The 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, 2007 is derived from the audited financial statements at that date. 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 for a fair presentation of financial results for the interim periods. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. The 2008 interim results reported herein may not necessarily be indicative of the results of the Company’s operations for the full year.

Non-cash investing activities for the sixnine months ended JuneSeptember 30, 2008 related primarily to the acquisition of Metals U.K. Group and consisted of $1,997 of stock consideration currently probable of being paid, but not yet paid. The Company had non-cash investing activities for the six months ended June 30, 2008 consistingpaid and $406 of $198, which represented capital expenditures in accounts payable.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) and in February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 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 157 encourages entities to combine fair value information disclosed under SFAS 157 with other accounting pronouncements, including SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, where applicable. Additionally, SFAS 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.

Effective January 1, 2008, the Company adopted SFAS 157 and SFAS 159. In February 2008, the FASB issued FASB Staff Position (“FSP”) Nos. FASSFAS 157-1 and FASSFAS 157-2 (“FSP 157-1” and “FSP 157-2”). FSP 157-1 excludes SFAS No. 13, “Accounting for Leases”, as well as other accounting pronouncements that address fair value measurements for leases, from the scope of SFAS No. 157. FSP 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008.

The Company did not elect the fair value option for any assets or liabilities. The adoption of SFAS 157 and SFAS 159 did not materially affect the Company’s consolidated financial results of operations, cash flows or financial position.

financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following currently existing generally accepted accounting principles until January 1, 2009. The Company is stillcurrently evaluating the expectedpotential impact, thatif any, of the adoption of SFAS 141R may have on the Company’s consolidated financial statements when effective.position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires that accounting and reporting for minority interests be re-characterized as non-controlling interests and classified as a component of equity. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement is effective as of the beginning of an entity’s first fiscal year beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on the Company’s financial condition,position, results of operations and cash flows.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). The previous U.S. GAAP hierarchy existed within the American Institute of Certified Public Accountants’ statements on auditing standards, which are directed to the auditor rather than the reporting entity. SFAS 162 moves the U.S. GAAP hierarchy to the accounting literature, thereby directing it to reporting entities which are responsible for selecting accounting principles for financial statements that are presented in conformity with U.S. GAAP. The Company will adopt SFAS 162 when it becomes effective which is 60 days followingIn September 2008, the SEC’sSEC issued an approval oforder for the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement is effective as of November 2008, 60 days after the issuance of the SEC approval order. The Company does not expect the adoption of this standard to have a material impact on the Company’s financial condition,position, results of operations and cash flows.

In May 2008, the FASB issued FASB Staff Position (“FSP”)FSP SFAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). This FSP is intended to improve the consistency between the useful life of an intangible asset determined under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R and other U.S. GAAP. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008. It is expected that FSP SFAS 142-3 will have an impact on the Company’s consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

Metals U.K. is a distributor and processor of specialty metals primarily serving the oil and gas, aerospace, petrochemical and power generation markets worldwide. Metals U.K. has four processing facilities; two in Blackburn, England, one in Hoddesdon, (North East of London)England and one in Bilbao, Spain. The acquisition of Metals U.K. is expected to allow the Company to expand its global reach and service potential high growth industries.

The aggregate purchase price was approximately $29,648,$29,693, or $28,809,$28,854, net of cash acquired, and represents the aggregate cash purchase price, contingent consideration currently probable of payment, debt paid off at closing, and direct transaction costs. There is also the potential for additional purchase price of up to $12,000 based on the achievement of performance targets related to fiscal year 2008. Based on its projections, the Company estimates that no additional purchase price will be paid. The premium paid in excess of the fair value of the net assets acquired was primarily for the ability to expand the Company’s global reach, as well as to obtain Metals U.K.’s skilled, established workforce.

In conjunction with the Acquisition, the Company amended its existing revolving line of credit, expanding it to $230,000, which includes a $50,000 multi-currency facility to fund the Acquisition and provide for future working capital needs of its European operations (see Note 5). The multi-currency facility allows for funding in either British Poundspounds or Euroseuros to reduce the impact of foreign exchange rate volatility.

