CARPENTER TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its Charter)

Securities registered pursuant to Section 12(b) of the Act:

                                                                                                              (Name of each exchange
(Title of each class)                                                                                 on which registered)
Common stock, par value $5 per share..…………………….New York Stock Exchange

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 the filing requirements for at least the past 90 days. Yes  X . No    .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

As of August 31, 2000, 22,024,060 shares of Common Stock of Carpenter Technology Corporation were outstanding and the aggregate market value of such Common Stock held by non-affiliates (based upon its closing transaction price on the Composite Tape on such date) was $623,571,878.

Part III incorporates by reference certain information from the 2000 definitive Proxy Statement, dated September 18, 2000.

The Exhibit Index appears on pages E-1 to E-4.

           Carpenter Technology Corporation, incorporated in 1904, is engaged in the manufacture, fabrication, and distribution of specialty metals and certain engineered products. There were no significant changes in the form of organization or mode of conducting business of Carpenter Technology Corporation (hereinafter called "the Company" or "Carpenter") during the year ended June 30, 2000, except that on February 1, 2000, Carpenter acquired the Anval Nyby Powder AB ("Anval"), a powder metal producer based in Torshalla, Sweden, at a cost of $7 million in cash, including acquisition costs, and assumed Anval's debt with a fair market value of $1.6 million.

          (b)  Financial Information About Segments:

            Carpenter is organized on a product basis and managed in three segments: Specialty Alloys, Titanium Alloys and Engineered Products. The Specialty Alloys and Titanium segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers, distribution methods and economic characteristics. See note 19 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data" for additional segment reporting information.

          (c)  Narrative Description of Business:

( 1)  Products:

            Carpenter primarily processes basic raw materials such as chromium, nickel, titanium, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire, narrow strip, special shapes, and hollow forms in many sizes and finishes and produces certain metal powders and fabricated metal products. In addition, ceramic and metal-injection molded products are produced from various raw materials using molding, heating and other processes.

Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in bar, wire, rod and strip forms. Sales are distributed both directly from producing plants and from a Carpenter operated distribution network. Specialty metals products include:

Stainless Steels -

A broad range of corrosion resistant alloys including conventional stainless steels and many proprietary grades for special applications.

Special Alloys -

Other special purpose alloys used in critical components such as bearings and fasteners. Heat resistant alloys that range from slight modifications of the stainless steels to complex nickel and cobalt base alloys. Alloys for electronic, magnetic and electrical applications with controlled thermal expansion characteristics, or high electrical resistivity or special magnetic characteristics. Fabrication of special stainless steels and zirconium base alloys into tubular products for the aircraft industry and nuclear reactors.

Titanium Products -

A corrosion resistant, highly specialized metal with a combination of high strength and low density. Most common uses are in aircraft, medical devices, sporting equipment and chemical and petroleum processing.

Tool and Other Steel -

Tool and die steels which are extremely hard alloys used for tooling and other wear-resisting components in metalworking operations such as stamping, extrusion and machining. Other steel includes carbon steels purchased for distribution and other miscellaneous products.

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. Engineered Products finished products include:

                    Ceramics and Other Materials -

( 2)  Classes of Products:

            The approximate percentage of Carpenter's consolidated net sales contributed by the major classes of products for the last three fiscal years are as follows:

            Carpenter's Specialty Metals segment depends on continued delivery of critical raw materials for its day-to-day operations. These raw materials are nickel, ferrochrome, cobalt, molybdenum, titanium, manganese and scrap. Some of these raw materials sources are located in countries subject to potential interruptions of supply. These potential interruptions could cause material shortages and affect the availability and price.

            Carpenter is in a strong raw material position because of its long-term relationships with major suppliers. These suppliers provide availability of material and competitive prices for these key raw materials to help Carpenter maintain the appropriate levels of raw materials.

( 4)  Patents and Licenses:

            Carpenter owns a number of United States and foreign patents and has granted licenses under some or all of them. Certain of the products produced by Carpenter are covered by patents of other companies from whom licenses have been obtained. Carpenter does not consider its business to be materially dependent upon any patent or patent rights.

