##### 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
    
    September 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 October 31, 2007Common Stock, $0.01 Par Value
    
    22,097,869 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
    
    
    14-20Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    20Item 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
    
    
    21CertificationCertificationCertification




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Page 3 of 25 
 CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in thousands, except share and per share data)
    
    As ofUnaudited
    
    Sept 30,
    
    
    Dec 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    19,078
    
    
    $
    9,526Accounts receivable, less allowances of $3,324 at September 30, 2007
and $3,112 at December 31, 2006
    
    
    184,101
    
    
    
    160,999Inventories (principally on last-in, first-out basis) (latest cost higher by $146,787
at September 30, 2007 and $128,404 at December 31, 2006)
    
    
    228,331
    
    
    
    202,394Other current assets
    
    
    14,760
    
    
    
    18,743Total current assets
    
    
    446,270
    
    
    
    391,662Investment in joint venture
    
    
    16,278
    
    
    
    13,577Goodwill
    
    
    100,904
    
    
    
    101,783Intangible assets
    
    
    61,254
    
    
    
    66,169Prepaid pension cost
    
    
    5,607
    
    
    
    5,681Other assets
    
    
    6,274
    
    
    
    5,850Property, plant and equipment, at costLand
    
    
    5,195
    
    
    
    5,221Building
    
    
    48,660
    
    
    
    49,017Machinery and equipment (includes construction in progress)
    
    
    153,037
    
    
    
    141,090206,892
    
    
    
    195,328Less  accumulated depreciation
    
    
    (134,874
    )
    
    
    (124,930
    )72,018
    
    
    
    70,398Total assets
    
    $
    708,605
    
    
    $
    655,120LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    111,393
    
    
    $
    117,561Accrued liabilities
    
    
    35,631
    
    
    
    30,152Income taxes payable
    
    
    2,436
    
    
    
    931Deferred income taxes  current
    
    
    13,576
    
    
    
    16,339Short-term debt
    
    
    60,470
    
    
    
    123,261Current portion of long-term debt
    
    
    6,823
    
    
    
    12,834Total current liabilities
    
    
    230,329
    
    
    
    301,078Long-term debt, less current portion
    
    
    67,164
    
    
    
    90,051Deferred income taxes
    
    
    28,934
    
    
    
    31,782Other non-current liabilities
    
    
    17,772
    
    
    
    16,302Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value - 10,000,000 shares
authorized; no shares issued at September 30, 2007 and 12,000 shares
issued and outstanding at December 31, 2006
    
    
    
    
    
    
    11,239Common stock, $0.01 par value - 30,000,000 shares authorized; 22,327,946
shares issued and 22,094,869 shares outstanding at September 30, 2007; and
17,447,205 shares issued and 17,085,091 outstanding at December 31, 2006
    
    
    220
    
    
    
    170Additional paid-in capital
    
    
    178,960
    
    
    
    69,775Retained earnings
    
    
    201,761
    
    
    
    160,625Accumulated other comprehensive loss
    
    
    (11,962
    )
    
    
    (18,504
    )Deferred unearned compensation
    
    
    (1,086
    )
    
    
    (1,392
    )Treasury stock, at cost - 233,077 shares at September 30, 2007
and 362,114 shares at December 31, 2006
    
    
    (3,487
    )
    
    
    (6,006
    )Total stockholders equity
    
    
    364,406
    
    
    
    215,907Total liabilities and stockholders equity
    
    $
    708,605
    
    
    $
    655,120
 The accompanying notes are an integral part of these statements.




