated market risk for Carpenter.

Contingencies

Environmental

We are subject to various federal, state, local and international 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 our 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 and other third party owned 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 PRP’s at these Superfund sites has been determined. The liability for future environmental remediation costs is evaluated on a quarterly basis. We accrue amounts for environmental remediation costs that represent our best estimate of the probable and reasonably estimable costs related to environmental remediation. During fiscal year 2011, there were no changes to the environmental liability. During fiscal year 2010, we decreased the liabilities recorded for environmental remediation costs by approximately $2.0 million for two environmental remediation sites. During fiscal year 2009, we increased the liabilities recorded for environmental remediation costs by approximately $2.0 million for one environmental remediation site. The liabilities recorded for environmental remediation costs at Superfund sites, at other third party-owned sites and at company-owned current or former operating facilities remaining at June 30, 2011 and 2010, was $4.9 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 our financial position, results of operations or cash flows over the long-term. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.

Boarhead Farm

In June 2002, we were named as a defendant in a lawsuit filed by a group of plaintiffs in the District Court for the Eastern District of Pennsylvania titled Boarhead Farm Agreement Group v. Advanced Environmental Technology Corporation et. al. (since amended to include the individual members). The suit alleges that we and the other named defendants contributed to damages caused at Boarhead Farms, a Superfund site located in Bridgeton, Pennsylvania. The Boarhead Farms site was the home of a now defunct chemical and waste hauling company that we and many other companies engaged to dispose of certain wastes during the 1970’s. The plaintiff group was individually named as PRP’s for the Boarhead site in the EPA’s “Record of Decision” in November 1998. Their June of 2002 lawsuit against various defendants, including Carpenter, sought contributions for a portion of costs incurred for various site cleanup activities as well as contributions to future cleanup efforts. The suit went to trial in June 2008. Prior to trial, all of the named co-defendants, except for Carpenter, reached an out of court settlement with the plaintiffs. We denied the claims made by the plaintiff group. On August 18, 2008, the Court awarded the plaintiffs judgment against us for 80 percent of the plaintiffs’ past costs of remediating the site, including prejudgment interest from June 18, 2002 to January 1, 2008, and held us liable for 80 percent of future costs of the cleanup activities at the site. We appealed the Court’s decision and oral arguments took place before the United States Court of Appeals for the Third Circuit on December 17, 2009. On April 12, 2010, the Court of Appeals for the Third Circuit vacated the previous judgment by the District Court and remanded the case for further proceedings. As of June 30, 2011 and June 30, 2010, we recorded a liability related to this case of $21.8 million. On July 19, 2011, we entered into a settlement agreement providing

for a dismissal of the lawsuit against us and a complete release in our favor by all parties to the litigation, in exchange for a payment by us of $21.8 million. On August 16, 2011, the settlement was approved by the Court.

Duty Drawback

Historically, we have participated in a program offered by U.S. Customs and Border Protection (“U.S. Customs”) known as duty drawback. Under the program, we claimed a refund of import duties on items manufactured and exported to customers in foreign countries. Certain vendors prepared certificates authorizing us to claim duty drawback refunds against imported goods purportedly shipped by the vendor to us. Because of the complexity of the program, we engaged a licensed U.S. customs broker specializing in duty drawback claims. The customs broker was responsible for performing the administration of the process which included maintaining and collecting various forms of supporting evidence for each claim including collecting appropriate certificates from vendors, as well as preparing and submitting the refund claims.

In fiscal year 2008, we received notice from U.S. Customs that we were under investigation related to claims previously filed by the customs broker on our behalf. The investigation alleged certain discrepancies and a lack of supporting documentation for the claims that had been filed by the broker. We initiated an internal review of the claims filed with U.S. Customs to determine the extent of claims that may have inadequate supporting documentation. We also engaged a new licensed U.S. customs broker. We have cooperated fully with the investigation of this matter and are currently engaged in settlement discussions with U.S. Customs.

Based on current facts we believe that the reserve recorded of $0.4 million as of June 30, 2011, together with an advance payment of $0.7 million paid to U.S. Customs paid during settlement discussions in fiscal year 2010, is a reasonable estimate of the probable settlement necessary to fully resolve this matter. We do not expect that any additional material liabilities will be incurred related to this matter.

Export Regulations Violations

In fiscal year 2008, we became aware of potential violations of federal export regulations at a business unit that was divested. Upon investigation, we discovered that approximately 40 foreign nationals employed over time at the business unit’s facility may have been exposed to protected technical data related to the production of various products for military applications. An export license from the Department of State and the Department of Commerce is required prior to the exporting of technical data for military applications. We have applied for and received similar applications for other business units, but did not have such a license for the divested business unit. Violations of federal export regulations can be subject to civil penalties depending upon the severity of the violation. We filed voluntary disclosures with the Department of State and the Department of Commerce before the divestiture of the business unit on March 31, 2008. The Department of State responded to the voluntary disclosure without assessing civil penalties. The Department of Commerce has not yet responded to the voluntary disclosure. It is not possible to determine the amount, if any, of civil penalties that may be assessed by the Department of Commerce. As a result, we have not recorded any liability for potential penalties as of June 30, 2011.

Other

We are defending various routine claims and legal actions that are incidental to our business, and we are subject to contingencies that are common to our operations, including those pertaining to product claims, commercial disputes, employment actions, employee benefits, compliance with domestic and foreign laws, personal injury claims and tax issues. We provide for costs relating to these matters when a loss is probable and the amount of the loss 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, we believe that the total liability from these matters will not have a material effect on our financial position, results of operations or cash flows over the long-term. However, there can be no assurance that an increase in the scope of pending matters or

that any future lawsuits, claims, proceedings or investigations will not be material to our financial position, results of operations or cash flows in a particular future quarter or year.

Forward Looking Statements

This Annual Report on 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, earnings and liquidity associated with continued growth in various market segments and cost reductions expected from various initiatives. 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, and they include but are not limited to: 1) the ability to successfully close the Latrobe Specialty Metals, Inc. transaction and the synergies, costs and other anticipated financial impacts of the transaction; 2) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, industrial, automotive, consumer, medical, and energy, or other influences on Carpenter’s business such as new competitors, the consolidation of competitors, customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; 3) the ability of Carpenter to achieve cost savings, productivity improvements or process changes; 4) the ability to recoup increases in the cost of energy, raw materials, freight or other factors; 5) domestic and foreign excess manufacturing capacity for certain metals; 6) fluctuations in currency exchange rates; 7) the degree of success of government trade actions; 8) the valuation of the assets and liabilities in Carpenter’s pension trusts and the accounting for pension plans; 9) possible labor disputes or work stoppages; 10) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; 11) the ability to successfully acquire and integrate acquisitions; 12) the availability of credit facilities to Carpenter, its customers or other members of the supply chain; 13) the ability to obtain energy or raw materials, especially from suppliers located in countries that may be subject to unstable political or economic conditions; 14) our manufacturing processes are dependent upon highly specialized equipment located primarily in one facility in Reading, Pennsylvania for which there may be limited alternatives if there are significant equipment failures or catastrophic event; and 15) our future success depends on the continued service and availability of key personnel, including members of our executive management team, management, metallurgists and other skilled personnel and the loss of these key personnel could affect our ability to perform until suitable replacements are found. 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

We use derivative financial instruments to reduce certain types of financial risk. Firm price sales arrangements involve a risk of profit margin fluctuations particularly as raw material prices have been volatile. As discussed in Item 7, in order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the products sold under the firm price sales arrangements. If a customer fails to perform its obligations under the firm price sales arrangements, we may realize losses as a result of the related commodity forward contracts. These customers have historically performed under these arrangements and we believe that they will honor such obligations in the future, notwithstanding the exceptional nature of the current economic conditions.

We are actively involved in managing risks associated with energy resources. Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources. In addition, we have used forwards and options to fix the price of a portion of our anticipated future purchases of certain energy requirements to protect against the impact of significant increases in energy costs. We also use surcharge mechanisms to offset a portion of these charges where appropriate.

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

We have used interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate. We have also entered into forward swap contracts to manage the risk of cash flow variability associated with fixed interest debt expected to be issued to refinance the $100 million of fixed rate debt scheduled to mature in August 2011. These forward swap contracts were terminated upon issuance of the $250 million bonds in June 2011.

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.

Our pension plan assets are invested in different asset classes including large-, mid- and small-cap growth and value funds, index and international equity funds, short-term and medium-term duration fixed-income funds and high yield funds. The plan’s current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income securities.

The status of our financial instruments as of June 30, 2011 is provided in Note 17 to the consolidated financial statements included in Item 8.,“Financial Statements and Supplementary Data.” Assuming on June 30, 2011, (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 and, (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.

Future Outlook

Demand growth remains strong in our strategic end markets. Several of our largest customers are seeking to expand and extend our supply contracts. We expect our net sales, excluding sales generated as a result of the Latrobe acquisition, to grow by more than 10 percent in fiscal year 2012. Operating income, excluding pension EID and costs associated with the Latrobe acquisition, on our base business should be approximately 50 percent higher than fiscal year 2011. We anticipate that the full-year tax rate will be 33 percent and interest expense should be about $7 million higher based on $150 million of incremental debt.

Free cash flow, excluding the impacts of acquisitions, is expected to be slightly negative after factoring in higher capital spending of about $200 million aimed at capacity expansion, and a modest increase in working capital to support business growth.

We are also excited about the Latrobe acquisition as it plays an important role in our growth strategy. Latrobe has a well-positioned business portfolio that is also benefiting from strong customer demand. We expect the combined business will enable production efficiencies which will result in expanded production capacity The combined entities also have a larger critical mass to justify the next major increment of premium capacity expansion. The Latrobe acquisition, including transactions costs, should be accretive in year one depending on the closing date, and strongly accretive in later years with the benefit of significant synergies.

Item 8.

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary Data


		Page
Consolidated Financial Statements:

Management’s Responsibilities for Financial Reporting		45

Management’s Report on Internal Control Over Financial Reporting		45

Report of Independent Registered Public Accounting Firm		46

Consolidated Statements of Income for the Years Ended June 30, 2011, 2010 and 2009		47

Consolidated Statements of Cash Flows for the Years Ended June 30, 2011, 2010 and 2009		48

Consolidated Balance Sheets as of June 30, 2011 and 2010		49

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 30, 2011, 2010 and 2009		50 - 51

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended June 30, 2011, 2010 and 2009		51

Notes to Consolidated Financial Statements		52 - 91

Supplementary Data:

Quarterly Financial Data (Unaudited)		92 -93

Schedule II		105

Management’s Responsibilities for Financial Reporting

Management prepared the financial statements included in this Annual Report on Form 10-K and is responsible for their integrity and objectivity. The statements were prepared in conformity with accounting principles generally accepted 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 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. We believe Carpenter’s system of internal controls provides this appropriate balance. The system of internal controls and compliance is continually monitored by Carpenter’s internal audit staff.

The Audit/Finance Committee of the Board of Directors, composed of independent directors, meets regularly with management, Carpenter’s internal auditors and our independent registered public accounting firm to consider audit results and to discuss significant internal control, auditing and financial reporting matters. Both the independent registered public accounting firm and internal auditors have unrestricted access to the Audit/Finance Committee.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Carpenter’s internal control over financial reporting as of June 30, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework . Based on its assessment, management concluded that, as of June 30, 2011, Carpenter’s internal control over financial reporting is effective based on those criteria.

The effectiveness of Carpenter’s internal control over financial reporting as of June 30, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing herein.

/s/ William A. Wulfsohn

William A. Wulfsohn

President and Chief Executive Officer

/s/ K. Douglas Ralph

K. Douglas Ralph

Senior Vice President and Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of Carpenter Technology Corporation

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Carpenter Technology Corporation and its subsidiaries at June 30, 2011 and June 30, 2010, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(1) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

August 24, 2011

Consolidated Statements of Income

Carpenter Technology Corporation

For the Years Ended June 30, 2011, 2010 and 2009


($ in millions, except per share data)	2011			2010			2009

NET SALES	$	1,675.1		$	1,198.6		$	1,362.3
Cost of sales		1,426.1			1,053.8			1,155.1

Gross profit		249.0			144.8			207.2

Selling, general and administrative expenses		149.5			133.1			133.8
Acquisition related costs		3.1			—			—
Restructuring charges		—			—			9.4

Operating income		96.4			11.7			64.0

Interest expense		(17.1	)		(17.8	)		(16.1	)
Other income, net		8.5			10.8			15.1


Income before income taxes		87.8			4.7			63.0
Income tax expense		16.1			2.6			15.1


Net income		71.7			2.1			47.9

Less: net income attributable to noncontrolling interest		(0.7	)		—			—


NET INCOME ATTRIBUTABLE TO CARPENTER	$	71.0		$	2.1		$	47.9


EARNINGS PER COMMON SHARE:
Basic	$	1.59		$	0.04		$	1.08

Diluted	$	1.59		$	0.04		$	1.08


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		44.1			43.9			43.9

Diluted		44.7			44.4			44.2

See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows

Carpenter Technology Corporation

For the Years Ended June 30, 2011, 2010 and 2009


($ in millions)	2011			2010			2009

OPERATING ACTIVITIES
Net income	$	71.7		$	2.1		$	47.9
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization		66.5			59.1			52.7
Deferred income taxes		(5.0	)		(0.9	)		16.4
Net pension expense		60.8			61.3			20.6
Net loss on disposal of property and equipment		0.8			2.0			1.7
Pension contribution		(3.9	)		—			—
Changes in working capital and other:
Accounts receivable		(56.9	)		(62.5	)		144.0
Inventories		(116.1	)		(19.1	)		13.4
Other current assets		6.4			24.2			(26.7	)
Accounts payable		34.5			60.8			(85.7	)
Accrued liabilities		4.6			13.4			(33.5	)
Other, net		0.8			(25.2	)		(5.3	)

Net cash provided from operating activities		64.2			115.2			145.5

INVESTING ACTIVITIES
Purchases of property, equipment and software		(79.6	)		(44.2	)		(116.3	)
Proceeds from disposals of property and equipment		1.1			1.0			0.1
Net proceeds from sales of businesses		—			—			13.4
Acquisition of businesses, net of cash acquired		(45.4	)		—			—
Acquisition of equity method investment		(6.2	)		—			—
Purchases of marketable securities		(91.3	)		(145.0	)		(49.5	)
Proceeds from sales and maturities of marketable securities		166.0			55.3			44.8

Net cash used for investing activities		(55.4	)		(132.9	)		(107.5	)

FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net of offering costs		247.4			—			—
Payments on long-term debt assumed in acquisition of business		(12.4	)		—			—
Payments on long-term debt		—			(20.0	)		(23.0	)
Proceeds received from sale of noncontrolling interest		9.1			—			—
Dividends paid		(32.1	)		(31.9	)		(31.5	)
Payments of debt issue costs		(1.4	)		(2.0	)		—
Purchases of treasury stock		—			—			(46.1	)
Tax benefits on share-based compensation		1.7			0.2			—
Proceeds from stock options exercised		1.6			0.2			0.1

Net cash provided from (used for) financing activities		213.9			(53.5	)		(100.5	)

Effect of exchange rate changes on cash and cash equivalents		4.4			(3.5	)		(0.7	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		227.1			(74.7	)		(63.2	)
Cash and cash equivalents at beginning of year		265.4			340.1			403.3

Cash and cash equivalents at end of year	$	492.5		$	265.4		$	340.1

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets

Carpenter Technology Corporation

June 30, 2011 and 2010


($ in millions, except share data)	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	492.5		$	265.4
Marketable securities		30.5			105.2
Accounts receivable, net of allowance for doubtful accounts of $2.7 million at June 30, 2011 and 2010		259.4			188.5
Inventories		328.6			203.6
Deferred income taxes		14.9			21.5
Other current assets		31.7			36.0

Total current assets		1,157.6			820.2
Property, plant and equipment, net		662.9			617.5
Goodwill		44.9			35.2
Other intangibles, net		30.0			17.6
Deferred income taxes		—			16.2
Other assets		96.5			76.5

Total assets	$	1,991.9		$	1,583.2


LIABILITIES
Current liabilities:
Accounts payable	$	170.5		$	130.5
Accrued liabilities		124.9			87.6
Current portion of long-term debt		100.0			—

Total current liabilities		395.4			218.1
Long-term debt, net of current portion		407.8			259.6
Accrued pension liabilities		188.5			322.6
Accrued postretirement benefits		108.7			146.7
Deferred income taxes		48.3			—
Other liabilities		67.2			62.8

Total liabilities		1,215.9			1,009.8


Contingencies and commitments (see Note 12)

STOCKHOLDERS’ EQUITY
Common stock – authorized 100,000,000 shares; issued 54,730,291 shares at June 30, 2011 and 54,644,401 shares at June 30, 2010; outstanding 44,107,380 shares at June 30, 2011 and 43,967,084 shares at June 30, 2010		273.7			273.2
Capital in excess of par value		235.4			223.3
Reinvested earnings		1,022.1			983.2
Common stock in treasury (10,622,911 shares and 10,677,317 shares at June 30, 2011 and 2010, respectively), at cost		(532.2	)		(535.2	)
Accumulated other comprehensive loss		(233.3	)		(371.1	)

Total Carpenter stockholders’ equity		765.7			573.4

Noncontrolling interest		10.3			—

Total equity		776.0			573.4

Total liabilities and equity	$	1,991.9		$	1,583.2

See accompanying notes to consolidated financial statements.

Consolidated Statement of Changes in Stockholders’ Equity

Carpenter Technology Corporation

For the Years Ended June 30, 2011, 2010 and 2009


	Carpenter Stockholders’ Equity
	Common Stock
($ in millions, except per share data)	Par Value Of $5		Capital in Excess of Par Value			Reinvested Earnings			Common Stock in Treasury			Accumulated Other Comprehensive Loss			Noncontrolling interest		Total Equity
Balances at June 30, 2008	$	273.0	$	197.5		$	996.6		$	(484.0	)	$	(143.9	)	$	—	$	839.2

Net income							47.9											47.9
Pension and post-retirement benefits, net of tax													(176.4	)				(176.4	)
Net losses on derivative instruments, net of tax													(5.9	)				(5.9	)
Foreign currency translation													(20.3	)				(20.3	)
Purchase of treasury stock										(46.1	)							(46.1	)
Cash Dividends:
Common @ $0.72 per share							(31.5	)										(31.5	)
Share-based compensation plans				10.4						(1.4	)							9.0
Uncertain tax positions adjustments				3.5														3.5
Stock options exercised		0.1																0.1
Tax shortfall on share-based compensation				(2.5	)													(2.5	)

Balances at June 30, 2009		273.1		208.9			1,013.0			(531.5	)		(346.5	)		—		617.0

Net income							2.1											2.1
Pension and post-retirement benefits, net of tax													(29.7	)				(29.7	)
Net gain on derivative instruments, net of tax													14.9					14.9
Unrealized loss on marketable securities, net of tax													(0.5	)				(0.5	)
Foreign currency translation													(9.3	)				(9.3	)
Cash Dividends:
Common @ $0.72 per share							(31.9	)										(31.9	)
Share-based compensation plans				10.2						(3.7	)							6.5
Uncertain tax positions adjustments				5.0														5.0
Stock options exercised		0.1		0.1														0.2
Tax shortfall on share-based compensation				(0.9	)													(0.9	)

Balances at June 30, 2010		273.2		223.3			983.2			(535.2	)		(371.1	)		—		573.4

Net income							71.0									0.7		71.7
Pension and post-retirement benefits, net of tax													116.8					116.8
Net gain on derivative instruments, net of tax													5.0					5.0
Foreign currency translation													16.0			0.5		16.5
Proceeds received from sale of non-controlling interest																9.1		9.1
Cash Dividends:
Common @ $0.72 per share							(32.1	)										(32.1	)
Share-based compensation plans				8.3						3.0								11.3
Uncertain tax positions adjustments				1.4														1.4
Stock options exercised		0.5		1.1														1.6
Tax windfall on share-based compensation				1.3														1.3

Balances at June 30, 2011	$	273.7	$	235.4		$	1,022.1		$	(532.2	)	$	(233.3	)	$	10.3	$	776.0

See accompanying notes to consolidated financial statements.

Consolidated Statement of Changes in Stockholders’ Equity (continued)

Carpenter Technology Corporation

For the Years Ended June 30, 2011, 2010 and 2009


	Common Shares
	Issued		Treasury			Net Outstanding

Balances at June 30, 2008		54,608,142		(9,312,372	)		45,295,770
Stock options exercised		6,700		—			6,700
Share-based compensation plans		—		(54,545	)		(54,545	)
Purchases of treasury stock		—		(1,218,900	)		(1,218,900	)

Balances at June 30, 2009		54,614,842		(10,585,817	)		44,029,025
Stock options exercised		29,559		—			29,559
Share-based compensation plans		—		(91,500	)		(91,500	)

Balances at June 30, 2010		54,644,401		(10,677,317	)		43,967,084
Stock options exercised		85,890		—			85,890
Share-based compensation plans		—		54,406			54,406

Balances at June 30, 2011		54,730,291		(10,622,911	)		44,107,380

Consolidated Statements of Comprehensive Income (Loss)

Carpenter Technology Corporation

For the years ended June 30, 2011, 2010 and 2009


($ in millions)	2011			2010			2009

Net income	$	71.7		$	2.1		$	47.9
Other comprehensive income (loss), net of tax
Pension and post-retirement benefits, net of tax of $(71.5), $23.5, and $110.3, respectively		116.8			(29.7	)		(176.4	)
Net gain (loss) on derivative instruments, net of tax of $(3.1), $(9.2), and $3.7, respectively		5.0			14.9			(5.9	)
Unrealized gain (loss) on marketable securities, net of tax of $(0.1), $0.3, $0.0 respectively		—			(0.5	)		—
Foreign currency translation		16.5			(9.3	)		(20.3	)

Comprehensive income (loss)		210.0			(22.5	)		(154.7	)
Comprehensive loss attributable to the noncontrolling interest		(1.2	)		—			—

Comprehensive income (loss) attributable to Carpenter	$	208.8		$	(22.5	)	$	(154.7	)

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 Statements of Income. As discussed in Note 3, effective November 1, 2010, the Company sold a 40 percent interest in Carpenter Powder Products AB. The financial results of Carpenter Powder Products AB are consolidated into the Company’s operating results and financial position, with the 40 percent interest of the noncontrolling partner recognized in the consolidated statement of income as net income attributable to noncontrolling interests and as equity attributable to the noncontrolling interest within total stockholders’ equity.

Revenue Recognition

Revenue, net of related discounts and allowances, is recognized when title and risk of loss has transferred to the customer, collectability is reasonably assured and pricing is fixed and determinable. This generally occurs when products are shipped.

Freight and Handling Fees and Costs

Freight and handling costs billed separately to customers are included as part of net sales, and freight and handling costs expensed are included as part of cost of sales on the consolidated statements of income.

Research and Development

Research and development expenditures, which amounted to $18.9 million, $17.8 million and $15.4 million in fiscal year 2011, 2010 and 2009, respectively, are expensed as incurred and are generally reported in cost of sales in the consolidated statement of income. 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.

Marketable Securities

Purchases and sales of marketable securities are recorded on a trade-date basis. Carpenter has determined that all of its marketable securities are to be classified as available-for-sale. These securities are carried at market value, with the unrealized gains and losses reported as a component of accumulated other comprehensive loss. Interest and dividends on securities classified as available-for-sale are included in other income, net.

Notes to Consolidated Financial Statements (continued)

Accounts Receivable

Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of outstanding amounts. Trade credit is extended based upon periodic evaluation of each customer’s ability to perform its obligations. The Company determines accounts receivable allowances based on an aging of accounts and a review of specific accounts identified as collection risks. The Company does not require collateral to secure accounts receivable.

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. As of June 30, 2011 and 2010, $84.7 million and $60.8 million of inventory, respectively, was accounted for using a method other than the LIFO method.

Property, Plant and Equipment 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 cost of goods sold in the consolidated statement of income.

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 7 years. Amortization expense charged to operations related to capitalized software amounted to $5.2 million, $4.4 million and $2.1 million for the years ended June 30, 2011, 2010 and 2009, respectively.

Goodwill

Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, is stated at cost. Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. The fair value is estimated using discounted cash flow and the use of market multiples valuation techniques. These valuation techniques require the use of estimates and assumptions related to projected operating results, capital expenditures and working capital levels as well as the cost of capital. 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.

Intangible assets

The costs of intangible assets, consisting principally of trademarks, trade names, non-compete arrangements and customer relationships are amortized on a straight-line basis over the estimated useful lives ranging from 5 to 30 years.

Notes to Consolidated Financial Statements (continued)

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

Derivative Financial Instruments

All derivative financial 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. The Company has utilized 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 international operations are translated into U.S. dollars at exchange rates in effect at year-end, and their income statements are translated at the average monthly exchange rates prevailing during the year. The resulting translation gains and losses are recorded each period as a component of accumulated other comprehensive income until the international entity is sold or liquidated. Gains and losses from transactions denominated in foreign currencies are reported in other income, net in the consolidated statement of income.

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.

Significant judgments, estimates and assumptions are required in determining tax return reporting positions and in calculating provisions for income tax, which are based on interpretations of tax regulations and accounting pronouncements. Liabilities are established for uncertain tax positions when it is more likely than not that such positions, if challenged would not be sustained upon review by taxing authorities. These liabilities are re-evaluated as tax regulations and facts and circumstances change, such as the closing of a tax audit or the expiration of the statute of limitations for a specific exposure.

Notes to Consolidated Financial Statements (continued)

Earnings per Share

The Company has certain nonvested restricted shares and units that are considered participating securities because the awards have the right to receive non-forfeitable dividends. Accordingly, the Company calculates basic earnings per share using the two class method. Under the two class method, earnings are allocated to common stock and participating securities according to their participation rights in dividends and undistributed earnings. The earnings available to each class of stock are divided by the weighted average number of shares for the period in each class. Because the participating securities have no obligation to share in net losses, losses are not allocated to the participating securities in this calculation.

