Good morning and welcome to Carpenter Technology first quarter 2010 earnings conference call. My name is Katie and I will be your coordinator for today. At this time all participants will be in a listen-only mode. After the speakers remarks you will be invited to participate in the question-and-answer session towards the end of this call. (Operator Instructions) I would now like to turn the call over to your host for today, Mr. Dave Christiansen, Vice President for Investor Relations and Business Development. Please proceed.

Thank you, Katie. Good morning and welcome to Carpenter’s earnings conference call for the first quarter ended September 30, 2009. This call is also being broadcast over the Internet. With me today are Greg Pratt, Chairman and Interim President and Chief Executive Officer; Doug Ralph, Senior Vice President and Chief Financial Officer; and Mike Shor, Executive Vice President, AMO and PAO operations; as well as other members of the management team. Statements made by management during this conference call that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter’s most recent SEC filings, including the company’s June 30, 2009, 10-K and the exhibits attached to that filing. I will now turn the call over to Greg.

Thank you, Dave. Allow me to extend my personal welcome and thank each of you for participating on this call. A couple of weeks ago, Carpenter announced a leadership change, separating the roles of Chairman of the Board and Chief Executive Officer. The decision to split these roles is very much in keeping with emerging best practice trends for governance of public companies. In taking these steps, Carpenter will join a growing list of US organizations that have determined this to be the best direction for corporate governance. We believe this change will enable the CEO to focus on growing the business and improving operating results. At the same time, it is a formal recognition of the intensity of a separate commitment of running the Board. I have been involved on the Board of Carpenter for many years and I look forward to continuing to serve on the Board as the Non-Executive Chair. We are actively searching for a successor to permanently fill the role as CEO. In the interim, we will remain committed to our three core principles, which are improving shareholder value, driving operational excellence and meeting our corporate community responsibilities. Consistent with last quarter’s call, we believe revenue will begin climbing over the remainder of the fiscal year as the global economy slowly recovers. Achieving positive earnings per share and generating positive cash flow remain our financial goals for the year. We are currently seeing some encouraging signs in our leading indicators and more balanced inventories in the key segments of our business, including materials for aerospace engines, power generation and automotive. We view these developments as green shoots in an uneven, lumpy economic recovery. Finally, Carpenter is a financially strong company with leading positions in attractive end markets. We remain committed to investing in R&D, key emerging markets and collaborative initiatives to facilitate long term growth and create shareholder value. Now let me turn the call over to Mike Shor to discuss our end markets.

Thank you, Greg. Good morning, aerospace market sales were $102.9 million in the first quarter down 35% compared to the same period a year ago. Excluding surcharge revenue, aerospace sales were down 30% on 22% lower volume. The decline reflected lower airplane build levels reductions in inventory in the supply chain and a leaner mix. We are seeing signs that supply chain inventories for jet engine materials are in better balance. This improved balance should result in more pull through in our second quarter and the remainder of the year, as order activity is more closely tied to usage. Fastener demand continues to be soft, with excess inventory remaining at manufacturers and distributors. Inventory destocking is continuing and we don’t expect to see significant demand improvement in the near term. This delayed demand typically corresponds with the six month difference in lead times between engine materials and fasteners. We continue to be encouraged by the latest airplane build projections that indicate improvements in the second half of our fiscal year. Furthermore, there is now evidence that revenue passenger miles are increasing in the US, Europe and Asia-Pacific. Industrial market sales in the first quarter were $50.4 million down 49% compared to the first quarter of fiscal 2009. Excluding surcharge, industrial sales decreased 37% on 27% lower volume. The decline reflects continued weak manufacturing demand. We expect slight improvements in this market. This view is supported by the industrial production index that we use as a gauge for this market, as well as the outlook from our major customers. The industrial production index its low during the fourth quarter and is projected to gradually increase during the remainder of fiscal 2010. Medical market shipments were up 15% in the first quarter, while sales decreased to $25.5 million down 13% from the…