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Page 4 of 25 
 CONSOLIDATED STATEMENTS OF INCOME
    
    For the Three
    
    
    For the Nine(Dollars in thousands, except per share data)
    
    Months Ended
    
    
    Months EndedUnaudited
    
    Sept 30,
    
    
    Sept 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    350,319
    
    
    $
    300,809
    
    
    $
    1,098,278
    
    
    $
    855,610Costs and expenses:Cost of materials (exclusive of depreciation)
    
    
    253,121
    
    
    
    214,792
    
    
    
    792,834
    
    
    
    606,136Warehouse, processing and delivery expense
    
    
    35,136
    
    
    
    30,117
    
    
    
    104,999
    
    
    
    88,720Sales, general, and administrative expense
    
    
    34,852
    
    
    
    26,847
    
    
    
    105,193
    
    
    
    76,805Depreciation and amortization expense
    
    
    4,903
    
    
    
    3,225
    
    
    
    14,776
    
    
    
    8,323Operating income
    
    
    22,307
    
    
    
    25,828
    
    
    
    80,476
    
    
    
    75,626Interest expense, net
    
    
    (2,746
    )
    
    
    (1,903
    )
    
    
    (11,170
    )
    
    
    (3,949
    )Income before income taxes and equity earnings of joint venture
    
    
    19,561
    
    
    
    23,925
    
    
    
    69,306
    
    
    
    71,677Income taxes
    
    
    (8,073
    )
    
    
    (9,470
    )
    
    
    (27,944
    )
    
    
    (29,110
    )Net income before equity in earnings of joint venture
    
    
    11,488
    
    
    
    14,455
    
    
    
    41,362
    
    
    
    42,567Equity in earnings of joint venture
    
    
    1,422
    
    
    
    1,037
    
    
    
    3,745
    
    
    
    3,332Net income
    
    
    12,910
    
    
    
    15,492
    
    
    
    45,107
    
    
    
    45,899Preferred stock dividends
    
    
    
    
    
    
    (235
    )
    
    
    (593
    )
    
    
    (720
    )Net income applicable to common stock
    
    $
    12,910
    
    
    $
    15,257
    
    
    $
    44,514
    
    
    $
    45,179Basic earnings per share
    
    $
    0.58
    
    
    $
    0.82
    
    
    $
    2.22
    
    
    $
    2.46Diluted earnings per share
    
    $
    0.57
    
    
    $
    0.82
    
    
    $
    2.14
    
    
    $
    2.45Dividends per common share paid
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.18
 The accompanying notes are an integral part of these statements.




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Page 5 of 25 
 CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)
    
    For the Nine MonthsUnaudited
    
    Ended Sept 30,2007
    
    
    2006Operating activities:Net income
    
    $
    45,107
    
    
    $
    45,899Adjustments
to reconcile net income to net cash from (used in) operating activities:Depreciation and amortization
    
    
    14,776
    
    
    
    8,323Amortization of deferred gain
    
    
    (670
    )
    
    
    (559
    )Loss on disposal of fixed assets
    
    
    1,325
    
    
    
    Impairment of long-lived asset
    
    
    589
    
    
    
    Equity in earnings from joint venture
    
    
    (3,745
    )
    
    
    (3,332
    )Dividends from joint venture
    
    
    1,103
    
    
    
    1,231Stock compensation expense
    
    
    3,798
    
    
    
    2,911Deferred tax provision
    
    
    (5,154
    )
    
    
    4,730Excess tax benefits from stock-based payment arrangements
    
    
    (420
    )
    
    
    (1,210
    )Increase (decrease) from changes, net of acquisitions, in:Accounts receivable
    
    
    (20,830
    )
    
    
    (40,380
    )Inventories
    
    
    (23,248
    )
    
    
    (36,020
    )Prepaid pension costs
    
    
    74
    
    
    
    2,865Other current assets
    
    
    3,357
    
    
    
    (2,115
    )Other assets
    
    
    2,937
    
    
    
    (2,299
    )Accounts payable
    
    
    (6,874
    )
    
    
    20,423Accrued liabilities
    
    
    8,252
    
    
    
    3,849Income tax payable
    
    
    2,096
    
    
    
    (9,946
    )Postretirement benefit obligations and other liabilities
    
    
    2,140
    
    
    
    714Net cash from (used in) operating activities
    
    
    24,613
    
    
    
    (4,916
    )Investing activities:Investments and acquisitions, net of cash acquired
    
