<HTML> <HEAD> <TITLE>Carpenter Technology's 10-Q for March 2000</TITLE> </HEAD> <BODY LINK="#0000ff" VLINK="#800080"> <B><FONT FACE="Courier"><P ALIGN="CENTER">UNITED STATES<BR> SECURITIES AND EXCHANGE COMMISSION<BR> WASHINGTON, D.C. 20549<BR> <BR> FORM 10-Q</P> <P><BR> (Mark One)</P></B></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=637> <TR><TD WIDTH="8%" VALIGN="TOP"> <P><B><FONT FACE="Courier">[X]</B></FONT></TD> <TD WIDTH="92%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <P> </TD> <TD WIDTH="92%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> </B></FONT></TD> <TD WIDTH="92%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>For the quarterly period ended March 31, 2000</B></FONT></TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <P> </TD> <TD WIDTH="92%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> </B></FONT></TD> <TD WIDTH="92%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> OR</B></FONT></TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>[ ]</B></FONT></TD> <TD WIDTH="92%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <P> </TD> <TD WIDTH="92%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="8%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> </B></FONT></TD> <TD WIDTH="92%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>For the transition period from ____ to ____</B></FONT></TD> </TR> </TABLE> <B><FONT FACE="Courier"><P><BR> <BR> Commission File Number 1-5828 <BR> <BR> </P> <P ALIGN="CENTER">CARPENTER TECHNOLOGY CORPORATION<BR> </B>(Exact name of Registrant as specified in its Charter)</P> <P> </P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=666> <TR><TD WIDTH="70%" VALIGN="TOP" HEIGHT=26> <P ALIGN="CENTER"><B><FONT FACE="Courier">Delaware</B></FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=26> <B><FONT FACE="Courier"><P ALIGN="CENTER">23-0458500</B></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">(State or other jurisdiction of incorporation or organization)</FONT></TD> <TD WIDTH="30%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">(I.R.S. Employer Identification No.)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <P> </TD> <TD WIDTH="30%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <B><FONT FACE="Courier"><P ALIGN="CENTER">1047 North Park Road, Wyomissing, Pennsylvania</B></FONT></TD> <TD WIDTH="30%" VALIGN="TOP"> <B><FONT FACE="Courier"><P ALIGN="CENTER">19610-1339</B></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">(Address of principal executive offices)</FONT></TD> <TD WIDTH="30%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">(Zip Code)</FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P ALIGN="CENTER"> <BR> <B>610-208-2000<BR> </B>(Registrant's telephone number, including area code)</P> <P><BR> <BR> 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 such filing requirements for the past 90 days. </P> <P ALIGN="RIGHT">Yes <U> X </U> No<U> </U> </P> <P><BR> Indicate the number of shares outstanding of each of the issuer's classes of common stock as of April 30, 2000.</P></FONT> <P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=631> <TR><TD WIDTH="49%" VALIGN="TOP"> <P ALIGN="CENTER"><B><FONT FACE="Courier">Common stock, $5 par value</B></FONT></TD> <TD WIDTH="51%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P ALIGN="CENTER"> 21,964,675 </B></U></FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">Class</FONT></TD> <TD WIDTH="51%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">Number of shares outstanding</FONT></TD> </TR> </TABLE> </CENTER></P> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> <BR> The Exhibit Index appears on page E-1. </P> <B><P ALIGN="CENTER">CARPENTER TECHNOLOGY CORPORATION<BR> FORM 10-Q<BR> INDEX</P> </B><P> </P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=630> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P ALIGN="CENTER">Page</B></U></FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <FONT FACE="Courier"><P>Part I FINANCIAL INFORMATION</P> <P><BR> </FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#Consolidated_Balance_Sheet"><FONT FACE="Courier">Consolidated Balance Sheet as of March 31, 2000<BR> (unaudited) and June 30, 1999......................... <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> 3</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#Consolidated_Statement_of_Income"><FONT FACE="Courier">Consolidated Statement of Income (unaudited) for the<BR> Three and Nine Months Ended March 31, 2000 and 1999... <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> 4</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#ComprehensiveIncome"><FONT FACE="Courier">Consolidated Statement of Comprehensive Income<BR> (unaudited) for the Three and Nine Months Ended <BR> March 31, 2000 and 1999............................... <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> <BR> 4</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#CashFlows"><FONT FACE="Courier">Consolidated Statement of Cash Flows (unaudited) for<BR> the Nine Months Ended March 31, 2000 and 1999......... <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> 5</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#FinancialStatements"><FONT FACE="Courier">Notes to Consolidated Financial Statements (unaudited). <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">6 - 12</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#ManagementsDiscussion"><FONT FACE="Courier">Management's Discussion and Analysis of Financial<BR> Condition and Results of Operations................... <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER"><BR> 13 - 17</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#ForwardLooking"><FONT FACE="Courier">Forward-looking Statements............................. <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">18</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <P><A HREF="#OtherInformation"><FONT FACE="Courier">Part II OTHER INFORMATION.............................. <P><BR> </FONT></A></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">19 - 20</FONT></TD> </TR> <TR><TD WIDTH="87%" VALIGN="TOP"> <FONT FACE="Courier"><P>Exhibit Index..........................................</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT FACE="Courier"><P ALIGN="CENTER">E-1</FONT></TD> </TR> </TABLE> <B><U><FONT FACE="Courier"><P>PART I</P> </U><P ALIGN="CENTER"><A NAME="Consolidated_Balance_Sheet"></A>CARPENTER TECHNOLOGY CORPORATION<BR> CONSOLIDATED BALANCE SHEET<BR> March 31, 2000 and June 30, 1999<BR> </B>(in millions)<BR> <B> </P></B></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=640> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <B><FONT FACE="Courier"><P> March 31,<BR> 2000</B></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <B><FONT FACE="Courier"><P>June 30,<BR> 1999</B></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>(Unaudited)</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>ASSETS</B></U></FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Current assets: </FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Cash and cash equivalents</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 8.4</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 5.5</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Accounts receivable, net</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 180.6</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 150.6</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Inventories</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 277.0</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 250.3</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Other current assets</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 20.3</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 16.3</U></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Total current assets</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 486.3</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 422.7</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Property, plant and equipment, net </FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 783.4</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 750.4</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Prepaid pension cost</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 174.8</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 140.5</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Goodwill, net</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 173.7</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 179.2</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Other assets</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 115.8</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 115.0</U></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Total assets</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 1,734.0</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 