10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2001
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____ to ____

Commission File Number 1-5828

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

Delaware (State or other jurisdiction of incorporation or organization)	23-0458500 (I.R.S. Employer Identification No.)
1047 North Park Road, Wyomissing, Pennsylvania (Address of principal executive offices)	19610-1339 (Zip Code)

610-208-2000
(Registrant's telephone number, including area code)

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 such filing requirements for the past 90 days.

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 31, 2001.

Common stock, $5 par value	22,178,222
Class	Number of shares outstanding

CARPENTER TECHNOLOGY CORPORATION
FORM 10-Q
INDEX

	Page
Part I FINANCIAL INFORMATION
Consolidated Balance Sheet as of September 30, 2001 (unaudited) and June 30, 2001	3
Consolidated Statement of Income (unaudited) for the Three Months Ended September 30, 2001 and 2000	4
Consolidated Statement of Comprehensive Income (unaudited) for the Three Months Ended September 30, 2001 and 2000	5
Consolidated Statement of Cash Flows (unaudited) for the Three Months Ended September 30, 2001 and 2000	6
Notes to Consolidated Financial Statements (unaudited)	7 - 15
Management's Discussion and Analysis of Financial Condition and Results of Operations	16 - 21
Forward-looking Statements	22
Part II OTHER INFORMATION	23 - 24
Signature	25
Exhibit Index	E-1

PART I

CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, 2001 and June 30, 2001
(in millions)

	September 30	June 30
	2001	2001
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$ 8.1	$ 7.8
Accounts receivable, net	169.7	193.8
Inventories	259.0	241.1
Deferred income taxes	2.3	--
Other current assets	16.5	16.4
Total current assets	455.6	459.1
Property, plant and equipment, net	746.5	752.2
Prepaid pension cost	232.9	225.6
Goodwill, net	161.7	161.7
Trademarks and trade names, net	27.2	27.5
Other assets	66.6	65.4
Total assets	$1,690.5	$1,691.5
LIABILITIES
Current liabilities:
Short-term debt	$ 80.3	$ 170.6
Accounts payable	84.9	82.3
Accrued liabilities	67.5	63.9
Deferred income taxes	--	2.1
Current portion of long-term debt	10.2	25.2
Total current liabilities	242.9	344.1
Long-term debt, net of current portion	426.3	326.9
Accrued postretirement benefits	160.2	157.8
Deferred income taxes	182.3	177.8
Other liabilities	35.9	36.3
STOCKHOLDERS' EQUITY
Convertible preferred stock	25.1	25.4
Common stock	116.4	116.3
Capital in excess of par value	197.0	196.7
Reinvested earnings	376.5	378.4
Common stock in treasury, at cost	(38.4)	(38.4)
Deferred compensation	(12.6)	(13.1)
Accumulated other comprehensive income (loss)	(21.1)	(16.7)
Total stockholders' equity	642.9	648.6
Total liabilities and stockholders' equity	$1,690.5	$1,691.5

See accompanying notes to consolidated financial statements.

CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
for the three months ended September 30, 2001 and 2000
(in millions, except per share data)

	Three Months
	2001	2000
NET SALES	$251.1	$293.1
COSTS AND EXPENSES:
Cost of sales	198.8	221.2
Selling and administrative expenses	36.1	38.2
Interest expense	8.9	10.7
Other income, net	(1.7)	(2.2)
	242.1	267.9
Income before income taxes and   cumulative effect of accounting change	9.0	25.2
Income taxes	3.1	9.9
Income before cumulative effect of   accounting change	5.9	15.3
Cumulative effect of accounting change	--	(14.1)
NET INCOME	$ 5.9	$ 1.2
EARNINGS PER COMMON SHARE:
Basic:
Income before cumulative effect of        accounting change	$ .24	$ .68
Cumulative effect of accounting change	--	(.64)
Net income	$ .24	$ .04
Diluted:
Income before cumulative effect of        accounting change	$ .24	$ .66
Cumulative effect of accounting change	--	(.62)
Net income	$ .24	$ .04
WEIGHTED AVERAGE COMMON      SHARES OUTSTANDING
Basic	22.2	22.0
Diluted	23.0	22.9
Cash dividends per common share	$ .33	$ .33

See accompanying notes to consolidated financial statements.

CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
for the three months ended September 30, 2001 and 2000
(in millions)

	Three Months
	2001	2000
Net income	$5.9	$1.2
Cumulative effect of change in      accounting principle for derivatives      and hedging activities (SFAS 133),      net of tax	--	.8
Net losses on derivative instruments,      net of tax	(4.0)	.3
Foreign currency translation, net of tax	(.4)	--
Comprehensive income	$1.5	$2.3

See accompanying notes to consolidated financial statements.

CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
for the three months ended September 30, 2001 and 2000
(in millions)

	2001	2000
OPERATIONS:
Net income	$ 5.9	$ 1.2
Cumulative effect of accounting change	--	14.1
Adjustments to reconcile net income to net cash      provided from operations:
Depreciation	14.1	13.5
Amortization of intangible assets	3.3	3.7
Deferred income taxes	2.2	8.7
Net pension credit	(4.3)	(10.1)
Net gain on asset disposals	(0.2)	(.8)
Changes in working capital and other:
Receivables	24.1	3.5
Inventories	(17.9)	(5.0)
Accounts payable	2.6	(4.9)
Accrued current liabilities	(1.6)	3.1
Other, net	(4.5)	(1.4)
Net cash provided from operations	23.7	25.6
INVESTING ACTIVITIES:
Purchases of plant, equipment and software	(9.8)	(14.4)
Proceeds from disposals of plant and equipment	0.2	5.0
Net cash used for investing activities	(9.6)	(9.4)
NET CASH PROVIDED BEFORE FINANCING ACTIVITIES	14.1	16.2
FINANCING ACTIVITIES:
Change in short-term debt	(90.3)	(0.2)
Proceeds from issuance of long-term debt	98.8	--
Payments on long-term debt	(15.0)	(10.1)
Dividends paid	(7.8)	(7.6)
Proceeds from issuance of common stock	0.5	1.6
Net cash used for financing activities	(13.8)	(16.3)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0.3	(0.1)
Cash and cash equivalents at beginning of period	7.8	9.5
Cash and cash equivalents at end of period	$ 8.1	$ 9.4

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending June 30, 2002. The June 30, 2001 condensed balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Carpenter's fiscal year 2001 Annual Report on Form 10-K.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain reclassifications of prior year's amounts have been made to conform with the current year's presentation.