    
    (280
    )
    
    
    (175,795
    )Capital expenditures
    
    
    (13,150
    )
    
    
    (10,170
    )Proceeds from sale of equipment
    
    
    23
    
    
    
    Net cash used in investing activities
    
    
    (13,407
    )
    
    
    (185,965
    )Financing activities:Short-term
borrowings, net
    
    
    (62,904
    )
    
    
    128,943Proceeds from issuance of long-term debt
    
    
    
    
    
    
    30,574Repayments of long-term debt
    
    
    (29,089
    )
    
    
    (680
    )Payment of debt issuance fees
    
    
    (21
    )
    
    
    Preferred stock dividend
    
    
    (345
    )
    
    
    (720
    )Common stock
dividends
    
    
    (3,378
    )
    
    
    (3,039
    )Proceeds from issuance of common stock
    
    
    92,883
    
    
    
    Exercise of stock options and other
    
    
    508
    
    
    
    6,525Excess tax benefits from stock-based payment arrangements
    
    
    420
    
    
    
    1,210Net cash
from (used in) financing activities
    
    
    (1,926
    )
    
    
    162,813Effect of exchange rate changes on cash and cash equivalents
    
    
    272
    
    
    
    432Net increase in cash and cash equivalents
    
    
    9,552
    
    
    
    (27,636
    )Cash and cash equivalents  beginning of year
    
    $
    9,526
    
    
    $
    37,392Cash and cash equivalents  end of period
    
    $
    19,078
    
    
    $
    9,756Supplemental
disclosure of cash flow information  cash paid during period:Interest
    
    $
    10,109
    
    
    $
    3,391Income taxes
    
    $
    30,479
    
    
    $
    32,190
 The accompanying notes are an integral part of these statements.




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Page 6 of 25  
   (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 nine
months ended September 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 nine months ended September 30, 2007
consisting of $3.0 million in profit sharing contributions made in treasury shares and $0.3
million in preferred stock 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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Page 7 of 25 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, to the extent dilutive. 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 and nine months ended September 30, 2007 and 2006
(in thousands, except per share data):
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income
    
    $
    12,910
    
    
    $
    15,492
    
    
    $
    45,107
    
    
    $
    45,899Preferred dividends distributed
    
    
    
    
    
    
    (235
    )
    
    
    (593
    )
    
    
    (720
    )Undistributed earnings
    
    $
    12,910
    
    
    $
    15,257
    
    
    $
    44,514
    
    
    $
    45,179Undistributed earnings attributable to:Common stockholders
    
    $
    12,910
    
    
    $
    14,014
    
    
    $
    42,936
    
    
    $
    41,485Preferred stockholders, as if converted
    
    
    
    
    
    
    1,243
    
    
    
    1,578
    
    
    
    3,694Total undistributed earnings
    
    $
    12,910
    
    
    $
    15,257
    
    
    $
    44,514
    
    
    $
    45,179Denominator:Weighted average common shares
outstanding
    
    
    22,076
    
    
    
    17,013
    
    
    
    19,369
    
    
    
    16,860Effect of dilutive securities:Outstanding employee and director
common stock options
    
    
    771
    
    
    
    125
    
    
    
    744
    
    
    
    88Convertible preferred stock
    
    
    
    
    
    
    1,794
    
    
    
    979
    
    
    
    1,794Denominator for diluted earnings per
share
    
    
    22,847
    
    
    
    18,932
    
    
    
    21,092
    
    
    
    18,742Basic earnings per common share
    
    $
    0.58
    
    
    $
    0.82
    
    
    $
    2.22
    
    
    $
    2.46Diluted earnings per common share
    
    $
    0.57
    
    
    $
    0.82
    
    
    $
    2.14
    
    
    $
    2.45Outstanding employee and director
common stock options and restricted
and convertible preferred stock shares
having no dilutive effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




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Page 8 of 25 4.
    
