Good morning and welcome to Carpenter Technology’s third quarter earnings conference call. [Operator instructions.] I would now like to turn the call over to your host for today, Mr. Mike Hajost, vice president, treasury and investor relations. Please proceed. Mike Hajost – VP and Treasurer, IR: Thank you operator. Good morning everyone and welcome to Carpenter’s earnings conference call for the third quarter ended March 31, 2011. This call is also being broadcast over the Internet. With us today are Bill Wulfsohn, president and chief executive officer, and Doug Ralph, senior vice president and chief financial officer, 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, 2010 10-K, its September 30, and December 31, 2010 10-Q and the exhibits attached to those filings. I will now turn the call over to Bill. Bill Wulfsohn – President and CEO: Thank you Mike. Good morning everyone, and thank you for joining us for our fiscal year 2011 third quarter earnings call. We performed very well this quarter, and in a manner consistent with the messages from our prior two calls and our investor day presentation in February. Operating income and profit per pound were up noticeably from Q2. Revenue growth was up 32% on 16% volume growth. In these results you can clearly see the positive impact of our mix management and pricing actions. As you will recall, we’ve been working on price and mix improvements for the last several quarters but are only now seeing the beginning of their impact due to our long lead times…

[Operator instructions.] And our first question is coming from the line of Edward Marshall from Sidoti & Company. Please proceed. Edward Marshall – Sidoti & Company: Quick question. You’ve obviously had some pretty good performance with the pricing that you had put in place prior. Where are you with the renewals as they’re coming up, the contract renewals on this pricing, and how fast do you expect them to be reset so that we can see continued improvement and kind of across all your business segments? Bill Wulfsohn – President and CEO: Well, as contracts are coming up for renewal, as you can imagine the dynamic of supply and demand is more favorable now than it was maybe several years ago. We have long-term agreements which are in place. Many of them are not up for renewal for several years. But in general I’d say that pricing opportunities are there. However, a big part of our margin enhancement strategy is really to focus on upgrading the mix as well, and that really allows us to provide more value to our customers beyond just the price itself. So from a pace standpoint, and where we are in the process, I think as we’ve outlined the recovery program over the next couple of years to get back by fiscal year ’13 or ’14 to the prior year peak EBITDA performance, we would view that pricing is a major driver, pricing mix, and that that is progressing on a trajectory that’s very consistent with that estimate. Edward Marshall – Sidoti & Company: When you mention long-term agreements, I’m assuming you’re referring more toward the PAO rather than, say, AMO. Would that, first, be a correct assumption? Bill Wulfsohn – President and CEO: Yes, roughly half of our business is LTAs, but if you…

Sure. From an operations perspective, we’ve put together a very strong operations team that’s been working very effectively with our BUs, and our focus is truly on the details of our operations down at the work center level, and we’ve been driving ongoing improvement. We have a good focus on our OEE initiatives to get more through our current operations with the capacity requirements that we see, the demand from the marketplace. We’re always working to get more. And with capital, reinvesting back into those operations, to further drive performance. And we’ve got a good start, and we’ll continue to focus in that way to get more through and to reduce our costs. Edward Marshall – Sidoti & Company: Is there any potential way we could quantify maybe the benefit that you could see in fiscal ’12 from some of these operations? Doug Ralph – CFO and SVP, Finance: I would just say that it’s all within the overall guidance that we gave about the kind of operating income progress that we expect next year, which is about 50% on a revenue increase that would be north of 10%.