2. Earnings Per Common ShareThe calculations of earnings per share for the three months ended September 30, 2001
and 2000 are as follows:

(in millions, except per share data)	Three Months Ended September 30, 2001
	Basic	Diluted
Net income	$5.9	$5.9
Dividends accrued on convertible preferred stock, net of tax benefits	(0.5)	--
Assumed shortfall between common and preferred dividend	--	(0.2)
Earnings available for common stockholders	$5.4	$5.7
Weighted average number of common shares outstanding	22.2	22.2
Assumed conversion of preferred shares	--	.8
Effect of shares issuable under stock option plans	--	--
Weighted average common shares	22.2	23.0
Earnings per share	$.24	$.24

	Three Months Ended September 30, 2000
	Basic	Diluted
Income before cumulative effect of accounting change, net of tax	$15.3	$15.3
Dividends accrued on convertible preferred stock, net of tax benefits	(0.4)	--
Assumed shortfall between common and preferred dividend	--	(0.2)
Earnings available for common stockholders	14.9	15.1
Cumulative effect of accounting change	(14.1)	(14.1)
Net income available for common stockholders	$0.8	$1.0
Weighted average number of common shares outstanding	22.0	22.0
Assumed conversion of preferred shares	--	0.8
Effect of shares issuable under stock option plans	--	0.1
Weighted average common shares	22.0	22.9
Earnings per share before cumulative effect of accounting change	$0.68	$0.66
Cumulative effect of accounting change	(0.64)	(0.62)
Earnings per share	$0.04	$0.04

3. Inventories

	September 30, 2001	June 30, 2001
	(in millions)
Finished and purchased products	$ 110.5	$ 108.7
Work in process	190.7	185.4
Raw materials and supplies	55.3	44.5
Total at current cost	356.5	338.6
Less excess of current cost over LIFO values	97.5	97.5
Total inventory	$ 259.0	$ 241.1

The current cost of LIFO-valued inventories was $291.1 million at
September 30, 2001 and $272.5 million at June 30, 2001.

4. Property, Plant and Equipment

	September 30, 2001	June 30, 2001
	(in millions)
Property, plant and equipment at cost	$1,354.0	$1,345.9
Less accumulated depreciation and amortization	607.5	593.7
	$ 746.5	$ 752.2

5. Stockholders' Equity Data

	September 30, 2001	June 30, 2001
Preferred shares issued	399.5	404.0
Common shares issued	23,286,469	23,267,519
Common shares in Treasury	(1,108,247)	(1,108,247)
Net common shares outstanding	22,178,222	22,159,272

6. Commitments and Contingencies

Environmental

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. No additional accrual was made for the three months ended September 30, 2001. For the three months ended September 30, 2000, the liability for environmental remediation costs was increased by $.6 million which was included in cost of sales. The liability for environmental remediation costs remaining at September 30, 2001 was $6.6 million. The estimated range of the reasonably possible future costs of remediation at superfund sites and at Carpenter-owned operating facilities is between $6.6 million and $13.3 million.

Carpenter did not enter into any settlements of litigation relating to insurance coverages for environmental remediation sites during the first quarter of fiscal 2002. However, during fiscal 2001, Carpenter entered into partial settlements of litigation relating to insurance coverages for certain environmental remediation sites and recognized income before income taxes of $.6 million for the three months ended September 30, 2000. This income was reported in other income.

Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based upon information presently available, such future costs are not expected to have a material effect on Carpenter's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year.

Other

Carpenter is also defending various claims and legal actions, and is subject to contingencies which are common to its operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenter's future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, in the opinion of management, any total ultimate liability will not have a material effect on Carpenter's financial position, results of operations or cash flows.

7. Business Segments

Statement of Financial Accounting Standards (SFAS) 131, "Disclosures about Segments of an Enterprise and Related Information," requires companies to disclose segment information on the same basis as that used internally by executive management to evaluate segment performance. Carpenter is organized on a product basis: Specialty Alloys, Titanium Alloys, Carpenter Powder Products, and Engineered Products. For the following segment reporting, the Specialty Alloys, Titanium Alloys, and Carpenter Powder Products segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers, distribution methods and economic characteristics.

Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Sales are distributed both directly from production plants and from Carpenter’s distribution network.

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.

Effective July 1, 2001, management changed the basis for measuring the business segment’s profits to allocate additional corporate costs to the business segments, to allocate pension credits to the business segments to offset the expense for the post retirement benefit plans and the other underfunded defined benefit pension plans charged to the operating segments, to show separately the remaining net pension credit, and to show separately other income and expense. All segment data for fiscal 2001 have been restated to reflect the current segment reporting structure. Sales between the segments are generally made at market-related prices.

The net pension credit represents the income relating to Carpenter’s overfunded defined benefit pension plan less the expense for the post retirement benefit plans and the other underfunded defined benefit pension plans. The corporate costs primarily represent the unallocated portion of the operating costs of the finance, law and human resource departments as well as the corporate management staff. Other income and expense, net includes non-operating income and expense components, such as interest income, gains and losses from sales of fixed assets, and market valuation adjustments of investments in life insurance policies. Corporate assets are primarily domestic cash and cash equivalents, prepaid pension cost, corporate-owned life insurance and corporate operating assets.

Carpenter's sales are not materially dependent on a single customer or small group of customers.

