UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarterly Period Ended June 30, 2015
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 incorporation of organization)
(I.R.S. Employer Identification No.)
 
 
1420 Kensington Road, Suite 220, Oak Brook, Illinois
60523
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone, including area code (847) 455-7111

(Former name, former address and former fiscal year, if changed since last report) None
 
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  ý No  ¨  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Yes  ý No  ¨  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
 
Accelerated filer
ý
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
 
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes  ¨ No  ý  
The number of shares outstanding of the registrant’s common stock as of July 31, 2015 was 23,777,280 shares.


A. M. CASTLE & CO.
Table of Contents
 



Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Amounts in thousands, except par value and per share data
CONDENSED CONSOLIDATED BALANCE SHEETS
 
As of
 
June 30,
2015
 
December 31,
2014
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
11,496

 
$
8,454

Accounts receivable, less allowances of $3,577 and $3,375
115,260

 
131,003

Inventories, principally on last-in first-out basis (replacement cost higher by $127,569 and $129,779)
203,143

 
236,932

Prepaid expenses and other current assets
11,081

 
9,458

Deferred income taxes
1,005

 
685

Income tax receivable
2,927

 
2,886

Total current assets
344,912

 
389,418

Investment in joint venture
38,455

 
37,443

Goodwill
12,973

 
12,973

Intangible assets, net
50,324

 
56,555

Prepaid pension cost
6,656

 
7,092

Other assets
10,254

 
11,660

Property, plant and equipment
 
 
 
Land
3,596

 
4,466

Buildings
50,608

 
52,821

Machinery and equipment
184,504

 
183,923

Property, plant and equipment, at cost
238,708

 
241,210

Less - accumulated depreciation
(172,362
)
 
(168,375
)
Property, plant and equipment, net
66,346

 
72,835

Total assets
$
529,920

 
$
587,976

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
61,339

 
$
68,782

Accrued and other liabilities
40,832

 
27,670

Income taxes payable
648

 
328

Current portion of long-term debt
617

 
737

Total current liabilities
103,436

 
97,517

Long-term debt, less current portion
326,066

 
309,377

Deferred income taxes
8,613

 
8,360

Other non-current liabilities
3,136

 
3,655

Pension and postretirement benefit obligations
19,830

 
18,747

Commitments and contingencies

 

Stockholders’ equity
 
 
 
Preferred stock, $0.01 par value—9,988 shares authorized (including 400 Series B Junior Preferred $0.00 par value shares); no shares issued and outstanding at June 30, 2015 and December 31, 2014
—

 
—

Common stock, $0.01 par value—60,000 shares authorized and 23,888 shares issued and 23,777 outstanding at June 30, 2015 and 23,630 shares issued and 23,559 outstanding at December 31, 2014
238

 
236

Additional paid-in capital
226,074

 
225,953

Accumulated deficit
(109,050
)
 
(29,424
)
Accumulated other comprehensive loss
(47,398
)
 
(45,565
)
Treasury stock, at cost—111 shares at June 30, 2015 and 71 shares at December 31, 2014
(1,025
)
 
(880
)
Total stockholders’ equity
68,839

 
150,320

Total liabilities and stockholders’ equity
$
529,920

 
$
587,976

The accompanying notes are an integral part of these statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS


 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
199,703

 
$
249,492

 
$
421,931

 
$
502,902

Costs and expenses:
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation and amortization)
172,402

 
191,565

 
340,513

 
380,096

Warehouse, processing and delivery expense
30,917

 
36,747

 
57,948

 
72,128

Sales, general and administrative expense
25,683

 
29,471

 
51,218

 
59,095

Restructuring activity, net
15,618

 
907

 
16,449

 
1,646

Depreciation and amortization expense
6,312

 
6,533

 
12,667

 
12,990

Impairment of goodwill
—

 
56,160

 
—

 
56,160

Operating loss
(51,229
)
 
(71,891
)
 
(56,864
)
 
(79,213
)
Interest expense, net
(10,374
)
 
(9,888
)
 
(20,920
)
 
(19,840
)
Other expense, net
3,963

 
1,590

 
(2,262
)
 
908

Loss before income taxes and equity in earnings of joint venture
(57,640
)
 
(80,189
)
 
(80,046
)
 
(98,145
)
Income taxes
(1,731
)
 
6,097

 
(906
)
 
6,148

Loss before equity in earnings of joint venture
(59,371
)
 
(74,092
)
 
(80,952
)
 
(91,997
)
Equity in earnings of joint venture
451

 
1,794

 
1,326

 
3,701

Net loss
$
(58,920
)
 
$
(72,298
)
 
$
(79,626
)
 
$
(88,296
)
 
 
 
 
 
 
 
 
Basic loss per share
$
(2.50
)
 
$
(3.10
)
 
$
(3.39
)
 
$
(3.78
)
Diluted loss per share
$
(2.50
)
 
$
(3.10
)
 
$
(3.39
)
 
$
(3.78
)
Dividends per common share
$
—

 
$
—

 
$
—

 
$
—

Comprehensive loss
$
(57,461
)
 
$
(71,003
)
 
$
(81,459
)
 
$
(87,163
)
The accompanying notes are an integral part of these statements.

4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
For the Six Months Ended June 30,
 
2015
 
2014
Operating activities:
 
 
 
Net loss
$
(79,626
)
 
$
(88,296
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
12,667

 
12,990

Amortization of deferred financing costs and debt discount
4,242

 
3,718

Impairment of goodwill
—

 
56,160

Gain on sale of property, plant and equipment
(5,681
)
 
(29
)
Unrealized gains on commodity hedges
(172
)
 
(865
)
    Unrealized foreign currency transaction losses
1,433

 
—

Equity in earnings of joint venture
(1,326
)
 
(3,701
)
Dividends from joint venture
315

 
1,085

Pension curtailment
3,080

 
—

Deferred taxes
142

 
(5,471
)
Other, net
(13
)
 
639

Increase (decrease) from changes in:
 
 
 
Accounts receivable
14,094

 
(17,371
)
Inventories
31,285

 
(6,709
)
Prepaid expenses and other current assets
(1,577
)
 
(3,375
)
Other assets
(1,988
)
 
(146
)
Prepaid pension costs
1,240

 
346

Accounts payable
(6,788
)
 
18,950

Income taxes payable and receivable
113

 
(1,899
)
Accrued and other liabilities
13,801

 
1,722

Postretirement benefit obligations and other liabilities
(315
)
 
(267
)
Net cash used in operating activities
(15,074
)
 
(32,519
)
Investing activities:
 
 
 
Capital expenditures
(3,295
)
 
(4,299
)
Proceeds from sale of property, plant and equipment
7,644

 
103

Net cash from (used) in investing activities
4,349

 
(4,196
)
Financing activities:
 
 
 
Proceeds from long-term debt
464,700

 
79,450

Repayments of long-term debt
(450,795
)
 
(56,798
)
Other financing activities
—

 
193

Net cash from financing activities
13,905

 
22,845

Effect of exchange rate changes on cash and cash equivalents
(138
)
 
117

Net change in cash and cash equivalents
3,042

 
(13,753
)
Cash and cash equivalents - beginning of year
8,454

 
30,829

Cash and cash equivalents - end of period
$
11,496

 
$
17,076

The accompanying notes are an integral part of these statements.

5

A. M. Castle & Co.
Notes to Condensed Consolidated Financial Statements
Unaudited - Amounts in thousands except per share data and percentages
(1) Condensed Consolidated Financial Statements
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”), and accounting principles generally accepted in the United States of America (“GAAP”). The Condensed Consolidated Balance Sheet at December 31, 2014 is derived from the audited financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with 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 period. 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 2015 interim results reported herein may not necessarily be indicative of the results of the Company’s operations for the full year.
(2) New Accounting Standards
Standards Updates Adopted
Effective January 1, 2015, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") No. 2014-08, "Presentation of Financial Statements and Property, Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU No. 2014-08 amends the definition of a discontinued operation, expands disclosure requirements for transactions that meet the definition of a discontinued operation and requires entities to disclose additional information about individually significant components that are disposed of or held for sale and do not qualify as discontinued operations. The adoption of this ASU did not have a material impact on the Company's financial condition or financial statement presentation.
Standards Updates Issued Not Yet Effective
In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement," which provides guidance on a customer's accounting for cloud computing costs. The ASU is effective for annual reporting periods beginning after December 15, 2015. The Company is currently reviewing the guidance and assessing the potential impact on its financial statements.
In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." This new standard would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this Update.The ASU is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. The Company anticipates adoption of the ASU for the effective period. The Company is currently reviewing the guidance and assessing the potential impact on its financial statements.
In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern," providing additional guidance surrounding the disclosure of going concern uncertainties in the financial statements and implementing requirements for management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The ASU is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2016. The Company does not anticipate the adoption of the ASU will result in additional disclosures, however, management will begin performing the periodic assessments required by the ASU on its effective date.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," related to revenue recognition. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in prior accounting guidance. The ASU provides alternative methods of initial adoption, and it is effective for annual reporting periods beginning after December 16, 2017, and interim periods within those annual periods. Early adoption is not permitted. The Company is currently reviewing the guidance and assessing the potential impact on its financial statements.