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.

Share-Based Compensation

The Company has two share-based employee compensation plans, which are more fully described in detail in Note 16. The Company recognizes compensation cost based on the fair value of the awards on the date of grant. The compensation cost is recognized over the requisite service period of the award, which is generally the shorter of the vesting period that the holder is required to provide service, or the period from the grant date to the date on which the employee is eligible to retire. Upon retirement, as defined in the Company’s share-based compensation plans, outstanding awards are subject to certain accelerated vesting terms.

Concentration of Credit Risk

Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investments in marketable securities and trade receivables. Investment and cash management policies have been implemented that limit deposit concentrations and limit investments to investment grade securities. The risk with respect to trade receivables is mitigated by monitoring payment terms and periodic credit evaluations we perform on our customers, the short duration of our payment terms and by the diversification of our customer base. In fiscal years 2011 and 2010, one customer accounted for 10% of total net sales. No single customer accounted for more than 10% or more of total net sales in fiscal year 2009.

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 amounts in the consolidated financial statements and notes to consolidated financial statements for prior years have been reclassified to conform to the fiscal year 2011 presentation.

Notes to Consolidated Financial Statements (continued)

2.	Restructuring Charges

During the year ended June 30, 2009, the Company recorded $9.4 million of charges associated with the closure of our metal strip manufacturing facility in the United Kingdom (“UK”), which we announced in March 2009. The UK facility employed approximately 35 workers and manufactured soft magnetic nickel-iron and cobalt-iron alloys in strip and bar form. The UK manufacturing operations were historically included in our Advanced Metals Operation segment, and the restructuring charges have not been included in the segment operating results.

3.	Acquisition and Strategic Partnership

Acquisitions

Latrobe Specialty Metals, Inc.

On June 20, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire Latrobe Specialty Metals, Inc., a Delaware corporation (“Latrobe”). The closing of the merger is subject to the satisfaction or waiver of certain conditions.

According to the terms of the Merger Agreement, the Company will issue 8.1 million shares of the Company’s common stock to Latrobe’s stockholders, subject to certain adjustments for working capital and other items. The Company will assume all third party indebtedness incurred by Latrobe, and pay all fees and expenses incurred by Latrobe prior to the Merger in connection with prior proposed securities offerings; provided, however, if the amount of Latrobe’s indebtedness assumed by the Company exceeds $160 million, or the amount of Latrobe’s prior securities offering related expenses paid by the Company exceeds $4 million, such excess amounts shall reduce the number of shares of Company common stock to be issued to Latrobe’s stockholders. In addition, the Company will pay all transaction related expenses of Latrobe; provided, however, that any such amounts in excess of $10 million may reduce the number of shares of Company common stock to be issued to Latrobe’s stockholders.

Under the Merger Agreement, a portion of the shares to be issued as merger consideration will be placed into escrow to secure Latrobe’s indemnification obligations and to account for pension funding issues of Latrobe. An indemnity escrow equal to $50 million worth of the Company common stock will be created to cover general indemnification claims. Assuming no claims are asserted, half of the indemnity escrow will be released on the first anniversary of the closing and the remaining shares will be released after 24 months. An additional 300,000 shares will be placed into a pension escrow account in connection with Latrobe’s Pension Funding Issues. The shares of Company common stock will be released from the pension escrow over a period of 5 years following closing based on the level of a particular fixed income index over such 5-year period.

The Company has agreed that upon consummation of the Merger and until the Company’s 2014 annual meeting of stockholders, certain of Latrobe’s stockholders will designate two persons who will be appointed to the Company’s Board of Directors. Certain of Latrobe’s stockholders (including those that have the right to designate directors to the Company’s Board of Directors) will, upon consummation of the Merger, agree (i) that during the time that such Latrobe stockholders may appoint designees to the Company’s Board of Directors (or shorter in the event such designees resign from the Company’s Board of Directors) they will vote the shares of the Company’s common stock in favor of the Company’s nominees for directors and not contrary to the recommendations of the Company’s Board of Directors on other matters, and (ii) for a period of five years following the consummation of the Merger they will not acquire any additional shares of the Company’s common stock or, with limited exceptions, sell their shares of the Company’s common stock where the result of such sale would be for a third party to own more than 5% of the Company’s outstanding common stock. The Company has also agreed to grant limited registration rights in favor of such Latrobe stockholders.

Notes to Consolidated Financial Statements (continued)

The Merger Agreement may be terminated by Latrobe or the Company in the event the consummation of the Merger has not occurred by September 30, 2011 and the cause for the consummation not occurring is not the terminating party; provided, however, if the Merger has not been consummated solely because the applicable antitrust approvals have not been received, and all other conditions to consummation of the Merger have been satisfied or waived, then the “Termination Date” shall be January 16, 2012. Latrobe also may terminate the Merger Agreement at any time after October 31, 2011 because the applicable antitrust approvals have not been received, although the Company may override such termination. If the override right is exercised and the Merger is not consummated by January 16, 2012, the Company shall be required to pay Latrobe a $5 million fee. In addition, if the Merger Agreement is terminated by Latrobe because applicable antitrust approvals have not, or cannot, be obtained, the Company agreed to reimburse Latrobe for its reasonable out-of-pocket costs related to seeking the applicable antitrust approvals.

In connection with the Merger Agreement, the Company incurred approximately $2.4 million of acquisition related costs in fiscal year 2011.

Amega West Services

On December 31, 2010, the Company acquired all of the members’ interests in Amega West Services, LLC (“Amega West”), a Houston-based manufacturer and service provider in the directional drilling industry for a cash purchase price of $41.6 million. In connection with the acquisition, the Company also assumed $12.4 million of Amega West’s long-term debt which was paid off in cash concurrently with closing of the purchase. Amega West is a leading manufacturer of high-precision components for measurement while drilling (“MWD”) and logging while drilling (“LWD”) housings, drill collars, stabilizers and other down-hole tools used for directional drilling. MWD and LWD technology is used to ensure critical data is obtained and transmitted to the surface to monitor progress of the well. The consideration paid has been allocated as follows:


Net working capital, including $4.9 million of accounts payable to Carpenter effectively settled at closing	$	6.5
Property, plant and equipment		25.9
Customer relationships		5.2
Non-compete agreements		5.4
Trademarks and tradenames		1.9
Goodwill		9.7
Deferred tax liabilities		(0.6	)
Long-term debt		(12.4	)

Total purchase price	$	41.6

Of the goodwill recorded related to the Amega West acquisition, $8.3 million is expected to be deductible for tax purposes.

The purchase agreement includes an earn-out opportunity for certain management equity sellers, designed to drive earnings growth at Amega West. According to the terms of the earn-out, the Company held back approximately $2.8 million of the cash purchase price otherwise payable to the earn-out participants, providing the participants with the opportunity to receive up to two times the holdback amount if certain earnings targets are achieved over a four and a half year period following the acquisition. $2.2 million of the earnout is guaranteed and is therefore considered as part of the total purchase price. The earnout payments in excess of the guaranteed minimum amount, if any, will be treated as compensation related to postcombination services.

Notes to Consolidated Financial Statements (continued)

The results of operations of Amega West have been included in the Consolidated Statements of Income since the acquisition date and are reported in the Emerging Ventures segment. The acquisition of Amega West is not considered material to the consolidated financial statements and accordingly the Company will not disclose proforma information.

In connection with the Amega West acquisition, the Company incurred approximately $0.7 million of acquisition related costs in fiscal year 2011.

Oilfield Alloys

On June 27, 2011, the Company acquired Oilfield Alloys Pte. Ltd. (“Oilfield Alloys”) for a purchase price of $4.8 million which consisted of a cash purchase price of $4.1 million, net of cash acquired of $0.3 million, paid at closing. The remaining purchase price of $0.7 million was held back to satisfy the occurrence of certain indemnification obligations, if any, and will be released to the sellers on the third anniversary of the acquisition less any indemnification claims. Based in Singapore, Oilfield Alloys manufactures and distributes directional drilling equipment in the Asia-Pacific region. A distributor of several Carpenter non-magnetic products, Oilfield Alloys also has a sales location in Dubai. Oilfield Alloys will become part of Amega West Services operations. The preliminary purchase price allocation includes $1.2 million of working capital of $1.7 million of property and equipment and $1.9 million of intangible assets. The final purchase price allocation is dependent on the final valuations which are expected to be completed during the first quarter of fiscal year 2012.

Strategic Partnership

Effective November 1, 2010, the Company established a strategic partnership with Sandvik Materials Technology (“Sandvik”) to further strengthen its leadership position in high-performance powder metal products. As part of the strategic partnership, the Company acquired a 40 percent interest in Sandvik Powdermet AB for a cash purchase price of $6.2 million. The Company has treated the acquisition of 40 percent interest in Sandvik Powdermet AB as an equity method investment. In addition, in connection with the strategic partnership, Sandvik acquired a 40 percent interest in Carpenter Powder Products AB for a cash purchase price of $9.1 million. Sandvik’s acquired interest in Carpenter Powder Products AB has been reported as a noncontrolling interest.

Carpenter Powder Products AB, a subsidiary of the Company based in Torshalla, Sweden, manufactures high-alloy powder and is currently one of Sandvik Powdermet AB’s major suppliers. The strategic partnership will provide the Company with access to Sandvik Powdermet AB’s market for near-net-shape powder products, and will ensure Sandvik’s long-term supply of high quality powder. As the name implies, near-net-shapes are produced using a manufacturing technique in which the initial production of the item is very close to the final (net) shape, resulting in lower production costs for end users of the products. The strategic partnership is expected to provide accelerated growth opportunities for both companies in powder metal markets, particularly in the energy end-use market. The two businesses, each with current annual revenues of approximately $20 million, will continue to operate under their current respective brands, Carpenter and Sandvik.

Notes to Consolidated Financial Statements (continued)

4.	Earnings per Common Share

The calculations of basic and diluted earnings from continuing operations per common share for the years ended June 30, 2011, 2010 and 2009 were as follows:


	Year Ended June 30,
($ in millions, except per share data)	2011			2010			2009
Net income attributable to Carpenter	$	71.0		$	2.1		$	47.9
Less: earnings and dividends allocated to participating securities		(0.8	)		(0.2	)		(0.1	)


Earnings available for Carpenter common shareholders	$	70.2		$	1.9		$	47.8


Weighted average number of common shares outstanding, basic		44.1			43.9			43.9

Effect of shares issuable under share based compensation plans		0.6			0.5			0.3


Weighted average number of common shares outstanding, diluted		44.7			44.4			44.2


Basic earnings per common share	$	1.59		$	0.04		$	1.08


Diluted earnings per common share	$	1.59		$	0.04		$	1.08

The following awards issued under share-based compensation plans were excluded from the calculations of diluted earnings per share above because their effects were anti-dilutive:


	Year Ended June 30,
(in millions)	2011		2010		2009

Stock options		0.1		0.4		0.4

Restricted stock awards		—		—		0.1

Notes to Consolidated Financial Statements (continued)

5.	Marketable Securities

The fair value of the Company’s marketable securities was based on quoted market prices or estimates of fair value as of June 30, 2011 and 2010. The following is a summary of marketable securities, all of which were classified as available-for-sale as of June 30, 2011 and 2010:


June 30, 2011 ($ in millions)	Cost		Unrealized Losses			Estimated Fair Value
Current
Government agency bonds	$	13.7	$	—		$	13.7
Corporate bonds		15.1		—			15.1
Commercial paper		1.7		—			1.7

	$	30.5	$	—		$	30.5

Non-current
Municipal auction rate securities	$	6.1	$	(0.8	)	$	5.3


June 30, 2010 ($ in millions)	Cost		Unrealized Losses			Estimated Fair Value
Current
Government agency bonds	$	78.9	$	—		$	78.9
Corporate bonds		15.4		—			15.4
Commercial paper		0.9		—			0.9
Certificate of deposit		10.0		—			10.0

	$	105.2	$	—		$	105.2

Non-current
Municipal auction rate securities	$	6.2	$	(0.9	)	$	5.3

For the fiscal years ended June 30, 2011, 2010 and 2009, proceeds from sales and maturities of marketable securities were $166.0 million, $55.3 million and $44.8 million, respectively.

Municipal Auction Rate Securities

As of June 30, 2011 and June 30, 2010, the Company’s marketable securities included municipal auction rate securities with a par value of $6.1 million and $6.2 million, respectively. The municipal auction rate securities are callable at par at the option of the issuer. As of June 30, 2011 and 2010 respectively, the Company recorded $0.8 million and $0.9 million of unrealized losses to reflect the estimated market value of these securities. The Company does not intend to sell the securities and believes that it is more likely than not that the Company will not be required to sell the securities before recovering their costs. The valuation of auction rate securities is subject to uncertainties that are difficult to predict. Factors that impact the valuation of these securities include changes in credit ratings of the securities as well as the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and the ongoing strength and quality of market credit and liquidity. The municipal auction rate securities owned by the Company are of high credit quality and maintain credit enhancements. The Company does not believe that any of the underlying issuers of our municipal auction rate securities are currently at risk of default. The securities have been classified according to their stated maturity dates, which range from 2019 to 2030. Accordingly, the municipal auction rate securities are included in other assets in the accompanying consolidated balance sheets.

Notes to Consolidated Financial Statements (continued)

6.	Inventories


	June 30,
($ in millions)	2011		2010
Raw materials and supplies	$	63.3	$	30.7
Work in process		171.9		109.1
Finished and purchased products		93.4		63.8

Total inventory	$	328.6	$	203.6

If the first-in, first-out method of inventory had been used instead of the LIFO method, inventories would have been $355.4 million and $331.8 million higher as of June 30, 2011 and 2010, respectively. Current cost of LIFO-valued inventories was $599.3 million at June 30, 2011 and $474.4 million at June 30, 2010. The reductions in LIFO-valued inventories decreased cost of sales by $1.7 million during fiscal year 2011, $7.0 million during fiscal year 2010, and $8.0 million during fiscal year 2009.

7.	Property, Plant and Equipment


	June 30,
($ in millions)	2011		2010
Land	$	8.5	$	8.1
Buildings and building equipment		267.6		263.4
Machinery and equipment		1,249.3		1,176.1
Construction in progress		38.4		18.6

Total at cost		1,563.8		1,466.2
Less: accumulated depreciation and amortization		900.9		848.7

Total property, plant, and equipment	$	662.9	$	617.5

The estimated useful lives of depreciable assets are as follows:


Asset Category	Useful Life (in Years)

Buildings and building equipment		10 – 45
Machinery and equipment		3 – 30

Depreciation for the years ended June 30, 2011, 2010 and 2009 was $59.2 million, $53.6 million and $49.5 million, respectively.

Notes to Consolidated Financial Statements (continued)

8.	Goodwill and Other Intangible Assets, Net

Goodwill

Carpenter conducted its annual impairment review as of June 30, 2011 and 2010 and determined that there was no goodwill impairment. The changes in the carrying amount of goodwill by reportable segment for fiscal year 2011 and 2010 were as follows:


($ in millions)	June 30, 2010			Acquisitions		June 30, 2011

Goodwill	$	69.9		$	9.7	$	79.6
Accumulated impairment losses		(34.7	)		—		(34.7	)

Total goodwill	$	35.2		$	9.7	$	44.9


Advanced Metals Operations	$	35.2		$	—	$	35.2
Emerging Ventures		—			9.7		9.7

Total goodwill	$	35.2		$	9.7	$	44.9

There were no changes in the carrying amount of goodwill during fiscal year 2010.

Other Intangible Assets, Net


	June 30,
	2011							2010
($ in millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Trademarks and trade names	$	32.5	$	(14.8	)	$	17.7	$	30.6	$	(13.7	)	$	16.9
Customer relationships		6.1		(0.7	)		5.4		0.9		(0.2	)		0.7
Non-compete agreements		5.4		(0.4	)		5.0		—		—			—
Other		1.9		—			1.9		—		—			—

Total	$	45.9	$	(15.9	)	$	30.0	$	31.5	$	(13.9	)	$	17.6

Carpenter recorded $2.0 million of amortization expense during fiscal year 2011, $1.1 million during fiscal year 2010, and $1.1 million during fiscal year 2009. The estimated annual amortization expense for each of the succeeding five fiscal years is $3.1 million.

Debt

On June 28, 2011, the Company issued an underwritten public offering of $250 million in aggregate principal amount of its 5.20% senior notes due 2021. The Company expects to use the net proceeds from the issuance of the senior notes to repay $100 million in principal amount of Carpenter Technology Corporation’s medium term notes, Series C, at 7.625% due August 2011. The Company intends to use the remaining net proceeds from the offering for general corporate purposes, which may include additions to working capital, capital expenditures, repayment of debt, the financing of acquisitions, joint ventures and other business combination opportunities or stock repurchases.

Notes to Consolidated Financial Statements (continued)

On June 21, 2011, the Company entered into $350 million syndicated credit facility (“Credit Agreement”) that extends to June 21, 2016. This five year Credit Agreement replaced the Company’s previous revolving credit facility, dated as of November 29, 2009, which had been set to expire in November 2012. During the fiscal year ended June 30, 2011, the Company capitalized $1.4 million of debt issue costs paid in connection with the Credit Agreement.

Interest on the borrowings under the Credit Agreement accrue at variable rates, based upon LIBOR or a defined “Base Rate,” that are determined based upon the rating of the Company’s senior unsecured long-term debt (the “Debt Rating”). The applicable margin to be added to LIBOR ranges from 0.65% to 1.95%, and for Base Rate-determined loans, from 0.0% to 0.95%. The Company also pays a quarterly facility fee ranging from 0.10% to 0.45%, determined based upon the Company’s Debt Rating, of the $350 million commitment under the Credit Agreement. In addition, the Company must pay certain letter of credit fees, ranging from 0.65% to 1.95%, with respect to letters of credit issued under the Credit Agreement. The Company has the right to voluntarily prepay and reborrow loans and to terminate or reduce the commitments under the facility. As of June 30, 2011, the Company had $3.5 million of issued letters of credit under the Credit Agreement, with the balance of $346.5 million available for future borrowings.

The Company is subject to certain financial and restrictive covenants under the Credit Agreement, which, among other things, require the maintenance of a minimum interest coverage ratio (which begins at 3.25 to 1.0 for the period through September 30, 2011, and ultimately increases to 3.5 to 1.0 thereafter). The interest coverage ratio is defined in the Credit Agreement as, for any period, the ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated interest expense for such period. The Credit Agreement also requires the Company to maintain a debt to capital ratio of less than 55%. The debt to capital ratio is defined in the Credit Agreement as the ratio of consolidated indebtedness, as defined, to consolidated capitalization, as defined. As of June 30, 2011, the Company was in compliance with all of the covenants of the Credit Agreement.

Long-term debt outstanding as of June 30, 2011 and 2010 consisted of the following:


	June 30,
($ in millions)	2011		2010
Senior unsecured notes, 6.625% due May 2013 (face value of $100.0 million at June 30, 2011 and 2010)	$	102.4	$	102.8
Medium-term notes, Series B at 6.74% to 7.10% due from April 2013 to May 2018 (face value of $56.0 million at June 30, 2011 and $56.0 million at June 30, 2010)		56.0		56.0
Medium-term notes, Series C at 7.625% due August 2011 (face value of $100.0 million at June 30, 2011 and 2010)		99.8		100.8
Senior unsecured notes, 5.200% due July 2021 (face value of $250.0 million at June 30, 2011)		249.6		—

Total		507.8		259.6
Less amounts due within one year		100.0		—

Long-term debt, net of current portion	$	407.8	$	259.6

The carrying value of the notes as of June 30, 2011 and 2010 includes fair value adjustments for interest rate swap contracts of $0.4 million and $0.7 million, respectively, for deferred gains on settled interest rate swaps. The deferred gains on settled interest rate swap contracts are being recognized as reductions to interest expense over the remaining term of the notes, which ranges from one to three years.

Notes to Consolidated Financial Statements (continued)

Aggregate maturities of long-term debt for the four years subsequent to June 30, 2011, are $100.0 million in fiscal year 2012, $101.0 million in fiscal year 2013 and $0 in fiscal year 2014 and 2015.

For the years ended June 30, 2011, 2010 and 2009, interest costs totaled $17.6 million, $18.8 million and $20.1 million, respectively, of which $0.5 million, $1.0 million and $4.0 million, respectively, were capitalized as part of the cost of property, plant, equipment and software.

10.

Accrued Liabilities

Accrued liabilities consisted of the following as of June 30, 2011 and 2010:


	June 30,
($ in millions)	2011		2010
Accrued compensation	$	41.2	$	38.6
Accrued pension liabilities		30.7		3.3
Accrued postretirement benefits		15.2		14.7
Derivative financial instruments		7.7		1.9
Other		30.1		29.1

Total accrued liabilities	$	124.9	$	87.6

11.

Pension and Other Postretirement Benefits

Carpenter provides several noncontributory defined benefit pension plans to certain employees. The plans provide defined benefits based on years of service and final average salary. Effective January 1, 2012, new employees will not be eligible to participate in the U.S. defined benefit pension plan.

Carpenter also provides other postretirement benefit plans to certain of its employees. The postretirement benefit plans consist of health care and life insurance plans. Benefit payments are currently paid from corporate assets. Plan assets are maintained in a Voluntary Employee Benefit Association Trust (“VEBA”) and are principally invested in equity securities.

Notes to Consolidated Financial Statements (continued)

The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans:


	Pension Plans						Other Postretirement Plans
($ in millions)	2011			2010			2011			2010
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	957.2		$	829.9		$	224.6		$	199.8
Service cost		22.8			21.0			2.7			2.3
Interest cost		46.5			50.2			10.9			12.1
Benefits paid		(55.8	)		(58.6	)		(10.7	)		(11.1	)
Actuarial (gain) loss		(41.5	)		115.1			(23.6	)		21.0
Plan settlements		(0.3	)		—			—			—
Plan amendments		0.2			(0.4	)		—			(0.3	)
Other		0.1			—			0.3			0.8

Projected benefit obligation at end of year	$	929.2		$	957.2		$	204.2		$	224.6


Change in plan assets:
Fair value of plan assets at beginning of year	$	631.5		$	586.6		$	63.2		$	57.0
Actual return on plan assets		127.8			100.0			17.4			6.4
Benefits paid from plan assets		(55.8	)		(58.6	)		(10.7	)		(11.1	)
Contributions		7.0			3.5			10.4			10.9
Plan settlements		(0.3	)		—			—			—

Fair value of plan assets at end of year	$	710.2		$	631.5		$	80.3		$	63.2


Funded status of the plans	$	(219.0	)	$	(325.7	)	$	(123.9	)	$	(161.4	)


Amounts recognized in the Consolidated Balance Sheets:
Other assets - noncurrent	$	0.2		$	0.2		$	—		$	—
Accrued liabilities - current		(30.7	)		(3.3	)		(15.2	)		(14.7	)
Accrued pension liabilities - noncurrent		(188.5	)		(322.6	)		—			—
Accrued postretirement benefits		—			—			(108.7	)		(146.7	)

	$	(219.0	)	$	(325.7	)	$	(123.9	)	$	(161.4	)

Notes to Consolidated Financial Statements (continued)


	Pension Plans				Other Postretirement Plans
($ in millions)	2011		2010		2011			2010
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	333.5	$	486.5	$	53.0		$	95.1
Prior service cost (credit)		4.3		5.0		(12.1	)		(20.0	)


Total	$	337.8	$	491.5	$	40.9		$	75.1


Additional information:

Accumulated benefit obligation for all pension plans	$	859.2	$	875.8		N/A			N/A

The following is additional information related to plans with projected benefit obligations in excess of plan assets as of June 30, 2011 and 2010:


	Pension Plans				Other Postretirement Plans
($ in millions)	2011		2010		2011		2010
Projected benefit obligation	$	929.2	$	957.2	$	204.2	$	224.6
Fair value of plan assets	$	710.2	$	631.5	$	80.3	$	63.2

The following additional information is for plans with accumulated benefit obligations in excess of plan assets as of June 30, 2011 and 2010:


	Pension Plans				Other Postretirement Plans
($ in millions)	2011		2010		2011		2010
Accumulated benefit obligation	$	859.2	$	875.8	$	204.2	$	224.6
Fair value of plan assets	$	710.2	$	631.5	$	80.3	$	63.2

The components of the net periodic benefit cost related to the Company’s pension and other postretirement benefits for the years ended June 30, 2011, 2010 and 2009 are as follows:

Notes to Consolidated Financial Statements (continued)


	Pension Plans									Other Postretirement Plans
($ in millions)	2011			2010			2009			2011			2010			2009
Service cost	$	22.8		$	21.0		$	18.0		$	2.7		$	2.3		$	2.2
Interest cost		46.5			50.2			50.4			10.9			12.1			12.1
Expected return on plan assets		(45.4	)		(45.0	)		(60.9	)		(5.0	)		(4.6	)		(6.2	)
Amortization of net loss		29.1			27.0			9.7			6.0			5.0			2.1
Amortization of prior service cost (benefit)		1.0			1.1			1.1			(7.9	)		(7.8	)		(7.9	)
Curtailment		—			—			—			—			—			—
Plan settlement expense		0.1			—			4.4			—			—			—

Net pension expense	$	54.1		$	54.3		$	22.7		$	6.7		$	7.0		$	2.3

As discussed in Note 2, the Company closed the metal strip manufacturing facility in the U.K. In conjunction with the closure, the Company settled the defined benefit pension plan covering employees at the U.K. facility.

The service cost component of Carpenter’s net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is included under the heading “Pension earnings, interest & deferrals” in the segment data presented in Note 20.

