17843--8/20/2010--CARPENTER_TECHNOLOGY

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{customer, product, revenue}

{cost, operation, labor}

{cost, regulation, environmental}

{condition, economic, financial}

{acquisition, growth, future}

{gas, price, oil}

{debt, indebtedness, cash}

{tax, income, asset}

{personnel, key, retain}

{loss, insurance, financial}

{product, liability, claim}

{operation, international, foreign}

{system, service, information}

{control, financial, internal}

The demand for certain products we produce may be cyclical. A significant portion of our sales represents products sold to customers in the commercial aerospace and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives. Periods of reduced demand and excess supply as well as the availability of substitute lower cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful. We rely on third parties to supply certain raw materials that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand. We provide benefits to active and retired employees throughout most of our Company, most of which are not covered by insurance, and thus our financial condition can be adversely affected if our investment returns are insufficient to meet these obligations. The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create the potential exposure to significant liabilities. Our manufacturing processes, and the manufacturing processes of many of our suppliers and customers, are energy intensive and generate carbon dioxide and other Greenhouse Gases , and pending legislation or regulation of Greenhouse Gases, if enacted or adopted in an onerous form, could have a material adverse impact on our results of operations, financial condition and cash flows. Product liability and product quality claims could adversely affect our operating results. Our business subjects us to risks of litigation claims, as a routine matter, and this risk increases the potential for a loss that might not be covered by insurance. A small number of our workforce is covered by a collective bargaining agreement and we may be subject to attempts to organize our other employees by a union which may cause work interruptions or stoppages. Our manufacturing processes are complex and depend upon critical, high cost equipment for which there may be only limited or no production alternatives. A significant portion of our manufacturing and production facilities are located in Reading, Pennsylvania, which increases our exposure to significant disruption to our business as a result of unforeseeable developments in a single geographic area. We rely on third parties to supply energy consumed at each of our energy-intensive production facilities. We consider acquisition, joint ventures and other business combination opportunities, as well as possible business unit dispositions, as part of our overall business strategy, which matters involve uncertainties and potential risks that we cannot predict or anticipate fully. Our business may be impacted by external factors that we may not be able to control. We believe that international sales, which are associated with various risks, will continue to account for a significant percentage of our future revenues. We value most of our inventory using the LIFO method, which could be repealed resulting in adverse affects on our cash flows and financial condition. We depend on the retention of key personnel. We depend on our IT infrastructure to support the current and future information requirements of our operations.

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17843--8/20/2010--CARPENTER_TECHNOLOGY_CORP