Jan. 29, 2007 — Carpenter Technology Corp. reported net income of $48.1 million on net sales of $441.3 million for the second quarter, and net income of $99.3 million on net sales of $845.8 million for the six months ended December 31, 2006. Carpenter says that results benefited from increased shipments, a continued focus on cost improvements through lean manufacturing, and higher prices.

Second Quarter Results—The $48.1 million net income ($1.82 per diluted share) compares with net income of $42.9 million ($1.65 per diluted share) a year ago. Net sales of $441.3 million compare with net sales of $345.7 million for the same quarter a year ago.

Free cash flow was $30.4 million, which compares with free cash flow of $41.4 million in the year-ago second quarter. Gross margins, excluding the negative impact of nickel, increased by 320 basis points from a year ago.

Six-Months Results—The $99.3 million net income ($3.76 per diluted share) compares to net income of $83.0 million ($3.19 per diluted share) for the comparable year-ago period. Net sales of $845.8 million compare with net sales of $691.7 million for the first half of fiscal 2006.

Free cash flow was $81.2 million, compared with $42.1 million in the same period a year ago.

Second Quarter Operating Summary—“We achieved record second quarter results due, in part, to solid demand from the industrial and aerospace markets and our greater emphasis on the energy market,” said Anne Stevens, Chairman, President and CEO.

“Our ability to achieve record earnings despite nickel prices that more than doubled from a year ago reflected our strong operational focus,” Stevens said. “The rapid rise in the cost of nickel had a profound impact on our margins. If raw materials prices stabilize, we fully expect that our margins will improve.”

For the second quarter, Carpenter’s sales were 28% higher than a year ago. Surcharges, an increase in pounds shipped, and higher base prices contributed to the sales gain. Adjusted for surcharges, sales increased 14% from the second quarter a year ago.

Sales to the industrial market improved by 46% to a record $94 million, as a result of increased shipments of materials used in the capital equipment and semiconductor markets, higher base prices and surcharges.

Automotive and truck market sales grew 34% from the second quarter a year ago to $56 million. Higher surcharges and base prices more than offset reduced shipments, which were negatively affected by lower U.S. automotive production rates.

Sales to the energy market, which includes oil and gas and power generation, increased 34% from a year ago to $36 million. Sales to the oil and gas sector grew 58% from the same quarter a year ago. The sales growth reflected the company’s increased dedication of resources to service the oil and gas sector. Also, sales to the power generation sector increased 4% from a year ago.

Sales to the aerospace market increased 26% from the second quarter a year ago to $167 million, a second- quarter record. Sales benefited from strong demand for titanium materials used in the manufacture of fasteners for commercial and military aircraft.

Carpenter also experienced solid demand for its specialty alloys used in the manufacture of aircraft engines and airframe structural components. Increased shipments, higher base prices and surcharges contributed to the sales growth.

Consumer market sales rose 20% to $56 million. Higher sales of materials used in consumer electronics were partially offset by reduced sales of materials used in the housing and sporting goods sectors. Medical market sales decreased 5% to $32 million from last year’s second quarter record. The decline in sales reflected the continued inventory adjustments taking place within that supply chain.

Geographically, sales outside the United States increased 13% from the same quarter a year ago to $121 million, a second-quarter record. International sales, which represented 27% of total sales, benefited from higher base prices and surcharges, and increased shipments of aerospace materials.

Second quarter gross profit improved to $97.1 million, or 22.0% of sales, from $93.8 million, or 27.1% of sales, in the same quarter a year ago.

Cash Flow and Liquidity—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.

Free cash flow in the recent second quarter was $30.4 million, compared with free cash flow of $41.4 million in the quarter a year ago. For the first six months of fiscal 2007, free cash flow was $81.2 million compared to $42.1 million for the same period a year ago.

Outlook—“The overall 2007 outlook for our end-use markets remains strong and we are particularly excited by the opportunities we are developing in the energy market,” Stevens said. “Since joining the company last November, I have been very impressed by the product depth, by the technical and managerial talent, and by the efforts of our employees to satisfy customers.”

Stevens concluded, “I am confident in our strategic direction and the long-term strength in the key end-use markets that we serve. Our announcement this morning to invest approximately $115 million in additional premium melt capacity will allow us to capitalize on the growth opportunities within these markets and create significant value for shareholders.

“Based upon current market conditions, and our confidence in the performance of Carpenter, we continue to expect record results for fiscal 2007. Additionally, as we previously stated, free cash flow should be in excess of $200 million in the current fiscal year.”