Segment Data

	Three Months Ended
	September 30
	2001	2000
Net sales:
Specialty Metals	$215.7	$255.9
Engineered Products	35.7	37.6
Intersegment	(.3)	(.4)
Consolidated net sales	$251.1	$293.1
Operating income:
Specialty Metals	$ 12.3	$ 24.5
Engineered Products	3.9	5.0
Net pension credit	4.3	10.1
Corporate costs	(4.3)	(5.9)
Total operating income	16.2	33.7
Interest expense	(8.9)	(10.7)
Other income, net	1.7	2.2
Consolidated income before income taxes and cumulative effect of accounting change	$ 9.0	$ 25.2

	September 30, 2001	June 30, 2001
Total assets:
Specialty Metals	$1,304.1	$1,310.2
Engineered Products	100.8	102.5
Corporate assets	285.6	278.8
Consolidated total assets	$1,690.5	$1,691.5

8. Special Charge

During the fourth quarter of fiscal 2001, Carpenter incurred a special charge of $37.6 million before taxes that was recognized in the consolidated statement of income as a separate $36.0 million special charge, an addition to cost of sales of $1.2 million as a result of a writedown of inventory and an addition to selling and administrative expenses of $.4 million due to a writedown of accounts receivable. The components of this special charge are indicated below.

Due to the pending divestiture of four Engineered Products Group (EPG) business units that were considered non-strategic, the Company recorded a pre-tax charge of $19.3 million consisting of $15.7 million in writedowns of long-lived assets, $1.2 million in writedowns of inventory, $.4 million in writedowns of accounts receivable, $1.0 million in writedowns of other current and non current assets, and $1.0 million for related exit costs. The $15.7 million writedown of long-lived assets consisted of machinery and equipment - $9.2 million (book value prior to writedown of about $12.7 million), buildings - $2.1 million (book value prior to writedown of about $2.5 million), land - $.3 million (book value prior to writedown of about $.3 million), and goodwill - $4.1 million (book value prior to writedown of $4.1 million). The book value of other current and non current assets prior to the writedown was about $1.1 million. These business units had combined fiscal 2001 annual sales and a net operating loss (before the special charge) of about $25.0 million and $3.0 million, respectively. Operating results were immaterial for the three month periods ended September 30, 2001 and 2000. As of September 30, 2001, none of the business units were sold, but all are expected to be sold by June 30, 2002.

A reduction in workforce of approximately 100 salaried positions as a result of the realignment of Specialty Alloys Operations (SAO) and Corporate staff. As of September 30, 2001, this workforce reduction was substantially complete. The pre-tax charge of $9.1 million consisted primarily of various personnel-related costs to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $7.6 million of the charge will be paid from the qualified pension plan and, accordingly, this portion of the special charge reduced the prepaid pension cost account on the balance sheet. There was also a $1.7 million pre-tax charge to writeoff certain SAO construction in progress due to the decision in the fourth quarter of fiscal 2001 to discontinue the capital project.

Carpenter incurred a one-time, non-cash charge of $7.5 million before taxes as a result of a May 2001 settlement agreement reached with the City of Bridgeport, Connecticut and the Bridgeport Port Authority in connection with the disposal of Carpenter's former steel mill property in Bridgeport. Under the settlement agreement, Carpenter received $9.25 million and retained responsibility for an existing oil deposit on the property, except to the extent the oil deposit is disturbed by the City of Bridgeport or the Bridgeport Port Authority or a third party acting on their behalf to develop the site.

9. Adoption of SAB 101

In the fourth quarter of fiscal 2001, Carpenter changed its method of accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." Carpenter's standard terms of sale for most of its sales included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except for certain foreign units, revenue cannot be recognized until title passes to the customer, which in Carpenter's case was when payment was received. This bulletin was adopted prospectively, and therefore did not result in a restatement of any results reported prior to July 1, 2000.

On April 1, 2001, Carpenter changed its terms of sale so that revenue can be recognized when product is shipped, in accordance with its historical practice. The combined effect of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million and income before cumulative effect of accounting change by $14.1 million, net of $9.4 million of tax. The cumulative effect at July 1, 2000 of this change in accounting principle was a charge of $14.1 million after taxes, or $.62 per diluted share.

As a result of adopting SAB 101 in fiscal 2001, all revenues reported by quarter through March 31, 2001 were deferred until cash was received. Results for the quarter ended June 30, 2001 included revenues from sales made in the quarter as well as collections on prior sales.

The fiscal 2001 restatements affected the quarterly distribution of earnings during the year but had no effect on total net income or earnings per share for the year. Carpenter's consolidated statements of income and cash flows for the first quarter of fiscal 2001 have been restated to include the effects of conforming to SAB 101. Previously reported net sales and net income for the first quarter of fiscal 2001 were $277.7 million and $11.1 million, respectively.

10. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) approved its proposed Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets."

SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Under SFAS 142, goodwill and intangible assets with indefinite lives will no longer be amortized, and will be tested for impairment at least annually. The Statement allows companies a 6-month period to identify potential goodwill impairment, and then, if there is an impairment, an additional 6-month period to calculate the impairment loss.

Carpenter has elected early implementation of SFAS 142 in fiscal 2002, consequently, effective July 1, 2001 goodwill is no longer being amortized. The total amount of goodwill amortization recorded by Carpenter in fiscal 2001 was about $ 6.7 million.

Net income and earnings per share for the first quarter of fiscal 2001, adding back goodwill amortization of $1.6 million ($.07 per share) would have been $2.8 million and $.11 per share (both basic and diluted), respectively, had the provisions of SFAS 142 been applied for that period. Income before cumulative effect of accounting change would have been $16.9 million or $.75 per basic share and $.73 per diluted share had the provisions of SFAS 142 been applied for that period.

As of September 30, 2001, Carpenter had $27.2 million of trademarks and trade names that have a gross carrying value of $32.0 million and accumulated amortization of $4.8 million. As of June 30, 2001, Carpenter had $27.5 million of trademarks and trade names that have a gross carrying value of $32.0 million and accumulated amortization of $4.5 million. Carpenter has determined that the 30-year life previously assigned to these finite-lived assets is still appropriate, and has recorded $.3 million of amortization expense in the first quarters of fiscal 2002 and 2001. The estimated annual amortization expense for each of the succeeding five fiscal years is $1.1 million.

