Page 1 of 2522

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, 2006~~March 31, 2007	or,

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the transition period from				to


Commission File Number		1-5415

A. M. Castle & Co.

(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

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer Accelerated Filer X Non-Accelerated Filer

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at ~~September~~April 30, ~~2006~~
		2007
Common Stock, $0.01 Par Value		~~17,013,371~~17,451,272 shares
Preferred Stock, $0.01 Par Value		12,000 shares

Page 3 of 2522

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) As of
Unaudited Sept 30, Dec 31
2006 2005
ASSETS
Current assets
Cash and cash equivalents $ 9,756 $ 37,392
Accounts receivable, less allowances of $3,263 at September 30, 2006 and $1,763 at December 31, 2005 182,023 107,064
Inventories (principally on last-in, first-out basis) (latest cost higher by $121,865 at September 30, 2006 and $104,036 at December 31, 2005) 216,216 119,306
Other current assets 13,996 6,351

Total current assets 421,991 270,113
Investment in joint venture 13,000 10,850
Goodwill 99,208 32,222
Intangible assets 68,520 70
Prepaid pension cost 39,082 41,946
Other assets 6,462 4,112
Property, plant and equipment, at cost
Land 5,224 4,772
Buildings 48,641 45,890
Machinery and equipment 138,458 127,048

192,323 177,710
Less — accumulated depreciation (121,080 ) (113,288 )

71,243 64,422

Total assets $ 719,506 $ 423,735

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 144,298 $ 103,246
Accrued liabilities 32,972 21,535
Current and deferred income taxes 10,863 7,052
Short-term debt 129,223 —
Current portion of long-term debt 12,527 6,233

Total current liabilities 329,883 138,066

Long-term debt, less current portion 97,718 73,827
Deferred income taxes 48,618 21,903
Deferred gain on sale of assets 5,907 5,967
Pension and postretirement benefit obligations 9,181 8,467
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value — 10,000,000 shares authorized; 12,000 shares issued and outstanding 11,239 11,239
Common stock, $0.01 par value — authorized 30,000,000 shares; issued and outstanding 17,013,371 at September 30, 2006 and 16,605,714 at December 31, 2005 170 166
Additional paid-in capital 67,772 60,916
Retained earnings 152,670 110,530
Accumulated other comprehensive income 3,281 2,370
Treasury stock, at cost — 411,235 shares at September 30, 2006 and 546,065 shares at December 31, 2005 (6,933 ) (9,716 )

Total stockholders’ equity 228,199 175,505

Total liabilities and stockholders’ equity $ 719,506 $ 423,735


CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)	As of
Unaudited	March 31,			Dec 31,
	2007			2006
ASSETS
Current assets
Cash and cash equivalents	$	11,453		$	9,526
Accounts receivable, less allowances of $3,268 at March 31, 2007 and $3,112 at December 31, 2006		189,934			160,999
Inventories (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			202,394
Other current assets		10,360			18,743

Total current assets		449,272			391,662
Investment in joint venture		14,152			13,577
Goodwill		101,790			101,783
Intangible assets		64,490			66,169
Prepaid pension cost		5,657			5,681
Other assets		5,955			5,850
Property, plant and equipment, at cost
Land		5,222			5,221
Building		48,927			49,017
Machinery and equipment		144,348			141,090

		198,497			195,328
Less — accumulated depreciation		(127,494	)		(124,930	)

		71,003			70,398

Total assets	$	712,319		$	655,120


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	152,822		$	117,561
Accrued liabilities		30,825			30,152
Income taxes payable		2,748			931
Deferred income taxes — current		15,746			16,339
Short-term debt		125,749			123,261
Current portion of long-term debt		12,844			12,834

Total current liabilities		340,734			301,078

Long-term debt, less current portion		88,338			90,051
Deferred income taxes		34,341			31,782
Deferred gain on sale of assets		5,419			5,666
Pension and postretirement benefit obligations		10,948			10,636
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value - 10,000,000 shares authorized; 12,000 shares issued and outstanding		11,239			11,239
Common 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			170
Additional paid-in capital		70,994			69,775
Retained earnings		175,194			160,625
Accumulated 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			215,907

Total liabilities and stockholders’ equity	$	712,319		$	655,120

The accompanying notes are an integral part of these statements

Page 4 of 2522

CONSOLIDATED STATEMENTS OF INCOME For the Three For the Nine
(Dollars in thousands, except per share data) Months Ended Months Ended
Unaudited Sept 30, Sept 30,
2006 2005 2006 2005
Net sales $ 300,809 $ 234,551 $ 855,610 $ 731,721
Cost of material sold 214,792 163,956 606,136 512,705

Gross material margin 86,017 70,595 249,474 219,016
Plant and delivery expense 30,117 27,920 88,720 81,635
Sales, general, and administrative expense 26,847 23,405 76,805 69,509
Depreciation and amortization expense 3,225 2,205 8,323 6,752

Total operating expense 60,189 53,530 173,848 157,896
Operating income 25,828 17,065 75,626 61,120
Interest expense, net (1,903 ) (1,765 ) (3,949 ) (5,875 )
Discount on sale of accounts receivable — (127 ) — (1,127 )

Income before income taxes and equity earnings of joint venture 23,925 15,173 71,677 54,118
Income taxes (9,470 ) (5,673 ) (29,110 ) (21,888 )

Income before equity in earnings of joint venture 14,455 9,500 42,567 32,230
Equity in earnings of joint venture 1,037 817 3,332 3,342

Net income 15,492 10,317 45,899 35,572
Preferred dividends (235 ) (240 ) (720 ) (720 )

Net income applicable to common stock $ 15,257 $ 10,077 $ 45,179 $ 34,852

Basic earnings per share $ 0.82 $ 0.63 $ 2.46 $ 2.19

Diluted earnings per share $ 0.82 $ 0.56 $ 2.45 $ 1.93

Dividends per common share $ 0.06 $ — $ 0.18 $ —


CONSOLIDATED STATEMENTS OF INCOME	For The Three
(Dollars in thousands, except per share data)	Months Ended
Unaudited	March 31,
	2007			2006
Net sales	$	375,351		$	279,193
Costs and expenses:
Cost of materials (exclusive of depreciation)		269,450			196,100
Warehouse, processing and delivery expense		35,570			29,625
Sales, general, and administrative expense		36,394			24,885
Depreciation and amortization expense		4,896			2,444

Operating income		29,041			26,139
Interest expense, net		(4,261	)		(1,087	)

Income before income taxes and equity earnings of joint venture		24,780			25,052
Income taxes		(9,877	)		(10,242	)

Net income before equity in earnings of joint venture		14,903			14,810
Equity in earnings of joint venture		932			1,239

Net income		15,835			16,049
Preferred stock dividends		(243	)		(242	)

Net income applicable to common stock	$	15,592		$	15,807

Basic earnings per share	$	0.84		$	0.95

Diluted earnings per share	$	0.81		$	0.86

Dividends per common share paid	$	0.06		$	0.06

The accompanying notes are an integral part of these statements

Page 5 of 2522

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) For the Nine Months
Unaudited Ended Sept 30,
2006 2005
Cash flows from operating activities:
Net income $ 45,899 $ 35,572
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 8,323 6,752
Amortization of deferred gain (559 ) (639 )
Equity in earnings from joint venture (3,332 ) (3,342 )
Stock compensation expense 2,911 2,607
Deferred tax provision 4,730 241
Excess tax benefits from stock-based payment arrangements (1,210 ) —
Increase (decrease) from changes, net of acquisitions, in:
Accounts receivable (40,380 ) (35,776 )
Inventories (36,020 ) 18,205
Prepaid pension costs 2,865 987
Other current assets (2,115 ) 316
Accounts payable 20,423 (8,182 )
Accrued liabilities 3,849 4,401
Income tax payable (9,946 ) 5,265
Postretirement benefit obligations and other liabilities (1,585 ) 308

Net cash (used in) from operating activities (6,147 ) 26,715
Cash flows from investing activities:
Investments and acquisitions, net of cash acquired (175,795 ) (236 )
Dividends from joint venture 1,231 1,705
Capital expenditures (10,170 ) (4,784 )
Collection of note receivable — 2,639

Net cash used in investing activities (184,734 ) (676 )
Cash flows from financing activities:
Proceeds from issuance of short-term debt 128,943 —
Proceeds from issuance of long-term debt 30,574 4,000
Repayments of long-term debt (680 ) (21,542 )
Preferred stock dividend (720 ) (720 )
Dividends paid (3,039 ) —
Exercise of stock options and other 6,525 597
Excess tax benefits from stock-based payment arrangements 1,210 —

