-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 WZExTvUxaGRL/YjM9yiMMaOgXpHj7xHRE7cfYlq9nIToMx7Fe8GVvCAVBORi7QSO
 z0U/zQcFKCGQ4z7lFlyZ7Q==

<SEC-DOCUMENT>0000017843-02-000007.txt : 20020514
<SEC-HEADER>0000017843-02-000007.hdr.sgml : 20020514
ACCESSION NUMBER:		0000017843-02-000007
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20020331
FILED AS OF DATE:		20020514

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CARPENTER TECHNOLOGY CORP
		CENTRAL INDEX KEY:			0000017843
		STANDARD INDUSTRIAL CLASSIFICATION:	STEEL WORKS, BLAST FURNACES  ROLLING MILLS (COKE OVENS) [3312]
		IRS NUMBER:				230458500
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05828
		FILM NUMBER:		02645643

	BUSINESS ADDRESS:	
		STREET 1:		1047 N PARK ROAD
		CITY:			WYOMISSING
		STATE:			PA
		ZIP:			19610-1339
		BUSINESS PHONE:		6102082000

	MAIL ADDRESS:	
		STREET 1:		1047 N PARK ROAD
		CITY:			WYOMISSING
		STATE:			PA
		ZIP:			19610
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>mar02qtr.htm
<DESCRIPTION>MAR 2002 10Q
<TEXT>
<html>

<head>

<title>Carpenter Technology Corporation - March 31, 2002 10-Q</title>
</head>

<body VLINK="#800080">
<font FACE="Arial"><b>

<p ALIGN="CENTER">UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
WASHINGTON, D.C. 20549<br>
<br>
<br>
FORM 10-Q</b></font></p>

<p><font face="Arial" color="#000000"><b>(Mark One)</b></font></p>
<div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="2" WIDTH="637">
  <tr>
    <td WIDTH="8%" VALIGN="TOP"><font FACE="Arial"><b>[X]</b></font></td>
    <td WIDTH="92%" VALIGN="TOP"><font FACE="Arial"><b>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"></td>
    <td WIDTH="92%" VALIGN="TOP"><font FACE="Arial"><b><br>
    For the quarterly period ended March 31, 2002</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="92%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="92%" VALIGN="TOP"><font FACE="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OR<br>
    </b></font><br>
    </td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"><font FACE="Arial"><b>[&nbsp;&nbsp;]</b></font></td>
    <td WIDTH="92%" VALIGN="TOP"><font FACE="Arial"><b>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"></td>
    <td WIDTH="92%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="92%" VALIGN="TOP"><font FACE="Arial"><b>For the transition period from ____ to
    ____</b></font></td>
  </tr>
</table>
</center></div><font FACE="Arial"><b>

<p ALIGN="CENTER"><br>
Commission File Number 1-5828&nbsp;<br>
<br>
CARPENTER TECHNOLOGY CORPORATION<br>
</b>(Exact name of Registrant as specified in its Charter)<br>
&nbsp;</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="2" WIDTH="666">
  <tr>
    <td WIDTH="70%" VALIGN="TOP" HEIGHT="26"><font SIZE="2"><p ALIGN="CENTER"></font><font
    FACE="Arial"><b>Delaware<br>
    </b>(State or other jurisdiction of incorporation or organization)</font></td>
    <td WIDTH="30%" VALIGN="TOP" HEIGHT="26"><font FACE="Arial"><b><p ALIGN="CENTER">23-0458500<br>
    </b>(I.R.S. Employer Identification No.)</font></td>
  </tr>
  <tr>
    <td WIDTH="70%" VALIGN="TOP"></td>
    <td WIDTH="30%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="70%" VALIGN="TOP"></td>
    <td WIDTH="30%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="70%" VALIGN="TOP"><font FACE="Arial"><b><p ALIGN="CENTER">1047 North Park Road,
    Wyomissing,&nbsp;Pennsylvania<br>
    </b>(Address of principal executive offices)</font></td>
    <td WIDTH="30%" VALIGN="TOP"><font FACE="Arial"><b><p ALIGN="CENTER">19610-1339<br>
    </b>(Zip Code)</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p ALIGN="CENTER">&nbsp;<br>
<b>610-208-2000<br>
</b>(Registrant's telephone number, including area code)</p>

<p><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&nbsp;days. <br>
</p>

<p ALIGN="RIGHT">Yes <u>&nbsp;X&nbsp;</u>&nbsp;&nbsp;No<u>&nbsp;&nbsp;&nbsp;</u>&nbsp;&nbsp;&nbsp;</p>

<p><br>
Indicate the number of shares outstanding of each of the issuer's classes of common stock
as of April 30, 2002.<br>
</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="2" WIDTH="631">
  <tr>
    <td WIDTH="49%" VALIGN="TOP"><font FACE="Arial"><b><p ALIGN="CENTER">Common stock, $5 par
    value<br>
    </b>Class</font></td>
    <td WIDTH="51%" VALIGN="TOP"><font FACE="Arial"><u><b><p ALIGN="CENTER">22,255,464<br>
    </b></u>Number of shares outstanding</font></td>
  </tr>
</table>
</center></div><font SIZE="2">

<p ALIGN="CENTER">&nbsp;</p>
</font><font FACE="Arial"><b>

<p ALIGN="CENTER">CARPENTER TECHNOLOGY CORPORATION<br>
FORM 10-Q<br>
INDEX<br>
</p>
</b>

<p>&nbsp;</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="2" WIDTH="636">
  <tr>
    <td WIDTH="86%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><u><b><p ALIGN="CENTER">Page</b></u></font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial">Part I FINANCIAL INFORMATION<p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#Consolidated_Balance_Sheet">Consolidated
    Balance Sheet as of March 31, 2002, <br>
    (unaudited) and June 30,
    2001......................&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    3</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a
    href="#Consolidated_Statement_of_Income">Consolidated Statement of Income (unaudited) for
    the<br>
    Three and Nine Months Ended March 31, 2002 and 2001 ..&#133;&#133;................</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    4</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#Comprehensive Income">Consolidated
    Statement of Comprehensive Income<br>
    (unaudited) for the Three and Nine Months Ended <br>
    March 31, 2002 and
    2001....................................&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;.</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    <br>
    5</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#Cash Flows">Consolidated
    Statement of Cash Flows (unaudited) for<br>
    the Nine Months Ended March 31, 2002 and
    2001.......&#133;&#133;.....&#133;&#133;&#133;&#133;..</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    6</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#Financial Statements">Notes to
    Consolidated Financial Statements (unaudited)...........................</a>...<p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER">7 - 17</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#MD&amp;A">Management's
    Discussion and Analysis of Financial<br>
    Condition and Results of
    Operations.................&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    18 - 28</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><a href="#Forward Looking">Forward-looking
    Statements...........................&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;</a><p><br>
    </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER">29</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><a href="#Part II - Other Info - Legal"><font FACE="Arial">Part
    II OTHER
    INFORMATION............................&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;&#133;..</font></a></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER">30</font></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="86%" VALIGN="TOP"><font FACE="Arial"><br>
    <a href="#Signature">Signature........................................................................................................</a></font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="CENTER"><br>
    31</font></td>
  </tr>
</table>
</center></div><font FACE="Arial"><b><u>

<p>&nbsp;</p>

<p>PART&nbsp;I</p>
</u>

<p ALIGN="CENTER"><a name="Consolidated_Balance_Sheet"></a>CARPENTER TECHNOLOGY
CORPORATION<br>
CONSOLIDATED BALANCE SHEET<br>
March 31, 2002 (Unaudited) and June 30, 2001<br>
</b>(in millions)<br>
<b></p>
</b></font><div align="center"><center>

<table CELLSPACING="1" BORDER="1" CELLPADDING="2" WIDTH="630">
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">March 31,&nbsp;&nbsp;<br>
    <u>2002</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><br>
    </u>(Unaudited)&nbsp;&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="CENTER">June 30,<br>
    <u>2001<br>
    </u></font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">ASSETS</font></td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Current assets:</font></td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Cash and cash
    equivalents</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$ 5.4</font><font
    SIZE="2">&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$ 7.8&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Accounts receivable,
    net</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">141.5&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">193.8&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Inventories</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">199.5&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">241.1&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Other current assets</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT"><u>23.4</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">16.4</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    current assets</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">369.8&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">459.1&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Property, plant and equipment, net</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">728.3&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">752.2&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Prepaid pension cost</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">247.7&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">225.6&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Goodwill, net</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">158.9&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">161.7&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Trademarks and trade names, net</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">26.7&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">27.6&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Other assets</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT"><u>63.2</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">65.3</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Total assets</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,594.6</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,691.5</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">LIABILITIES</font></td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Current liabilities:</font></td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Short-term debt</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$ 15.4&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$ 170.6&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Accounts payable</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">72.6&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">82.3&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Accrued liabilities</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">57.4&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">63.9&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Deferred income taxes</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">.5&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">2.1&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Current portion of
    long-term debt</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">15.2</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">25.2</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    current liabilities</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">161.1&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">344.1&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Long-term debt, net of current portion</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">420.9&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">326.9&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Accrued postretirement benefits</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">165.2&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">157.8&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Deferred income taxes</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">182.5&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">177.8&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Other liabilities</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">34.4&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">36.3&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">STOCKHOLDERS' EQUITY</font></td>
    <td WIDTH="91" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Convertible preferred
    stock</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">24.7&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">25.4&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Common stock</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">116.5&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">116.3&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Capital in excess of
    par value - common stock</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">197.0&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">196.7&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Reinvested earnings</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">354.0&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">378.4&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Common stock in
    treasury, at cost</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">(38.3)</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">(38.4)</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Deferred compensation</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">(11.1)</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">(13.1)</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Accumulated other
    comprehensive income (loss)</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">(12.3</u>)</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT"><u>(16.7</u>)</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    stockholders' equity</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="RIGHT">630.5</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT"><u>648.6</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="380" VALIGN="MIDDLE"><font FACE="Arial">Total liabilities and stockholders'
    equity</font></td>
    <td WIDTH="91" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,594.6</u>&nbsp;</font></td>
    <td WIDTH="13" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="101" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,691.5</u>&nbsp;</font></td>
    <td WIDTH="15" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>See accompanying notes to consolidated financial statements.</p>

