##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 ý
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For Quarterly Period Ended
    
    June 30, 2007
    
    or,
 o
    
    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
    
    1-5415
  
 (Exact name of registrant as specified in its charter)
 Maryland
    
    36-0879160(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation of organization)3400 North Wolf Road, Franklin Park, Illinois
    
    60131(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone, including area code
    
    847/455-7111
  
 (Former name, former address and former fiscal year, if changed since last report)
 X
  X
  X
  Class
    
    Outstanding at July 31, 2007Common Stock, $0.01 Par Value
    
    22,037,535 shares




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##### 



PageNumberPart I. Financial InformationItem 1.
    
    Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Income
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6-14Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14-19Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    20Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    21Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 6.
    
    Exhibits
    
    
    21Section 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEO and CFO




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CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in thousands, except per share data)
    
    As ofUnaudited
    
    June 30,
    
    
    Dec 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    13,064
    
    
    $
    9,526Accounts receivable, less allowances of $3,184 at June 30, 2007
and $3,112 at December 31, 2006
    
    
    187,397
    
    
    
    160,999Inventories (principally on last-in, first-out basis)
(latest cost higher by $161,591 at June 30, 2007 and $128,404
at December 31, 2006)
    
    
    247,313
    
    
    
    202,394Other current assets
    
    
    16,940
    
    
    
    18,743Total current assets
    
    
    464,714
    
    
    
    391,662Investment in joint venture
    
    
    15,223
    
    
    
    13,577Goodwill
    
    
    101,848
    
    
    
    101,783Intangible assets
    
    
    62,881
    
    
    
    66,169Prepaid pension cost
    
    
    5,632
    
    
    
    5,681Other assets
    
    
    5,564
    
    
    
    5,850Property, plant and equipment, at costLand
    
    
    5,226
    
    
    
    5,221Building
    
    
    48,944
    
    
    
    49,017Machinery and equipment
    
    
    147,767
    
    
    
    141,090201,937
    
    
    
    195,328Less  accumulated depreciation
    
    
    (131,249
    )
    
    
    (124,930
    )70,688
    
    
    
    70,398Total assets
    
    $
    726,550
    
    
    $
    655,120LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    123,726
    
    
    $
    117,561Accrued liabilities
    
    
    29,689
    
    
    
    30,152Income taxes payable
    
    
    
    
    
    
    931Deferred income taxes  current
    
    
    18,516
    
    
    
    16,339Short-term debt
    
    
    83,840
    
    
    
    123,261Current portion of long-term debt
    
    
    6,823
    
    
    
    12,834Total current liabilities
    
    
    262,594
    
    
    
    301,078Long-term debt, less current portion
    
    
    67,185
    
    
    
    90,051Deferred income taxes
    
    
    30,809
    
    
    
    31,782Other non-current liabilities
    
    
    17,570
    
    
    
    16,302Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value - 10,000,000 shares
authorized; 0 shares outstanding at June 30, 2007 and 12,000 shares
issued and outstanding at December 31, 2006
    
    
    
    
    
    
    11,239Common stock, $0.01 par value  authorized 30,000,000
shares; 22,270,612 shares issued and 22,037,535 shares outstanding
at June 30, 2007; and 17,447,205 shares issued and 17,085,091
shares outstanding at December 31, 2006
    
    
    218
    
    
    
    170Additional paid-in capital
    
    
    177,666
    
    
    
    69,775Retained earnings
    
    
    190,173
    
    
    
    160,625Accumulated other comprehensive loss
    
    
    (14,845
    )
    
    
    (18,504
    )Deferred unearned compensation
    
    
    (1,333
    )
    
    
    (1,392
    )Treasury stock, at cost - 233,077 shares at June 30, 2007
and 362,114 shares at December 31, 2006
    
    
    (3,487
    )
    
    
    (6,006
    )Total stockholders equity
    
    
    348,392
    
    
    
    215,907Total liabilities and stockholders equity
    
    $
    726,550
    
    
    $
    655,120
 The accompanying notes are an integral part of these statements




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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    
    For the Three
    
    For the Six(Dollars in thousands, except per share data)
    
    Months Ended
    
    Months EndedUnaudited
    
    June 30,
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    372,608
    
    
    $
    275,607
    
    
    $
    747,959
    
    
    $
    554,800Costs and expenses:Cost of materials (exclusive of depreciation)
    
    
    270,263
    
    
    
    195,244
    
    
    
    539,713
    
    
    
    391,343Warehouse, processing and delivery expense
    
    
    34,293
    
    
    
    28,981
    
    
    
    69,863
    
    
    
    58,605Sales, general, and administrative expense
    
    
    33,947
    
    
    
    25,071
    
    
    
    70,341
    
    
    