Net cash from (used in) financing activities 162,813 (17,665 )
Effect of exchange rate changes on cash and cash equivalents 432 476
Net (decrease) increase in cash and cash equivalents (27,636 ) 8,850

Cash and cash equivalents — beginning of year $ 37,392 $ 3,106

Cash and cash equivalents — end of period $ 9,756 $ 11,956

Supplemental cash disclosure — cash paid during the period:
Interest $ 3,391 $ 6,808

Income taxes $ 32,190 $ 15,410


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)	For the Three Months
Unaudited	Ended Mar 31,
	2007			2006

Cash flows from operating activities:
Net income	$	15,835		$	16,049
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		4,896			2,444
Amortization 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			974
Deferred 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			1,058
Other current assets		2,216			(813	)
Other assets		(67	)		(32	)
Accounts payable		32,325			10,100
Accrued liabilities		694			(2,514	)
Income tax payable		8,055			4,395
Postretirement benefit obligations and other liabilities		288			252

Net cash from operating activities		4,486			618
Cash flows from investing activities:
Dividends from joint venture		358			354
Capital 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		—			479
Excess tax benefits from stock-based payment arrangements		—			168

Net cash used in financing activities		(490	)		(728	)
Effect of exchange rate changes on cash and cash equivalents		(257	)		67
Net (decrease) increase in cash and cash equivalents		1,927			(4,688	)

Cash and cash equivalents — beginning of year	$	9,526		$	37,392

Cash and cash equivalents — end of period	$	11,453		$	32,704

Supplemental disclosure of cash flows information — Cash paid during the period:
Interest	$	3,009		$	54

Income taxes	$	1,035		$	7,044

See Note 3 to the consolidated financial statements for disclosure of noncash investing activity.
The accompanying notes are an integral part of these statements

Page 6 of 2522

A. M. Castle & Co.

Notes to Consolidated Financial Statements

~~September 30, 2006~~

March 31, 2007
(Unaudited)

1.		Consolidated Financial Statements

		The consolidated financial statements included herein ~~are unaudited.~~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, ~~2005~~2006 is derived from the audited financial statements at that date. ~~A. M. Castle & Co. and subsidiaries (the “Company”) believe~~The Company believes that the disclosures ~~included herein~~ are adequate and make the information not ~~misleading. However,~~misleading; however, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted ~~accounting principles~~in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the ~~Securities and Exchange Commission (“SEC”).~~SEC. In the opinion of management, the unaudited ~~consolidated financial~~ 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 ~~presented. These condensed~~then ended. It is suggested that these consolidated financial statements ~~should~~ be read in conjunction with the ~~consolidated~~ financial statements and the notes thereto included in the Company’s latest Annual Report onForm ~~10-K.~~10-K. The ~~2006~~2007 interim results reported herein may not necessarily be indicative of the results of the Company’s operations for the full year.

2.		~~Impact of Recently~~New Accounting Standards – Issued ~~Accounting Principles~~Not Yet Adopted

		~~On July 13,~~In September 2006 the Financial Accounting Standards Board (“FASB”) issued ~~Interpretation~~Statement of Financial Accounting Standards (“SFAS”) No. ~~48 (“FIN~~157, “Fair Value Measurement” and in February 2007, the FASB issued SFAS No. ~~48”)~~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 ~~for Uncertainty in Income Taxes: an interpretation~~pronouncements, including SFAS No. 107, “Disclosures about Fair Value of ~~FASB Statement~~Financial Instruments”, where applicable. SFAS No. 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FAS No. 109, Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement principles157 is effective for financial statements ~~of tax positions taken or expected to be taken on a tax return. This interpretation is effective~~issued for fiscal years beginning after ~~December~~November 15, ~~2006.~~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 ~~is assessing the impact~~does not expect the adoption of ~~FIN No. 48 will have on the Company’s consolidated financial position and results of operations.~~

In September 2006, the FASB issued the Statement of Financial Accounting Standards (“FAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, which was an amendment of FAS No. 87, 88, 106 and 132(R). Among other items, FAS 158 requires recognition of the overfunded or underfunded status of an entity’s defined benefit postretirement plan as an asset or liability in the financialthese statements requires recognition of the funded status of defined benefit postretirement plans in other comprehensive income. FAS No. 158 is effective for fiscal years ending after December 15, 2006 and early application is encouraged. The Company is currently assessing the impact that the adoption of this standard will have on the Company’s consolidated financial position.

~~Also, in September 2006 the FASB issued FAS No. 157, “Fair Value Measurement”. Among other items, FAS 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. FAS No. 157 encourages entities to combine fair value information disclosed under FAS No. 157 with other accounting pronouncements, including FAS No. 107, “Disclosures about Fair Value of Financial Instruments”, where applicable. The guidance in this statement applies to derivatives and other financial instruments measured at fair value under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, at initial and in all subsequent periods. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect this interpretation will 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.

Page 7 of 25

3.		~~Acquisition~~

		On 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.

Transtar is a leading supplier of high performance alloys to the aerospace and defense industries, supporting the on-going requirements of those markets with a broad range of inventory, processing and supply chain services. As a result of the acquisition, the Company will have expanded access to aerospace customers and avenues to cross-sell its other products into this growth market. The acquisition will also provide both companies the benefits of deeper access to certain inventories and purchasing synergies, as well as provide the Company an existing platform to markets in Asia and other international markets. These results and the assets of Transtar are included in the Company’s Metals segment, because Transtar has similar economic and other characteristics of the Metals segment.

The aggregate purchase price was $173.3 million, excluding transaction related costs, but includes the assumption of $1.0 million of foreign debt and $0.6 million in Transtar capital leases. An escrow in the amount of $18.0 million funded from the purchase price was established to satisfy H.I.G. Transtar Inc.’s indemnification obligations related to the acquisition. The purchase price was funded via new debt financing and existing cash balances and is subject to adjustment based on a final calculation of Transtar’s working capital at the date of acquisition. In addition, the Company is in the process of obtaining third-party valuations of certain intangible assets and liabilities, thus the following allocation of the purchase price is preliminary and represents the aggregate purchase price, certain cash, debt and capital leases assumed as well as transaction costs:

~~Preliminary Purchase Price Allocation~~

Current assets $ 102,674
PP & E, net 4,274
Intangibles 69,005
Goodwill 66,960
Other long-term assets 366

Total assets 243,279

Current liabilities 35,076
Long-term liabilities 29,732

Total liabilities 64,808

Net assets $ 178,471

The following unaudited pro-forma information presents a summary of the Company’s consolidated results of operations as if the acquisition had taken place as of the beginning of the current and preceding fiscal year.

Three Months Nine Months
($’s in millions, except per share data) Ended September 30, Ended September 30,
2006 2005 2006 2005
Net sales $ 341.9 $ 292.6 $ 1,036.1 $ 900.4
Net income $ 15.1 $ 10.7 $ 48.6 $ 36.8
Net income per diluted common share $ 0.80 $ 0.58 $ 2.59 $ 2.00

~~These pro forma results of operations have been presented for informational purposes only~~

~~Page 8 of 25~~

~~and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred on the dates indicated, or which may result in the future.~~

4.		Earnings ~~Per Share~~per share

		The 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 ~~FASB Statement~~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 ~~FAS~~SFAS No. 128, ~~“Earnings per Share”,~~ the following table is a reconciliation of the basic and ~~fully~~ diluted earnings per share calculations for the ~~periods reported.~~three months ended March 31, 2007 and 2006(in thousands, except per share data):


(dollars and shares in thousands,	For The Three Months						For The Nine Months
except per share data	Ended September 30,						Ended September 30,
													For The Three Months
													Ended March 31,
	2006			2005			2006			2005			2007			2006

Numerator:
Net income	$	15,492		$	10,317		$	45,899		$	35,572		$	15,835		$	16,049
Preferred dividends distributed		(235	)		(240	)		(720	)		(720	)		(243	)		(242	)

Undistributed earnings	$	15,257		$	10,077		$	45,179		$	34,852		$	15,592		$	15,807

Undistributed earnings attributable to:
Common stockholders		14,014			10,077			41,485			34,852		$	14,327		$	15,807
Preferred stockholders, as if converted		1,243						3,694						1,265			—

Total undistributed earnings	$	15,257		$	10,077		$	45,179		$	34,852		$	15,592		$	15,807

Denominator:
Denominator for basic earnings per share:
Weighted average common shares outstanding		17,013			15,948			16,860			15,883			17,048			16,633
Effect of dilutive securities:
Outstanding employee and directors’ common stock options and restricted stock		125			600			88			749
Outstanding employee and director common stock options and restricted stock														771			322
Convertible preferred stock		1,794			1,794			1,794			1,794			1,794			1,794