Thanks Mike. Overall, our financial results for the quarter and our current financial projections for the year, are shaping up as expected. We are reporting a first quarter net loss of $9.3 million or $0.21 per diluted share. For perspective, the quarter would have been right around breakeven, without the $0.21 of non-cash pension expense in the period. Our earnings result reflects production volume efficiencies versus the second half of last year, and our strong focus on cost reduction, which has offset lower revenue in the quarter and a weaker product mix. Moving on to the elements of the income statement, net sales in the quarter were $234 million, or 44% below a year ago. Excluding raw-material surcharge, sales were down 38%. Overall tonnage volume decreased 30% in the quarter, with special alloy products down 27%, titanium products also off 27%, and stainless steel products down 32%. First quarter gross profit was $19.2 million, compared with $73.7 million a year ago. Excluding surcharge revenue, our gross margin in the period was 10.2%, versus 24.4% last year. The lower gross margin is primarily due to reduced volume and correspondingly higher volume related costs. The margin was also adversely affected by a leaner mix of products, including lower demand for premium alloys for energy and aerospace, as well as the portion of higher pension expense that hits our cost of sales. Reported SG&A expenses decreased 3% year-over-year. The decrease was 10% if you adjust out the impact of non-cash pension expense in both years. The lower SG&A continues to reflect the actions we have taken to reduce headcount and spending across the business beginning last fall. For the quarter we had an operating loss of $13.3 million, compared with income of $40.3 million in last year’s first quarter. Our operating margin excluding…

(Operator Instructions) Your first question comes from Edward Marshall - Sidoti & Company. Edward Marshall - Sidoti & Co: My first question has to do with the months of supply and the energy channel. Is there any way for you to quantify, in particular in the oil and gas, as to what the months of supply and how long it will take to kind of work through.

Ed, this is Mike Shor, good morning. A couple of things; number one, we are seeing that rigs or the count of rigs are off the bottom with oil prices recovering. Even as more directional rigs come online it will be several quarters before the growth resumes. We’ve seen some significant over buying there for inventory in the supply chain, which will lead to at least a couple of quarters before we see something coming back. Edward Marshall - Sidoti & Co: Okay, and then from an inventory level, as you are holding on the balance sheet here, do you kind of expect that to remain somewhat stable for the remainder of the year?

Relatively stable; we’d expect to end the year at about the same position that we started the year.

Your next question comes from the line of Gautam Khanna - Cowen & Co. Gautam Khanna - Cowen & Co: One of your customers was acquired by Precision Castparts recently, and there’s been talk about potentially enforcing some of the nickel you provide. How long do your contracts extend with Carlton Forge and what is your exposure there?

Gautam, it’s Mike Shor, a couple of points related to that. On the PCC acquisition of Carlton, we are comfortable about the commitments we have from Carlton for the next year or two. Beyond that timeframe, there is still a number of products that we supply to Carlton that we believe have very high value to them, and that we would expect for them to purchase from us. Really the summary is, we believe that we can more than offset the loss of the Carlton business as it occurs. A couple of other points that I think are worthwhile; we have continued to aggressively pursue share gain opportunities beyond Carlton, both short and long term in our aerospace business, and we have been successful in gaining share that will result in some near term growth, and beyond that, we are looking at products new to Carpenter and some long term share initiatives also. Gautam Khanna - Cowen & Co: Can you quantify how much of Carlton’s nickel you feel that you actually supply, and perhaps whether SMC’s special metals growth can actually make the number of these alloys that you provide for Carlton.

I think it’s fair to say that we’ve had majority share, not certainly all share, but majority share there, and I think on the higher volume products, certainly Special is capable of manufacturing those products, and we believe there is significant value still seen in some of the other products that we supply. Gautam Khanna - Cowen & Co: And when you said next year or two, I mean can you tell us, is it half the business that was under contract for one year and half for another year. Is there any sort of duration you can apply to this?

We have a variety of different documentation with them. So it really varies based on who their customer is and the specific product. That’s really as far as we can go on that one. Gautam Khanna - Cowen & Co: And just a follow-up; you mentioned the jet engine slightly appears to be more in balance. Now that your PCP and ATI mentioned that they have a destocking that’s pretty heavy this quarter, and that they don’t expect it to abate until sometime in the first calendar quarter of next year, are you guys seeing anything differently or can we interpret your comments to be consistent with those?