    49,957Depreciation and amortization expense
    
    
    4,977
    
    
    
    2,654
    
    
    
    9,873
    
    
    
    5,097Operating income
    
    
    29,128
    
    
    
    23,657
    
    
    
    58,169
    
    
    
    49,798Interest expense, net
    
    
    (4,163
    )
    
    
    (958
    )
    
    
    (8,424
    )
    
    
    (2,046
    )Income before income taxes and equity earnings of joint venture
    
    
    24,965
    
    
    
    22,699
    
    
    
    49,745
    
    
    
    47,752Income taxes
    
    
    (9,994
    )
    
    
    (9,397
    )
    
    
    (19,871
    )
    
    
    (19,639
    )Net income before equity in earnings of joint venture
    
    
    14,971
    
    
    
    13,302
    
    
    
    29,874
    
    
    
    28,113Equity in earnings of joint venture
    
    
    1,391
    
    
    
    1,056
    
    
    
    2,323
    
    
    
    2,295Net income
    
    
    16,362
    
    
    
    14,358
    
    
    
    32,197
    
    
    
    30,408Preferred stock dividends
    
    
    (350
    )
    
    
    (243
    )
    
    
    (593
    )
    
    
    (485
    )Net income applicable to common stock
    
    $
    16,012
    
    
    $
    14,115
    
    
    $
    31,604
    
    
    $
    29,923Basic earnings per share
    
    $
    0.81
    
    
    $
    0.83
    
    
    $
    1.65
    
    
    $
    1.78Diluted earnings per share
    
    $
    0.78
    
    
    $
    0.76
    
    
    $
    1.59
    
    
    $
    1.62Dividends per common share paid
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.12
 The accompanying notes are an integral part of these statements




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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)
    
    For the Six MonthUnaudited
    

Ended June 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    32,197
    
    
    $
    30,408Adjustments to reconcile net income to net cash
from operating activities:Depreciation and amortization
    
    
    9,873
    
    
    
    5,097Amortization of deferred gain
    
    
    (447
    )
    
    
    (295
    )Loss on disposal of fixed assets
    
    
    1,327
    
    
    
    Impairment of long-lived asset
    
    
    589
    
    
    
    Equity in earnings from joint venture
    
    
    (2,323
    )
    
    
    (2,295
    )Dividends from joint venture
    
    
    715
    
    
    
    825Stock compensation expense
    
    
    2,515
    
    
    
    1,945Deferred tax provision
    
    
    1,498
    
    
    
    (1
    )Excess tax benefits from stock-based payment arrangements
    
    
    (148
    )
    
    
    (811
    )Increase (decrease) from changes, net of acquisitions, in:Accounts receivable
    
    
    (25,153
    )
    
    
    (21,644
    )Inventories
    
    
    (43,611
    )
    
    
    (20,089
    )Prepaid pension costs
    
    
    49
    
    
    
    1,909Other current assets
    
    
    2,762
    
    
    
    (1,118
    )Other assets
    
    
    2,035
    
    
    
    (755
    )Accounts payable
    
    
    5,741
    
    
    
    20,210Accrued liabilities
    
    
    2,454
    
    
    
    1,471Income tax payable
    
    
    (1,861
    )
    
    
    (6,588
    )Postretirement benefit obligations and other liabilities
    
    
    626
    
    
    
    482Net cash (used in) provided by operating activities
    
    
    (11,162
    )
    
    
    8,751Cash flows from investing activities:Capital expenditures
    
    
    (8,371
    )
    
    
    (7,804
    )Proceeds from sale of equipment
    
    
    23
    
    
    
    Net cash used in investing activities
    
    
    (8,348
    )
    
    
    (7,804
    )Cash flows from financing activities:Net repayments of short-term debt
    
    
    (39,560
    )
    
    
    Repayments of long-term debt
    
    
    (28,899
    )
    
    
    (258
    )Payment of debt issuance fees
    
    
    (21
    )
    
    
    Preferred stock dividend
    
    
    (345
    )
    
    
    (485
    )Dividends paid
    
    
    (2,056
    )
    
    
    (2,018
    )Net proceeds from issuance of common stock
    
    
    93,196Exercise of stock options and other
    
    
    210
    
    
    
    6,174Excess tax benefits from stock-based payment arrangements
    
    
    148
    
    
    
    811Net cash provided by financing activities
    
    
    22,673
    
    
    
    4,224Effect of exchange rate changes on cash and cash equivalents
    
    
    375
    
    
    
    419Net increase in cash and cash equivalents
    
    
    3,538
    
    
    
    5,590Cash and cash equivalents  beginning of year
    
    $
    9,526
    
    
    $
    37,392Cash and cash equivalents  end of period
    
    $
    13,064
    
    
    $
    42,982Supplemental disclosure of cash flow information  cash paid during period:Interest
    
    $
    8,413
    
    
    $
    2,953Income taxes
    
    $
    21,050
    
    
    $
    25,093
 The accompanying notes are an integral part of these statements




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##### Table of Contents



(Unaudited)
 1.
    