Denominator for diluted earnings per share		18,932			18,342			18,742			18,426			19,613			18,749

Basic earnings per common share	$	0.82		$	0.63		$	2.46		$	2.19		$	0.84		$	0.95

Diluted earnings per common share	$	0.82		$	0.56		$	2.45		$	1.93		$	0.81		$	0.86

Outstanding employees & directors common stock options and restricted and preferred stock shares having no dilutive effect		—			41			—			126
Outstanding employee & director common stock options and restricted and convertible preferred stock shares having no dilutive effect														30			6

Page 98 of 2522

5.		Debt

		~~On September 5,~~Short-term and long-term debt consisted of the following at March 31, 2007 and December 31, 2006 ~~the Company and its Canadian subsidiary entered into a $210.0 million five-year secured Amended and Restated Credit Agreement (the “amended senior credit facility”) with its lending syndicate.~~(dollars in thousands):


	March 31,			December
	2007			31, 2006

SHORT-TERM DEBT
U.S. Revolver	$	108,500		$	108,000
Canadian facility		509			—
Mexico		2,350			1,863
Transtar		1,627			1,383
Trade acceptances		12,763			12,015

Total short-term debt		125,749			123,261

LONG-TERM DEBT
U.S. Term Loan due in scheduled installments from 2007 through 2011		27,000			28,500
6.76% insurance company loan due in scheduled installments from 2007 through 2015		69,283			69,283
Industrial development revenue bonds due in varying amounts through 2009		3,600			3,600
Other, primarily capital leases		1,299			1,502

Total long-term debt		101,182			102,885
Less-current portion		(12,844	)		(12,834	)

Total long-term portion		88,338			90,051

TOTAL SHORT-TERM AND LONG-TERM DEBT	$	226,931		$	226,146

In September 2006, the Company entered into a $210 million amended senior credit facility with its lending syndicate. This facility replaced the Company’s $82.0 million revolving credit facility entered into in July 2005. The amended senior credit facility provides for (i) a ~~$170.0~~$170 million revolving loan ~~(the ”U.S. Revolver”)~~ to be drawn on by the ~~Company~~company from time to time, (ii) a ~~$30.0~~$30 million term loan ~~( the “U.S. Term Loan” and with the U.S. Revolver, the “U.S. Facility”),~~ and (iii) a Cdn. $11.1 million revolving loan (approximately $9.9 million in U.S. dollars)~~, (the “Canadian Facility”)~~ to be drawn on by the Company’s Canadian subsidiary from time to time. The ~~Canadian Facility can be drawn in either U.S. dollars or Canadian dollars. The~~ revolving loans and term loan ~~will~~ mature in 2011.

~~The U.S. Facility~~Available revolving credit capacity is ~~guaranteed by the material domestic subsidiaries of the Company (“Guarantee Subsidiaries”) and is secured by substantially all of the assets of the Company and the Guarantee Subsidiaries pursuant~~primarily used to an Amended and Restated Security Agreement entered into by the Company and the Guarantee Subsidiaries on the same date. Depending on the type of borrowing selected by the Company, the applicable interest rate for loans under the U.S. Facility is calculated as a per annum rate equal to (i) LIBOR plus a variable margin or (ii) the greater of the U.S. prime rate or the federal funds effective rate plus 0.5% and a variable margin. The margin on LIBOR loans may fall or rise as set forth on a grid depending on the Company’s debt-to-capital ratio as calculated on a quarterly basis.fund working capital needs. As of ~~September 30, 2006, the company’s interest rate was 7.09%.~~

~~The Canadian Facility is guaranteed by the Company and is secured by substantially all of the assets of the Canadian Subsidiary.~~

The Company used the proceeds from the $30.0 million term loan and drew $117.0 million of the amount available under the U.S. Revolver to finance the acquisition of Transtar Intermediate Holdings #2, Inc. (see Note 3). In accordance with the aforementioned acquisition, the Company assumed $1.1 million of foreign short-term bank debt. As of September 30, 2006,March 31, 2007, the Company had ~~$1.2~~outstanding borrowings of $108.5 million ~~outstanding in foreign debt.~~

~~As of September 30, 2006, the Company had $158.0 million outstanding~~ under ~~the~~its U.S. Revolver ~~Facility~~ and ~~there were no~~had availability of $53.7 million. The Company’s Canadian subsidiary had $0.5 million in outstanding borrowings under the Canadian ~~Facility. At December~~Revolver and availability of $9.4 million at March 31, ~~2005, the Company had no borrowings outstanding under any~~2007.

Page 10 of 25

~~The changes in carrying amounts of goodwill were as follows~~~~(in thousands)~~:

Metals Plastics
Segment Segment Total

Balance as of December 31, 2005 $ 19,249 $ 12,973 $ 32,222
Acquisition of Transtar 66,960 — 66,960
Currency valuation 26 — 26

Balance as of September 30, 2006 $ 86,235 $ 12,973 $ 99,208

Intangible assets at September 30, 2006 consist primarily of customer relationships/contracts and non-compete agreements acquired as part of the Transtar acquisition. The value preliminarily assigned to such assets is approximately $69.0 million and approximately $0.5 million of amortization has been recorded against such assets since the acquisition. Amortization expense on the Company’s intangible assets for the years ending December 31, 2006, 2007, 2008, 2009, 2010 and 2011 is expected to be $2.2 million, $6.7 million, $6.7 million, $6.5 million, $6.1 million and $6.1 million, respectively.

7.		Inventory

		Final inventory ~~valuations~~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 ~~amounts,~~determinations, including those at ~~September 30, 2006,~~March 31, 2007, are based solely on management’s estimates of ~~year-end~~ 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 ~~calculations.~~valuations.

Current replacement cost of inventories exceeded book value by ~~$121.9~~$143.0 million and ~~$104.0~~$128.4 million at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively. Income taxes would become payable on any realization of this excess from reductions in the level of ~~the Company’s~~ 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. ~~Revenue~~Net sales derived from consigned inventories at customer locations for ~~the nine-months ended September 30, 2006~~2007 was ~~$14.8~~$4.3 million, or ~~1.7%~~1.1% of sales. Inventory on consignment at customers as of ~~September 30, 2006~~March 31, 2007 was ~~$1.7~~$4.0 million, or ~~0.8%~~1.7%, of consolidated net inventory as reported on the Company’s consolidated balance sheets.

8.		Share-Based Compensation

		~~As described~~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 quarter of 2007. Other forms of share-based compensation have generally used the market price of the Company’s ~~Annual Report~~stock on ~~Form 10-K for~~ the ~~year-ended December 31,~~date of grant to estimate fair value.

		In 2005, the Company ~~adopted FAS No. 123R, “Share-Based Payments”, effective October 1,~~established the 2005 ~~using~~Performance Stock Equity Plan (the “Performance Plan”). Under the ~~modified retrospective method of adoption. Accordingly, all prior period financial statements~~Performance Plan, 438,448 stock awards have been ~~restated~~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 ~~reflect~~ the ~~adoption~~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 ~~standard.~~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.

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 nine-months of 2006. Other forms of share-based compensation have 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 were granted of which 73,319 have been forfeited. In the third quarter of 2006, awards of 2,750 were granted. The number of shares that could potentially be issued is 730,258.