<p>&nbsp;</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, 2002 and 2001<br>
(in millions, except per share data)<br>
</p>
</b></font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="7" WIDTH="649">
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="143" VALIGN="TOP" COLSPAN="3"><font FACE="Arial"><p ALIGN="CENTER">Three Months</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="148" VALIGN="BOTTOM" COLSPAN="3"><font FACE="Arial"><p ALIGN="CENTER">Nine
    Months</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">NET SALES</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>250.2</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>297.3</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u>749.5</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>882.6</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">COSTS AND EXPENSES:</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Cost of sales</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">222.3&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">231.2&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">622.1&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">678.1&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Selling and
    administrative expenses</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">35.0&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">38.2&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">108.0&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">113.9&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Interest expense</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">8.3&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">&nbsp;9.9&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">26.3&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">31.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Other expense
    (income), net</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">.9</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp; (.1</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(4.2</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">(3.0</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">266.5</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">279.2</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">752.2</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">820.2</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">Income (loss) before income taxes <br>
    &nbsp;&nbsp;and cumulative effect of accounting<br>
    &nbsp;&nbsp;change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    (16.3)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    18.1&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(2.7)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">62.4&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">Income tax expense (benefit)</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><u>(5.8</u>)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">7.6</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(1.6</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">23.2</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">Income (loss) before cumulative<br>
    &nbsp;&nbsp;effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    (10.5)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    10.5&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(1.1)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    39.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">Cumulative effect of accounting <br>
    &nbsp;&nbsp;change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    &nbsp;<u>&nbsp;&nbsp; &nbsp; &nbsp;--</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    (14.1</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">NET INCOME (LOSS)</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $<u>(10.5</u>)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $<u> 10.5</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (1.1</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $<u> 25.1</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">EARNINGS (LOSS) PER COMMON<br>
    &nbsp;&nbsp;SHARE:</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Basic:</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
    (loss) before cumulative <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ (.49)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ .46&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ (.11)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ 1.73&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cumulative
    effect of accounting<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    --</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    --</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp; --</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <u>(.64</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    income (loss)</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (.49</u>)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .46</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (.11</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> 1.09</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Diluted:</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
    (loss) before cumulative <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ (.49)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ .45&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ (.11)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    $ 1.69&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cumulative
    effect of accounting<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    &nbsp; --</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT"><br>
    --</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;
    &nbsp;&nbsp;--</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    &nbsp;<u>&nbsp;&nbsp;&nbsp;(.62</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    income (loss)</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (.49</u>)</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .45</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (.11</u>)</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> 1.07</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">WEIGHTED AVERAGE COMMON<br>
    &nbsp;&nbsp;SHARES OUTSTANDING</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial">&nbsp;&nbsp;Basic </font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><u><p ALIGN="RIGHT">22.2</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><p ALIGN="RIGHT"><u>22.1</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><u><p ALIGN="RIGHT">22.2</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="58" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><p ALIGN="RIGHT"><u>22.0</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial">&nbsp;&nbsp;Diluted</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><u><p ALIGN="RIGHT">22.2</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><p ALIGN="RIGHT"><u>23.0</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><u><p ALIGN="RIGHT">22.2</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="BOTTOM" HEIGHT="20"></td>
    <td WIDTH="58" VALIGN="BOTTOM" HEIGHT="20"><font FACE="Arial"><p ALIGN="RIGHT"><u>23.0</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="280" VALIGN="BOTTOM"><font FACE="Arial">Cash dividends per common share</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .33</u>&nbsp;</font></td>
    <td WIDTH="2" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .33</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .99</u>&nbsp;</font></td>
    <td WIDTH="1" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u> .99</u>&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>See accompanying notes to consolidated financial statements.</p>
<b>

<p ALIGN="CENTER"><a name="Comprehensive Income"></a>CARPENTER TECHNOLOGY CORPORATION<br>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME<br>
(Unaudited)<br>
for the three and nine months ended March 31, 2002 and 2001<br>
(in millions)<br>
</p>
</b></font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="7" WIDTH="619">
  <tr>
    <td WIDTH="289" VALIGN="TOP" HEIGHT="14">&nbsp;&nbsp;</td>
    <td WIDTH="141" VALIGN="TOP" COLSPAN="2" HEIGHT="14"><font FACE="Arial"><p ALIGN="CENTER">Three&nbsp;Months</font></td>
    <td WIDTH="135" VALIGN="TOP" COLSPAN="2" HEIGHT="14"><font FACE="Arial"><p ALIGN="CENTER">Nine&nbsp;Months</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP" HEIGHT="28">&nbsp;&nbsp;</td>
    <td WIDTH="63" VALIGN="TOP" HEIGHT="28"><font FACE="Arial"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="28"><font FACE="Arial"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
    <td WIDTH="59" VALIGN="TOP" HEIGHT="28"><font FACE="Arial"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP" HEIGHT="28"><font FACE="Arial"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Net&nbsp;income (loss)</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$(10.5)</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$10.5&nbsp;</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$(1.1)</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$25.1&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Cumulative effect of change in<br>
    &nbsp;&nbsp;&nbsp;&nbsp;accounting principle for derivatives<br>
    &nbsp;&nbsp;&nbsp;&nbsp;and hedging activities (SFAS 133),<br>
    &nbsp;&nbsp;&nbsp;&nbsp;net of tax</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    --&nbsp;</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    --&nbsp;</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    --&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    .8&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Net gains (losses) on derivative<br>
    &nbsp;&nbsp;&nbsp;&nbsp;instruments, net of tax</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    3.5&nbsp;</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    (.5)</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    3.8&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    (2.8)</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Unrealized loss on investment, net of tax</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(.1)</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Foreign&nbsp;currency&nbsp;translation,&nbsp;net&nbsp;of&nbsp;tax</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">.4&nbsp;</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(.7)</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">.6&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(1.0)</font></td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="63" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="60" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="59" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="58" VALIGN="TOP">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="289" VALIGN="TOP"><font FACE="Arial">Comprehensive&nbsp;income (loss)</font></td>
    <td WIDTH="63" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;(6.6)</font></td>
    <td WIDTH="60" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;9.3&nbsp;</font></td>
    <td WIDTH="59" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;3.3&nbsp;</font></td>
    <td WIDTH="58" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$22.0&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>See accompanying notes to consolidated financial statements.<br>
</p>

<p>&nbsp;</p>
<b>

<p ALIGN="CENTER"><a name="Cash Flows"></a>CARPENTER TECHNOLOGY CORPORATION<br>
CONSOLIDATED STATEMENT OF CASH FLOWS<br>
(Unaudited)<br>
for the nine months ended March 31, 2002 and 2001<br>
</b>(in millions)<br>
</p>
</font><div align="center"><center>

<table CELLSPACING="1" BORDER="1" CELLPADDING="2" WIDTH="620">
  <tr>
    <td WIDTH="382" VALIGN="TOP" HEIGHT="15"></td>
    <td WIDTH="88" VALIGN="MIDDLE" HEIGHT="15"><font FACE="Arial"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="MIDDLE" HEIGHT="15"></td>
    <td WIDTH="90" VALIGN="MIDDLE" HEIGHT="15"><font FACE="Arial"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="TOP" HEIGHT="15"></td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">OPERATIONS:</font></td>
    <td WIDTH="88" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Net income (loss)</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ (1.1)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ 25.1&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Cumulative effect of
    accounting change</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">14.1&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Adjustments to reconcile
    net income to net cash<br>
    &nbsp;&nbsp;&nbsp;&nbsp;provided from operations:</font></td>
    <td WIDTH="88" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
    </font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">42.1&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">41.6&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
    of intangible assets</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">8.8&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">12.3&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
    income taxes</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">4.1&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">19.3&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    pension credit</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(12.8)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(30.3)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    loss (gain) on asset disposals </font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">.8&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(2.4)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;Changes in
    working capital and other:</font></td>
    <td WIDTH="88" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Receivables</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">52.7&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(2.2)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">41.7&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(.9)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
    payable</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(9.7)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(16.0)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
    current liabilities</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(6.4)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(2.1)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other,
    net</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(6.4</u>)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">10.7</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">Net cash provided from operations</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">113.8</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">69.2</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial"><br>
    INVESTING ACTIVITIES:</font></td>
    <td WIDTH="88" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Purchases of plant,
    equipment and software </font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(24.0)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(39.6)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Proceeds from disposals of
    plant and equipment</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">.5&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">8.7&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial">&nbsp;&nbsp;Proceeds from
    sales of businesses</font></td>
    <td WIDTH="88" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial"><p ALIGN="RIGHT"><u>3.0</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM" HEIGHT="18"></td>
    <td WIDTH="90" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE" HEIGHT="18"></td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">Net cash used for investing activities</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(20.5</u>)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT"><u>(30.9</u>)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial"><br>
    NET CASH PROVIDED BEFORE <br>
    FINANCING ACTIVITIES</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">93.3</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">38.3</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial"><br>
    FINANCING ACTIVITIES:</font></td>
    <td WIDTH="88" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Change in short-term debt</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(155.8)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(10.9)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Proceeds from issuance of
    long-term debt</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">98.3&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;
    &nbsp; --&nbsp;</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Payments on long-term debt</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(15.5)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(10.5)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Dividends paid</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(23.3)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(23.1)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;Proceeds from issuance of
    common stock</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">.6</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">2.5</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="BOTTOM">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">Net cash used for financing activities</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(95.7</u>)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">(42.0</u>)</font></td>
    <td WIDTH="19" VALIGN="MIDDLE">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">(DECREASE) IN CASH AND CASH EQUIVALENTS</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(2.4)</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(3.7)</font></td>
    <td WIDTH="19" VALIGN="BOTTOM">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">Cash and cash equivalents at beginning
    of period</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">7.8</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">9.6</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="BOTTOM">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="382" VALIGN="BOTTOM"><font FACE="Arial">Cash and cash equivalents at end of
    period</font></td>
    <td WIDTH="88" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> 5.4</u>&nbsp;</font></td>
    <td WIDTH="21" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="90" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> 5.9</u>&nbsp;</font></td>
    <td WIDTH="19" VALIGN="BOTTOM">&nbsp;</td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>See accompanying notes to consolidated financial statements.<br>
</p>

<p>&nbsp;</p>
<b><u>

<p ALIGN="CENTER"><a name="Financial Statements"></a>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS<br>
(Unaudited)<br>
</p>
</u>

<p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Basis&nbsp;of&nbsp;Presentation<br>
</p>

<blockquote>
  <p></u></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited consolidated financial
  statements of Carpenter Technology Corporation (hereinafter called &quot;The Company&quot;
  or &quot;Carpenter&quot;) 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, 2002 are not necessarily indicative
  of the results that may be expected for the year ending June 30, 2002. The June&nbsp;30,
  2001 condensed balance sheet data were derived from audited financial statements, but do
  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 fiscal
  year 2001 Annual Report on Form 10-K.<br>
  <u><b><br>
  </b></u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of the consolidated financial
  statements in conformity with generally accepted accounting principles requires management
  to make estimates and assumptions that affect the amounts of assets and liabilities and
  disclosure of contingent assets and liabilities at the date of the financial statements
  and the reported amounts of revenues and expenses during the reporting period. Actual
  results could differ from those estimates.<br>
  <br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain reclassifications of prior year's amounts have been
  made to conform with the current year's presentation.<b><u></p>
</blockquote>