    Condensed Consolidated Financial StatementsThe condensed consolidated financial statements included herein have been prepared by A.M.
Castle & Co. and subsidiaries (the Company), without audit, pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission (SEC). The Condensed Consolidated
Balance Sheet at December 31, 2006 is derived from the audited financial statements at that
date. The Company believes that the disclosures are adequate and make the information not
misleading; however, certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations
of the SEC. In the opinion of management, the unaudited statements, included herein, contain all
adjustments (consisting of only normal recurring adjustments) necessary to present fairly the
financial position, the cash flows and the results of operations for the periods then ended. It
is suggested that these condensed consolidated financial statements be read in conjunction with
the financial statements and the notes thereto included in the Companys latest Annual Report on
Form 10-K. The 2007 interim results reported herein may not necessarily be indicative of the
results of the Companys operations for the full year.The amounts presented on the Condensed Consolidated Statement of Cash Flows for the six months
ended June 30, 2006 have been corrected to report dividends from joint venture as a cash flow
from operating activities to conform to the 2007 presentation. The dividends from joint venture
were previously reported as a cash flow from investing activities.The Company had non-cash investing activities for the six months ended June 30, 2007 consisting
of $3.0 million in profit sharing contributions made in treasury shares and $0.3 million in
preferred share dividends paid in shares of common stock.2.
    
    New Accounting Standards  Issued Not Yet AdoptedIn September 2006 the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurement and in February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities. SFAS No. 157 was issued to eliminate the diversity in practice that exists due
to the different definitions of fair value and the limited guidance in applying these
definitions. SFAS No. 157 encourages entities to combine fair value information disclosed under
SFAS No. 157 with other accounting pronouncements, including SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, where applicable. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007. SFAS No. 159 permits
entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions. SFAS No. 159 is
effective as of the beginning of an entitys first fiscal year that begins after November 15,
2007. The Company does not expect the adoption of these statements to materially affect its
consolidated financial results of operations, cash flows or its financial position.




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3.
    
    Earnings per shareFor the period through the conversion of the preferred stock in connection with the secondary
offering on May 24, 2007, the Companys preferred stockholders participated in dividends paid on
the Companys common stock on an if converted basis. In accordance with Emerging Issues Task
Force Issue No. 03-6, Participating Securities and the Two-Class Method under SFAS No. 128,
Earnings per Share, basic earnings per share is computed by applying the two-class method to
compute earnings per share. The two-class method is an earnings allocation method under which
earnings per share is calculated for each class of common stock and participating security
considering both dividends declared and participation rights in undistributed earnings as if all
such earnings had been distributed during the period. Diluted earnings per share is computed by
dividing net income by the weighted average number of shares of common stock plus common stock
equivalents. Common stock equivalents consist of stock options, restricted stock awards and
convertible preferred stock shares, which have been included in the calculation of weighted
average shares outstanding using the treasury stock method. In accordance with SFAS No. 128,
the following table is a reconciliation of the basic and diluted earnings per share calculations
for the six months ended June 30, 2007 and 2006 (in thousands, except per share data):
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income
    
    $
    16,362
    
    
    $
    14,358
    
    
    $
    32,197
    
    
    $
    30,408Preferred dividends distributed
    
    
    (350
    )
    
    
    (243
    )
    
    
    (593
    )
    
    
    (485
    )Undistributed earnings
    
    $
    16,012
    
    
    $
    14,115
    
    
    $
    31,604
    
    
    $
    29,923Undistributed earnings attributable to:Common stockholders
    
    $
    15,392
    
    
    $
    14,115
    
    
    $
    29,730
    
    
    $
    29,923Preferred stockholders, as if converted
    
    
    620
    
    
    
    
    
    
    
    1,874
    
    
    
    Total undistributed earnings
    
    $
    16,012
    
    
    $
    14,115
    
    
    $
    31,604
    
    
    $
    29,923Denominator:Weighted average common shares
outstanding
    
    
    18,985
    
    
    
    16,653
    
    
    
    18,016
    
    
    
    16,657Effect of dilutive securities:Outstanding employee and director
common stock options
    
    
    780
    
    
    
    360
    
    
    
    786
    
    
    
    305Convertible preferred stock
    
    
    1,196
    
    
    
    1,794
    
    
    
    1,495
    
    
    
    1,794Denominator for diluted earnings per
share
    
    
    20,961
    
    
    
    18,807
    
    
    
    20,277
    
    
    
    18,756Basis earnings per common share
    
    $
    0.81
    
    
    $
    0.83
    
    
    $
    1.65
    
    
    $
    1.78Diluted earnings per common share
    
    $
    0.78
    
    
    $
    0.76
    
    
    $
    1.59
    
    
    $
    1.62Outstanding employee and director
common stock options and restricted
and convertible preferred stock shares
having no dilutive effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4




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4.
    