In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment of Long-Lived Assets," which is effective for Carpenter in fiscal 2003. Management is currently assessing the provisions of this statement to determine their impact on the Company's consolidated results of operations and financial position.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the fourth quarter of fiscal 2001, Carpenter changed its method of accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." Carpenter's standard terms of sale for most of its sales included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except for certain foreign units, revenue cannot be recognized until title passes to the customer, which in Carpenter's case was when payment was received. This bulletin was adopted prospectively, and therefore did not result in a restatement of any results reported prior to July 1, 2000.

On April 1, 2001, Carpenter changed its terms of sale so that revenue can be recognized when product is shipped, in accordance with its historical practice. The combined effect of SAB 101 and the change in terms of sale increased fiscal 2001 sales by $138.0 million and income before cumulative effect of accounting change by $14.1 million, net of $9.4 million of tax. The cumulative effect at July 1, 2000 of this change in accounting principle was a charge of $14.1 million after taxes, or $.62 per diluted share.

As a result of adopting SAB 101 in fiscal 2001, all revenues reported by quarter through March 31, 2001 were deferred until cash was received. Results for the quarter ended June 30, 2001 included revenues from sales made in the quarter as well as collections on prior sales.

The fiscal 2001 restatements affected the quarterly distribution of earnings during the year but had no effect on total net income or earnings per share for the year. Carpenter's consolidated statements of income and cash flows for the first quarter of fiscal 2001 have been restated to include the effects of conforming to SAB 101.

The following is a reconciliation of amounts on the income statement to amounts previously reported for net sales, gross profit, net income and diluted earnings per share for the first quarter of fiscal 2001:

	($ in millions)
	Net Sales	Gross Profit	Net Income	Diluted Earnings Per Share
Amounts per income statement	$293.1	$ 71.9	$ 1.2	$.04
SAB 101 Effects:
Cumulative effect of accounting change	--	--	14.1	.62
Adjustment regarding timing of sales recognition	( 15.4)	( 6.9)	( 4.2)	(.18)
Amounts as previously reported	$277.7	$ 65.0	$11.1	$.48

The discussion that follows compares actual results of operations for the three months ended September 30, 2001 with "Amounts as previously reported" for the three months ended September 30, 2000. For this comparison, both periods report results of operations on a consistent basis, as products are shipped (see footnote 9 to consolidated financial statements).

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued

Results of Operations - Three Months Ended September 30, 2001 vs.
Three Months Ended September 30, 2000 excluding SAB 101:

Net income for the quarter ended September 30, 2001 was $5.9 million compared with $11.1 million in the prior year period. Diluted earnings per share were $.24 compared with $.48 a year ago.

Net sales for the quarter decreased 9.6 percent from $277.7 million to $251.1 million for the same period a year ago. The $26.6 million decrease in net sales for the quarter was chiefly due to lower shipment levels offset by a richer sales mix. Most of the volume drop occurred in the Specialty Metals segment, and was a result of lower stainless steel shipments because of weaker demand in the automotive, industrial and consumer markets, due in part to a high level of imports of bar, rod and wire. This lower volume was partially offset by higher shipments and improved pricing of titanium products to the aerospace and medical markets, and higher shipments of special alloys to the aerospace and medical markets. International sales increased 16 percent to $58.2 million from the first quarter a year ago, reflecting stronger demand, particularly in Europe.

The gross profit of 20.8 percent for the quarter was lower than last year's 23.4 percent. This decrease was chiefly due to lower production levels, higher depreciation costs and a reduced net pension credit. These negatives were partially offset by lower raw material costs and a richer sales mix in Specialty Alloys Operations.

Selling and administrative expenses as a percent of sales increased to 14.4 percent from 13.8 percent last year. However, in absolute terms, selling and administrative expenses were down $2.1 million compared with a year ago because of the elimination of goodwill amortization pursuant to SFAS 142, lower salaries and benefits expenses, and lower professional fees. These favorable items were partially offset by the increased software amortization, primarily E-business related costs.

Interest expense of $8.9 million is lower than last year by $1.8 million due to lower interest rates on short-term debt and lower current year debt levels.

Other income of $1.7 million in the current year is lower than last year by $.5 million. This decrease was principally a result of favorable adjustments included in last year's other income related to the disposition of certain subsidiaries acquired as part of the acquisition of Talley Industries, Inc.

Carpenter's effective tax rate (income taxes as a percent of income before taxes) for the quarter ended September 30, 2001 is 34.4 percent versus 39.0 percent a year ago. This rate is lower due to the impact of the elimination of the goodwill amortization pursuant to SFAS 142.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued

Business Segment Results:

The following is a reconciliation of the net sales and operating income including and excluding SAB 101 for the reportable segments during the first quarter of fiscal 2001:

	($ in millions)
	Specialty Metals		Engineered Products
	Net Sales	Operating Income	Net Sales	Operating Income
Amounts including SAB 101	$ 255.9	$ 24.5	$ 37.6	$ 5.0
SAB 101 adjustment	(14.2)	(5.3)	(1.3)	(1.7)
Amounts excluding SAB 101	$ 241.7	$ 19.2	$ 36.3	$ 3.3

Specialty Metals Segment

Net sales for the quarter ended September 30, 2001 for this segment, which aggregates the Specialty Alloys Operations (SAO), Titanium, and Carpenter Powder Products (CPP) of Carpenter were $215.7 million, which were $26.0 million lower than in the same quarter a year ago. SAO sales decreased by 13 percent because of lower stainless steel shipments due to weaker demand in the automotive, industrial and consumer markets, due in part to a high level of imports of bar, rod and wire. This volume drop was partially offset by higher shipments of special alloys to the aerospace and medical markets and a richer sales mix. Titanium sales increased 37 percent in the first quarter versus a year ago. Sales benefited from strong demand for aerospace and medical products and improved pricing. However, CPP’s sales declined 33 percent from the same period a year ago primarily because of lower tool steel sales due to depressed automotive market conditions.