Your next question comes from the line of Brian Yu from Citi. Please proceed. Brian Yu – Citi: Congrats on a strong quarter. I want to get a better understanding just about the fiscal 3Q. I think Doug, you mentioned that if we look at operating income before EID, that’s $46 million, but $3 million of that had some positive impact from the nickel inventory drawdowns. And can you give us a sense of how much of the business push from second to the third quarter had on operating profits? Doug Ralph – CFO and SVP, Finance: I don’t think we would want to overplay that, but there was certainly at the end of here as we highlighted in our last call. Some customer-driven volume that moved from the second into the third quarter and that helped us have a particularly strong volume and revenue quarter this quarter. Brian Yu – Citi: Okay, now I’m looking at your fourth quarter and should we expect operating profits before EID to come in around the $40 million mark? And then I’m using that to try to get a sense of 2012, where you’re guiding for a very impressive 50% increase and it seems like it would get us to a little bit under $200 million operating profit before EID in 2012? Is that the right way to look at it? Doug Ralph – CFO and SVP, Finance: We disclose our pension EID expense, and if you adjust our operating income level for that and then assume about a 50% growth rate on top of that, that’s in line with our expectation for next year. As it related to the fourth quarter versus the third quarter, we’re very conscious in the items that we’re calling out as relevant for your thinking in the fourth quarter. So we certainly had tax items that influenced our third quarter result. I think we’ll be challenged to maintain the same volume and revenue level just because of some of the strength that we talked about of volume carryovers from the second quarter and then what ended up being a very strong performance at the end of this third quarter, and we had the inventory effect that I mentioned that was about $3 million positive to our operating income in the third quarter. Brian Yu – Citi: All right. Just my last question, can you detail some of the major spends for next year on the growth side that’s driving the year-on-year increase?

When you take a look at the capital requirements for next year, again we’re continuing to invest back into our operations to get more product through and at the same time we’re looking at the major capacity constraints that we have downstream from melting. We’re pretty well positioned over the next several years from a melting standpoint, but re-melting and hot working are areas of concern that we’ve talked about in the past and plan to get moving on for this next fiscal year. Bill Wulfsohn – President and CEO: In addition, certainly we’re looking at continuing to provide strong capital funding to support the growth of Amega West as it expands its footprint as well as our powder business and our Dynamet business, both of which have a strong sales and strategic momentum right now, so we want to continue to support those. That will be a big part of the capital investment as well. Brian Yu – Citi: And would all that take place in 2012? Or would you expect additional spending into 2013? Bill Wulfsohn – President and CEO: Well, depending upon the actions that we take, if we make an investment in a major capacity expansion for hot workings, certainly that would go at least into 2013 as well.

Your next question comes from the line of Michael Gambardella from JP Morgan. Please proceed.

Congratulations on the quarter. Just had a question on the titanium fasteners and what you’re seeing there. Are you pretty well satisfied that the inventory on the titanium fasteners is pretty much behind them in terms of the overhang and what are you seeing on some of the recent production build rates related to your fasteners? Bill Wulfsohn – President and CEO: Well, build rates have been continuing to be strong and go up across really the majority of the fleet. The airline monitor is a reference that we use and they’ve increased their outlook several times. Of course, you’ve got the Paris air show coming up shortly. But when you look at the total backlog numbers I think they’re roughly 3,400 for Airbus and also for Boeing. So a lot of single aisle activity going on right now. That certainly is movement that will affect the demand profile. But from the titanium fastener standpoint, you have the 787, which uses such a substantially larger portion of titanium fasteners than, say, a 737. So you put that all together and the types of projections that we put in our investor presentation, I think back in February, are still consistent with our outlook as we have it today.

So the delays that Boeing has experienced on the Dreamliner, you feel that whatever backlog there was on some of the fasteners there is long gone? Bill Wulfsohn – President and CEO: We don’t see that as an issue going forward, and that’s why we’re expanding our capacity in that business as we speak, so we can support the growth that’s going to be coming.

Your next question comes from the line of Steve Levenson from Stifel Nicolaus. Please proceed. Steve Levenson – Stifel Nicolaus: Can you give us an idea what the lead times are now, separately for titanium and for nickel alloys? Bill Wulfsohn – President and CEO: For the nickel alloys, we’re currently receiving orders out towards the end of the calendar year, so our activity levels remain very strong there. On the titanium side, about that same neighborhood. Steve Levenson – Stifel Nicolaus: Great, thank you. Second, just in terms of markets, can you give us an idea what you’re seeing, or what you’re expecting, in the next couple quarters for industrial gas turbine materials as well as – and I don’t know if you differentiate, but if you do differentiate, between the large commercial jets and business jets, regional jets, what do you see for the business and regional please? Bill Wulfsohn – President and CEO: Sure, from a power generation standpoint, the inventory’s been depleted. The backlog is growing, but demand I would say overall has been pretty lumpy – is how we’re describing it. It is more spotty, but we are increasingly optimistic about the long-term demand for industrial gas turbines. We reference often General Electric as they’re a large producer, and of course discuss their gas turbine business and they said that their, I think Q1 calendar year ’11 gas turbine business increased by roughly 170%. So from the business jet standpoint, they’re a small percentage of our total demand, both because of the number that are being built and the relative size. So we see that not having a major impact, either plus or minus, on our business.