( 5)  Seasonality of Business:

            Carpenter's sales and earnings results are normally influenced by seasonal factors. The first fiscal quarter (three months ending September 30) is typically the lowest - principally because of annual plant vacation and maintenance shutdowns in this period by Carpenter as well as by many of its customers. The timing of major changes in the general economy can alter this pattern, but over the longer time frame, the historical patterns generally prevail.

The chart below shows the percent of net sales by quarter for the past three fiscal years:

            Imports of foreign specialty steels have long been a concern to the domestic steel industry because of the potential for unfair pricing by foreign producers. Such pricing practices have usually been supported by foreign governments through direct and indirect subsidies.

            Because of these unfair trade practices, Carpenter several years ago joined with other domestic producers in the filing of trade actions against foreign producers who had dumped their specialty steel products into the United States. As a result of these actions, the U.S. Department of Commerce issued antidumping orders for the collection of dumping duties on imports of stainless bar from Brazil, India, Japan and Spain at rates ranging up to about 63% of their value and on imports of stainless rod from Brazil, France and India at rates ranging up to about 49% of their value.

            As a result of a sunset review determination made by the International Trade Commission in July 2000, the antidumping orders on stainless rod were extended to July 2005. The antidumping orders on stainless bar will end or be extended in calendar year 2001, depending upon the sunset review determination to be made by the Commission.

            Additional antidumping orders are in place with regard to imports of stainless rod from Italy, Japan, Korea, Spain, Sweden and Taiwan at rates ranging up to 34% of their value. Countervailing duty orders are also in place against stainless rod imports from Italy. These orders were established in 1998 and will continue in effect until September 2003, at which time they will be subject to a sunset review.

( 9)  Research, Product and Process Development:

            Carpenter's expenditures for company-sponsored research and development were approximately $14.4 million, $15.4 million and $16.1 million in fiscal 2000, 1999 and 1998, respectively.

(10)  Environmental Regulations:

            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. Recoveries of expenditures are recognized as a receivable when they are estimable and probable. For further information on environmental remediation, see the Contingencies section included in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and note 18 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".

            The costs of maintaining and operating environmental control equipment were about $5.3 million and $9.8 million for fiscal 2000 and 1999, respectively. The capital expenditures for environmental control equipment were $2.6 million and $.3 million for fiscal 2000 and 1999, respectively. Carpenter anticipates spending approximately $3.8 million on major domestic environmental capital projects over the next five fiscal years. This includes $1.0 million for fiscal 2001 and $1.0 million for fiscal 2002. Due to the possibility of unanticipated factual or regulatory developments, the amount of future capital expenditures may vary from these estimates.

(d)  Financial information about foreign and domestic operations and export sales:

            Sales outside of the United States, including export sales, were $207.1 million, $184.8 million and $179.6 million in fiscal 2000, 1999 and 1998, respectively.

            Reference note 19 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".

            The primary locations of Carpenter's specialty metals manufacturing and fabrication plants are: Reading, Pennsylvania; Hartsville, South Carolina; Washington, Pennsylvania; Orangeburg, South Carolina; Orwigsburg, Pennsylvania; Clearwater, Florida; and Crawley, England. The Reading, Hartsville, Washington, Orangeburg, Orwigsburg and Crawley plants are owned in fee. The Clearwater plant is owned, but the land is leased.

            The primary locations of Carpenter's engineered products manufacturing operations are: Wood-Ridge, New Jersey; Carlstadt, New Jersey; Corby, England; Wilkes-Barre, Pennsylvania; Chicago, Illinois; Auburn, California; El Cajon, California; Petaluma, California and Palmer, Massachusetts. The Corby and Chicago plants are owned, while the rest of the locations are leased.

            The Reading plant has an annual practical melting capacity of approximately 231,000 ingot tons of its normal product mix. The annual tons shipped will be considerably less than the tons melted due to processing losses and finishing operations. During the years ended June 30, 2000 and 1999, the plant operated at approximately 91 percent and 79 percent, respectively, of its melting capacity.

