##### 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
    
    March 31, 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 April 30, 2007Common Stock, $0.01 Par Value
    
    17,451,272 sharesPreferred Stock, $0.01 Par Value
    
    12,000 shares




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##### 



Page 2 of 22  
   PageNumberPart I. Financial InformationItem 1.
    
    Consolidated Financial Statements (unaudited):Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    6-13Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    13-17Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    17-18Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    18-19Item 6.
    
    Exhibits
    
    
    19Certification Pursuant to Section 302 by CEOCertification Pursuant to Section 302 by CFOCertification Pursuant to Section 906 by CEO & CFO




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Page 3 of 22 
 CONSOLIDATED BALANCE SHEETS(Dollars in thousands)
    
    As ofUnaudited
    
    March 31,
    
    
    Dec 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    11,453
    
    
    $
    9,526Accounts receivable, less allowances of $3,268 at March 31, 2007
and $3,112 at December 31, 2006
    
    
    189,934
    
    
    
    160,999Inventories (principally on last-in, first-out basis)
(latest cost higher by $142,984 at March 31, 2007 and $128,404
at December 31, 2006)
    
    
    237,525
    
    
    
    202,394Other current assets
    
    
    10,360
    
    
    
    18,743Total current assets
    
    
    449,272
    
    
    
    391,662Investment in joint venture
    
    
    14,152
    
    
    
    13,577Goodwill
    
    
    101,790
    
    
    
    101,783Intangible assets
    
    
    64,490
    
    
    
    66,169Prepaid pension cost
    
    
    5,657
    
    
    
    5,681Other assets
    
    
    5,955
    
    
    
    5,850Property, plant and equipment, at costLand
    
    
    5,222
    
    
    
    5,221Building
    
    
    48,927
    
    
    
    49,017Machinery and equipment
    
    
    144,348
    
    
    
    141,090198,497
    
    
    
    195,328Less  accumulated depreciation
    
    
    (127,494
    )
    
    
    (124,930
    )71,003
    
    
    
    70,398Total assets
    
    $
    712,319
    
    
    $
    655,120LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    152,822
    
    
    $
    117,561Accrued liabilities
    
    
    30,825
    
    
    
    30,152Income taxes payable
    
    
    2,748
    
    
    
    931Deferred income taxes  current
    
    
    15,746
    
    
    
    16,339Short-term debt
    
    
    125,749
    
    
    
    123,261Current portion of long-term debt
    
    
    12,844
    
    
    
    12,834Total current liabilities
    
    
    340,734
    
    
    
    301,078Long-term debt, less current portion
    
    
    88,338
    
    
    
    90,051Deferred income taxes
    
    
    34,341
    
    
    
    31,782Deferred gain on sale of assets
    
    
    5,419
    
    
    
    5,666Pension and postretirement benefit obligations
    
    
    10,948
    
    
    
    10,636Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value - 10,000,000 shares
authorized; 12,000 shares issued and outstanding
    
    
    11,239
    
    
    
    11,239Common stock, $0.01 par value  authorized 30,000,000
shares; issued and outstanding 17,085,091 at March 31, 2007
and 17,085,091 at December 31, 2006
    
    
    170
    
    
    
    170Additional paid-in capital
    
    
    70,994
    
    
    
    69,775Retained earnings
    
    
    175,194
    
    
    
    160,625Accumulated other comprehensive loss
    
    
    (17,895
    )
    
    
    (18,504
    )Deferred unearned compensation
    
    
    (1,157
    )
    
    
    (1,392
    )Treasury stock, at cost - 362,114 shares at March 31, 2007
and 362,114 shares at December 31, 2006
    
    
    (6,006
    )
    
    
    (6,006
    )Total stockholders equity
    
    
    232,539
    
    
    
    215,907Total liabilities and stockholders equity
    
    $
    712,319
    
    
    $
    655,120
 The accompanying notes are an integral part of these statements




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Page 4 of 22 
 CONSOLIDATED STATEMENTS OF INCOME
    
    For The Three(Dollars in thousands, except per share data)
    
    Months EndedUnaudited
    

March
31,2007
    
    

2006Net sales
    
    $
    375,351
    
    
    $
    279,193Costs and expenses:Cost of materials (exclusive of depreciation)
    
    
    269,450
    
    
    
    196,100Warehouse, processing and delivery expense
    
    
    35,570
    
    
    
    29,625Sales, general, and administrative expense
    
    
    36,394
    
    
    
    24,885Depreciation and amortization expense
    
    
    4,896
    
    
    
    2,444Operating income
    
    
    29,041
    
    
    