1,607.8</U></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>LIABILITIES</B></U></FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Current liabilities:</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> </FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Short-term debt</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 212.4</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 140.0</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Accounts payable</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 97.4</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 59.6</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Accrued liabilities</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 75.5</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 78.2</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Deferred income taxes</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> -</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 1.3</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Current portion of long-term debt</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 10.8</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 15.4</U></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Total current liabilities</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 396.1</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 294.5</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Long-term debt, net of current portion</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 352.0</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 355.0</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Accrued postretirement benefits</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 143.8</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 138.9</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Deferred income taxes</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 160.5</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 149.8</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Other liabilities</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 35.3</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 37.1</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP" HEIGHT=13><P></P></TD> <TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=13><P></P></TD> <TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=13><P></P></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>SHAREHOLDERS' EQUITY</B></U></FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP" HEIGHT=36> <FONT FACE="Courier"><P>Convertible preferred stock -<BR> authorized 2 million shares</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=36> <FONT FACE="Courier"><P> 26.3</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=36> <FONT FACE="Courier"><P> 26.8</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP" HEIGHT=38> <FONT FACE="Courier"><P>Common stock - authorized <BR> 100 million shares</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=38> <FONT FACE="Courier"><P> 115.3</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=38> <FONT FACE="Courier"><P> 115.3</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Capital in excess of par value -<BR> common stock</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 192.2</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 191.9</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Reinvested earnings</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 377.6</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 365.5</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP" HEIGHT=16> <FONT FACE="Courier"><P>Common stock in treasury, at cost</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=16> <FONT FACE="Courier"><P> (38.4)</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=16> <FONT FACE="Courier"><P> (38.4)</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Deferred compensation</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (14.5)</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (16.4)</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Accumulated other comprehensive<BR> income</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (12.2</U>)</FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (12.2</U>)</FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P> Total shareholders' equity</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 646.3</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 632.5</U></FONT></TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="60%" VALIGN="TOP"> <FONT FACE="Courier"><P>Total liabilities and shareholders' <BR> equity</FONT></TD> <TD WIDTH="22%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 1,734.0</U></FONT></TD> <TD WIDTH="17%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 1,607.8</U></FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P> </P> <P>See accompanying notes to consolidated financial statements.</P> <P> </P> <B><P ALIGN="CENTER"><A NAME="Consolidated_Statement_of_Income"></A>CARPENTER TECHNOLOGY CORPORATION<BR> CONSOLIDATED STATEMENT OF INCOME<BR> (Unaudited)<BR> for the three and nine months ended March 31, 2000 and 1999<BR> </B>(in millions, except per share data)</P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=673> <TR><TD WIDTH="43%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="29%" VALIGN="BOTTOM" COLSPAN=3> <B><U><FONT FACE="Courier"><P> Three Months </B></U></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><U><FONT FACE="Courier"><P> Nine Months </B></U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <B><FONT FACE="Courier"><P> <U>2000</B></U></FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <B><FONT FACE="Courier"><P> <U>1999</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>2000</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net sales</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 298.1</U></FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <U><FONT FACE="Courier"><P>$ 271.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 787.5</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 770.8</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Costs and expenses:</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Cost of sales</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 223.1</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> 207.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> 587.5</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> 574.6</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Selling and <BR> administrative <BR> expenses</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 49.4</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> 40.0</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> 131.4</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> 121.1</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Interest expense</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 8.7</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> 7.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> 23.7</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> 21.6</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Special charge</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> -</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> 14.2</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> 14.2</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Other (income) expense,<BR> net</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (2.2</U>)</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <U><FONT FACE="Courier"><P> 3.3</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> (7.9</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> 1.0</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 279.0</U></FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <U><FONT FACE="Courier"><P> 273.3</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 734.7</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 732.5</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Income (loss) before<BR> income taxes</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 19.1</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> (1.5)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> 52.8</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> 38.3</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Income tax expense (benefit)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 7.2</U></FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <U><FONT FACE="Courier"><P> (2.7</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 18.0</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 12.7</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net income</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 11.9</U></FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <U><FONT FACE="Courier"><P>$ 1.2</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 34.