            During the fiscal years 2000 and 1999, the Talley Metals plant in Hartsville, South Carolina had an annual hot rolling capacity of approximately 78,500 tons. The annual tons shipped will be less than the tons hot rolled due to processing losses in finishing operations. During the year ended June 30, 2000 and 1999, the plant operated at approximately 73% and 84%, respectively, of its hot rolling capacity.

            Carpenter also operates sales offices and distribution and service centers, most of which are leased, at various locations in many states and several foreign countries.

            The plants, service centers and offices of Carpenter have been acquired at various times over many years. There is an active maintenance program to keep facilities in good condition. In addition, Carpenter has had an active capital spending program to replace equipment as needed to keep it technologically competitive on a world-wide basis. Carpenter believes its facilities are in good condition and suitable for its business needs.

           On August 6, 1999, the Bridgeport, Connecticut Port Authority filed a Certificate of Taking, acquiring fee simple ownership of Carpenter’s former plant site in that city. The proposed compensation for the site is $2.5 million and the Port Authority has stated its intention to seek reimbursement of any additional site remediation costs. The carrying value for the site on Carpenter’s books is approximately $14 million and is based upon a recent appraisal and arms-length negotiated selling prices with interested parties. Carpenter has begun legal proceedings in court to obtain a fair value for the property and a declaratory judgment absolving Carpenter from any remediation costs caused by the Port Authority’s development efforts. This matter is pending in the U.S. District Court for the District of Connecticut. While the ultimate outcome of these proceedings is undeterminable, in the opinion of management, the Port Authority’s proposed compensation and remediation reimbursement are unreasonable and will not be upheld and accordingly, no provision has been made for an impairment in carrying value.

            Other 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 Carpenter, or any owner of more than five percent of any class of voting securities of Carpenter, or any associate of any Director, Officer, affiliate, or security holder of Carpenter, is a party adverse to Carpenter or has a material interest adverse to the interest of Carpenter 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 Carpenter (2) involves a claim for damages, potential monetary sanctions or capital expenditures exceeding ten percent of the current assets of Carpenter or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000.

  Not applicable.

            Listed below are the names of corporate executive officers as of fiscal year end, including those required to be listed as executive officers for Securities and Exchange Commission purposes, each of whom assumes office after the annual meeting of the Board of Directors which immediately follows the Annual Meeting of Stockholders. All of the corporate officers listed below have held responsible positions with the registrant for more than five years except for Dennis M. Draeger, who joined Carpenter in 1996.

            Mr. Draeger, who was elected President and Chief Operating Officer and Director of Carpenter effective June 1, 1999, was Executive Vice President of Carpenter from July 1, 1998 to May 31, 1999 and a director of the corporation from 1992 until June 30, 1996. Mr. Draeger assumed the duties of Senior Vice President - Specialty Alloys Operations for Carpenter effective July 1, 1996, when he resigned from Carpenter's Board of Directors. Prior to that he had been President of Worldwide Floor Products Operations for Armstrong World Industries, Inc. since 1994 and he became Group Vice President for Armstrong in 1988.

            Mr. Shor, who was appointed Senior Vice President - Specialty Alloys Operations, effective January 31, 2000, was Vice President - Manufacturing Operations from March 3, 1997 through January 30, 2000; General Manager - Global Marketing and Product Services from July 13, 1995 through March 2, 1997; and General Manager - Marketing from October 1, 1994 through July 12, 1995.

            Mr. Torcolini, who was appointed Senior Vice President - Engineered Products Operations, effective January 31, 2000, has been President of Dynamet, Incorporated, a subsidiary of Carpenter Technology Corporation since February 28, 1997 and was Vice President - Manufacturing Operations of Carpenter from January 29, 1993 through
February 27, 1997.

PART II

Item 5.      Market for the Registrant's Common Stock and Related Stockholder Matters

            Common stock of Carpenter is listed on the New York Stock Exchange. The ticker symbol is CRS. The high and low market prices of Carpenter's stock for the past two fiscal years are indicated below:

            The range of Carpenter's common stock price from July 1, 2000 to September 20, 2000 was $21 to $33-1/4. The closing price of the common stock was $29-15/16 on September 20, 2000.