Page 11 of 2522

9.		Comprehensive Income

		Comprehensive 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		2006
Net income	$	15.8	$	16.0
Foreign currency translation		0.1		(0.2	)
Pension cost amortization, net of tax		0.5		—

Total Comprehensive Income	$	16.4	$	15.8

The total accumulated other comprehensive losses at March 31, 2007 and December 31, 2006 comprised (dollars in millions):


	March 31,			December 31,
	2007			2006

Foreign currency valuation	$	3.7		$	3.6
Unrecognized pension and postretirement benefit costs, net of tax		(21.6	)		(22.1	)

Total Accumulated Other Comprehensive Loss	$	(17.9	)	$	(18.5	)

10.		Segment Reporting

		The 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 ~~separate~~ segments ~~in accordance with~~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 1, “Principal Accounting Policies” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2005. Management evaluates performance of its business segments based on operating income. The Company does not maintain separate standalone financial statements prepared in accordance with generally accepted accounting principles 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 quarters ended ~~September 30, 2006~~March 31, 2007 and ~~2005:~~2006:

Gross Other Operating Capital
Net Material Operating Income Expendi- Depre-
(dollars in millions) Sales Margin Expense (Loss) tures ciation

2006
Metals Segment $ 272.1 $ 76.3 $ 50.4 $ 25.9 $ 2.3 $ 2.9
Plastics Segment 28.7 9.7 7.5 2.2 0.1 0.3
Other — — 2.3 (2.3 ) — —

Consolidated $ 300.8 $ 86.0 $ 60.2 $ 25.8 $ 2.4 $ 3.2

2005
Metals Segment $ 208.7 $ 61.8 $ 44.3 $ 17.5 $ 2.4 $ 1.9
Plastics Segment 25.9 8.8 7.2 1.6 0.2 0.3
Other — — 2.0 (2.0 ) — —

Consolidated $ 234.6 $ 70.6 $ 53.5 $ 17.1 $ 2.6 $ 2.2

~~The following is the segment information for the nine-months ended September 30, 2006 and 2005:~~

Gross Other Operating Capital
Net Material Operating Income Expendi- Depre-
(dollars in millions) Sales Margin Expense (Loss) tures ciation

2006
Metals Segment $ 767.5 $ 220.0 $ 144.2 $ 75.8 $ 9.4 $ 7.6
Plastics Segment 88.1 29.5 22.8 6.7 0.8 0.8
Other — — 6.9 (6.9 ) — —

Consolidated $ 855.6 $ 249.5 $ 173.9 $ 75.6 $ 10.2 $ 8.3

2005
Metals Segment $ 650.7 $ 192.4 $ 129.9 $ 62.5 $ 3.9 $ 6.0
Plastics Segment 81.0 26.6 21.5 5.1 0.9 0.8
Other — — 6.5 (6.5 ) — —

Consolidated $ 731.7 $ 219.0 $ 157.9 $ 61.1 $ 4.8 $ 6.8

~~“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.~~


	Net		Operating			Capital		Depreciation &
(dollars in millions)	Sales		Income			Expenditures		Amortization

2007
Metals Segment	$	346.6	$	30.3		$	1.8	$	4.6
Plastics Segment		28.8		1.5			0.4		0.3
Other		—		(2.8	)		—		—

Consolidated	$	375.4	$	29.0		$	2.2	$	4.9


2006
Metals Segment	$	250.7	$	26.5		$	4.6	$	2.1
Plastics Segment		28.5		1.8			0.4		0.3
Other		—		(2.2	)		—		—

Consolidated	$	279.2	$	26.1		$	5.0	$	2.4

Page 13 of 2522

13.		Income Taxes

		In 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.~~Operations

Financial Review

This discussion should be read in conjunction with the information contained in the Consolidated Financial Statements and Notes.

Executive Overview

Economic Trends and Current Business Conditions

A. M. Castle & Co. and subsidiaries (“the Company”) continued to enjoy favorable ~~demand~~pricing for its products through the ~~third~~first quarter of ~~2006. The~~2007. Projected 2007 demand in the aerospace and oil and gas markets remain bullish, and general economic indicators do not currently suggest that a significant downturn in the Metals business is on the near-term horizon. Forecasted 2007 demand in the North American durable goods manufacturing sector, ~~the Company’s primary market,~~which is a leading economic indicator, continues to exhibit ~~demand~~ requirements above ~~2005~~2006 levels. The aerospace, oil and gas, and mining and construction equipment sectors continued to show particular strength. The Company’s metals product offerings are predominantly in carbon bar or tubing, alloy bar, high-end specialty metals (such as nickel alloy, stainless steel and aluminum), and carbon plate up to twenty inches thick.

Historically, the Company has used the Purchaser’s Managers Index (“PMI”) provided by the Institute of Supply Managers to track general demand trends in its customer markets. Table 1 below shows recent PMI trends from the first quarter of 2005 through the ~~third~~first quarter of ~~2006.~~2007. Generally speaking, an index above 50.0 indicates growth in the manufacturing sector of the U.S. economy. As the table indicates, ~~there has been sustained~~the demand trend, while down from earlier quarters, still reflected a favorable growth inrate for the ~~manufacturing sector for several quarters.~~

~~Table 1~~

YEAR Qtr 1 Qtr 2 Qtr 3 Qtr 4

2005 55.7 53.2 56.0 57.0
2006 55.6 55.2 54.0

first quarter of 2007. The Company’s revenue growth ~~in real terms, or net of material price increases,~~ has historically improved over these same quarters. ~~Third~~However, first quarter ~~2006 revenue~~2007 volume growth for the Company on a consolidated basis, ~~was~~excluding Transtar, is approximately ~~28.2% ahead of~~5% less than the same quarter in ~~2005~~2006. The Company experienced its highest volume growth rate in the first quarter of 2006 versus any other quarter in recent years. First quarter 2007 volume, excluding Transtar, was up slightly versus each of the prior three quarters.

Page 14 of 22


YEAR	Qtr 1	Qtr 2	Qtr 3	Qtr 4

2005	55.7	53.2	55.8	57.2
2006	55.6	55.2	53.8	50.9
2007	50.8

Results of Operations: Year-to-Year Comparisons and ~~16.9% ahead on~~Commentary

Consolidated results by business segment are summarized in the following table for the quarter ended March 31, 2007 and 2006. First quarter 2007 net income included a ~~comparative year-to-date basis.~~$0.9 million after-tax charge for the write-off of the Company’s investments in information technology systems, which were under development and are included in the Company’s Metals segment reporting. During the quarter, the Company signed an agreement to purchase Oracle’s ERP system in support of its strategic growth initiative, leading to the accelerated write-off of the Company’s investment in its current systems.

Operating Results by Segment


	*Quarter Ended*
(dollars in millions)	*March 31,*						*Fav/(Unfav)*
	*2007*			*2006*			*Fav/(Unfav)*			*% Change*

Net Sales
Metals	$	346.6		$	250.7		$	95.9			38.3	%
Plastics		28.8			28.5			0.3			1.1

Total Net Sales	$	375.4		$	279.2		$	96.2			34.4	%

Cost of Materials
Metals	$	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 Expenses
Metals	$	66.3		$	47.1		$	19.2			40.8	%
Plastics		7.8			7.7			0.1			1.3
Other		2.8			2.2			0.6			27.3

Total Other Operating Costs & Expense	$	76.9		$	57.0		$	19.9			34.9	%
% of Total Net Sales		20.5	%		20.4	%		(0.1	)%

Operating Income
Metals	$	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	)%

Page 15 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.

Acquisition of Transtar

On 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.

Transtar is a leading supplier of high performance alloys to the aerospace and defense industries, supporting the on-going requirements of those markets with a broad range of inventory, processing and supply chain services. As a result of For more information regarding the acquisition of Transtar, refer to our 2006 Annual Report on Form 10-K. In order to present a consistent quarter-over-quarter analysis of financial condition and results of operation, the Company ~~will have expanded access to aerospace customers and avenues to cross-sell~~is herein disclosing the incremental impact of its other products into this growth market. The acquisition will also provide both companies the benefits of deeper access to certain inventories and purchasing synergies, as well as provide the Company an existing platform to markets in Asia and other international markets.recent acquisition.

The aggregate purchase price was $173.3 million which includes the assumption of $1.0 million of foreign debt and $0.6 million in Transtar capital leases. An escrow in the amount of $18.0 million funded from the purchase price was established to satisfy H.I.G. Transtar Inc.’s indemnification obligations related to the acquisition. The purchase price is subject to adjustment based on a final calculation of Transtar’s working capital at the date of acquisition. This final calculation is still in-process, but is not expected to significantly change the purchase price.

~~Page 14 of 25~~

Three Months Nine Months
($’s in millions, except per share data) Ended September 30, Ended September 30,
2006 2005 2006 2005

Net sales $ 341.9 $ 292.6 $ 1,036.1 $ 900.4
Net income $ 15.1 $ 10.7 $ 48.6 $ 36.8
Net income per diluted common share $ 0.80 $ 0.58 $ 2.59 $ 2.00

These pro forma results of operations have been presented for informational purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred on the dates indicated, or which may result in the future.