<p></u>2.&nbsp;&nbsp;&nbsp;<u>Earnings (Loss) Per Common Share<font FACE="Arial" SIZE="2"><br>
<br>
</u></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The calculations of earnings
(loss) per share for the periods ended&nbsp;March 31, 2002 and 2001 are<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shown below. No calculations are presented
for the diluted losses per share for the three and nine<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;months ended March 31, 2002 since the
assumed conversion of preferred shares and the exercise<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of stock options are anti-dilutive.</p>
</font></font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="7" WIDTH="564">
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">(in&nbsp;millions,&nbsp;except&nbsp;<br>
    &nbsp;per&nbsp;share&nbsp;data)</font></td>
    <td WIDTH="128" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Three&nbsp;Months
    Ended<br>
    March 31</font></td>
    <td WIDTH="124" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Nine&nbsp;Months
    Ended<br>
    March 31</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP" HEIGHT="17">&nbsp;&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="53" VALIGN="TOP" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
    <td WIDTH="55" VALIGN="TOP" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP" HEIGHT="8"><font FACE="Arial" SIZE="2"><u>Basic</u>:</font></td>
    <td WIDTH="57" VALIGN="TOP" HEIGHT="8">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP" HEIGHT="8">&nbsp;&nbsp;</td>
    <td WIDTH="55" VALIGN="BOTTOM" HEIGHT="8">&nbsp;&nbsp;</td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="8">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="baseline" HEIGHT="8"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Income
    (loss) before cumulative effect<br>
    &nbsp;&nbsp;&nbsp;&nbsp; of&nbsp;accounting change, net of tax</font></td>
    <td WIDTH="57" VALIGN="baseline" HEIGHT="8"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $(10.5)</font></td>
    <td WIDTH="53" VALIGN="baseline" HEIGHT="8"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.5&nbsp;</font></td>
    <td WIDTH="55" VALIGN="baseline" HEIGHT="8"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $(1.1)</font></td>
    <td WIDTH="51" VALIGN="baseline" HEIGHT="8"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $39.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="baseline"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Dividends&nbsp;accrued<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;on&nbsp;convertible&nbsp;preferred<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock,&nbsp;net&nbsp;of&nbsp;tax&nbsp;benefits</font></td>
    <td WIDTH="57" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    <br>
    (0.4)</font></td>
    <td WIDTH="53" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    <br>
    (0.4)</font></td>
    <td WIDTH="55" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    <br>
    (1.3)</font></td>
    <td WIDTH="51" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    <br>
    (1.3)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="baseline"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings&nbsp;(loss)
    available&nbsp;for&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders</font></td>
    <td WIDTH="57" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    (10.9)</font></td>
    <td WIDTH="53" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    10.1&nbsp;</font></td>
    <td WIDTH="55" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    (2.4)</font></td>
    <td WIDTH="51" VALIGN="baseline"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    37.9&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="bottom"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Cumulative effect
    of accounting change</font></td>
    <td WIDTH="57" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="55" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="51" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(14.1)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Net
    income&nbsp;(loss) available&nbsp;for&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders&nbsp;</font></td>
    <td WIDTH="57" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $(10.9)</font></td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.1&nbsp;</font></td>
    <td WIDTH="55" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(2.4)</font></td>
    <td WIDTH="51" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $23.8&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="55" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="51" VALIGN="TOP">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="bottom"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Weighted&nbsp;average&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares&nbsp;outstanding</font></td>
    <td WIDTH="57" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    22.2&nbsp;</font></td>
    <td WIDTH="53" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    22.1&nbsp;</font></td>
    <td WIDTH="55" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">22.2&nbsp;</font></td>
    <td WIDTH="51" VALIGN="bottom"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">22.0&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP" HEIGHT="14"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings&nbsp;(loss)&nbsp;per
    share before <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cumulative effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.49)</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $0.46&nbsp;</font></td>
    <td WIDTH="55" VALIGN="BOTTOM" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.11)</font></td>
    <td WIDTH="51" VALIGN="BOTTOM" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$1.73&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Cumulative
    effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="55" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="51" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(0.64)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings&nbsp;(loss)&nbsp;per&nbsp;share</font></td>
    <td WIDTH="57" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.49)</font></td>
    <td WIDTH="53" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$0.46&nbsp;</font></td>
    <td WIDTH="55" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.11)</font></td>
    <td WIDTH="51" VALIGN="bottom" HEIGHT="14"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$1.09&nbsp;</font></td>
  </tr>
</table>
</center></div><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="7" WIDTH="564">
  <tr>
    <td WIDTH="258" VALIGN="TOP">&nbsp;&nbsp;<br>
    </td>
    <td WIDTH="128" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER"><br>
    Three&nbsp;Months Ended<br>
    March 31</font></td>
    <td WIDTH="124" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER"><br>
    Nine&nbsp;Months Ended<br>
    March 31</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="MIDDLE" HEIGHT="17">&nbsp;&nbsp;</td>
    <td WIDTH="57" VALIGN="MIDDLE" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="53" VALIGN="MIDDLE" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
    <td WIDTH="53" VALIGN="MIDDLE" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2002</u>&nbsp;</font></td>
    <td WIDTH="53" VALIGN="MIDDLE" HEIGHT="17"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT">2001</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u>Diluted</u>:</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Income before
    cumulative effect of<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounting change, net of tax</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.5&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $39.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Assumed shortfall
    between<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common and preferred dividends</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    (0.1)</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    (0.5)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings
    available&nbsp;for&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders&nbsp;</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    10.4&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    38.7&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Cumulative effect of
    accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(14.1)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Net income
    available&nbsp;for&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders&nbsp;</font></td>
    <td WIDTH="57" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.4&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $24.6&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="TOP">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Weighted&nbsp;average&nbsp;common<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares&nbsp;outstanding</font></td>
    <td WIDTH="57" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    22.1&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    22.0&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Assumed&nbsp;conversion&nbsp;of&nbsp;preferred<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="34">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    0.8&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">0.8&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Effect&nbsp;of&nbsp;shares&nbsp;issuable&nbsp;under<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock&nbsp;option&nbsp;plans</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="34">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    0.1&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="34"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">0.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP" HEIGHT="12"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Adjusted
    weighted&nbsp;average<br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common&nbsp;shares</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="12">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="12"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">23.0&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="12">&nbsp;&nbsp;</td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="12"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">23.0&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings&nbsp;(loss)
    per share before &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cumulative&nbsp;effect of accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $(0.49)</font></td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $0.45&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.11)</font></td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $1.69&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Cumulative effect of
    accounting change</font></td>
    <td WIDTH="57" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">--&nbsp;</font></td>
    <td WIDTH="53" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(0.62)</font></td>
  </tr>
  <tr>
    <td WIDTH="258" VALIGN="TOP" HEIGHT="18"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;Earnings&nbsp;(loss)
    per&nbsp;share</font></td>
    <td WIDTH="57" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.49)</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$0.45&nbsp;</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$(0.11)</font></td>
    <td WIDTH="53" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$1.07&nbsp;</font></td>
  </tr>
</table>
</center></div><b><font FACE="Arial"><u>

<p ALIGN="CENTER"></u>&nbsp;</p>

<p>3.&nbsp;&nbsp;&nbsp;<u>Inventories<br>
</p>
</u></font></b><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="2" WIDTH="558">
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">March 31,<br>
    <u>2002</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">June&nbsp;30,<br>
    <u>2001</u>&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="42%" VALIGN="MIDDLE" COLSPAN="2"><font FACE="Arial"><p ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(in&nbsp;millions)</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Raw&nbsp;materials&nbsp;and&nbsp;supplies</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;52.4&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;44.5&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Work&nbsp;in&nbsp;process</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">139.0&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">185.4&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Finished&nbsp;and&nbsp;purchased&nbsp;products</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">112.1&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">&nbsp;108.7&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Total&nbsp;at&nbsp;current&nbsp;cost</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">303.5&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">338.6&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Less&nbsp;excess&nbsp;of&nbsp;current&nbsp;cost&nbsp;over<br>
    &nbsp;&nbsp;&nbsp;LIFO&nbsp;values</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">104.0&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">97.5&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP" HEIGHT="16"><font FACE="Arial">Total&nbsp;inventory</font></td>
    <td WIDTH="24%" VALIGN="BOTTOM" HEIGHT="16"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;&nbsp;199.5&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="BOTTOM" HEIGHT="16"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;241.1&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<dir>
  <dir>
    <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current cost of LIFO-valued inventories was $234.1
    million at March 31, 2002 and $272.5 million at June&nbsp;30, 2001. Reductions in
    LIFO-valued inventories resulted in additional costs of $6.5 million before taxes or $.19
    per diluted share during the third quarter of fiscal 2002.</p>
    <p>&nbsp;</p>
  </dir>
</dir>
<b>

<p>4.&nbsp;&nbsp;&nbsp;<u>Property, Plant and Equipment<br>
</p>
</u></b></font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="2" WIDTH="558">
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">March 31,<br>
    <u>2002</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">June&nbsp;30,<br>
    <u>2001</u>&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="42%" VALIGN="MIDDLE" COLSPAN="2"><font FACE="Arial"><p ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(in&nbsp;millions)</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Property,&nbsp;plant&nbsp;and&nbsp;equipment&nbsp;at&nbsp;cost</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$1,358.3&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$1,345.9&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Less&nbsp;accumulated&nbsp;depreciation&nbsp;and<br>
    &nbsp;&nbsp;&nbsp;amortization</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    630.0&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    593.7&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;&nbsp;728.3&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$&nbsp;&nbsp;752.2&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>&nbsp;</p>
<b>

<p>5.&nbsp;&nbsp;&nbsp;<u>Stockholders' Equity Data<br>
</p>
</u></b></font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="2" WIDTH="558">
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">March 31,<br>
    <u>2002</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">June&nbsp;30,<br>
    <u>2001</u>&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP" HEIGHT="31">&nbsp;&nbsp;</td>
    <td WIDTH="42%" VALIGN="TOP" COLSPAN="2" HEIGHT="31">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Preferred&nbsp;shares&nbsp;issued</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">392.5&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">404.0&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Common&nbsp;shares&nbsp;issued</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">23,295,709&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">23,267,519&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Common&nbsp;shares&nbsp;in&nbsp;Treasury</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(1,104,295)&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(1,108,247)</font></td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="58%" VALIGN="TOP"><font FACE="Arial">Net&nbsp;common&nbsp;shares&nbsp;outstanding</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">22,191,414&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">22,159,272&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>&nbsp;</p>
<b><u>

<p ALIGN="CENTER">&nbsp;</p>
</u>

<p>6. &nbsp;<u>Commitments and Contingencies<br>
</p>
</u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environmental<br>
</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter is subject to various stringent federal, state
and local environmental laws and regulations. The liability for future environmental
remediation costs is evaluated by management on a quarterly basis. 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
additional accrual was made for the nine months ended March 31, 2002. For the three months
ended September 30, 2000, the liability for environmental remediation costs was increased
by $.6 million which was included in cost of sales. No additional accruals were made for
the balance of fiscal 2001. The liability for environmental remediation costs remaining at
March 31, 2002 was $6.4 million. A compliance status report is currently being prepared by
an outside consultant to determine what, if any, potential remediation costs there may be
at a former manufacturing site of a Talley Industries, Inc. subsidiary that was sold prior
to Carpenter's acquisition of Talley Industries, Inc. The estimated range of the
reasonably possible future costs of remediation at superfund sites, at other third
party-owned sites and at Carpenter-owned operating facilities is between $6.4 million and
$13.1 million. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 selection of alternative
remediation methodologies, 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.