            Carpenter has paid quarterly cash dividends on its common stock for 94 consecutive years. The quarterly dividend rate was $.33 per share for the fiscal years ended June 30, 2000, 1999 and 1998.

            Carpenter had 5,728 common shareholders of record as of August 31, 2000. The balance of the information required by this item is disclosed in note 9 to the consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data".

Five-Year Financial Summary
Dollar amounts in millions, except per share data
(years ended June 30)

See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" for discussion of factors that affect the comparability of the "Selected Financial Data".

Fiscal 2000 was a year of partial recovery from the cyclical downturn which occurred in fiscal 1999. While demand for most products recovered strongly, profitability was impacted by a surge in nickel costs and selling price erosion due to foreign imports and weakness in the euro. Carpenter was able to partially mitigate these negatives through cost reduction efforts, a higher operating level and several non-operating gains.

Net sales and earnings trends for the past three fiscal years are summarized below:

*Excludes a special charge of $8.5 million after taxes or $.37 per diluted share for a salaried work force reduction and a reconfiguration of Carpenter’s U.S. distribution network (see note 15 to the consolidated financial statements).

Unit selling prices decreased by an average of 3 percent, equivalent to $34.6 million in sales, even though raw material surcharges were implemented to recover cost increases. Increased imports, weaker demand for titanium products and a decline in the value of the euro were the key factors in the price erosion.

Sales outside of the U.S. improved by 12 percent to $207.1 million as compared to fiscal 1999. Most of the sales increase came from the Mexico, Canada and Asia-Pacific regions. In Europe, which accounted for approximately one-half of all sales outside the United States, sales were about the same as fiscal 1999 because of the increased competition caused by the weaker euro. Details of sales by geographical region for the past three fiscal years are presented in note 19 to the consolidated financial statements.

Cost of sales as a percentage of net sales were 75 percent in fiscal 2000 and 1999. Higher sales and production levels, manufacturing cost reductions and higher pension credits were the key positives. Higher costs for nickel offset much of these favorable effects. Carpenter’s raw material surcharge recovers cost increases approximately 60 days after they are incurred but cost increases affect cost of sales in the month they occur because of Carpenter’s use of the LIFO method of accounting for inventories.

Selling and administrative expenses increased by $13.9 million from the fiscal 1999 level. Increased freight and depreciation costs, start-up costs related to the consolidation of the distribution system and development costs for Carpenter’s e-business activities were the primary cost drivers. Increased pension credits and salaried staff reductions partially offset these cost increases.

Other (income) expense, net was $13.2 million more favorable in fiscal 2000 than in fiscal 1999. Most of the improvement was due to non-recurring gains in fiscal 2000 related to sales of warehouses ($5.6 million), adjustments to liabilities for environmental remediation and insurance claims and other matters related to the acquisition of Talley Industries, Inc. ($3.3 million), and insurance and investment gains ($2.1 million).

Interest expense was $33.4 million in fiscal 2000, a $4.1 million increase over the fiscal 1999 level. Increased short-term debt and higher interest rates were the major causes of this cost increase.

Income taxes as a percent of pre-tax income (effective tax rate) were approximately 33.3 percent in fiscal 2000 and 33.5 percent in fiscal 1999. Both years were favorably affected by the resolution of foreign and state tax issues related to prior years. See note 14 to the consolidated financial statements for a reconciliation of the statutory federal tax rate to the effective tax rate for each of the past three years.

Business Segment Results
(Segment data for fiscal 1999 have been restated - see note 19 to the consolidated financial statements.)

Specialty Metals Segment

*Excludes special charge of $14.2 million (see note 15 to the consolidated financial statements).

Net sales for this segment, which aggregates the Specialty Alloys Operations (SAO) and Dynamet units of Carpenter, were 5 percent higher than those of fiscal 1999. The increase was primarily due to higher volume and was offset by lower selling prices and mix changes. Sales for SAO rose by 7 percent while Dynamet sales were lower by 15 percent. Most of SAO’s end-use market sectors were improved but aerospace demand for both SAO and Dynamet products was at lower levels than in fiscal 1999.