    26,139Interest expense, net
    
    
    (4,261
    )
    
    
    (1,087
    )Income before income taxes and equity earnings of
joint venture
    
    
    24,780
    
    
    
    25,052Income taxes
    
    
    (9,877
    )
    
    
    (10,242
    )Net income before equity in earnings of joint venture
    
    
    14,903
    
    
    
    14,810Equity in earnings of joint venture
    
    
    932
    
    
    
    1,239Net income
    
    
    15,835
    
    
    
    16,049Preferred stock dividends
    
    
    (243
    )
    
    
    (242
    )Net income applicable to common stock
    
    $
    15,592
    
    
    $
    15,807Basic earnings per share
    
    $
    0.84
    
    
    $
    0.95Diluted earnings per share
    
    $
    0.81
    
    
    $
    0.86Dividends per common share paid
    
    $
    0.06
    
    
    $
    0.06
 The accompanying notes are an integral part of these statements




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Page 5 of 22 
 CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)
    
    For the Three MonthsUnaudited
    
    Ended Mar 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    15,835
    
    
    $
    16,049Adjustments to reconcile net income to net cash
from operating activities:Depreciation and amortization
    
    
    4,896
    
    
    
    2,444Amortization of deferred gain
    
    
    (223
    )
    
    
    (213
    )Loss on disposal of fixed assets
    
    
    1,340
    
    
    
    Equity in earnings from joint venture
    
    
    (932
    )
    
    
    (1,239
    )Stock compensation expense
    
    
    1,454
    
    
    
    974Deferred tax provision
    
    
    1,649
    
    
    
    (1,117
    )Excess tax benefits from stock-based payment arrangements
    
    
    
    
    
    
    (168
    )Increase (decrease) from changes, net of acquisitions, in:Accounts receivable
    
    
    (28,859
    )
    
    
    (26,712
    )Inventories
    
    
    (35,012
    )
    
    
    (1,846
    )Prepaid pension costs
    
    
    827
    
    
    
    1,058Other current assets
    
    
    2,216
    
    
    
    (813
    )Other assets
    
    
    (67
    )
    
    
    (32
    )Accounts payable
    
    
    32,325
    
    
    
    10,100Accrued liabilities
    
    
    694
    
    
    
    (2,514
    )Income tax payable
    
    
    8,055
    
    
    
    4,395Postretirement benefit obligations and other liabilities
    
    
    288
    
    
    
    252Net cash from operating activities
    
    
    4,486
    
    
    
    618Cash flows from investing activities:Dividends from joint venture
    
    
    358
    
    
    
    354Capital expenditures
    
    
    (2,179
    )
    
    
    (4,999
    )Proceeds from sale of equipment
    
    
    9
    
    
    
    Net cash used in investing activities
    
    
    (1,812
    )
    
    
    (4,645
    )Cash flows from financing activities:Proceeds from issuance of short-term debt
    
    
    2,500
    
    
    
    Repayments of long-term debt
    
    
    (1,703
    )
    
    
    (129
    )Payment of debt issuance fees
    
    
    (21
    )
    
    
    Preferred stock dividend
    
    
    (243
    )
    
    
    (242
    )Dividends paid
    
    
    (1,023
    )
    
    
    (1,004
    )Exercise of stock options and other
    
    
    
    
    
    
    479Excess tax benefits from stock-based payment arrangements
    
    
    
    
    
    
    168Net cash used in financing activities
    
    
    (490
    )
    
    
    (728
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (257
    )
    
    
    67Net (decrease) increase in cash and cash equivalents
    
    
    1,927
    
    
    
    (4,688
    )Cash and cash equivalents  beginning of year
    
    $
    9,526
    
    
    $
    37,392Cash and cash equivalents  end of period
    
    $
    11,453
    
    
    $
    32,704Supplemental
disclosure of cash flows information  Cash paid during the period:Interest
    
    $
    3,009
    
    
    $
    54Income taxes
    
    $
    1,035
    
    
    $
    7,044
 The accompanying notes are an integral part of these statements




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Page 6 of 22  
 (Unaudited)
 1.
    
    Consolidated Financial StatementsThe 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 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 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.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.3.
    
    Noncash Investing ActivityThe Company had noncash investing activities for the quarter ended March 31, 2007 of $2,957,000,
which represented capital expenditures in accounts payable. This item is the Companys initial
payment due and payable in April 2007 to Oracle Corporation as part of the Companys investment
in its new Enterprise Resource Planning (ERP) technology.




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Page 7 of 22 4.
    