6

(3) Earnings Per Share
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 employee and director stock options, restricted stock awards, other share-based payment awards, and contingently issuable shares related to the Company’s convertible debt which are included in the calculation of weighted average shares outstanding using the treasury stock method, if dilutive. The following table is a reconciliation of the basic and diluted earnings per share calculations for the three and six months ended June 30, 2015 and 2014, respectively:
 
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net loss
$
(58,920
)
 
$
(72,298
)
 
$
(79,626
)
 
$
(88,296
)
Denominator:
 
 
 
 
 
 
 
Denominator for basic loss per share:
 
 
 
 
 
 
 
Weighted average common shares outstanding
23,560

 
23,351

 
23,511

 
23,337

Effect of dilutive securities:
 
 
 
 
 
 
 
Outstanding common stock equivalents
—

 
—

 
—

 
—

Denominator for diluted earnings per share
23,560

 
23,351

 
23,511

 
23,337

Basic loss per share
$
(2.50
)
 
$
(3.10
)
 
$
(3.39
)
 
$
(3.78
)
Diluted loss per share
$
(2.50
)
 
$
(3.10
)
 
$
(3.39
)
 
$
(3.78
)
Excluded outstanding share-based awards having an anti-dilutive effect
368

 
630

 
368

 
630

Excluded "in the money" portion of Convertible Notes having an anti-dilutive effect
—

 
1,024

 
—

 
1,332

The Convertible Notes are dilutive to the extent the Company generates net income and the average stock price during the period is greater than $10.28, which is the conversion price of the Convertible Notes. The Convertible Notes are only dilutive for the “in the money” portion of the Convertible Notes that could be settled with the Company’s stock. In future periods, absent a fundamental change (as defined in the Convertible Notes agreement), the outstanding Convertible Notes could increase diluted average shares outstanding by a maximum of approximately 5,600 shares.
(4) Inventories
Approximately 77% of the Company’s inventories are valued at the lower of LIFO cost or market. Final inventory determination under the LIFO costing method is 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 June 30, 2015, are based on management’s estimates of future inventory levels and costs for the balance of the current fiscal year. The Company values its LIFO increments using the cost of its latest purchases during the periods reported.
Current replacement cost of inventories exceeded book value by $127,569 and $129,779 at June 30, 2015 and December 31, 2014, respectively. Income taxes would become payable on any realization of this excess from reductions in the level of inventories.

7

(5) Joint Venture
Kreher Steel Company, LLC is a 50% owned joint venture of the Company. Kreher is a national distributor and processor of carbon and alloy steel bar products, headquartered in Melrose Park, Illinois.
The following information summarizes financial data for this joint venture for the three and six months ended June 30, 2015 and 2014, respectively:
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
41,014

 
$
62,608

 
$
93,620

 
$
127,859

Cost of materials
35,045

 
52,100

 
79,395

 
106,403

Income before taxes
760

 
4,639

 
2,750

 
9,443

Net income
902

 
3,588

 
2,652

 
7,402

(6) Goodwill and Intangible Assets
The changes in carrying amounts of goodwill during the six months ended June 30, 2015 were as follows:

 
Metals
Segment
 
Plastics
Segment
 
Total
Balance as of January 1, 2015
 
 
 
 
 
Goodwill
$
116,377

 
$
12,973

 
$
129,350

Accumulated impairment losses
(116,377
)
 
—

 
(116,377
)
Balance as of January 1, 2015
—

 
12,973

 
12,973

Balance as of June 30, 2015
 
 
 
 
 
Goodwill
116,377

 
12,973

 
129,350

Accumulated impairment losses
(116,377
)
 
—

 
(116,377
)
Balance as of June 30, 2015
$
—

 
$
12,973

 
$
12,973

The Company tests goodwill for impairment at the reporting unit level on an annual basis as of December 1 and more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company assesses, at least quarterly, whether any triggering events have occurred. A two-step method is used for determining goodwill impairment. The first step is performed to identify whether a potential impairment exists by comparing each reporting unit’s fair value to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the next step is to measure the amount of impairment loss, if any.
The Company completed its December 1, 2014 annual goodwill impairment test for its Plastics reporting unit and there were no identified impairment charges. No annual goodwill impairment testing was performed for the Metals reporting unit as of December 1, 2014, since the Metals reporting unit goodwill was eliminated as a result of second quarter 2014 interim goodwill impairment testing.
The following table summarizes the components of intangible assets, all of which relate to the Metals reporting unit:
 
June 30, 2015
 
December 31, 2014
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Customer relationships
$
115,193

 
$
69,628

 
$
116,268

 
$
64,922

Trade name
7,747

 
2,988

 
7,864

 
2,655

Total
$
122,940

 
$
72,616

 
$
124,132

 
$
67,577

For the six months ended June 30, 2015 and 2014, the aggregate amortization expense was $5,346 and $5,837, respectively.

8

The following is a summary of the estimated annual amortization expense for 2015 and each of the next 4 years:
2015
$
10,688

2016
10,688

2017
8,665

2018
4,548

2019
4,548

(7) Debt
Long-term debt consisted of the following:
 
 
June 30,
2015
 
December 31,
2014
LONG-TERM DEBT
 
 
 
12.75% Senior Secured Notes due December 15, 2016
$
210,000

 
$
210,000

7.0% Convertible Notes due December 15, 2017
57,500

 
57,500

Revolving Credit Facility due December 10, 2019
73,500

 
59,200

Other, primarily capital leases
859

 
1,257

Total long-term debt
341,859

 
327,957

Less: unamortized discount
(15,176
)
 
(17,843
)
Less: current portion
(617
)
 
(737
)
Total long-term portion
326,066

 
309,377

TOTAL DEBT
$
326,683

 
$
310,114

Secured Notes
As of June 30, 2015, the Company had $210,000 aggregate principal amount of Senior Secured Notes (the "Secured Notes") outstanding that will mature on December 15, 2016. The Company pays interest on the Secured Notes at a rate of 12.75% per annum in cash semi-annually. The Secured Notes are fully and unconditionally guaranteed, jointly and severally, by certain 100% owned domestic subsidiaries of the Company (the Note Guarantors). Refer to Note 16 for Guarantor Financial Information disclosure.
Subject to certain conditions, within 95 days after the end of each fiscal year, the Company must make an offer to purchase the Secured Notes with certain of its excess cash flow (as defined in the indenture) for such fiscal year at 103% of the principal amount thereof, plus accrued and unpaid interest. For the fiscal year ended December 31, 2014, the Company estimated that it had no excess cash flow (as defined in the indenture) and therefore, the Company was not required to make an offer to purchase the Secured Notes.