    DebtShort-term and long-term debt consisted of the following at June 30, 2007 and December 31, 2006
(dollars in thousands):
 June 30,
    
    
    December2007
    
    
    31, 2006SHORT-TERM DEBTU.S. Revolver
    
    $
    65,700
    
    
    $
    108,000Canadian facility
    
    
    700
    
    
    
    Mexico
    
    
    2,350
    
    
    
    1,863Transtar
    
    
    1,135
    
    
    
    1,383Trade acceptances
    
    
    13,955
    
    
    
    12,015Total short-term debt
    
    
    83,840
    
    
    
    123,261LONG-TERM DEBTU.S. Term Loan due in scheduled installments
from 2007 through 2011
    
    
    
    
    
    
    28,5006.76% insurance company loan due in
scheduled installments from 2007 through
2015
    
    
    69,283
    
    
    
    69,283Industrial development revenue bonds due in
varying amounts through 2009
    
    
    3,600
    
    
    
    3,600Other, primarily capital leases
    
    
    1,125
    
    
    
    1,502Total long-term debt
    
    
    74,008
    
    
    
    102,885Less-current portion
    
    
    (6,823
    )
    
    
    (12,834
    )Total long-term portion
    
    
    67,185
    
    
    
    90,051TOTAL SHORT-TERM AND LONG-TERM DEBT
    
    $
    157,848
    
    
    $
    226,146




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6.
    
    Goodwill and Intangible AssetsAcquisition of TranstarOn September 5, 2006, the Company acquired all of the issued and outstanding capital stock of
Transtar Intermediate Holdings #2, Inc. (Transtar), a wholly owned subsidiary of H.I.G.
Transtar Inc. The results of Transtars operations have been included in the consolidated
financial statements since that date. These results and the assets of Transtar are included in
the Companys Metals segment. In accordance with the purchase agreement, the determination of
the final purchase price is subject to a working capital adjustment. The final determination
and agreement on the adjustment has not yet been completed but the Company expects that it will
be finalized by the end of the calendar year. The purchase price adjustment will impact the
final allocation of purchase price to the acquired assets and liabilities. For more information
regarding the acquisition of Transtar, refer to our 2006 Annual Report on Form 10-K.The changes in carrying amounts of goodwill were as follows (dollars in thousands):
 Metals
    
    PlasticsSegment
    
    Segment
    
    TotalBalance as of December 31, 2006
    
    $
    88,810
    
    
    $
    12,973
    
    
    $
    101,783Currency translation
    
    
    65
    
    
    
    
    
    
    
    65Balance as of June 30, 2007
    
    $
    88,875
    
    
    $
    12,973
    
    
    $
    101,848
 The Company performs an annual impairment test on goodwill during the first quarter of each
fiscal year. Based on the test performed during the first quarter of 2007, the Company has
determined that there is no impairment of goodwill.The following summarizes the components of intangible assets at June 30, 2007 and December 31,
2006 (dollars in thousands):
 June 30, 2007
    
    December 31, 2006Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationCustomer Relationships
    
    $
    66,851
    
    
    $
    5,096
    
    
    $
    66,851
    
    
    $
    2,061Non-Compete Agreements
    
    
    1,557
    
    
    
    431
    
    
    
    1,557
    
    
    
    178Total
    
    $
    68,408
    
    
    $
    5,527
    
    
    $
    68,408
    
    
    $
    2,239
 The weighted-average amortization period is 10.8 years, 11 years for customer contracts and 3
years for non-compete agreements. Substantially all of the Companys intangible assets were
acquired as part of the acquisition of Transtar on September 5, 2006.For the six-month period ended June 30, 2007, the aggregate amortization expense was $3.3
million. For the six-month period ended June 30, 2006, the aggregate amortization expense was
immaterial.The following is a summary of the estimated aggregate amortization expense for each of the next
five years (dollars in thousands):




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##### Table of Contents



2007 (July 1 through December 31, 2007)
    
    $
    3,3022008
    
    
    6,6042009
    
    
    6,4412010
    
    
    6,0812011
    
    
    6,0702012
    
    
    6,070
 6.
    