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 25.6</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Earnings per common share:</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Basic</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ .53</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P>$ .04</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 1.54</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 1.10</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Diluted</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ .52</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P>$ .04</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 1.51</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 1.08</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Dividends per common share</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ .33</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" COLSPAN=2> <FONT FACE="Courier"><P>$ .33</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ .99</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ .99</FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P> </P> <P> </P> <B><P ALIGN="CENTER"><A NAME="ComprehensiveIncome"></A>CARPENTER TECHNOLOGY CORPORATION<BR> CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME<BR> (Unaudited)<BR> for the three and nine months ended March 31, 2000 and 1999<BR> </B>(in millions)</P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=673> <TR><TD WIDTH="43%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><U><FONT FACE="Courier"><P> Three Months </B></U></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><U><FONT FACE="Courier"><P> Nine Months </B></U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>2000</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>1999</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>2000</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=22><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net income</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 11.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 1.2</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 34.8</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P>$ 25.6</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P>Foreign currency<BR> translation,<BR> net of tax</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> <U> .1</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> <U> (.2</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> <U> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <BR> <U> (.2</U>)</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> Comprehensive income</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> $ 12.0</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> $ 1.0</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <U>$ 34.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> <U>$ 25.4</U></FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P> </P> <P> </P> <P>See accompanying notes to consolidated financial statements.</P> <B><P ALIGN="CENTER"><A NAME="CashFlows"></A>CARPENTER TECHNOLOGY CORPORATION<BR> CONSOLIDATED STATEMENT OF CASH FLOWS<BR> (Unaudited)<BR> for the nine months ended March 31, 2000 and 1999<BR> </B>(in millions)</P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=571> <TR><TD WIDTH="70%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="16%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>2000</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>OPERATIONS</B></FONT></TD> <TD WIDTH="16%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net income</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 34.8</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 25.6</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Adjustments to reconcile net income to <BR> net cash provided from operations:</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Depreciation </FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 38.5</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 39.6</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Amortization of intangible assets</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 11.2</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 10.0</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Deferred income taxes </FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 11.8</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (16.9)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Prepaid pension costs</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (34.3)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (18.7)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> (Gain) loss on disposal of assets</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (2.1)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 2.1</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Special charge</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> -</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 14.2</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Changes in working capital and other,<BR> net of acquisitions:</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Receivables</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (28.1)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 18.5</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Inventories</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (23.4)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 7.0</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Accounts payable</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 35.9</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (18.7)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Accrued current liabilities</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (4.7)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (12.4)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Other, net</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (5.2</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (4.2</U>)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Net cash provided from operations</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 34.4</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 46.1</U></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP" HEIGHT=24><P></P></TD> <TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=24><P></P></TD> <TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=24><P></P></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP" HEIGHT=24> <B><FONT FACE="Courier"><P>INVESTING ACTIVITIES</B></FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=24><P></P></TD> <TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=24><P></P></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Purchases of plant and equipment </FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (73.4)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>(118.9)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Proceeds from disposals of plant <BR> and equipment</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 7.8</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> .2</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Acquisitions of businesses, net of cash <BR> received</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (6.7)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (23.1)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Proceeds from net assets held for sale </FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 97.0</U></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Net cash used for investing <BR> activities</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (72.3</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (44.8</U>)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>FINANCING ACTIVITIES</B></FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net change in short-term debt</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 71.0</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 47.1</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Proceeds from issuance of long-term debt</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 7.6</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> -</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Payments on long-term debt</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (15.4)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (36.2)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Dividends paid</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (22.7)</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (23.1)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Proceeds from issuance of common stock</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> .3 </FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 1.3</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Payments to acquire treasury stock</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (34.9</U>)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P> Net cash provided from (used for) <BR> financing activities</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 40.