EBIT was slightly lower than that of fiscal 1999, excluding the 1999 special charge. The improved unit volume shipments and cost reductions at SAO were offset by the lag in recovering the significant rise in nickel costs in the SAO unit and lower sales volume for Dynamet.

The 14 percent increase in sales resulted from improved volume at all of the Engineered Products’ business units. Demand was particularly strong for ceramic cores for land-based turbine blade castings and structural ceramic parts.

This improved profit level resulted from higher sales volume, manufacturing cost efficiencies and reduced product development and administrative costs.

Pension credits, related to overfunded defined benefit pension plans, were $45.7 million during fiscal 2000 compared to $36.1 million in fiscal 1999. The increase in these credits was primarily due to the strong investment returns on the pension plan assets during fiscal 1999 that resulted in an excess of plan assets over liabilities of $413.6 million at June 30, 1999. Based upon the actuarial valuation as of June 30, 2000, the pension credits for fiscal 2001 will be approximately $48 million.

Net sales were $1,036.7 million in fiscal 1999, a 12 percent decrease from the record level of $1,176.7 million in fiscal 1998. Reduced unit volume accounted for approximately $121 million of the sales decrease. Unit selling price decreases averaged 6 percent, accounting for $74 million of the sales decrease. Most of these negative effects were experienced in the Specialty Metals segment and were partially offset by the inclusion of a full year’s sales in fiscal 1999 for companies acquired during fiscal 1998.

Cost of sales as a percentage of sales increased to 75 percent in fiscal 1999 from 72 percent a year earlier, because of lower production levels, selling price reductions and a less profitable product mix in the Specialty Metals segment. Reduced staffing levels, lower raw material costs and increased pension credits helped to partially offset the margin decline.

Selling and administrative expenses for fiscal 1999 were higher than in fiscal 1998 by $5.1 million, primarily because of the impact of newly acquired companies and increases in salaries. Reductions in salaried staffing levels, lower bonus payments and improved pension credits helped to offset these effects.

Other (income) expense, net was favorable by $2.2 million as compared to fiscal 1998. This improvement was primarily related to a nonrecurring pre-tax loss of $2.7 million in fiscal 1998 for the sale of a joint venture in Taiwan.

Income taxes as a percent of pre-tax income (effective tax rate) were approximately 33.5 percent in fiscal 1999 and 38.7 percent in fiscal 1998. The resolution of certain prior year state tax issues was the major factor in the lower rate. See note 14 to the consolidated financial statements for a reconciliation of the statutory federal tax rate to the effective tax rate.

Business Segment Results
(Segment data for 1999 and 1998 have been restated -- see note 19 to the consolidated financial statements.)

Specialty Metals Segment

*Excludes special charge of $14.2 million (see note 15 to the consolidated financial statements).

The 14 percent decrease in net sales was due to a combination of lower unit volume and reduced selling prices, each accounting for about one-half of the sales decline. Selling prices for both the Specialty Alloys products and Dynamet titanium products were lower by 7 percent, in part due to lower nickel, cobalt and titanium costs but also because of intense competition from imported steel.

Sales to the aerospace market sector were adversely affected by inventory reductions by customers to correct for overstocked inventory positions. Sales to industrial end-use markets were another area of weakness, especially in products for petrochemical, semiconductor and processing industry applications. Automotive products were down moderately as a result of a General Motors strike early in fiscal 1999 and design changes.

EBIT fell 47 percent primarily because of the lower unit sales volume and selling prices. Profit margins were also affected by a less profitable product mix and a lower production level as inventories were reduced. Lower costs for raw materials, more favorable pension credits and reductions in salaried and production staffing levels helped offset the sales effects.

The 12 percent increase in sales was the result of including a full year’s sales in fiscal 1999 for Carpenter Advanced Ceramics, which was acquired during 1998, and volume growth, particularly in ceramic cores for aerospace and land-based turbine blade castings and in structural ceramics applications.

The 64 percent decrease in EBIT was due to several factors. Developmental costs for new metal injection molded products, start-up costs for three new ceramics facilities and expanded sales, marketing and process research programs adversely impacted fiscal 1999. Also, an equipment impairment loss of $1.5 million was recognized in fiscal 1999.