Your next question comes from the line of Dan Whalen of Capstone Investments. Please proceed. Dan Whalen – Capstone Investments: In your opening comments, you mentioned that the quarter seemed to be more heavily weighted to the back end. Thank you for that color, first of all. Second of all, could you give any order of magnitude? I mean, is it one-third, two-third, or any additional color? And then secondarily, as you were going through lightening up on inventories, I would imagine from a margin perspective that the quarter was even more backward loaded from a margin perspective versus a revenue perspective. Is that fair? Bill Wulfsohn – President and CEO: Yeah. I wouldn’t want to get too specific there, but I think that’s generally fair. I think one indication of that is if you just look at what happened to our receivables quarter to quarter where we were up about $80 million in receivables and our total revenue including the surcharge, which is the more relevant for receivables, was up something like $90 million quarter to quarter. So I think that says that if nothing else we had a very strong March performance. Dan Whalen – Capstone Investments: Great. And then one clarification and then a follow on. Your EBITDA commentary in terms of returning to prior peak levels over the next two to three years, say, that excludes any potential bullpen acquisitions or unannounced capacity additions, correct? Bill Wulfsohn – President and CEO: Yeah, that certainly would be a fair expectation. Dan Whalen – Capstone Investments: Okay. So then given what you’re seeing in the demand picture, where your positioned in terms of your balance sheet being very lean, I mean, 10-20% from either growth through acquisitions or capital expansions? I know timing’s always tough, but is that…

Your next question comes from the line of Sanil Daptardar of Sentinel Investments.

A few clarifications. You initially talked about your existing capacity booked for four years on the long-term contracts. Is it across the board, across all your segments – aerospace, industrial, consumer, [inaudible], medical, or is it in two segments? And secondly, is that like [inaudible] contracts? What kind of contracts are those?

A few clarifications. You initially talked about your existing capacity booked for four years on the long-term contracts. Is it across the board, across all your segments – aerospace, industrial, consumer, [inaudible], medical, or is it in two segments? And secondly, is that like [inaudible] contracts? What kind of contracts are those? Bill Wulfsohn – President and CEO: Again, roughly, half of our business is through long-term agreements. Much of that in our premium business, and when you look at that a lot of that is concentrated in aerospace and energy. Also, some long-term contracts in the medical area and industrial area. So we have them in all of our markets, but that’s where the primary concentration really – aerospace and energy.

Okay. The second one I had on the backlog, you mentioned about that – it’s a three-year high. Is it a reflection of the European backlog, or is it total backlog?

Okay. The second one I had on the backlog, you mentioned about that – it’s a three-year high. Is it a reflection of the European backlog, or is it total backlog? Bill Wulfsohn – President and CEO: That was specifically referencing the European backlog. The same could be true – we haven’t looked at it, but it could be true for the base business. We’d have to look at that. But certainly our backlog is very strong as our lead times are fairly long at this point in time. So we would describe the demand as robust.

Okay. In case of the earthquake in Japan, are you seeing any positive impact from that earthquake to your business? Because of the disruption there?

Okay. In case of the earthquake in Japan, are you seeing any positive impact from that earthquake to your business? Because of the disruption there? Bill Wulfsohn – President and CEO: What a sad tragedy, really unbelievable. And the net impact of our business is at this point there has not been a significant impact. We are seeing some additional interest and activity in industrial gas turbine billet. As you can imagine, there are some energy needs because of the situation there. And in general, over time we may see the focus on natural gas and industrial gas turbines being especially strong, which would help our business. We’ve also gotten inquiries from some customers who’ve been supplied out of Japan and some of those customers their supply of material was disrupted. But we haven’t had a major shift because of the event that took place over there in our business as of today.