    DebtShort-term and long-term debt consisted of the following at September 30, 2007 and December 31,
2006 (dollars in thousands):
 September
    
    
    December30, 2007
    
    
    31, 2006SHORT-TERM DEBTU.S. Revolver
    
    $
    45,000
    
    
    $
    108,000Mexico
    
    
    1,350
    
    
    
    1,863Transtar
    
    
    1,652
    
    
    
    1,383Trade acceptances
    
    
    12,468
    
    
    
    12,015Total short-term debt
    
    
    60,470
    
    
    
    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
    
    
    1,104
    
    
    
    1,502Total long-term debt
    
    
    73,987
    
    
    
    102,885Less-current portion
    
    
    (6,823
    )
    
    
    (12,834
    )Total long-term portion
    
    
    67,164
    
    
    
    90,051TOTAL SHORT-TERM AND LONG-TERM DEBT
    
    $
    134,457
    
    
    $
    226,146




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Page 9 of 25 5.
    
    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, as Chief Operating Decision-Maker, our Chief Executive Officer
reviews and manages these two businesses separately. As such, these businesses are considered
operating 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.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.The following is the segment information for the three months ended September 30, 2007 and
2006:
 Net
    
    
    Operating

    
    Capital

    
    Depreciation &(dollars in millions)
    
    Sales
    
    
    Income

    
    Expenditures

    
    Amortization2007Metals Segment
    
    $
    320.8
    
    
    $
    24.1
    
    
    $
    3.8
    
    
    $
    4.6Plastics Segment
    
    
    29.5
    
    
    
    1.0
    
    
    
    1.0
    
    
    
    0.3Other
    
    
    
    
    
    
    (2.8
    )
    
    
    
    
    
    
    Consolidated
    
    $
    350.3
    
    
    $
    22.3
    
    
    $
    4.8
    
    
    $
    4.92006Metals Segment
    
    $
    272.1
    
    
    $
    25.9
    
    
    $
    2.3
    
    
    $
    2.9Plastics Segment
    
    
    28.7
    
    
    
    2.2
    
    
    
    0.1
    
    
    
    0.3Other
    
    
    
    
    
    
    (2.3
    )
    
    
    
    
    
    
    Consolidated
    
    $
    300.8
    
    
    $
    25.8
    
    
    $
    2.4
    
    
    $
    3.2
 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
    
    
    Operating

    
    Capital

    
    Depreciation &(dollars in millions)
    
    Sales

    
    Income

    
    Expenditures

    
    Amortization2007Metals Segment
    
    $
    1,010.8
    
    
    $
    83.9
    
    
    $
    11.2
    
    
    $
    13.9Plastics Segment
    
    
    87.5
    
    
    
    4.2
    
    
    
    2.0
    
    
    
    0.9Other
    
    
    
    
    
    
    (7.6
    )
    
    
    
    
    
    
    Consolidated
    
    $
    1,098.3
    
    
    $
    80.5
    
    
    $
    13.2
    
    
    $
    14.82006Metals Segment
    
    $
    767.5
    
    
    $
    75.8
    
    
    $
    9.4
    
    
    $
    7.5Plastics Segment
    
    
    88.1
    
    
    
    6.7
    
    
    
    0.8
    
    
    
    0.8Other
    
    
    
    
    
    
    (6.9
    )
    
    
    
    
    
    
    Consolidated
    
    $
    855.6
    
    
    $
    75.6
    
    
    $
    10.2
    
    
    $
    8.3
 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.