9

Convertible Notes
As of June 30, 2015, the Company had $57,500 aggregate principal amount of Convertible Senior Notes (the "Convertible Notes") outstanding that are due December 15, 2017. The Company pays interest on the Convertible Notes at a rate of 7.0% per annum in cash semi-annually. The Convertible Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Note Guarantors. The initial conversion rate for the Convertible Notes is 97.2384 shares of the Company’s common stock per $1 principal amount of Convertible Notes, equivalent to an initial conversion price of approximately $10.28 per share of common stock. The conversion rate will be subject to adjustment, but will not be adjusted for accrued and unpaid interest, if any. In addition, if an event constituting a fundamental change occurs, the Company will in some cases increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such fundamental change. Upon conversion, the Company will pay and/or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, together with cash in lieu of fractional shares.
Revolving Credit Facility
The Revolving Credit Facility consists of a $125,000 senior secured asset-based revolving credit facility. In December 2014, the Company obtained an extension on its revolving credit facility, which extended the maturity date from December 15, 2015 to December 10, 2019 (or 91 days prior to the maturity date of the Company's Senior Secured Notes or Convertible Notes if they have not been refinanced). If certain incurrence tests are met, subject to approval by the Revolving Credit Facility lending group, the Company may have the ability to exercise the accordion option under its revolving credit facility for an additional $25,000 of aggregate commitments in the future. Currently, the Company is not able to exercise the accordion.
The weighted average interest rate for borrowings under the Revolving Credit Facility for the six months ended June 30, 2015 was 2.74%. The Company pays certain customary recurring fees with respect to the Revolving Credit Facility.
The Revolving Credit Facility contains a springing financial maintenance covenant requiring the Company to maintain the ratio (as defined in the Revolving Credit Facility Loan and Security Agreement) of EBITDA to fixed charges of 1.1 to 1.0 when excess availability is less than the greater of 10% of the calculated borrowing base (as defined in the Revolving Credit Facility Loan and Security Agreement) or $12,500. In addition, if excess availability is less than the greater of 12.5% of the calculated borrowing base (as defined in the Revolving Credit Facility Loan and Security Agreement) or $15,625, the lender has the right to take full dominion of the Company’s cash collections and apply these proceeds to outstanding loans under the Revolving Credit Facility. The Company's ratio of EBITDA to fixed charges was negative for the twelve months ended June 30, 2015. At this ratio, the Company's current maximum borrowing capacity would be $101,147 before triggering full dominion of the Company's cash collections. As of June 30, 2015, the Company had $27,647 of additional unrestricted borrowing capacity under the Revolving Credit Facility.
(8) Fair Value Measurements
The three-tier value hierarchy the Company utilizes, which prioritizes the inputs used in the valuation methodologies, is:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
The fair value of cash, accounts receivable and accounts payable approximate their carrying values. The fair value of cash equivalents are determined using the fair value hierarchy described above. Cash equivalents consisting of money market funds are valued based on quoted prices in active markets and as a result are classified as Level 1.

10

The Company’s pension plan asset portfolio as of June 30, 2015 and December 31, 2014 is primarily invested in fixed income securities, which generally fall within Level 2 of the fair value hierarchy. Fixed income securities are valued based on evaluated prices provided to the trustee by independent pricing services. Such prices may be determined by factors which include, but are not limited to, market quotations, yields, maturities, call features, ratings, institutional size trading in similar groups of securities and developments related to specific securities.
Fair Value Measurements of Debt
The fair value of the Company’s Secured Notes as of June 30, 2015 was estimated to be $202,253 compared to a carrying value of $210,000. The fair value for the Secured Notes is determined based on recent trades of the bonds and fall within Level 2 of the fair value hierarchy.
The fair value of the Convertible Notes as of June 30, 2015 was approximately $48,620 compared to a carrying value of $57,500. The fair value of the Convertible Notes, which fall within Level 3 of the fair value hierarchy, is determined based on similar debt instruments that do not contain a conversion feature, as well as other factors related to the callable nature of the notes.
The main inputs and assumptions into the fair value model for the Convertible Notes at June 30, 2015 were as follows:
Company's stock price at the end of the period
$
6.17

Expected volatility
49.8
%
Credit spreads
21.65
%
Risk-free interest rate
0.81
%
As of June 30, 2015, the estimated fair value of the Company's debt outstanding under its revolving credit facility, which falls within Level 3 of the fair value hierarchy, was $61,041 compared to its carrying value of $73,500, assuming the current amount of debt outstanding as of June 30, 2015 was outstanding until the maturity of the Company's facility in December 2019. Although borrowings could be materially greater or less than the current amount of borrowings outstanding at the end of the period, it is not practical to estimate the amounts that may be outstanding during the future periods since there is no predetermined borrowing or repayment schedule.
Fair Value Measurements of Commodity Hedges
The Company has a commodity hedging program to mitigate risks associated with certain commodity price fluctuations. At June 30, 2015, the Company had executed forward contracts that extend through 2016. The counterparty to these contracts is not considered a credit risk by the Company. At June 30, 2015, the notional value associated with forward contracts was $5,283. The Company recorded, through cost of materials, realized and unrealized net losses of $244 and $454 for the three and six months ended June 30, 2015, respectively, and a realized and unrealized net gain of $217 and a realized and unrealized net loss of $69 for the three and six months ended June 30, 2014, respectively, as a result of the change in the fair value of the contracts. As of June 30, 2015 and December 31, 2014, respectively, all commodity hedge contracts were in a liability position. Refer to Note 14 for letters of credit outstanding for collateral associated with commodity hedges.
The Company uses information which is representative of readily observable market data when valuing derivative liabilities associated with commodity hedges. The derivative liabilities are included in accrued liabilities and other non-current liabilities on the Company's balance sheets and classified as Level 2 in the table below.
The liabilities measured at fair value on a recurring basis were as follows:
 
Level 1
 
Level 2
 
Level 3
 
Total(a)
As of June 30, 2015
 
 
 
 
 
 
 
Derivative liability for commodity hedges
$
—

 
$
1,442

 
$
—

 
$
1,442

As of December 31, 2014
 
 
 
 
 
 
 
Derivative liability for commodity hedges
$
—

 
$
1,615

 
$
—

 
$
1,615

(a) As of June 30, 2015 and December 31, 2014 the short-term portion of the derivative liability for commodity hedges of $1,095 and $1,137, respectively, is included in "Accrued and other liabilities" and the long-term portion of $347 and $478, respectively, is included in "Other non-current liabilities" in the Condensed Consolidated Balance Sheet.

11

(9) Stockholders’ Equity
Comprehensive Loss
Comprehensive loss includes net loss and all other non-owner changes to equity that are not reported in net loss.
The Company’s comprehensive loss for the three and six months ended June 30, 2015 and 2014, respectively, is as follows:
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Net loss
$
(58,920
)
 
$
(72,298
)
 
$
(79,626
)
 
$
(88,296
)
Foreign currency translation adjustments
(378
)
 
1,041

 
(4,692
)
 
626

Change in unrecognized pension and postretirement benefit costs, net of tax
1,837

 
254

 
2,859

 
507

Total comprehensive loss
$
(57,461
)
 
$
(71,003
)
 
$
(81,459
)
 
$
(87,163
)
The components of accumulated other comprehensive loss are as follows:
 
June 30,
2015
 
December 31,
2014
Foreign currency translation losses
$
(14,686
)
 
$
(9,994
)
Unrecognized pension and postretirement benefit costs, net of tax
(32,712
)
 
(35,571
)
Total accumulated other comprehensive loss
$
(47,398
)
 
$
(45,565
)
Changes in accumulated other comprehensive loss by component for the three months ended June 30, 2015 and 2014 are as follows:
 
Defined Benefit Pension and Postretirement Items
 
Foreign Currency Items
 
Total
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Balance as of April 1,
$
(34,549
)
 
$
(13,873
)
 
$
(14,308
)
 
$
(5,032
)
 
$
(48,857
)
 
$
(18,905
)
Other comprehensive (loss) income before reclassifications
—

 
—

 
(378
)
 
1,041

 
(378
)
 
1,041

Amounts reclassified from accumulated other comprehensive loss, net of tax (a)
1,837

 
254

 
—

 
—

 
1,837

 
254

Net current period other comprehensive income (loss)
1,837

 
254

 
(378
)
 
1,041

 
1,459

 
1,295

Balance as of June 30,
$
(32,712
)
 
$
(13,619
)
 
$
(14,686
)
 
$
(3,991
)
 
$
(47,398
)
 
$
(17,610
)
(a) See reclassifications from accumulated other comprehensive loss table for details of reclassification from accumulated other comprehensive loss for the three month periods ended June 30, 2015 and 2014, respectively.