<dl>
</dl>
<b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter is also defending various claims and legal
actions, and is subject to 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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><b>Business Segments<br>
<br>
<br>
</b></u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting
Standards (SFAS) 131, &quot;Disclosures about Segments of an Enterprise and Related
Information&quot;, 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: Specialty Alloys Operations, Titanium, Carpenter Powder
Products, and Engineered Products. For the following segment reporting, the Specialty
Alloys Operations, Titanium, and Carpenter Powder Products segments have been aggregated
into one reportable segment, Specialty Metals, because of the similarities in products,
processes, customers, distribution methods and economic characteristics.<u><b></p>
</b></u>

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

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective July 1, 2001, management changed the basis for
measuring the business segment's profits to allocate additional corporate costs to the
business segments, to allocate pension credits to the business segments to offset the
expense for the post retirement benefit plans and the other underfunded defined benefit
pension plans charged to the operating segments, to show separately the remaining net
pension credit, and to show separately other income and expense, net. All segment data for
fiscal 2001 have been restated to reflect the current segment reporting structure. Sales
between the segments are generally made at market-related prices.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net pension credit represents the income relating to
Carpenter's overfunded defined benefit pension plan less the expense for the post
retirement benefit plans and the other underfunded defined benefit pension plans. The
corporate costs primarily represent the unallocated portion of the operating costs of the
finance, law and human resource departments as well as the corporate management staff.
Other income and expense, net, includes non-operating income and expense components, such
as tariffs received from the U.S. Customs Department, interest income, gains and losses
from sales of fixed assets, and market valuation adjustments of investments in life
insurance policies. Corporate assets are primarily domestic cash and cash equivalents,
prepaid pension cost, corporate-owned life insurance and corporate plant, equipment and
software.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter's sales are not materially dependent on a
single customer or small group of customers.</p>
<b>

<p>Segment Data<br>
</b>&nbsp;&nbsp;(in millions)</p>
</font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" CELLPADDING="2" WIDTH="618">
  <tr>
    <td WIDTH="41%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="30%" VALIGN="TOP" COLSPAN="3"><font FACE="Arial"><p ALIGN="CENTER">Three Months
    Ended<br>
    <u>March 31</u></font></td>
    <td WIDTH="29%" VALIGN="TOP" COLSPAN="3"><font FACE="Arial"><p ALIGN="CENTER">Nine Months
    Ended<br>
    <u>March 31</u></font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="MIDDLE">&nbsp;&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="MIDDLE">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="MIDDLE">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="MIDDLE">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="MIDDLE">&nbsp;&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="CENTER">2002</u></font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="CENTER">2001</u></font></td>
    <td WIDTH="14%" VALIGN="MIDDLE"><font FACE="Arial"><p ALIGN="CENTER">&nbsp;&nbsp;<u>2002</u></font></td>
    <td WIDTH="3%" VALIGN="MIDDLE">&nbsp;</td>
    <td WIDTH="13%" VALIGN="MIDDLE"><font FACE="Arial"><u><p ALIGN="CENTER">2001</u></font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="MIDDLE" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="MIDDLE" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="MIDDLE" HEIGHT="16">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="16">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">Net sales:</font></td>
    <td WIDTH="15%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Specialty Metals</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$219.8&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$260.7&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$650.8&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$772.7&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Engineered Products</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">30.9&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">36.9&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">100.3&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">111.3&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Intersegment</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">(.5</u>)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.3</u>)&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT"><u>(1.6</u>)</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(1.4</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Consolidated net
    sales</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>250.2</u>&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>297.3</u>&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u>749.5</u>&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u>882.6</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="BOTTOM" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="BOTTOM" HEIGHT="22">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM" HEIGHT="22"></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">Operating income (loss):</font></td>
    <td WIDTH="15%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Specialty Metals</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$ &nbsp; (8.6)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$ 19.7&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ 12.1&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$ 64.8&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Engineered Products</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">2.0&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">2.6&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">7.9&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">10.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="bottom"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Net pension credit</font></td>
    <td WIDTH="15%" VALIGN="bottom"><font FACE="Arial"><p ALIGN="RIGHT">4.3&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="bottom">&nbsp;</td>
    <td WIDTH="13%" VALIGN="bottom"><font FACE="Arial"><p ALIGN="RIGHT">10.0&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="bottom"><font FACE="Arial"><p ALIGN="RIGHT">12.8&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="bottom">&nbsp;</td>
    <td WIDTH="13%" VALIGN="bottom"><font FACE="Arial"><p ALIGN="RIGHT">30.3&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="bottom"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Corporate costs</font></td>
    <td WIDTH="15%" VALIGN="bottom"><font FACE="Arial"><u><dl>
      <div align="right">
      <dt>&nbsp;&nbsp;&nbsp;(4.8</u>)</font></dt>
      </div>
    </dl>
    </td>
    <td WIDTH="3%" VALIGN="bottom">&nbsp;</td>
    <td WIDTH="13%" VALIGN="bottom"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;(4.4</u>)&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="bottom"><p align="right"><font FACE="Arial"><u>(13.4</u>)</font></td>
    <td WIDTH="3%" VALIGN="bottom">&nbsp;</td>
    <td WIDTH="13%" VALIGN="bottom"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;(14.7</u>)</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    operating income (loss)</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(7.1)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">27.9&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">19.4&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">90.6&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">Interest expense</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(8.3)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">(9.9)&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(26.3)</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">(31.2)</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">Other income (expense), net</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp; (.9</u>)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp; &nbsp;&nbsp;.1</u>&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">4.2</u>&nbsp;</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;3.0</u>&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="14%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%" VALIGN="BOTTOM"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated
    income (loss) <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;before income taxes and <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cumulative effect of <br>
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounting change</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    $<u> (16.3</u>)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT"><br>
    <br>
    <br>
    $<u> 18.1</u>&nbsp;&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> (2.7</u>)</font></td>
    <td WIDTH="3%" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="13%" VALIGN="BOTTOM"><font FACE="Arial"><p ALIGN="RIGHT">$<u> 62.4</u>&nbsp;</font></td>
  </tr>
</table>
</center></div>

<p>&nbsp;</p>
<div align="center"><center>

<table CELLSPACING="1" BORDER="1" CELLPADDING="2" WIDTH="540">
  <tr>
    <td WIDTH="40%" VALIGN="MIDDLE" HEIGHT="36"><font FACE="Arial">&nbsp;&nbsp;<p></font>&nbsp;</td>
    <td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="36">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="MIDDLE" HEIGHT="36">&nbsp;</td>
    <td WIDTH="22%" VALIGN="MIDDLE" HEIGHT="36"><font FACE="Arial"><p ALIGN="CENTER">March 31,<br>
    <u>2002</u></font></td>
    <td WIDTH="21%" VALIGN="MIDDLE" HEIGHT="36"><font FACE="Arial"><p ALIGN="RIGHT">June
    30,&nbsp;<br>
    <u>2001</u>&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" HEIGHT="11">&nbsp;&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="11">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="11">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP" HEIGHT="11">&nbsp;&nbsp;</td>
    <td WIDTH="21%" VALIGN="TOP" HEIGHT="11">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial">Total&nbsp;assets:</font></td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="18">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="18">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP" HEIGHT="18">&nbsp;&nbsp;</td>
    <td WIDTH="21%" VALIGN="TOP" HEIGHT="18">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Specialty&nbsp;Metals</font></td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="18">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="18">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial"><p ALIGN="RIGHT">$1,197.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="21%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial"><p ALIGN="RIGHT">$1,310.2&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Engineered&nbsp;Products</font></td>
    <td WIDTH="13%" VALIGN="TOP" HEIGHT="18">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="18">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial"><p ALIGN="RIGHT">98.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="21%" VALIGN="TOP" HEIGHT="18"><font FACE="Arial"><p ALIGN="RIGHT">102.5&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP"><font FACE="Arial">&nbsp;&nbsp;&nbsp;Corporate&nbsp;assets</font></td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;298.8</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="21%" VALIGN="TOP"><font FACE="Arial"><u><p ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;278.8&nbsp;</u></font></td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP"><font FACE="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated&nbsp;total&nbsp;assets</font></td>
    <td WIDTH="13%" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="22%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,594.6</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="21%" VALIGN="TOP"><font FACE="Arial"><p ALIGN="RIGHT">$<u>1,691.5&nbsp;</u></font></td>
  </tr>
</table>
</center></div><b><font FACE="Arial"><u>

<p ALIGN="CENTER">&nbsp;</p>
</u>

<p>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Special Charge</u></font><font FACE="Arial"
SIZE="1">

<dir>
  <dir>
    </font></b><font FACE="Arial"><p>During the fourth quarter of fiscal 2001, Carpenter
    incurred a special charge of $37.6 million before taxes that was recognized in the
    consolidated statement of income as a separate $36.0 million special charge, an addition
    to cost of sales of $1.2 million as a result of a writedown of inventory and an addition
    to selling and administrative expenses of $.4 million due to a writedown of accounts
    receivable. The components of this special charge are indicated below.</p>
    </font><font FACE="Arial" SIZE="1">
  </dir>
</dir>

<blockquote>
  <blockquote>
    <ul>
      <li></font><font face="Arial" size="3">Due to the pending divestiture of four Engineered
        Products Group (EPG) business units that were considered non-strategic, the Company
        recorded a pre-tax charge of $19.3 million consisting of $15.7 million in writedowns of
        long-lived assets, $1.2 million in writedowns of inventory, $.4 million in writedowns of
        accounts receivable, $1.0 million in writedowns of other current and non current assets,
        and $1.0 million for related exit costs. The $15.7 million writedown of long-lived assets
        consisted of machinery and equipment - $9.2 million (book value prior to writedown of
        about $12.7 million), buildings - $2.1 million (book value prior to writedown of about
        $2.5 million), land - $.3 million (book value prior to writedown of about $.3 million),
        and goodwill - $4.1 million (book value prior to writedown of $4.1 million). The book
        value of other current and non current assets prior to the writedown was about $1.1
        million. These business units had combined fiscal 2001 annual sales and a net operating
        loss (before the special charge) of about $25.0 million and $3.0 million, respectively.
        Operating results of these EPG business units were immaterial for the nine-month periods
        ended March 31, 2002 and 2001. Two of the EPG business units have been sold--one in
        October 2001 and the second in January 2002. The sales of the two remaining business units
        are not expected to occur until fiscal 2003.</font><font FACE="Arial" SIZE="1"></li>
    </ul>
  </blockquote>
</blockquote>