Operating income for the Specialty Metals segment was $12.3 million, which was $ 6.9 million, lower than last year. This decrease was due primarily to SAO's lower shipment levels, lower production levels, and higher depreciation costs, offset by lower raw material costs, the elimination of goodwill amortization pursuant to SFAS 142 and an improved sales mix.

Engineered Products Segment

Net sales for this segment decreased about 2 percent. This group of companies has experienced strong demand related to aerospace, nuclear, power generation and industrial gas turbine applications. However, demand for automotive-related products has been weak, and demand for certain telecommunication products has been impacted by the general industry slowdown. Operating income was $3.9 million which was $.6 million higher than last year. The profit improvement was primarily due to lower administrative expenses, including the elimination of goodwill amortization pursuant to SFAS 142.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued

Net Pension Credit:

The net pension credit represents the income relating to Carpenter’s overfunded defined benefit pension plan less the expense for the post retirement benefit plans and the other underfunded defined benefit pension plans. The net pension credit was $4.3 million in the first quarter versus $10.1 million last year. The net pension credit is chiefly a result of the overfunded position of Carpenter's defined benefit pension plan. The lower level of the net pension credit versus the prior year was due primarily to the equity markets' investment losses on the pension and post retirement plan assets during fiscal 2001. This unfavorable variance from the previous year's level of net pension credits will continue for the balance of fiscal 2002.

Cash Flow and Financial Condition:

Carpenter has maintained the ability to provide 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.

During the three months ended September 30, 2001, Carpenter's free cash flow (cash flow provided before financing activities less dividends paid) was $6.3 million versus $8.6 million a year ago. Cash from operations was $23.7 million for the current quarter as compared to $25.6 million a year ago.

Capital expenditures for plant, equipment and software consumed $9.8 million in cash during the first three months of fiscal 2002 versus $14.4 million for the same year ago period. Total capital expenditures for all of fiscal 2002 are anticipated to be about $40 million.

In August 2001, Carpenter issued $100 million of 10-year medium-term notes with a coupon of 7.625%. Carpenter used the net proceeds from the sale of the notes to reduce the outstanding principal amount under its short-term revolving credit agreements.

Financing of $275 million is available to the company under three revolving credit agreements with four financial institutions. As of September 30, 2001, $194.7 million was available under these facilities. The company is currently working with a group of financial institutions to refinance its three revolving credit facilities, which have maturity dates ranging from November 2001 through February 2002. As part of its refinancing, Carpenter intends to establish an accounts receivable purchase facility. Carpenter anticipates that accounts receivable sold under this facility will be less than 50% of total net accounts receivable and approximately 5% of tangible assets. The establishment of an accounts receivable purchase facility will be subject to negotiation and execution of documentation. In addition to the accounts receivable purchase facility, Carpenter intends to establish a five-year revolving credit facility and a 364-day revolving credit facility. The establishment of these facilities is subject to negotiation of terms and conditions and execution of documentation.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued

Total debt decreased $5.9 million since June 30, 2001 to a level of $516.8 million or 44.6 percent of capital, which was the same percent of capital at June 30, 2001.

At September 30, 2001, current assets exceeded current liabilities by $212.7 million (a ratio of 1.9 to 1). The current ratio is conservatively stated because certain inventories are valued $97.5 million less than the current cost as a result of using the LIFO method.

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

Environmental:

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. No additional accrual was made for the three months ended September 30, 2001. For the three months ended September 30, 2000, the liability for environmental remediation costs was increased by $.6 million which was included in cost of sales. The liability for environmental remediation costs remaining at September 30, 2001 was $6.6 million. The estimated range of the reasonably possible future costs of remediation at superfund sites and at Carpenter-owned operating facilities is between $6.6 million and $13.3 million.

Carpenter did not enter into any settlements of litigation relating to insurance coverages for environmental remediation sites in fiscal 2002. However, during fiscal 2001, Carpenter entered into partial settlements of litigation relating to insurance coverages for certain environmental remediation sites and recognized income before income taxes of $.6 million for the three months ended September 30, 2000. This income was reported in other income.

Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based upon information presently available, such future costs are not expected to have a material effect on Carpenter's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued

Future Outlook:

Because of the tragic events of September 11th and the corresponding effects on many economic drivers, it is difficult to project earnings beyond the second quarter with any degree of accuracy. Therefore, based on our current view of business, Carpenter now anticipates that earnings per share for the second quarter of fiscal 2002 will be in the range of $.15 to $.25 per diluted share.

Forward-looking Statements

This Form 10-Q contains various "Forward-looking Statements" pursuant to the "safe harbor" provisions 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, industrial products and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) economic, political or military conditions resulting from the tragic events of September 11th; 3) the continuing high levels of stainless steel imports into the United States; 4) 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; 5) the ability of Carpenter to recoup increased costs of electricity, natural gas and raw materials through increased prices and surcharges; 6) worldwide excess manufacturing capacity for certain alloys which Carpenter produces and fluctuations in currency exchange rates, resulting in increased competition and downward pricing pressure on certain Carpenter products; 7) fluctuations in financial markets that could impact the valuation of the assets in Carpenter's pension trusts and the accounting for pension assets; 8) the critical importance of certain raw materials used by Carpenter, some of which are acquired from foreign sources and may be located in countries subject to unstable political and economic conditions, which may affect the prices or supply of thesematerials; 9) the susceptibility of export sales to the effects of export controls, changes in legal and regulatory requirements, policy changes affecting the markets, changes in tax laws and tariffs, exchange rate fluctuations and political and economic instability; and 10) the effects on operations of changes in domestic and foreign governmental laws and public policy, including environmental regulations. 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 4. Submission of Matters to a Vote of Security Holders.