    InventoriesFinal inventory determination under the last-in,first-out (LIFO) method can only be made at the
end of each fiscal year based on the actual inventory levels and costs at that time.
Accordingly, interim LIFO determinations, including those at June 30, 2007, are based solely on
managements estimates of inventory levels and costs. Since future estimates of inventory levels
and costs are subject to certain forces beyond the control of management, interim financial
results are subject to fiscal year-end LIFO inventory valuations.Current replacement cost of inventories exceeded book value by $161.6 million and $128.4
million at June 30, 2007 and December 31, 2006, respectively. Income taxes would become payable
on any realization of this excess from reductions in the level of inventories.The Company has entered into consignment inventory agreements with a few select customers
whereby revenue is not recorded until the customer has consumed product from the consigned
inventory and title has passed. Net sales derived from consigned inventories at customer
locations for 2007 was $10.2 million, or 1.4% of sales. Inventory on consignment at customers
as of June 30, 2007 was $5.2 million, or 2.0%, of consolidated net inventory as reported on the
Companys consolidated balance sheets.7.
    
    Share-Based CompensationThe Company maintains long-term stock incentive and stock option plans for the benefit of
officers, directors and key management employees. The fair value of stock options granted has
been estimated using the Black-Scholes option pricing model. There were no stock options granted
in the first or second quarters of 2007. Other forms of share-based compensation have generally
used the market price of the Companys stock on the date of grant to estimate fair value.In 2005, the Company established the 2005 Performance Stock Equity Plan (the Performance
Plan). Under the Performance Plan, 438,448 stock awards have been granted, of which 79,902
have been forfeited. In the second quarter of 2007, no awards were granted and 3,833 were
forfeited in this plan. The number of shares that could potentially be issued is 717,092.In 2007, the Company established the 2007 Long-Term Incentive Plan (the 2007 Performance
Plan), which is similar in form to the Performance Plan. Under this Plan, 82,400 restricted
stock awards were granted in January 2007 and 38,100 restricted stock awards were granted in
April 2007. None have been forfeited. The number of shares that could potentially be issued
under this plan is 241,000. The grant date fair values range from $25.45 to $34.33. Under the
2007 Performance Plan, the shares related to the awards will be distributed in 2010, contingent
upon meeting company-wide performance goals over the 2007-2009 performance periods.Additionally, 13,014 shares of restricted stock awards were granted in April 2007 to the
non-employee members of the board of directors at a grant date fair value of $34.58 per share.The consolidated expense for all share based compensation plans was $1.1 million and $0.9
million for the three months ended June 30, 2007 and 2006, respectively and $2.5 million
and $1.9 million for the six months ended June 30, 2007 and 2006, respectively. The
unrecognized compensation cost as of June 30, 2007 associated
with all plans is $5.8 million and the weighted average period
over which it is to be expensed is 1.8 years.




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##### Table of Contents



8.
    
    Comprehensive IncomeComprehensive income includes net income and all other non-owner changes to equity that are not
reported in net income. Below is the Companys comprehensive income for the three months ended
June 30, 2007 and 2006 (dollars in millions).
 2007
    
    2006Net income
    
    $
    16.4
    
    
    $
    14.4Foreign currency translation
    
    
    2.6
    
    
    
    1.4Pension cost amortization, net of tax
    
    
    0.5
    
    
    
    Total Comprehensive Income
    
    $
    19.5
    
    
    $
    15.8
 Below is the Companys comprehensive income for the six months ended June 30, 2007 and 2006
(dollars in millions).
 2007
    
    2006Net income
    
    $
    32.2
    
    
    $
    30.4Foreign currency translation
    
    
    2.7
    
    
    
    1.1Pension cost amortization, net of tax
    
    
    1.0
    
    
    
    Total Comprehensive Income
    
    $
    35.9
    
    
    $
    31.5
 The total accumulated other comprehensive losses at June 30, 2007 and December 31, 2006
comprised (dollars in millions):
 June 30,
    
    December 31,2007
    
    2006Foreign currency valuation
    
    $
    6.3
    
    
    $
    3.6Unrecognized pension and postretirement
benefit costs, net of cash
    
    
    (21.1
    )
    
    
    (22.1
    )Total Accumulated Other Comprehensive Loss
    
    $
    (14.8
    )
    
    $
    (18.5
    )
 9.
    
    Segment ReportingThe Company distributes and performs processing on both metals and plastics. Although the
distribution processes are similar, different customer markets, supplier bases and types of
products exist. Additionally, our Chief Executive Officer reviews and manages these two
businesses separately. As such, these businesses are considered segments according to SFAS No.
131 Disclosures about Segments of an Enterprise and Related Information and are reported
accordingly in the Companys consolidated financial statements.