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Page 10 of 25  September 30,
    

    December 31,(dollars in millions)
    
    2007

    
    2006Metals Segment
    
    $
    642.4
    
    
    $
    593.7Plastics Segment
    
    
    49.9
    
    
    
    47.8Other
    
    
    16.3
    
    
    
    13.6Consolidated
    
    $
    708.6
    
    
    $
    655.1
 Other  The segments total assets consist of the Companys investment in a joint
venture.
 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 is pursuing a
conclusion, the result of which is not expected to be material to the purchase price. 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
the Companys 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
    
    
    115
    
    
    
    
    
    
    
    115Deferred tax valuation
    
    
    (994
    )
    
    
    
    
    
    
    (994
    )Balance as of September 30, 2007
    
    $
    87,931
    
    
    $
    12,973
    
    
    $
    100,904
 During the third quarter ended September 30, 2007, the Company finalized its valuation of
deferred taxes associated with the acquisition. 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 September 30, 2007 and
December 31, 2006 (dollars in thousands):




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##### Table of Contents



September 30, 2007
    
    December 31, 2006Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationCustomer Relationships
    
    $
    66,876
    
    
    $
    6,619
    
    
    $
    66,851
    
    
    $
    2,061Non-Compete Agreements
    
    
    1,557
    
    
    
    560
    
    
    
    1,557
    
    
    
    178Total
    
    $
    68,433
    
    
    $
    7,179
    
    
    $
    68,408
    
    
    $
    2,239
   dollars in thousands
 2008
    
    $
    6,6092009
    
    
    6,4462010
    
    
    6,0862011
    
    
    6,0752012
    
    
    6,072
 7.
    
    InventoriesInventories consist primarily of finished goods. Final 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 September 30, 2007, are based solely on managements estimates of future
inventory levels and costs. Since estimates of future inventory levels and costs are subject to
certain forces beyond the control of management, interim financial results are subject to the
estimated fiscal year-end LIFO inventory valuations.
  8.
    
    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 three quarters of 2007. Other forms of share-based compensation use the market
price of the Companys stock on the date of grant to estimate fair value.




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##### Table of Contents



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 (loss) for the three months
ended September 30, 2007 and 2006 (dollars in millions).
 2007
    
    2006Net income
    
    $
    12.9
    
    
    $
    15.5Foreign currency translation
    
    
    2.4
    
    
    
    (0.2
    )Pension cost amortization, net of tax
    
    
    0.5
    
    
    
    Total Comprehensive Income
    
    $
    15.8
    
    
    $
    15.3
 (dollars in millions)
 2007
    
    2006Net income
    
    $
    45.1
    
    
    $
    45.9Foreign currency translation
    
    
    5.0
    
    
    
    0.9Pension cost amortization, net of tax
    
    
    1.5
    
    
    
    Total Comprehensive Income
    
    $
    51.6
    
    
    $
    46.8
 of (dollars in millions)
 September 30,
    
    December 31,2007
    
    2006Foreign currency translation
    
    $
    8.6
    
    
    $
    3.6Unrecognized pension and postretirement
benefit costs, net of tax
    
    
    (20.6
    )
    
    
    (22.1
    )Total Accumulated Other Comprehensive Loss
    
    $
    (12.0
    )
    
    $
    (18.5
    )




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##### Table of Contents



10.
    
    Pension and Postretirement BenefitsThe following are the components of the net pension and postretirement benefit expenses
(dollars in thousands):
 For the Three Months EndedSeptember 30,2007
    
    2006Service cost
    
    $
    935
    
    
    $
    918Interest cost
    
    
    1,911
    
    
    
    1,806Expected return on plan assets
    
    
    (2,520
    )
    
    
    (2,424
    )Amortization of prior service cost
    
    
    26
    
    
    
    26Amortization of net loss
    
    
    787
    
    
    
    946Net periodic cost
    
    $
    1,139
    
    
    $
    1,272
 For the Nine Months EndedSeptember 30,2007
    
    2006Service cost
    
    $
    2,804
    
    
    $
    2,754Interest cost
    
    
    5,733
    
    
    
    5,417Expected return on plan assets
    
    
    (7,560
    )
    
    
    (7,272
    )Amortization of prior service cost
    
    
    79
    
    
    
    79Amortization of net loss
    
    
    2,361
    
    
    
    2,838Net periodic cost
    
    $
    3,417
    
    
    $
    3,816
  11.
    