Your next question comes from the line of Tim Hayes from Davenport & Company. Please proceed. Timothy Hayes – Davenport & Company: A few questions. Starting out, on the volumes, can you run through the six end markets and give the sequential change in volumes? Bill Wulfsohn – President and CEO: Yeah Tim, the aerospace was up 27% second to third quarter. Our energy business was actually down 1% despite the strong growth. Medical was up 18%. Industrial business was up 8%. Automotive as a function of just some of the mix management activities there down 6%. And the consumer business up 10%. So in all, up 10%. Timothy Hayes – Davenport & Company: Okay, and then with the volumes that were helped in Q3 a little bit, was there a particular end market where you saw the volumes get pulled from Q2 into Q3? Bill Wulfsohn – President and CEO: I think you can just see from the aerospace number and the fact that that’s 45% of our total business, that most of those comments would be relative to aerospace as the biggest driver. Timothy Hayes – Davenport & Company: And then during the prepared remarks, you mentioned a figure – up 53% in terms of volumes I believe in the energy market. Was that specifically to the IGT, and was it year-over-year? Bill Wulfsohn – President and CEO: It was specific to what we call power generation, and it was the year-to-year growth rate. So power generation, IGT would be the big component of that. Timothy Hayes – Davenport & Company: Okay. And then last question. Just to get some clarification on the pieces of guidance. The reported number was 64. You back out the tax rate you’re down to 53. The nickel, the $3 million help in…

Your next question comes from the line of Gautam Khanna from Cowen and Co. Please proceed. Gautam Khanna – Cowen and Co.: First, for Doug, I just want to understand the guidance fiscal ’12. So it looks like you’re implying something of around $100 million of operating income this year, fiscal ’11. You add back the $61 million – just rough numbers here - $161 million ex pension EID. And so the gain next year will be 50% of that. So we’re talking somewhere in the 240 range prior to pension. Is that a fair characterization? Bill Wulfsohn – President and CEO: Maybe in a follow up call we could just help you through that, but I’m not sure where you get your starting point from. Gautam Khanna – Cowen and Co.: The $100 million you mean? Bill Wulfsohn – President and CEO: Yeah. Why don’t we work through all that in a follow up call. Gautam Khanna – Cowen and Co.: Okay. I’m looking after corporate costs. Is that how you’re talking about operating income? Bill Wulfsohn – President and CEO: No, it’s just simply our operating income reported on the income statement adjusted for the pension EID line. Gautam Khanna – Cowen and Co.: Got it. Okay. So the second question is, on pension, could you remind me what your smoothing period is? Bill Wulfsohn – President and CEO: Our smoothing period? Gautam Khanna – Cowen and Co.: Yeah, so the amortized losses and gains, outside the corridor or what have you. How long does that run? Because your actual service cost is somewhere in the $20-25 million range, right? Yet the expense is $61 million. I just want to understand how many years of losses are we – does the ’08 loss come out of the number…

Your next question comes from the line of Mark Parr with KeyBanc Capital. Please proceed. Mark Parr – KeyBanc Capital: So Bill, it was nice to see that number you printed this morning. Great job. And I know there’s been a lot of discussion about all the takeaways out of the number, but any way you cut this it was really a breakout quarter for you guys and congratulations on tremendous execution. And in the face of this recovering demand situation, you really are kind of getting it both ways. The market’s reacting very nicely to your stock today and congratulations on that. Bill Wulfsohn – President and CEO: Well thank you. A lot of people worked very hard in the quarter. Mark Parr – KeyBanc Capital: I believe it. I honestly believe it. One of the things, Bill, you have been mentioning is the mix enhancement and that certainly is something that’s not new to Carpenter, but it’s something you and your team have been working on aggressively. Could you talk a little bit about how much more you have to go in that regard? And maybe how much more is there, and how long does it take to get there? Can you give us some more color along those lines? Bill Wulfsohn – President and CEO: Well, I think you have both short- and long-term impact. It is our number one priority without question. You have the short-term impact, which is as we see more demand than our real supply capabilities, it gives us the opportunities to price up some materials, which were lower value, and sometimes we find that the customer finds enough value to continue to have a supply. Other times, they’ll seek an alternative because it’s more of a commodity material. But that gives us…