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##### Table of Contents



Net
    
    Operating
    
    Capital
    
    Depreciation &(dollars in millions)
    
    Sales
    
    Income
    
    Expenditures
    
    Amortization2007Metals Segment
    
    $
    343.3
    
    
    $
    29.4
    
    
    $
    5.6
    
    
    $
    4.7Plastics Segment
    
    
    29.3
    
    
    
    1.7
    
    
    
    0.6
    
    
    
    0.3Other
    
    
    
    
    
    
    (2.0
    )
    
    
    
    
    
    
    Consolidated
    
    $
    372.6
    
    
    $
    29.1
    
    
    $
    6.2
    
    
    $
    5.02006Metals Segment
    
    $
    244.8
    
    
    $
    23.3
    
    
    $
    5.1
    
    
    $
    2.5Plastics Segment
    
    
    30.8
    
    
    
    2.8
    
    
    
    0.3
    
    
    
    0.2Other
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    Consolidated
    
    $
    275.6
    
    
    $
    23.7
    
    
    $
    5.4
    
    
    $
    2.7
 Other  Operating loss includes the costs of executive, finance and legal departments, and
other corporate activities which support both the metals and plastics segments of the
Company.The following is the segment information for the six months ended June 30, 2007 and 2006:
 Net
    
    Operating
    
    Capital
    
    Depreciation &(dollars in millions)
    
    Sales
    
    Income
    
    Expenditures
    
    Amortization2007Metals Segment
    
    $
    690.0
    
    
    $
    59.8
    
    
    $
    7.4
    
    
    $
    9.3Plastics Segment
    
    
    58.0
    
    
    
    3.2
    
    
    
    1.0
    
    
    
    0.6Other
    
    
    
    
    
    
    (4.8
    )
    
    
    
    
    
    
    Consolidated
    
    $
    748.0
    
    
    $
    58.2
    
    
    $
    8.4
    
    
    $
    9.92006Metals Segment
    
    $
    495.4
    
    
    $
    49.9
    
    
    $
    7.2
    
    
    $
    4.5Plastics Segment
    
    
    59.4
    
    
    
    4.5
    
    
    
    0.6
    
    
    
    0.6Other
    
    
    
    
    
    
    (4.6
    )
    
    
    
    
    
    
    Consolidated
    
    $
    554.8
    
    
    $
    49.8
    
    
    $
    7.8
    
    
    $
    5.1
 Other  Operating loss includes the costs of executive, finance and legal departments, and
other corporate activities which support both the metals and plastics segments of the Company.
  June 30,
    
    December 31,(dollars in millions)
    
    2007
    
    2006Metals Segment
    
    $
    662.8
    
    
    $
    593.7Plastics Segment
    
    
    48.6
    
    
    
    47.8Other
    
    
    15.2
    
    
    
    13.6Consolidated
    
    $
    726.6
    
    
    $
    655.1




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##### Table of Contents



10.
    
    Pension and Postretirement BenefitsThe following are the components of the net pension and postretirement benefit expenses (in
thousands):
 For the Three Months EndedJune 30,2007
    
    2006Service cost
    
    $
    934.5
    
    
    $
    917.8Interest cost
    
    
    1,911.1
    
    
    
    1,805.8Expected return on plan assets
    
    
    (2,520.0
    )
    
    
    (2,423.9
    )Amortization of prior service cost
    
    
    26.4
    
    
    
    26.4Amortization of net loss
    
    
    787.0
    
    
    
    945.8Net periodic cost
    
    $
    1,139.0
    
    
    $
    1,271.9
 For the Six Months EndedJune 30,2007
    
    2006Service cost
    
    $
    1,869.0
    
    
    $
    1,835.6Interest cost
    
    
    3,822.2
    
    
    
    3,611.6Expected return on plan assets
    
    
    (5,040.0
    )
    
    
    (4,847.8
    )Amortization of prior service cost
    
    
    52.8
    
    
    
    52.8Amortization of net loss
    
    
    1,574.0
    
    
    
    1,891.6Net periodic cost
    
    $
    2,278.0
    
    
    $
    2,543.8
 As of June 30, 2007, the Company has not made any cash contributions to its pension plans
for this fiscal year and does not anticipate making any contributions for the balance of
2007.
 11.
    
    Commitments and Contingent LiabilitiesAt June 30, 2007, the Company had $5.3 million of irrevocable letters of credit
outstanding, $1.7 million of which is for compliance with the insurance reserve
requirements of its workers compensation insurance carrier. The remaining $3.6 million is
in support of the outstanding industrial revenue bonds. The Company is the defendant in
several lawsuits arising out of the conduct of its business. These lawsuits are incidental
and occur in the normal course of the Companys business affairs. It is the opinion of the
Company, based on current knowledge that no uninsured liability will result from the
outcome of this litigation that would have a material adverse effect on the consolidated
results of operations, financial condition or cash flows of the Company.12.
    
