April 25, 2006 — Carpenter Technology Corp. reported record quarterly net income of $60.8 million on record net sales of $426.0 million. Carpenter says the results were led by strong demand for aerospace materials and by the company's continued focus on cost through lean and variation reduction.

Third Quarter Results—The $60.8 million net income ($2.32 per diluted share) compares to net income of $35.3 million ($1.38 per diluted share) a year ago. Net sales of $426.0 million compare with $342.1 million for the same quarter a year ago.

Free cash flow in the third quarter was $53.3 million, compared with $46.1 million in the quarter a year ago.

Year-to-Date Results—Net income for the first nine months was $143.8 million ($5.51 per diluted share), which compares with net income of $87.6 million ($3.48 per diluted share) for the same period a year ago. Net sales were $1.1 billion, compared with $951.8 million for the same period a year ago.

Free cash flow was $95.8 million, compared to free cash flow of $88.7 million for the same period a year ago.

Comments—"Record quarterly results were achieved primarily due to robust demand from the aerospace market for our specialty alloy and titanium materials, and our ongoing focus on operational excellence," said Robert J. Torcolini, Chairman, President and CEO. "Our growth in the aerospace and other key markets reflects our strategy to develop and produce materials that are valued for their performance characteristics.

"For the quarter, aerospace sales reached a record level and accounted for 43% of total sales. Sales of our higher-value materials also benefited from favorable market conditions in the medical and power generation markets.

"I am pleased that a continuous refinement of our business operating model has proven effective in enabling us to generate returns above our cost of capital. We will continue to improve upon our operating model so that we can build shareholder value through all phases of a business cycle."

Third Quarter Operating Summary—Carpenter's sales increased 25% compared to a year ago. Sales benefited from increased sales of higher-value materials, especially to the aerospace, medical and power generation markets, and higher base selling prices. Adjusted for surcharges, sales increased 26% from the year-ago third quarter. In addition, sales increased in several key end-use markets compared to the year-ago third quarter.

Aerospace market sales increased 80%, which reflected strong demand for specialty alloys and ceramics used in the manufacture of jet engines, and titanium used in the manufacture of structural components. Demand for aerospace materials was particularly strong due to the number and models of aircraft being built. The new, wide-body aircraft typically require a greater use of lighter-weight materials such as titanium.

Medical market sales increased 40% primarily as a result of a richer product mix, growth in international markets, and increased selling prices.

Sales to the power generation market increased 10%. Adjusted for sales of a divested business, sales to this market increased 30% compared to the same quarter a year ago. The increase reflected solid demand as a result of industrial gas turbine new build and maintenance activity.

Sales to the consumer market were up 6% compared to a year ago. An increase in sales to the electronics, sporting goods and housing markets was tempered by the intentional reduction in sales of marginally profitable products.

Sales to the automotive and truck markets decreased 7%. An increase in sales of higher value materials for the heavy duty truck market was more than offset by lower sales of materials used in engine components and in general applications.

Industrial market sales decreased 10% as higher sales to the energy market were offset by reduced sales of materials to capital equipment manufacturers.

Geographically, sales outside the United States increased 48% from a year ago and represented 33% of third quarter sales. International sales reflected strong demand for higher value materials, particularly in the aerospace and power generation markets.

Carpenter's third quarter gross profit increased 46% to $124.1 million (29.1% of sales) from $85.2 million (24.9% of sales) in the same quarter a year ago. The 420 basis point increase in the gross profit margin reflected a richer product mix, driven primarily by demand for higher value materials from the aerospace, power generation and medical markets, reduced sales of marginally profitable products, and higher base selling prices. Margins also benefited from the ongoing lean and variation reduction initiatives.

Carpenter's operating income increased 63% to $92.3 million (21.7% of sales) from $56.6 million (16.5% of sales) a year ago. The increase resulted from improved gross margins and diligent management of selling and administrative expenses.

Outlook—"Our operating performance through the balance of this fiscal year should benefit from the momentum in the aerospace market, as well as from the strength in other key markets," Torcolini said. "We are focused on leveraging these opportunities through our continuous efforts in lean and variation reduction in order to further enhance margins.

"In the past quarter, J. Michael Fitzpatrick joined the company as vice chairman from the Board of Directors. Mike is leading a team of dedicated internal and external resources focused on developing alternative market and business strategies to further improve long-term shareholder value."

Despite volatility in order patterns characteristic of a tight supply chain, Carpenter says that it expects that its current fourth quarter operating performance will show year-over-year improvement. Also, Carpenter continues to estimate that its free cash flow will exceed $150 million for fiscal 2006. The estimate was confirmed despite increased working capital requirements caused by a higher value mix and by additions to inventory needed to support higher sales.

Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys and superalloys, and various engineered products.