Notes to Consolidated Financial Statements (continued)

Principal actuarial assumptions at June 30:


	Pension Plans									Other Postretirement Plans
	2011			2010			2009			2011			2010			2009
Weighted-average assumptions used to determine benefit obligations at fiscal year end
Discount rate		5.50	%		5.00	%		6.25	%		5.50	%		5.00	%		6.25	%
Rate of compensation increase		3.66	%		3.66	%		3.65	%		N/A			N/A			N/A

	Pension Plans									Other Postretirement Plans
	2011			2010			2009			2011			2010			2009
Weighted-average assumptions used to determine net periodic benefit cost for the fiscal year
Discount rate		5.00	%		6.25	%		6.75	%		5.00	%		6.25	%		6.75	%
Expected long-term rate of return on plan assets		7.50	%		8.00	%		8.00	%		8.00	%		8.00	%		8.00	%
Long-term rate of compensation increase		3.66	%		3.65	%		3.65	%		N/A			N/A			N/A

The following table shows the expected health care rate increase and the future rate and time at which it is expected to remain constant.


	June 30,
	2011			2010
Assumed health care cost trend rate		8.5	%		9	%
Rate to which the cost trend rate is assumed to decline and remain (the ultimate trend rate)		5	%		5	%
Year that the rate reaches the ultimate trend rate		2018			2018

Assumed health care cost trend rates have an effect on the amounts reported for other postretirement benefits. A one percentage point increase in the assumed health care cost trend rate would increase service and interest cost by $0.4 million and increase the postretirement benefit obligation by $6.9 million. A one percentage point decrease in the assumed health care cost trend rate would decrease service and interest cost by $0.4 million and decrease the postretirement benefit obligation by $6.1 million.

Notes to Consolidated Financial Statements (continued)

Net pension expense, which we define to include the net periodic benefit costs of both the pension and other postretirement plans, is estimated to be $39.4 million for the year ended June 30, 2012, comprised of $37.5 million of net periodic benefit costs for pension plans and $1.9 million of net periodic benefit costs for other post-retirement benefit plans. The discount rate and expected long-term rate of return on plan assets used to calculate the net periodic benefit costs for pension plans for the year ended June 30, 2012 were 5.5 percent and 7.5 percent, respectively. The discount rate and expected long-term rate of return on plan assets used to calculate the net periodic benefits costs for other post-retirement benefit plans for the year ended June 30, 2012 were 5.5 percent and 8.0 percent, respectively.

Amounts in other comprehensive loss that are expected to be recognized as components of net periodic benefit cost in the year ended June 30, 2012 are:


($ in millions)	Pension Plans		Other Postretirement Plans			Total
Amortization of prior service cost (credit)	$	0.7	$	(7.9	)	$	(7.2	)
Amortization of net actuarial loss		17.5		2.6			20.1

Amortization of accumulated other comprehensive loss	$	18.2	$	(5.3	)	$	12.9

Carpenter’s U.S. pension plans’ weighted-average asset allocations at June 30, 2011 and 2010, by asset category are as follows:


	2011			2010
Equity securities		66.1	%		49.1	%
Fixed income securities		32.3			33.0
Cash and cash equivalents		1.6			17.9

Total		100.0	%		100.0	%

Carpenter’s policy for developing a pension plan investment strategy includes the periodic development of an asset and liability study by an independent investment consultant. Management considers this study in establishing an asset allocation that is presented to and approved by the Company’s Plan Committee.

Management determines an asset allocation that will provide the highest level of return for an acceptable level of risk. Accordingly, Carpenter invests in different asset classes including large-, mid- and small-cap growth and value funds, index and international equity funds, short-term and medium-term duration fixed-income funds and high yield funds. The plan’s current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income securities. The Company may vary the actual asset mix based on the ratio of the plan assets and liabilities. Management reviews the asset allocation on a quarterly basis and makes revisions as deemed necessary. The assets related to Carpenter’s other postretirement benefit plans were invested 100 percent in equity securities as of June 30, 2011 and 2010.

Notes to Consolidated Financial Statements (continued)

The fair values of the Company’s pension plan assets as of June 30, 2011 and 2010, by asset category and by the levels of inputs used to determine fair value were as follows:


	June 30, 2011						June 30, 2010
	Fair Value						Fair Value
($ in millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Short-term investments	$	—	$	10.5	$	10.5	$	—	$	121.5	$	121.5
Domestic and international equities		252.0		0.7		252.7		253.8		0.9		254.7
Commingled funds		40.6		246.2		286.8		—		112.7		112.7
Government agency bonds		65.6		—		65.6		65.0		—		65.0
Corporate bonds		76.0		—		76.0		—		63.0		63.0
Mortgage backed securities		—		17.6		17.6		—		13.5		13.5
Asset backed securities and other		—		1.0		1.0		—		1.1		1.1


	$	434.2	$	276.0	$	710.2	$	318.8	$	312.7	$	631.5

The fair values of the Company’s other postretirement benefit plans as of June 30, 2011 and 2010, by asset category and by the level of inputs used to determine fair value, were as follows:


	June 30, 2011						June 30, 2010
	Fair Value						Fair Value
($ in millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Commingled fund	$	—	$	43.9	$	43.9	$	—	$	34.9	$	34.9
Short-term investments		—		14.5		14.5		—		4.3		4.3
Government agency bonds		16.0		—		16.0		—		—		—
Corporate bonds and other		5.9		—		5.9		—		—		—
Domestic and international equities		—		—		—		23.6		0.4		24.0


	$	21.9	$	58.4	$	80.3	$	23.6	$	4.7	$	28.3

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Investments in domestic and international equities are generally valued at the closing price reported on the active market on which they are traded. Commingled funds are valued based on the net asset value (“NAV”) established for the fund at each valuation date. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Corporate and government agency bonds and other fixed income securities are valued using closing bid prices on an active market when possible, otherwise using evaluated bid prices.

Management establishes the expected long-term rate of return assumption by reviewing historical trends and analyzing the current and projected market conditions in relation to the plan’s asset allocation and risk management objectives. In determining the expected long-term rate of return, Carpenter considered historical returns for individual asset classes and the impact of active portfolio management.

Notes to Consolidated Financial Statements (continued)

Cash Flows – Employer Contributions

The Company made a contribution of $3.9 million to its US pension plan during fiscal year 2011 but was not required to make contributions to the plans during fiscal years 2010 and 2009. The Company currently expects to make approximately $27.7 million in required contributions to the Company’s US pension plan during fiscal year 2012 During the years ended June 30, 2011, 2010 and 2009, the Company made contributions of $3.1 million, $3.5 million and $8.0 million to other pension plans, respectively.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid. Pension Benefits are currently paid from plan assets and Other Benefits are currently paid from corporate assets:


($ in millions)	Pension Benefits		Other Benefits
2012	$	59.6	$	12.8
2013	$	60.4	$	13.2
2014	$	62.3	$	13.7
2015	$	64.3	$	14.1
2016	$	65.2	$	14.4
2017-2021	$	353.2	$	75.6

Other Benefit Plans

Carpenter also maintains defined contribution retirement and savings plans for substantially all domestic employees. Company contributions were $5.2 million in fiscal year 2011, $4.0 million in fiscal year 2010 and $4.9 million in fiscal year 2009.

12.

Contingencies and Commitments

Environmental

Carpenter is subject to various federal, state, local and international 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 PRP’s at these Superfund sites has 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 year 2011, there were no changes to the liabilities recorded for environmental remediation costs. During fiscal year 2010, Carpenter decreased the liabilities recorded for environmental remediation costs by $2.0 million related to two environmental remediation sites. During fiscal year 2009, Carpenter increased the liabilities recorded for environmental remediation costs by approximately $2.0 million for one environmental remediation site. 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, 2011 and 2010 was $4.9 million.

Notes to Consolidated Financial Statements (continued)

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 over the long-term. However, such costs could be material to Carpenter’s financial position, results of operations or cash flows in a particular future quarter or year.

Boarhead Farms

In June 2002, the Company was named as a defendant in a lawsuit filed by a group of plaintiffs in the District Court for the Eastern District of Pennsylvania titled Boarhead Farm Agreement Group v. Advanced Environmental Technology Corporation et al. (since amended to include the individual members). The suit alleges that the Company and the other named defendants contributed to damages caused at Boarhead Farms, a Superfund site located in Bridgeton, Pennsylvania. The Boarhead Farms site was the home of a now defunct chemical and waste hauling company that the Company and many others engaged to dispose of certain wastes during the 1970’s. The plaintiff group was individually named as PRP’s for the Boarhead site in the EPA’s “Record of Decision” in November 1998. Their June 2002 lawsuit against various defendants, including Carpenter, sought contributions for a portion of costs incurred for various site cleanup activities as well as contributions to future cleanup efforts. The suit went to trial in June 2008. Prior to trial, all of the named co-defendants, except for Carpenter, reached an out of court settlement with the plaintiffs. Carpenter denied the claims made by the plaintiff group. On August 18, 2008, the Court awarded the plaintiffs judgment against the Company for 80 percent of the plaintiffs’ past costs of remediating the site, including prejudgment interest from June 18, 2002 to January 1, 2008, and held the Company liable for 80 percent of future costs of the cleanup activities at the site. The Company appealed the Court’s decision and oral arguments took place before the United States Court of Appeals for the Third Circuit on December 17, 2009. On April 12, 2010, the Court of Appeals for the Third Circuit vacated the previous judgment by the District Court and remanded the case for further proceedings. As of June 30, 2011 and June 30, 2010, the Company has recorded a liability related to this case of $21.8 million. On July 19, 2011, the Company entered into a settlement agreement providing for a dismissal of the lawsuit and a complete release in the Company’s favor by all parties to the litigation, in exchange for a payment of $21.8 million. On August 16, 2011, the settlement was approved by the Court.

Duty Drawback

Historically, the Company has participated in a program offered by U.S. Customs and Border Protection (“U.S. Customs”) known as duty drawback. Under the program, the Company claimed a refund of import duties on items manufactured and exported to customers in foreign countries. Certain vendors of the Company prepared certificates authorizing the Company to claim duty drawback refunds against imported goods purportedly shipped by the vendor to the Company. Because of the complexity of the program, the Company engaged a licensed U.S. customs broker specializing in duty drawback claims. The customs broker was responsible for performing the administration of the process which included maintaining and collecting various forms of supporting evidence for each claim including collecting appropriate certificates from vendors, as well as preparing and submitting the refund claims.

Notes to Consolidated Financial Statements (continued)

In fiscal year 2008, the Company received notice from U.S. Customs that the Company was under investigation related to claims previously filed by the customs broker on the Company’s behalf. The investigation alleged certain discrepancies and a lack of supporting documentation for the claims that had been filed by the broker. The Company initiated an internal review of the claims filed with U.S. Customs to determine the extent of claims that may have inadequate supporting documentation. The Company has also engaged a new licensed U.S. customs broker. The Company has cooperated fully with the investigation of this matter and is currently engaged in settlement discussions with U.S. Customs.

Based on current facts we believe that the reserve recorded of $0.4 million as of June 30, 2011, together with an advance payment of $0.7 million paid to U.S. Customs during settlement discussions in fiscal year 2010, is a reasonable estimate of the probable settlement necessary to fully resolve this matter. The Company does not expect that any additional material liabilities will be incurred related to this matter.

Export Regulations Violations

During fiscal year 2008, the Company became aware of potential violations of federal export regulations at a business unit that was recently divested. Upon investigation, the Company discovered that approximately 40 foreign nationals employed over time at the business unit’s facility may have been exposed to protected technical data related to the production of various products for military applications. An export license from the Department of State and the Department of Commerce is required prior to the exporting of technical data for military applications. The Company has applied for and received similar applications for other business units, but did not have such a license for the divested business unit. Violations of Federal export regulations can be subject to civil penalties depending upon the severity of the violation. The Company filed voluntary disclosures with the Department of State and the Department of Commerce before the divestiture of the business unit on March 31, 2008. The Department of State responded to the voluntary disclosure without assessing civil penalties. The Department of Commerce has not yet responded to the voluntary disclosure. It is not possible to determine the amount, if any, of civil penalties that may be assessed by the Department of Commerce. As a result the Company has not recorded any liability for potential penalties as of June 30, 2011.

Other

The Company is defending various routine claims and legal actions that are incidental to its business, and the Company is subject to contingencies that are common to its operations, including those pertaining to product claims, commercial disputes, employment actions, employee benefits, compliance with domestic and foreign laws, personal injury claims and tax issues. The Company provides for costs relating to these matters when a loss is probable and the amount of the loss is reasonably estimable. The effect of the outcome of these matters on the Company’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 liability from these matters will not have a material effect on the Company’s financial position, results of operations or cash flows over the long-term. However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to the Company’s financial position, results of operations or cash flows in a particular future quarter or year.

Notes to Consolidated Financial Statements (continued)

The Company has entered into purchase agreements primarily for various key raw materials at market related prices, all made in the normal course of business. The commitments include both fixed and variable price provisions. We used June 30, 2011 raw material prices for commitments with variable pricing. The purchase commitments covered by these agreements aggregate to approximately $210.6 million as of June 30, 2011. Of this amount, $175.2 million relates to fiscal year 2012, $25.2 million to fiscal year 2013, and $10.2 million to fiscal year 2014.

13.

Operating Leases

The Company leases certain facilities and equipment under operating leases. Total rent expense was $7.3 million, $6.8 million and $6.4 million for the fiscal years ended June 30, 2011, 2010 and 2009, respectively.

Future minimum payments for non-cancellable operating leases in effect at June 30, 2011 are: $6.6 million in fiscal year 2012, $4.2 million in fiscal year 2013, $2.8 million in fiscal year 2014, $2.4 million in fiscal year 2015, $1.1 million in fiscal year 2016 and $2.7 million thereafter.

14.

Fair Value Measurements

The fair value hierarchy has three levels based on the inputs used to determine fair value. Level 1 refers to quoted prices in active markets for identical assets or liabilities. Level 2 refers to observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3, which the Company does not currently use, refers to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Notes to Consolidated Financial Statements (continued)

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.


	Fair Value
	Measurements Using
June 30, 2011	Input Type
(in millions)	Level 1		Level 2		Total
Assets:
Marketable securities
Government agency bonds	$	13.7	$	—	$	13.7
Corporate bonds		15.1		—		15.1
Commercial paper		1.7		—		1.7
Municipal auction rate securities		—		5.3		5.3
Derivative financial instruments		—		20.0		20.0

Total assets	$	30.5	$	25.3	$	55.8


Liabilities:
Derivative financial instruments	$	—	$	14.1	$	14.1


	Fair Value
	Measurements Using
June 30, 2010	Input Type
(in millions)	Level 1		Level 2		Total
Assets:
Marketable securities
Government agency bonds	$	78.9	$	—	$	78.9
Certificates of deposit		10.0		—		10.0
Corporate bonds		15.4		—		15.4
Commercial Paper		0.9		—		0.9
Municipal auction rate securities		—		5.3		5.3
Derivative financial instruments		—		9.2		9.2

Total assets	$	105.2	$	14.5	$	119.7


Liabilities:
Derivative financial instruments	$	—	$	6.7	$	6.7

The Company’s derivative financial instruments consist of commodity forward contracts, foreign exchange forward contracts and interest rate swaps. These instruments are measured at fair value using the market method valuation technique. The inputs to this technique utilize information related to foreign exchange rates, commodity prices and interest rates published by third-party leading financial news and data providers. This is observable data; however, the valuation of these instruments is not based on actual transactions for the same instruments so they are classified as Level 2. The Company’s use of derivatives and hedging policies are more fully discussed in Note 17.

The Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States.

Notes to Consolidated Financial Statements (continued)

The carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of these items.

The carrying amounts and estimated fair values of Carpenter’s financial instruments not recorded at fair value in the financial statements were as follows:


	June 30, 2011				June 30, 2010
(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Company-owned life insurance	$	11.4	$	11.4	$	9.3	$	9.3
Long-term debt	$	507.8	$	515.9	$	259.6	$	267.9

The carrying amount for company-owned life insurance reflects cash surrender values based upon the market values of underlying securities, net of any outstanding policy loans. The carrying value associated with the cash surrender value of these policies is recorded in other assets in the accompanying consolidated balance sheets.

The fair values of long-term debt as of June 30, 2011 and June 30, 2010 were determined by using current interest rates for debt with terms and maturities similar to the Company’s existing debt arrangements.

15.

Share Repurchase Program

In December 2007, the Company’s Board of Directors authorized a share repurchase program as a result of the completion of the purchases of the previously authorized share repurchase program. Under the terms of the share repurchase programs, the Company purchased 1,218,900 shares of its common stock on the open market for $46.1 million during the year ended June 30, 2009.

16.

Share-Based Compensation

Carpenter has two share-based compensation plans: the 1993 Plan covering officers and key employees and the Director’s Plan covering non-employee directors. Awards granted under the share-based compensation plans are generally paid from shares held in treasury and any additional required share payments are made with newly issued shares. The total compensation cost that has been charged against income related to these share-based compensation plans was $14.4 million, $7.4 million, and $10.3 million for the years ended June 30, 2011, 2010 and 2009, respectively.

1993 Plan

The 1993 plan provides that the Board of Directors may grant stock options, restricted stock, and restricted stock units, and determine the terms and conditions of each grant. The 1993 plan provides the Chief Executive Officer with limited authority to grant awards. As of June 30, 2011, 2,719,790 shares were available for awards which may be granted under this plan.

Notes to Consolidated Financial Statements (continued)

Director’s Plan

The Director’s plan provides for the granting of stock options, performance units and stock units to non-employee Directors. As of June 30, 2011, 874,080 shares were reserved for awards which may be granted under this plan.

Stock Options (all plans):

Stock options granted under the plans above are granted with an exercise price equal to at least the fair market value of the Company’s common stock on the date of grant. The options are exercisable after one to three years of service and expire no longer than ten years from the grant date.

The fair value of stock options awarded in fiscal years 2011, 2010 and 2009 were estimated on the date of each grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	Year Ended June 30,
	2011			2010			2009
Expected volatility		55	%		54	%		45	%
Dividend yield		2	%		2	%		2	%
Risk-free interest rate		1.6	%		2.6	%		2.9	%
Expected term (in years)		5.0			5.0			5.0

The assumptions are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price based on historical performance for the same expected term of the options granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of each grant.

Notes to Consolidated Financial Statements (continued)


	Number of Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (In Millions)
Outstanding at June 30, 2008		430,106		$	37.88
Granted		145,315			28.57
Exercised		(6,700	)		14.39
Cancelled		(27,458	)		43.49

Outstanding at June 30, 2009		541,263			35.36
Granted		592,746			18.50
Exercised		(29,559	)		10.00
Cancelled		(283,795	)		28.31

Outstanding at June 30, 2010		820,655			26.53
Granted		227,600			34.78
Exercised		(85,590	)		17.91
Cancelled		(5,858	)		31.31

Outstanding at June 30, 2011		956,807		$	29.23		7.6 Years	$	27.4


Exercisable at June 30, 2011		546,306		$	30.91		6.8 Years	$	14.8

Outstanding and Exercisable Options:


Exercise Price Range	Number Outstanding at June 30, 2011		Weighted Average Remaining Contractual Term (in Years)		Weighted Average Exercise Price		Number Exercisable at June 30, 2011		Weighted Average Exercise Price
$5 -$10		20,000		2.0	$	8.43		20,000	$	8.43
$10 - $20		295,526		7.3		16.76		115,192		15.92
$21 - $65		641,281		7.9		35.63		411,114		36.20

		956,807			$	29.23		546,306	$	30.91

The weighted average grant date fair value of options awarded during fiscal years 2011, 2010 and 2009 was $14.75, $7.77 and $10.34, respectively. Share based compensation charged against income related to stock options for the years ended June 30, 2011, 2010 and 2009 was $3.8 million, $2.2 million and $3.3 million, respectively. As of June 30, 2011, $1.3 million of compensation cost related to non vested stock options remains to be recognized over a weighted average remaining life of 1.3 years.

Of the options outstanding at June 30, 2011, 744,651 relate to the 1993 plan and 212,156 relate to the Directors’ Plan.

Notes to Consolidated Financial Statements (continued)

Nonvested Stock Awards (all plans):

Nonvested stock awards are granted to employees with performance and/or service conditions. Nonvested awards receive non-forfeitable cash dividends during the restriction period. The fair value of the nonvested stock awards is determined based on the Company’s stock price at the grant date.

Performance-based restricted share awards are earned only if Carpenter achieves certain performance goals during a specified performance period according to the terms determined by the Board at the date of the grant. These shares vest from one to two years from the date of the attainment of the specified performance goals. Compensation cost is determined and charged to expense beginning in the performance period through the vesting period. The performance goals for fiscal year 2009 were not attained for the performance shares and therefore no performance shares were earned during fiscal year 2009.

Time-based restricted share awards vest three years from the date of grant. Compensation cost related to time based share awards is recognized over the vesting period of the award.

Amounts charged to compensation expense for nonvested stock awards was $7.7 million, $3.4 million and $5.9 million for the years end June 30, 2011, 2010 and 2009, respectively. As of June 30, 2011, $5.3 million of compensation cost related to nonvested restricted stock awards remains to be recognized over a weighted average remaining life of 1.5 years.


	Number of Awards			Weighted- Average Grant Date Fair Value
Nonvested Balance at June 30, 2008		441,199		$	53.19
Time-based granted		34,788		$	36.45
Vested		(178,745	)	$	50.01
Forfeited		(38,678	)	$	61.72

Nonvested Balance at June 30, 2009		258,564		$	50.90
Time-based granted		219,448		$	19.66
Performance-based earned		110,904		$	18.59
Vested		(125,222	)	$	50.04
Forfeited		(118,667	)	$	32.78

Nonvested Balance at June 30, 2010		345,027		$	26.63
Time-based granted		171,617		$	33.10
Performance-based earned		131,644		$	32.52
Vested		(165,576	)	$	33.43
Forfeited		(1,971	)	$	36.64

Nonvested Balance at June 30, 2011		480,741		$	28.17

Notes to Consolidated Financial Statements (continued)

Total Stockholder Return Awards:

The Company granted Total Stockholder Return (“TSR”) awards in fiscal year 2011, 2010 and 2009. The TSR awards are granted at a target number of shares, and vest based on the Company’s total stockholder return compared to the total stockholder returns of a group of peer companies at the end of a three-year period. The actual number of shares awarded may range from a minimum of 50 percent of the target shares to a maximum of two times target. Participants do not have any rights to dividends (or equivalents) during the performance period. The fair value of the TSR awards was estimated using Monte Carlo valuation models. Compensation cost recognized in fiscal years 2011, 2010 and 2009 related to TSR awards was $1.9 million, $0.6 million and $0.6 million, respectively.

Director Stock Units

According to the provisions of the Director’s plan, on the date of each annual stockholders’ meeting or on such other regularly scheduled date as the Board of Directors may determine from time to time in light of the Company’s prevailing practices for the grant of equity awards to employees, each Director shall be granted, in place of cash compensation, a number of stock units determined by dividing 50 percent of the Director’s annual retainer by the fair market value of the Company’s common stock on that date. Each Director may elect to increase the percentage up to 100 percent of the annual retainer to be paid in stock units in lieu of cash. Stock units granted at each annual meeting will be forfeited if the Director terminates service as a Director for any reason other then retirement, disability or death before the next annual stockholders’ meeting. Additional units are credited to each Director on a quarterly basis to reflect dividend equivalents on the Company’s common stock.

Following a Director’s retirement, the Director will be paid the number of the Company’s common stock shares equal to the number of stock units credited to the Director’s account.


	Number of Units		Weighted- Average Grant Date Fair Value
Outstanding at June 30, 2008		75,362	$	27.06
Granted		21,444	$	22.24
Dividend equivalents		3,257	$	—

Outstanding at June 30, 2009		100,063	$	25.95
Granted		59,332	$	18.12
Dividend equivalents		3,469	$	—

Outstanding at June 30, 2010		162,864	$	22.66
Granted		29,822	$	36.45
Dividend equivalents		3,015	$	—

Outstanding at June 30, 2011		195,701	$	25.81

Compensation cost is determined using the grant-date fair value and charged to expense over the vesting period of one year and amounted to $1.0 million, $1.2 million and $0.5 million for the years ended June 30, 2011, 2010 and 2009, respectively. As of June 30, 2011, $0.3 million of compensation cost related to director stock units remains to be recognized over a weighted average remaining life of 0.3 years.

Notes to Consolidated Financial Statements (continued)

17.

Derivatives and Hedging Activities

The Company uses commodity forwards, interest rate swaps and foreign currency forwards to manage risks generally associated with commodity price, interest rate and foreign currency rate fluctuations. The following explains the various types of derivatives and includes a recap about the impact the derivative instruments have had on the Company’s financial position, results of operations, and cash flows.

Cash Flow Hedging – Commodity forward contracts: The Company enters into commodity forward contracts to fix the price of a portion of anticipated future purchases of certain critical raw materials and energy to manage the risk of cash flow variability associated with volatile commodity prices. The commodity forward contracts have been designated as cash flow hedges. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in other comprehensive income to the extent effective, and reclassified to costs of sales in the period during which the hedged transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

Cash Flow Hedging – Forward interest rate swaps: The Company has entered into forward swap contracts to manage the risk of cash flow variability associated with fixed interest debt expected to be issued to refinance the $100 million of fixed rate debt scheduled to mature in August 2011. The forward interest rate swaps have been designated as cash flow hedges. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income to the extent effective, and reclassified to interest expense in the period during which the hedged transaction affects earnings or it becomes probable that the forecasted transaction will not occur. These contracts were terminated upon issuance of the $250 million bonds in June 2011. The gain associated with the settled contracts will be amortized over the term of the bonds issued.

Cash Flow Hedging – Foreign currency forward contracts: The Company uses foreign currency forward contracts 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 qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in other comprehensive income to the extent effective, and reclassified to net sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

The Company also uses foreign currency forward contracts to protect certain short-term asset positions denominated in foreign currency against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other income and expense. As of June 30, 2011, the fair value of the outstanding foreign currency forwards not designated as hedging instruments and the charges to income for changes in fair value for these contracts was not material.