12

Changes in accumulated other comprehensive loss by component for the six months ended June 30, 2015 and 2014, respectively, are as follows:
 
Defined Benefit Pension and Postretirement Items
 
Foreign Currency Items
 
Total
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Balance as of January 1,
$
(35,571
)
 
$
(14,126
)
 
$
(9,994
)
 
$
(4,617
)
 
$
(45,565
)
 
$
(18,743
)
Other comprehensive (loss) income before reclassifications
—

 
—

 
(4,692
)
 
626

 
(4,692
)
 
626

Amounts reclassified from accumulated other comprehensive loss, net of tax (a)
2,859

 
507

 
—

 
—

 
2,859

 
507

Net current period other comprehensive income (loss)
2,859

 
507

 
(4,692
)
 
626

 
(1,833
)
 
1,133

Balance as of June 30,
$
(32,712
)
 
$
(13,619
)
 
$
(14,686
)
 
$
(3,991
)
 
$
(47,398
)
 
$
(17,610
)
(a) See reclassifications from accumulated other comprehensive loss table for details of reclassification from accumulated other comprehensive loss for the six months periods ended June 30, 2015 and 2014, respectively.
Reclassifications from accumulated other comprehensive loss are as follows:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Unrecognized pension and postretirement benefit items:
 
 
 
 
 
 
 
 
Prior service cost (b)
 
$
(907
)
 
$
(70
)
 
$
(1,001
)
 
$
(141
)
Actuarial loss (b)
 
(930
)
 
(345
)
 
(1,858
)
 
(690
)
Total before tax
 
(1,837
)
 
(415
)
 
(2,859
)
 
(831
)
Tax effect
 
—

 
161

 
—

 
324

Total reclassifications for the period, net of tax
 
$
(1,837
)
 
$
(254
)
 
$
(2,859
)
 
$
(507
)
(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost included in "Sales, general and administrative expense." Prior service cost of $813 for pension curtailment is shown as "Restructuring activity, net" in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six month periods ended June 30, 2015. There was no pension curtailment expense in 2014 (see Note 11 for additional details).

(10) Share-based Compensation
The Company accounts for its share-based compensation arrangements by recognizing compensation expense for the fair value of the share awards granted ratably over their vesting period. All compensation expense related to share-based compensation arrangements is recorded in sales, general and administrative expense and warehouse, processing and delivery expense. The unrecognized compensation cost as of June 30, 2015 associated with all share-based payment arrangements is $1,663 and the weighted average period over which it is to be expensed is 1.3 years.

13

(11) Employee Benefit Plans
In conjunction with the restructuring activities in the second quarter of 2015, the Company recorded a pension curtailment of $3,080, related to the company-sponsored defined benefit plans.
Components of the net periodic pension and postretirement benefit cost for the three and six months ended June 30, 2015 and 2014, respectively, are as follows:
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Service cost
$
237

 
$
128

 
$
474

 
$
255

Interest cost
1,795

 
1,740

 
3,590

 
3,480

Expected return on assets
(2,317
)
 
(2,095
)
 
(4,634
)
 
(4,190
)
Amortization of prior service cost
94

 
70

 
188

 
141

Amortization of actuarial loss
929

 
345

 
1,857

 
690

Curtailment charge
$
3,080

 
$
—

 
$
3,080

 
$
—

Net periodic pension and postretirement benefit cost
$
3,818

 
$
188

 
$
4,555

 
$
376

Contributions paid
$
—

 
$
—

 
$
—

 
$
—

The Company anticipates making no significant cash contributions to its pension plans in 2015.
(12) Restructuring Activity

As part of the Company’s continued efforts to adapt operations to market conditions, additional restructuring activities related to the Company’s organizational structure and operations were announced in the second quarter of 2015. In April 2015, the Company announced organizational changes, which include workforce reductions and the consolidations of up to ten facilities in locations it deemed to have redundant operations. The plan has now been changed to consolidate only seven facilities. The consolidations and organizational changes are part of the Company’s restructuring plan to streamline the organizational structure, lower structural operating costs, and increase liquidity. The Company expects that most of the actions related to the restructuring plan will be completed by the end of the first quarter of 2016. Depending on future market conditions and activity levels, further actions may be necessary to adjust operations, which may result in additional charges in 2015. Restructuring activity is primarily included in the Company's Metals segment. There was not any restructuring activity in the Company's Plastic segment. Restructuring activity associated with the write-down of inventory is included in "Cost of materials" in the Condensed Consolidated Statement of Operations and Comprehensive Loss and all other restructuring is recorded in the "Restructuring activity, net" line item.
The Company recorded the following restructuring activity during the three and six months ended June 30, 2015 and 2014:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Employee termination and related benefits
 
$
14,252

 
$
870

 
$
14,252

 
$
870

Moving costs associated with plant consolidations
 
601

 
37

 
$
601

 
$
776

Professional fees
 
765

 
—

 
1,596

 
—

Total
 
$
15,618

 
$
907

 
$
16,449

 
$
1,646


Employee termination and related benefits
In the second quarter of 2015, the Company began a workforce reduction which decreased its headcount by seven percent. The Company plans to eliminate further positions by the first quarter of 2016 as the branch consolidations occur. As a result of the restructuring plan, the Company recorded a charge for severance expense totaling $5,672. The Company also recorded a pension curtailment charge of $3,080 and an estimated pension withdrawal liability charge of $5,500 from a multi-employer plan.


14

Moving costs associated with plant consolidations
As part of the restructuring plan, the Company will consolidate seven facilities. The closing plants will move certain of their operations to the remaining facilities. As a result, the Company recognized $601 of moving costs associated with the closing or moving of certain facilities and inventory in the second quarter of 2015.

Professional fees
As of June 30, 2015, the Company incurred $1,596 to date in professional fees associated with the development and implementation of the current restructuring plan.

Inventory charge
In addition to the matters described above, the Company recorded charges of $22,335 for inventory which was identified to be scrapped or reserved in the second quarter 2015. Management decided it was more economically feasible to scrap aged material as opposed to expending the time and effort to sell such material in the normal course. The charge includes a provision for small pieces of inventory at closing branches which will not be moved, as well as, provisions for excess inventory levels based on estimates of current and future market demand. The inventory charge is reported in the "Cost of materials" line item in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

Restructuring reserve activity for the six months ended June 30, 2015 is summarized below:

 
 
 
 
Period Activity
 
 
 
 
Balance January, 1 2015
 
Charges (gains)
 
Cash receipts (payments)
 
Write-down of inventory
 
Balance June 30, 2015
Employee termination and related benefits
 
$
—

 
$
14,252

 
$
(508
)
 
$
—

 
$
13,744

Lease termination costs (a)
 
636

 
—

 
(202
)
 
—

 
434

Moving costs associated with plant consolidations
 
—

 
601

 
(601
)
 
—

 
—

Professional fees
 
—

 
1,596

 
(1,596
)
 
—

 
—

Inventory write-down
 
—

 
22,335

 
—

 
(22,335
)
 
—

Total
 
$
636

 
$
38,784

 
$
(2,907
)
 
$
(22,335
)
 
$
14,178

(a) Payments on certain of the lease obligations are scheduled to continue until 2016. Market conditions and the Company’s ability to sublease these properties could affect the ultimate charge related to the lease obligations. Any potential recoveries or additional charges could affect amounts reported in the consolidated financial statements of future periods. As of June 30, 2015, the short-term portion of the lease termination costs of $388, and the employee termination and related benefits of 13,744 are included in accrued liabilities and the long-term portion of the lease termination costs of $46 is included in other non-current liabilities in the Consolidated Balance Sheet.

(13) Income Taxes

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three months ended June 30, 2015, the Company recorded income tax expense of $1,731 on pre-tax losses of $57,189, for an effective tax rate of (3.0)%. For the three months ended June 30, 2014, the Company recorded income tax benefit of $6,097 on pre-tax loss of $78,395, for an effective tax rate of 7.8%.

For the six months ended June 30, 2015 , the Company recorded income tax expense of $906 on pre-tax losses of $78,720, for an effective tax rate of (1.2)%. For the six months ended June 30, 2014, the Company recorded income tax benefit of $6,148 on pre-tax loss of $94,444, for an effective tax rate of 6.5%.

The Company's U.S. statutory rate is 35%. The most significant factors impacting the effective tax rate for the three and six months ended June 30, 2015 and 2014 were losses in jurisdictions that the Company is not able to benefit due to uncertainty as to the realization of those losses, and the tax effects of goodwill impairment charges in 2014.