    Earnings per shareThe Companys preferred stock participates 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 three months
ended March 31, 2007 and 2006 (in thousands, except per share data):
 For The Three MonthsEnded March 31,2007
    
    
    2006Numerator:Net income
    
    $
    15,835
    
    
    $
    16,049Preferred dividends distributed
    
    
    (243
    )
    
    
    (242
    )Undistributed earnings
    
    $
    15,592
    
    
    $
    15,807Undistributed earnings attributable to:Common stockholders
    
    $
    14,327
    
    
    $
    15,807Preferred stockholders, as if converted
    
    
    1,265
    
    
    
    Total undistributed earnings
    
    $
    15,592
    
    
    $
    15,807Denominator:Denominator for basic earnings per share:Weighted average common shares outstanding
    
    
    17,048
    
    
    
    16,633Effect of dilutive securities:Outstanding employee and director common stock options
and restricted stock
    
    
    771
    
    
    
    322Convertible preferred stock
    
    
    1,794
    
    
    
    1,794Denominator for diluted earnings per share
    
    
    19,613
    
    
    
    18,749Basic earnings per common share
    
    $
    0.84
    
    
    $
    0.95Diluted earnings per common share
    
    $
    0.81
    
    
    $
    0.86Outstanding employee & director common stock options
and restricted and convertible preferred stock shares having no dilutive effect
    
    
    30
    
    
    
    6




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Page 8 of 22 5.
    
    DebtShort-term and long-term debt consisted of the following at March 31, 2007 and December 31, 2006
(dollars in thousands):
 March 31,
    
    December2007
    
    31, 2006SHORT-TERM DEBTU.S. Revolver
    
    $
    108,500
    
    
    $
    108,000Canadian facility
    
    
    509
    
    
    
    Mexico
    
    
    2,350
    
    
    
    1,863Transtar
    
    
    1,627
    
    
    
    1,383Trade acceptances
    
    
    12,763
    
    
    
    12,015Total short-term debt
    
    
    125,749
    
    
    
    123,261LONG-TERM DEBTU.S. Term Loan due in scheduled installments from 2007
through 2011
    
    
    27,000
    
    
    
    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
    
    
    1,299
    
    
    
    1,502Total long-term debt
    
    
    101,182
    
    
    
    102,885Less-current portion
    
    
    (12,844
    )
    
    
    (12,834
    )Total long-term portion
    
    
    88,338
    
    
    
    90,051TOTAL SHORT-TERM AND LONG-TERM DEBT
    
    $
    226,931
    
    
    $
    226,146




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Page 9 of 22 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. 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
    
    
    7
    
    
    
    
    
    
    
    7Balance as of March 31, 2007
    
    $
    88,817
    
    
    $
    12,973
    
    
    $
    101,790
 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 March 31, 2007 and December 31,
2006 (dollars in thousands):
 March 31, 2007
    
    December 31, 2006Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationCustomer Relationships
    
    $
    66,851
    
    
    $
    3,578
    
    
    $
    66,851
    
    
    $
    2,061Non-Compete Agreements
    
    
    1,557
    
    
    
    340
    
    
    
    1,557
    
    
    
    178Total
    
    $
    68,408
    
    
    $
    3,918
    
    
    $
    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 three month period ended March 31, 2007, the aggregate amortization expense was $1.7
million. For the three month period ended March 31, 2006, the aggregate amortization expense
was immaterial.




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Page 10 of 22 7.
    
    InventoryFinal 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 March 31, 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.
   8.
    
    Share-Based CompensationThe 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 quarter 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 76,069 have
been forfeited. In the first quarter of 2007, no awards were granted and 1,250 were forfeited
in this plan. The number of shares that could potentially be issued is 724,758.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 period.




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Page 11 of 22 
 9.
    
    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
March 31, 2007 and 2006 (dollars in millions).
 March 31,
    
    March 31,2007
    
    2006Net income
    
    $
    15.8
    
    
    $
    16.0Foreign
currency translation
    
    
    0.1
    
    
    
    (0.2
    )Pension cost
amortization, net of tax
    
    
    0.5
    
    
    
    Total Comprehensive Income
    
    $
    16.4
    
    
    $
    15.8
  March 31,
    
    December 31,2007
    
    2006Foreign currency valuation
    
    $
    3.7
    
    
    $
    3.6Unrecognized pension and postretirement
benefit costs, net of tax
    
    
    (21.6
    )
    
    
    (22.1
    )Total Accumulated Other Comprehensive Loss
    
    $
    (17.9
    )
    
    $
    (18.5
    )
 10.
    