Notes to Consolidated Financial Statements (continued)

Fair Value Hedging – Interest rate swaps: The Company has used interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate. 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 interest expense in the consolidated statements of income. As of both June 30, 2011 and 2010, the total notional amounts of floating interest rate contracts was $65.0 million. For the years ended June 30, 2011 and 2010, net gains of $2.8 million and $2.4 million were recorded as a reduction to interest expense, respectively. These amounts include the impact of previously terminated swaps which are being amortized over the remaining term of the underlying debt.

Notes to Consolidated Financial Statements (continued)

The fair value and location of outstanding derivative contracts recorded in the accompanying consolidated balance sheets were as follows as of June 30, 2011 and 2010:


June 30, 2011 ($ in millions)	Interest Rate Swaps		Foreign Currency Contracts		Commodity Contracts		Total Derivatives
Asset Derivatives:
Derivatives designated as hedging instruments:
Other current assets	$	0.8	$	—	$	5.4	$	6.2
Other assets		2.0		—		11.8		13.8

Total asset derivatives	$	2.8	$	—	$	17.2	$	20.0


Liability Derivatives:
Derivatives designated as hedging instruments:
Accrued liabilities	$	—	$	0.9	$	6.8	$	7.7
Other liabilities		—		—		6.4		6.4

Total liability derivatives	$	—	$	0.9	$	13.2	$	14.1


June 30, 2010 ($ in millions)	Interest Rate Swaps		Foreign Currency Contracts		Commodity Contracts		Total Derivatives
Asset Derivatives:
Derivatives designated as hedging instruments:
Other current assets	$	0.5	$	1.8	$	3.4	$	5.7
Other assets		3.2		—		0.3		3.5

Total asset derivatives	$	3.7	$	1.8	$	3.7	$	9.2


Liability Derivatives:
Derivatives designated as hedging instruments:
Accrued liabilities	$	—	$	—	$	1.9	$	1.9
Other liabilities		—		—		4.8		4.8

Total liability derivatives	$	—	$	—	$	6.7	$	6.7

Notes to Consolidated Financial Statements (continued)

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transactions affects earnings or it becomes probable that the forecasted transaction will not occur. The following is a summary of the gains (losses) related to cash flow hedges recognized during the years ended June 30, 2011 and 2010:


	Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
	Years Ended June 30,
($ in millions)	2011			2010
Derivatives in Cash Flow Hedging Relationship:
Commodity contracts	$	15.2		$	23.3
Foreign exchange contracts		(2.4	)		0.7
Forward interest rate swaps		1.0			—

Total	$	13.8		$	24.0


($ in millions)		Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)


Derivatives in Cash Flow Hedging Relationship:	Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
		Years Ended June 30,
		2011			2010
Commodity contracts	Cost of sales	$	7.6		$	(3.2	)
Foreign exchange contracts	Net sales		(1.2	)		1.3

Total		$	6.4		$	(1.9	)

The Company estimates that $2.3 million of net derivative losses included in OCI as of June 30, 2011 will be reclassified into earnings within the next twelve months. No significant cash flow hedges were discontinued during the year ended June 30, 2011. Ineffectiveness was not material during the year ended June 30, 2011.

The changes in other accumulated comprehensive income associated with derivative hedging activities during the years ended June 30, 2011, 2010 and 2009 were as follows:


	2011			2010			2009
Balance at July 1	$	(2.4	)	$	(17.3	)	$	(11.4	)
Current period changes in fair value, net of tax		8.5			11.6			(41.8	)
Reclassification to earnings, net of tax		(3.5	)		3.3			35.9

Balance at June 30	$	2.6		$	(2.4	)	$	(17.3	)

According to the provisions of the Company’s derivative arrangements, in the event that the fair value of outstanding derivative positions with certain counterparties exceeds certain thresholds, the

Notes to Consolidated Financial Statements (continued)

Company may be required to issue cash collateral to the counterparties. The Company’s contracts with these counterparties allow for netting of derivative instrument positions executed under each contract. As of June 30, 2011 the Company had no cash collateral held by counterparties.

The Company is exposed to credit loss in the event of nonperformance by counterparties on its derivative instruments as well as credit or performance risk with respect to its customer commitments to perform. Although nonperformance is possible, the Company does not anticipate nonperformance by any of the parties. In addition various master netting arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

18.

Income Taxes

Income from continuing operations before income taxes for the Company’s domestic and foreign operations was as follows:


	Years Ended June 30,
($ in millions)	2011		2010			2009
Domestic	$	64.9	$	(7.4	)	$	50.0
Foreign		22.9		12.1			13.0

Income before income taxes	$	87.8	$	4.7		$	63.0

The provision (benefit) for income taxes from continuing operations consisted of the following:


	Years Ended June 30,
($ in millions)	2011			2010			2009
Current:
Federal	$	9.2		$	—		$	(8.5	)
State		5.2			0.7			0.3
Foreign		6.7			2.8			6.9

Total current		21.1			3.5			(1.3	)

Deferred:
Federal		(3.6	)		2.2			16.5
State		(1.3	)		(4.1	)		1.8
Foreign		(0.1	)		1.0			(1.9	)

Total deferred		(5.0	)		(0.9	)		16.4


Total income tax expense	$	16.1		$	2.6		$	15.1

The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company’s effective income tax rate:

Notes to Consolidated Financial Statements (continued)


	Years Ended June 30,
(% of pre-tax income)	2011			2010			2009
Statutory federal income tax rate		35.0	%		35.0	%		35.0
State income taxes, net of federal tax benefit		2.9			(13.5	)		(1.1	)
Domestic manufacturing deduction		(3.4	)		(13.7	)		(0.5	)
Research and development tax credit		(3.7	)		(6.0	)		(5.6	)
Foreign tax rate differential		(1.7	)		(10.7	)		1.0
Nontaxable income		(0.6	)		(27.3	)		(2.1	)
Foreign source income		(7.3	)		—			1.0
Increases (decreases) in valuation allowances		(0.2	)		7.9			7.4
Adjustments of prior years’ income taxes		(2.6	)		57.8			(3.4	)
Changes in uncertain tax positions, net		(0.4	)		(104.8	)		(5.2	)
Healthcare reform		—			126.9			—
Other, net		0.3			3.7			(2.5	)

Effective income tax rate		18.3	%		55.3	%		24.0	%

Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the Consolidated Balance Sheet are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2011, the Company had state net operating loss carryforwards of $332.5 million expiring between 2012 and 2031. The valuation allowance decreased from 2010 by $0.4 million primarily due to an increase in the amount of future reversals of taxable temporary differences.


	June 30,
($ in millions)	2011			2010
Deferred tax assets:
Pensions	$	75.7		$	125.6
Postretirement provisions		48.0			61.6
Net operating loss carryforwards		20.5			20.2
Environmental		12.8			12.5
Other		19.5			17.8

Gross deferred tax assets		176.5			237.7
Valuation allowances		(17.5	)		(17.9	)

Net deferred tax assets		159.0			219.8


Deferred tax liabilities:
Depreciation		(177.7	)		(170.9	)
Intangible assets		(9.4	)		(7.8	)
Inventories		(5.3	)		(3.4	)

Total deferred tax liabilities		(192.4	)		(182.1	)


Deferred tax (liabilities) assets	$	(33.4	)	$	37.7

At June 30, 2011, the Company had undistributed earnings of foreign subsidiaries, amounting to $114.5 million on which deferred income taxes have not been provided because earnings are expected to

Notes to Consolidated Financial Statements (continued)

be reinvested indefinitely outside of the U.S. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding taxes in various foreign tax jurisdictions. It is not practical to calculate these taxes due to the complex and hypothetical nature of the calculations.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions is as follows:


	Year Ended June 30,
($ in millions)	2011			2010			2009
Balance, beginning	$	3.6		$	14.3		$	19.8
Additions based on tax positions of prior years		0.3			—			1.5
Additions based on tax positions of current years		—			—			1.7
Reductions as a result of a lapse of statute of limitations		(2.0	)		(8.2	)		(8.7	)
Reductions based on tax positions of prior year		—			(1.9	)		—
Settlements		—			(0.6	)		—

Balance, ending	$	1.9		$	3.6		$	14.3

The liability for unrecognized tax benefits as of June 30, 2011 of $1.9 million includes $1.5 million of offsetting tax benefits for reversals of deferred tax items. The net amount of $0.4 million would, if recognized, favorably impact the Company’s effective tax rate. The net amounts at June 30, 2010 and 2009 were $0.6 million and $4.1 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefits will change within the next 12 months; however, any such changes should not have a significant impact on the Company’s consolidated financial statements.

It is the Company’s policy to classify interest and penalties recognized on uncertain tax positions as a component of income tax expense. The Company’s income tax expense included benefits related to interest and penalties of $0.3 million, $1.7 million, and $1.4 million for the years ended June 30, 2011, 2010 and 2009, respectively. In addition, $0.3 million and $0.6 million was included in accrued income taxes in the Consolidated Balance Sheet as of June 30, 2011 and 2010, respectively.

All years prior to June 30, 2008 have been settled with the Internal Revenue Service and with most significant state tax jurisdictions. The Company has not extended any statute of limitations period for any significant location in which it operates. Generally, tax years are open to examination for a period of four to six years following the filing of the tax returns.

Notes to Consolidated Financial Statements (continued)

19.

Other Income, Net

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


	Year Ended June 30,
($ in millions)	2011		2010		2009
Equity in earnings (loss) of unconsolidated subsidiaries	$	2.6	$	1.0	$	(0.1	)
Continued Dumping and Subsidy Offset Act receipts		2.0		5.7		6.1
Interest income		1.1		1.6		4.7
Foreign exchange gain		0.1		0.6		7.7
Other		2.7		1.9		(3.3	)

Total other income, net	$	8.5	$	10.8	$	15.1

20.

Segment Information, Geographic and Product Data

The Company has three reportable business segments: Advanced Metals Operations, Premium Alloys Operations, and Emerging Ventures.

The Advanced Metals Operations (“AMO”) segment includes the manufacturing and distribution of high temperature and high strength metal alloys, stainless steels, and titanium in the form of small bars and rods, wire, narrow strip and powder. Products in this segment typically go through more finishing operations, such as rolling, turning, grinding, drawing, and atomization, than products in our PAO segment. Also, sales in the AMO segment are spread across many end-use markets, including the aerospace, industrial, consumer, automotive, and medical industries. AMO products are sold under the Carpenter, Dynamet, Talley, Carpenter Powder Products and Aceros Fortuna brand names.

The Premium Alloys Operations (“PAO”) segment includes the manufacturing and distribution of high temperature and high strength metal alloys and stainless steels in the form of ingots, billets, large bars and hollows. Also, the PAO segment includes conversion processing of metal for other specialty metals companies. A significant portion of PAO sales are to customers in the aerospace and energy industries. Much of PAO sales are to forging companies that further shape, mill, and finish the metals into more specific dimensions. All such sales are made under the Carpenter brand name.

The Emerging Ventures segment currently includes the operations of the recently completed acquisitions of Amega West and Oilfield Alloys, manufacturers and service provider of high-precision components for MWD and LWD housings, drill collars, stabilizers and other down-hole tools used for directional drilling. MWD and LWD technology is used to ensure critical data is obtained and transmitted to the surface to monitor progress of the well. The net sales of Amega West are to customers in the energy end use market.

The Company’s consolidated total assets are managed as corporate-level assets and, therefore, are not allocated to the business segments. Only a portion of the expenses related to these assets, principally depreciation and amortization, is allocated to the individual business segments for inclusion in their respective measures of operating income.

The service cost component of the Company’s net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the

Notes to Consolidated Financial Statements (continued)

operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is included under the heading “Pension earnings, interest & deferrals.”

On a consolidated basis, one customer, Precision Castparts Corporation, accounted for 10% ($161.7 million and $116.1 million) of the Company’s sales for the years ended June 30, 2011 and 2010, respectively. There were no significant individual customer sales that accounted for more than 10 percent of the total sales during fiscal year 2009.

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


Segment Data	Year Ended June 30,
($ in millions)	2011			2010			2009
Net Sales:
Advanced Metals Operations	$	1,141.1		$	853.0		$	957.4
Premium Alloys Operations		533.0			348.3			413.2
Emerging Ventures		35.3			—			—
Intersegment		(34.3	)		(2.7	)		(8.3	)

Consolidated net sales	$	1,675.1		$	1,198.6		$	1,362.3

Operating Income:
Advanced Metals Operations	$	62.3		$	11.8		$	34.1
Premium Alloys Operations		110.2			71.2			76.9
Emerging Ventures		3.9			—			—
Corporate costs		(42.0	)		(33.5	)		(37.5	)
Pension earnings, interest & deferrals		(35.2	)		(37.9	)		(0.1	)
Restructuring costs		—			—			(9.4	)
Intersegment		(2.8	)		0.1			—

Consolidated operating income	$	96.4		$	11.7		$	64.0


Geographic Data	Year Ended June 30,
($ in millions)	2011			2010			2009
Net Sales: ^(a)
United States	$	1,163.7		$	829.5		$	885.3
Europe		277.4			194.6			261.5
Asia Pacific		110.7			82.9			86.4
Mexico		67.1			49.3			72.0
Canada		36.6			31.6			34.2
Other		19.6			10.7			22.9

Consolidated net sales	$	1,675.1		$	1,198.6		$	1,362.3

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

Notes to Consolidated Financial Statements (continued)


Long-lived assets:	June 30,
($ in millions)	2011		2010
United States	$	646.8	$	611.5
Canada		6.9		—
Europe		5.9		4.4
Mexico		1.6		1.3
Asia Pacific		1.7		0.3

Consolidated long-lived assets	$	662.9	$	617.5


Product Data	Year Ended June 30,
($ in millions)	2011		2010		2009
Special alloys	$	841.8	$	637.8	$	694.6
Stainless steels		610.5		398.3		460.1
Titanium products		140.7		112.4		141.4
Other materials		82.1		50.1		66.2

Total net sales	$	1,675.1	$	1,198.6	$	1,362.3

21.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRS (“ASU 2011-04”), which amends ASC 820 Fair Value Measurement . ASU 2011-04 improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements. Although ASU 2011-04 is not expected to have a significant effect on practice, it changes some fair value measurement principles and disclosure requirements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011, and must be applied prospectively. Early application is not permitted. The Company does not anticipate that the adoption of ASU 2011-04 will have a material impact on financial position or the results of operations.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05) . ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity is eliminated. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and is required to be applied retrospectively. The Company is evaluating if other comprehensive income will be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements.

Notes to Consolidated Financial Statements (continued)

22.

Supplemental Data

The following are additional required disclosures and other material items:


	Year Ended June 30,
($ in millions)	2011			2010			2009
Cost Data:
Repairs and maintenance costs	$	74.8		$	60.4		$	65.3


Cash Flow Data:
Cash paid during the year for:
Interest payments	$	18.3		$	19.8		$	21.1

Income tax payments (refunds), net	$	11.5		$	(13.7	)	$	33.3


	June 30,
($ in millions)	2011			2010			2009
Accumulated Other Comprehensive Loss:
Foreign currency translation adjustment	$	(7.7	)	$	(23.7	)	$	(14.4	)
Pension and post-retirement benefits, net of tax		(227.7	)		(344.5	)		(314.8	)
Net unrealized gains (losses) on derivatives, net of tax		2.6			(2.4	)		(17.3	)
Unrealized losses on marketable securities, net of tax		(0.5	)		(0.5	)		—

	$	(233.3	)	$	(371.1	)	$	(346.5	)

23.

Subsequent Event

As discussed further in Note 12, Contingencies and Commitments, on July 19, 2011, the Company entered into a settlement agreement providing for a dismissal of the Boarhead Farms lawsuit. The settlement agreement provides for a complete release in the Company’s favor by all parties to the litigation, in exchange for a payment of $21.8 million. On August 16, 2011, the settlement was approved by the court.

SUPPLEMENTARY DATA

Quarterly Financial Data (Unaudited)

Quarterly sales and earnings results are normally influenced by seasonal factors. Historically, the first two fiscal quarters (three months ending September 30 and December 31) are typically the lowest principally because of annual plant vacation and maintenance shutdowns by Carpenter and by many of its customers. However, the timing of major changes in the general economy or the markets for certain products can alter this pattern.


(dollars and shares in millions, except per share amounts)	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Results of Operations
Fiscal Year 2011
Net sales	$	351.7		$	375.6	$	464.2	$	483.6


Gross profit	$	49.8		$	49.1	$	73.1	$	77.0


Operating income	$	14.1		$	12.1	$	35.2	$	35.0


Net income	$	7.6		$	9.4	$	28.8	$	25.9


Net income attributable to Carpenter	$	7.6		$	9.3	$	28.6	$	25.5


Fiscal Year 2010
Net sales	$	233.7		$	263.8	$	336.9	$	364.2


Gross profit	$	19.2		$	35.6	$	46.3	$	43.7


Operating (loss) income	$	(13.3	)	$	2.0	$	12.8	$	10.2


Net (loss) income	$	(9.3	)	$	3.5	$	2.1	$	5.9


Net (loss) income attributable to Carpenter	$	7.6		$	9.3	$	28.6	$	25.5


	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Earnings per common share
Fiscal Year 2011

Basic earnings	$	0.17		$	0.21	$	0.64	$	0.57


Diluted earnings	$	0.17		$	0.21	$	0.64	$	0.57


	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Fiscal Year 2010

Basic earnings	$	(0.21	)	$	0.08	$	0.05	$	0.13


Diluted earnings	$	(0.21	)	$	0.08	$	0.05	$	0.13


	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Weighted average common shares outstanding (in millions)
Fiscal Year 2011
Basic		44.1			44.1		44.1		44.2

Diluted		44.5			44.7		44.7		45.0

Fiscal Year 2010
Basic		43.9			44.0		44.0		44.0

Diluted		43.9			44.2		44.4		44.5

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable

Item 9A.

Controls and Procedures

(a)	Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of June 30, 2011. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of June 30, 2011 were effective in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required under the Securities and Exchange Commission’s rules and forms, including a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)	Management’s Report on Internal Control over Financial Reporting

Management’s Report on the Company’s internal control over financial reporting is included in Item 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control Over Financial Reporting” and is incorporated herein by reference. The Company’s independent registered public accounting firm has issued a report on management’s assessment of the Company’s internal control over financial reporting and is set forth in Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference.

(c)	Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information

Not applicable

PART III

Item 10.

Directors and Executive Officers and Corporate Governance

Listed below are the names of our corporate executive officers, 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.

William A Wulfsohn was appointed President and Chief Executive Officer effective July 1, 2010. Mr. Wulfsohn has served as a Director for the Company since April 2009. Mr. Wulfsohn most recently served as Senior Vice President, Industrial Coatings at PPG Industries, a Fortune 200 company with more than $12 billion in annual revenues. Prior to joining PPG Industries, Mr. Wulfsohn served as Vice President and General Manager for Honeywell International. Previously, Mr. Wulfsohn worked for Morton International/Rohm & Haas, beginning as a director of marketing and culminating as Vice President and Business Director.

K. Douglas Ralph was appointed Senior Vice President and Chief Financial Officer effective July 9, 2007. Mr. Ralph most recently served as Executive Vice President and Chief Financial Officer at Foamex International, Inc. from February 2003 to April 2006. Foamex International, Inc. is a leading manufacturer of flexible polyurethane foam for bedding, furniture, automotive, carpet cushion, and other consumer and industrial applications in North America. At Foamex International, Inc., Mr. Ralph had responsibility for total financial operations, including accounting, treasury, investor relations and information technology of the $1.3 billion global company. Prior to joining Foamex International, Inc., Mr. Ralph spent 21 years as a financial executive for the Procter & Gamble Company.

David L. Strobel was appointed to Senior Vice President – Global Operations on September 2, 2010. Since joining Carpenter in 1983, Mr. Strobel has held numerous positions of increasing responsibility, including Vice President – Manufacturing and most recently serving as Vice President Technology.

Sunil Y. Widge was appointed to Senior Vice President – Strategic Business Development and Governmental Affairs on September 2, 2010. Prior to his current position, Dr. Widge served as Chief Technology Officer Emeritus since 2009. Dr. Widge previously served as Senior Vice President &Chief Technology Officer until his retirement in January 2009. During his nearly thirty three years with the Company, Dr. Widge led the expansion of Carpenter’s world-renowned scientific capability in specialty alloys materials.

James D. Dee was appointed Vice President, General Counsel and Secretary on September 13, 2010. Mr. Dee most recently served as General Counsel, Secretary and Chief Administrative Officer at C&D Technologies. Mr. Dee is a graduate of the Marshall-Wythe School of Law of the College of William and Mary and the University of Pennsylvania. Mr. Dee is a member of the Bars of Pennsylvania, New Jersey and Florida and is admitted to practice before the United States Patent and Trademark Office.


Name	Age	Position	Assumed Present Position

William A. Wulfsohn	49	President and Chief Executive Officer Director	July 2010

K. Douglas Ralph	50	Senior Vice President – Finance and Chief Financial Officer	July 2007

David L. Strobel	50	Senior Vice President – Global Operations	September 2010

Sunil Y Widge	61	Senior Vice President – Strategic Business Development & Governmental Affairs	September 2010

James D. Dee	54	Vice President, General Counsel & Secretary	September 2010

The information required as to directors and the committees of the Board of Directors is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the captions “Election of Directors” and “Corporate Governance.”

The information concerning compliance with Section 16(a) of the Securities and Exchange Act of 1934, as amended, is incorporate herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “Corporate Governance.”

The information concerning Carpenter’s Code of Ethics and certain additional information relating to the Company’s Corporate Governance is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “Corporate Governance.”

The information concerning the Audit Committee and its financial experts is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “Audit/Finance Committee Report.”

The information concerning material changes to the procedures by which shareholders may recommend nominees to the Board of Directors is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “General Information.”

On October 27, 2010, we filed with the New York Stock Exchange (“NYSE”) the Annual CEO Certification regarding our compliance with the NYSE’s Corporate Governance listing standards as required by Section 303 A-12(a) of the NYSE Listed Company Manual. In addition, we have filed as exhibits to our annual report on Form 10-K for the fiscal year ended June 30, 2011, the applicable certifications of our Chief Executive Officer and our Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of Carpenter’s public disclosures.

Item 11.

Executive Compensation

Certain information required by this item is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the captions “Compensation Discussion and Analysis” and “Executive Compensation.”

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “Security Ownership of Certain Persons.”

Equity Compensation Plan Information

The following table shows the securities authorized for issuance under equity compensation plans as of June 30, 2011:


Equity Compensation Plan Information
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		956,807	$	29.23		3,593,870	⁽¹⁾
Equity compensation plans not approved by security holders		—		—		—

Total		956,807	$	29.23		3,593,870	⁽¹⁾

⁽¹⁾

Includes 2,719,790 shares available for issuance under the Stock-Based Incentive Compensation Plan for Officers and Key Employees (which provides for the issuance of stock options, restricted stock, and restricted stock units) and 874,080 shares available under the Stock-Based Compensation Plan for Non-Employee Directors (which provides for issuance of stock options, stock units and performance units.)

Item 13.

Certain Relationships, Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the captions “Corporate Governance” and “Executive Compensation.”

Item 14.

Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the Company’s fiscal year 2011 definitive Proxy Statement under the caption “Approval of Appointment of Independent Registered Public Accounting Firm.”

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)

Financial Statement Schedule:

(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:”):

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.

(b)

Exhibits

Exhibits required to be filed by Item 601 of Regulation S-K are listed below. Documents not designated as being incorporated herein by reference are filed herewith. The exhibit numbers correspond to the paragraph numbers designated in Item 601 of Regulation S-K.


Exhibit No.		Description

3(A)		Restated Certificate of Incorporation, dated October 26, 1998, is incorporated herein by reference to Exhibit 3(A) of Carpenter’s 2005 Annual Report on Form 10-K filed on September 9, 2005.

3(B)		By-Laws, amended as of April 19, 2011, incorporated by reference to Exhibit 3.2 of Carpenter’s Current Report on Form 8-K filed April 21, 2011.

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

4(B)		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.

4(C)		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.

4(D)		Indenture, dated January 6, 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 Registration Statement No. 33-51613, as filed on January 12, 1994.

4(E)		Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B are incorporated by reference to Exhibit 4(F) of Carpenter’s 2004 Annual Report on Form 10-K filed September 3, 2004.

4(F)		Pricing Supplements No. 1 through 25 dated and filed from April 2, 1998 to June 12, 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.


Exhibit No.		Description

4(G)		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.

4(H)		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 incorporated herein by reference to Exhibit 4(I) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.

4(I)		Second Supplemental Indenture, dated as of June 30, 2011, between Carpenter and U.S. Bank National Association related to Carpenter’s issuance of $250,000,000 principal amount of its 5.20% Senior Notes due 2012 is incorporated herein by reference to Exhibit 4.1 of Carpenter’s Current Report on Form 8-K filed June 30, 2011.

4(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 incorporated herein by reference to Exhibit 4(J) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.

4(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 incorporated herein by reference to Exhibit 4(K) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.

4(L)		Form of 5.20% Senior Notes Due 2012 related to Carpenter’s issuance of $250,000,000 principal amount of its 5.20% Senior Notes due 2012 is incorporated herein by reference to Exhibit 4.2 of Carpenter’s Current Report on Form 8-K filed June 30, 2011.

† 10(A)		Supplemental Retirement Plan for Executives of Carpenter Technology Corporation as amended on June 29, 2010 is incorporated by reference to Exhibit 10(A) to Carpenter’s 2010 Annual Report on Form 10-K filed August 20, 2010.

† 10(B)		Deferred Compensation Plan for Non-Management Directors of Carpenter Technology Corporation, amended as of August 16, 2011 (filed herewith).

† 10(C)		Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation, as amended and restated effective January 1, 2008, is incorporated herein by reference to Exhibit 10(C) of Carpenter’s Form 10-Q for the quarter ended December 31, 2009 filed February 3, 2010.

† 10(D)		Executive Bonus Compensation Plan, amended restated July 1, 2011 (filed herewith).


Exhibit No.		Description

† 10(E)		Stock-Based Compensation Plan For Non-Employee Directors, as amended as of August 16, 2011 (filed herewith).