15


(14) Commitments and Contingent Liabilities
As of June 30, 2015, the Company had $5,092 of irrevocable letters of credit outstanding which primarily consisted of $2,000 for collateral associated with commodity hedges and $1,842 for compliance with the insurance reserve requirements of its workers’ compensation insurance carriers.
The Company is party to a variety of legal proceedings arising from the operation of its business. These proceedings are incidental and occur in the normal course of the Company’s business affairs. It is the opinion of management, based upon the information available at this time, that the current expected outcome of these proceedings will not have a material effect on the consolidated results of operations, financial condition or cash flows of the Company.
(15) Segment Reporting
The Company distributes and performs processing on both metals and plastics. Although the distribution processes are similar, the customer markets, supplier bases and types of products are different. 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 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 precise specifications. Core products include alloy, aluminum, stainless, nickel, titanium and carbon. Inventories of these products assume many forms such as plate, sheet, extrusions, 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, trepanning machinery, boring machinery, honing equipment, 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 a wholly-owned subsidiary that operates as Total Plastics, Inc. (“TPI”) headquartered in Kalamazoo, Michigan, and its wholly-owned subsidiaries. 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), automotive, marine, office furniture and fixtures, safety products, life sciences applications, and general manufacturing industries. TPI has locations throughout the upper Northeast and Midwest regions 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, 2014. Management evaluates the performance of its business segments based on operating income.

16

Segment information for the three months ended June 30, 2015 and 2014 is as follows:
 
Net
Sales
 
Operating
(Loss) Income
 
Capital
Expenditures
 
Depreciation &
Amortization
2015
 
 
 
 
 
 
 
Metals segment
$
166,328

 
$
(49,996
)
 
$
713

 
$
5,887

Plastics segment
33,375

 
1,748

 
521

 
425

Other (a)
—

 
(2,981
)
 
—

 
—

Consolidated
$
199,703

 
$
(51,229
)
 
$
1,234

 
$
6,312

2014
 
 
 
 
 
 
 
Metals segment
$
214,095

 
$
(70,155
)
 
$
1,859

 
$
6,103

Plastics segment
35,397

 
1,667

 
428

 
430

Other (a)
—

 
(3,403
)
 
—

 
—

Consolidated
$
249,492

 
$
(71,891
)
 
$
2,287

 
$
6,533

(a) “Other” – Operating loss includes the costs of executive, legal and elements of the finance departments which are shared by both the Metals and Plastics segments.
Segment information for the six months ended June 30, 2015 and 2014, respectively, is as follows:
 
Net
Sales
 
Operating
(Loss) Income
 
Capital
Expenditures
 
Depreciation &
Amortization
2015
 
 
 
 
 
 
 
Metals segment
$
354,868

 
$
(53,000
)
 
$
2,550

 
$
11,781

Plastics segment
67,063

 
2,978

 
745

 
886

Other (a)
—

 
(6,842
)
 
—

 
—

Consolidated
$
421,931

 
$
(56,864
)
 
$
3,295

 
$
12,667

2014
 
 
 
 
 
 
 
Metals segment
$
433,158

 
$
(76,387
)
 
$
3,737

 
$
12,159

Plastics segment
69,744

 
3,174

 
562

 
831

Other (a)
—

 
(6,000
)
 
—

 
—

Consolidated
$
502,902

 
$
(79,213
)
 
$
4,299

 
$
12,990

(a) “Other” – Operating loss includes the costs of executive, legal and elements of the finance departments which are shared by both the Metals and Plastics segments.
Below are reconciliations of segment data to consolidated loss before income taxes for the three and six months ended June 30, 2015 and 2014, respectively,:
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Operating loss
$
(51,229
)
 
$
(71,891
)
 
$
(56,864
)
 
$
(79,213
)
Interest expense, net
(10,374
)
 
(9,888
)
 
(20,920
)
 
(19,840
)
Other expense, net
3,963

 
1,590

 
(2,262
)
 
908

Loss before income taxes and equity in earnings of joint venture
(57,640
)
 
(80,189
)
 
(80,046
)
 
(98,145
)
Equity in earnings of joint venture
451

 
1,794

 
1,326

 
3,701

Consolidated loss before income taxes
$
(57,189
)
 
$
(78,395
)
 
$
(78,720
)
 
$
(94,444
)

17

Segment information for total assets is as follows:
 
June 30,
2015
 
December 31,
2014
Metals segment
$
431,013

 
$
489,563

Plastics segment
60,452

 
60,970

Other (a)
38,455

 
37,443

Consolidated
$
529,920

 
$
587,976

(a) “Other” — Total assets consist of the Company's investment in joint venture.
(16) Guarantor Financial Information
The Company's Senior Secured Notes are guaranteed by certain 100% directly owned subsidiaries of the Company (the "Guarantors"). As of June 30, 2015, the Guarantors included Total Plastics, Inc., Advanced Fabricating Technology, LLC, Keystone Tube Company, LLC and Paramount Machine Company, LLC, each of which fully and unconditionally guarantee the Senior Secured Notes on a joint and several basis.
The accompanying financial statements have been prepared and presented pursuant to Rule 3-10 of SEC Regulation S-X “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The financial statements present condensed consolidating financial information for A. M. Castle & Co. (the "Parent"), the Guarantors, the non-guarantor subsidiaries (all other subsidiaries) and an elimination column for adjustments to arrive at the information for the Parent, Guarantors, and non-guarantors on a consolidated basis. The condensed consolidating financial information has been prepared on the same basis as the consolidated financial statements of the Parent. The equity method of accounting is followed within this financial information.

18


Condensed Consolidating Balance Sheet
As of June 30, 2015

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,674

 
$
1,222

 
$
8,600

 
$
—

 
$
11,496

Accounts receivable, less allowance for doubtful accounts
53,682

 
18,629

 
42,949

 
—

 
115,260

Receivables from affiliates
1,089

 
113

 
—

 
(1,202
)
 
—

Inventories
104,572

 
19,960

 
78,679

 
(68
)
 
203,143

Prepaid expenses and other current assets
3,888

 
413

 
10,712

 
—

 
15,013

Total current assets
164,905

 
40,337

 
140,940

 
(1,270
)
 
344,912

Investment in joint venture
38,455

 
—

 
—

 
—

 
38,455

Goodwill
—

 
12,973

 
—

 
—

 
12,973

Intangible assets, net
38,189

 
—

 
12,135

 
—

 
50,324

Other assets
15,094

 
—

 
2,675

 
(859
)
 
16,910

Investment in subsidiaries
57,299

 
—

 
—

 
(57,299
)
 
—

Receivables from affiliates
133,707

 
42,079

 
—

 
(175,786
)
 
—

Property, plant and equipment, net
40,783

 
11,774

 
13,789

 
—

 
66,346

Total assets
$
488,432

 
$
107,163

 
$
169,539

 
$
(235,214
)
 
$
529,920

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
36,336

 
$
9,391

 
$
15,612

 
$
—

 
$
61,339

Payables due to affiliates
1,089

 
—

 
113

 
(1,202
)
 
—

Other current liabilities
32,724

 
2,668

 
6,088

 
—

 
41,480

Current portion of long-term debt
575

 
—

 
42

 
—

 
617

Total current liabilities
70,724

 
12,059

 
21,855

 
(1,202
)
 
103,436

Long-term debt, less current portion
326,036

 
—

 
30

 
—

 
326,066

Payables due to affiliates
—

 
7,004

 
168,782

 
(175,786
)
 
—

Deferred income taxes
—

 
5,524

 
3,948

 
(859
)
 
8,613

Other non-current liabilities
22,833

 
—

 
133

 
—

 
22,966

Stockholders’ equity (deficit)
68,839

 
82,576

 
(25,209
)
 
(57,367
)
 
68,839

Total liabilities and stockholders’ equity
$
488,432

 
$
107,163

 
$
169,539

 
$
(235,214
)
 
$
529,920


19

Condensed Consolidating Balance Sheet
As of December 31, 2014

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
511

 
$
977

 
$
6,966

 
$
—

 
$
8,454

Accounts receivable, less allowance for doubtful accounts
66,178

 
19,303

 
45,522

 
—

 
131,003

Receivables from affiliates
2,071

 
81

 
—

 
(2,152
)
 
—

Inventories
142,314

 
19,320

 
75,366

 
(68
)
 
236,932

Prepaid expenses and other current assets
3,490

 
1,033

 
8,506

 
—

 
13,029

Total current assets
214,564

 
40,714

 
136,360

 
(2,220
)
 