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> (45.8</U>)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <P> </TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>INCREASE (DECREASE) IN CASH AND CASH <BR> EQUIVALENTS </B></FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 2.9</FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> (44.5)</FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Cash and cash equivalents at <BR> beginning of period </FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 5.5</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 52.4</U></FONT></TD> </TR> <TR><TD WIDTH="70%" VALIGN="TOP"> <FONT FACE="Courier"><P>Cash and cash equivalents at <BR> end of period</FONT></TD> <TD WIDTH="16%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 8.4</U></FONT></TD> <TD WIDTH="14%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P>$ 7.9</U></FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P><BR> <BR> <BR> <BR> See accompanying notes to consolidated financial statements.</P> <B><U><P ALIGN="CENTER"><A NAME="FinancialStatements"></A>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR> </U>(Unaudited)</P> <P>1. <U>Basis of Presentation</P><DIR> <DIR> </B></U><P> The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending June 30, 2000. The June 30, 1999 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Carpenter's 1999 Annual Report on Form 10-K.<BR> <BR> 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.<BR> <BR> Certain reclassifications of prior year's amounts have been made to conform with the current year's presentation. These reclassifications did not affect reported net income.</P> <B><P ALIGN="CENTER"> </P></DIR> </DIR> <P>2. <U>Earnings Per Common Share<BR> </B></U> The calculations of earnings per share for the periods ended<BR> March 31, 2000 and 1999 are as follows:</P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=678> <TR><TD WIDTH="42%" VALIGN="TOP"> <P><FONT FACE="Courier" SIZE=2>(in millions, except <BR> per share data)</FONT></TD> <TD WIDTH="30%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P><BR> Three Months</B></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P><BR> Nine Months</B></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="30%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> <U>2000</B></U></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> <U>2000</B></U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=22> <FONT FACE="Courier" SIZE=2><P> </FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=22> <B><FONT FACE="Courier" SIZE=2><P> <U>Basic</B></U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P>Diluted</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P> Basic</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P>Diluted</B></U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=8> <FONT FACE="Courier" SIZE=2><P>Net income </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=8> <FONT FACE="Courier" SIZE=2><P>$ 11.9</FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=8> <FONT FACE="Courier" SIZE=2><P>$ 11.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=8> <FONT FACE="Courier" SIZE=2><P>$ 34.8</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=8> <FONT FACE="Courier" SIZE=2><P>$ 34.8</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Dividends accrued<BR> on convertible preferred<BR> stock, net of tax benefits</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> (.3)</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> (1.0)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> -</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Assumed shortfall between<BR> common and preferred dividend</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> (.1</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <U> (.5</U>)</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Earnings available for <BR> common shareholders</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> <U>$ 11.6</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ 11.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <U>$ 33.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <U>$ 34.3</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Weighted average number<BR> of common shares outstanding</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> 22.0</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 22.0</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 22.0</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 22.0</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Assumed conversion of<BR> preferred shares</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> -</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> .8</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> .8</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Effect of shares issuable<BR> under stock option plans</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <U> -</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Weighted average common shares</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <U><FONT FACE="Courier" SIZE=2><P> 22.0</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P> 22.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P> 22.0</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P> 22.8</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=15> <FONT FACE="Courier" SIZE=2><P>Earnings per share</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=15> <U><FONT FACE="Courier" SIZE=2><P>$ .53</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=15> <U><FONT FACE="Courier" SIZE=2><P>$ .52</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=15> <U><FONT FACE="Courier" SIZE=2><P>$ 1.54</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=15> <U><FONT FACE="Courier" SIZE=2><P>$ 1.51</U></FONT></TD> </TR> </TABLE> <FONT FACE="Courier" SIZE=2><P> </P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=678> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="30%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> Three Months</B></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> Nine Months</B></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="30%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> <U>1999</B></U></FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier" SIZE=2><P> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=22> <FONT FACE="Courier" SIZE=2><P> </FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=22> <B><FONT FACE="Courier" SIZE=2><P> <U>Basic</B></U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P>Diluted</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P> Basic</B></U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=22> <B><U><FONT FACE="Courier" SIZE=2><P>Diluted</B></U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Net income</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P>$ 1.2</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>$ 1.2</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>$ 25.6</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>$ 25.6</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Dividends accrued on<BR> convertible preferred stock,<BR> net of tax benefits</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> (.4)</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> (1.2)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <BR> -</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Assumed shortfall between<BR> common and preferred dividend</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ -</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ (.3)</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ (.6)</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Earnings available for common<BR> shareholders </FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> <U>$ .8</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ .9</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ 24.4</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> $ 25.0</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Weighted average number of<BR> common shares outstanding</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> 21.9</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 21.9 </FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 22.2</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> 22.2</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Assumed conversion of preferred<BR> shares</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <FONT FACE="Courier" SIZE=2><P><BR> -</FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> .9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> .9</FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P>Effect of shares issuable under<BR> stock option plans</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier" SIZE=2><P><BR> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT FACE="Courier" SIZE=2><P><BR> <U> -</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=12> <FONT FACE="Courier" SIZE=2><P>Weighted average common shares</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=12> <U><FONT FACE="Courier" SIZE=2><P> 21.9</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=12> <U><FONT FACE="Courier" SIZE=2><P> 22.