1. On October 22, 2001, Carpenter Technology Corporation held its 2001 Annual Meeting of Stockholders.
   
   
2. At the 2001 Annual Meeting, stockholders of Carpenter elected the following Directors to a three-year term which will expire at the 2004 Annual Meeting of Stockholders: Robert J. Lawless, Robert N. Pokelwaldt, Kathryn C. Turner and Stephen M. Ward, Jr. Voting for these Directors was as follows:
   

	For	Withheld
Robert J. Lawless	17,600,866	362,273
Robert N. Pokelwaldt	17,556,197	406,942
Kathryn C. Turner	17,581,811	381,328
Stephen M. Ward, Jr.	17,599,568	363,571

The following are the other Directors whose terms continued following the 2001 Annual Meeting: Marcus C. Bennett, William S. Dietrich II, Dennis M. Draeger, J. Michael Fitzpatrick, William J. Hudson, Marlin Miller, Jr., Peter C. Rossin and Kenneth L. Wolfe.

3. Stockholders also approved the appointment of PricewaterhouseCoopers LLP as independent public accountants for Carpenter for fiscal 2002. The voting on this matter was as follows:

	For	Against	Abstain
Appointment of PricewaterhouseCoopers	17,770,538	148,044	44,557

Item 6. Exhibits and Reports on Form 8-K.

1. The following document is filed as an Exhibit:

Exhibits 3B and 4A. By-Laws of Carpenter Technology Corporation, as amended effective October 22,
2001.

2. Current Reports on Form 8-K were filed on behalf of Carpenter on July 10, 2001, July 27, 2001 and August 20, 2001. The Reports were dated respectively June 26, 2001, July 26, 2001 and August 13, 2001 and covered Item 5, Other Events. No financial statements were filed with these Reports.

Items 2, 3 and 5 are omitted as the answer is negative or the items are not applicable.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned duly authorized officer, on its behalf and in the capacity indicated.

Carpenter Technology Corporation

(Registrant)

Date: November 14, 2001 _____________________________
Terrence E. Geremski
Senior Vice President - Finance
and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.
Title
Page

3.		Articles of Incorporation and By-Laws
	B.	By-Laws as amended effective October 22, 2001 are attached as an Exhibit to this Quarterly Report on Form 10-Q.
4.		Instruments Defining Rights of Security Holders, Including Indentures
	A.	By-Laws as amended effective October 22, 2001, set forth in Exhibit 3B above.

E-1

EX-3

By-Laws

of

CARPENTER TECHNOLOGY CORPORATION
As Last Amended Effective October 22, 2001

1.      MEETINGS OF STOCKHOLDERS.

         1.1        Annual Meeting. The annual meeting of stockholders shall be held during the last two weeks of October in each year, and shall be held at a place and time determined by the Board of Directors (the "Board").

         At an annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, or (b) otherwise brought before the meeting by or at the direction of the Board or by a stockholder in accordance with the following provisions. In addition to any other applicable requirements, for business to be brought before an annual meeting by a stockholder, the stockholder must have given notice thereof in writing to the Secretary of the Corporation, which must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of the stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder must be so received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business.

         Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 1.1.

         The chairperson of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.1 and, if the chairperson should so determine, any such business not properly brought before the meeting shall not be transacted.

       1.2        Special Meetings. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, special meetings of the stockholders may be called only by the Board pursuant to a resolution approved by a majority of the entire Board. At a special meeting of the stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board.

       1.3        Place of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place specified in the notice by the person or persons calling the meeting.

       1.4        Notice of Meetings. Written notice of each meeting of stockholders shall be mailed to each stockholder entitled to vote at the meeting, not less than 20 nor more than 40 days before the meeting, and shall state the time and place of the meeting and the purposes for which it is called.

       1.5        Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of any business, except as otherwise provided by law. In the absence of a quorum any officer entitled to preside at or act as secretary of such meeting shall have the power to adjourn the meeting from time to time until a quorum is present, without further notice other than announcement at the meeting of the adjourned time and place (provided that if a meeting is adjourned for more than 30 days, or if a new record date is set, a new notice must be given). At any adjourned meeting at which a quorum is present, any action may be taken which might have been taken at the meeting as originally called.

       1.6        Voting; Proxies. Stockholders may attend meetings and vote either in person or by proxy. Without limiting the manner in which a stockholder may authorize another person or persons to act for the stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority:

                     (i)     A stockholder may execute a writing authorizing another person or persons to act for the stockholder as proxy. Execution may be accomplished by the stockholder or an authorized officer, director, employee or agent signing such writing or causing their signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature.

                     (ii)    A stockholder may authorize another person or persons to act for the stockholder as proxy by transmitting or authorizing the transmission of a telegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram or other electronic transmission was authorized by the stockholder.

         Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Corporate action to be taken by stockholder vote, other than the election of directors, shall be authorized by a majority of the votes cast at a meeting of stockholders at which a quorum is present, except as otherwise provided by law, by the Certificate of Incorporation, as amended from time to time, or by these By-Laws. Directors shall be elected in the manner provided in Section 2.l of these By-Laws.

         1.7        Inspectors of Election. In advance of every meeting of the stockholders, the Board by resolution or the Chairperson or President shall appoint one or more persons to act as inspectors of election at the meeting. One or more other persons may be designated as alternate inspectors to replace any inspector who is unable or unwilling to act at such meeting. If no inspector or alternate inspector has been appointed or is present, ready and willing to act at any meeting, the chairperson of the meeting shall appoint one or more persons to act as inspectors at the meeting. Each inspector, before discharging the duties of office, shall faithfully take and sign an oath to execute the duties of inspector with strict impartiality and according to the best of the inspector's ability. The inspectors shall have the duties prescribed by law. Any person, including persons who serve the Corporation in other capacities, including without limitation, as officers, employees, agents or representatives of the Corporation, may act as an inspector, except that no candidate for the office of director shall act as an inspector of any election for directors.

         1.8        Opening and Closing of the Polls. At every meeting of the stockholders, the chairperson of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting.