389,418

Investment in joint venture
37,443

 
—

 
—

 
—

 
37,443

Goodwill
—

 
12,973

 
—

 
—

 
12,973

Intangible assets, net
42,772

 
—

 
13,783

 
—

 
56,555

Other assets
18,766

 
—

 
996

 
(1,010
)
 
18,752

Investment in subsidiaries
70,274

 
—

 
—

 
(70,274
)
 
—

Receivables from affiliates
113,188

 
36,607

 
2,157

 
(151,952
)
 
—

Property, plant and equipment, net
46,094

 
12,184

 
14,557

 
—

 
72,835

Total assets
$
543,101

 
$
102,478

 
$
167,853

 
$
(225,456
)
 
$
587,976

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
41,613

 
$
8,055

 
$
19,114

 
$
—

 
$
68,782

Payables due to affiliates
2,071

 
—

 
81

 
(2,152
)
 
—

Other current liabilities
18,841

 
3,065

 
6,092

 
—

 
27,998

Current portion of long-term debt
691

 
—

 
46

 
—

 
737

Total current liabilities
63,216

 
11,120

 
25,333

 
(2,152
)
 
97,517

Long-term debt, less current portion
307,327

 
—

 
2,050

 
—

 
309,377

Payables due to affiliates
—

 
5,581

 
146,371

 
(151,952
)
 
—

Deferred income taxes
—

 
5,524

 
3,846

 
(1,010
)
 
8,360

Other non-current liabilities
22,238

 
—

 
164

 
—

 
22,402

Stockholders’ equity (deficit)
150,320

 
80,253

 
(9,911
)
 
(70,342
)
 
150,320

Total liabilities and stockholders’ equity
$
543,101

 
$
102,478

 
$
167,853

 
$
(225,456
)
 
$
587,976








20

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
For the Three Months Ended June 30, 2015

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Net sales
$
112,785

 
$
33,375

 
$
56,405

 
$
(2,862
)
 
$
199,703

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation and amortization)
105,590

 
23,291

 
46,383

 
(2,862
)
 
172,402

Warehouse, processing and delivery expense
21,319

 
3,053

 
6,545

 
—

 
30,917

Sales, general and administrative expense
18,053

 
4,336

 
3,294

 
—

 
25,683

Restructuring activity
15,421

 
—

 
197

 
—

 
15,618

Depreciation and amortization expense
4,718

 
564

 
1,030

 
—

 
6,312

Operating (loss) income
(52,316
)
 
2,131

 
(1,044
)
 
—

 
(51,229
)
Interest expense, net
(6,360
)
 
—

 
(4,014
)
 
—

 
(10,374
)
Other expense, net
—

 
—

 
3,963

 
—

 
3,963

(Loss) income before income taxes and equity in earnings of subsidiaries and joint venture
(58,676
)
 
2,131

 
(1,095
)
 
—

 
(57,640
)
Income taxes
(231
)
 
(810
)
 
(690
)
 
—

 
(1,731
)
Equity in losses of subsidiaries
(464
)
 
—

 
—

 
464

 
—

Equity in earnings of joint venture
451

 
—

 
—

 
—

 
451

Net (loss) income
$
(58,920
)
 
$
1,321

 
$
(1,785
)
 
$
464

 
$
(58,920
)
Comprehensive (loss) income
$
(57,461
)
 
$
1,321

 
$
(2,163
)
 
$
842

 
$
(57,461
)







21

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
For the Three Months Ended June 30, 2014

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Net sales
$
153,251

 
$
35,397

 
$
63,503

 
$
(2,659
)
 
$
249,492

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation and amortization)
116,974

 
25,255

 
51,995

 
(2,659
)
 
191,565

Warehouse, processing and delivery expense
26,789

 
2,889

 
7,069

 
—

 
36,747

Sales, general and administrative expense
19,436

 
4,633

 
5,402

 
—

 
29,471

Restructuring activity
733

 
—

 
174

 
—

 
907

Depreciation and amortization expense
4,934

 
561

 
1,038

 
—

 
6,533

Impairment of goodwill
41,308

 
—

 
14,852

 
—

 
56,160

Operating (loss) income
(56,923
)
 
2,059

 
(17,027
)
 
—

 
(71,891
)
Interest expense, net
(6,294
)
 
—

 
(3,594
)
 
—

 
(9,888
)
Other expense, net
—

 
—

 
1,590

 
—

 
1,590

(Loss) income before income taxes and equity in earnings of subsidiaries and joint venture
(63,217
)
 
2,059

 
(19,031
)
 
—

 
(80,189
)
Income taxes
2,452

 
(782
)
 
4,427

 
—

 
6,097

Equity in losses of subsidiaries
(13,327
)
 
—

 
—

 
13,327

 
—

Equity in earnings of joint venture
1,794

 
—

 
—

 
—

 
1,794

Net (loss) income
$
(72,298
)
 
$
1,277

 
$
(14,604
)
 
$
13,327

 
$
(72,298
)
Comprehensive (loss) income
$
(71,003
)
 
$
1,277

 
$
(13,563
)
 
$
12,286

 
$
(71,003
)








22

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
For the Six Months Ended June 30, 2015

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Net sales
$
245,235

 
$
67,063

 
$
115,405

 
$
(5,772
)
 
$
421,931

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation and amortization)
205,383

 
47,281

 
93,621

 
(5,772
)
 
340,513

Warehouse, processing and delivery expense
38,861

 
5,971

 
13,116

 
—

 
57,948

Sales, general and administrative expense
35,395

 
8,903

 
6,920

 
—

 
51,218

Restructuring activity
16,252

 
—

 
197

 
—

 
16,449

Depreciation and amortization expense
9,461

 
1,163

 
2,043

 
—

 
12,667

Operating (loss) income
(60,117
)
 
3,745

 
(492
)
 
—

 
(56,864
)
Interest expense, net
(12,773
)
 
—

 
(8,147
)
 
—

 
(20,920
)
Other expense, net
—

 
—

 
(2,262
)
 
—

 
(2,262
)
(Loss) income before income taxes and equity in earnings of subsidiaries and joint venture
(72,890
)
 
3,745

 
(10,901
)
 
—

 
(80,046
)
Income taxes
216

 
(1,423
)
 
301

 
—

 
(906
)
Equity in losses of subsidiaries
(8,278
)
 
—

 
—

 
8,278

 
—

Equity in earnings of joint venture
1,326

 
—

 
—

 
—

 
1,326

Net (loss) income
$
(79,626
)
 
$
2,322

 
$
(10,600
)
 
$
8,278

 
$
(79,626
)
Comprehensive (loss) income
$
(81,459
)
 
$
2,322

 
$
(15,292
)
 
$
12,970

 
$
(81,459
)

23


Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
For the Six Months Ended June 30, 2014
 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Net sales
$
317,457

 
$
69,744

 
$
123,469

 
$
(7,768
)
 
$
502,902

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation and amortization)
238,886

 
49,360

 
99,618

 
(7,768
)
 
380,096

Warehouse, processing and delivery expense
52,792

 
5,871

 
13,465

 
—

 
72,128

Sales, general and administrative expense
39,397

 
9,462

 
10,236

 
—

 
59,095

Restructuring activity
1,472

 
—

 
174

 
—

 
1,646

Depreciation and amortization expense
9,824

 
1,093

 
2,073

 
—

 
12,990

Impairment of goodwill
41,308

 
—

 
14,852

 
—

 
56,160

Operating (loss) income
(66,222
)
 
3,958

 
(16,949
)
 
—

 
(79,213
)
Interest expense, net
(12,460
)
 
—

 
(7,380
)
 
—

 
(19,840
)
Other expense, net
—

 
—

 
908

 
—

 
908

(Loss) income before income taxes and equity in earnings of subsidiaries and joint venture
(78,682
)
 
3,958

 
(23,421
)

—

 
(98,145
)
Income taxes
5,026

 
(1,162
)
 
2,284

 
—

 
6,148

Equity in losses of subsidiaries
(18,341
)
 
—

 
—

 
18,341

 
—

Equity in earnings of joint venture
3,701

 
—

 
—

 
—

 
3,701

Net (loss) income
$
(88,296
)
 
$
2,796

 
$
(21,137
)
 
$
18,341

 
$
(88,296
)
Comprehensive (loss) income
$
(87,163
)
 
$
2,796

 
$
(20,511
)
 
$
17,715

 
$
(87,163
)

24


Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2015

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(79,626
)
 
$
2,322

 
$
(10,600
)
 