    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 FAS No.
131 Disclosures about Segments of an Enterprise and Related Information and are reported
accordingly in the Companys consolidated financial statements.The accounting policies for all segments are described in Note 3 Segment Reporting in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006. Management evaluates
performance of its business segments based on operating income. The Company does not maintain
separate standalone financial statements prepared in accordance with GAAP for each of its
operating segments.
  Net
    
    Operating
    
    Capital
    
    Depreciation &(dollars in millions)
    
    Sales
    
    Income
    
    Expenditures
    
    Amortization2007Metals Segment
    
    $
    346.6
    
    
    $
    30.3
    
    
    $
    1.8
    
    
    $
    4.6Plastics Segment
    
    
    28.8
    
    
    
    1.5
    
    
    
    0.4
    
    
    
    0.3Other
    
    
    
    
    
    
    (2.8
    )
    
    
    
    
    
    
    Consolidated
    
    $
    375.4
    
    
    $
    29.0
    
    
    $
    2.2
    
    
    $
    4.92006Metals Segment
    
    $
    250.7
    
    
    $
    26.5
    
    
    $
    4.6
    
    
    $
    2.1Plastics Segment
    
    
    28.5
    
    
    
    1.8
    
    
    
    0.4
    
    
    
    0.3Other
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    Consolidated
    
    $
    279.2
    
    
    $
    26.1
    
    
    $
    5.0
    
    
    $
    2.4




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Page 12 of 22 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 segment information for total assets at March 31, 2007 and December 31, 2006 was as
follows:
 March 31,
    
    December 31,(dollars in millions)
    
    2007
    
    2006Metals Segment
    
    $
    648.6
    
    
    $
    593.7Plastics Segment
    
    
    49.5
    
    
    
    47.8Other
    
    
    14.2
    
    
    
    13.6Consolidated
    
    $
    712.3
    
    
    $
    655.1
 Other  The segments total assets consist of the Companys investment in a joint venture.11.
    
    Pension and Postretirement BenefitsThe following are the components of the net pension and postretirement benefit expenses
(in thousands):
 For the three months endedMarch 31,2007
    
    2006Service cost
    
    $
    934.5
    
    
    $
    917.8Interest cost
    
    
    1,911.1
    
    
    
    1,805.8Expected return on plan
    
    
    (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
 As of March 31, 2007 the Company has not made any cash contributions to its pension plans
for this fiscal year but will continue to evaluate options for funding this plan in 2007.12.
    
    Commitments and Contingent LiabilitiesAt March 31, 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.




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##### Table of Contents



Page 13 of 22 13.
    
    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
measurement attribute for financial statement disclosure of tax positions taken or expected to
be taken on a tax return.The Company adopted FIN 48 on January 1, 2007. No increase in liability for unrecognized tax
benefits were recorded as a result of the adoption. As of March 31, 2007, the Company has a
$1.0 million liability recorded for unrecognized tax benefits of which $0.4 million would impact
the effective tax rate if recognized. The Company recognizes interest and penalties related to
unrecognized tax benefits as a component of tax expense.The Company anticipates the amount of unrecognized tax benefits to increase $0.2 million by
December 31, 2007. This increase will result in an increase in currently unrecognized
tax benefits.The Company or its subsidiaries files income tax returns in the U.S., 28 states and 5 foreign
jurisdictions. The Canadian income tax returns for 2002 through 2004 are currently under
audit. No material adjustments have been proposed to date. The tax years 2003 through 2006
remain open to examination by the major taxing jurisdictions to which the Company is subject.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Financial Review
  Executive Overview
 Economic Trends and Current Business Conditions




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##### Table of Contents



Page 14 of 22 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
 Results of Operations: Year-to-Year Comparisons and Commentary
  Operating Results by Segment
 Quarter Ended(dollars in millions)
    
    March 31,
    
    Fav/(Unfav)2007
    
    2006
    
    Fav/(Unfav)
    
    % ChangeNet SalesMetals
    
    $
    346.6
    
    
    $
    250.7
    
    
    $
    95.9
    
    
    
    38.3
    %Plastics
    
    
    28.8
    
    
    
    28.5
    
    
    
    0.3
    
    
    
    1.1Total Net Sales
    
    $
    375.4
    
    
    $
    279.2
    
    
    $
    96.2
    
    
    
    34.4
    %Cost of MaterialsMetals
    
    $
    250.0
    
    
    $
    177.1
    
    
    $
    72.9
    
    
    