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=12> <U><FONT FACE="Courier" SIZE=2><P> 22.2</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=12> <U><FONT FACE="Courier" SIZE=2><P> 23.1</U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier" SIZE=2><P>Earnings per share</FONT></TD> <TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=18> <U><FONT FACE="Courier" SIZE=2><P>$ .04</U></FONT></TD> <TD WIDTH="15%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier" SIZE=2><P>$ .04</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier" SIZE=2><P>$ 1.10</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier" SIZE=2><P>$ 1.08</U></FONT></TD> </TR> </TABLE> <B><FONT FACE="Courier"><P ALIGN="CENTER"> </P> <P>3. <U>Inventories</P></B></U></FONT> <P ALIGN="RIGHT"><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=572> <TR><TD WIDTH="59%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="23%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> March 31,<BR> <U>2000</B></U></FONT></TD> <TD WIDTH="18%" VALIGN="TOP"> <B><FONT FACE="Courier"><P>June 30,<BR> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P> </FONT></TD> <TD WIDTH="41%" VALIGN="MIDDLE" COLSPAN=2> <B><FONT FACE="Courier"><P>(In Millions)</B></FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P>Finished and purchased products</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 144.6</FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P>$ 142.6</FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P>Work in process</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 188.6</FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 167.3</FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P>Raw materials and supplies</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 44.4</U></FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 41.5</U></FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P>Total at current cost</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 377.6</FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM"> <FONT FACE="Courier"><P> 351.4</FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP"> <FONT FACE="Courier"><P>Less excess of current cost over<BR> LIFO values</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 100.6</U></FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM"> <U><FONT FACE="Courier"><P> 101.1</U></FONT></TD> </TR> <TR><TD WIDTH="59%" VALIGN="TOP" HEIGHT=16> <FONT FACE="Courier"><P>Inventory per Balance Sheet</FONT></TD> <TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=16> <U><FONT FACE="Courier"><P>$ 277.0</U></FONT></TD> <TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=16> <U><FONT FACE="Courier"><P>$ 250.3</U></FONT></TD> </TR> </TABLE> </P> <DIR> <DIR> <FONT FACE="Courier"><P ALIGN="RIGHT"> The current cost of LIFO-valued inventories was $327.9 million at March 31, 2000 and $294.9 million at June 30, 1999.</P> <P> </P> <P> </P></DIR> </DIR> <B><P>4. <U>Property, Plant and Equipment</P></B></U></FONT> <P ALIGN="RIGHT"><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=588> <TR><TD WIDTH="57%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="23%" VALIGN="TOP" COLSPAN=2> <B><FONT FACE="Courier"><P> March 31,<BR> <U>2000</B></U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> June 30,<BR> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <P> </TD> <TD WIDTH="43%" VALIGN="MIDDLE" COLSPAN=3> <B><FONT FACE="Courier"><P>(In Millions)</B></FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Property, plant and equipment<BR> at cost</FONT></TD> <TD WIDTH="23%" VALIGN="TOP" COLSPAN=2> <FONT FACE="Courier"><P><BR> $ 1,320.2</FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <FONT FACE="Courier"><P><BR> $ 1,253.8</FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Less accumulated depreciation and<BR> amortization</FONT></TD> <TD WIDTH="23%" VALIGN="TOP" COLSPAN=2> <U><FONT FACE="Courier"><P><BR> 536.8</U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> 503.4</U></FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <P> </TD> <TD WIDTH="23%" VALIGN="TOP" COLSPAN=2> <U><FONT FACE="Courier"><P><BR> $ 783.4</U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <U><FONT FACE="Courier"><P><BR> $ 750.4</U></FONT></TD> </TR> </TABLE> </P> <FONT FACE="Courier"><P ALIGN="RIGHT"> </P> <B><P>5. <U>Shareholders' Equity Data</P></B></U></FONT> <P ALIGN="RIGHT"><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=588> <TR><TD WIDTH="57%" VALIGN="TOP"> <P><FONT FACE="Courier"> </FONT></TD> <TD WIDTH="22%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> March 31,<BR> <U>2000</B></U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <B><FONT FACE="Courier"><P> June 30,<BR> <U>1999</B></U></FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP"> <P> </TD> <TD WIDTH="20%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Preferred shares issued</FONT></TD> <TD WIDTH="22%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 418.2</U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 425.8</U></FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP"> <P> </TD> <TD WIDTH="20%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Common shares issued</FONT></TD> <TD WIDTH="22%" VALIGN="TOP"> <FONT FACE="Courier"><P>23,066,635</FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <FONT FACE="Courier"><P>23,051,776</FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Common shares in Treasury</FONT></TD> <TD WIDTH="22%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>(1,106,960</U>)</FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>(1,105,041</U>)</FONT></TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP"> <P> </TD> <TD WIDTH="20%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="57%" VALIGN="TOP"> <FONT FACE="Courier"><P>Net outstanding</FONT></TD> <TD WIDTH="22%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>21,959,675</U></FONT></TD> <TD WIDTH="20%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>21,946,735</U></FONT></TD> </TR> </TABLE> </P> <FONT FACE="Courier"><P ALIGN="RIGHT"> </P> <P> </P> <P ALIGN="CENTER"> </P> <B><P>6. <U>Commitments and Contingencies</P> </U><P>Environmental</P> </B><P> Carpenter accrues amounts for environmental remediation costs which represent management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. No amount was charged or credited to operations for the three months ended March 31, 2000. For the nine months ended March 31, 2000, the liability for environmental remediation costs was reduced by $.8 million which was included in Other Income. This adjustment was recorded in the second quarter and related to updated estimates of probable liabilities for sites previously owned by Talley Industries, Inc. No amounts were charged or credited to operations for the three and nine months ended March 31, 1999. The liability for environmental remediation costs remaining at March 31, 2000 was $8.5 million. The estimated range of the reasonably possible future costs of remediation at superfund sites and at Carpenter-owned operating facilities is between $8.5 million and $11.0 million. </P> <P> Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based upon information presently available, such future costs are not expected to have a material effect on Carpenter's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year. </P> <P> <B>Bridgeport, CT Property</P> </B><P> On January 15, 1999, the Bridgeport, Connecticut, Port Authority issued a Notice of Condemnation for the taking of Carpenter's former plant site in that city. On August 6, 1999, the Port Authority filed a Certificate of Taking, acquiring fee simple ownership of the property. The proposed compensation for the site is $2.5 million and the Port Authority has stated its intention to seek reimbursement of any additional site remediation costs. The carrying value for the site on Carpenter's books is approximately $14 million and is based upon arms-length negotiated selling prices with interested parties. Carpenter has begun legal proceedings in court to obtain a fair value for the property and a declaratory judgment absolving Carpenter from any remediation costs caused by the Port Authority's development efforts. While the ultimate outcome of these proceedings is undeterminable, in the opinion of management the Port Authority's proposed compensation and remediation reimbursement are unreasonable and will not be upheld and accordingly, no provision has been made for an impairment in carrying value.