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News Release

Carpenter Announces Strategic Initiatives

WYOMISSING, Pa.--(BUSINESS WIRE)--Sept. 21, 2006--Carpenter Technology Corporation (NYSE:CRS) announced today its strategic initiatives to drive long-term growth. These initiatives will provide a cornerstone for Carpenter to further enhance Total Shareholder Return ("TSR"). They include:

    --  Accelerated growth in certain core markets, in particular
        aerospace, medical, and energy, resulting in a greater mix of
        higher value materials and products

    --  Profitable growth through complementary acquisitions that can
        be quickly integrated

    --  Establishment of a share repurchase program

    --  More competitive dividend

These actions will be consistent with Carpenter's financial discipline and its stated financial objectives.

    The Company has previously committed to, at a minimum:

    --  Sales growth of 5%

    --  Operating margin of 12%

    --  Return on Net Assets of 10%

    --  Debt-to-Capital of 35% or less

    --  Economic Profit

"Our success over the last few years has been achieved by focusing on operational excellence and by investing capital with greater financial discipline," said Robert J. Torcolini, chairman, president and chief executive officer. "Through a comprehensive review process led by Carpenter's Vice Chairman Mike Fitzpatrick, we have identified significant growth opportunities close to our core business. Our strong financial position will allow us to grow profitably, organically and through acquisitions while at the same time providing our shareholders with increased cash returns through dividends and share repurchases."

Organic Growth

At the heart of the Company's strategy is its plan to build on its core business in four attractive and fast growing end-use markets: aerospace, medical, energy, and high value segments of automotive. These markets require high performance products made to exacting specifications that cannot be easily substituted. Typically, Carpenter is one of a few companies worldwide that is able to supply these technically demanding materials and products. Today, sales of Carpenter products into these four markets represent approximately 55 percent, or $875 million, of the Company's fiscal 2006 revenue. As a result of the strategic review process, Carpenter believes that approximately $500 million of organic growth opportunities in its highest margin businesses exist in these markets over the next four years.

In the aerospace market, commercial aircraft build rates are forecast to increase, on average, 10% annually through 2011. Airbus and Boeing have five years of production on their order books. These strong order patterns are coming primarily from Middle Eastern and Asian airlines and regional and low cost airlines in the United States and Europe. The major United States and European airlines are also expected to begin replacing a greater percentage of their fleets during this period, which would further strengthen demand.

Many of the new, lighter, more fuel efficient aircraft will use significantly more titanium for their airframes than current models and will require more of the high temperature superalloys that Carpenter specializes in for the new generation of high performance engines.

The medical products market is also set for strong growth, which will generate increasing demand for Carpenter's titanium, CCM (cobalt / chrome / molybdenum), and specialty stainless products. These high performance materials are used in medical implants, surgical instruments, and other critical medical applications.

In the United States and Europe, the population entering its sixties carries an expectation of additional years of active lifestyles and, in many cases, a preference for joint replacement rather than reduced mobility. A better standard of living in Asia is also generating demand for the latest health care advances. Carpenter continues to develop new alloys and products to meet the growing demand of these technology advances.

Growth rates in the aerospace and medical markets are expected to be greater than 10%, on average, over the next four years. The Company believes this robust activity will generate increased demand for its highest margin products, including nickel-based alloys and titanium, in excess of those growth rates.

To capitalize on these opportunities, Carpenter plans to invest approximately $200 million in capital expenditures over the next four years, which will include additional premium melt capacity. Additionally, the company will increase its focus on key end-use markets and place a greater emphasis on research and development.

Recently, Carpenter modernized two previously idled electro-slag-remelting ("ESR") furnaces to increase the production of premium melt products. Carpenter is also currently installing two additional vacuum arc remelting ("VAR") furnaces that are expected to be operational by December 2006 and will augment its 17 existing furnaces.

The ESR and VAR furnaces are used in the production of higher margin products for critical end product applications such as rotating aircraft engine parts, high performance automotive and truck engine parts, and medical devices. These investments are in addition to the nearly $500 million of prior capital spending made between 1997 and 2002.