2.      BOARD OF DIRECTORS.

         2.1        Number, Election and Term of Directors. The business of the Corporation shall be managed under the direction of the Board, which shall consist of not less than three nor more than seventeen directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board. A majority of the Board must be persons who are neither current nor former officers or employees of the Corporation or its subsidiaries. The Board of Directors shall be divided into three classes. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board. The term of office of the first class will expire at the first annual meeting of the stockholders after the initial classification of the Board, that of the second class will expire at the second meeting after the initial classification of the Board, and that of the third class will expire at the third annual meeting after the initial classification of the Board. At each annual meeting of the stockholders after such initial classification of the Board, directors shall be chosen for a term of three years to succeed those whose terms expire, and shall hold office until the third following annual meeting of stockholders and until the election of their respective successors, subject to the provisions of Section 2.6 hereof. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case may a decrease in the number of directors shorten the term of any incumbent director. Directors shall be elected at each annual meeting of stockholders by a plurality of the votes cast by written ballot. As used in these By-Laws, "entire Board" means the total number of directors which the Corporation would have if there were no vacancies.

         2.2        Quorum and Manner of Acting. A majority of the directors in office (but not less than one-third of the entire Board) shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.7 of these By-Laws. Action of the Board shall be authorized by the vote of a majority of the directors present at the time of the vote, if a quorum is present, unless otherwise provided by law or these By-Laws. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum is present, on notice given as provided in Section 2.5 hereof.

         2.3        Annual and Regular Meetings. Annual meetings of the Board, for the election of officers and consideration of other matters, shall be held either (a) without notice immediately after the annual meeting of stockholders and at the same place, or (b) as soon as practicable after the annual meeting of stockholders on notice as provided in Section 2.5 of these By-Laws. Regular meetings of the Board may be held at such times and places as the Board determines.

         2.4        Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board or the Chief Executive Officer of the Corporation or by three directors, one from each class of directors then in office.

         2.5        Notice of Meetings; Waiver of Notice. Notice of the time and place of each regular and special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director by mailing it to the Director at the Director's residence or usual place of business at least five days before the meeting, or by delivering or telephoning or telegraphing it to the Director at least one day before the meeting. Notice of a special meeting shall also state the general purpose or purposes for which the meeting is called. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting, or who attends the meeting without protesting the lack of notice to him or herself, either before the meeting or when it begins. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at which the adjournment is taken.

         2.6        Resignation and Retirement of Directors. Any director may resign at any time by giving written notice to the Chief Executive Officer or Secretary of the Corporation, to take effect at the time specified therein. The acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make it effective. Unless otherwise provided by resolution of the Board, any director who is also an officer of the Corporation shall retire from the Board upon the earlier of (a) attaining age 65 or (b) retirement as an officer of the Corporation. Unless otherwise provided by resolution of the Board, any Director who is not an Officer of the Corporation shall retire from the Board at the next Annual Meeting of Stockholders after the Director attains the age of 70.

         2.7        Vacancies. Any vacancy in the Board, including one created by an increase in the number of directors, may be filled for the unexpired term by a majority vote of the remaining directors, though not a quorum.

         2.8        Action by Directors Without a Meeting. Any action by the Board or any committee of the Board may be taken without a meeting, if a written consent to the action is signed by all of the members of the Board or committee.

         2.9       Compensation. Directors shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties. A director may also be paid for serving the Corporation, its affiliates or subsidiaries in other capacities.

         2.10     Nominations of Director Candidates. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at meetings of stockholders. Nominations of persons for election to the Board of the Corporation may be made at a meeting of stockholders by (a) the Board, (b) any committee whose responsibilities include director nominations or person appointed by the Board, or (c) any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.10. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of the stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the date on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Schedule 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

         The chairperson of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure and, if the chairperson should so determine, the chairperson shall so declare to the meeting and the defective nomination shall be disregarded.

3.  COMMITTEES.

         3.1        Standing Committees. The Board shall by resolution designate an Audit/Finance Committee, a Corporate Governance Committee, and a Human Resources Committee, each consisting of two or more members of the Board. Unless otherwise provided by Board resolution, any current or former officer or employee of the Corporation or its subsidiaries shall not serve on any standing Committee. The members of each such Committee shall serve at the pleasure of the Board, and the Board shall designate from the membership a Committee chairperson and shall fill any membership vacancies. The Corporate Governance Committee shall determine, from time to time, after consultation with each Committee, the scope of each standing Committee’s responsibilities, which shall be set forth in a written statement to be submitted to the Board for approval. Each such Committee shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board.

         3.2        Executive Committee. The Board may by resolution designate an Executive Committee of four or more members of the Board, which Committee shall have all the authority of the Board except as otherwise provided in the resolution or by law. The members of such Committee shall serve at the pleasure of the Board, and the Board shall designate from among the membership a Committee chairperson and shall fill any membership vacancies.

         3.3        Other Committees. The Board may by resolution provide for such other standing or special committees, composed of two or more members of the Board, and discontinue the same at its pleasure. Each such committee shall have such powers and perform such duties, not inconsistent with law, as may be assigned to it by the Board.

         3.4        Meetings of Committees. Each committee of the Board shall fix its own rules of procedure consistent with the provisions of the Board governing such committee, and shall meet as provided by such rules or by resolution of the Board, and it shall also meet at the call of its chairperson or any two members of such committee. Unless otherwise provided by such rules or by such resolution, the provisions of Article 2 of these By-Laws relating to the place of holding and notice required of meetings of the Board shall govern committees of the Board. A majority of each committee shall constitute a quorum thereof; provided, however, that in the absence of any member of such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board otherwise qualified for membership of such committee to act in the place of such absent member. The vote of a majority of such quorum at a duly constituted meeting shall be sufficient to authorize any action within the scope of responsibilities of each committee, unless otherwise provided by the rules of such committee or by resolution of the Board. Each committee shall keep minutes of its meetings and all action taken by such committee shall be reported to the Board at its next meeting.