~~Results of Operations: Year-to-Year Comparisons and Commentary~~

~~Consolidated results by business segment are summarized in the following table for the quarter ended September 30, 2006 and 2005.~~

~~Operating Results by Segment~~

(dollars in millions) Quarter Ended Fav/(Unfav)
September 30,
2006 2005 Fav/(Unfav) % Chge

Net Sales
Metals $ 272.1 $ 208.7 $ 63.4 30.4 %
Plastics 28.7 25.9 2.8 10.8

Total Net Sales $ 300.8 $ 234.6 $ 66.2 28.2 %

Gross Material Margin
Metals $ 76.3 $ 61.8 $ 14.5 23.5 %
% of Metals Sales
28.0 % 29.6 % (1.6 )%
Plastics 9.7 8.8 0.9 10.2
% of Plastics Sales
33.8 % 34.0 % (0.2 )%

Total Gross Material Margin $ 86.0 $ 70.6 $ 15.4 21.8 %
% of Total Net Sales
28.6 % 30.1 % (1.5 )%

Operating Expense
Metals $ 50.4 $ 44.3 $ (6.1 ) (13.8 )%
Plastics 7.5 7.2 (0.3 ) (4.2 )
Other 2.3 2.0 (0.3 ) (15.0 )

Total Operating Expense $ 60.2 $ 53.5 $ (6.7 ) (12.5 )%
% of Total Net Sales
20.0 % 22.8 % 2.8 %

Operating Income
Metals $ 25.9 $ 17.5 $ 8.4 48.0 %
% of Metals Sales
9.5 % 8.4 % 1.1 %
Plastics 2.2 1.6 0.6 37.5
% of Plastics Sales
7.7 % 6.2 % 1.5 %
Other (2.3 ) (2.0 ) (0.3 ) 15.0

Total Operating Income $ 25.8 $ 17.1 $ 8.7 50.9 %
% of Total Net Sales
8.6 % 7.3 % 1.3 %

~~“Other” – Operating expense includes the costs of executive, finance and legal departments, and other corporate activities which support both the metals and plastics segments of the Company.~~

~~Page 15 of 25~~

Net Sales:

Consolidated net sales of ~~$300.8~~$375.4 million increased ~~28.2%~~34.4%, or ~~$66.2~~$96.2 million, versus the ~~third~~first quarter of ~~2005.~~2006. Transtar added $72.8 million of net sales for the quarter and the remaining $302.6 million of net sales were $23.4 million, or 8.4%, ahead of the same quarter last year. Metals segment sales of ~~$272.1~~$346.6 million were ~~$63.4~~$95.9 million, or ~~30.4%~~38.3%, ahead of last year. ~~Both increases include $18.6 million of~~Of the 38.3% sales ~~related~~increase, 29.0% was attributable to ~~the acquired~~ Transtar ~~business. Without the effect of the acquired business, consolidated net sales~~ and ~~Metals segment sales~~14.4% was attributable to increased ~~20.3% and 21.5%, respectively. Strong demand continued for the Company’s metals products, particularly~~material pricing, offset by a 5.1% decline in ~~the aerospace and oil and gas markets. Increased volume, excluding the acquisition, accounted for approximately 9% of this segment’s sales growth with the balance due to favorable material price.~~volume.

Plastics segment sales of ~~$28.7~~$28.8 million were ~~$2.8~~$0.3 million, or ~~11%~~approximately 1.1%, stronger than the same quarter of ~~2005. Increased volume accounted for 9%~~2006. Volume and material pricing in the plastics segment were essentially flat versus the first quarter of 2006.

Cost of Materials

Consolidated first quarter 2007 costs of materials (exclusive of depreciation) increased $73.4 million, or 37.4%, to $269.5 million. The acquisition of Transtar contributed $50.8 million of the ~~sales growth while 2%~~increase. The balance of the increase was ~~attributable~~due to higher material ~~pricing levels.~~costs from suppliers, typically in the form of surcharges.

~~Gross Material Margin~~Other Operating Expenses and Operating Income:
Consolidated gross material margin of $86.0 million was $15.4 million, or 21.8%, higher than last year driven by increased sales. Metals segment gross material margin of $76.3 million was $14.5 million, or 23.5%, ahead of the third quarter of 2005. About one-third of both increases were the result of the Transtar acquisition. Gross material margin as a percentage of net sales (“gross margin rate”) in our Metals business was lower during the quarter due to increased supplier surcharges, primarily in nickel alloy, that were passed through to our customers at cost. The acquisition had a negligible impact on the gross margin rate.

Plastics segment gross material margin increased by $0.9 million, or 10.2%, to a level of $9.7 million. The Company has generally been able to maintain its material margin percentages in the Plastics segment.

Total consolidated operating expenses of ~~$60.2~~$76.9 million increased ~~$6.7~~$19.9 million, or ~~12.5%~~34.9%, versus the ~~third~~first quarter of last year on a ~~28.2%~~34.4% increase in net sales. The ~~increased expenses were due to the impact~~Transtar acquisition added $15.9 million of the ~~Transtar acquisition, including intangible asset amortization expense ($0.6 million), as well as increased demand~~increase, the systems write-off accounted for $1.4 million, and ~~related distribution activity across both segments.~~general inflation on wages, benefits and other variable expenses account for the balance of the change.

Consolidated operating income of ~~$25.8~~$29.0 million ~~(8.6%~~(7.7% of sales) is ~~$8.7~~$2.9 million ~~better~~higher than the ~~third~~first quarter of last ~~year.~~year largely reflecting continued top line growth.

Other Income and Expense, Income Taxes and Net ~~Results:~~Income:

Equity in earnings of joint venture of ~~$1.0~~$0.9 million was ~~$0.2~~$0.3 million ~~higher~~lower than ~~2005,~~in 2006, reflecting ~~increased~~weaker automotive industry-related sales ~~and earnings performance by~~at the Company’s joint venture, Kreher Steel.

Financing costs, ~~for~~which consist primarily of interest expense, were $4.3 million in the ~~third~~first quarter of ~~2006 were $1.9~~2007 which was $3.2 million ~~which included one month~~higher than the same period in 2006. The primary driver of ~~acquisition debt. This~~higher interest expense was the ~~same as~~Company’s increased borrowings related to the ~~corresponding period~~acquisition of Transtar in ~~2005. However, these costs are expected to increase in the near future as a result of the debt issued to fund the Transtar acquisition.~~September 2006.

Consolidated net income applicable to common stock was ~~$15.3~~$15.6 million, or ~~$0.82~~$0.81 per diluted share, in the ~~third~~first quarter of ~~2006~~2007 versus a consolidated net income applicable to common stock of ~~$10.1~~$15.8 million, or ~~$0.56~~$0.86 per diluted share, in the corresponding period of ~~2005.~~2006. Transtar contributed $3.7 million to net income during the quarter. First quarter 2007 net income included a $0.9 million after-tax charge ($0.04 per diluted share) for the write-off of the Company’s prior investment in information technology systems.

Page 16 of 25

~~Results of Operations: Nine-Month Comparisons and Commentary~~
~~Consolidated results by business segment are summarized in the following table for the nine-months ended September 30, 2006 and 2005~~

Nine-Months Ended Sept 30, Fav/(Unfav)
2006 2005 $ Change % Change

Net Sales
Metals $ 767.5 $ 650.7 $ 116.8 17.9 %
Plastics 88.1 81.0 7.1 8.8

Total Net Sales $ 855.6 $ 731.7 $ 123.9 16.9 %

Gross Material Margin
Metals $ 220.0 $ 192.4 $ 27.6 14.3 %
% of Metals Sales
28.7 % 29.6 % (0.9 )%
Plastics 29.5 26.6 2.9 10.9
% of Plastics Sales
33.5 % 32.8 % 0.6 %

Total Gross Material Margin $ 249.5 $ 219.0 $ 30.5 13.9 %
% of Total Net Sales
29.2 % 29.9 % (0.8 )%

Operating Expense
Metals $ 144.2 $ 129.9 $ (14.3 ) (11.0 )%
Plastics 22.8 21.5 (1.3 ) (6.0 )
Other 6.9 6.5 (0.4 ) (6.2 )

Total Operating Expense $ 173.9 $ 157.9 $ (16.0 ) (10.1 )%
% of Total Net Sales
20.3 % 21.6 % 1.3 %

Operating Income
Metals $ 75.8 $ 62.5 $ 13.3 21.3 %
% of Metals Sales
9.9 % 9.6 % 0.3 %
Plastics 6.7 5.1 1.6 31.4
% of Plastics Sales
7.6 % 6.3 % 1.3 %
Other (6.9 ) (6.5 ) (0.4 ) 6.2

Total Operating Income $ 75.6 $ 61.1 $ 14.5 23.7 %
% of Total Net Sales
8.8 % 8.4 % 0.5 %

~~Net Sales:~~
Nine-month 2006 consolidated net sales of $855.6 million were $123.9 million, or 16.9%, stronger than last year. Metals segment sales of $767.5 million were $116.8 million, or 17.9%, ahead of last year. Both increases include $18.6 million of sales related to the acquired Transtar business. Without the effect of the acquired business, consolidated net sales and Metals segment sales increased, 14.4% and 15.1%, respectively. Strong demand existed across our customer base through the first nine-months of 2006. For the nine-months ended September 30, 2006, Metals segment sales volume, net of material price increases and the effect of the Transtar acquisition, was 8.0% higher than for the same period in 2005. Metals material sales were approximately 7.0% higher than the corresponding 2005 period due to price increases.