    Commitments and Contingent LiabilitiesAt September 30, 2007, the Company had $5.9 million of irrevocable letters of credit
outstanding, which primarily consisted of $3.6 million in support of the outstanding
industrial development revenue bonds and $2.1 million for compliance with the insurance
reserve requirements of its workers compensation insurance carrier.
  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
measurement attribute for financial statement disclosure of tax positions taken or expected to
be taken on a tax return.




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##### Table of Contents



13.
    
    Subsequent EventsIn October 2007, the Company completed the sale of Metal Mart, LLC for $6.7 million. The
impact of the divestiture is not material to the Companys consolidated financial statements.
The net proceeds from the sale were used to repay a portion of the Companys outstanding
debt.
 
 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



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
    
    
    
    52.9
 Results of Operations: Third Quarter 2007 Comparisons to Third Quarter 2006
 (dollars in millions)
 Quarter EndedSeptember 30,
    
    Fav/(Unfav)2007
    
    2006
    
    $ Change
    
    % ChangeNet SalesMetals
    
    $
    320.8
    
    
    $
    272.1
    
    
    $
    48.7
    
    
    
    17.9
    %Plastics
    
    
    29.5
    
    
    
    28.7
    
    
    
    0.8
    
    
    
    2.8
    %Total Net Sales
    
    $
    350.3
    
    
    
    300.8
    
    
    $
    49.5
    
    
    
    16.5
    %Cost of MaterialsMetals
    
    $
    232.8
    
    
    $
    195.8
    
    
    $
    37.0
    
    
    
    18.9
    %% of Metals Sales
    
    
    72.6
    %
    
    
    72.0
    %
    
    
    
    
    
    
    (0.6
    )%Plastics
    
    
    20.3
    
    
    
    19.0
    
    
    
    1.3
    
    
    
    6.8
    %% of Plastics Sales
    
    
    68.8
    %
    
    
    66.2
    %
    
    
    
    
    
    
    (2.6
    )%Total Cost of Materials
    
    $
    253.1
    
    
    $
    214.8
    
    
    $
    38.3
    
    
    
    17.8
    %% of Total Net Sales
    
    
    72.3
    %
    
    
    71.4
    %
    
    
    
    
    
    
    (0.9
    )%Other Operating Costs and ExpensesMetals
    
    $
    63.9
    
    
    $
    50.4
    
    
    $
    13.5
    
    
    
    26.8
    %Plastics
    
    
    8.2
    
    
    
    7.5
    
    
    
    0.7
    
    
    
    9.3
    %Other
    
    
    2.8
    
    
    
    2.3
    
    
    
    0.5
    
    
    
    21.7
    %Total Other
Operating Costs & Expense
    
    $
    74.9
    
    
    $
    60.2
    
    
    $
    14.7
    
    
    
    24.4
    %% of Total Net Sales
    
    
    21.4
    %
    
    
    20.0
    %
    
    
    
    
    
    
    (1.4
    )%Operating Income (Loss)Metals
    
    $
    24.1
    
    
    $
    25.9
    
    
    $
    (1.8
    )
    
    
    (6.9
    )%% of Metals Sales
    
    
    7.5
    %
    
    
    9.5
    %
    
    
    
    
    
    
    (2.0
    )%Plastics
    
    
    1.0
    
    
    
    2.2
    
    
    
    (1.2
    )
    
    
    (54.5
    )%% of Plastics Sales
    
    
    3.4
    %
    
    
    7.7
    %
    
    
    
    
    
    
    (4.3
    )%Other
    
    
    (2.8
    )
    
    
    (2.3
    )
    
    
    (0.5
    )
    
    
    (21.7
    )%Total Operating Income
    
    $
    22.3
    
    
    $
    25.8
    
    
    $
    (3.5
    )
    
    
    (13.6
    )%% of Total Net Sales
    
    
    6.4
    %
    
    
    8.6
    %
    
    
    
    
    
    
    (2.2
    )%
  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:




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##### Table of Contents



Results of Operations: Nine Months 2007 Comparisons to Nine Months 2006
 (dollars in millions)
 Nine Months EndedSeptember 30,
    
    Fav/(Unfav)2007
    
    2006
    
    $ Change
    
    % ChangeNet SalesMetals
    
    $
    1,010.8
    
    
    $
    767.5
    
    
    $
    243.3
    
    
    
    31.7
    %Plastics
    
    
    87.5
    
    
    
    88.1
    
    
    
    (0.6
    )
    
    
    (0.7
    )%Total Net Sales
    
    $
    1,098.3
    
    
    $
    855.6
    
    
    $
    242.7
    
    
    
    28.4
    %Cost of MaterialsMetals
    
    $
    733.5
    
    
    $
    547.5
    
    
    $
    185.9
    
    
    
    34.0
    %% of Metals Sales
    
    
    72.6
    %
    
    
    71.3
    %
    
    
    
    
    
    
    (1.3
    )%Plastics
    
    
    59.3
    
    
    
    58.6
    
    
    
    0.7
    
    
    
    1.2
    %% of Plastics Sales
    
    
    67.8
    %
    
    
    66.5
    %
    
    
    
    
    
    
    (1.3
    )%Total Cost of Materials
    
    $
    792.8
    
    
    $
    606.1
    
    
    $
    186.7
    
    
    
    30.8
    %% of Total Net Sales
    
    
    72.2
    %
    
    
    70.8
    %
    
    
    
    
    
    
    (1.4
    )%Other Operating Costs
and ExpensesMetals
    
    $
    193.4
    
    
    $
    144.2
    
    
    $
    49.2
    
    
    
    34.1
    %Plastics
    
    
    24.0
    
    
    
    22.8
    
    
    
    1.2
    
    
    
    5.3
    %Other
    
    
    7.6
    
    
    
    6.9
    
    
    
    0.7
    
    
    
    10.1
    %Total Other
Operating Costs & Expense
    
    $
    225.0
    
    
    $
    173.9
    
    
    $
    51.1
    
    
    
    29.4
    %% of Total Net Sales
    
    
    20.5
    %
    
    
    20.3
    %
    
    
    
    
    
    
    (0.2
    )%Operating Income (Loss)Metals
    
    $
    83.9
    
    
    $
    75.8
    
    
    $
    8.1
    
    
    
    10.7
    %% of Metals Sales
    
    
    8.3
    %
    
    
    9.9
    %
    
    
    
    
    
    
    (1.6
    )%Plastics
    
    
    4.2
    
    
    
    6.7
    
    
    
    (2.5
    )
    
    
    (37.3
    )%% of Plastics Sales
    
    
    4.8
    %
    
    
    7.6
    %
    
    
    
    
    
    
    (2.8
    )%Other
    
    
    (7.6
    )
    
    
    (6.9
    )
    
    
    (0.7
    )
    
    
    (10.1
    )%Total Operating Income
    
    $
    80.5
    
    
    $
    75.6
    
    
    $
    4.9
    
    
    
    6.5
    %% of Total Net Sales
    
    
    7.3
    %
    
    
    8.8
    %
    
    
    
    
    
    
    (1.5
    )%
 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:




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##### Table of Contents



Cost of Materials:
  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 three months October 1, 2007 to December 31, 2007)
    
    $
    6,2472008
    
    
    7,0352009
    
    
    10,5092010
    
    
    7,2562011
    
    
    7,6742012 and beyond
    
    
    35,266Total debt
    
    $
    73,987
   Commitments and Contingencies




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
    Internal Control  Integrated Framework,
 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)July 1 
July 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1 
August 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1 
September 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 Item 6. Exhibits




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##### Table of Contents



SIGNATURES
  A. M. Castle & Co.(Registrant)Date: November 2, 2007
    
    By:
    
    /s/ Patrick R. AndersonPatrick R. AndersonVice President  Controller and Chief
Accounting Officer(Mr. Anderson has been authorized to
sign on behalf of the Registrant.)