† 10(F)		Officers’ and Key Employees Supplemental Retirement Plan of Carpenter Technology Corporation, restated as of August 20, 2007, is incorporated herein by reference to Exhibit 10(G) of Carpenter’s 2007 Annual Report on Form 10-K filed August 29, 2007.

† 10(G)		Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated September 11, 1990 as restated on May 1, 1997 and amended October 28, 2002 and January 23, 2003, 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 by reference to Exhibit 10(J) of Carpenter’s 2002 Annual Report on Form 10-K filed September 23, 2002 and the amendments thereof are incorporated herein by reference to Exhibit 10(I) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.

† 10(H)		Indemnification Agreement dated as of July 1, 2010 by and between the Company and William A. Wulfsohn (pursuant to Instruction 2 to Item 601 of Regulation S-K, the Indemnification Agreements, which are substantially identical in all material respects, except as to the parties thereto and the dates, between the Company and the following individuals, were not filed: K. Douglas Ralph, David L. Strobel, Sunil Y. Widge and James D. Dee) (filed herewith).

† 10(I)		Stock-Based Incentive Compensation Plan for Officers and Key Employees, as amended effective July 1, 2011 (filed herewith).

† 10(J)		Amended and Restated Carpenter Technology Corporation Change of Control Severance Plan, effective September 1, 2010, is incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed September 3, 2010.

† 10(K)		Earnings Adjustment Plan of Carpenter Technology Corporation, restated as of August 20, 2007, is incorporated herein by reference to Exhibit 10(M) of Carpenter’s 2007 Annual Report on Form 10-K filed August 29, 2007.

† 10(L)		Benefit Equalization Plan of Carpenter Technology Corporation, restated as of August 20, 2007, is incorporated herein by reference to Exhibit 10(N) of Carpenter’s 2007 Annual Report on Form 10-K filed August 29, 2007.

† 10(M)		Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated December 7, 1990 as restated on May 1, 1997 and amended October 28, 2002 and January 23, 2003, relating in part to the Directors’ Retirement Plan and the Deferred Compensation Plan for Non-Management Directors, is incorporated by reference to Exhibit 10(P) of Carpenter’s 2002 Annual Report on Form 10-K filed September 23, 2002 and the amendments thereof are incorporated herein by reference to Exhibit 10(O) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.

100


Exhibit No.		Description

10(N)		Revolving Credit Agreement, dated as of November 30, 2009, among Carpenter and certain of its subsidiaries as Borrowers and with JPMorgan Chase Bank NA, The Bank of Tokyo-Mitsubishi UFJ Trust Company, PNC Bank National Association and Keybank, National Association as Lenders is incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed November 25, 2009.

10(O)		Credit Agreement, dated as of June 21, 2011, among Carpenter as Borrower, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto, JPMorgan Chase Bank, N.A. and Syndication Agent, PNC Bank, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Sovereign Bank each as Documentation Agent, Merrill Lynch, Pierce & Smith Incorporated and J.P. Morgan Securities LLC as Joint Lead Arrangers and Joint Book Managers is incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed June 21, 2011.

† 10(P)		Release and Termination of Employment Agreement executed November 6, 2009, between the Company and T. Kathleen Hanley is incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed on November 12, 2009.

† 10(Q)		Supplemental Separation Pay Agreement executed July 20, 2010 between the Company and Anne L Stevens is incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed on July 22, 2010.

† 10(R)		Employment Letter Agreement of K. Douglas Ralph, dated July 6, 2007, is incorporated herein by reference to Exhibit 99.2 of Carpenter’s Current Report on Form 8-K filed July 11, 2007.

† 10(S)		Employment Letter Agreement of William A. Wulfsohn, dated June 3, 2010, incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed on June 7, 2010.

† 10(T)		Employment Letter Agreement of David Strobel, dated September 2, 2010, is incorporated herein by reference to Exhibit 10(C) of Carpenter’s Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010.

† 10(U)		Employment Letter Agreement of Michael L. Shor, dated September 2, 2010, is incorporated herein by reference to Exhibit 10(D) of Carpenter’s Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010.

† 10(V)		Agreement, dated September 2, 2010, by and between the Company and Dr. Sunil Y. Widge is incorporated herein by reference to Exhibit 10(E) of Carpenter’s Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010.

† 10(W)		Employment Letter of Agreement of James Dee, dated August 13, 2010, is incorporated herein by reference to Exhibit 10(F) of Carpenter’s Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010.

† 10(X)		Severance Pay Plan for Executives of Carpenter Technology Corporation, as adopted July 1, 2010, incorporated herein by reference to Exhibit 10.1 of Carpenter’s Current Report on Form 8-K filed on July 2, 2010.

101


Exhibit No.		Description

† 10(Y)		Form of Restricted Stock Option Award Agreement (pursuant to Carpenter’s Stock-Based Incentive Plan for Officers and Key Employees) (filed herewith).

† 10(Z)		Form of Restricted Unit Award Agreement (pursuant to Carpenter’s Stock-Based Incentive Plan for Officers and Key Employees) is incorporated herein by reference to Exhibit 10(B) of Carpenter’s Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010.

10(BB)		Agreement and Plan of Merger, dated as of June 20, 2011, by and among Carpenter, Hawke Acquisition Corp., HHEP-Latrobe, L.P. and Watermill-Toolrock Partners, L.P. is incorporated herein by reference to Exhibit 2.1 of Carpenter’s Current Report on Form 8-K filed June 21, 2011.

12		Computations of Ratios of Earnings to Fixed Charges (unaudited) (filed herewith)

21		Subsidiaries of the Registrant (filed herewith)

23		Consent of PricewaterhouseCoopers LLP (filed herewith)

24		Powers of Attorney in favor of James D. Dee or K. Douglas Ralph (filed herewith)

31(A)		Certification of Chief Executive Officer required by Securities and Exchange Commission Rule 13a-14(a)/15d-14(a) (filed herewith).

31(B)		Certification of Chief Financial Officer required by Securities and Exchange Commission Rule 13a-14(a)/15d-14(a) (filed herewith).

32		Certification pursuant to 18 U.S.C Section 1350 (filed herewith)

99		Agreement to Furnish Debt Instruments (filed herewith)

101		The following financial information from this Annual Report on Form 10-K for the fiscal year ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Changes in Equity and (vi) the Notes to the Consolidated Financial Statements.

†	Management contract or compensatory plan or arrangement

102

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/ K. Douglas Ralph
		K. Douglas Ralph
		Senior Vice President and
		Chief Financial Officer

Date: August 24, 2011

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/ William A. Wulfsohn	President and Chief Executive Officer and Director (Principal Executive Officer)	August 24, 2011
William A. Wulfsohn


/s/ K. Douglas Ralph	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	August 24, 2011
K. Douglas Ralph


/s/ Thomas F. Cramsey	Vice President and Chief Accounting Officer (Principal Accounting Officer)	August 24, 2011
Thomas F. Cramsey


*	Chairman and Director	August 24, 2011
Gregory A. Pratt

*	Director	August 24, 2011
Carl G. Anderson, Jr.

*	Director	August 24, 2011
Robert R. McMaster

*	Director	August 24, 2011
I. Martin Inglis

*	Director	August 24, 2011
Peter N. Stephans

*	Director	August 24, 2011
Kathryn C. Turner

*	Director	August 24, 2011
Jeffrey Wadsworth

103


*	Director	August 24, 2011
Stephen M. Ward, Jr.

*	Director	August 24, 2011
Dr. Phillip M. Anderson

Original Powers of Attorney authorizing James D. Dee or K. Douglas Ralph to sign this Report on behalf of: Carl G. Anderson, Jr., Robert R. McMaster, Martin Inglis, Gregory A. Pratt, Peter N. Stephans, Kathryn C. Turner, Jeffrey Wadsworth, Stephen M. Ward, Jr. and Dr. Phillip M. Anderson are being filed with the Securities and Exchange Commission.


*By	/s/ James D. Dee
		James D. Dee
		Attorney-in-fact

104

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, 2011

Allowance for doubtful accounts receivable	$	2.7	$	(0.2	)	$	—	$	0.2		$	2.7

Deferred tax valuation allowance	$	17.6	$	(0.2	)	$	—	$	0.1		$	17.5

Inventory reserves	$	15.2	$	(3.5	)	$	—	$	0.3		$	12.0


Year ended June 30, 2010

Allowance for doubtful accounts receivable	$	2.8	$	(0.1	)	$	—	$	—		$	2.7

Deferred tax valuation allowance	$	17.9	$	(0.4	)	$	—	$	0.1		$	17.6

Inventory reserves	$	16.0	$	(0.9	)	$	—	$	0.1		$	15.2


Year ended June 30, 2009

Allowance for doubtful accounts receivable	$	2.7	$	1.2		$	—	$	(1.1	)	$	2.8

Deferred tax valuation allowance	$	12.0	$	5.9		$	—	$	—		$	17.9

Inventory reserves	$	7.8	$	11.1		$	—	$	(2.9	)	$	16.0

105

Exhibit 10(B)

CARPENTER TECHNOLOGY CORPORATION

DEFERRED COMPENSATION PLAN

FOR NON-MANAGEMENT DIRECTORS

As amended and restated, effective August 19, 2011

This is an amendment and restatement of the Carpenter Technology Corporation Deferred Compensation Plan for Non-Management Directors (the “Plan”), effective August 19, 2011, established by Carpenter Technology Corporation and its subsidiaries expressly included herein to provide its non-employee directors with an additional method of planning for their retirement. The Plan is intended to be an unfunded plan maintained for the purpose of providing deferred compensation to the non-employee directors of Carpenter Technology Corporation.

The Plan has been amended and restated to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.

ARTICLE I - DEFINITIONS

The following words and phrases as used herein have the following meanings unless the context plainly requires a different meaning:

1.1 “Account” means the total amount credited to the bookkeeping accounts in which a Participant’s Deferral Credits are maintained, including earnings thereon. The Accounts will consist of Tranches for each type of Deferral made under Article IV, as the Plan Administrator deems necessary.

1.2 “Beneficiary” means the person that the Participant designates to receive any unpaid portion of the Participant’s Account should the Participant’s death occur before the Participant receives the entire balance to the credit of such Participant’s Account. If the Participant does not designate a beneficiary, his Beneficiary shall be his spouse if he is married at the time of his death, or his estate if he is unmarried at the time of his death.

1.3 “Board of Directors” means the board of directors of Carpenter Technology Corporation.

1.4 “Change in Control” means and includes each of the following which also constitutes a “change in the ownership or effective control of the corporation or in the ownership of a substantial portion of the assets of the corporation” within the meaning of Code Section 409A and the Treasury regulations issued thereunder:

1.4.1 The acquisition by any individual, entity, or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the

Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.4.3 (i), 1.4.3 (ii) and 1.4.3(iii);

1.4.2 individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors during any 12 month period; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;

1.4.3 consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Company” means the Carpenter Technology Corporation or any successor by merger, purchase or otherwise.

1.7 “Compensation” means all cash amounts that a Director receives in payment for serving on the Board of Directors. Notwithstanding the preceding sentence, Compensation shall not include amounts either granted or elected as stock units under the Carpenter Technology

Corporation Stock-Based Compensation Plan for Non-Employee Directors, or identified by the Company as expense allowances or reimbursements.

1.8 “Credits” means the amount credited to a Participant’s Account or Tranche, as appropriate, as a result of a Participant’s Deferrals plus earnings credited under Section 4.4.

1.9 “Deferral” means an amount deferred under the Plan pursuant to a Participant’s election under Article IV and credited to a Participant’s Account. No money or other assets will actually be contributed to such Accounts.

1.10 “Director” means an individual who serves on the Board of Directors.

1.11 “Disability” means a qualified physician designated by the Company has reviewed and approved the determination that a Participant:

1.11.1 is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

1.11.2 is, by reasons of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering Directors or employees of the Company or any subsidiary.

1.12 “Effective Date” means August 19, 2011.

1.13 “Event” means any one or combination of the following elected by the Participant in writing prior to the year of deferral to govern distribution of a Tranche: Change in Control, Disability, Termination or specific date or dates (such as attainment of a specified age). When a Participant elects a combination of events, the Participant must specify whether the event that is the “earlier of” or “later of” will control distribution. In the absence of a designation by the Participant, the “earlier of” will apply to a combination of events.

1.14 “Five-Year Medium Term Note Borrowing Rate” means the Company’s Five-Year Medium Term Note Borrowing Rate, as provided by one of the Company’s investment bankers for any such medium term note that would have been issued on August 15 (or the next business day thereafter if August 15 is not a business day) of each Plan Year.

1.15 “Participant” means a Director who is eligible and elects to participate in the Plan pursuant to Article II.

1.16 “Plan Committee” means the Plan Committee appointed pursuant to the General Retirement Plan for Employees of Carpenter Technology Corporation, as constituted from time to time.

1.17 “Plan” means this Carpenter Technology Corporation Deferred Compensation Plan for Non-Management Directors, as may be amended from time to time.

1.18 “Plan Administrator” means the Plan Committee.

1.19 “Plan Year” means the 12-month period beginning October 1 and ending September 30.

1.20 “Termination” means a Participant’s termination of service as a Director with the Company which constitutes a “separation from service” within the meaning of Code Section 409A.

1.21 “Tranche” means the Deferrals and associated investment results related to each separate election made by a Participant under Article IV.

1.22 “Unforeseeable Emergency” means a severe financial hardship to the Participant or a Beneficiary resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152, without regard to sections 152(b)(1), (b)(2) and (d)(1)(B)) of the Participant, loss of the Participant’s property due to casualty, need to pay for medical expenses, or need to pay for funeral expenses of a spouse, Beneficiary or dependent (as defined in Code section 152, without regard to sections 152(b)(1), (b)(2) and (d)(1)(B)), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

ARTICLE II - PARTICIPATION

2.1 Eligibility to Participate . All Directors who are neither current nor past employees of the Company or any of its subsidiaries are eligible to participate in the Plan.

2.2 Participation . Any Director who elects to participate in the Plan shall become a Participant in the Plan immediately upon enrolling as a Participant by the method required by the Plan Administrator. An individual shall remain a Participant in the Plan until all amounts credited to the Participant’s Account have been distributed to the Participant or the Participant’s Beneficiary.

ARTICLE III - VESTING

Participants are always fully vested in all amounts credited to their Accounts.

ARTICLE IV - DEFERRAL CREDITS

4.1 Eligibility to Receive Deferral Credits . Subject to Section 4.2, a Participant may receive Deferral Credits in each Plan Year that the Participant is a Director and is not an employee of the Company.

4.2 Deferrals . A Participant may elect to defer receipt of up to 100% of the Participant’s Compensation and to have the Company credit that amount to the Participant’s Account under the Plan.

4.3 Elections .

4.3.1 Frequency and Timing of Elections. Any elections made pursuant to this Section 4.3 may not be modified during the Plan Year to which such election applies, except that a Participant’s elections must cease to apply in the event such Participant receives a distribution from this Plan due to an Unforeseeable Emergency. The Participant must make an election prior to the end of the preceding Plan Year for it to take effect for the next Plan Year. Notwithstanding the foregoing, a newly appointed Director may file an initial election governing Deferrals during the first 30 days of eligibility to participate in the Plan.

4.3.2 Duration of Elections. Elections to receive Deferral Credits under this Article IV expire at the end of each Plan Year for which the election was made. Each such election shall constitute a separate Tranche.

4.3.3 Restriction on Elections. Elections to receive Deferral Credits may be in the form of a whole percentage or in $1 increments.

4.4 Earnings . All amounts credited to a Participant’s Account shall be credited with earnings at a rate equal to the Five-Year Medium Term Note Borrowing Rate, established as of August 15 (or the next business day thereafter if August 15 is not a business day) of the prior Plan Year. For the first Plan Year, the rate is 8.25%. The Plan Committee shall communicate to all Directors the Five-Year Medium Term Note Borrowing Rate for the next Plan Year no later than August 30 of the current Plan Year. Earnings on Credits shall begin to accrue on the date that such Deferral would have been paid to the Participant but for an election to defer under this Article IV. Earnings shall be compounded semi-annually on each October 1 and April 1. In addition, any distribution not made on either October 1 or April 1 shall have earnings compounded as of the date of distribution.

ARTICLE V - DISTRIBUTIONS

5.1 Source of Distributions . All distributions shall, at the Company’s discretion, be made directly out of the Company’s general assets or from the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors, if available.

5.2 Form of Distributions . A Participant may receive distributions in one of the following manners, which the Participant shall elect on the deferral election form.

5.2.1 A lump sum distribution of the Participant’s entire Tranche;

5.2.2 Ten annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator of the fraction is always one, and the denominator of the fraction is ten for the first distribution and is reduced by one for each subsequent distribution; or

5.2.3 Fifteen annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator of the fraction is always one, and the denominator of the fraction is fifteen for the first distribution and is reduced by one for each subsequent distribution.

5.3 Timing of Distributions . Each Participant shall elect the timing of the distribution with respect to each of his or her Tranches in the manner authorized by the Plan Administrator. The Participant’s election(s) shall indicate that payment of each Tranche shall be made (in the case of a lump sum election) or shall commence (in the case of an installment election) as soon as administratively practicable and no more than thirty (30) days following the Participant’s elected Event; provided, however, if the Participant is determined to be a “specified employee” under Code Section 409A, any distributions scheduled to be paid upon Termination shall not commence before the date which is 6 months following the date of Termination (or, if earlier, the death of the Participant) and, if such distribution is the first in a series of installments, subsequent distributions shall be paid upon the anniversary of the Termination date.

Notwithstanding a Participant’s elections under Article IV, the balance of a Participant’s Account shall be paid as soon as practicable and no more than thirty (30) days following the date of the Participant’s death.

5.4 Change in Form or Time of Distribution . A Participant may change his or her form and timing election applicable to the distribution of any Tranche under Sections 5.2 and 5.3, provided that such request for change is made (i) at least twelve (12) consecutive months prior to the date on which such distribution would otherwise have been made or commenced and (ii) the first payment with respect to such new election is deferred for a period of not less than 5 years beyond the date such distribution would otherwise have been made.

5.5 Distributions Due to Unforeseeable Emergency . Distributions hereunder may commence if the Plan Administrator determines, based on uniform, established standards, that the Participant has incurred an Unforeseeable Emergency. The amount distributed under this Section 5.5 shall not exceed the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). The Plan Administrator shall make such distribution from the Tranche(s) identified by the Participant. If the Participant fails to identify Tranches with sufficient Credits to satisfy the Unforeseeable Emergency, the Plan Administrator shall determine any additional Tranches required to complete the distribution.

5.6 Termination of Service . Upon Termination, a Participant, or the Beneficiary if the Termination is caused by the Participant’s death, shall receive distribution of the Participant’s Account pursuant to the election(s) in place under Sections 5.2, 5.3 and 5.4.

ARTICLE VI - PLAN ADMINISTRATION

6.1 General . The Plan shall be administered by the Company subject to the oversight of the Plan Administrator. Employees (of the Company) and members (of the Committee or Plan Committee), including any appointee or designee of such entity, shall use that degree of care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the employee’s or member’s conduct of a similar situation.

The Committee, Company or Plan Committee may appoint such agents, who need not be members (of the Committee or Plan Committee) or employees (of the Company), as it deems necessary for the effective exercise of its duties and may delegate to such agents any powers and duties, both ministerial and discretionary, as the Committee, Company or Plan Committee, as applicable, may deem expedient and appropriate.

6.2 Responsibilities and Reports . The Plan Administrator may pursuant to a written resolution allocate specific responsibilities under the Plan among one or more of its members, or such other persons it deems appropriate. The Plan Administrator shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports that are furnished by any actuary, accountant, controller, counsel, investment banker or other person who is employed or engaged for such purposes.

6.3 Governing Law . This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, to the extent not preempted by federal law.

ARTICLE VII - CLAIMS PROCEDURE

7.1 Plan Interpretation . The Corporate Governance Committee of the Board of Directors (including any designated sub-committee or successor committee performing similar duties, herein the “Committee”) shall have the authority and responsibility to interpret and construe the Plan and to decide all questions arising thereunder, including without limitation, questions of eligibility for participation, eligibility for Deferral Credits, the amount of Account balances, and the timing of the distribution thereof, and shall have the authority to deviate from the literal terms of the Plan to the extent it shall determine to be necessary or appropriate to operate the Plan in compliance with the provisions of applicable law. Notwithstanding the above, a member of the Committee shall not take any part in decisions regarding his participation in the Plan. The decisions of the Committee upon all matters within the scope of its authority shall be final, binding and conclusive upon all parties.

7.2 Denial of Claim for Benefits . Any denial by the Committee of any claim for benefits under the Plan by a Participant or Beneficiary shall be stated in writing by the Committee and delivered or mailed to the Participant or Beneficiary. The Committee shall furnish the claimant with notice of the decision not later than 90 days after receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90 day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the final decision. The notice of the Committee’s decision shall be written in a manner calculated to be understood by the claimant and shall include (i) the specific reasons for the denial, including, where appropriate, references to the Plan, (ii) any additional information necessary to perfect the claim with an explanation of why the information is necessary, and (iii) an explanation of the procedure for perfecting the claim.

7.3 Appeal of Denial . The claimant shall have 60 days after receipt of written notification of denial of his or her claim in which to file a written appeal with the Committee. As a part of any

such appeal, the claimant may submit issues and comments in writing and shall, on request, be afforded an opportunity to review any documents pertinent to the perfection of his or her claim. The Committee shall render a written decision on the claimant’s appeal ordinarily within 60 days of receipt of notice thereof but, in no case, later than 120 days.

ARTICLE VIII - FUNDING

8.1 Funding . The Company shall not segregate or hold separately from its general assets any amounts credited to the Accounts, and shall be under no obligation whatsoever to fund in advance any amounts under the Plan, including all Credits and earnings thereon.

8.2 Insolvency . In the event that the Company becomes insolvent, all Participants and Beneficiaries shall be treated as general, unsecured creditors of the Company with respect to any amounts credited to the Accounts under the Plan.

ARTICLE IX - AMENDMENT AND TERMINATION

9.1 Reservation of Rights . The Company reserves the right to amend or terminate the Plan at any time by action of the Board of Directors. Notwithstanding the foregoing, no such amendment or termination shall reduce the balance of any Participant’s Account as of the date of such amendment or termination.

9.2 Funding upon Termination . Upon a complete termination of the Plan, the Company shall contribute to the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors an amount equal to the aggregate of all amounts credited to Participants’ Accounts as of the date of such termination. If the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors does not exist at the time the Plan is terminated, the Company shall create an irrevocable grantor trust to which it will contribute such amounts. This newly created trust shall be designed to ensure that Participants will not be subject to taxation on amounts contributed to and held under the trust on their behalf before the amounts are distributed.

9.3 Survival of Accounts and Elections . Notwithstanding any termination of the Plan, the trustee of the trust to which amounts are contributed under Section 9.2 shall maintain the Accounts for Participants in the same manner as under this Plan and all elections for distributions under Article V of the Plan shall survive the termination and remain in effect.

ARTICLE X - MISCELLANEOUS

10.1 Limited Purpose of Plan . The establishment or existence of the Plan shall not confer upon any individual the right to continue as a Director.

10.2 Non-alienation . No amounts payable under the Plan shall be subject in any manner to anticipation, assignment, or voluntary or involuntary alienation.

10.3 Facility of Payment . If the Plan Administrator, in its sole discretion, deems a Participant or Beneficiary who is eligible to receive any payment hereunder to be incompetent to receive the same by reason of age, illness or any infirmity or incapacity of any kind, the Plan Administrator

may direct the Company to apply such payment directly for the benefit of such person, or to make payment to any person selected by the Plan Administrator to disburse the same for the benefit of the Participant or Beneficiary. Payments made pursuant to this Section 10.3 shall operate as a discharge, to the extent thereof, of all liabilities of the Company and the Plan Administrator to the person for whose benefit the payments are made.

10.4 Section 409A of the Code . The Plan is intended to comply in form and operation with the requirements of section 409A of the Code and applicable regulations and other guidance of general applicability issued thereunder (“Section 409A”). It is the intention of the Company that the amounts deferred pursuant to this Plan shall not be included in the gross income of the Directors or their Beneficiaries until such time as the deferred amounts are distributed from the Plan. At all times, this Plan shall be interpreted and operated in accordance with the requirements of Section 409A, unless an exemption from Section 409A is available and applicable. Notwithstanding any provision to the contrary in this Plan, if, at the time of a Director’s separation from service, such Director has an account in this Plan and is determined to be a “specified employee” under Section 409A, any payment due to the Director on account of his or her “separation from service” may not be made before the date that is six months after the date of separation from service (or, if earlier, the date of death of the Director), except as may be otherwise permitted pursuant to Section 409A.

Exhibit 10(D)

EXECUTIVE BONUS COMPENSATION PLAN OF

CARPENTER TECHNOLOGY CORPORATION

EFFECTIVE JULY 1, 1989

As Amended and Restated July 1, 2011

To be Effective July 1, 2011

I.	Statement and Purpose of Plan

The Executive Bonus Compensation Plan of Carpenter Technology Corporation provides additional compensation for selected employees based on the Company’s financial performance. The combination of Base Pay and Executive Bonus Compensation is intended to provide a competitive cash-compensation opportunity to Participants.

II.

Definitions

Base Pay means a Participant’s gross bi-weekly salary paid during the Performance Period (including holidays, vacation and approved absence) plus the restoration of (1) any salary reduction resulting from any Company plan providing benefits authorized under sections 125, 401(a) or 409A of the Code and (2) deductions from salary for jury duty pay, military pay or workers compensation payments. Eligible Base Pay during an approved absence is limited to one week per occurrence under this Plan. Excluded from Base Pay are any payments from a third-party and cash payments from the Company not otherwise expressly included (e.g., moving allowance, mortgage interest differential allowance, imputed income, severance pay, etc.).

Board means the Board of Directors of the Company.