~~Page 17 of 25~~

Plastics segment sales of $88.1 million were $7.1 million, or 8.8%, higher than the first nine months of 2005. Approximately 6.0% of the revenue increase was attributable to higher material pricing levels. The balance of the year-over-year sales increase in the Plastics segment was due to increased customer demand.

~~Gross Material Margin and Operating Profit:~~
Consolidated gross material margin for the first nine-months of 2006 was $249.5 million, or 13.9% higher than the same period of 2005. Metals segment gross material margin of $220.0 million was $27.6 million, or 14.3%, higher than last year due to increased sales levels. Excluding the effect of the Transtar acquisition consolidated gross material margin and Metals segment gross material margin would have increased 11.6% and 11.7%, respectively. Gross material margin as a percentage of net sales (“gross margin rate”) in our Metals segment was lower in 2006 due to increased supplier surcharges that were passed through to our customers at cost.

~~Plastics segment gross material margin increased by $2.9 million, or 10.9%, to a level of $29.5 million versus the first nine-months of 2005.~~

Year-to-date consolidated operating expenses of $173.9 million were $16.0 million, or 10.1% higher than last year, largely due to increased overall volume as well as the effect of the Transtar acquisition.

~~Consolidated operating profit of $75.6 million, or 8.8% of sales, was $14.5 million better than last year.~~

~~Other Income and Expense, and Net Results:~~
~~Joint venture equity earnings for the first nine-months of 2006 of $3.3 million were slightly below the corresponding period in 2005.~~

Nine-month financing costs, which consist of interest expense and discount on sale of accounts receivable in 2005, were $3.9 million for 2006 and $7.0 million for 2005 due to reduced borrowings and lower interest rates on our refinanced debt. However, interest expense is expected to increase in the near future as a result of the debt issued to fund the Transtar acquisition.

Year-to-date consolidated net income applicable to common stock (after preferred dividends of $0.7 million) was $45.2 million, or $2.45 per diluted share, versus $34.9 million, or $1.93 per diluted share, in the corresponding period of 2005.

Critical Accounting Policies:

The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes” – an interpretation of FASB No. 109. See Note 12 to the consolidated financial statements for more information regarding the Company’s adoption of FIN 48. There have been no other changes in critical accounting policies from those described in the Company’s Annual Report on Form 10-K for the ~~year-ended~~year ended December 31, ~~2005.~~2006.

In September of 2006, as part of the acquisition of Transtar the Company acquired $69.0 million of identifiable intangible assets. The fair value of these identifiable intangible assets, principally customer relationships and contracts, has been preliminarily derived by using certain estimates and assumptions such as potential customer attrition and a discount rate factor. Under FAS No. 142,~~Goodwill and Other Intangible Assets~~, identifiable intangible assets are amortized over their useful lives. We review the recoverability of such assets whenever significant events or changes occur which might impair the recovery of recorded costs. We measure possible impairment based on either significant losses of an entity or the ability to recover the balance of the long-lived asset from expected future operating cash flows on a discounted basis. If impairment is identified, we would calculate the amount of such impairment based upon the discounted cash flows as compared to the recorded book value of the entity.

~~Recent Accounting Pronouncements:~~
~~See footnote 2 to the condensed consolidated financial statements for discussion of accounting standards recently issued and not yet adopted by the Company.~~

~~Page 18 of 25~~

Liquidity and Capital Resources

The Company’s principal sources of liquidity are earnings from operations, management of working capital and the ~~$210.0~~$210 million amended senior credit facility with a syndicate of banks. This facility replaced the Company’s $82.0 million Revolver entered into in 2005. Depending on the type of borrowing selected by the Company, the applicable interest rate for loans under the U.S. Facility is calculated as a per annum rate equal to (i) LIBOR plus a variable margin or (ii) the greater of the U.S. prime rate or the federal funds effective rate plus 0.5% and a variable margin. The margin on LIBOR loans may fall or rise as set forth on a grid depending on the Company’s debt-to-capital ratio as calculated on a quarterly basis. As of September 30, 2006, the company’s interest rate was 7.09%.

The amended senior credit facility provides for (i) a $170.0 million revolving loan (the ”U.S. Revolver”) to be drawn on by the Company from time to time, (ii) a $30.0 million term loan ( the “U.S. Term Loan” and with the U.S. Revolver, the “U.S. Facility”), and (iii) a Cdn. $11.1 million revolving loan (approximately $9.9 million in U.S. dollars) (the “Canadian Facility”) to be drawn on by the Company’s Canadian subsidiary from time to time. The Canadian Facility can be drawn in either U.S. dollars or Canadian dollars. The revolving loans and term loan will mature in 2011.

The Company used the proceeds from the $30.0 million term loan and drew $117.0 million of the amount available under the U.S. Revolver to finance the acquisition of Transtar. See footnote 5 to the condensed consolidated financial statements for a more detailed discussion of the Company’s debt arrangements.facility.

Cash ~~used in~~from operating activities ~~through~~in the first ~~nine-months~~quarter of ~~2006~~2007 was ~~$6.1~~$4.5 million. ~~In general, working capital cash needs offset cash generated from operations.~~

Working capital, ~~including the effect of the acquisition and~~ excluding the current portion of ~~long- and short-term~~long-term debt, isof $121.4 million was up ~~$95.6~~$18.0 million since the beginning of the year. Trade receivables of ~~$182.0~~$189.9 million were up ~~$75.0 million. About one-half of the increase in accounts receivable is~~$28.9 million due to ~~the addition of Transtar, while the remaining increase reflects strong sales growth year-to-date as receivable~~increased sales. Receivable days sales outstanding ~~(DSO) only increased 0.9~~declined 4.2 days from ~~year-end~~December 31, 2006 to a level of ~~44 days.~~43.1 days reflecting strong collections during the quarter. Inventory at net book value of ~~$216.2~~$237.5 million, including ~~LIFO (last-in, first-out)~~last-in, first-out reserves of ~~$121.9~~$143.0 million, ~~is up $96.9~~increased $35.1 million from ~~year-end of which $64.6 million is attributable to Transtar.~~December, 2006. Days sales in inventory ~~(DSI) increased 3~~of 121.7 days ~~from year-end~~reflects higher receipts of nickel and aluminum materials in the first quarter.

Available revolving credit capacity is primarily used to ~~a level~~fund working capital needs. As of ~~122 days.~~March 31, 2007, the Company had outstanding borrowings of $108.5 million under its U.S. Revolver and had availability of $53.7 million. The ~~Company expects to reduce current inventory levels~~Company’s Canadian subsidiary had $0.5 million in outstanding borrowings under the Canadian Revolver and ~~operate~~availability of $9.4 million at ~~an average DSI of below 120 days in 2006.~~March 31, 2007.

The Company ~~also~~ paid a cash dividend to its shareholders of $0.06 per common share, or $1.0 million, during the ~~third~~first quarter of ~~2006. Year-to-date, $3.0~~2007. The Company also paid $0.2 million in preferred stock dividends during the first quarter of ~~cash dividends have been paid, excluding the $0.7 million of dividends paid to preferred stockholders.~~

2007. Capital expenditures in the first ~~nine-months~~quarter of ~~2006~~2007 were $10.2 million. Expenditures included spending associated with the new Birmingham, Alabama facility ($3.2 million) and the Company’s ongoing business system replacement initiative ($2.1 million), along with$2.2 million, reflecting typical equipment replacement and upgrades. Despite increased working capital levels, the Company reduced its debt, net of cash position, by $1.1 million since the beginning of the year.

The Company’s principal payments on long-term debt, including the current portion of long-term debt, required over the next few years are summarized below ~~in Table 2~~(dollars in thousands):.


*Table 2*

Year ending December 31,			Year ending December 31,

2006	$	7,418
2007		12,822
2007 (for the nine months April 1, 2007 to December 31, 2007)			2007 (for the nine months April 1, 2007 to December 31, 2007)	$	11,131
2008		12,980	2008		12,998
2009		16,462	2009		16,470
2010		13,208	2010		13,220
2011 and beyond		47,355
2011			2011		12,140
2012 and beyond			2012 and beyond		35,223

Total debt	$	110,245	Total debt	$	101,182

Page 17 of 22

Commitments and Contingencies

At ~~September 30, 2006,~~March 31, 2007 the Company had ~~a $1.7~~$5.3 million of irrevocable ~~letter~~letters of credit outstanding, ~~to comply~~$1.7 million of which were for compliance with the insurance reserve requirements of its workers’ compensation insurance carrier. The ~~letter of credit is obtained under a provision~~remaining $3.6 million was in support of the ~~revolving credit facility.~~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 ~~management,~~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.