    Income TaxesIn June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes  an interpretation of FASB No. 109. This interpretation clarifies the accounting
for uncertainty in income taxes recognized in an entitys financial statements in accordance
with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and




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##### Table of Contents



measurement attribute for financial statement disclosure of tax positions taken or expected to
be taken on a tax return.
    
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Financial Review
  Executive Overview
 Economic Trends and Current Business Conditions
   YEAR
    
    Qtr 1
    
    Qtr 2
    
    Qtr 3
    
    Qtr 42005
    
    
    55.7
    
    
    
    53.2
    
    
    
    55.8
    
    
    
    57.22006
    
    
    55.6
    
    
    
    55.2
    
    
    
    53.8
    
    
    
    50.92007
    
    
    50.8
    
    
    
    55.2




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##### Table of Contents



Results of Operations: Second Quarter 2007 Comparisons to Second Quarter 2006
  Quarter Ended(dollars in millions)
    
    June 30,
    
    Fav/(Unfav)2007
    
    2006
    
    $ Change
    
    % ChangeNet SalesMetals
    
    $
    343.3
    
    
    $
    244.8
    
    
    $
    98.5
    
    
    
    40.2
    %Plastics
    
    
    29.3
    
    
    
    30.8
    
    
    
    (1.5
    )
    
    
    (4.9
    )%Total Net Sales
    
    $
    372.6
    
    
    
    275.6
    
    
    $
    97.0
    
    
    
    35.2
    %Cost of MaterialsMetals
    
    $
    250.7
    
    
    $
    174.8
    
    
    $
    75.9
    
    
    
    43.4
    %% of Metals Sales
    
    
    73.0
    %
    
    
    71.4
    %
    
    
    
    
    
    
    (1.6
    )%Plastics
    
    
    19.6
    
    
    
    20.4
    
    
    
    (0.8
    )
    
    
    (3.9
    )%% of Plastics Sales
    
    
    66.9
    %
    
    
    66.2
    %
    
    
    
    
    
    
    (0.7
    )%Total Cost of Materials
    
    $
    270.3
    
    
    $
    195.2
    
    
    $
    75.1
    
    
    
    38.5
    %% of Total Net Sales
    
    
    72.5
    %
    
    
    70.8
    %
    
    
    
    
    
    
    (1.7
    )%Other Operating Costs and
ExpensesMetals
    
    $
    63.2
    
    
    $
    46.7
    
    
    $
    16.5
    
    
    
    35.3
    %Plastics
    
    
    8.0
    
    
    
    7.6
    
    
    
    0.4
    
    
    
    5.3
    %Other
    
    
    2.0
    
    
    
    2.4
    
    
    
    (0.4
    )
    
    
    (16.7
    )%Total Other Operating
Costs & Expense
    
    $
    73.2
    
    
    $
    56.7
    
    
    $
    16.5
    
    
    
    29.1
    %% of Total Net Sales
    
    
    19.6
    %
    
    
    20.6
    %
    
    
    
    
    
    
    0.9
    %Operating IncomeMetals
    
    $
    29.4
    
    
    $
    23.3
    
    
    $
    6.1
    
    
    
    26.2
    %% of Metals Sales
    
    
    8.6
    %
    
    
    9.5
    %
    
    
    
    
    
    
    (0.9
    )%Plastics
    
    
    1.7
    
    
    
    2.8
    
    
    
    (1.1
    )
    
    
    39.3
    %% of Plastics Sales
    
    
    5.8
    %
    
    
    9.1
    %
    
    
    
    
    
    
    (3.3
    )%Other
    
    
    (2.0
    )
    
    
    (2.4
    )
    
    
    0.4
    
    
    
    16.7
    %Total Operating Income
    
    $
    29.1
    
    
    $
    23.7
    
    
    $
    5.4
    
    
    
    22.8
    %% of Total Net Sales
    
    
    7.8
    %
    
    
    8.6
    %
    
    
    
    
    
    
    (0.8
    )%
 Other  Operating loss includes the costs of executive, finance and legal departments, and
other corporate activities which support both the Metals and Plastics segments of the Company.
 Acquisition of Transtar




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##### Table of Contents



Net Sales:
    Cost of Materials
  Other Operating Expenses and Operating Income:
   Other Income and Expense, Income Taxes and Net Income:
    Results of Operations: Six Months 2007 Comparisons to Six Months 2006
 (dollars in millions)




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##### Table of Contents



Six Months EndedJune 30,
    
    Fav/(Unfav)2007
    
    2006
    
    $ Change
    
    % ChangeNet SalesMetals
    
    $
    690.0
    
    
    $
    495.4
    
    
    $
    194.6
    
    
    