Code means the Internal Revenue Code of 1986, as amended.

Committee means a committee of the Board of Directors selected to administer the Plan. With respect to Qualified Executive Bonus Compensation, the Committee shall either be comprised exclusively of two or more members of the Board who are non-employee “outside directors” within the meaning of section 162(m)(4)(C) of the Code and treasury regulation 1.162-27(e)(3) or the Committee shall designate a sub-committee that is so comprised.

Company means Carpenter Technology Corporation, a Delaware corporation, or any successor by merger, purchase or otherwise.

Determination Date means the date upon which the Committee determines Performance Goals and Executive Bonus Compensation opportunities. The Determination Date must be no later than (1) 90 days after the first day of the Performance Period and (2) the date upon which 25% of the Performance Period has elapsed.

Disability means that the Participant has been totally disabled by bodily injury or disease in the opinion of a qualified physician designated by the Company so as to be prevented thereby from engaging in any employment then available by the Company during the remainder of the Performance Period. Disability does not include incapacity contracted, suffered or

incurred while the Participant was engaged in, or resulted from the Participant’s having engaged in, a criminal enterprise.

Executive Bonus Compensation means an amount that is payable to a Participant in the Plan based on the achievement of specified Performance Goals.

General Retirement Plan means the General Retirement Plan for Employees of Carpenter Technology Corporation, effective January 1, 1950, as amended from time to time.

Participant means any employee, who on or before April 1 of the first year of the Performance Period is (1) designated by the Board to act as the President, Vice-Chairman, Chief Executive Officer, Chief Operating Officer or any category of Vice-President of the Company, or (2) any other key employee of the Company designated by the Committee to participate in the Plan.

Performance Goal means any one or more of the following performance goals, intended by the Committee to constitute objective goals for purposes of Code Section 162(m), either individually, alternatively, or in any combination, applied to either the Company as a whole or to a business unit or affiliate, either individually, alternatively or in combination, and measured either quarterly, annually, or cumulatively over a period of quarters or years, on an absolute basis or relative to a pre-established target, to previous quarter’s or years’ results or to a designated comparison group, in each case as established by the Committee not later than the Determination Date:

(a) stock price;

(b) market share;

(d) revenue;

(e) earnings or diluted earnings per share, with or without net pension credit/expense;

(f) return on shareholder equity;

(g) return on common book equity;

(h) costs;

(i) cash flow;

(j) return on total assets (“ROA”);

(k) return on invested capital;

(l) return on net assets (“RONA”);

(m) income, including but not limited to operating income and net income, with or without net pension credit/expense;

(n) operating margin;

(o) capital costs;

(p) earnings before interest and income taxes (“EBIT”) or earnings before interest, income taxes, depreciation and amortization (“EBITDA”);

(q) economic profit;

(r) total shareholder return;

(s) economic value added;

(t) expenses or operating expenses;

(u) cost reduction goals;

(v) total case incidence rate;

(w) customer satisfaction as measured by expenses or costs of, or lost income, revenue, or sales attributable to, customer claims for refunds or remakes; or

(x) any combination of the foregoing.

The Committee may appropriately adjust any evaluation of performance under a Performance Goal to remove the effect of equity compensation expense under FAS 123R, amortization of acquired technology and intangibles, asset write-downs; litigation or claim judgments or settlements; the effect of changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; and any items that are extraordinary, unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption under Section 162(m) of the Code, if applicable.

Performance Period means a period of one or more consecutive fiscal years, or portions thereof, of the Company as established by the Committee during which the performance of the Company, any subsidiary or any department thereof, or any individual is measured for the purpose of determining the extent to which a Performance Goal is achieved. Nothing in this Plan shall prevent the Committee from establishing a Performance Period that commences prior to the termination of one or more other Performance Periods.

Plan means the Carpenter Technology Corporation Executive Bonus Compensation Plan herein set forth, as amended from time to time.

Qualified Executive Bonus Compensation means Executive Bonus Compensation that is intended to be “qualified performance-based compensation” under section 162(m) of the Code and Treasury regulation 1.162-27(e), including any successor provision.

Retirement means a Participant’s termination of employment with eligibility to receive a monthly payment in the following month under either the General Retirement Plan or the Supplemental Retirement Plan for Executives of Carpenter Technology Corporation (“ SERP ”).

III.

Administration

The Committee shall have the authority, subject to the provisions herein, (A) to select employees to participate in the Plan; (B) to establish and administer the Performance Goals and the Executive Bonus Compensation opportunities applicable to each Participant and certify whether the Performance Goals have been attained; (C) to construe and interpret the Plan and any agreement or instrument entered into under or in connection with the Plan; (D) to establish, amend, and waive rules and regulations for the Plan’s administration; and (E) to make all other determinations that may be necessary or advisable for the administration of the Plan. Any determination by the Committee pursuant to the Plan shall be final, binding and conclusive on all employees and Participants and anyone claiming under or through any of them.

IV.

Establishment of Performance Goals and Executive Bonus Compensation Opportunities

No later than the Determination Date for each Performance Period, the Committee shall establish in writing, the method for computing the amount of Qualified Executive Bonus Compensation or percentage of Base Pay that may be payable under the Plan to each Participant in the Plan for such Performance Period if the Performance Goals established by the Committee for such Performance Period are attained in whole or in part. The maximum amount that may be payable to any Participant in any calendar year under the Plan shall not exceed four (4) times the maximum deduction limit imposed by section 162(m) of the Code on compensation that is not performance based. Such method shall be stated in terms of an objective formula or standard that precludes discretion to increase the amount of Qualified Executive Bonus Compensation or percentage of Base Pay that would otherwise be due upon attainment of the goals and may be different for each Participant. Notwithstanding anything to the contrary contained herein, the Committee may, however, exercise negative discretion within the meaning of treasury regulation 1.162-27(e)(2)(iii)(A) with respect to any Executive Bonus Compensation hereunder to reduce any amount that would otherwise be payable hereunder to the extent necessary to allow the Company to deduct that Executive Bonus Compensation despite the limits imposed by section 162(m) of the Code.

No later than the Determination Date for each Performance Period, the Committee shall establish in writing the Performance Goals for such Performance Period.

V.	Attainment of Performance Goals Required; Employment Status

Executive Bonus Compensation shall be paid under this Plan for any Performance Period only upon the attainment of the Performance Goals established by the Committee with respect to such Performance Period. Executive Bonus Compensation shall also be contingent upon the Participant remaining employed by the Company or a subsidiary of the Company during such Performance Period, except as follows:

A Participant may receive Executive Bonus Compensation which shall be paid at the same time as the Executive Bonus Compensation the Participant would have received for such Performance Period had no termination of employment occurred, and which shall be equal to the amount of such Executive Bonus Compensation multiplied by a fraction the numerator of which is the number of full and partial pay periods elapsed in such Performance Period prior to termination of employment and the denominator of which is the number of total pay periods in the Performance Period in the event the Participant’s termination of employment is by reason of the Participant’s death, Disability or, unless otherwise determined by the Committee, Retirement.

A Participant whose employment terminates prior to the end of a Performance Period for any reason not excepted above shall not be entitled to any Executive Bonus Compensation under the Plan for that Performance Period.

VI.

Shareholder Approval and Committee Certification; Payment of Executive Bonus Compensation

Unless the Committee provides otherwise, (1) earned Executive Bonus Compensation shall be paid no later than 2 ¹ / 2 months after the end of the Performance Period with respect to which such Executive Bonus Compensation is earned, and (2) such payment shall be made in cash (subject to any payroll tax withholding the Company may determine applies).

Payment of any Qualified Executive Bonus Compensation under this Plan shall be contingent upon an affirmative vote of the shareholders of at least a majority of the votes cast (including abstentions) approving the Plan, including the basis upon which Performance Goals may be established under Section II(L) hereof, sufficient to satisfy the applicable requirements of Code section 162(m) and the regulations promulgated thereunder. Unless and until such shareholder approval is obtained, no Qualified Executive Bonus Compensation shall be paid pursuant to this Plan.

Payment of any Qualified Executive Bonus Compensation under this Plan shall be contingent upon the Committee’s certifying in writing that the Performance Goals and any other material terms applicable to such Qualified Executive Bonus Compensation were in fact satisfied, in accordance with applicable Treasury regulations under Code section 162(m). Unless and until the Committee so certifies, such Qualified Executive Bonus Compensation shall not be paid.

Every fifth year following shareholder approval of this Plan, or more frequently if necessary for purposes of Code section 162(m), this Plan shall be resubmitted to shareholders for their reapproval for the relevant Performance Period(s).

VII.

Amendment, Termination and Term of Plan

The Board may amend, modify or terminate this Plan at any time. The Plan will remain in effect until terminated by the Board.

VIII.

Interpretation and Construction

No provision of the Plan, nor the selection of any Participant, shall constitute an employment agreement or affect the duration of any Participant’s employment, which shall remain “employment at will” unless an employment agreement between the Company and the Participant provides otherwise. Both the Participant and the Company shall remain free to terminate employment at any time to the same extent as if the Plan had not been adopted.

Any provision of the Plan that could be construed to prevent Qualified Executive Bonus Compensation under the Plan from qualifying for deductibility under section 162(m) of the Code or Treasury regulation 1.162-27(e) shall be administered, interpreted and construed to carry out such intention and any provision that cannot be so administered, interpreted and construed shall to that extent be disregarded.

IX.

Governing Law

The terms of this Plan shall be governed by the laws of the Commonwealth of Pennsylvania, without reference to the conflicts of laws principles thereof.

Exhibit 10(E)

CARPENTER TECHNOLOGY CORPORATION

STOCK-BASED COMPENSATION PLAN FOR

NON-EMPLOYEE DIRECTORS

Originally Effective August 9, 1990

As Amended and Restated on August 16, 2011

1.	Purpose:

The purposes of the Plan are to attract and retain the services of experienced and knowledgeable non-employee directors, to encourage Eligible Directors of Carpenter Technology Corporation (the “Company”) to acquire a proprietary and vested interest in the growth and performance of the Company, and to generate an increased incentive for Eligible Directors to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of its stockholders.

This Plan is an amendment and restatement of the Carpenter Technology Corporation Non-Qualified Stock Option Plan for Non-Employee Directors as adopted effective August 9, 1990, and subsequently amended and/or restated as set out in Section 15 below. The rights of any Eligible Director whose service as an Eligible Director ended on or before August 16, 2011 shall be governed by the terms of the Plan as in effect when that Eligible Director’s Award was granted. This amendment and restatement of the Plan does not increase the number of Shares theretofore otherwise available under the Plan.

2.	Definitions:

As used in the Plan, the following terms shall have the meanings set forth below:

a) “Annual Retainer” shall mean base compensation for services as an Eligible Director. Annual Retainer shall not include meeting fees, committee service fees, if any, expense allowances or reimbursements or any other additional compensation for services as an Eligible Director.

b) “Award” shall mean the Options and Stock Units granted under the Plan.

c) “Award Agreement” shall mean a written agreement, instrument or document evidencing an Award.

d) “Beneficiary” shall mean the person who the Eligible Director designates to receive any unpaid portion of the Eligible Director’s account should the Eligible Director’s death occur before the Eligible Director receives the entire balance to the credit of such Eligible Director’s account. If the Eligible Director does not designate a Beneficiary, the Beneficiary shall be the person’s spouse if the person is married at the time of death, or the Eligible Director’s estate if unmarried at the time of the person’s death.

e) “Board” shall mean the Board of Directors of the Company. (Including Any Committee designated by the Board).

f) “Cause” shall mean the Eligible Director’s: (i) willful misconduct or gross negligence in connection with the performance of the Eligible Director’s duties for the Company

or any affiliated company; (ii) conviction of, or a plea of guilty or nolo contendere to, a felony or a crime involving fraud or moral turpitude; (iii) engagement in any business that directly or indirectly competes with the Company or any affiliated company; or (iv) disclosure of trade secrets, customer lists or confidential information of the Company or any affiliated company to a competitor or unauthorized person.

g) “Chair Retainer” shall mean compensation for services as Chair of a committee of the Board of Directors of the Company.

h) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

i) “Common Stock” shall mean the Common Stock, $5.00 par value, of the Company.

j) “Company” shall mean Carpenter Technology Corporation, a Delaware corporation, or any successor corporation.

k) “Disability” shall mean that a qualified physician designated by the Company has reviewed and approved the determination that an Eligible Director is either:

(i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees or directors of the Company or any subsidiary.

l) “Election Date” shall mean with respect to an Option hereunder the date of the appointment, election, or re-election of the Eligible Director that prompted the grant of such Option.

m) “Eligible Director” shall mean each director of the Company who is not an employee of the Company or any of the Company’s subsidiaries (as defined in section 424(f) of the Code), or who is not otherwise excluded from participation by agreement.

n) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

o) “Fair Market Value” shall mean the fair market value of the Company’s Common Stock, determined in accordance with section 409A of the Code, and based upon (i) the last sale price of the Common Stock on the date on which such value is determined, as reported on the consolidated tape of New York Stock Exchange issues or, if there shall be no trades on such date, on the date nearest preceding such date; (ii) if the Common Stock is not then listed for trading on the New York Stock Exchange, the last sale price of the Common Stock on the date on which such value is determined, as reported on another recognized securities exchange or on

the NASDAQ National Market System if the Common Stock shall then be listed and traded upon such exchange or system or, if there shall be no trades on such date, on the date nearest preceding such date; or (iii) the mean between the bid and asked quotations for such stock on such date (as reported by a recognized stock quotation services) or, in the event that there shall be no bid or asked quotations on such date, then upon the basis of the mean between the bid and asked quotations on the date nearest preceding such date.

p) “Grant Date” shall mean, with respect to an Option hereunder, the date upon which such Option is granted; and with respect to Stock Units, the date upon which such Stock Units are awarded.

q) “Option” shall mean any right granted to an Eligible Director allowing such Eligible Director to purchase Shares at such price or prices and during such period or periods as set forth under the Plan. All Options shall be non-qualified options not entitled to special tax treatment under section 422 of the Code.

r) “Plan Year” shall mean the 12-month period beginning October 1 and ending September 30.

s) “ Separation from Service ” shall mean a “separation from service” within the meaning of section 409A of the Code and the Treasury regulations and other guidance issued thereunder.

t) “Shares” shall mean shares of Common Stock.

u) “Stock Unit” shall mean the right to receive, upon satisfaction or lapse of any applicable vesting requirement or forfeiture condition specified in this Plan or as otherwise specified in an Award Agreement, one share of Common Stock. For purposes of this Plan, fractional Stock Units, measured to the nearest four decimal places, may be credited.

v) “Unit” shall mean a Stock Unit.

3.	Administration:

a) The Plan shall be administered by the Company. Subject to the terms of the Plan, the Board shall have the power to interpret the provisions and supervise the administration of the Plan. Any action of the Board in administering the Plan shall be final, conclusive and binding on all persons, including the Company, Eligible Directors, persons claiming rights from or through Eligible Directors and stockholders of the Company.

b) Subject to the provisions of the Plan, the Board shall have full and final authority in its discretion (i) to determine the terms and conditions of any Award granted under the Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, based in each case on such considerations as the Board shall determine) and all other matters to be determined in connection with an Award; (ii) to determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; (iii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such rules

and regulations as, in its opinion, may be advisable in the administration of the Plan; and (iv) to make all other determinations as it may deem necessary or advisable for the administration of the Plan. Notwithstanding the foregoing, an Eligible Director must be recused and abstain from participating in any action of the Board that affects his or her outstanding Award.

c) Notwithstanding anything to the contrary herein, discretionary Awards to any Eligible Director under the Plan shall be made by the Board or an independent committee of the Board without the vote of any directors who are also employees of the Company.

4.	Shares Subject to the Plan:

a) Total Number . Subject to future adjustment as provided in this Section, the total number of Shares available for Awards under the Plan as of the August 16, 2011 date of the amendment and restatement is 874,080 . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury Shares.

b) Reduction of Shares Available .

(i) The grant of an Option will reduce the number of Shares available for further grants by the number of Shares subject to such Option.

(ii) Any shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the Shares available for grants under the Plan.

(iii) The grant of Stock Units will reduce the number of Shares available for further grants by the number of Units granted.

c) Increase of Shares Available . The lapse, cancellation or other termination of an Option or Unit that has not been fully exercised or paid shall increase the available Shares for such Options or Units by the number of Shares that have not been issued upon exercise of such Option or payment of such Unit.

d) Other Adjustments . The total number and kind of Shares available for Options or Units under the Plan or which may be allocated to any one Eligible Director, the number and kind of Shares subject to outstanding Options or Units, and the exercise price for such Options or the value of Units shall be appropriately adjusted by the Board for any increase or decrease in the number of outstanding Shares resulting from a stock dividend, subdivision, combination of Shares, reclassification, or other change in corporate structure affecting the Shares or for any conversion of the Shares into or exchange of the Shares for other Shares as a result of any merger or consolidation (including a sale of assets) or other recapitalization as may be necessary to maintain the proportionate interest of the Option or Unit holder.

5.	Initial Options:

Initial Options may be granted to Eligible Directors as follows: Each Eligible Director who has not previously received a grant under this Plan may be granted an Option to acquire up to 4,000 Shares (or such different number of Shares as the Board may determine by duly adopted

resolution, consistent with any applicable requirements under securities laws or continued listing standards of the principal stock exchange for trading of the Common Stock) on such Eligible Director’s Election Date or such later date as may be required to comply with the Company’s normal practices under applicable securities laws and regulations.

6.	Retainer Stock Units:

a) Required Annual Grant of Stock Units . On the date of the annual meeting of stockholders or on such other date as the Board may determine from time to time in light of the Company’s prevailing practices for the grant of equity-based awards to other personnel, each Eligible Director shall be granted each year, in place of equivalent cash compensation, a number of Stock Units determined by dividing 50% of the Eligible Director’s Annual Retainer by the Fair Market Value on that date.

b) Election as to Annual Stock Units . By written election filed with the Board prior to the end of the preceding Plan Year, an Eligible Director may elect to increase the percentage in Section 6(a) above up to 100%, and thereby have up to the entire amount of the Eligible Director’s Annual Retainer for the following Plan Year granted in Stock Units. An Eligible Director may also elect, by written election filed with the Board prior to the end of the preceding Plan Year, to have a portion or all of his or her Chair Retainer for the following Plan Year granted in Stock Units. An election under this Section 6(b) shall expire at the end of each Plan Year for which the election was made.

c) Other Stock Units . In addition to and not in lieu of the provisions of this Section 6, other Stock Units may be awarded to Eligible Directors pursuant to Section 7 of this Plan.

7.	Other Awards of Options or Stock Units:

In addition to an initial grant of an Option pursuant to Section 5, or an award of Stock Units pursuant to Section 6, other Options or Stock Units may be granted to Eligible Directors as follows:

a) Annual Grant . Each Eligible Director on or after the Effective Date of the Plan may be granted, immediately after the annual meeting of the Company’s stockholders or on such other regularly scheduled date as the Board may determine from time to time in light of the Company’s prevailing practices for the grant of equity-based awards to other personnel, Options, Stock Units, or a combination of Options and Stock Units with respect to that number of Shares having a Fair Market Value on the Grant Date of up to Ninety Thousand Dollars ($90,000) (or such different dollar amount as the Board may determine by duly adopted resolution, consistent with any applicable requirements under securities laws or continued listing standards of the principal stock exchange for trading of the Common Stock), either in lieu of or in addition to such Eligible Director’s Annual Retainer.

b) Other Grants or Awards . In addition to an annual Option grant or Stock Units award pursuant to Section 7(a) above, each Eligible Director may be granted or awarded, at any time and from time to time as may be determined by the Board, Options or Stock Units with respect to such number of Shares as the Board may determine by duly adopted resolution,

consistent with any applicable requirements under this Plan, securities laws or continued listing standards of the principal stock exchange for trading of the Common Stock.

8.	General Terms of Options:

The following provisions shall apply to any Option:

a) Option Price . The purchase price per Share purchasable under an Option shall be 100% of the Fair Market Value of a Share on the Grant Date.

b) Option Period . Each Option shall expire ten years from its Grant Date, subject to earlier termination as hereinafter provided.

c) Exercisability . Each Option granted under this Plan shall become exercisable by the Eligible Director only after completion of one year of Board service immediately following the Grant Date; provided, however, that one quarter of the Options granted within the one year period preceding the Eligible Director’s Separation from Service (for any reason other than death or Disability) shall become exercisable in whole or in part for every three months of service completed following the Grant Date. In the event of Separation from Service due to death or Disability, all Options granted to such Eligible Director shall become immediately exercisable. Exercise of any or all prior existing Options shall not be required. In the event of the Separation from Service as an Eligible Director other than for Cause, an exercisable Option may be exercised at any time prior to the expiration of the original ten-year term. In the event of removal for Cause, all outstanding Options shall be of no force and effect.

d) Nontransferability of Options . No Option under this Plan may be transferable by the Eligible Director except by will or the laws of descent and distribution. If an option is exercisable under Section 8(c) as of the date of an Eligible Director’s death, the Option may be transferred to the Eligible Director’s personal representative, heirs or legatees (“Transferee”) and may be exercised by the Transferee for the remainder of the exercise period then available to the Eligible Director.

e) Method of Exercise . Any Option may be exercised by the Eligible Director in whole or in part at such time or times and by such methods as the Board may specify. An applicable Award Agreement may provide that the Eligible Director may make payment of the Option price in cash, Shares held by the Director, or such other consideration as the Board may specify, including but not limited to “cashless exercise” arrangements such as through a broker or by net exercise, to the extent permitted by applicable law, or any combination thereof, having a Fair Market Value on the exercise date equal to the total Option price.

f) Automatic Exercise of Options . An Option that is exercisable but unexercised as of the last day of the original ten-year term of the Option shall be automatically exercised on the last day of the Option’s original ten-year term if the purchase price of the Option is less than the Fair Market Value of a Share on such date and the automatic exercise will result in the issuance of at least 1 whole share of Common Stock to the Eligible Director after payment of the purchase price and any applicable tax withholding requirements. Payment of the purchase price and any applicable tax withholding requirements shall be made by having a number of Shares withheld,

the Fair Market Value of which as of the date of exercise is sufficient to satisfy payment of the exercise price and any applicable tax withholding requirements.

9.	General Terms of Stock Units:

a) Vesting or Forfeiture of Stock Units .

(i) Stock Units granted pursuant to an election under Section 6(b) are at all times fully vested and are nonforfeitable.

(ii) Stock Units granted pursuant to Section 6(a) or Section 7 shall vest one year after the Grant Date; provided, however, that one quarter of the Stock Units granted within the one year period preceding the Eligible Director’s Separation from Service (for any reason other than death or Disability) shall vest for every three months of service completed following the Grant Date. In the event of Separation from Service due to death or Disability, all Stock Units granted pursuant to Section 6(a) and Section 7 to such Eligible Director shall immediately vest. In the event of removal for Cause, all Stock Units granted pursuant to Section 6(a) and Section 7 to such Eligible Director shall be forfeited.

b) Nontransferability of Units . Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated, other than by will or by the laws of descent and distribution.

10.

Dividend Equivalents:

An Eligible Director who has been granted Stock Units will also be allocated additional Units, determined on a quarterly basis, with respect to the payment of dividends on outstanding Common Stock within thirty (30) days following the date the dividend was paid to the holders of the Common Stock. The number of additional Units to be allocated will be determined by multiplying the quarterly dividend per Share, if any, for the immediately preceding quarter by the number of Units credited to the Eligible Director’s account on the first day of that calendar quarter and dividing the result by the Fair Market Value on the last business day of that quarter. Any additional Units credited to the Eligible Director’s account pursuant to this Section 10 with respect to Stock Units will be forfeited if and when such Stock Units are forfeited and will be payable if and when such Stock Units are payable.

11.