The following allocation of the purchase price is preliminary:

As discussed in Note 8 to the consolidated financial statements included in the Company’s Annual Reportannual report on Form 10-K for the year ended December 31, 2007, the final purchase price for the 2006 acquisition of Transtar iswas subject to a working capital adjustment. In accordance with provisions of the purchase agreement, these matters were submitted to arbitration. On August 21, 2008, the arbitrator issued a final award on all pending matters with respect to the Transtar acquisition.

As a result of the arbitrator’s final award, the Company owed approximately $352 to the seller, which reflects the $1,261 of working capital adjustment and miscellaneous costs awarded to the Company, offset by legal fees and other costs of $1,613 awarded to the seller. The final determination and agreement onfinalization of the working capital adjustment was not completeddecreased goodwill by $244 as of JuneSeptember 30, 2008. For the three and nine month periods ended September 30, 2008, but the Company is pursuing a conclusion, the resultnet impact to income before income taxes and equity in earnings 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 assetsjoint venture was $1,720 and liabilities.$2,470, respectively.

The Company determined earnings per share in accordance with SFAS No. 128, “Earnings Per Share” (“SFAS 128”). For the period through the conversion of the preferred stock in connection with the secondary offering in May 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 FASB Statement 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, convertible preferred stock shares and other share-based payment awards, which have been included in the calculation of weighted average shares outstanding using the treasury stock method. The following table is a reconciliation of the basic and diluted earnings per share calculations for the three and sixnine months ended JuneSeptember 30, 2008 and 2007:

Short-term and long-term debt consisted of the following:

As of JuneSeptember 30, 2008, the Company had outstanding borrowings under its U.S. Revolver A of $17,500$41,000 and availability of $142,204. Outstanding borrowings$119,767. Borrowings under the U.S. Revolver B were $32,712$28,366 and availability was $17,288$21,634 as of JuneSeptember 30, 2008. The Company’s Canadian subsidiary had no outstanding borrowings under the Canadian Facility and had availability of $10,000. The weighted average interest rate for borrowings under the U.S. Revolver A and U.S. Revolver B as of JuneSeptember 30, 2008 was 5.33%4.68% and 6.49%6.42%, respectively.

As of JuneSeptember 30, 2008, the Company remains in compliance with the covenants of its financial agreements, which require it to maintain certain funded debt-to-capital ratios, working capital-to-debt ratios and a minimum adjusted consolidated net worth as defined within the agreements.

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, the Company’s Chief Executive Officer, the chief operating decision-maker, reviews and manages these two businesses separately. As such, these businesses are considered reportable segments in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” and are reported accordingly.

In its Metals segment, the Company’s marketing strategy focuses on distributing highly engineered specialty grades and alloys of metals as well as providing specialized processing services designed to meet very tight specifications. Core products include nickel alloys, aluminum, stainless steels and carbon. Inventories of these products assume many forms such as plate, sheet, round bar, hexagon bar, square and flat bar, tubing and coil. Depending on the size of the facility and the nature of the markets it serves, service centers are equipped as needed with bar saws, plate saws, oxygen and plasma arc flame cutting machinery, water-jet cutting, stress relieving and annealing furnaces, surface grinding equipment and sheet shearing equipment. This segment also performs various specialized fabrications for its customers through pre-qualified subcontractors that thermally process, turn, polish and straighten alloy and carbon bar.

The Company’s Plastics segment consists exclusively of Total Plastics, Inc. (“TPI”) headquartered in Kalamazoo, Michigan. The Plastics segment stocks and distributes a wide variety of plastics in forms that include plate, rod, tube, clear sheet, tape, gaskets and fittings. Processing activities within this segment include cut to length, cut to shape, bending and forming according to customer specifications. The Plastics segment’s diverse customer base consists of companies in the retail (point-of-purchase), marine, office furniture and fixtures, transportation and general manufacturing industries. TPI has locations throughout the upper northeast and midwest portions of the U.S. and one facility in Florida from which it services a wide variety of users of industrial plastics.

The accounting policies of all segments are the same as described in Note 1 “Basis of Presentation and Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. Management evaluates the performance of its business segments based on operating income. The Metals segment includes the operating results of Metals U.K. for the three and sixnine months ended JuneSeptember 30, 2008.