Net pension credits were $36.1 million in fiscal 1999 and $23.6 million in fiscal 1998.

Net cash generated from operating activities was $62.4 million in fiscal 2000. This level was down from $87.4 million and $108.4 million in fiscal 1999 and 1998, because of increases in working capital.

Capital expenditures, including software, continued at a high level. Fiscal 2000 expenditures totaled $105.0 million versus $153.1 million in fiscal 1999 and $99.5 million in fiscal 1998. The major expenditures during fiscal 2000 were for new strip facilities and a new 4500-ton forging press. These projects completed a five-year, $500 million capital program for capacity expansion and modernization. Total capital spending is expected to be approximately $55 million in fiscal 2001.

Fiscal 2000 acquisition spending totaled $7.0 million versus $23.1 million in fiscal 1999 and $177.8 million in fiscal 1998. The acquisition in fiscal 2000 was for the Anval Group, a powder metal producer based in Sweden. Fiscal 1999 acquisitions included the strip products business of Telcon, Ltd., in the United Kingdom and a joint venture for specialty steel production and distribution in India. The most significant acquisition in fiscal 1998 was Talley Industries, Inc. Details of acquisition activities for the past three years are included in note 3 to the consolidated financial statements.

During fiscal 1999 and 1998, Carpenter sold all of the businesses of the Talley Industries, Inc., government products and services and industrial products segments except for one insignificant company, as planned at the time Talley was acquired in fiscal 1998. These sales resulted in net proceeds before taxes of $121.4 million in fiscal 1999 and $20.7 million in fiscal 1998. Additional details regarding these divestitures are provided in note 16 to the consolidated financial statements.

Total debt increased by $72.2 million to $582.6 million in fiscal 2000, including debt of an acquired company. Debt as a percent of total capital (debt, deferred taxes and shareholders’ equity) increased to 41.6 percent at June 30, 2000, from 39.4 percent at the beginning of the fiscal year. During fiscal 2000, Carpenter’s borrowing capacity was increased by $25 million. Additionally, a long-term collateralized note was issued for $7.6 million in connection with an equipment purchase. Details of debt and financing agreements are provided in note 7 to the consolidated financial statements.

In fiscal 1999, $35.0 million of cash was used to acquire 955,567 treasury common shares. The dividend payout rates on common and preferred stock were maintained at $1.32 and $5,362.50 per share, respectively, and totaled $30.8 million, $30.7 million and $28.5 million in fiscal years 2000, 1999 and 1998, respectively.

During the past three fiscal years, Carpenter maintained the ability to provide adequate 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.

Carpenter ended fiscal 2000 with current assets exceeding current liabilities by $88.6 million (a ratio of 1.2 to 1). This ratio is conservatively stated because certain inventories are valued $126.0 million less than the current cost as a result of using the LIFO method.

Financing is available under a $275 million revolving credit agreement with four banks. Carpenter limits the aggregate commercial paper and credit facility borrowings at any one time to a maximum of $275 million. As of June 30, 2000, $59.7 million was available under the credit facility and commercial paper program. Details of financing agreements are provided in note 7 to the consolidated financial statements.

Carpenter believes that its present financial resources, both from internal and external resources, will be adequate to meet its foreseeable short-term and long-term liquidity needs.

Carpenter uses derivative financial instruments to reduce certain types of financial risk. Raw material cost fluctuations for the Specialty Metals Segment are normally offset by selling price adjustments, primarily through the use of surcharge mechanisms and base price adjustments. Firm price sales contracts involve a risk of profit margin decline in the event of raw material increases. Carpenter reduces this risk on nickel and cobalt by entering into commodity forward contracts and commodity price swaps which are effective hedges of the risk. Fluctuations in foreign exchange subject Carpenter to risk of losses on anticipated future cash flows from its foreign operations. Foreign currency forward contracts are used to hedge this foreign exchange risk. These hedging strategies are reviewed and approved by management before being implemented. Management has established policies regarding the use of derivative instruments which prohibit the use of speculative or leveraged derivatives. Market valuations are performed at least quarterly to monitor the effectiveness of Carpenter’s risk management programs.