Two points that I think are worth noting; number one, we are receiving feedback from some of our major customers about the destocking coming to an end, and I guess the key sign, as we look at when this type of inventory reduction ends, is when our customers begin coming to us for short lead times; meaning that they are out of inventory and they need something rather quickly. We’re beginning to see those types of requests coming in, which is what gives us some confidence.

(Operator Instructions) Your next question comes from John Tumazos - John Tumazos & Co. John Tumazos - John Tumazos & Co: To the new VIM and VAR furnaces, how much is the incremental depreciation? Had there been any interest capitalized during their construction? Are there older furnaces you are taking offline, given the low current levels of business as the new machines come on?

Yes, of the new investment, specifically it was around $120 million CapEx project, so we are looking at $3 million to $4 million of annual depreciation against that. There are no parts of the operation that are being decommissioned as part of that, and I don’t know whether we covered all your questions there, John. John Tumazos - John Tumazos & Co: Are there any new orders that you are getting because of the new furnaces?

John, it’s Mike. I would say that the majority, not all of what goes into those furnaces are through our aerospace and energy businesses, and as you can see by the results, we are down in both of those businesses. So I would say at this point the answer is, no. The key for us is being able to have the capacity as these markets recover, because we are truly bumping up against our maximum capacity in the past. So as we look at these markets, these growth markets going forward, really these things are for filling the demand as we move out of the current business that we’re in.

Your next question comes from Brian Yu - Citigroup.

With respect to your aerospace business, you said your engine market looks like it’s turned around a little bit; airframe, still perhaps a bit more destocking to go. Can you give us a sense of how your business splits between those two markets currently?

I think we’ve traditionally said that engines is a majority of our aerospace business, and fasteners is the second biggest component.

Okay, and that still holds true given the changes in the order rates?

Yes.

Like 75/ 25 or…?

I wouldn’t go beyond what we said. The engine parts are a majority of our business, and then fasteners would be the second biggest component, and fasteners would consist of both nickel and titanium based fasteners.

Okay, and with your expanded capacity, where would you peg your maximum annual pounds that you could do; would it be close to $300 million?

I think I prefer to express that in revenue terms, and so if you looked at where we were pre-downturn fiscal 2008, and we’ve consistently said that the new capacity would give us something in the order of $150 million incremental revenue potential. Mike is going to add a couple…

Just one other comment for some color on that, if you look at our new furnace being online in vacuum induction melting, including the new furnace, we are probably operating at 50% to 55% of capacity on that; in rough numbers, about 70% on re-melting. So we’ve got significant available capacity in those areas to grow.

Your next question comes from Mark Parr - KeyBank Capital Markets.

One thing, I was curious if you could give us some color on the new VIM capacity at Latrobe. Does that create any additional competitive, potentially competitive issues for you guys over the next several years?

Mark, it’s Mike. Two points on that; number one, when you look at what’s in VIM furnaces, the first piece is the critical rotating product that goes into our high temperature alloy blip, and there are very, very, very long approvals on that, and very few people in the world are approved. So on the true high end, of our high end I would say that, no, at this point there are not concerns. When you get into some of the other alloys, for example the stainless steels that are VIM melted of course there, and even some of the alloy steels that are VIM melted, there certainly would be an impact as another VIM comes on, but on the high end and our top products, I believe the answer is no.

Okay. I guess another question, given that your new capacity is perhaps lower cost capacity and more state-of-the-art, I’m wondering if you’re seeing any or pursuing any increase in export opportunities, or maybe even from a semi finished standpoint if there are opportunities there you are seeing outside of the U.S.

I’d say with the expanded capacity we have, we are absolutely pursuing opportunities, both within and outside the U.S.. We utilize this furnace; it’s a large furnace, so we can utilize this very cost effectively obviously. On the high end products, we are going through our approval processes, so we are looking at what we can creatively do to fill a furnace as we hit the low in the business that we’re at now.

I apologize for missing the first several minutes of the call and I don’t know if you had made any comments related to the change in executive leadership, if there is any update there or if you said anything. I’d just like to get some color on that if you could share anything at this point that’s incremental.