    39.3
    %Plastics
    
    
    58.0
    
    
    
    59.4
    
    
    
    (1.4
    )
    
    
    (2.4
    )%Total Net Sales
    
    $
    748.0
    
    
    $
    554.8
    
    
    $
    193.2
    
    
    
    34.8
    %Cost of MaterialsMetals
    
    $
    500.7
    
    
    $
    351.7
    
    
    $
    149.0
    
    
    
    42.4
    %% of Metals Sales
    
    
    72.6
    %
    
    
    71.0
    %
    
    
    
    
    
    
    (1.6
    )%Plastics
    
    
    39.0
    
    
    
    39.6
    
    
    
    (0.6
    )
    
    
    (1.5
    )%% of Plastics Sales
    
    
    67.2
    %
    
    
    66.7
    %
    
    
    
    
    
    
    (0.5
    )%Total Cost of Materials
    
    $
    539.7
    
    
    $
    391.3
    
    
    $
    148.4
    
    
    
    37.9
    %% of Total Net Sales
    
    
    72.2
    %
    
    
    70.5
    %
    
    
    
    
    
    
    (1.7
    )%Other Operating Costs
and ExpensesMetals
    
    $
    129.5
    
    
    $
    93.8
    
    
    $
    35.7
    
    
    
    38.1
    %Plastics
    
    
    15.8
    
    
    
    15.3
    
    
    
    0.5
    
    
    
    3.3
    %Other
    
    
    4.8
    
    
    
    4.6
    
    
    
    0.2
    
    
    
    4.3
    %Total Other Operating
Costs & Expense
    
    $
    150.1
    
    
    $
    113.7
    
    
    $
    36.4
    
    
    
    32.0
    %% of Total Net Sales
    
    
    20.1
    %
    
    
    20.5
    %
    
    
    
    
    
    
    0.4
    %Operating IncomeMetals
    
    $
    59.8
    
    
    $
    49.9
    
    
    $
    9.9
    
    
    
    19.8
    %% of Metals Sales
    
    
    8.7
    %
    
    
    10.1
    %
    
    
    
    
    
    
    (1.4
    )%Plastics
    
    
    3.2
    
    
    
    4.5
    
    
    
    (1.3
    )
    
    
    28.9
    %% of Plastics Sales
    
    
    5.5
    %
    
    
    7.6
    %
    
    
    
    
    
    
    (2.1
    )%Other
    
    
    (4.8
    )
    
    
    (4.6
    )
    
    
    (0.2
    )
    
    
    4.3
    %Total Operating Income
    
    $
    58.2
    
    
    $
    49.8
    
    
    $
    8.4
    
    
    
    16.9
    %% of Total Net Sales
    
    
    7.8
    %
    
    
    9.0
    %
    
    
    
    
    
    
    (1.2
    )%
 Other  Operating loss includes the costs of executive, finance and legal departments,
and other corporate activities which support both the metals and plastics segments of the
Company.
 Net Sales:
    Cost of Materials:




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##### Table of Contents



Other Operating Expenses and Operating Income:
   Other
Income and Expense, Income Taxes and Net Income:
    Critical Accounting Policies:
  Liquidity and Capital Resources




---



##### Table of Contents



(dollars in thousands):
 Year ending December 31,2007 (for the six months July 1, 2007 to December 31, 2007)
    
    $
    6,4262008
    
    
    7,0052009
    
    
    10,4772010
    
    
    7,2212011
    
    
    7,6402012 and beyond
    
    
    35,239Total debt
    
    $
    74,008
   Commitments and Contingencies




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
    Internal Control  Integrated Framework,
 (b)
    
    Changes in Internal Controls




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##### Table of Contents



Part II. OTHER INFORMATION
 
   
   
  (d) MaximumNumber (orApproximate(c) Total Number
    
    Dollar Value) of(a) Total Number
    
    (b) Average Price
    
    of Shares (or
    
    Shares (or Units)of Shares (or
    
    Paid per
    
    Units) Purchased
    
    that May Yet BePeriod
    
    Units) Purchased
    
    Share (or Unit)
    
    as Part of
    
    PurchasedPublicly Announced
    
    (Under the PlansPlans or Programs
    
    or Programs)April 1 
April 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 1 
May 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1 
June 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 Item 6. Exhibits




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##### Table of Contents



SIGNATURES
  A. M. Castle & Co.(Registrant)Date: August 2, 2007
    
    By:
    
    /s/ Henry J. VeithHenry J. VeithController(Mr. Veith is the Chief Accounting Officer and has been authorized to sign on behalf of the Registrant.)