4.  OFFICERS.

         4.1        Executive and Other Officers. The officers of the Corporation shall be a Chairperson of the Board (who shall be elected from among the Directors); a President, if the Board chooses to elect one; one or more Vice Presidents, a Treasurer; a Secretary and a Controller (any of whom may be designated as executive officers). The offices of Chairperson and President may be held by the same person, and the offices of Treasurer, Controller or Secretary may be filled by the same person who may also be a Vice President. The Board shall designate the Chairperson or the President as Chief Executive Officer of the Corporation. The Officers specifically listed above, or otherwise designated as executive officers, shall be elected annually by the Board, and each such officer shall hold office until the next annual meeting of the Board and until the election of his successor, or until his earlier resignation or removal.

         The Board may elect other officers including Vice Presidents (not otherwise designated by the Board as executive officers), Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, each of whom shall hold office for such period and have such powers and duties as the Board determines.

         4.2         Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Section 4.l of these By-Laws for election or appointment to the office.

         4.3        Chairperson of the Board. The Chairperson of the Board, if one is elected, shall preside at all meetings of the Board and of the stockholders. The Chairperson shall perform all duties incident to the office of Chairperson of the Board and shall have such other powers and duties as the Board assigns to that individual. In the absence of the Chairperson, the Board shall designate a member of the Board as temporary Chairperson.

         4.4        The President. The President shall perform all duties incident to the office of President and such other duties as the Board assigns to that individual.

         4.5        Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board, have the general management and control of the business and affairs of the Corporation and, in general, shall have all powers and perform all duties incident to the office of Chief Executive Officer.

         4.6        Vice Presidents. Each Vice President shall have such designation as the Board may determine and such powers and duties as the Board or the Chief Executive Officer, subject to the control of the Board, assigns to that individual. One of the Vice Presidents, who is an executive officer, may be designated by the Board to act, in the absence of the Chief Executive Officer, in the Chief Executive Officer's place.

         4.7        The Treasurer. The Treasurer shall, subject to the direction of the Chief Executive Officer, have charge of all funds, securities, notes, receipts and disbursements of the Corporation. The Treasurer shall be responsible for the deposit of Corporation funds in or withdrawal from such banks or other depositories as shall be selected by the Chief Executive Officer with the approval of the Board, and shall provide all necessary cash and other records to the Controller. The Treasurer shall perform such other duties as treasurers of corporations usually have or as the Chief Executive Officer or the Vice President to whom the Treasurer reports assigns to that individual.

         4.8        The Secretary. The Secretary shall be the secretary of, and keep the minutes of, all meetings of the Board and of the stockholders, shall be responsible for giving notice of all meetings of the Board and of the stockholders and shall keep the seal and shall apply it to any instrument requiring it. The Secretary shall be custodian of the corporate records (except accounting records), contracts and documents, and shall have such other powers and duties as the Chief Executive Officer or the Vice President to whom the Secretary reports assigns to that individual. In the absence of the Secretary from meetings, the minutes shall be kept by the person appointed for that purpose by the presiding officer.

         4.9        The Controller. The Controller shall be the officer in charge of accounts of the Corporation and shall be responsible for the maintenance of adequate accounting and internal control procedures, and adequate records of the Corporation, for the preparation of financial statements and reports on the operation of the business. The Controller shall be responsible for the administration of the office and shall have such other powers and duties as the Board, the Chief Executive Officer or the Vice President to whom the Controller reports assigns to that individual.

         4.10      Division Officers. For administrative and management purposes, the Chief Executive Officer, with the approval of the Board, may appoint such division officers with such titles, as deemed necessary or advisable for the transaction of the business of the Corporation. Any division officer may be removed from office as a division officer, either with or without cause, at any time, by the Board, the Chief Executive Officer or by any other executive officer of the Corporation or officer of a division to whom such division officer may at the time be responsible. A division officer shall not be an officer of the Corporation by virtue of his or her position as such division officer. Division officers shall perform such duties as shall be assigned to them from time to time by the Chief Executive Officer but no division officer shall execute any deed, lease or other conveyance or transfer of real property of the Corporation, any note or other evidence of indebtedness or any mortgage or other security for indebtedness.

5.  SHARES.

         5.1        Certificates. The shares of the Corporation shall be represented by certificates in the form approved by the Board, unless the Board by resolution provides that some or all classes or series of stock shall be uncertificated shares (provided that no such resolution shall apply to shares theretofore represented by a certificate unless and until such certificate is surrendered to the Corporation). Notwithstanding the adoption of such resolution by the Board, every holder of shares represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate representing such shares registered in his or her name on the Corporation's books. Each certificate shall be signed by the Chairperson, the President or a Vice President and by the Secretary or the Treasurer. Any or all the signatures on the certificate may be a facsimile.

         5.2        Transfers. Shares shall be transferable only on the Corporation's books, (and, in the case of shares represented by certificates,) upon surrender of the certificate for the shares, properly endorsed. The Board may require satisfactory surety before issuing a new certificate to replace a certificate claimed to have been lost or destroyed.

         5.3        Transfer Agents and Registrars. The Corporation shall have one or more transfer agents and one or more registrars of its shares, whose respective duties shall be defined by the Board. Unless the Board specifically directs otherwise with respect to a particular certificate, no certificates for shares shall be valid unless countersigned by a transfer agent and unless registered by a registrar.

6.     MISCELLANEOUS.

         6.1        Seal. The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the Corporation's name and the year and state in which it was incorporated.

         6.2        Fiscal Year. The Board may determine the Corporation's fiscal year. Until changed by the Board, the Corporation's fiscal year shall end on June 30.

         6.3        Voting of Shares in Other Corporations. Shares in other corporations which are held by the Corporation may be represented and voted by the Chairperson, the President or a Vice President of this Corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares.

         6.4         Indemnification of Officers, Directors, Employees and Agents. The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law as amended from time to time, indemnify all persons whom it may indemnify under that Section.

         For these purposes an employee or agent shall be deemed to have acted in good faith only if his or her action were within the scope of employment as defined by an agreement with the Corporation or in accordance with the rules of the Corporation or an authorized officer thereof.

         6.5        Amendments. These By-Laws may be amended, repealed or adopted by the affirmative vote of a majority of the entire Board or of the holders of two-thirds of the issued and outstanding stock of the Corporation entitled to vote.

BYLAWS.RL.10.01