This is Greg Pratt speaking. We did start off with commenting on the change, and just to summarize what we talked about, we indicated that the change was something that we did, because we believed that it was certainly in keeping with the growing list of U.S. organizations that have determined that splitting this chairman role and chief executive role, is the best direction for corporate governance. We made this change because we believe that this will enable the CEO to focus on growing the business and improving operating results. At the same time, for us it’s a formal recognition of the intensity of the separate commitment to running the Board, and finally, I commented on the fact that I have been with the Board for over seven years and once we have completed our search process, I look forward to continuing to serve on the Board as a non-executive chair.

Then, just lastly if I could, just to kind of summarize your update on the 2010 guidance, did I hear you say that you expect about a 6% EBIT margin and positive free-cash flow? Did you make any comments on the revenues? Again, I apologize if I missed that.

Comment on the revenue Mark, and all of this is consistent with where we were last quarter, but on the revenue, we expect the first quarter to be a bottom, and then we’d expect to see quarter-to-quarter improvement over the course of the fiscal year. As far as the financial results, we do expect an overall operating margin, and for us we always exclude pension EID from that, but an overall operating margin that’s in line with last year’s level, which is about 6%, and also do expect to achieve our goal of positive free cash flow.

(Operator Instructions) Your next question comes from Wayne Atwell - Casimir Capital.

Could you give us an update on your thinking about capital spending for this year?

We’d expect about $50 million in total capital spending, which is similar to also what we’ve been talking about all along.

And when your sales get back to what you would consider a more normal level, how much working capital will that chew up, because I assume you are working off working capital now, and you’ll have to rebuild that.

I think if you look at fiscal 2009, there was about $70 million of net working capital benefit that we got as the volume was reduced. Quite a bit bigger number in the receivables area, and so I think certainly as the business grows, we would anticipate working capital needs to increase, and in part, that’s one of the reasons why we are managing CapEx tightly to the $50 million level, versus what was about $119 million that we spent in CapEx last year.

So we might see you chew up $50 million to $70 million when you get inventories, when you get your business level back to a more normal level?

I wouldn’t say all during the course of fiscal year 2010, because the business won’t be recovered to that previous level by the end of fiscal year 2010, but moving in that direction.

Lastly, you obviously have a very strong balance sheet. Could you sort of give us an update on what you plan to do with that?

Yes, I think our cash deployment priorities would remain the same as what they have been, which is first and foremost, make sure that we’re taking care of the organic CapEx investment needs of the business. We do have the cash resources for external growth, if and when the right opportunity comes along there, and we’re going to be disciplined and strategic about what we go about there. Then dividend has been something that’s also been a cash priority. We’ve got certainly the financial flexibility to continue the dividend if it’s the right shareholder strategy for deploying the cash. So share buyback a couple of years ago was something that we were devoting cash to. We don’t have an active share buyback program right now, and that’s not on the horizon for discussion, and so I think between CapEx, external growth, and continued dividend, that’s where we are going to invest our cash.

Your next question comes from Tim Hayes - Davenport & Co. Tim Hayes - Davenport & Co: Just a question on corporate costs; do you expect more decline in the upcoming quarters as we get sort of the full effect of the cost cuts that have been made?

If you’re talking about our reported SG&A, a lot of those cost actions were initiated in the fall when the downturn began. So I would anticipate there, that the year-to-year improvement is going to narrow as that’s more reflected in our base, but I still think we are going to have a good, strong cost year in the overhead area, and that the actions that we’ve taken will enable us to achieve targets. Especially when you take the pension out of the comparison numbers this year that are below where we experienced last year. Tim Hayes - Davenport & Co: What about specific to corporate expense, the $9 million that was incurred in the fiscal quarter? A little bit more decline there for the upcoming quarter?

I think if you look year on year at our corporate cost line item, it will be I would say about the same as it was last fiscal year, for the full year.