<BR> </P> <P ALIGN="CENTER"> </P> <P> <B>Other</P> </B><P> Carpenter is also defending various claims and legal actions, and is subject to commitments and contingencies which are common to its operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenter's future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, in the opinion of management, any total ultimate liability will not have a material effect on Carpenter's financial position, results of operations or cash flows.</P> <B><P>7.</B> <B><U>Business Segments</P> </B></U><P> Statement of Financial Accounting Standards (SFAS) 131, "Disclosures about Segments of an Enterprise and Related Information," requires companies to disclose segment information on the same basis as that used internally by executive management to evaluate segment performance. Carpenter is organized on a product basis and managed in three segments: Specialty Alloys, Titanium Alloys and Engineered Products. For the following segment reporting, the Specialty Alloys and Titanium Alloys (Dynamet) segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers and distribution methods.</P> <P> Specialty Metals includes the manufacture and distribution of stainless, titanium, high temperature, electronic, tool and other alloys in bar, wire, rod, and strip forms. Sales are distributed both directly from producing plants and from Carpenter's distribution network.</P> <P> Engineered Products includes structural ceramic products, ceramic cores for the casting industry, metal-injection molded products, tubular metal products for nuclear and aerospace applications, custom shaped bar and ultra hard wear materials.</P> <P> Effective July 1, 1999, management changed the basis for measuring the business segments' profits to exclude the costs of all corporate functions and the pension credit from the Specialty Metals segment, to transfer the Mexican operations from the Engineered Products segment to the Specialty Metals segment, to allocate certain corporate costs to the business segments, and to show separately both the unallocated corporate costs and the pension credit. All segment data for fiscal 1999 have been restated to reflect the current segment reporting structure.</P> <P> Carpenter evaluates segment performance based upon income before interest and income taxes (EBIT) and return on assets after the allocation of certain corporate costs. Sales between the segments are generally made at market-related prices.</P> <P> The pension credit represents the income relating to Carpenter's overfunded defined benefit pension plans. None of the pension credit is allocated to the business segments. The corporate costs primarily represent the unallocated portion of the operating costs of the finance, information services, law and human resource departments and corporate management staff. Corporate assets are primarily cash and cash equivalents, prepaid pension cost, certain assets held for sale, corporate-owned life insurance, other investments and corporate operating assets.</P> <P> Carpenter's sales are not materially dependent on a single customer or small group of customers.</P> <B><P>Segment Data</P></B></FONT> <P ALIGN="RIGHT"><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=618> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=31> <P><FONT FACE="Courier">(In Millions)</FONT></TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=2 HEIGHT=31> <FONT FACE="Courier"><P> Three Months Ended<BR> March 31,</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=31> <FONT FACE="Courier"><P> Nine Months Ended<BR> March 31,</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>2000</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>1999</U></FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>2000</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>1999</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>Net Sales:</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Specialty Metals</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 266.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 244.0</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 697.1</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 688.6</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Engineered Products</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 32.1</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 28.3</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 92.6</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 83.8</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Intersegment</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> (.9</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> (.5</U>)</FONT></TD> <TD WIDTH="17%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> (2.2</U>)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> (1.6</U>)</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=13> <FONT FACE="Courier"><P> Consolidated net sales</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=13> <U><FONT FACE="Courier"><P>$ 298.1</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=13> <U><FONT FACE="Courier"><P>$ 271.8</U></FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=13> <U><FONT FACE="Courier"><P>$ 787.5</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=13> <U><FONT FACE="Courier"><P>$ 770.8</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>Income (loss) before income taxes:</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Specialty Metals</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 23.1</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 17.1</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 55.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$ 63.5</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Engineered Products</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 1.4</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 1.0</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 3.8</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 1.2</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Pension Credit</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 11.5</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 9.3</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 34.3</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 27.1</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Corporate Costs</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (8.7)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (7.4)</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (19.4)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (19.6)</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Special Charge</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier"><P> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier"><P> (14.2</U>)</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier"><P> -</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <U><FONT FACE="Courier"><P> (14.2</U>)</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Consolidated EBIT</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 27.3</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 5.8</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 74.6</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 58.0</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Interest expense</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (8.7)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (7.9)</FONT></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (23.7)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> (21.6)</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Interest income</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> .5</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> .6</U></FONT></TD> <TD WIDTH="17%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 1.9</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 1.9</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Consolidated income (loss) <BR> before income taxes</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 19.1</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ (1.5</U>)</FONT></TD> <TD WIDTH="17%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 52.8</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$ 38.3</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>March 31,</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>June 30,</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>2000</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> <U>1999</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>Total assets:</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Specialty Metals</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$1,359.9</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P>$1,272.5</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> Engineered Products</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 117.6</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <FONT FACE="Courier"><P> 115.7</FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Corporate assets</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 256.5</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P> 219.6</U></FONT></TD> </TR> <TR><TD WIDTH="43%" VALIGN="TOP"> <FONT FACE="Courier"><P> Consolidated total assets</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$1,734.0</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <U><FONT FACE="Courier"><P>$1,607.8</U></FONT></TD> </TR> </TABLE> </P> <B><FONT FACE="Courier"><P> </P> <P>8.