    41.2
    %% of Metals Sales
    
    
    72.1
    %
    
    
    70.6
    %
    
    
    (1.5
    )%Plastics
    
    
    19.5
    
    
    
    19.0
    
    
    
    0.5
    
    
    
    2.6
    %% of Plastics Sales
    
    
    67.7
    %
    
    
    66.7
    %
    
    
    (1.0
    )%Total Cost of Materials
    
    $
    269.5
    
    
    $
    196.1
    
    
    $
    73.4
    
    
    
    37.4
    %% of Total Net Sales
    
    
    71.8
    %
    
    
    70.2
    %
    
    
    (1.6
    )%Other Operating Costs and
ExpensesMetals
    
    $
    66.3
    
    
    $
    47.1
    
    
    $
    19.2
    
    
    
    40.8
    %Plastics
    
    
    7.8
    
    
    
    7.7
    
    
    
    0.1
    
    
    
    1.3Other
    
    
    2.8
    
    
    
    2.2
    
    
    
    0.6
    
    
    
    27.3Total Other Operating
Costs & Expense
    
    $
    76.9
    
    
    $
    57.0
    
    
    $
    19.9
    
    
    
    34.9
    %% of Total Net Sales
    
    
    20.5
    %
    
    
    20.4
    %
    
    
    (0.1
    )%Operating IncomeMetals
    
    $
    30.3
    
    
    $
    26.5
    
    
    $
    3.8
    
    
    
    14.3
    %% of Metals Sales
    
    
    8.7
    %
    
    
    10.6
    %
    
    
    (1.9
    )%Plastics
    
    
    1.5
    
    
    
    1.8
    
    
    
    (0.3
    )
    
    
    (16.7
    )%% of Plastics Sales
    
    
    5.2
    %
    
    
    6.3
    %
    
    
    (1.1
    )%Other
    
    
    (2.8
    )
    
    
    (2.2
    )
    
    
    (0.6
    )
    
    
    (27.3
    )%Total Operating Income
    
    $
    29.0
    
    
    $
    26.1
    
    
    $
    2.9
    
    
    
    11.1
    %% of Total Net Sales
    
    
    7.7
    %
    
    
    9.3
    %
    
    
    (1.6
    )%




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##### Table of Contents



Page 15 of 22  Acquisition of Transtar
  Net Sales:
   Cost of Materials
  Other Operating Expenses and Operating Income:
   Other Income and Expense, Income Taxes and Net Income:




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##### Table of Contents



Page 16 of 22 Critical Accounting Policies:
  Liquidity and Capital Resources
     (dollars in
thousands):
 Year ending December 31,2007
(for the nine months April 1, 2007 to December 31, 2007)
    
    $
    11,1312008
    
    
    12,9982009
    
    
    16,4702010
    
    
    13,2202011
    
    
    12,1402012 and beyond
    
    
    35,223Total debt
    
    $
    101,182




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##### Table of Contents



Page 17 of 22 Commitments and Contingencies
   
    
  Evaluation of Disclosure Controls and Procedures
    Internal Control  Integrated Framework,




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##### Table of Contents



Page 18 of 22 Changes in Internal Controls
   
 Part II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 There were no material legal proceedings other than the ordinary routine litigation
incidental to the business of the Company.
 
 Item 1A.
    
    Risk Factors
 During the quarter there were no material changes to the risk factors set forth in
the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2006.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (d) Maximum(c) Total Number
    
    Number (orof Shares (or
    
    ApproximateUnits) Purchased
    
    Dollar Value) of(a) Total Number
    
    (b) Average
    
    as Part of
    
    Shares (or Units)of Shares (or
    
    Price Paid per
    
    Publicly
    
    that May Yet BePeriod
    
    Units) Purchased
    
    Share (or Unit)
    
    Announced
    
    PurchasedPlans or
    
    (Under the PlansPrograms
    
    or Programs)January 1  January 31
    
    
    
    
    
    
    
    February 1  February 28
    
    
    
    
    
    
    
    March 1 
March 31
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
 
 Item 6.
    
    Exhibits
 Exhibit 31.1 Certification Pursuant to Section 302
by CEO
Exhibit 31.2 Certification Pursuant to Section 302 by CFO
Exhibit 32.1 Certification Pursuant to Section 906 by CEO & CFO




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##### Table of Contents



SIGNATURES
  A. M. Castle & Co.(Registrant)Date: May 4, 2007
    
    By:
    
    /s/ Henry J. VeithHenry J. VeithController(Mr. Veith is the Chief Accounting Officer
and has beenauthorized to sign on
behalf of the Registrant.)