Your next question comes from Gautam Khanna - Cowen & Co. Gautam Khanna - Cowen & Co: The name distortion gets worse and worse each time. Anyway, I just wanted to ask, you mentioned Mike, some of the share gains that you are making to offset potential loss over at Carlton. Could you characterize what they are? I mean, have you had some agreements you haven’t announced yet or is this something that’s still in process, and if so, in which side of the business? Also, if you could also give us the ex-surcharge sales by end markets?

Gautam, as far as share gain, typically we have not in the past announced specifics when we have gained some share. In the high temperature alloy blip business, we have been successful obviously around the Carlton in some other areas where we have over the last year, and continue to gain share at some major customers, so that’s what’s happened and is happening. As we move forward, we know there are some alloys that are being manufactured today that Carpenter has not participated in; that we have spent probably the last year working through attempts to do that, to enter into some supply chains that we’ve not been in before. Then longer term, looking at the three, four year out horizon in working to determine, both with the engine builders and with our forging customers, what else we can do for share gains. So we know we’ve had some short term. We believe there is an opportunity from the alloy perspective in the medium term and some more share gain in the long term. It’s something which we’ve focused on for quite a while and obviously it’s critical, given what has happened in the market in the past and what’s recently happened with Carlton.

Then Gautam, to your other question of the sales ex-surcharge by end market, our total for the corporation was $188 million in the period, and that broke down into $81 million of aerospace, $42 million for industrial, $16 million for automotive, $21 million for medical, $9 million for energy, and $18 million for consumer. Gautam Khanna - Cowen & Co: Doug, I know you’ve given us direct kind of notional guidance of positive EPS for the year, and sequential builds, but is there anything you can give us for the magnitude, because you’re starting out in the whole $0.21. Do you have a view on what Q2 is likely to be if it’s near flat, and how should we think about kind of the exit rate in Q4? Also, I know you mentioned pensions will be modest at 12, 31, but what is the recurring piece of the pension expense in fiscal 2011 that you can speak to now? If there’s anything outside the quarter, the amortized gains and losses outside the corridor?

Let’s see if I remember all of that. So I think we’ve already given, without giving any specific quarterly or fiscal year guidance, a fair amount of direction with where we would expect our operating income to be for the year, and etc.. So I think that’s hopefully helpful in that context. As far as the EPS pattern that we expect over the year, since we expect our revenue to increase quarter-to-quarter and since we expect to be vigilant with our cost management efforts, I think it’s fair to assume that our earnings-per-share are going to get better quarter-to-quarter as well. As to the pension, our ongoing pension service costs so to speak, somewhere just in excess of $20 million annually.

Your next question comes from John Tumazos - John Tumazos & Co. John Tumazos - John Tumazos & Co: I wanted to just follow up with the same clarification. When you made the projection earlier, the 6% operating margin positive, excluding pension, and free cash flow for the year, were you predicting a net profit for each of the successive quarters?

We didn’t talk anything about net profit in the subsequent quarters. We would expect it sequentially better, and when I look at the current analyst estimates, they are right around the breakeven points in the second quarter. So it’s not anything that we would want to make a specific comment about for the second quarter.

Your next question comes from Mark Parr - KeyBanc Capital Markets.

Just to follow-up, Doug can you talk a little bit about LIFO impacts in the September quarter, and what your thoughts are about LIFO for the full year?

Very minimal. I think the LIFO impacts that we’ve had historically have been triggered by build and de-build of inventory levels, and have also been triggered by the slope of nickel costs. While nickel costs have I would say, trickled up since the beginning of the year, we have been managing our inventories on a much more level basis, and so that in itself just significantly mitigates any quarterly LIFO impacts. So we do not, as we look ahead, anticipate any significant LIFO accounting impacts on a quarterly or annual basis.

At this time, I am showing you have no further questions. I would like to now hand the call back over to Mr. Greg Pratt for closing remarks.

Thank you very much. Again, I want to thank you for participating on today’s call. I just want to reiterate that Carpenter is an excellent company, that has successfully managed through downturns in the past, and that we are very well positioned in the marketplace as conditions improve. Our capabilities, coupled with our strong financial position, make this a very exciting time to be at Carpenter, and we look forward to talking with you again next quarter. Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference call. You may now disconnect. Have a wonderful day.