</B> <B><U>Special Charge</P> </B></U><P> During the third quarter of fiscal 1999, Carpenter recorded a pre-tax charge of $14.2 million ($8.5 million after-tax or $.37 per diluted share) related to a salaried work force reduction and a reconfiguration of its U.S. distribution network. The eliminated positions included various salaried positions throughout the Specialty Alloys Operations and corporate offices. The charge consisted chiefly of various personnel-related costs for about 210 employees to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $13.0 million of the charge will be paid from pension funds and, accordingly, this portion of the special charge reduced the prepaid pension cost account on the balance sheet. Through March 31, 2000, there was a reduction of approximately 195 employees. The remaining employees are expected to depart by June 30, 2000.</P> <B><P>9.</B> <B><U>Accounting Pronouncements</P> </B></U><P> The Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which will be effective for Carpenter's fiscal year 2001. This standard requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives will be recorded each period in current earnings or comprehensive income. Since the implementation rules have not been finalized, Carpenter has not completed its evaluation of the impact of adopting this statement.</P> <B><U><P ALIGN="CENTER"><A NAME="ManagementsDiscussion"></A>MANAGEMENT'S DISCUSSION AND ANALYSIS OF<BR> FINANCIAL CONDITION AND RESULTS OF OPERATIONS<BR> </U> </P> <U><P>Results of Operations - Three Months Ended March 31, 2000 vs.<BR> Three Months Ended March 31, 1999</U>:</P> </B><P><BR> Net income for the quarter ended March 31, 2000, was $11.9 million as compared with $9.6 million, before a special charge, for the year ago quarter. Diluted earnings per share for the quarter increased 27 percent to $.52 per share from last year's $.41 per share, before a special charge. Last year's special charge of $14.2 million before taxes ($.37 per diluted share) resulted from a salaried work force reduction and a reconfiguration of the U.S. distribution network.</P> <P> Net sales for the third fiscal quarter ended March 31, 2000 were $298.1 million compared with $271.8 million for last year's third quarter. The overall 10 percent sales increase from the same quarterly period a year ago was primarily a result of a 13 percent increase in the sales of Specialty Alloys Operations (SAO) and a 14 percent increase in sales of the Engineered Products Group. These increases were somewhat offset by a 16 percent decrease in sales at Dynamet Incorporated.</P> <P> Overall, Carpenter's quarterly gross margin (sales less cost of sales) increased to 25.2 percent of sales compared with 23.5 percent last year. This increase resulted from higher unit sales and production levels in SAO and manufacturing cost reductions. Higher costs for nickel offset much of these favorable effects because Carpenter's raw material surcharge recovers nickel cost increases approximately 60 days after they are incurred. Raw material is accounted for under the last-in, first-out (LIFO) method of accounting, resulting in current cost being charged to the income statement. </P> <P> Selling and administrative expenses for the quarter increased by $9.4 million over the same quarter a year ago, due primarily to increased freight costs, start-up costs related to the consolidation of the SAO distribution system and development costs for Carpenter's e-business initiatives.</P> <P> Other income/expense, compared with the same quarter a year ago, was more favorable by $5.5 million. Other income for the quarter ended March 31, 2000, of $2.2 million was primarily gains recognized on the sale of three warehouses. Last year's third quarter other expense included foreign exchange losses and write-downs of assets held for sale. </P> <P> Income taxes for the quarter were 37.5 percent of income before taxes. For the same period last year the effective tax rate was lower due to an income tax benefit of $2.2 million which was recognized as a result of tax issues that were satisfactorily resolved. </P> <B><U><P> </P> <P>Business Segment Results</P> </B></U><P> During the quarter ended September 30, 1999, Carpenter changed its segment reporting. The changes are described in Note 7 to the Consolidated Financial Statements. All segment data for the quarter and nine months ended March 31, 1999 have been restated to reflect the current segment reporting structure.<BR> </P> <B><P>Specialty Metals Segment</P> </B><P> Net sales for this segment, which aggregates the SAO and Dynamet units of Carpenter were $266.9 million which was 9 percent higher than those of the same quarter a year ago. The increase in sales was primarily due to a 13 percent increase in sales at SAO, which was partially offset by a 16 percent decrease in sales at Dynamet. The improved SAO sales were the result of improved demand in the automotive, industrial and consumer markets. Aerospace related sales continued to fall behind year-earlier levels both at SAO and Dynamet.</P> <P> Earnings before interest and taxes (EBIT) for the Specialty Metals segment were $23.1 million which was 35 percent higher than last year's third quarter before the special charge. This increase was due to higher sales volume along with cost reductions in manufacturing and administrative functions. These effects were partially offset by the continued escalation of nickel prices and freight costs and start-up costs related to the consolidation of the SAO distribution system and development of Carpenter's e-business initiatives.</P> <B><P>Engineered Products Segment</P> </B><P> Net sales for this segment were $32.1 million which was 14 percent higher than the same quarter of last year. EBIT was $1.4 million which was $0.4 million higher than the third quarter of last year. This profit growth was due to higher sales volume and lower administrative costs. All units within the segment had sales improvements with the ceramics cores products showing the most growth.</P> <B><P>Pension Credits</P> </B><P> Pension credits, which result from the significant overfunded position of Carpenter's defined benefit pension plans, were $11.5 million in the March 2000 quarter versus $9.3 million in the same quarter a year ago. The higher level of credits was due primarily to the investment returns on the pension plan assets during fiscal 1999. This variance from the previous year's level of pension credits will continue for the balance of fiscal 2000.<BR> <BR> <BR> </P> <B><U><P>Results of Operations - Nine Months Ended March 31, 2000 vs.<BR> Nine Months Ended March 31, 1999</U>:</P> </B><P> Net income for the nine months ended March 31, 2000, was $34.8 million compared to $34.1 million, before the special charge, last year. Diluted earnings per share were $1.51 per share compared with $1.45, before the special charge, for the same period a year ago. The growth in earnings for the nine months was constrained by reduced selling prices and higher raw material costs.</P> <P> Net sales for the nine months were $787.5 million compared with $770.8 million reported last year. This increase was primarily the result of a 10 percent volume increase which was partially offset by price decreases and mix changes.</P> <P> Cost of sales as a percent of net sales remained relatively constant at 74.6 percent of sales compared to 74.5 percent last year.</P> <P> Selling and administrative expenses increased by $10.3 million due primarily to start-up costs for the distribution system consolidation and e-business initiatives, and increased freight and depreciation expenses. These factors were partially offset by the favorable effects of staff reductions and higher pension credits.</P> <P> Other income was more favorable than a year ago by $8.9 million, primarily as a result of the gains recognized on the sale of three warehouses, and the favorable effects reported in the second quarter resulting from adjustments to liabilities for environmental remediation, workers' compensation and other matters related to the acquisition of Talley Industries, Inc. Last year's other expense included foreign exchange losses and write downs of assets held for sale.