Payment of Stock Units:

a) Credit to Eligible Director’s Account . In connection with each grant of Stock Units to an Eligible Director, the Eligible Director’s account shall be credited with such amount of Stock Units, subject to the forfeiture or vesting terms and conditions established as part of the grant or as set forth in an Award Agreement. Separate accounts or subaccounts shall be established for crediting Stock Units granted under Section 6 and for crediting Stock Units granted under Section 7. Stock Units granted under Section 6(a) and Section 7 shall vest and no longer be subject to forfeiture as provided in Section 9(a)(ii) or as otherwise provided in an applicable Award Agreement. Upon forfeiture, Stock Units shall be subtracted from the Eligible Director’s account, along with any additional Units that were credited to the account as dividend equivalents.

b) Payment of Stock Units Awarded Under Section 6 and Section 7 . The following applies in the event neither an election for deferral of units has been made under Section 11(c) nor an election for installment payments has been made under Section 11(d). All vested Stock Units awarded pursuant to Section 6 and Section 7 shall be settled and payable in Shares only upon the Eligible Director’s Separation from Service with the Board. As soon as practicable and no more than thirty (30) days following the Eligible Director’s Separation from Service from the Board, the Eligible Director (or, in the event of death, the Eligible Director’s Beneficiary) shall receive Shares in payment of the vested Stock Units credited to the Eligible Director’s account in a single lump sum distribution, with the number of Shares equal to the number of such whole Stock Units credited to the Eligible Director’s account and with cash paid in lieu of any fractional Units based on the Fair Market Value on the date of the Eligible Director’s Separation from Service as an Eligible Director.

c) Deferral of Units . Effective for Units granted on or after August 16, 2011, for compensation earned and paid in Plan Years commencing on or after October 1, 2011 and annual elections thereafter, the Company may, but need not, permit an Eligible Director to defer receipt of payment in satisfaction of earned Units, provided that any such deferral shall be administered in compliance with section 409A of the Code and the Treasury regulations and other guidance thereunder, including the following rules:

(i) An Eligible Director may only elect to defer payment of vested Stock Units by making a valid, irrevocable election prior to the close of the Plan Year preceding the Plan Year for which the award of Stock Units is granted;

(ii) Unless otherwise provided by the Company, during the deferral period, the Eligible Director shall have those rights with respect to Units set forth at Section 10;

(iii) An Eligible Director may elect to have such Units paid upon the later of the Eligible Director’s Separation from Service or a date specified by the Eligible Director, provided that such date shall be no earlier than the first day of the fourth month of the Company’s fiscal year following the year during which such Units are vested;

(iv) If the Eligible Director makes an election pursuant to Section 11(c)(iii) above, the Eligible Director may also elect to have the Units subject to such election paid on the earlier of the Eligible Director’s Disability or a 409A Change in Control (as defined in Section 12) in the event that the Eligible Director experiences a Separation from Service prior to the specified date elected pursuant to Section 11(c)(iii) above;

(v) Payment of Units deferred pursuant to this Section 11(c) shall be made in a lump sum no more than thirty (30) days following the payment event elected pursuant to this Subsection (c), unless the Eligible Director has elected pursuant to Section 11(d) below to receive payment of such deferred Units in installments, in which event payment shall be made in accordance with Subsection (d) below; and

(vi) The Company is authorized to take such action as it deems necessary and reasonable to avoid the application of the additional tax described in section 409A(a)(1)(B) of the Code to any Award deferred hereunder.

d) Installment Payments . Effective for Units granted on or after June 29, 2010, for compensation earned and paid in Plan Years beginning on or after October 1, 2010 and annual elections thereafter, the Company may, but need not, permit an Eligible Director to elect to receive Shares in payment of Units credited to the Eligible Director’s account and otherwise vested and payable under Section 9 and Section 11(a) in annual installments payable over either ten or fifteen years beginning (1) with respect to Units for which the Eligible Director has not made a deferral election pursuant to Section 11(c) above, as soon as is practicable but in any event no more than thirty (30) days after the Eligible Director’s Separation from Service; or (2) with respect to Units for which the Eligible Director has made a deferral election pursuant to Section 11(c) above, upon the permissible payment event under Section 409A of the Code elected by the Eligible Director in the deferral election made pursuant to Section 11(c). Subsequent installment payments shall be made on the same date thereafter annually. Such election shall be made in the manner prescribed by the Company, but in no event later than the close of the Plan Year preceding the Plan Year for which the award of Units is granted. An election made under this Section 11(d) shall be administered in compliance with Section 409A of the Code and the Treasury regulations and other guidance issued thereunder. If an Eligible Director does not make a valid, irrevocable election under this Section or Section 11(c), the Eligible Director’s Shares in payment of Units credited to the Eligible Director’s account shall be paid in accordance with Section 11(b).

The provisions of Sections 11(c) and 11(d) above shall apply to any Units awarded that are subject to the application of Code Section 409A.

12.

Change in Control:

a) Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Company, the Options granted under Sections 5 and 7 shall vest and become immediately exercisable and any unvested Stock Units granted under Sections 6 and 7 shall vest.

b) For purposes of this Plan, “Change in Control” means:

(i) the acquisition by any individual, entity or group within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided , however , that, for purposes of this Section 12(b), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (4) any acquisition by any corporation pursuant to a transaction that complies with Sections 12(b)(iii)(A), 12(b)(iii)(B) and 12(b)(iii)(C);

(ii) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board during any 12 month period; provided , however , that any individual becoming a director subsequent to the

date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii) consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person [excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination] beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

c) For purposes of this Plan, a “409A Change in Control” means a Change in Control that satisfies the definition of a “change in control” under Section 409A of the Code and the Treasury regulations and other guidance issued thereunder.

13.

Amendments and Termination:

a) General Authority of the Board . The Board may amend or terminate the Plan at any time, without approval thereof by the stockholders of the Company or any other person, except that (i) the Board may not amend the Plan without approval of the Company’s stockholders if (A) stockholder approval is necessary in order for the Plan to comply with any requirement that confers a material benefit on the Company or its stockholders under the Code or other applicable tax or securities laws or regulations or (B) such amendment would constitute a

repricing or exchange of any outstanding Option or Unit, which would require stockholder approval under the rules of any exchange upon which the Company’s Common Stock is listed; and (ii) the Board may not amend or terminate the Plan at a time (or in a manner) that would adversely impair or affect any rights or obligations under any outstanding Option or Unit, without the consent of the affected Eligible Director, unless such amendment or termination is required by the Code, applicable securities laws, or the rules of any exchange upon which the Company’s Common Stock is listed.

b) Amendment With Approval of Stockholders . The Plan may otherwise be amended or terminated by the Board, at any time and in any manner that is permitted by applicable law, if the effectiveness thereof is subject to approval by the stockholders of the Company, and such stockholder approval is obtained.

14.

General Provisions:

a) Compliance Regulations . All certificates for Shares delivered under this Plan pursuant to any Option or Unit shall be subject to such stock-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Company shall not be required to issue or deliver any Shares under the Plan prior to the completion of any registration or qualification of such Shares under any federal or state law, or under any ruling or regulations of any governmental body or national securities exchange that the Board in its sole discretion shall deem to be necessary or appropriate.

b) Other Plans . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required by applicable law or the rules of any stock exchange on which the Common Stock is then listed; and such arrangements may be either generally applicable or applicable only in specific cases.

c) Governing Law . The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable federal law.

d) Conformity With Law . If any provision of this Plan is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, or would disqualify the Plan or any Option or Unit under any law deemed applicable by the Board, such provision shall be construed or deemed amended in such jurisdiction to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

e) Insufficient Shares . In the event there are insufficient Shares remaining to satisfy all of the grants of Options or Units made on the same day, such Options or Units shall be reduced pro-rata.

f) Section 409A of the Code . The Plan is intended to comply in form and operation with the requirements of section 409A of the Code and applicable Treasury regulations and other guidance of general applicability issued thereunder (“Section 409A”). It is the intention of the Company that the amounts deferred pursuant to this Plan shall not be included in the gross income of the Eligible Directors or their Beneficiaries until such time as the deferred amounts are distributed from the Plan. At all times, this Plan shall be interpreted and operated (i) in accordance with the requirements of Section 409A, unless an exemption from Section 409A is available and applicable, and (ii) to maintain the exemption from Section 409A of awards designed to meet the short-term deferral exception under Section 409A, and (iii) to preserve the status of deferrals made prior to the effective date of Section 409A as exempt from Section 409A (i.e., to preserve the grandfathered status of Awards that were vested as of, and not modified after, December 31, 2004). Notwithstanding any provision to the contrary in this Plan, if, at the time of a director’s Separation from Service, such director has an account in this Plan and is determined to be a “specified employee” under Section 409A, any payment due to the director on account of his or her Separation from Service may not be made before the date that is six months after the date of separation from service (or, if earlier, the date of death of the director), except as may be otherwise permitted pursuant to Section 409A.

15.

Effective Date, Prior Amendments and Termination:

The effective date of this amendment of the Plan is August 16, 2011. The Plan’s original effective date, as approved by the Board and ratified by the stockholders on October 30, 1990, was August 9, 1990. The Plan was thereafter amended (and restated) by the Board on August 10, 1995, with the same ratified by the stockholders on October 23, 1995; was restated under its current title (and ratified by the stockholders) on October 20, 1997; and was thereafter amended effective on April 26, 2001, October 22, 2001, June 29, 2006, and April 24, 2007, with a ratification of the June 29, 2006 amendment (which increased the number of available Shares under the Plan) by the Company’s stockholders on October 16, 2006; and was thereafter amended (and restated) by the Board effective on April 21, 2009; and was thereafter amended effective on July 29, 2009; and was thereafter amended and restated effective on June 29, 2010. The Plan will terminate upon the date on which all outstanding Options have expired or terminated, and all outstanding Units have been paid or otherwise provided for.

PRIVILEGED AND CONFIDENTIAL

Exhibit 10 (H)

Exhibit E

INDEMNITY AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of this 1 ^st day of July, 2010 by and between Carpenter Technology Corporation, a Delaware corporation, and William A. Wulfsohn (“Indemnitee”).

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.

WHEREAS, the Restated Certificate of Incorporation and Bylaws of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification pursuant to the Delaware General Corporation Law (“DGCL”).

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

WHEREAS, this Agreement is a supplement to and in furtherance of the Restated Certificate of Incorporation and Bylaws of the Company and any resolutions adopted pursuant thereto and any liability insurance, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

WHEREAS, Indemnitee does not regard the protection available under the Company’s Restated Certificate of Incorporation, Bylaws and insurance as adequate in the present

circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified;

NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

1. Services to the Company. Indemnitee will serve or continue to serve, at the will of the Company, as an officer, director or key employee of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation; however, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments or the parties, if any.

2. Definitions. As used in this Agreement

(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i) Acquisition of Stock by Third Party. Any Person (as defined below) or group (within the meaning of Section 13(d)(3) and Section 14(d)(2) of the Exchange Act, or any successor provision) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in substantially the same proportions as their current ownership of stock, more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

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(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets other than such a sale or disposition to an entity in which the Company or its shareholders continue to own after such a sale at least 51% of the total voting power represented by the voting securities of such entity in substantially the same proportions as their then current ownership of stock of the Company and have the power to elect at least a majority of the board of directors or other governing body of such surviving entity; and

(v) Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

For purposes of this Section 2(a), the following terms shall have the following meanings:

(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(B) “Person” means an individual, entity, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, unincorporated organization, and a governmental entity or any department agency or political subdivision thereof; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(b) “Company” shall mean Carpenter Technology Corporation, and shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, trustees, fiduciaries or agents, so that if Indemnitee is or was a director, officer, employee, trustee, fiduciary or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee. trustee, fiduciary or agent of another corporation, partnership, joint venture, trust employee benefit program or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

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(c) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent, trustee or fiduciary of the Company or of any other corporation, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.

(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent, trustee or fiduciary.

(f) “Expenses” shall mean all retainers, court costs, transcript costs, fees of experts, witness fees, private investigators, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, fax transmission charges, secretarial services, delivery service fees, reasonable attorneys’ fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or in connection with seeking indemnification under this Agreement. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee

(g) “Losses” shall mean all loss, liability, judgments, damages, amounts paid in settlement, fines, penalties, interest, assessments, other charges or, with respect to an employee benefit plan, excise taxes or penalties assessed with respect thereto.

(h) Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee, trustee, fiduciary or agent of the Company which imposes duties on, or involves services by, such director, officer, employee, trustee, fiduciary or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to under applicable law.

(i) The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, including any and all appeals, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of or relating to the fact that Indemnitee is or was a director, officer, employee, agent, trustee or fiduciary of the

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Company, by reason of or relating to any action taken by him or of any action on his part while acting as director, officer, employee, agent, trustee or fiduciary of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another Enterprise, in each case whether or not serving in such capacity at the time any Loss or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement, including one initiated by a Indemnitee to enforce his rights under this Agreement.

(j) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of relevant corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses and Losses arising out of or relating to this Agreement or its engagement pursuant hereto.

(k) For purposes of Sections 3 and 4, the meaning of the phrase “to the fullest extent permitted by law” shall include, but not be limited to:

(i) to the fullest extent permitted by Section 145 of the DGCL or any section that replaces or succeeds Section 145 with respect to such matters of the DGCL, and

(ii) to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers, directors, employees, agents, trustees, fiduciaries and other persons acting or serving at the Company’s request.

3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was or is, or was or is threatened to be made, a party to or a witness or participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses and Losses to the fullest extent permitted under law.

4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was or is, or was or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses and Losses actually and reasonably incurred or suffered by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein to the fullest extent permitted under law. No indemnification for Expenses shall

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be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee was or is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter and any claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(c) in connection with any Proceeding (or any part of any Proceeding) initiated or brought voluntarily by Indemnitee prior to a Change of Control against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board of Directors of the Company authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

8. Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance the Expenses incurred by Indemnitee in connection with

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any Proceeding for which indemnification is or may be available pursuant to this Agreement within 20 days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances solely upon the execution and delivery to the Company of an undertaking providing that the Indemnitee undertakes to repay the advance to the extent that it is ultimately determined pursuant to Section 11(a) that Indemnitee is not entitled to be indemnified by the Company in respect thereof.

9. Selection of Counsel. In the event the Company is obligated under Section 8 hereof to pay, and pays the Expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such Proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel approved by the Indemnitee to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

10. Procedure for Notification and Defense of Claim.

(a) Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement, provided however, that a delay in giving such notice shall not deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the extent that, such delay is materially prejudicial to the defense of such claim. The omission to notify the Company will not relieve the Company from any liability for indemnification which it may have to Indemnitee otherwise than under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) The Company will be entitled to participate in any Proceeding at its own expense.

11. Procedure Upon Application for Indemnification.

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(a) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as

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the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

12. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) If the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not meet any applicable standard of conduct under applicable law (or did or did not hold any particular state of knowledge referred to under applicable law).

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(d) Reliance as Safe Harbor . For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) Actions of Others . The knowledge and/or actions, or failure to act, of any director, officer, agent, trustee, fiduciary or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

13. Remedies of Indemnitee.

(a) In the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within 30 days after receipt by the Company of the request for indemnification, or (iv) payment of indemnification is not made pursuant to Section 3, 4 or 5 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or , if a determination is required by law, within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication (or, in the case of clause (i), to seek an adjudication) by the Delaware Court or by any court in the State of Pennsylvania of his entitlement to such indemnification or advancement of Expenses; provided, that nothing contained in this Section 13 shall be deemed to limit Indemnitee’s rights under Section 12(b). Alternatively, Indemnitee, at his option, may seek an award in binding arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact

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necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement, under the Company’s certificate of incorporation or bylaws as in effect from time to time or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Restated Certificate of Incorporation, the Company’s Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Restated Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the directors, officers, employees, trustees, fiduciaries and agents of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, trustees, fiduciaries and agents of the Company or of any other corporation,

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partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, trustee, fiduciary or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee, trustee, fiduciary or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

15. Settlement .

(a) The Company shall have no obligation to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding by the Indemnitee effected without the Company’s prior written consent.

(b) The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, any non-monetary remedy affecting or obligation of Indemnitee, or Monetary Loss for which Indemnitee is not indemnified hereunder or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party, witness or participant or may be or is otherwise entitled to seek indemnification hereunder, does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee.

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16. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or as a director, officer, employee, trustee, fiduciary or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Company; or (b) 1 year after the final termination of any Proceeding, including any and all appeals, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 13 of this Agreement relating thereto.

17. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators.

18. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

19. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

20. Effectiveness of Agreement. This Agreement shall be effective as of the date set forth on the first page and may apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer, director, employee, trustee, fiduciary or other agent of the Company, or was serving at the request of the Company as a director, officer, employee, trustee, fiduciary or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, at the time such act or omission occurred.

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21. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

22. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

23. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to:

Carpenter Technology Corp

101 W. Bern Street

P.O. Box 14662

Reading, PA 19601

Attention: General Counsel

or to any other address as may have been furnished to Indemnitee by the Company.

24. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Losses and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees, trustees, fiduciaries and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

25. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration or proceeding commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree

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that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

26. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

27. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. The term including shall mean including without limitation.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.


CARPENTER TECHNOLOGY CORPORATION		INDEMNITEE

By:	/s/ Gregory A. Pratt	/s/ William A. Wulfsohn
	Gregory A. Pratt Chairman	William A. Wulfsohn

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Exhibit 10(I)

STOCK-BASED INCENTIVE COMPENSATION PLAN FOR OFFICERS AND KEY EMPLOYEES

CARPENTER TECHNOLOGY CORPORATION

STOCK-BASED INCENTIVE COMPENSATION PLAN

FOR OFFICERS AND KEY EMPLOYEES

Originally Adopted June 22, 1993

As Amended and Restated July 1, 2011

To be Effective July 1, 2011

CARPENTER TECHNOLOGY CORPORATION

STOCK-BASED INCENTIVE COMPENSATION PLAN

FOR OFFICERS AND KEY EMPLOYEES

Section 1. Purpose of the Plan . The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining valued Employees by offering them a greater stake in the Company’s success and a closer identity with it, and to encourage ownership of the Company’s stock by such Employees.

Section 2. Definitions . As used herein, the following definitions shall apply:

2.1 “Award” means the grant of Restricted Stock, Options or Restricted Stock Units under the Plan.

2.2 “Award Agreement” means the written agreement, instrument or document evidencing an Award.

2.3 “Board” means the Board of Directors of the Company.

2.4 “Cause” means the Employee’s: (a) willful misconduct or gross negligence in connection with the performance of the Employee’s duties for the Company or any Subsidiary; (b) conviction of, or a plea of guilty or nolo contendere to, a felony or a crime involving fraud or moral turpitude; (c) engagement in any business that directly or indirectly competes with the Company or any Subsidiary; (d) disclosure of trade secrets, customer lists or confidential information of the Company or any Subsidiary to a competitor or unauthorized person; or (e) act or omission that results in a violation of policy of either the Company or any Subsidiary, as reasonably determined by the Board in its sole discretion.

2.5 “Change in Control” means and includes each of the following:

(a) The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of either (i) more than 50% of the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or, (ii) within any 12 month period, 35% or more of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company;

(b) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board during any 12 month period; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(c) the acquisition by any Person during any 12 month period of assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to the acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with the assets.

2.6 “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.

2.7 “Committee” means the committee designated by the Board to administer the Plan under Section 4. With respect to Qualified Performance-Based Awards, the Committee shall either be comprised exclusively of two or more members of the Board who are Non-Employee Directors and “outside directors” within the meaning of section 162(m)(4)(C) of the Code and treasury regulation 1.162-27(e)(3) or the Committee shall designate a sub-committee that is so comprised.

2.8 “Common Stock” means the Common Stock of the Company, par value $5.00 per share.

2.9 “Company” means Carpenter Technology Corporation, a Delaware corporation, or any successor corporation.

2.10 “Disability” means a qualified physician designated by the Company has reviewed and approved the determination that an Employee:

(a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or

(b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement

benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company or any Subsidiary.

2.11 “Employee” means an officer or other key employee of the Company or a Subsidiary including a director who is such an employee.

2.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended. A reference to any provision of the Exchange Act or rule promulgated under the Exchange Act shall include reference to any successor provision or rule.

2.13 “Fair Market Value” means on any given date, the closing price of a share of Common Stock on the New York Stock Exchange, or, in the absence of a closing price on such date, the closing price on the last trading day preceding such date.

2.14 “Non-Employee Director” means a member of the Board who is not an Employee as defined in Rule 16b-3 promulgated by the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

2.15 “Non-Qualified Option” means an Option or portion thereof not intended to be an “Incentive Stock Option” as defined in section 422 of the Code.

2.16 “Option” means a right granted under the Plan to purchase a specified number of shares of Common Stock at a specified price. All Options available under the Plan are Non-Qualified Options.

2.17 “Outside Director” means a member of the Board within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation 1.162-27(e)(3), or any successor thereto.

2.18 “Participant” means any individual who receives an Award.

2.19 “Performance Goal” means any one or more of the following performance goals, intended by the Committee to constitute objective goals for purposes of Code Section 162(m), either individually, alternatively, or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually, alternatively or in combination, and measured either quarterly, annually, or cumulatively over a period of quarters or years, on an absolute basis or relative to a pre-established target, to previous quarter’s or years’ results or to a designated comparison group, in each case as specified by the Committee in the Award:

(a) the price of Common Stock;

(b) market share;

(d) revenue;

(e) earnings or diluted earnings per share of Common Stock, with or without net pension credit/expense;

(f) return on shareholder equity;

(g) return on common book equity;

(h) costs;

(i) cash flow;

(j) return on total assets (“ROA”);

(k) return on invested capital;

(l) return on net assets (“RONA”);

(m) income, including but not limited to operating income and net income, with or without net pension credit/expense;

(n) operating margin;

(o) capital costs;

(p) earnings before interest and income taxes (“EBIT”) or earnings before interest, income taxes, depreciation and amortization (“EBITDA”);

(q) economic profit;

(r) total shareholder return;

(s) economic value added;

(t) expenses or operating expenses;

(u) cost reduction goals;

(v) total case incidence rate;

(w) customer satisfaction as measured by expenses or costs of, or lost income, revenue, or sales attributable to, customer claims for refunds or remakes; or

(x) any combination of the foregoing.

2.20 “Performance Period” means a period of one or more consecutive fiscal years, or portions thereof, of the Company specified by the Committee during which the performance of the Company, any Subsidiary or any department thereof, or any individual is measured for the purpose of determining the extent to which a Performance Goal is achieved. Nothing in this Plan shall prevent the Committee from establishing a Performance Period that commences prior to the termination of one or more other Performance Periods.

2.21 “Plan” means the Carpenter Technology Corporation Stock-Based Incentive Compensation Plan for Officers and Key Employees herein set forth, as amended from time to time.

2.22 “Qualified Performance-Based Award” means an Award or portion of an Award that is intended to satisfy the requirements for “qualified performance-based compensation” under section 162(m) of the Code and the regulations issued thereunder. The Committee shall designate any Qualified Performance-Based Award as such at the time it is granted.

2.23 “Restricted Stock” means Common Stock granted by the Committee under Section 6.1 of the Plan.

2.24 “Restricted Stock Unit” means a book-entry unit with a value equal to one share of Common Stock.

2.25 “Restriction Period” means the period during which Restricted Stock granted under Section 6.1 of the Plan or Restricted Stock Units granted under Section 6.3 of the Plan are subject to forfeiture.

2.26 “Retirement” means the Participant’s termination of employment with the Company with eligibility to receive a monthly retirement benefit payment in the following month under either the General Retirement Plan for Employees of Carpenter Technology Corporation or the Supplemental Retirement Plan for Executives of Carpenter Technology Corporation.

2.27 “Separation from Service” means a “separation from service” within the meaning of section 409A of the Code and the Treasury regulations and other guidance issued thereunder.

2.28 “Subsidiary” means any corporation, partnership, joint venture or other business entity of which 50% or more of the outstanding voting power is beneficially owned, directly or indirectly, by the Company.

Section 3. Eligibility . Any Employee may be selected by the Company to receive an Award.

Section 4. Administration and Implementation of Plan.

4.1 The Plan shall be administered by the Committee. Any action of the Committee in administering the Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, their employees, Participants, persons claiming rights from or through Participants and stockholders of the Company.

4.2 Subject to the provisions of the Plan, and specifically including Section 3 hereof, the Committee shall have full and final authority in its discretion (a) to select the Employees who will receive Awards pursuant to the Plan, (b) to determine the type or types of Awards to be granted to each Participant, (c) to determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award; (d) to determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; (e) to determine whether, and to certify that, Performance Goals to which the settlement of an Award is subject are satisfied; (f) to correct any defect or supply any omission or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; and (g) to make all other determinations as it may deem necessary or advisable for the administration of the Plan.

4.3 The Committee may delegate to the Company’s Chief Executive Officer (the “CEO”), its authority under Section 4.2(a)-(d) above, to grant or amend Awards covering a pre-determined aggregate number of shares of Common Stock. Such delegation is limited to the authority to grant and amend Awards to Participants who are not subject to the requirements of Rule 16b-3 of the Exchange Act. Any Awards granted or amended by the CEO shall be subject to the terms of the Plan. The CEO shall report to the Committee, in a form and manner to be determined by the Committee, at least annually on the disposition of shares subject to Awards granted or amended by the CEO.

Section 5. Shares of Common Stock Subject to the Plan.

5.1 Subject to adjustment as provided in Section 9, the total number of shares of Common Stock available for Awards under the Plan as of June 29, 2011, shall be 2,719,790 shares, increased by any shares of Common Stock that were reserved under the Plan but were either (a) not subject to Awards or (b) subject to Awards which were

forfeited, canceled or expired unexercised, in either case prior to this amendment and restatement. Common Stock granted under the Plan may be reserved or made available from the Company’s authorized and unissued Common Stock or from Common Stock reacquired and held in the Company’s treasury.

5.2 Subject to adjustment as provided in Section 9, the maximum number of shares that may be granted to any Employee as Awards under the Plan during any calendar year shall not exceed 500,000 shares.

5.3 If any shares subject to an Award are forfeited or such Award otherwise terminates or is settled for any reason whatsoever without an actual distribution of shares to the Participant, any shares counted against the number of shares available for issuance pursuant to the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement, or termination, again be available for Awards under the Plan; provided, however, that the Committee may adopt procedures for the counting of shares relating to any Award to ensure appropriate counting, avoid double counting, and provide for adjustments in any case in which the number of shares actually distributed differs from the number of shares previously counted in connection with such Award.

Section 6. Awards . Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date the Award is granted or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of the termination of employment or other relationship with the Company or any Subsidiary by the Participant; provided, however, that the Committee shall retain full power to accelerate or waive any such additional term or condition as it may have previously imposed. Each Award shall be evidenced by an Award Agreement. The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such Performance Goals as may be specified by the Committee consistent with Section 6.6 hereof.

6.1 Restricted Stock . An Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to the Participant, which shares are subject to forfeiture upon the happening of specified events. Such an Award shall be subject to the following terms and conditions:

(a) Upon determination of the number of shares of Restricted Stock to be granted to the Participant, the Committee shall direct the Company to see that its transfer agent and registrar for the Common Stock (“Transfer Agent”) establishes a special account representing the number of restricted shares of Common Stock issued to the Participant. Following the Restriction Period, the Company will instruct the Transfer Agent to remove the restriction from such shares of Common Stock held for the Participant in the special account and transfer these shares to an unrestricted account in the Participant’s name.

(b) From time to time during the Restriction Period, the Committee may, but is not required to, authorize the payment of an amount equivalent to a

dividend declared and paid on the Company’s Common Stock to any Participant awarded Restricted Stock. Such payment may be made in cash currently or deemed reinvested in Restricted Stock as determined by the Committee in its sole discretion. During the Restriction Period the Participant shall have the right to vote the shares of Restricted Stock.