$
8,278

 
$
(79,626
)
Equity in losses of subsidiaries
8,278

 
—

 
—

 
(8,278
)
 
—

Adjustments to reconcile net (loss) income to cash from (used in) operating activities
70,924

 
2,725

 
(9,097
)
 
—

 
64,552

Net cash from (used in) operating activities
(424
)
 
5,047

 
(19,697
)
 
—

 
(15,074
)
Investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
(1,460
)
 
(753
)
 
(1,082
)
 
—

 
(3,295
)
Proceeds from sale of property, plant and equipment
7,641

 
—

 
3

 
—

 
7,644

Net advances to subsidiaries
(20,519
)
 
—

 
—

 
20,519

 
—

Net cash used in investing activities
(14,338
)
 
(753
)
 
(1,079
)
 
20,519

 
4,349

Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt
464,700

 
—

 
—

 
—

 
464,700

Repayments of long-term debt
(448,775
)
 
—

 
(2,020
)
 
—

 
(450,795
)
Net intercompany (repayments) borrowings
—

 
(4,049
)
 
24,568

 
(20,519
)
 
—

Net cash from (used in) financing activities
15,925

 
(4,049
)
 
22,548

 
(20,519
)
 
13,905

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(138
)
 
—

 
(138
)
Net change in cash and cash equivalents
1,163

 
245

 
1,634

 
—

 
3,042

Cash and cash equivalents - beginning of year
511

 
977

 
6,966

 
—

 
8,454

Cash and cash equivalents - end of period
$
1,674

 
$
1,222

 
$
8,600

 
$
—

 
$
11,496


25


Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2014

 
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(88,296
)
 
$
2,796

 
$
(21,137
)
 
$
18,341

 
$
(88,296
)
Equity in losses of subsidiaries
18,341

 
—

 
—

 
(18,341
)
 
—

Adjustments to reconcile net (loss) income to cash from (used in) operating activities
54,603

 
(2,381
)
 
3,555

 
—

 
55,777

Net cash (used in) from operating activities
(15,352
)
 
415

 
(17,582
)
 
—

 
(32,519
)
Investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
(2,364
)
 
(585
)
 
(1,350
)
 
—

 
(4,299
)
Proceeds from sale of property, plant and equipment
51

 
—

 
52

 
—

 
103

Net cash used in investing activities
(2,313
)
 
(585
)
 
(1,298
)
 
—

 
(4,196
)
Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt
78,450

 
—

 
1,000

 
—

 
79,450

Repayments of long-term debt
(55,785
)
 
—

 
(1,013
)
 
—

 
(56,798
)
Net intercompany (repayments) borrowings
(9,869
)
 
912

 
8,957

 
—

 
—

Other financing activities
193

 
—

 
—

 
—

 
193

Net cash from financing activities
12,989

 
912

 
8,944

 
—

 
22,845

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
117

 
—

 
117

Net change in cash and cash equivalents
(4,676
)
 
742

 
(9,819
)
 
—

 
(13,753
)
Cash and cash equivalents - beginning of year
8,675

 
495

 
21,659

 
—

 
30,829

Cash and cash equivalents - end of period
$
3,999

 
$
1,237

 
$
11,840

 
$
—

 
$
17,076


26

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Amounts in millions, except per share data
Disclosure Regarding Forward-Looking Statements
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements only speak as of the date of this report and the Company assumes no obligation to update the information included in this report.  Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy, and the cost savings and other benefits that we expect to achieve from our facility closures and organizational changes.  These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “predict,” “plan,” "should," or similar expressions.  These statements are not guarantees of performance or results, and they involve risks, uncertainties, and assumptions.  Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements, including our ability to effectively manage our operational initiatives, the impact of volatility of metals and plastics prices, the cyclical and seasonal aspects of our business, our ability to effectively manage inventory levels and the impact of our substantial level of indebtedness, as well as including those risk factors identified in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above.  Except as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future, to reflect the occurrence of unanticipated events or for any other reason.
The following discussion should be read in conjunction with the Company’s condensed consolidated financial statements and related notes thereto in Item 1 “Financial Statements (unaudited)”.
Executive Overview
Economic Trends and Current Business Conditions
A. M. Castle & Co. and subsidiaries (the “Company”) experienced lower net sales in its Metals segment products in the second quarter of 2015 compared to the second quarter of 2014, primarily due to lower demand for tubing in the Oil and Gas sectors, while demand for aluminum in the Aerospace sector was up. Net sales in the Company's Plastics segment in the second quarter of 2015 were 5.7% lower when compared to the same period last year, primarily due to an automotive project that expired in July 2014. The remainder of the decline in the Plastics segment was primarily due to softer demand amplified by raw material pricing declines across most product lines.
Consolidated net sales decreased $49.8 million or 20.0% from the second quarter of 2014 due to decreased Metals segment sales volumes. Consolidated operating loss for the second quarter of 2015 was $51.2 million, which included a $15.6 million charge for restructuring activity in addition to a $22.3 million inventory charge related to restructuring activities, compared to second quarter of 2014 consolidated operating loss of $71.9 million, which included a $0.9 million charge for restructuring activity and a $56.2 million non-cash goodwill impairment charge. Consolidated net loss for the second quarter of 2015 was $58.9 million compared to consolidated net loss of $72.3 million for the second quarter of 2014.
The restructuring actions, announced on April 28, 2015 are expected to result in annualized cost improvement of approximately $40.0 million when measured against annualized first quarter 2015 run rate revenue and upon full implementation of these activities. Significant progress was made in implementing the plan in the second quarter 2015. The original plan was changed to close only seven facilities as compared to ten announced in April 2015. Further analysis indicated that operating results would benefit by keeping the three facilities open versus the savings expected to be realized by closing them. The results of these restructuring activities are also expected to improve the Company's working capital through better management of its assets and, consequentially, improve its liquidity. Total restructuring charges recorded during the second quarter of 2015 were $37.9 million, of which $12.5 million represented cash charges. The cash charges include an estimated $5.5 million that may be paid over 20 years. The Company's total estimated charges to be incurred as part of its restructuring initiatives remain consistent with its initial estimated range of $49.5 million to $64.4 million, including $17.7 million to $21.4 million of estimated cash charges. Not included in this

27

range is the Company's revised estimate of cash proceeds related to the closure and sale of seven facilities of approximately $23.0 million.
Results of Operations: Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
Consolidated results by business segment are summarized in the following table for the three months ended June 30, 2015 and 2014.
 
 
 
 
 
Favorable/(Unfavorable)
 
2015
 
2014
 
$ Change
 
% Change
Net Sales
 
 
 
 
 
 
 
Metals
$
166.3

 
$
214.1

 
$
(47.8
)
 
(22.3
)%
Plastics
33.4

 
35.4

 
(2.0
)
 
(5.7
)%
Total Net Sales
$
199.7

 
$
249.5

 
$
(49.8
)
 
(20.0
)%
Cost of Materials
 
 
 
 
 
 
 
Metals
$
149.1

 
$
166.3

 
$
17.2

 
10.3
 %
% of Metals Sales
89.6
 %
 
77.7
 %
 
 
 
 
Plastics
23.3

 
25.3

 
2.0

 
7.9
 %
% of Plastics Sales
69.8
 %
 
71.3
 %
 
 
 
 
Total Cost of Materials
$
172.4

 
$
191.6

 
$
19.2

 
10.0
 %
% of Total Sales
86.3
 %
 
76.8
 %
 
 
 
 
Operating Costs and Expenses
 
 
 
 
 
 
 
Metals
$
67.2

 
$
117.9

 
$
50.7

 
43.0
 %
Plastics
8.3

 
8.4

 
0.1

 
1.6
 %
Other
3.0

 
3.4

 
0.4

 
12.4
 %
Total Operating Costs & Expenses
$
78.5

 
$
129.8

 
$
51.3

 
39.5
 %
% of Total Sales
39.3
 %
 
52.0
 %
 
 
 
 
Operating Income (Loss)
 
 
 
 
 
 
 
Metals
$
(50.0
)
 
$
(70.2
)
 
$
20.2

 
28.7
 %
% of Metals Sales
(30.1
)%
 
(32.8
)%
 
 
 
 
Plastics
1.7

 
1.6

 
0.1

 
4.9
 %
% of Plastics Sales
5.1
 %
 
4.7
 %
 
 
 
 
Other
(3.0
)
 