Growth Through Acquisitions

In addition to organic growth, Carpenter will seek to acquire companies that sell into high growth markets including, but not limited to, the aerospace, medical, energy and automotive and, which provide a strong fit with the Company's expertise in high performance materials. In addition, the Company will seek opportunities to expand its geographic base.

Carpenter's priority will be acquisitions close to its core businesses and markets that can make an immediate and meaningful contribution to Carpenter's operating income.

In maintaining Carpenter's financial discipline, acquired companies will be expected to:

    --  Generate earnings that will exceed Carpenter's cost of capital

    --  Generate earnings that are accretive to earnings per share in
        year one

Transactions will be structured in a manner that maintains an investment grade debt rating.

Share Repurchase Program

As part of the company's strategy to enhance TSR, the Board of Directors has authorized a share repurchase program of up to $250 million of Carpenter's outstanding common stock. The share repurchase program reaffirms management's view that Carpenter's stock is an attractive investment based on its strategic initiatives and expected growth in earnings and cash flow.

The repurchases will occur at such times and at such prices as the management of the Company determines. The share repurchase program will be funded with the Company's excess cash after giving consideration to capital investments, acquisitions and future cash flows. It is expected that the authorization will be utilized over the next 12-18 months, subject to market conditions.

Dividend Increase

Another element of Carpenter's TSR strategy is its dividend rate, which was reflected in the 50% increase in the company's quarterly cash dividend that was announced on August 24, 2006. Carpenter's new annualized dividend is $0.90 per share of common stock.

Torcolini added, "Over the last several years, we have transformed Carpenter into a company producing and distributing higher value products. At the same time, we have lowered our cost structure to further enhance our overall competitiveness throughout the business cycle. Carpenter expects to continue generating returns in excess of its cost of capital, and combined with strong cash flows, is in a position to further reward shareholders with this increased dividend."

The company intends to maintain a dividend that delivers a return to shareholders competitive with that of other materials stocks and relevant indices. Future dividend increases will be made at a measured pace, consistent with business conditions.

There are a number of factors that the Company will consider in determining the size of future dividend increases and share repurchases. It is critical that the Company maintains its strong and flexible financial position in order to ensure that regardless of the stage of the business cycle, it will be able to:

    --  Continue the research, development, and introduction of new

    --  Continue to identify and make acquisitions that meet its
        financial criteria

    --  Make key investments, capital expenditures and pursue other
        activities to achieve its long term profitability.

Torcolini concluded, "Carpenter recently achieved several milestones, including another record fiscal year and a fourth quarter that surpassed last year's fourth quarter earnings by more than 40 percent. We are excited about the growth prospects in our core markets and we are confident in our ability to capture opportunities which will enable us to continue to profitably grow our Company and to continue to reward our shareholders."

Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys, and superalloys, and various engineered products. Information about Carpenter can be found on the Internet at

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. 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 filings with the Securities and Exchange Commission including its annual report on Form 10-K for the year ended June 30, 2006, and the exhibits attached to those filings. They include but are not limited to: 1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, industrial, automotive, consumer, medical, and energy including power generation, or other influences on Carpenter's business such as new competitors, the consolidation of customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; 2) the ability of Carpenter to achieve cost savings, productivity improvements or process changes; 3) the ability to recoup increases in the cost of energy and raw materials or other factors; 4) domestic and foreign excess manufacturing capacity for certain metals; 5) fluctuations in currency exchange rates; 6) the degree of success of government trade actions; 7) the valuation of the assets and liabilities in Carpenter's pension trusts and the accounting for pension plans; 8) possible labor disputes or work stoppages; 9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; and 10) the ability to successfully acquire and integrate acquisitions. 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.

CONTACT: Carpenter Technology Corporation
Mr. Jaime Vasquez, 610-208-2165

SOURCE: Carpenter Technology Corporation

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