(c) The Award Agreement shall specify the duration of the Restriction Period and the performance, employment or other conditions under which the Restricted Stock may be forfeited to the Company. The Restriction Period for such Awards, unless otherwise determined by the Committee, shall be at least (i) three years for Awards that vest solely on the passage of time and (ii) one year for Awards that are earned in whole or in part upon the attainment of Performance Goals. At the end of the Restriction Period applicable to all or a portion of the Restricted Stock, as applicable, the restrictions imposed hereunder shall lapse with respect to that number of shares of Restricted Stock and these shares will be transferred to an unrestricted account in the Participant’s name.

6.2 Options . Options give a Participant the right to purchase a specified number of shares of Common Stock from the Company for a specified time period at a fixed (or other determinable) price. The Award of Options shall be subject to the following terms and conditions:

(a) Option Price: The price per share at which Common Stock may be purchased upon exercise of an Option shall be determined by the Committee and set forth in the applicable Award Agreement, but shall not be less than the Fair Market Value of a share of Common Stock on the date the Award is granted.

(b) Term of Options: The Award Agreement shall specify when an Option may be exercisable and the terms and conditions applicable thereto. The term of an Option shall in no event be greater than ten years and no Option may be exercisable sooner than one year from the date the Award is granted.

(c) Payment of Option Price: The Committee shall determine the time or times at which an Option may be exercised by the Participant in whole or in part, whether the exercise price for an Option shall be paid in cash, by the surrender at Fair Market Value of Common Stock held by the Participant, by any combination of cash and shares of Common Stock, the means or methods of payment, including “cashless exercise” arrangements such as through a broker or by net exercise, to the extent permitted by applicable law, and the methods by which, or the time or times at which, Common Stock will be delivered or deemed to be delivered to the Participant upon the exercise of such Option. Notwithstanding the foregoing, the Committee shall not permit payment through any method that would constitute a prohibited extension of credit to those officers of the Company who are subject to the provisions of the Sarbanes-Oxley Act of 2002.

6.3 Restricted Stock Units . Restricted Stock Units shall confer on the Participant the right to receive the Fair Market Value of the Restricted Stock Units upon the attainment of Performance Goals, after a Restriction Period, or a combination thereof, as specified by the Committee. The Award of Restricted Stock Units shall be subject to the following terms and conditions:

(a) A Participant may not receive Awards of Restricted Stock Units totaling more than the limit set forth in Section 5.2 hereof.

(b) Dividend Equivalents: The Committee may, but is not required to, authorize the payment of an amount equivalent to a dividend declared and paid on the Company’s Common Stock to any Participant awarded Restricted Stock Units, provided that any such payment, if authorized, shall be made within 30 days following the date the dividend was paid to the holders of the Company’s Common Stock and shall be in the form of (i) cash or (ii) additional Restricted Stock Units that shall be subject to the provisions of the Award Agreement governing the Restricted Stock Units upon which the dividend equivalent is paid and added to the number of Restricted Stock Units awarded under such Award Agreement. Notwithstanding the preceding, a dividend equivalent shall be forfeited if the Participant terminates employment with the Company for any reason prior to the payment date of the dividend equivalent.

(c) Voting Rights: A Participant shall not have voting rights with respect to Restricted Stock Units prior to payment of Common Stock in satisfaction of such Restricted Stock Units.

(d) Form and Timing of Payment of Restricted Stock Units: Payment of Restricted Stock Units shall be made as soon as practicable but not later than 30 days following the later of the close of the Performance Period or the close of the Restriction Period, as determined by the Committee and specified in the applicable Award Agreement. Payment shall be in the form of Common Stock which has an aggregate Fair Market Value equal to the Fair Market Value of the Restricted Stock Units at the close of the Performance Period or other applicable period determined at the Committee’s discretion and specified in the applicable Award Agreement. The provisions of Section 6.4 below shall apply to any Award that is subject to the application of Code Section 409A.

6.4 Deferral of Restricted Stock Units . The Committee may, but need not, permit a Participant to defer receipt of payment in satisfaction of earned Restricted Stock Units, provided that any such deferral shall be administered in good faith compliance with section 409A of the Code and the guidance thereunder, including the following rules:

(a) A Participant may only elect to defer payment of vested Restricted Stock Units by making a valid, irrevocable election prior to: (i) in the case of Restricted Stock Units that may become vested solely based upon the attainment of Performance Goals within a Performance Period, six months prior to any date

during the Performance Period upon which the outcome of Performance Goals will determine the portion, if any, of the vesting of such Award, (ii) in the case of Restricted Stock Units that may become vested in whole or in part as a result of the passage of time, the earlier of 30 days following the grant of Restricted Stock Units or the last day of the Company’s fiscal year during which the Restricted Stock Units are granted so long as the initial scheduled vesting of such Restricted Stock Units does not precede the last day of the subsequent fiscal year;

(b) Unless otherwise provided by the Committee, during the deferral period, the Participant shall have those rights with respect to Restricted Stock Units set forth at Section 6.3(b);

(i) such Participant’s Separation from Service on or after the Participant’s Retirement;

(ii) a Change in Control which also constitutes a “change in the ownership or effective control of the corporation or in the ownership of a substantial portion of the assets of the corporation” within the meaning of Code Section 409A and the Treasury regulations issued thereunder (a “409A Change in Control”);

(iii) Disability;

(iv) the earlier to occur of (i), (ii) or (iii) above;

(v) the occurrence of an “Unforeseeable Emergency” within the meaning of section 409A of the Code and the guidance thereunder; or

(vi) a date specified by the Participant, provided that such date shall be no earlier than the first day of the fourth month of the Company’s fiscal year following the year during which such Restricted Stock Units are earned or time-vested;

(d) Notwithstanding the foregoing, with respect to a Participant who, as of the date of the Participant’s Separation from Service, is a “Specified Employee” within the meaning of section 409A of the Code and the Treasury regulations and other guidance thereunder, any payment of deferred Restricted Stock Units on account of the Participant’s Separation from Service in accordance with Section 6.4(c)(i) may not be made earlier than 6 months following such Participant’s Separation from Service, except that in the event of any Participant’s earlier death, such Restricted Stock Units shall be paid within 30 days after the Company receives notice of the Participant’s death; and

(e) The Committee is authorized to take such action as it deems necessary and reasonable to avoid the application of the additional tax described in section 409A(a)(1)(B) of the Code to any Award deferred hereunder.

6.5 Effect of Termination on Awards . Unless otherwise specified in the Award Agreement applicable to the relevant Award, the following rules shall apply:

(a) Options : Provided the Participant has remained in service for at least 12 months following the grant of an Option to such Participant, such Participant’s Option will be exercisable following such Participant’s termination of employment as follows:

(i) If the Participant’s termination of employment is by reason of such Participant’s death or Disability, all Options that were granted more than 12 months before such event shall become fully vested and exercisable by the Participant or his or her estate at any time prior to the expiration of the original term of the Option.

(ii) If the Participant’s termination is by reason of Retirement, all unexercisable Options that were granted more than 12 months before such Retirement date shall be immediately vested and exercisable by the Participant or his or her estate prior to the expiration of the original term of the Option; provided, however, that the Committee (or the CEO in the case of an Option granted under Section 4.3 hereof) reserves the right to determine that unvested Options are forfeited. Options that were exercisable at the Participant’s Retirement shall continue to be exercisable by the Participant, or his or her estate, prior to the expiration of the original term.

(iii) If the Participant’s termination of employment is for any reason other than as described in Sections 6.5(a)(i) and 6.5(a)(ii) above, any then exercisable Option shall expire, and no longer be exercisable, by the Participant or his or her estate as of the earlier of three months following such termination or the original term of the Option.

(b) Restricted Stock and Restricted Stock Units :

(i) If the Participant’s termination of employment is by reason of such Participant’s death or Disability, all earned Restricted Stock or Restricted Stock Units shall become immediately vested and payable to the Participant, or his or her estate. The Participant, or his or her estate, shall also be eligible to receive a prorated payout of any unearned performance-based Restricted Stock or Restricted Stock Units, payable at the time such payment would otherwise have been made had the Participant’s employment continued, based upon the extent to which Performance Goals were met during the Performance Period.

(ii) If the Participant’s termination is by reason of Retirement, all earned Restricted Stock and Restricted Stock Units shall become immediately vested and payable to the Participant, or his or her estate. The Participant, or his or her estate shall also be eligible to receive a pro-rated payout of any unearned performance-based Restricted Stock or Restricted Stock Units, payable at the time such payment would otherwise have been made had the Participant’s employment continued, based upon the extent to which Performance Goals were met during the Performance Period. Notwithstanding the foregoing, the Committee (or the CEO in the case of an Award granted under Section 4.3 hereof) reserves the right to determine that unvested Restricted Stock and Restricted Stock Units are forfeited.

(iii) In the event of the Participant’s termination of employment for any reason other than death, Disability or Retirement, any Award of Restricted Stock or Restricted Stock Units subject to Performance Goals or other restrictions or conditions not satisfied at the time of such termination shall be forfeited.

(c) Termination for Cause : Notwithstanding anything in the Plan to the contrary, in the event a Participant’s employment with the Company or any Subsidiary is terminated for Cause, the Committee (or the CEO in the case of an Award granted under Section 4.3 hereof) may, in its sole discretion, cancel each unexercised or unvested Award granted to such Participant effective upon such termination.

6.6 Rules Applicable to Qualified Performance-Based Awards . To the extent the Committee determines, in its sole discretion, that it is necessary or advisable to grant Qualified Performance-Based Awards in compliance with section 162(m) of the Code, the following rules shall apply:

(a) Only Employees who are “Covered Employees” within the meaning of section 162(m) of the Code and the Treasury regulations thereunder shall be eligible to receive Qualified Performance-Based Awards. The Committee shall designate in its sole discretion which Covered Employees will be Participants for a Performance Period within the earlier of (x) the first 90 days of a Performance Period and (y) the lapse of 25% of the Performance Period.

(b) The Committee shall establish in writing within the earlier of (x) the first 90 days of a Performance Period and (y) the lapse of 25% of the Performance Period, and in any event, while the outcome is substantially uncertain, (i) Performance Goals for the Performance Period, and (ii) in respect of such Performance Goals, a minimum acceptable level of achievement below which no payment will be made or no Award shall vest or become exercisable, and an objective formula or other method for determining the amount of any payment to be made or the extent to which an Award hereunder shall vest or

become exercisable if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Goals.

(c) Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing the amount of the Qualified Performance-Based Awards earned for the Performance Period based upon the Performance Goals and the related formulas or methods as determined pursuant to Section 6.6(b). The Committee shall then determine the actual amount payable or the extent to which an Award is vested or exercisable as a result of attainment of such Performance Goals under each Participant’s Award for the Performance Period, and, in doing so, may reduce or eliminate, except as otherwise provided in the Award Agreement, the amount of the Award. In no event shall the Committee have the authority to increase Award amounts to any Covered Employee.

(d) An Award granted, vesting or becoming exercisable with respect to a Performance Period shall be paid (unless such Award is subject to the Participant’s exercise, which exercise such Participant has not effectuated) to the Participant within a reasonable time after completion of the certification described in Section 6.6(c) and in accordance with Section 6.1, 6.2, 6.3, 6.4, or 6.5, as applicable.

6.7 Additional Provisions Applicable to Awards . Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan or any Award granted under any other plan of the Company or any Subsidiary or any business entity acquired by the Company or any Subsidiary, or any other right of a Participant to receive payment from the Company or any Subsidiary.

Section 7. Exchange and Buy Out Provisions . Subject to the restrictions of Section 10 hereof, the Committee may at any time exchange or buy out any previously granted Award other than an Award with an exercise price that is less than Fair Market Value or may provide in any Award Agreement terms and conditions under which the Participant must sell, or offer to sell, to the Company any unexercised Award, whether or not vested, or any Common Stock acquired pursuant to such Award for a payment in cash, Common Stock or other property based on such terms and conditions as the Committee shall determine and communicate to the Participant at the time that such offer is made or as may be set forth in the Award Agreement.

Section 8. Change in Control . Notwithstanding any provision in this Plan to the contrary and unless otherwise provided in the applicable Participant’s Award Agreement, upon the occurrence of a Change in Control (or solely with respect to Restricted Stock Units, a 409A Change in Control), (a) each Option then outstanding shall become immediately exercisable to the full extent of any shares of Common Stock subject thereto, (b) any remaining restrictions on shares of Restricted Stock shall immediately lapse, and (c) the Performance Goals and/or time period or periods applicable to any Restricted Stock or Restricted Stock Units shall be deemed satisfied and payment shall be made pursuant to Sections 6.1(c) and 6.3(d), respectively.

Section 9. Adjustments upon Changes in Capitalization.

9.1 In the event that the Committee shall determine that any stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or event, affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (a) the number and kind of shares of Common Stock which may thereafter be issued in connection with Awards, (b) the number and kind of shares of Common Stock issuable in respect of outstanding Awards, (c) the aggregate number and kind of shares of Common Stock available under the Plan, and (d) the exercise or Award-date price relating to any Award, or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award; provided, however, in each case, that no adjustment shall be made that would adversely affect the status of any Award that is intended to be a Qualified Performance-Based Award.

9.2 In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards, including any Performance Goals, in recognition of unusual or nonrecurring events (including, without limitation, events described in Section 15.1) affecting the Company or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. Notwithstanding the foregoing, no adjustment shall be made in any outstanding Awards to the extent that such adjustment would adversely affect the status of an Award intended to be a Qualified Performance-Based Award.

Section 10. Changes to the Plan and Awards.

10.1 The Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of the Company’s stockholders or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Company’s stockholders if (a) such action would (i) increase the number of shares subject to the Plan, except as permitted at Section 9.1 hereof, (ii) constitute a repricing or exchange of any Awards issued hereunder, or (iii) change the provisions of this Section 10; (b) such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted; or (c) the Board determines, in its discretion, to submit other such changes to the Plan to the stockholders for approval; provided, however, that without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any outstanding Award unless required to comply with any provision of the Code, applicable securities laws, or the rules of any exchange upon which the Company’s Common Stock is listed.

10.2 Upon termination of this Plan, each Participant may receive payment of all outstanding Restricted Stock Unit Awards if and to the extent permitted under Code Section 409A and the related Treasury regulations and other guidance issued under Code

Section 409A. Accordingly, payment of a Participant’s Restricted Stock Unit Award may be made hereunder in accordance with one of the following:

(a) the termination of the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331 or with the approval of a bankruptcy court pursuant to 11 U.S.C. 503(b)(1)(A), as provided in Treasury Regulation Section 1.409A-3(j)(4)(ix)(A); or

(b) the termination of the Plan within the thirty (30) days preceding or the twelve (12) months following a Change in Control, provided that all substantially similar arrangements are also terminated, as provided in Treasury Regulation Section 1.409A-3(j)(4)(ix)(B); or

(c) the termination of the Plan, provided that the termination does not occur proximate to a downturn in the financial health of the Company, if all arrangements that would be aggregated with the Plan under Treasury Regulation Section 1.409A-1(c) are terminated, and no payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within twelve (12) months of the Plan termination, and all payments are made within twenty-four (24) months of the Plan termination, and no new arrangement that would be aggregated with the Plan under Treasury Regulation Section 1.409A-1(c) is adopted within three (3) years following the Plan termination, as provided in Treasury Regulation Section 1.409A-3(j)(4)(ix)(C); or

(d) such other events and conditions as the IRS may prescribe in generally applicable published regulatory or other guidance under Code Section 409A.

Section 11. No Right to Award, Employment or Service . No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation that the terms of Awards be uniform or consistent among Participants. Neither the Plan nor any action taken hereunder shall be construed as giving any Employee any right to be retained in the employ of the Company or any Subsidiary. For purposes of this Plan, transfer of employment between the Company and its Subsidiaries and affiliates shall not be deemed a termination of employment.

Section 12. Taxes . Each Participant must make appropriate arrangement for the payment of any taxes relating to an Award granted hereunder. The Company or any Subsidiary is authorized to withhold from any payment relating to an Award under the Plan, including from a distribution of Common Stock or any payroll or other payment to a Participant amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Common Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations. Withholding of taxes in the form of shares of Common Stock from the profit attributable to the Award shall not occur at a rate that exceeds the legally required federal and state withholding rates.

Section 13. Limits on Transferability; Beneficiaries . No Award or other right or interest of a Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participant to, any party, other than the Company, any Subsidiary or affiliate, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, provide that Awards or other rights or interests of a Participant granted pursuant to the Plan be transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners. The Committee may attach to such transferability feature such terms and conditions as it deems advisable. In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which may be a person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant. A beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional restrictions deemed necessary or appropriate by the Committee.

Section 14. Foreign Nationals . Without amending the Plan, Awards may be granted to Employees who are foreign nationals or employed outside the United States or both. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures, and sub-plans with provisions that limit or modify rights on death, disability or retirement or on termination of employment; available methods of exercise or settlement of an award; payment of income, social insurance contributions and payroll taxes; the withholding procedures and handling of any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures, or sub-plans applicable to particular affiliates or locations.

Section 15. Securities Law Requirements.

15.1 No Award granted hereunder shall be exercisable if the Company shall at any time determine that (a) the listing upon any securities exchange, registration or qualification under any state or federal law of any Common Stock otherwise deliverable upon such exercise, or (b) the consent or approval of any regulatory body or the satisfaction of withholding tax or other withholding liabilities, is necessary or appropriate in connection with such exercise. In any of the events referred to in clause (a) or clause (b) above, the exercisability of such Awards shall be suspended and shall not be effective unless and until such withholding, listing, registration, qualifications or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its sole discretion, notwithstanding any termination of any Award or any portion of any Award during the period when exercisability has been suspended.

15.2 The Committee may require, as a condition to receive or exercise any Award, that the Participant deliver to the Company representations, warranties and agreements to the effect that any shares of Common Stock to be purchased or acquired pursuant to such Award are for investment only and without any present intention to sell or otherwise distribute such shares and that the Participant will not dispose of such shares in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder. The certificates issued to evidence such shares shall bear appropriate legends summarizing such restrictions on the disposition thereof.

Section 16. Automatic Termination . Unless earlier terminated, the Plan shall terminate upon the date on which all outstanding Awards have expired, terminated, been paid or otherwise provided for, and no Awards under the Plan shall thereafter be granted.

Section 17. Fractional Shares . The Company will not be required to issue any fractional shares of Common Stock pursuant to the Plan. The Committee may provide for the elimination of fractions and settlement of such fractional shares of Common Stock in cash.

Section 18. Discretion . In exercising, or declining to exercise, any grant of authority or discretion hereunder, the Committee may consider or ignore such factors or circumstances and may accord such weight to such factors and circumstances as the Committee alone and in its sole judgment deems appropriate and without regard to the effect such exercise, or declining to exercise such grant of authority or discretion, would have upon the affected Participant, any other Participant, any employee, the Company, any Subsidiary, any affiliate, any stockholder or any other person.

Section 19. Governing Law . To the extent that Federal laws (such as the Exchange Act or the Code) do not apply, the validity and construction of the Plan and any Award Agreements entered into thereunder shall be construed and enforced in accordance with the laws of the State of Delaware, but without giving effect to the choice of law principles thereof.

Section 20. Adoption of the Plan and Effective Date . This amendment and restatement of the Plan shall become effective upon its approval by the stockholders of the Company, and no Award granted under this restatement shall become exercisable, realizable or vested prior to such approval.

Exhibit 10(Y)

CARPENTER TECHNOLOGY CORPORATION

STOCK-BASED COMPENSATION PLAN

FOR OFFICERS AND KEY EMPLOYEES

STOCK OPTION AWARD AGREEMENT

CARPENTER TECHNOLOGY CORPORATION (the “Company”) grants this STOCK OPTION to the individual identified below (the “Participant”). Capitalized terms used herein without definition have the respective meanings ascribed to them in the CARPENTER TECHNOLOGY CORPORATION STOCK-BASED COMPENSATION PLAN FOR OFFICERS AND KEY EMPLOYEES, as amended and effective July 1, 2011 (the “Plan”); the terms, conditions and provisions of which are applicable to the Award evidenced hereby and incorporated herein by reference.

1. Grant of Option . The Participant has been granted a non-qualified stock option (the “Option”) to purchase the number of Shares set forth below (the “Option Shares”) pursuant to the terms of the Plan.

2. Price . The purchase price per Option Share is set forth below.

3. Term of Exercise . One-third (1/3) of the total Option Shares shall become exercisable on each of the first three anniversaries of the Grant Date contingent upon continued employment of the Participant with the Company on each such anniversary and shall continue to be exercisable within the period ending on the tenth anniversary of the Grant Date, except as otherwise provided under the terms of the Plan.

4. Payment . Notice of the Participant’s intention to exercise all or a portion of the Option shall be given (in accordance with the procedures established by the Company from time to time) by the Participant or, in the case of death of the participant, his/her legal representative. The form of payment is to be specified in such notice. Full payment for Option Shares purchased shall be made to the Plan Administrator, as specified in the guidelines, following delivery to the Plan Administrator of notice of intention to exercise.

5. Automatic Exercise . Any Option Shares that are exercisable but unexercised as of the tenth anniversary of the Grant Date shall be automatically exercised on the tenth anniversary of the Grant Date if the purchase price of an Option Share is less than the Fair Market Value of a Share on such date and the automatic exercise will result in the issuance of at least one (1) whole Share to the Participant after payment of the purchase price and any applicable tax withholding requirements. Payment of the purchase price and any applicable tax withholding requirements shall be made by having the number of Shares to be issued upon exercise reduced by a number of Shares having a Fair Market Value on the date of exercise equal to the purchase price and any applicable tax withholding requirements.

6. Binding Effect . Subject to the terms of the Plan, the terms of this Option shall be binding upon, and inure to the benefit of, both the Company, its successors and assigns, and the Participant, his/her heirs and personal representatives.

7. Plan Compliance . The Participant should be aware that the terms of this Option, including methods for exercise, may be modified without the consent of the Participant to comply with applicable law, stock exchange or accounting requirements.


Name of Participant:						CARPENTER TECHNOLOGY CORPORATION
Number of Option Shares:						By:
Purchase Price per Option Share:						President and Chief Executive Officer

Grant Date:

Exhibit 12

Carpenter Technology Corporation

Computation of Ratios of Earnings to Fixed Charges – unaudited

Five Years ended June 30, 2011

(dollars in millions)


	Year Ended June 30,
	2011			2010			2009		2008			2007
Fixed charges:
Interest costs ^(a)	$	17.6		$	18.8		$	20.1	$	22.8		$	23.3
Interest component of non-capitalized lease rental expense ^(b)		2.4			2.3			2.1		2.2			3.0

Total fixed charges	$	20.0		$	21.1		$	22.2	$	25.0		$	26.3

Earnings as defined:
Income before income taxes	$	87.8		$	4.7		$	63.0	$	297.3		$	312.0
Less income from less-than-fifty-percent owned entities, and loss on sale of partial interest in less-than-fifty percent owned enities		(2.6	)		(1.0	)		0.1		(1.1	)		(1.2	)
Noncontrolling interest in the income of subsidiary with fixed charges		(0.7	)		—			—		—			—
Fixed charges less interest capitalized		19.5			20.1			18.2		22.7			25.8
Amortization of capitalized interest		2.6			2.8			2.5		2.5			2.5

Earnings as defined	$	106.6		$	26.6		$	83.8	$	321.4		$	339.1

Ratio of earnings to fixed charges		5.3x			1.3x			3.8x		12.9x			12.9x

⁽ ^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
Carpenter Investments, Inc.		Delaware
CRS Holdings, Inc.		Delaware
Dynamet Incorporated		Delaware
Talley Industries, Inc.		Delaware

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 2-83780, 2-81019, 2-60469, 33-42536, 33-42997, 3365077, 33-54045, 333-40991, 333-55667, 333-55669, 333-57774, 333-147057, 333-147059, and 333-17830) of Carpenter Technology Corporation of our report dated August 24, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K .

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

August 24, 2011

Exhibit 24

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her capacity as a Director of Carpenter Technology Corporation, hereby appoints James D. Dee and K. Douglas Ralph, or either of them, his or her true and lawful attorneys to execute in his name, place and stead, in his or her capacity as Director of the 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, 2011, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file them with the Securities and Exchange Commission. The 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 voluntarily executed this instrument this 16th day of August, 2011.

/s/ Gregory A. Pratt

Gregory A. Pratt

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Carl G. Anderson, Jr.

Carl G. Anderson, Jr.

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Robert R. McMaster

Robert R. McMaster

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ I. Martin Inglis

I. Martin Inglis

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Peter N. Stephans

Peter N. Stephans

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Kathryn C. Turner

Kathryn C. Turner

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Jeffrey Wadsworth

Jeffrey Wadsworth

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Stephen M. Ward, Jr.

Stephen M. Ward, Jr.

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

IN TESTIMONY WHEREOF, the undersigned has voluntarily executed this instrument this 16th day of August, 2011.

/s/ Dr. Phillip M. Anderson

Dr. Phillip M. Anderson

Director

Exhibit 31(A)

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William A. Wulfsohn, 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;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the Registrant’s fourth fiscal quarter in the case of an annual report) 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: August 24, 2011		/s/ William A. Wulfsohn
		William A. Wulfsohn, President and
		Chief Executive Officer

Exhibit 31(B)

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, K. Douglas Ralph, 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;

(a)

(b)

(c)

(d)

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)

(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: August 24, 2011		/s/ K. Douglas Ralph
		K. Douglas Ralph, Senior Vice President
		and Chief Financial 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 Annual Report of Carpenter Technology Corporation (the “Issuer”) on Form 10-K for the year ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, William A. Wulfsohn, and I, K. Douglas Ralph, 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 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 results of operations of the Issuer.

Date: August 24, 2011

Exhibit 99

AGREEMENT TO FURNISH DEBT INSTRUMENTS

Pursuant to Item 601(b)(4)(iii) 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 Item, to furnish a copy of any such instrument to the Securities and Exchange Commission upon request of the Commission.


CARPENTER TECHNOLOGY CORPORATION

By:		/s/ James D. Dee
		James D. Dee,
		Vice President, General Counsel & Secretary