On October 22, 2006 members of the United Steelworks Union ratified a four-year collective bargaining agreement through September 30, 2010. The new agreement covers 278 of the 289 union employees included in its total workforce.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The Company is exposed to ~~various~~ interest rate, commodity price, and ~~metals and plastics price~~foreign exchange rate risks that arise in the normal course of business. ~~The Company finances its operations with fixed and variable rate borrowings. Market risk arises from~~

There have been no significant or material changes to such risks since December 31, 2006. Refer to Item 7a in ~~variable interest rates. Under its Revolver,~~our Annual Report on Form 10-K filed for the Company’s interest rate on borrowings is subject to changes in the LIBOR and Prime Rate. A 1.0% change in its interest rate would alter the Company’s interest expense by $0.2 million annually at the current debt level. The Company’s raw material costs are comprised primarilyyear ended December 31, 2006 for further discussion of engineered metals and plastics. Market risk arises from changes in the price of steel, other metals and plastics. Although average selling prices generally increase or decrease as material costs increase or decrease, the impact of a change in the purchase price of materials is more immediately reflected in the Company’s cost of material sold than in its selling prices.such risks.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

A review and evaluation was performed by the Company’s management, including the ~~Company’s~~ Chief Executive Officer ~~(the ”CEO”)~~(CEO) and Chief Financial Officer ~~(the “CFO”),~~(CFO) of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) ~~under~~of the ~~Securities~~Security Exchange Act of 1934) as of the end of the period covered by this report.

As part of its evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report, and in accordance with the framework published by the Committee of Sponsoring Organizations of the Treadway Commission, referred to as theInternal Control — Integrated Framework,the Company’s management has ~~(i) identified no material weaknesses other than those described above and (ii) evaluated whether the material weaknesses described above continue to exist. Although the Company believes~~concluded that ~~the changes in~~our internal controls discussed below begin to address the reported material weaknesses, management cannot conclude that these weaknesses are eliminated until the Company performs further testing of internal controlscontrol over financial reporting ~~in subsequent periods and takes further action steps to address these weaknesses. Therefore, the CEO and CFO have concluded that the Company’s current disclosure controls and procedures,~~was effective as designed and implemented, were not effective in ensuring that the information the Company is required to disclose in this quarterly report is recorded, processed, summarized and reported reliably in accordance with generally accepted accounting principles within the time period required by the rules of the ~~Securities and Exchange Commission.~~end of the period covered by this report.

Page 18 of 22

(b)Changes in Internal Controls
~~In response~~

There was no change in the Company’s “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(d) of the Securities Exchange Act of 1934 that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to ~~deficiencies~~materially affect, the Company’s internal control over financial reporting.

During the quarter, the Company signed an agreement to purchase Oracle’s ERP system in support of its strategic growth initiative. While no changes have been made to our internal control over financial reporting at this time, we will continue to review our internal control over financial reporting as ~~identified above, management~~the ERP system is implemented within the following changes in the Company’s internal control over financial reporting during the period ended September 30, 2006 in addition to initiatives highlighted in previous Securities and Exchange Commission Form 10-Q filings.

~~To remediate deficiencies in the accounting close and reporting process~~Company. Additionally, the Company ~~engaged a firm to document its financial close process and recommend changes. Their recommendations on the close process are currently being implemented. The reporting process~~ is currently under review. To improve its internal capabilities for tax accounting, new software has been purchased and is being implemented for the tax provision calculations and tracking. To remediate deficiencies in complex accounting issues, the Company has engaged outside service providers to aide in the purchase accounting associated with the Transtar acquisition. The Company will continue to augment its capabilities on as needed basis when complex issues arise.

~~The Company has begun~~ the process of reviewing and documenting the internal control structure of Transtar and, if necessary, will make appropriate changes as it incorporates its controls and procedures into this recently acquired business. This review will continue beyond December 31, 2006 and therefore management’s annual assessment of the effectiveness of the Company’sto Transtar’s internal control over financial reporting as of December 31, 2006 will exclude the recently acquired Transtar business, which represents approximately 3% of the Company’s total sales and approximately 34% of the Company’s total assets for the nine month period ended September 30, 2006reporting.

~~Page 21 of 25~~

Part II. OTHER INFORMATION


Item 1.		Legal Proceedings


		There ~~are~~were no material legal proceedings other than the ordinary routine litigation incidental to the business of the Company.


Item 1A.		Risk Factors


			~~Our business, operations and financial conditions are subject~~During the quarter there were no material changes to ~~various risks and uncertainties. Current or potential investors should carefully consider~~ the ~~risks and uncertainties described~~risk factors set forth in the Company’s Annual Report on Form ~~10K on file with~~10-K for the SEC, and other documents filed with the SEC, before making any investment decisions with respect to the Company’s securities. In addition, during this quarter additional risk factors were identified as outlined below.

			~~General Business Risks~~ On September 5, 2006, the Company acquired Transtar Metals. This acquisition and its integration into the Company increases the risk associated with the financial close process by adding additional variability and entities into the consolidation process.

			~~Concentration in Aerospace and Defense Industry~~ With the addition of Transtar Metals, the Company has increased participation in the aerospace and defense industries. This industry now represents about 30% of the Company’s business. This participation increases the likelihood that the Company is susceptible to fluctuations in the global aerospace and defense industry having a significant impact on the Company’s performance.fiscal year ended December 31, 2006.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

(d) Maximum

Number (or

of Shares (or

Approximate

Units) 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 Be

Period

Units) Purchased

Share (or Unit)

Announced

Purchased

Plans or

(Under the Plans

Programs

or Programs)

January 1 – January 31

—

February 1 – February 28

—

~~(d) Maximum~~—

—

~~(c) Total~~

~~Number (or~~

~~Number of~~

~~Approximate~~

~~(a) Total~~

~~Shares (or~~

~~Dollar Value) of~~

~~Number of~~

~~(b) Average~~

~~Units)~~

~~Shares (or~~

~~Price Paid per~~

~~Purchased as~~

~~Units) that May~~

~~Units)~~

~~Share (or Unit)~~

~~Part of Publicly~~

~~Yet Be~~

~~Purchased~~

~~Announced~~

~~Purchased~~

~~Period~~

~~Plans or~~

~~(Under the~~

~~Programs~~

~~Plans or~~

~~Programs)~~

~~July~~March 1 ~~— July~~– March 31

—

~~N/A~~

—

~~August 1 — August 31~~

—

~~N/A~~

—

~~September 1 — September 30~~

—

~~N/A~~

—

Total

~~N/A~~—

—

~~N/A~~—

~~N/A~~

—

~~Item 6.~~


Item 6.		Exhibits

~~Exhibit 31.1 Certification Pursuant to Section 302 by CEO~~

~~Exhibit 31.2 Certification Pursuant to Section 302 by CFO~~


		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

6.		Goodwill and Intangible Assets

		Acquisition of Transtar

		On 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):


	March 31, 2007				December 31, 2006
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization

Customer Relationships	$	66,851	$	3,578	$	66,851	$	2,061
Non-Compete Agreements		1,557		340		1,557		178

Total	$	68,408	$	3,918	$	68,408	$	2,239

		“Other” — The segment’s total assets consist of the Company’s ~~income tax receivable and its~~ investment in a joint venture.