Segment information for the three months ended JuneSeptember 30, 2008 and 2007 is as follows:

As discussed in Note 3, the Company acquired the outstanding capital stock of Metals U.K. on January 3, 2008. Metals U.K.’s results and assets are included in the Company’s Metals segment from the date of acquisition.

The changes in carrying amounts of goodwill during the sixnine months ended JuneSeptember 30, 2008 were as follows:

The following summarizes the components of intangible assets:

Over 80 percent of the Company’s inventories are stated at the lower of last-in, first-out (“LIFO”) cost or market. Final inventory determination under the LIFO method can only be made at the end of each fiscal year based on the actual inventory levels and costs at that time. Interim LIFO determinations, including those at JuneSeptember 30, 2008, are based on management’s estimates of future inventory levels and costs.

The Company accounts for its share-based compensation programs by recognizing compensation expense for the fair value of the share awards granted ratably over their vesting period in accordance with SFAS No. 123R, “Share-Based Payment.” The compensation cost that has been charged against income for the Company’s share-based compensation arrangements was $926$798 and $1,061$1,283 for the three months ended JuneSeptember 30, 2008 and 2007, respectively and $1,757$2,555 and $2,515$3,798 for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for share-based compensation arrangements was $361$311 and $390$406 for the three months ended JuneSeptember 30, 2008 and 2007, respectively, and $685$996 and $752$1,158 for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively. All compensation expense related to share-based compensation plans is recorded in sales, general and administrative expense. The unrecognized compensation cost as of JuneSeptember 30, 2008 associated with all share-based payment arrangements is $6,249$5,068 and the weighted average period over which it is to be expensed is 1.81.4 years.

Restricted Stock, Stock Option and Equity Compensation Plans-— The Company maintains certain long-term stock incentive and stock option plans for the benefit of officers, directors and key management employees. During the first quarter of 2008, the Company established the 2008 Restricted Stock, Stock Option and Equity Compensation Plan, which authorized up to 2,000,0002,000 shares to be issued under the plan.

Beginning in 2006, the Company began to utilize restricted stock to compensate non-employee directors and non-vested shares issued under the Long-Term Incentive Performance (“LTIP”) Plans as its long-term incentive compensation method for executives and other key employees. Stock options may be granted in the future under certain circumstances when deemed appropriate by management and the Board of Directors.

The Company’s stock options have been granted with an exercise price equal to the market price of the Company’s stock on the date of the grant and have a contractual life of 10 years. Options and restricted stock grants generally vest in one to five years for executive and employee option grants and one year for options and restricted stock grants granted to directors. The Company generally issues new shares upon share option exercise. A summary of the stock option activity under the Company’s share-based compensation plans is shown below:

A summary of the restricted stock activity is as follows:

2008 Plan- The fair value of the awards granted under the 2008 Plan wasranged from $22.90 to $28.17 per share and was established using the market price of the Company’s stock on the datedates of grant. As of JuneSeptember 30, 2008, based on its projections, the Company estimates that 216,439206 shares will be issued. The maximum number of shares that could potentially be issued under the 2008 Plan is 443,500.430. The shares associated with the 2008 Plan will be distributed in 2011, contingent upon the Company meeting performance goals over the three-yearthree—year period ending December 31, 2010.

Comprehensive income includes net income and all other non-owner changes to equity that are not reported in net income. The Company’s comprehensive income for the three months ended JuneSeptember 30, 2008 and 2007 is as follows:

match the overall duration and term of the Company’s pension liability structure. The Company’s decision to change the investment portfolio target allocation could impact the expected long-term rate of return and the Company’s future net periodic pension cost.

Components of the net periodic pension and postretirement benefit cost for the three and sixnine months ended are as follows:

The following table shows the net change in the Company’s unrecognized tax benefits:

such as increased transportation costs continued to outpace overall volume growth. As a result, operating income was 4.3% of sales in carbon products during the secondthird quarter of 2008.2008, which was lower than the 6.4% in the prior year period.