Just to add a couple comments there Mark. Our sales and Latrobe are different key products that we’re producing. When you add a VIM furnace like we’ve added, it’s a big chunk of capacity and the new furnace is running really well for us overall from a VIM standpoint. To hang a number on it, I’d say we’re probably around 85% or so. We have been receiving qualifications for that new furnace, so that gives us a lot of additional flexibility as far as mixing and matching and what products we’re melting in what furnace, to further optimize our yield performance and downstream cost picture as well. So again, the short-term focus from capacity adds will really be focused on the re-melting and hot-working parts of the equation. Mark Parr – KeyBanc Capital: All right, so by hot-working, is it fair to assume that you’re thinking about a rotating forge or is it just more of a forge press? Bill Wulfsohn – President and CEO: Press or forge we’re looking at. Mark Parr – KeyBanc Capital: If you made that decision today, and signed a contract, how long would it take to begin commissioning on one of those new major pieces of equipment? Bill Wulfsohn – President and CEO: Just ballparking it, I’d say about two years before we’d have hot commission. Mark Parr – KeyBanc Capital: Is the utilization rate of that equipment, your hot-working equipment, meaningfully higher than 85% right now?

Absolutely. It’s high 90s, Mark. Mark Parr – KeyBanc Capital: Wow. And again, one last question. I don’t want to beat this to death, but is there other call it non-legacy capacity, is there capacity outside of you that you could outsource to continue to satisfy customer growth needs?

Good question. There’s actually two aspects. One is to take a look at, again, from an OEE standpoint, or take a look at the availability, performance, and quality of the performance of our current units and how do we improve that. We’re working very hard on that and there are some opportunities that we’re exploring and we’re working with others on as far as taking some products and getting some assistance outside. Bill Wulfsohn – President and CEO: Just for Gautam’s benefit and really everybody’s benefit, in terms of the operating income ex pension base that we’re talking about, if you take some specific numbers off our financial statements that are attached to the press release, our operating income just on its own, fiscal year to date, is $61.4 million. And then if you refer back to one of our supporting schedules on the pension EID number for fiscal year to date is $26.4 million. So in total it’s about an $88 million run rate on our operating income ex pension EID through nine months of the year.

I do have a followup question coming from the line of Sanil Daptardar from Sentinel Investments. Please proceed.

You did present a 2013 or 2014 view going to the pre-EBITDA levels, did you just say that your operating margins can go back to 17-18% from the 13% that you are currently? And the cause of it might be price and the mix. How would your mix stand to be? What kind of volumes would be driven by the higher-margin businesses?

You did present a 2013 or 2014 view going to the pre-EBITDA levels, did you just say that your operating margins can go back to 17-18% from the 13% that you are currently? And the cause of it might be price and the mix. How would your mix stand to be? What kind of volumes would be driven by the higher-margin businesses? Bill Wulfsohn – President and CEO: Doug can probably give you a more specific answer from a quantitative perspective. I would just say that as you know, the investment that was made in the down cycle was in premium melt capacity, supporting primarily aerospace and energy. We’ve made the Amega acquisition. We’re expanding the titanium business. We’re talking about re-melting and hot-working capabilities, which are primarily focused on those more premium areas that are related to aerospace and energy. So of course we have other parts of the business which, over time, will become more commodity in nature, and that will offset that. Some of that we’re trying to crowd out of the portfolio, but some of it will be there to baseload what we do. Certainly the types of objective that you said are very much the types of objectives that we have for the business. Doug Ralph – CFO and SVP, Finance: And what I’d add to that is I think directionally that would be right. So during our peak, when we were earning $350-360 million of EBIT, our margins were up in the 20% range, and so directionally our business would move back toward that. I will say though, as a qualifier, that margins can be a tricky way to look at the business because we do have low-value products that have a good margin and so profit per pound is increasingly the way that I think it’s better to look at our business. That’s why we’re disclosing segment volumes, to enable you and all investors to be able to follow our progress there. I think both will move in an upward direction, but margins would not be the best way I’d look at that.

At this time I’m showing no further questions in queue. I would like to turn the call back over to Mr. Bill Wulfsohn for any closing remarks. Bill Wulfsohn – President and CEO: Okay. Well, thank you all for participating in the call. We’re obviously pleased with the results of the quarter, but we know we have a lot more work to do, so we’re continuing to push on the price and mix management, also cost. We’re continuing to focus on expanding our capacity to meet the demands for the high-value products as we’ve talked about, and we’re looking forward to giving you further updates on our initiatives during our fourth quarter call at the end of July. So thank you, and goodbye.