The status of Carpenter’s financial instruments as of June 30, 2000 and 1999, is provided in note 8 to the consolidated financial statements. Assuming (a) an instantaneous 10 percent decrease in the price of raw materials for which Carpenter has commodity forward contracts and swaps, (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, (c) a 10 percent change in interest rates on Carpenter’s short-term debt, and (d) a 10 percent decrease in the market value of investments in corporate-owned life insurance had all occurred on June 30, 2000 and 1999, Carpenter’s results of operations, cash flow and financial position would not have been materially affected.

Carpenter has environmental liabilities at some of its owned operating facilities, and has been designated as a potentially responsible party ("PRP") with respect to certain Superfund waste disposal sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact amount of cleanup costs nor the final method of their allocation among all designated PRPs at these Superfund sites has been determined. Carpenter accrues amounts for environmental remediation costs that represent management’s best estimate of the probable and reasonably estimable costs related to environmental remediation. The liability recorded for environmental cleanup costs at June 30, 2000 was $7.7 million. The estimated range of the reasonably possible costs of remediation at Carpenter-owned operating facilities and the Superfund sites is between $7.7 million and $11.4 million as of June 30, 2000. Recoveries of expenditures are recognized as receivables when they are estimable and probable.

Additional details are provided in note 18 to the consolidated financial statements. Carpenter does not anticipate that its financial position will be materially affected by additional environmental remediation costs, although quarterly or annual operating results could be materially affected by future developments.

Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Additional details are provided in note 18 to the consolidated financial statements. While it is not feasible to determine the outcome of these matters, management believes that any total ultimate liability will not have a material effect on Carpenter’s financial position or results of operations and cash flows.

This Form 10-K contains various "Forward-looking Statements" within the meaning 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 statements are based on current expectations regarding future events that involve a number of risks and uncertainties which could cause actual results to differ from those of such forward-looking statements. These risks and uncertainties include those set forth in other filings made by Carpenter under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and also include the following factors: 1) the cyclical nature of the specialty materials business and certain end-use markets, including, but not limited to, aerospace, automotive and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to recoup increased costs of fuel and raw materials, such as nickel, through increased prices and surcharges; 3) excess inventory and the impact of inventory adjustments in Carpenter's aerospace customer base; 4) worldwide excess capacity for certain alloys which Carpenter produces, resulting in increased competition and downward pricing pressure on Carpenter products; 5) the impact on the overfunding of Carpenter's pension plans, of an increase in the pension liability or a decrease in plan assets, approximately 70 percent of which are invested in common stock equities; 6) the criticality of certain raw materials acquired from foreign sources, some of which are located in countries that may be subject to unstable political and economic conditions, potentially affecting the prices of these materials; 7) the level of export sales impacted by political and economic instability, particularly in Asia, Eastern Europe and Latin America, resulting in lower global demand for stainless steel products; 8) the ability of Carpenter, along with other domestic producers of stainless steel products, to obtain and retain favorable rulings in dumping and countervailing duty claims against foreign producers; 9) the level of sales impacted by export controls, changes in legal and regulatory requirements, policy changes affecting the markets, changes in tax laws and tariffs, exchange rate fluctuations and accounts receivable collection; 10) the effects on operations of changes in U.S. and foreign governmental laws and public policy, including environmental regulations; and 11) the outcome of the litigation between the Bridgeport, Connecticut, Port Authority and Carpenter concerning the value of the Corporation's former plant site and responsibility for site remediation costs caused by the Port Authority's development efforts. Any of these factors could have an adverse and/or fluctuating effect on Carpenter's results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Index to Consolidated Financial Statements and Supplementary Data

To the Board of Directors and
Shareholders of Carpenter Technology Corporation

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial position of Carpenter Technology Corporation and subsidiaries at June 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of Carpenter's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

s/PricewaterhouseCoopers LLP

Consolidated Statement of Income
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998

See accompanying notes to consolidated financial statements.

Consolidated Statement of Cash Flows
Carpenter Technology Corporation
For the years ended June 30, 2000, 1999 and 1998