<blockquote>
  <blockquote>
    <ul>
      <font FACE="Arial">
      <li></font></font><font face="Arial" size="3">Carpenter implemented a reduction in its
        workforce of approximately 100 salaried positions as a result of the realignment of
        Specialty Alloys Operations (SAO) and Corporate staff. As of March 31, 2002, this
        workforce reduction was substantially complete. The pre-tax charge of $9.1 million
        consisted primarily of various personnel-related costs to cover severance payments,
        enhanced pension benefits, medical coverage and related items. Approximately $7.6 million
        of the charge will be paid from the qualified pension plan and, accordingly, this portion
        of the special charge reduced the prepaid pension cost account on the balance sheet. There
        was also a $1.7 million pre-tax charge to writeoff certain SAO construction in progress
        due to the decision in the fourth quarter of fiscal 2001 to discontinue the capital
        project. </font><font FACE="Arial" SIZE="1"><font FACE="Arial"></li>
    </ul>
    </font>
  </blockquote>
</blockquote>

<blockquote>
  <blockquote>
    <ul>
      <li></font><font face="Arial" size="3">Carpenter incurred a one-time, non-cash charge of
        $7.5 million before taxes as a result of a May 2001 settlement agreement reached with the
        City of Bridgeport, Connecticut and the Bridgeport Port Authority in connection with the
        disposal of Carpenter's former steel mill property in Bridgeport. Under the settlement
        agreement, Carpenter received $9.25 million and retained responsibility for an existing
        oil deposit on the property, except to the extent the oil deposit is disturbed by the City
        of Bridgeport or the Bridgeport Port Authority or a third party acting on their behalf to
        develop the site. </font><font FACE="Arial" SIZE="1"></li>
      <font FACE="Arial">
    </ul>
    </font>
  </blockquote>
</blockquote>
</font><font FACE="Arial"><b>

<p>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Adoption of SAB 101

<dir>
  <dir>
    </u></b><p>In the fourth quarter of fiscal 2001, Carpenter changed its method of
    accounting for revenue recognition in accordance with the guidance of the Securities and
    Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101), &quot;Revenue
    Recognition in Financial Statements.&quot; Carpenter's standard terms of sale for most of
    its sales included a provision that title to the goods was retained as a security interest
    until payment was received, even though the risks and benefits of ownership were passed to
    the customer at the time of shipment. Under SAB 101, except for certain foreign units,
    revenue cannot be recognized until title passes to the customer, which in Carpenter's case
    was when payment was received. This bulletin was adopted prospectively, and therefore did
    not result in a restatement of any results reported prior to July 1, 2000.</p>
    <p>On April 1, 2001, Carpenter changed its terms of sale so that revenue is recognized
    when product is shipped, in accordance with its historical practice. The combined effect
    of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million
    and income before cumulative effect of accounting change by $14.1 million, net of $9.4
    million of tax. The cumulative effect at July 1, 2000 of this change in accounting
    principle was a charge of $14.1 million after taxes, or $.62 per diluted share.</p>
    <p>As a result of adopting SAB 101 in fiscal 2001, all revenues reported through March 31,
    2001 were deferred until cash was received. Results for the quarter ended June 30, 2001
    included revenues from sales made in the quarter as well as collections on prior sales.</p>
    <p>The fiscal 2001 restatements affected the quarterly distribution of earnings during the
    year but had no effect on total net income or earnings per share for the year. Carpenter's
    consolidated statements of income and cash flows for the first three quarters of fiscal
    2001 have been restated to include the effects of conforming to SAB 101. Previously
    reported net sales and net income for the third quarter of fiscal 2001 were $311.8 million
    and $11.6 million, respectively. Previously reported net sales and net income for the
    first three quarters of fiscal 2001 were $878.2 million and $36.0 million, respectively.</p>
    <b><u>
  </dir>
</dir>
</u>

<p>10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Accounts Receivable Securitization

<dir>
  <dir>
    </u></b><p>In December 2001, Carpenter and CRS Funding Corp., a wholly owned consolidated
    Special Purpose Entity, entered into a $75 million three-year accounts receivable purchase
    facility (&quot;Purchase Facility&quot;) with an independent financial institution.
    Pursuant to the terms of the Purchase Facility, Carpenter sells certain of its accounts
    receivable to CRS Funding Corp. In turn, CRS Funding Corp. sells a participating interest
    in these accounts receivable to the independent financial institution. These transactions
    are treated as sales under SFAS No. 140, &quot;Accounting for Transfers and Servicing of
    Financial Assets and Extinguishments of Liabilities.&quot; All intercompany transactions
    and balances between Carpenter and CRS Funding Corp. are eliminated in the consolidated
    financial statements. Carpenter will continue to service the accounts receivable.</p>
    <p>At March 31, 2002, CRS Funding Corp. owned approximately $95.3 million of Carpenter's
    accounts receivable, and sold a participating interest of $22.0 million to the independent
    financial institution. Carpenter received from CRS Funding Corp. $22.0 million in cash and
    a subordinated note for the balance of the accounts receivable sold. Carpenter used the
    cash received from the sale to pay down debt. Accordingly, the sale of the participating
    interest in the accounts receivable and the pay down of the debt result in removing the
    equivalent amount of accounts receivable and short-term debt from Carpenter's consolidated
    balance sheet, and increasing net cash provided from operations on the consolidated
    statement of cash flows.</p>
    <p>The economic substance of the accounts receivable securitization is based on the sale
    of a portion of CRS Funding Corp.'s accounts receivable to an independent financial
    institution, and the receipt of cash at full value from the independent financial
    institution. CRS Funding Corp.'s ability to continue raising capital under the Purchase
    Facility is dependent, in part, upon the amount and quality of the accounts receivable it
    purchases from Carpenter. Carpenter's accounts receivable at March 31, 2002 were $141.5
    million, after the $22.0 million accounts receivable securitization.</p>
    <b><u>
  </dir>
</dir>
</u>

<p>11.&nbsp; &nbsp;&nbsp;&nbsp;<u>Goodwill and Other Intangible Assets</u></b>

<dir>
  <dir>
    <p>In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 142,
    &quot;Goodwill and Other Intangible Assets&quot; which primarily addresses the accounting
    for goodwill and intangible assets subsequent to their acquisition. Under SFAS 142,
    goodwill and intangible assets with indefinite lives will no longer be amortized, and will
    be tested for impairment at least annually. In the year of adoption, SFAS 142 allows
    companies a 6-month period to identify potential goodwill impairment, and then, if there
    is potential impairment, an additional 6-month period to calculate the loss, if any.</p>
  </dir>
</dir>

<dir>
  <dir>
    <p>Carpenter has elected early implementation of SFAS 142 in fiscal 2002, consequently,
    effective July 1, 2001 goodwill is no longer being amortized. The total amount of goodwill
    amortization recorded by Carpenter in fiscal 2001 was $6.7 million.</p>
    <p>Pursuant to SFAS 142, Carpenter performed a transitional assessment of goodwill by
    comparing each individual reporting unit's carrying amount of net assets, including
    goodwill, to their fair value. Fair value was estimated based upon discounted cash flow
    analyses and the use of market multiples. Because the carrying amount of several
    individual reporting units within the Specialty Metals segment exceeded the estimated fair
    value, Carpenter began performing the second step of the transitional goodwill impairment
    test during the second half of fiscal 2002. This analysis involves allocating the
    estimated fair values to the assets and liabilities of the individual reporting units,
    with the remaining balance designated as &quot;implied goodwill&quot;. The amount of
    &quot;implied goodwill&quot; will be compared to goodwill as reported by the reporting
    units, and any shortfall will result in an impairment charge. This non-cash, non-operating
    charge will be recognized as a change in accounting principle as of the beginning of
    fiscal 2002. A substantial portion of the $150.0 million Specialty Metals segment goodwill
    at June 30, 2001 could be impaired.</p>
    <p>Net income and earnings per share for the third quarter of fiscal 2001, adding back
    goodwill amortization of $1.7 million ($.08 per basic share and $.07 per diluted share)
    would have been $12.2 million, $.54 per basic share and $.52 per diluted share.</p>
    <p>Net income and earnings per share for the nine months ended March 31, 2001, adding back
    goodwill amortization of $5.0 million ($.23 per basic share and $.21 diluted per share)
    would have been $30.1 million, $1.32 per basic share and $1.28 per diluted share. Income
    before cumulative effect of accounting change would have been $44.2 million, $1.96 per
    basic share and $1.90 per diluted share.</p>
    <p>Of the $161.7 million goodwill at June 30, 2001, $150.0 million relates to the
    Specialty Metals segment while $11.7 million relates to the Engineered Products segment.
    Of the $158.9 million goodwill at March 31, 2002, $147.2 million relates to the Specialty
    Metals segment while $11.7 million relates to the Engineered Products segment. Unrelated
    to the SFAS 142 goodwill assessment, there was a $2.8 million decrease in goodwill in the
    second quarter of fiscal 2002 due to a change in estimate relating to the realization of
    certain tax assets for a previously acquired company in the Specialty Metals segment.</p>
  </dir>
</dir>

<dir>
  <dir>
    <p>As of March 31, 2002, Carpenter has $26.7 million of trademarks and trade names that
    have a gross carrying value of $32.0 million and accumulated amortization of $5.3 million.
    As of June 30, 2001, Carpenter had $27.5 million of trademarks and trade names that had a
    gross carrying value of $32.0 million and accumulated amortization of $4.5 million.
    Carpenter has determined that the 30-year life previously assigned to these finite-lived
    assets is still appropriate, and has recorded $.3 million of amortization expense in the
    third quarters of fiscal 2002 and 2001, and $.8 million of amortization expense in the
    first nine months of both fiscal 2002 and fiscal 2001. The estimated annual amortization
    expense for each of the succeeding five fiscal years is $1.1 million. </p>
  </dir>
</dir>
<b>

<p>12. <u>New Accounting Pronouncement</u></b>

<dir>
  <dir>
    <p>In August 2001, the FASB issued SFAS 144, &quot;Accounting for the Impairment of
    Long-Lived Assets,&quot; which is effective for Carpenter in fiscal 2003. Management is
    currently assessing the provisions of this statement to determine their impact on the
    Company's consolidated results of operations and financial position.</p>
    <p>&nbsp;</p>
  </dir>
</dir>
<u><b>