The Company’s Plastics segment reported 8.2%experienced a 2.4% decline in sales growth compared to the secondthird quarter of 2007 driven by healthyprimarily due to lower demand in key end-markets such as industrial and office furniture markets.the boat manufacturing sector.

Management uses the Purchaser’s Managers Index (“PMI”) provided by the Institute of Supply Management (website is www.ism.ws) as an external indicator for tracking the demand outlook and possible trends in its general manufacturing markets. The table below shows PMI trends from the first quarter of 2006 through the secondthird quarter of 2008. Generally speaking, it is considered that an index above 50.0 indicates continuing growth in the manufacturing sector of the U.S. economy. As the data indicates, the index experienced a slight increasedecrease from the firstsecond quarter of 2008.2008 and has been below 50.0 for the last four quarters.

Consolidated results by business segment are summarized in the following table for the quarters ended JuneSeptember 30, 2008 and 2007.

(excluding the impact of 33the Metals U.K. acquisition and the fourth quarter 2007 divestiture of Metal Express) increased 2.6% compared to the third quarter of 2007.

The Metals segment sales volume increase during the secondthird quarter of 2008 was primarily driven by strong growth in carbon and alloy plate and alloy bar sales.products. The increase in tons sold combined with increased pricinghigher prices for certaincarbon-based products resulted in higher sales compared to the favorable revenue comparison from the same period last year.prior year period.

Plastics segment sales during the secondthird quarter of 2008 of $31.7$28.8 million were $2.4$0.7 million, or 8.2% higher2.4% lower than the secondthird quarter of 20072007. Plastics sales were primarily due to growthimpacted by lower demand in the office furniture and industrial markets.boat manufacturing sector.

Consolidated secondthird quarter 2008 cost of materials (exclusive of depreciation and amortization) increased $26.9$34.7 million, or 10.0%13.7%, to $297.2$287.8 million. The increase in consolidated cost of materials is primarily driven by the results of the Metals segment. Within the Metals segment during the secondthird quarter of 2008, material costs were 75.3%74.5% of sales as compared to 73.0%72.6% in the secondthird quarter of 2007. IncreasedHigher material costs, particularly in carbon-based products, were the primary driver of increased material costs as a percent of sales are partlysales. In addition, the result of price increases announced and implemented throughout the marketplace during the second quarter, as well as changes in sales mix. The secondthird quarter 2008 results included a LIFO inventory reserve chargeincrease of $29.8$6.0 million compared to an $18.6a decrease of $14.8 million charge in the comparable prior year period.

On a consolidated basis, other operating costs and expenses increased $9.1$9.6 million, or 12.4%12.8%, compared to the secondthird quarter of 2007. Other operating costs and expenses during the secondthird quarter of 2008 were $82.3$84.5 million, or 20.7%21.7% of sales compared to $73.2$74.9 million, or 19.6%21.4% of sales last year. ExcludingThird quarter 2008 results included $1.1 million of incremental operating expenses associated with the January 2008 acquisition of Metals U.K. acquisition and(net of the Metal Express divestiture impacts,divestiture) as well as $1.4 million for costs related to the secondTranstar acquisition arbitration settlement. The remaining third quarter other operating expense increase was $7.5$7.1 million, which was primarily related to $4.5$3.6 million of higher warehouse, plant, transportation and transportationselling costs associated with higher sales volumes and increased fuel charges, as well as $1.3$1.7 million of higher outside service costs forrelated to the Oracle ERP implementation and corporate legal costs.implementation.

Consolidated operating income for the secondthird quarter of $17.6$16.6 million was $11.5$5.7 million, or 39.5%25.6% lower than the same quarter last year. The Company’s secondthird quarter 2008 operating profit margin (defined as operating income divided bya percentage of net sales)sales decreased to 4.4%4.3% from 7.8%6.4% in the second quarter of 2007.

Weighted average diluted shares outstanding increased 8.7% to 22,776was 22.8 million shares for the quarter-ended JuneSeptember 30, 2008 as compared to 20,961 shares for the same period in 2007. The increase in average diluted shares outstanding is primarily due to the additional shares issued during the Company’s secondary equity offering in Mayand 2007.