~~10.~~11.		Pension and Postretirement Benefits

		The following are the components of the net pension and ~~post-retirement~~postretirement benefit expenses (~~(dollars~~ in thousands):


For Quarter Ended	September 30,
	2006			2005

Service cost	$	917.8		$	720.5
Interest cost		1,805.8			1,593.0
Expected return on plan		(2,423.9	)		(2,394.2	)
Amortization of prior service cost		26.4			27.7
Amortization of net loss		945.8			14.6

Net periodic cost	$	1,271.9		$	561.6


For Nine-Months Ended	September 30,
	2006			2005

Service cost	$	2,753.4		$	2,161.5
Interest cost		5,417.4			4,779.1
Expected return on plan		(7,271.7	)		(7,182.6	)
Amortization of prior service cost		79.2			82.9
Amortization of net loss		2,837.4			1,843.9

Net periodic cost	$	3,815.7		$	1,684.8


		Page
		Number
Part I. Financial Information

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets		3

	Consolidated Statements of Income		4

	Consolidated Statements of Cash Flows		5

	Notes to Consolidated Financial Statements			~~6-12~~	6-13

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations			~~13-19~~	13-17

Item 3.	Quantitative and Qualitative Disclosure About Market Risk		20	17

Item 4.	Controls and Procedures			~~20-21~~	17-18

Part II. Other Information

Item 1.	Legal Proceedings		22	18

Item 1A.	Risk Factors		22	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			22	18-19

Item 6.	Exhibits		22	19
Certification Pursuant to Section 302 by CEO ~~Certification~~
Certification Pursuant to Section 302 by CFO ~~Certification~~
Certification Pursuant to Section 906 by CEO ~~and~~& CFO ~~Certifications~~


CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)	As of
Unaudited	Sept 30,			Dec 31
	2006			2005
ASSETS
Current assets
Cash and cash equivalents	$	9,756		$	37,392
Accounts receivable, less allowances of $3,263 at September 30, 2006 and $1,763 at December 31, 2005		182,023			107,064
Inventories (principally on last-in, first-out basis) (latest cost higher by $121,865 at September 30, 2006 and $104,036 at December 31, 2005)		216,216			119,306
Other current assets		13,996			6,351

Total current assets		421,991			270,113
Investment in joint venture		13,000			10,850
Goodwill		99,208			32,222
Intangible assets		68,520			70
Prepaid pension cost		39,082			41,946
Other assets		6,462			4,112
Property, plant and equipment, at cost
Land		5,224			4,772
Buildings		48,641			45,890
Machinery and equipment		138,458			127,048

		192,323			177,710
Less — accumulated depreciation		(121,080	)		(113,288	)

		71,243			64,422

Total assets	$	719,506		$	423,735


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	144,298		$	103,246
Accrued liabilities		32,972			21,535
Current and deferred income taxes		10,863			7,052
Short-term debt		129,223			—
Current portion of long-term debt		12,527			6,233

Total current liabilities		329,883			138,066

Long-term debt, less current portion		97,718			73,827
Deferred income taxes		48,618			21,903
Deferred gain on sale of assets		5,907			5,967
Pension and postretirement benefit obligations		9,181			8,467
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value — 10,000,000 shares authorized; 12,000 shares issued and outstanding		11,239			11,239
Common stock, $0.01 par value — authorized 30,000,000 shares; issued and outstanding 17,013,371 at September 30, 2006 and 16,605,714 at December 31, 2005		170			166
Additional paid-in capital		67,772			60,916
Retained earnings		152,670			110,530
Accumulated other comprehensive income		3,281			2,370
Treasury stock, at cost — 411,235 shares at September 30, 2006 and 546,065 shares at December 31, 2005		(6,933	)		(9,716	)

Total stockholders’ equity		228,199			175,505

Total liabilities and stockholders’ equity	$	719,506		$	423,735


CONSOLIDATED STATEMENTS OF INCOME	For the Three						For the Nine
(Dollars in thousands, except per share data)	Months Ended						Months Ended
Unaudited	Sept 30,						Sept 30,
	2006			2005			2006			2005
Net sales	$	300,809		$	234,551		$	855,610		$	731,721
Cost of material sold		214,792			163,956			606,136			512,705

Gross material margin		86,017			70,595			249,474			219,016
Plant and delivery expense		30,117			27,920			88,720			81,635
Sales, general, and administrative expense		26,847			23,405			76,805			69,509
Depreciation and amortization expense		3,225			2,205			8,323			6,752

Total operating expense		60,189			53,530			173,848			157,896
Operating income		25,828			17,065			75,626			61,120
Interest expense, net		(1,903	)		(1,765	)		(3,949	)		(5,875	)
Discount on sale of accounts receivable		—			(127	)		—			(1,127	)

Income before income taxes and equity earnings of joint venture		23,925			15,173			71,677			54,118
Income taxes		(9,470	)		(5,673	)		(29,110	)		(21,888	)

Income before equity in earnings of joint venture		14,455			9,500			42,567			32,230
Equity in earnings of joint venture		1,037			817			3,332			3,342

Net income		15,492			10,317			45,899			35,572
Preferred dividends		(235	)		(240	)		(720	)		(720	)

Net income applicable to common stock	$	15,257		$	10,077		$	45,179		$	34,852

Basic earnings per share	$	0.82		$	0.63		$	2.46		$	2.19

Diluted earnings per share	$	0.82		$	0.56		$	2.45		$	1.93

Dividends per common share	$	0.06		$	—		$	0.18		$	—


Current assets	$	102,674
PP & E, net		4,274
Intangibles		69,005
Goodwill		66,960
Other long-term assets		366

Total assets		243,279

Current liabilities		35,076
Long-term liabilities		29,732

Total liabilities		64,808

Net assets	$	178,471


	Three Months				Nine Months
($’s in millions, except per share data)	Ended September 30,				Ended September 30,
	2006		2005		2006		2005
Net sales	$	341.9	$	292.6	$	1,036.1	$	900.4
Net income	$	15.1	$	10.7	$	48.6	$	36.8
Net income per diluted common share	$	0.80	$	0.58	$	2.59	$	2.00


	Metals		Plastics
	Segment		Segment		Total

Balance as of December 31, 2006	$	88,810	$	12,973	$	101,783
Currency translation		7		—		7

Balance 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 ~~2006,~~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):

		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.

		“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 ~~and December 31, 2005~~ was as follows:


	For the three months ended
	March 31,
	2007			2006

Service cost	$	934.5		$	917.8
Interest cost		1,911.1			1,805.8
Expected return on plan		(2,520.0	)		(2,423.9	)
Amortization of prior service cost		26.4			26.4
Amortization of net loss		787.0			945.8

Net periodic cost	$	1,139.0		$	1,271.9

~~11.~~		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 Liabilities

		At ~~September 30, 2006,~~March 31, 2007 the Company had ~~a $1.7~~$5.3 million of irrevocable ~~letter~~letters of credit outstanding, ~~to comply~~$1.7 million of which is for compliance with the insurance reserve requirements of its workers’ compensation insurance carrier. The ~~letter~~remaining $3.6 million is in support of ~~credit is obtained under a provision in~~ the ~~revolving credit facility.~~outstanding industrial revenue bonds.


	*Nine-Months Ended Sept 30,*						*Fav/(Unfav)*
	*2006*			*2005*			*$ Change*			*% Change*

Net Sales
Metals	$	767.5		$	650.7		$	116.8			17.9	%
Plastics		88.1			81.0			7.1			8.8

Total Net Sales	$	855.6		$	731.7		$	123.9			16.9	%

Gross Material Margin
Metals	$	220.0		$	192.4		$	27.6			14.3	%
% of Metals Sales		28.7	%		29.6	%		(0.9	)%
Plastics		29.5			26.6			2.9			10.9
% of Plastics Sales		33.5	%		32.8	%		0.6	%

Total Gross Material Margin	$	249.5		$	219.0		$	30.5			13.9	%
% of Total Net Sales		29.2	%		29.9	%		(0.8	)%

Operating Expense
Metals	$	144.2		$	129.9		$	(14.3	)		(11.0	)%
Plastics		22.8			21.5			(1.3	)		(6.0	)
Other		6.9			6.5			(0.4	)		(6.2	)

Total Operating Expense	$	173.9		$	157.9		$	(16.0	)		(10.1	)%
% of Total Net Sales		20.3	%		21.6	%		1.3	%

Operating Income
Metals	$	75.8		$	62.5		$	13.3			21.3	%
% of Metals Sales		9.9	%		9.6	%		0.3	%
Plastics		6.7			5.1			1.6			31.4
% of Plastics Sales		7.6	%		6.3	%		1.3	%
Other		(6.9	)		(6.5	)		(0.4	)		6.2

Total Operating Income	$	75.6		$	61.1		$	14.5			23.7	%
% of Total Net Sales		8.8	%		8.4	%		0.5	%


	~~Required~~		~~Actual~~
			~~9/30/06~~

~~Debt-to-Capital Ratio~~		~~< 0.55~~		~~0.45~~

~~Working Capital-to-Debt Ratio~~		~~> 1.00~~		~~1.36~~

~~Book Value of Equity~~	~~$167.5 million~~		~~$228.2 million~~


		A. M. Castle & Co.

		(Registrant)

Date: ~~November 8, 2006~~May 4, 2007	By:	/s/ Henry J. Veith

		Henry J. Veith

		Controller
		(Mr. Veith is the Chief Accounting Officer and has been authorized to sign on behalf of the Registrant.)