<p ALIGN="CENTER"><a name="MD&amp;A"></a>MANAGEMENT'S DISCUSSION AND ANALYSIS OF<br>
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</p>
</b></u>

<p>In the fourth quarter of fiscal 2001, Carpenter changed its method of accounting for
revenue recognition in accordance with the guidance of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101 (SAB 101), &quot;Revenue Recognition in
Financial Statements.&quot; Carpenter's standard terms of sale for most of its sales
included a provision that title to the goods was retained as a security interest until
payment was received, even though the risks and benefits of ownership were passed to the
customer at the time of shipment. Under SAB 101, except for certain foreign units, revenue
cannot be recognized until title passes to the customer, which in Carpenter's case was
when payment was received. This bulletin was adopted prospectively, and therefore did not
result in a restatement of any results reported prior to July 1, 2000.</p>

<p>On April 1, 2001, Carpenter changed its terms of sale so that revenue is recognized
when product is shipped, in accordance with its historical practice. The combined effect
of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million
and income before cumulative effect of accounting change by $14.1 million, net of $9.4
million of tax. The cumulative effect at July 1, 2000 of this change in accounting
principle was a charge of $14.1 million after taxes, or $.62 per diluted share.</p>

<p>As a result of adopting SAB 101 in fiscal 2001, all revenues reported through March 31,
2001 were deferred until cash was received. Results for the quarter ended June 30, 2001
included revenues from sales made in the quarter as well as collections on prior sales.</p>

<p>The fiscal 2001 restatements affected the quarterly distribution of earnings during the
year but had no effect on total net income or earnings per share for the year. Carpenter's
consolidated statements of income and cash flows for the first three quarters of fiscal
2001 have been restated to include the effects of conforming to SAB 101. </p>
<u><b>

<p>Results of Operations - Three Months Ended March 31, 2002 vs.<br>
Three Months Ended March 31, 2001 excluding SAB 101:</p>
</b></u>

<p>The following is a reconciliation of amounts on the income statement to amounts
previously reported for net sales, gross profit, net income and diluted earnings per share
for the third quarter of fiscal 2001:</p>
</font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" BORDERCOLOR="#000000" WIDTH="593">
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="258" VALIGN="TOP" COLSPAN="3"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">($
    in millions)</font></td>
    <td WIDTH="103" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Gross Profit</u></font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Income</u></font></td>
    <td WIDTH="103" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Diluted
    Earnings<u><br>
    Per Share</u></font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts per consolidated<br>
    &nbsp;&nbsp;statement of income</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $297.3&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;66.1&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="103" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $.45&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="bottom">&nbsp;&nbsp;</td>
    <td WIDTH="71" VALIGN="bottom">&nbsp;&nbsp;</td>
    <td WIDTH="89" VALIGN="bottom">&nbsp;&nbsp;</td>
    <td WIDTH="82" VALIGN="bottom">&nbsp;&nbsp;</td>
    <td WIDTH="103" VALIGN="bottom">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">SAB 101 Effects:</font></td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="89" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><ul>
      <font FACE="Arial" SIZE="2">
      <li>Adjustment regarding<br>
        timing of sales recognition</font></li>
    </ul>
    </td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    </u>&nbsp;<u>&nbsp;&nbsp;14.5</u>&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    </u>&nbsp;<u> &nbsp;1.9</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    1.1</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="103" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    .05</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="89" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts as previously reported</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>311.8</u>&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>&nbsp;68.0</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>11.6</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="103" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>.50</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>
</center></div><i><font FACE="Arial" SIZE="2"><b>

<p>The discussion that follows compares actual results of operations for the three months
ended March 31, 2002 with &quot;Amounts as previously reported&quot; for the three months
ended March 31, 2001. For this comparison, both periods report results of operations on a
consistent basis, as products are shipped (see footnote 9 to the consolidated financial
statements).</p>
</b></font></i><font FACE="Arial">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net loss for the quarter ended March 31, 2002 was
$10.5 million or $.49 per diluted share versus net income of $11.6 million or $.50 per
diluted share in the prior year period. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the quarter decreased 19.8 percent from
$311.8 million to $250.2 million. The $61.6 million decrease in net sales for the quarter
was chiefly due to lower shipment levels across most of Carpenter's major product lines
and end use markets. Most of the volume drop occurred in the Specialty Metals segment. The
majority of the volume drop was a result of lower stainless steel shipments because of
weaker demand in the automotive, industrial and consumer markets, due in part to a high
level of imports of bar, rod and wire. The aerospace business, which includes mostly
higher value products, also suffered from reduced volumes, as the expected decline in that
market materialized during the quarter. Additionally, the Company experienced a slower
growth rate in the power generation business as that market began to adjust production to
meet a reduced level of demand. During the third quarter of fiscal 2002, Carpenter also
experienced lower average selling prices and a weaker sales mix. However, international
sales increased 3.0 percent to $65.5 million from the third quarter a year ago. The
increased sales in Europe and Canada were partially offset by lower sales in Mexico.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross profit of 11.2 percent for the quarter was
lower than last year's 21.8 percent. This gross profit deterioration was primarily due to
the effects of inventory management initiatives which increased costs by approximately
$13.0 million because of lower production levels, taking additional manufacturing downtime
and LIFO inventory layer liquidations at higher costs. In addition, the net pension credit
was $5.3 million lower. Without these items, the gross profit would have been
approximately 18.7 percent.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling and administrative expenses as a percent of sales
increased to 14.0 percent from 12.2 percent last year. However, in absolute terms, selling
and administrative expenses were down $3.2 million compared with a year ago chiefly
because of the elimination of goodwill amortization of $1.7 million pursuant to the
adoption of SFAS 142, and $1.5 million lower salary expense. These reductions were
partially offset by $1.4 million of higher professional fees associated mostly with our
inventory reduction initiatives and a $.7 million increase in reserves for doubtful
accounts.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense of $8.3 million was lower than last year
by $1.6 million due to lower interest rates on short-term debt and lower current year debt
levels. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense/income, net for the quarter was an expense
of $0.9 million in the current year compared to income of $0.1 million last year. This
$1.0 million unfavorable change was principally due to losses on disposals of equipment
this year versus a gain on the disposal of a warehouse last year.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter's effective tax rate (income tax expense or
benefit as a percent of income or loss before taxes) for the quarter ended March 31, 2002
was a benefit of 35.6 percent versus an expense of 42.1 percent a year ago. Fiscal 2001's
third quarter rate was higher than normal due to an adjustment made in March of 2001
needed to bring the total annual effective tax rate up to 38 percent.</p>
<b><u>

<p>Business Segment Results:</p>
</u></b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a reconciliation of the net sales and
operating income including and excluding SAB 101 for the reportable segments during the
third quarter of fiscal 2001:</p>
</font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" BORDERCOLOR="#000000" WIDTH="566">
  <tr>
    <td WIDTH="207" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="343" VALIGN="TOP" COLSPAN="4"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">($
    in millions)</font></td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="167" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Specialty
    Metals</font></td>
    <td WIDTH="168" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Engineered
    Products</font></td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="88" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Operating<u>
    Income</u></font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="78" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Operating<u><br>
    Income</u></font></td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP"><font FACE="Arial" SIZE="2"><br>
    Amounts including SAB 101</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $ 260.7&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="88" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;19.7&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;36.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="78" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP"><font FACE="Arial" SIZE="2">SAB 101 adjustment</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">15.4&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="88" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">&nbsp;2.0&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(0.8)&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="78" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">&nbsp;&nbsp;--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="78" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="207" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts excluding SAB 101</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$
    276.1&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="88" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$&nbsp;21.7&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$&nbsp;36.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="78" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$&nbsp;2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial"><b>

<p>Specialty Metals Segment </p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the quarter ended March 31, 2002 for this
segment, which aggregates the Specialty Alloys Operations (SAO), Titanium, and Carpenter
Powder Products (CPP), were $219.8 million or $56.3 million (20.4 percent) lower than the
$276.1 million for the same quarter a year ago. SAO sales decreased by 20 percent
principally because of lower stainless steel shipments due to: (1) weaker demand in the
automotive, industrial and consumer markets, and (2) a high level of imports of bar, rod
and wire, and because of lower forged bar and billet shipments due to deteriorating
conditions in the aerospace market. Titanium's sales decreased 14 percent in the third
quarter versus a year ago primarily because of a rapid decline in demand from the
aerospace market. CPP's sales declined 38 percent from the same period a year ago
primarily because of lower tool steel sales due to weak demand in the automotive market as
well as a high level of imports. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operating loss for the Specialty Metals segment was
$8.6 million versus operating income of $21.7 million for the same period a year ago. This
decrease was due primarily to SAO's lower shipment levels, the unfavorable shift in the
product mix sold, inventory management initiatives resulting in lower production levels
and higher costs because of LIFO inventory layer liquidations, partially offset by lower
raw material costs</font><font FACE="Arial" COLOR="#ff0000"> </font><font FACE="Arial">and
elimination of goodwill amortization pursuant to the adoption of SFAS 142. </p>
<b>

<p>Engineered Products Segment</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for this segment decreased $5.2 million or 14.4
percent from $36.1 million to $30.9 million. The two EPG business units that were sold
earlier this year accounted for $1.9 million of the year to year reduction. The balance of
the reduction was chiefly related to reduced ceramic core sales that have applications in
jet engine manufacturing. Operating income was $2.0 million versus $2.6 million for last
year. This $.6 million decrease was due to the sales shortfall, which was partially offset
by lower administrative expenses resulting from lower salaries and benefits, as well as
the elimination of goodwill amortization pursuant to the adoption of SFAS 142.</p>
<u><b>

<p>Results of Operations - Nine Months Ended March 31, 2002 vs.<br>
Nine Months Ended March 31, 2001 excluding SAB 101:</p>
</b></u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a reconciliation of amounts on the
income statement to amounts previously reported for net sales, gross profit, net income
and diluted earnings per share for the nine months ended March 31, 2001:</p>
</font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" BORDERCOLOR="#000000" WIDTH="591">
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="258" VALIGN="TOP" COLSPAN="3"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">($
    in millions)</font></td>
    <td WIDTH="101" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Gross Profit</u></font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Income</u></font></td>
    <td WIDTH="101" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Diluted
    Earnings<u><br>
    Per Share</u></font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts per consolidated<br>
    &nbsp;&nbsp;statement of income</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;882.6&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $204.5&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;25.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="101" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $1.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="89" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="101" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">SAB 101 Effects:</font></td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="89" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="101" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><ul>
      <font FACE="Arial" SIZE="2">
      <li>Cumulative effect<br>
        of accounting change</font></li>
    </ul>
    </td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    --&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    --&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    14.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="101" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    .62&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><ul>
      <font FACE="Arial" SIZE="2">
      <li>Adjustment regarding<br>
        timing of sales recognition</font></li>
    </ul>
    </td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    </u>(<u>&nbsp;&nbsp;&nbsp;&nbsp;4.4</u>)&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    &nbsp;(&nbsp;&nbsp;5.3</u>)&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    </u>(<u>&nbsp;&nbsp;3.2</u>)&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="101" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="RIGHT"><br>
    &nbsp;(.14</u>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="71" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="89" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="101" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="208" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts as previously reported</font></td>
    <td WIDTH="71" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>&nbsp;878.2</u>&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="89" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>199.2</u>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>36.0</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="101" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$<u>1.55</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial" SIZE="2"><i><b>