</P> <P> The effective tax rate was 34.0 percent for the nine months ended March 31, 2000, versus 33.3 percent for the same period a year earlier. The increase in the current year was primarily due to the resolution of a foreign tax issue occurring in the second quarter of this fiscal year which reduced tax expense by $1.9 million. Last year several pending income tax issues were resolved resulting in a reduction of income tax expense for the third quarter of $2.2 million.</P> <B><U><P>Business Segment Results</P> </U><P>Specialty Metals Segment</P> </B><P> Net sales for this segment, which aggregates the SAO and Dynamet units of Carpenter were $697.1 million which was 1 percent higher than those for the same period a year ago. The increase in sales was primarily due to higher volume and was reduced by lower selling prices and mix changes. SAO sales rose by 4 percent while Dynamet sales were lower by 20 percent.</P> <P>Most SAO market sectors were improved but aerospace demand for both SAO and Dynamet products remained at lower levels.</P> <P> Earnings before interest and taxes (EBIT) were $55.9 million which was 12 percent lower than the same period last year, before the special charge. Profit margins were lower as selling prices fell in SAO and at Dynamet despite higher SAO costs for nickel versus a year ago. These effects were partially offset by cost reductions in manufacturing and administrative functions.</P> <B><P>Engineered Products Segment</P> </B><P> Net sales for this segment were $92.6 million which was 11 percent higher than the same period last year. Increased demand for ceramics, metal injection molded and shaped products accounted for most of the sales improvement.</P> <P> EBIT was $3.8 million, an increase of $2.6 million from the same period last year. This profit improvement was due to the increased sales, manufacturing cost efficiencies and reduced product development and administrative costs.</P> <B><P>Pension Credits</P> </B><P> Pension credits were $34.3 million for the nine months ending March 2000 compared to $27.1 million for the same period a year ago. The higher level of credits was due primarily to the investment returns on the pension plan assets during fiscal 1999.</P> <B><U><P>Cash Flow and Financial Condition</B></U>:</P> <P> During the nine months ended March 31, 2000, Carpenter's cash and cash equivalents increased by $2.9 million, as shown in the consolidated statement of cash flows.</P> <P> Net cash generated from operating activities was $34.4 million, primarily as a result of improved operating performance offset by increased working capital.</P> <P> Investing activities for plant and equipment consumed $73.4 million in cash during the first nine months of fiscal 2000. Total capital expenditures for all of fiscal 2000 are anticipated to be about $100 million. During the third quarter, Carpenter acquired The Anval Group, a powder metal producer based in Sweden, for $6.7 million which is net of cash received.</P> <P> Total debt, excluding debt of acquired businesses, increased by $63.2 million since June 30, 1999 to a level of $575.2 million or 41.6 percent of total capital employed, including deferred taxes. During the third quarter Carpenter's borrowing capacity was increased by $25 million. Additionally, in early April a long-term collateralized note was issued for $7.6 million, which was utilized to repay short-term debt and accordingly, the short-term debt was classified as long-term as of March 31, 2000. </P> <P> At March 31, 2000, current assets exceeded current liabilities by $90.2 million (a ratio of 1.2 to 1). This ratio is conservatively stated because certain inventories are valued $100.6 million less than the current cost as a result of using the LIFO method.</P> <P> Carpenter believes that its present financial resources, both from internal and external sources, will be adequate to meet its foreseeable short-term and long-term liquidity needs.</P> <B><U><P ALIGN="CENTER"><A NAME="ForwardLooking"></A>Forward-looking Statements</P> </B></U><P> This Form 10-Q contains various "Forward-looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations regarding future events that involve a number of risks and uncertainties which could cause actual results to differ from those of such forward-looking statements. Such risks and uncertainties include those set forth in other filings made by Carpenter under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and also include the following factors: 1) the cyclical nature of the specialty materials business and certain end-use markets, including, but not limited to, aerospace, automotive and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to recoup increased nickel costs through increased prices and surcharges and Carpenter's ability to reduce the impact of a strike in the nickel industry, if it should occur; 3) excess inventory and the impact of inventory adjustments in Carpenter's aerospace customer base; 4) worldwide excess capacity for certain alloys which Carpenter produces, resulting in increased competition and downward pricing pressure on Carpenter products; 5) the impact on the overfunding of Carpenter's pension plans of an increase in the pension liability or a decrease in plan assets, approximately 70 percent of which are invested in common stock equities; 6) the criticality of certain raw materials acquired from foreign sources, some of which are located in countries that may be subject to unstable political and economic conditions, potentially affecting the prices of these materials; 7) the level of export sales impacted by political and economic instability, particularly in Asia, Eastern Europe and Latin America, resulting in lower global demand for stainless steel products; 8) the ability of Carpenter, along with other domestic producers of stainless steel products, to obtain and retain favorable rulings in dumping and countervailing duty claims against foreign producers; 9) the level of sales impacted by export controls, changes in legal and regulatory requirements, policy changes affecting the markets, changes in tax laws and tariffs, exchange rate fluctuations and accounts receivable collection; 10) the effects on operations of changes in U.S. and foreign governmental laws and public policy, including environmental regulations; and 11) the accuracy of Carpenter's belief that the valuation of the Corporation's former plant site by the Bridgeport, Connecticut Port Authority will be overturned and that Carpenter will be absolved from remediation costs caused by the Port Authority's development efforts. Any of these factors could have an adverse and/or fluctuating effect on Carpenter's 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.</P> <B><U><P><A NAME="OtherInformation"></A>PART II - OTHER INFORMATION</P> <P>Item 1. Legal Proceedings</P> </B></U><P> There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of their properties is subject or which is known by the Company to be contemplated by government authorities. There are no material proceedings to which any Director, Officer, or affiliate of the Company, or any owner of more than five percent of any class of voting securities of the Company, or any associate of any Director, Officer, affiliate, or security holder of the Company, is a party adverse to the Company or has a material interest adverse to the interest of the Company or its subsidiaries. There is no administrative or judicial proceeding arising under any Federal, State or local provisions regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that (1) is material to the business or financial condition of the Company, (2) involves a claim for damages, potential sanctions or capital expenditures exceeding ten percent of the current assets of the Company or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000.</P> <P> </P> <B><U><P>Item 6. Exhibits and Reports on Form 8-K</U>.</P> </B><P> a. The following documents are filed as exhibits:</P> <P> 27. Financial Data Schedule.</P> <P> b. The Company did not file any Reports on Form 8-K <BR> for events occurring during the quarter of the <BR> fiscal year covered by this report. </P> <B><P> Items 2, 3, 4 and 5</B> are omitted as the answer is negative or the items are not applicable.</P> <B><U><P ALIGN="CENTER">SIGNATURE</P> </B></U><P>Pursuant to the requirements 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.</P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=637> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="58%" VALIGN="TOP"> <B><U><FONT FACE="Courier"><P>Carpenter Technology Corporation</B></U></FONT></TD> </TR> <TR><TD WIDTH="42%" VALIGN="TOP"> <P> </TD> <TD WIDTH="58%" VALIGN="TOP"> <FONT FACE="Courier"><P> (Registrant)</FONT></TD> </TR> </TABLE> <FONT FACE="Courier"><P> </P></FONT> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=638> <TR><TD WIDTH="50%" VALIGN="TOP"> <P><FONT FACE="Courier">Date:<U> May 12, 2000 </U></FONT></TD> <TD WIDTH="50%" VALIGN="TOP"> <FONT FACE="Courier"><P>_____________________________<BR> G. Walton Cottrell<BR> Sr. Vice President - Finance<BR> and Chief Financial Officer</FONT></TD> </TR> </TABLE> </BODY> </HTML>