<p>The discussion that follows compares actual results of operations for the nine months
ended March 31, 2002 with &quot;Amounts as previously reported&quot; for the nine months
ended March 31, 2001. For this comparison, both periods report results of operations on a
consistent basis, as products are shipped (see footnote 9 to the consolidated financial
statements).</p>
</b></i></font><font FACE="Arial">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net loss for the nine months ended March 31, 2002 was
$1.1 million or $.11 per diluted share versus net income of $36.0 million or $1.55 per
diluted share for the same period a year ago.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the first nine months of fiscal 2002
decreased 14.7 percent from $878.2 million to $749.5 million. The $128.7 million decrease
in net sales was chiefly due to lower shipment levels throughout the period partially
offset by a richer sales mix during the first half of fiscal 2002. Most of the volume drop
occurred in the Specialty Metals segment, and was a result of lower stainless steel
shipments because of weaker demand in the automotive, industrial and consumer markets, due
in part to a high level of imports of bar, rod and wire. International sales increased 13
percent to $189.0 million from the year ago period, reflecting stronger demand,
particularly in Europe.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross profit of 17.0 percent for the nine month
period was lower than last year's 22.7 percent. This decrease was primarily due to lower
production levels, a LIFO inventory layer liquidation at higher costs and a reduced net
pension credit. These negatives were partially offset by lower raw material costs in
Specialty Alloys Operations.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling and administrative expenses as a percent of sales
increased to 14.4 percent from 13.0 percent last year. However, in absolute terms, selling
and administrative expenses were down $5.9 million compared with a year ago principally
because of the elimination of goodwill amortization of $5.0 million pursuant to the
adoption of SFAS 142.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense of $26.3 million was lower than last
year by $4.9 million due to lower interest rates on short-term debt and lower current year
debt levels. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense/income, net of $4.2 million in the current
year was higher than last year by $1.2 million. This increase was principally due to the
receipt in December 2001 of $3.5 million of tariffs from the U.S. Customs Department under
the &quot;Dumping and Subsidy Offset Act of 2001.&quot; Fiscal 2001 included favorable
adjustments related to the disposition of certain subsidiaries acquired as part of the
acquisition of Talley Industries, Inc., and gains on the disposals of warehouses.</p>
<b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Carpenter's effective tax rate (income tax expense or
benefit as a percent of income or loss before taxes) for the nine months ended March 31,
2002 was a benefit of 59.3 percent versus an expense of 37.0 percent last year. The
current year rate is higher than expected because it includes a $.7 million reduction in a
tax valuation allowance that was recorded as a result of a change in estimate on the
utilization of certain previously unrecognized tax assets.</p>
<b><u>

<p>Business Segment Results:</p>
</u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>The following is a reconciliation of the net sales
and operating income including and excluding SAB 101 for the reportable segments for the
nine months ending March 31, 2001:</p>
</font><div align="center"><center>

<table BORDER="1" CELLSPACING="1" BORDERCOLOR="#000000" WIDTH="570">
  <tr>
    <td WIDTH="38%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="4"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">($
    in millions)</font></td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="30%" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Specialty
    Metals</font></td>
    <td WIDTH="32%" VALIGN="TOP" COLSPAN="2"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Engineered
    Products</font></td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="17%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Operating<u>
    Income</u></font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><u><p ALIGN="CENTER"><br>
    Net Sales</u></font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="CENTER">Operating<u><br>
    Income</u></font></td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><br>
    Amounts including SAB 101</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $ 772.7&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="17%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $&nbsp;64.8&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $111.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT"><br>
    $10.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP"><font FACE="Arial" SIZE="2">SAB 101 adjustment</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(0.9)&nbsp;&nbsp;</font></td>
    <td WIDTH="17%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(3.4)&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(3.5)&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">(1.8)&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="17%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="38%" VALIGN="TOP"><font FACE="Arial" SIZE="2">Amounts excluding SAB 101</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$
    771.8&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="17%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$&nbsp;61.4&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$107.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="16%" VALIGN="TOP"><font FACE="Arial" SIZE="2"><p ALIGN="RIGHT">$&nbsp;8.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>
</center></div><font FACE="Arial"><b>

<p>Specialty Metals Segment </p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the nine months ended March 31, 2002 for
this segment, which aggregates the Specialty Alloys Operations (SAO), Titanium, and
Carpenter Powder Products (CPP), were $650.8 million or $121.0 million (15.7 percent)
lower than the $771.8 million for the same period a year ago. SAO sales decreased by 17
percent because of lower stainless steel shipments due to: (1) weaker demand in the
automotive, industrial and consumer markets, and (2) a high level of imports of bar, rod
and wire. Titanium's sales increased 11 percent from the same period a year ago,
benefiting from strong demand for medical products and improved pricing during the first
half of fiscal 2002. CPP's sales declined 35 percent from the same period a year ago
primarily because of lower tool steel sales due to weak demand in the automotive market as
well as a high level of imports.</font><font FACE="Arial" SIZE="2"> </p>
</font><font FACE="Arial">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income for the Specialty Metals segment was
$12.1 million, which was $49.3 million lower than last year's $61.4 million. This decrease
was due primarily to SAO's lower shipment levels, lower production levels, a LIFO
inventory layer liquidation at higher costs and higher professional fees. These negative
factors were partially offset by lower raw material costs and the elimination of goodwill
amortization pursuant to the adoption of SFAS 142.</p>
<b>

<p>Engineered Products Segment</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for this segment decreased $7.5 million or 7.0
percent from $107.8 million to $100.3 million. The two EPG business units that were sold
earlier this year accounted for $3.9 million of the year to year reduction. The balance of
the reduction was primarily attributable to weaker demand for aerospace and
automotive-related products as well as weaker demand for certain telecommunication
products because of the general industry slowdown. Partially offsetting those factors, EPG
has experienced strong demand in the nuclear and various consumer product markets.
Operating income was $7.9 million compared to $8.4 million for the same period last year.
The lower administrative expenses during the nine month period offset much of the net
sales revenue decline.</p>
<u><b>

<p>Net Pension Credit:</p>
</b></u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net pension credit represents the income relating to
Carpenter's overfunded defined benefit pension plan less the expense for the post
retirement benefit plans and the other underfunded defined benefit pension plans. The net
pension credit was $12.8 million for the first nine months of fiscal 2002 versus $30.3
million last year. The net pension credit is primarily attributable to the overfunded
position of Carpenter's defined benefit pension plan. The lower level of the net pension
credit versus the prior year was due primarily to the equity markets' investment losses on
the pension and post retirement plan assets during fiscal 2001. This unfavorable variance
from the previous year's level of net pension credits will continue for the balance of
fiscal 2002. </p>
<u><b>

<p>Cash Flow and Financial Condition</b></u>:</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter has maintained the ability to provide cash to
meet its needs through cash flow from operations, management of working capital and the
flexibility to use outside sources of financing to supplement internally generated funds.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine months ended March 31, 2002, Carpenter's
free cash flow (cash flow provided before financing activities less dividends paid), after
the $22 million accounts receivable securitization, was $70.0 million versus $15.2 million
a year ago. Cash provided from operations, after the $22.0 million accounts receivable
securitization, was $113.8 million for the current period as compared to $69.2 million a
year ago. Carpenter's efforts to improve working capital management by reducing
inventories through the enhancement of its order management systems and the improvements
in its production processes, as well as efforts to accelerate the collection of accounts
receivable, contributed to the higher cash provided from operations and corresponding
improved liquidity.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures</font> <font FACE="Arial">for plant,
equipment and software used $24.0 million in cash during the first nine months of fiscal
2002 versus $39.6 million for the same year ago period. Total capital expenditures for all
of fiscal 2002 are anticipated to be between $30-35 million.</font> </p>
<font FACE="Arial">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of Carpenter's debt refinancing strategy designed
to enhance liquidity, it entered into a series of financing arrangements.&nbsp; In August
2001, Carpenter issued $100 million of 10-year medium-term notes with a coupon of 7.625%.
Carpenter used the net proceeds from the sale of the notes to reduce the outstanding
principal amount under its short-term revolving credit agreements. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2001, Carpenter entered into a $125 million
five-year unsecured credit facility (&quot;Committed Facility&quot;) and a $75 million
364-day unsecured credit facility (&quot;364-day Facility&quot;). Borrowings under each of
the facilities accrue at either a base rate or LIBOR plus applicable margin. The
facilities contain two financial covenants, a debt-to-capital test and an
EBITDA-to-interest coverage test. At March 31, 2002, the Company had $116 million
available under its Committed Facility, after taking into account $9 million of
outstanding letters of credit, and $60 million available under the 364-day Facility. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2001, Carpenter and CRS Funding Corp., a
wholly owned consolidated Special Purpose Entity, entered into a $75 million three-year
accounts receivable purchase facility (&quot;Purchase Facility&quot;) with an independent
financial institution. Pursuant to the terms of the Purchase Facility, Carpenter sells
certain of its accounts receivable to CRS Funding Corp. In turn, CRS Funding Corp. sells a
participating interest in these accounts receivable to the independent financial
institution. These transactions are treated as sales under SFAS No. 140, &quot;Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.&quot;
All intercompany transactions and balances between Carpenter and CRS Funding Corp. are
eliminated in the consolidated financial statements. Carpenter will continue to service
the accounts receivable.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March 31, 2002, CRS Funding Corp. owned approximately
$95.3 million of Carpenter's accounts receivable, and sold a participating interest of
$22.0 million to the independent financial institution. Carpenter received from CRS
Funding Corp. $22.0 million in cash and a subordinated note for the balance of the
accounts receivable sold. Carpenter used the cash received from the sale to pay down debt.
Accordingly, the sale of the participating interest in the accounts receivable and the pay
down of the debt result in removing the equivalent amount of accounts receivable and
short-term debt from Carpenter's consolidated balance sheet, and increasing net cash
provided from operations on the consolidated statement of cash flows.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The economic substance of the accounts receivable
securitization is based on the sale of a portion of CRS Funding Corp.'s accounts
receivable to an independent financial institution, and the receipt of cash at full value
from the independent financial institution. CRS Funding Corp.'s ability to continue
raising capital under the Purchase Facility is dependent, in part, upon the amount and
quality of the accounts receivable it purchases from Carpenter. Carpenter's accounts
receivable at March 31, 2002 were $141.5 million, after the $22.0 million accounts
receivable securitization.</p>

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

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March 31, 2002, Carpenter had $229 million of
available borrowings under the above facilities.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A component of Carpenter's debt refinancing strategy is
to maintain a certain level of floating rate debt relative to its fixed rate debt. In
order to achieve this targeted level, the Company uses interest rate swaps. These
instruments will obligate the Company to either pay a swap counterparty a floating
interest in return for it receiving a fixed rate of interest or obligate the Company to
pay a fixed rate of interest in return for it receiving a floating rate of interest. At
March 31, 2002, Carpenter had entered into interest rate swaps with a notional principal
amount of approximately $61 million.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to Carpenter's efforts to improve working capital
management, total debt decreased $71.2 million since June&nbsp;30, 2001 to a level of
$451.5 million or 41.7 percent of capital, versus 44.6 percent of capital at June 30,
2001. All of the $22 million cash received from the sales of accounts receivable was used
to pay down debt. Total obligations, including the $22.0 million due under the Purchase
Facility, were $473.5 million at March 31, 2002.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>Critical Accounting Policies and Estimates</u>:</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. On an on-going basis, Carpenter evaluates its
estimates, including those related to bad debts, customer claims, inventories, goodwill
(see separate disclosure on pages 27-28), other intangible assets, income taxes,
restructuring, pensions and other postretirement benefits, contingencies and litigation,
environmental liabilities (see separate disclosure on page 27), and derivative instruments
and hedging activities.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter believes the following critical accounting
policies affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter maintains an allowance for doubtful accounts
for estimated losses resulting from the failure of its customers to make required
payments. If the financial condition of Carpenter's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may be
required.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prepaid pension asset on the balance sheet is chiefly
a result of the overfunded status of Carpenter's major defined benefit plan. As a result
of this prepaid pension asset, Carpenter records a pension credit on its income statement.
The amount of the pension credit, which is determined annually, is based upon the value of
the assets in the pension trust at the beginning of the fiscal year as well as many
actuarial assumptions, such as interest rates, inflation rates and employee demographics.
The fluctuations in stock and bond markets could cause actual investment results to be
significantly different from those assumed, and, therefore, significantly impact the
valuation of the assets in Carpenter's pension trust and the accounting for the pension
assets.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-lived assets are reviewed for impairment and written
down to fair value whenever events or changes in circumstances indicate that the carrying
value may not be recoverable through future undiscounted cash flows. The amount of the
impairment loss is the excess of the carrying amount of the impaired assets over the fair
value of the assets based upon discounted future cash flows. Carpenter evaluates
long-lived assets for impairment by individual business unit.</p>

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

<p>Environmental</u>:</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter is subject to various stringent federal, state
and local environmental laws and regulations. The liability for future environmental
remediation costs is evaluated by management on a quarterly basis. 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
additional accrual was made for the nine months ended March 31, 2002. For the three months
ended September 30, 2000, the liability for environmental remediation costs was increased
by $.6 million which was included in cost of sales. No additional accruals were made for
the balance of fiscal 2001. The liability for environmental remediation costs remaining at
March 31, 2002 was $6.4 million. A compliance status report is currently being prepared by
an outside consultant to determine what, if any, potential remediation costs there may be
at a former manufacturing site of a Talley Industries, Inc. subsidiary that was sold prior
to Carpenter's acquisition of Talley Industries, Inc. The estimated range of the
reasonably possible future costs of remediation at superfund sites, at other third
party-owned sites and at Carpenter-owned operating facilities is between $6.4 million and
$13.1 million.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 selection of alternative
remediation methodologies, 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>
<b><u>

<p>Goodwill Accounting</u>:</p>
</b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS 142, &quot;Goodwill and Other Intangible Assets&quot; which primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition. Under SFAS 142, goodwill and intangible assets with indefinite lives will no
longer be amortized, and will be tested for impairment at least annually. In the year of
adoption, SFAS 142 allows companies a 6-month period to identify potential goodwill
impairment, and then, if there is potential impairment, an additional 6-month period to
calculate the loss, if any.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter has elected early implementation of SFAS 142 in
fiscal 2002, consequently, effective July 1, 2001 goodwill is no longer being amortized.
The total amount of goodwill amortization recorded by Carpenter in fiscal 2001 was $6.7
million.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to SFAS 142, Carpenter performed a transitional
assessment of goodwill by comparing each individual reporting unit's carrying amount of
net assets, including goodwill, to their fair value. Fair value was estimated based upon
discounted cash flow analyses and the use of market multiples. Because the carrying amount
of several individual reporting units within the Specialty Metals segment exceeded the
estimated fair value, Carpenter began performing the second step of the transitional
goodwill impairment test during the second half of fiscal 2002. This analysis involves
allocating the estimated fair values to the assets and liabilities of the individual
reporting units, with the remaining balance designated as &quot;implied goodwill&quot;.
The amount of &quot;implied goodwill&quot; will be compared to goodwill as reported by the
reporting units, and any shortfall will result in an impairment charge. This non-cash,
non-operating charge will be recognized as a change in accounting principle as of the
beginning of fiscal 2002. A substantial portion of the $150.0 million Specialty Metals
segment goodwill at June 30, 2001 could be impaired.</p>

<p>&nbsp;</p>
<u><b>

<p>Future Outlook:</p>
</b></u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although recent economic news has been encouraging about
the prospects of a recovery in the U.S. manufacturing sector, the Company has not yet seen
a turnaround and, consequently, remains cautious about the balance of its fiscal year.
While showing improvements in certain markets such as automotive, order activity remains
depressed in most other consumer and industrial markets served by the Company. Also, a
slowdown in the aerospace and power generation markets will challenge our business
performance.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter expects to benefit from the new tariffs against
steel imports, which were put into place in March 2002 by the Bush Administration, as well
as the new antidumping orders recently implemented against unfairly priced stainless bar
imports. The Company is beginning to see a modest improvement in stainless volume;
however, a significant improvement will be dependent on resumption of capital spending in
its key markets.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A weak U.S. manufacturing environment and a continued
focus on inventory management will continue to depress near-term operating performance.
Given the softening conditions in the aerospace and power generation markets, coupled with
the uncertain timing of a recovery in the manufacturing sector, Carpenter expects to
report a net loss of approximately $.20 per diluted share in the fourth quarter.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carpenter anticipates that its fiscal year 2002 free cash
flow (cash flow provided before financing activities less dividends paid) will be $30-40
million, and will be used to pay down debt. Deteriorating economic or industry conditions
could affect the ability of Carpenter's customers to pay within defined terms, which could
impede the Company's ability to achieve its free cash flow target.</p>

<p>&nbsp;</p>
<u><b>

<p ALIGN="CENTER"><a name="Forward Looking"></a>Forward-looking Statements<br>
</p>
</b></u>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Form 10-Q contains various &quot;Forward-looking
Statements&quot; pursuant to the &quot;safe harbor&quot; provisions of the Private
Securities Litigation Reform Act of 1995. These statements, which represent Carpenter's
expectations or beliefs concerning various future events, include statements concerning
future revenues and continued growth in various market segments. These forward-looking
statements are subject to risks and uncertainties that could cause actual results to
differ from those projected, anticipated or implied. The most significant of these
uncertainties are described in Carpenter's Form 10-K, its Form 10-Q for its second fiscal
quarter, Carpenter's most recently filed S-4 Registration Statement and the exhibits
attached to those filings, and include (but are not limited to): 1) a high level of
stainless imports, unfair trade practices of foreign producers, and worldwide excess
capacity for certain alloys that Carpenter produces; 2) the cyclical nature of the
specialty materials business and certain end-use markets, including aerospace, automotive
and consumer durables, all of which are subject to changes in general economic and
financial market conditions; 3) the ability of Carpenter to recoup increased costs of
fuel, such as natural gas, and raw materials, such as nickel, through increased prices and
surcharges; 4) fluctuations in currency exchange rates, resulting in increased competition
and downward pricing pressure on Carpenter products; and 5) fluctuations in stock markets
which could impact the valuation of the assets in Carpenter's pension trusts and the
accounting for pension assets. 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. Carpenter undertakes no obligation to update or revise any
forward-looking statements.</p>
<b><u>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p><a name="Part II - Other Info - Legal"></a>PART&nbsp;II&nbsp;-&nbsp;OTHER&nbsp;INFORMATION<br>
</p>

<p>Item 1. Legal Proceedings</u>.<u><br>
</p>
</u></b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending legal proceedings involve ordinary routine
litigation incidental to the business of Carpenter. 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>
<b><u>

<p>&nbsp;</p>

<p>Item 6. Exhibits and Reports on Form 8-K</u>.<br>
</p>
</b>

<p>a. No documents are filed as Exhibits.

<dir>
  <dir>
    <p>b. No Current Report on Form 8-K was filed on behalf of Carpenter during the quarter
    ended March 31, 2002.</p>
    <p>&nbsp;</p>
    <p>&nbsp;</p>
  </dir>
</dir>
<b>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Items 2, 3, 4 and 5</b> are omitted as the answers are
negative or the items are not applicable.</p>

<p>&nbsp;</p>

<p>&nbsp;</p>
<u><b>

<p ALIGN="CENTER"><a name="Signature"></a>SIGNATURE<br>
</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 by the undersigned duly authorized officer, on its
behalf and in the capacity indicated.</p>

<p>&nbsp;</p>

<p>&nbsp;</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="643">
  <tr>
    <td WIDTH="51%" VALIGN="TOP"></td>
    <td WIDTH="49%" VALIGN="TOP"><font FACE="Arial"><u><b>Carpenter Technology Corporation<br>
    </b></u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Registrant)</font></td>
  </tr>
  <tr>
    <td WIDTH="51%" VALIGN="TOP"></td>
    <td WIDTH="49%" VALIGN="TOP"></td>
  </tr>
</table>
</center></div><font FACE="Arial">

<p>&nbsp;</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="638">
  <tr>
    <td WIDTH="50%" VALIGN="TOP"><font FACE="Arial">Date:<u>&nbsp;&nbsp;May&nbsp;14,
    2002&nbsp;&nbsp;</u></font></td>
    <td WIDTH="50%" VALIGN="TOP"><font FACE="Arial"><u>s/Terrence E.
    Geremski&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
    Terrence E. Geremski<br>
    Senior Vice President - Finance<br>
    and Chief Financial Officer</font></td>
  </tr>
</table>
</center></div>
</body>
</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