(3.4
)
 
0.4

 
12.4
 %
Total Operating Income (Loss)
$
(51.2
)
 
$
(71.9
)
 
$
20.7

 
28.7
 %
% of Total Sales
(25.7
)%
 
(28.8
)%
 
 
 
 
“Other” includes the costs of executive, legal and finance departments which are shared by both segments of the Company.
Net Sales:
Consolidated net sales were $199.7 million, a decrease of $49.8 million, or 20.0%, compared to the second quarter of 2014. Metals segment net sales during the second quarter of 2015 of $166.3 million were $47.8 million, or 22.3%, lower than the same period last year. Plastics segment net sales during the second quarter of 2015 of $33.4 million were $2.0 million, or 5.7% lower than the second quarter of 2014.
Metals segment pricing was up 7.5% compared to the prior year quarter. The pricing increase was driven by average price increases for carbon and alloy plate, stainless, and alloy bar products. Metals segment sales volumes were down 29.0% compared to second quarter of 2014. Carbon and alloy plate and tubing products had the most significant decline in sales volumes compared to the second quarter of 2014. Within the Metals segment, net sales for the second quarter of 2015 were lower for both the Oil and Gas and Industrial businesses compared to the second quarter of 2014. The decrease in Plastics segment net sales during the second quarter of 2015 was primarily due to weaker performance in the automotive and home goods sectors.

28

Cost of Materials:
Cost of materials (exclusive of depreciation and amortization) during the second quarter of 2015 was $172.4 million, a decrease of $19.2 million, or 10.0%, compared to the second quarter of 2014. Second quarter 2015 included a LIFO credit of $1.5 million while the second quarter of 2014 included no LIFO income. Second quarter 2015 also included a $22.3 million restructuring charge related to the write-down of aged and excess inventory. The charge includes a provision for small pieces of inventory at closing branches which will not be moved, as well as, provisions for excess inventory levels based on estimates of current and future market demand. Management decided it was more economically feasible to scrap aged material as opposed to expending the time and effort to sell such material in the normal course.
Material costs for the Metals segment for the second quarter of 2015 including the $22.3 million inventory restructuring charge were $149.1 million, or 89.6% as a percent of net sales, compared to $166.3 million, or 77.7% as a percent of net sales, for the second quarter of 2014. Cost of materials in the Metals segment decreased $17.2 million compared to the second quarter of 2014. The decrease is primarily due to the decrease in sales volumes from the prior year period. Material costs for the Plastics segment for the second quarter of 2015 were $23.3 million, or 69.8% as a percent of net sales, compared to $25.3 million, or 71.3% as a percent of net sales, for the second quarter of 2014. Plastics segment material costs as a percent of net sales were lower than second quarter of 2014 due to a decline in net sales caused by an expiration of an automotive program and softer demand that was amplified by raw material pricing declines.
Operating Costs and Expenses and Operating Income (Loss):
On a consolidated basis, operating costs and expenses decreased $51.3 million, or 39.5%, from $129.8 million, or 52.0% of net sales, in the second quarter of 2014 to $78.5 million, or 39.3% of net sales, during the second quarter of 2015.
A charge of $15.6 million associated with the Company's restructuring activities was included in operating costs and expenses for the three months ended June 30, 2015 compared to $0.9 million in the three months ended June 30, 2014. Restructuring activities for the three months ended June 30, 2015 consisted of (i) employee termination and related benefits for the workforce reductions from the organizational changes announced in April 2015; (ii) an estimated pension withdrawal liability charge for withdrawal from a multi-employer pension plan; (iii) non-cash pension curtailment charge; (iv) moving costs associated with plant consolidations; and (v) professional fees related to implementation of the restructuring plan. The three months ended June 30, 2014 included a $56.2 million goodwill impairment charge.
In addition to the restructuring items and goodwill impairment, all other operating costs decreased by $9.9 million compared to the prior year quarter due to decreases in sales, general and administrative costs and warehouse, processing and delivery costs which related to the following:
•
Sales, general and administrative costs decreased by $3.8 million as a result of lower payroll and benefits costs;
•
Warehouse, processing and delivery costs decreased by approximately $5.8 million as a result of the decrease in sales activity.
Benefits from restructuring activity are not expected to begin to be realized until the fourth quarter of 2015.
Consolidated operating loss for the second quarter of 2015, including a loss from restructuring activity of $15.6 million, was $51.2 million compared to an operating loss of $71.9 million, including $0.9 million of restructuring charges and a $56.2 million goodwill impairment charge, for the same period last year.
Other Income and Expense, Income Taxes and Net Loss:
Interest expense, net was $10.4 million in the second quarter of 2015 which was $0.5 million higher than the prior year second quarter of 2014 due to increased revolver borrowings.
Other income related to foreign currency transaction gains was $4.0 million in the second quarter of 2015 compared to other income of $1.6 million for foreign currency transaction gains in the same period last year. These losses and gains relate to foreign currency transactions and unhedged intercompany financing arrangements.
The Company recorded an income tax expense of $1.7 million for the quarter ended June 30, 2015 compared to an income tax benefit of $6.1 million for the same period last year. The Company’s effective tax rate is expressed as

29

‘Income taxes’, which includes tax expense on the Company’s share of joint venture earnings, as a percentage of ‘Loss before income taxes and equity in earnings of joint venture.’ The effective tax rate for the quarters ended June 30, 2015 and 2014 was (3.0)% and 7.8%, respectively. The lower effective tax rate results from changes in the geographic mix and timing of income (losses), recording valuation allowances against certain deferred tax assets in the U.S. and at certain foreign subsidiaries and the impact of restructuring charges.
Equity in earnings of the Company’s joint venture was $0.5 million in the second quarter of 2015 and $1.8 million in the same period last year. Earnings of the joint venture in the second quarter of 2015 have been impacted by declines in activity in the energy markets.
Consolidated net loss for the second quarter of 2015 was $58.9 million, or $2.50 per diluted share, compared to net loss of $72.3 million, or $3.10 per diluted share, for the same period in 2014.

Results of Operations: Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
Consolidated results by business segment are summarized in the following table for the six months ended June 30, 2015 and 2014.
 
 
 
 
 
Favorable/(Unfavorable)
 
2015
 
2014
 
$ Change
 
% Change
Net Sales
 
 
 
 
 
 
 
Metals
$
354.9

 
$
433.2

 
$
(78.3
)
 
(18.1
)%
Plastics
67.1

 
69.7

 
(2.7
)
 
(3.8
)%
Total Net Sales
$
421.9

 
$
502.9

 
$
(81.0
)
 
(16.1
)%
Cost of Materials
 
 
 
 
 
 
 
Metals
$
293.2

 
$
330.8

 
$
37.5

 
11.3
 %
% of Metals Sales
82.6
 %
 
76.4
 %
 
 
 
 
Plastics
47.3

 
49.3

 
2.1

 
4.2
 %
% of Plastics Sales
70.5
 %
 
70.8
 %
 
 
 
 
Total Cost of Materials
$
340.5

 
$
380.1

 
$
39.6

 
10.4
 %
% of Total Sales
80.7
 %
 
75.6
 %
 
 
 
 
Operating Costs and Expenses
 
 
 
 
 
 
 
Metals
$
114.6

 
$
178.8

 
$
64.2

 
35.9
 %
Plastics
16.8

 
17.2

 
0.4

 
2.4
 %
Other
6.8

 
6.0

 
(0.8
)
 
(14.0
)%
Total Operating Costs & Expenses
$
138.3

 
$
202.0

 
$
63.7

 
31.6
 %
% of Total Sales
32.8
 %
 
40.2
 %
 
 
 
 
Operating (Loss) Income
 
 
 
 
 
 
 
Metals
$
(53.0
)
 
$
(76.4
)
 
$
23.4

 
30.6
 %
% of Metals Sales
(14.9
)%
 
(17.6
)%
 
 
 
 
Plastics
3.0

 
3.2

 
(0.2
)
 
(6.2
)%
% of Plastics Sales
4.4
 %
 
4.6
 %
 
 
 
 
Other
(6.8
)
 
(6.0
)
 
(0.8
)
 
(14.0
)%
Total Operating Loss
$
(56.9
)
 
$
(79.2
)
 
$
22.3

 
28.2
 %
% of Total Sales
(13.5
)%
 
(15.8
)%
 
 
 
 
“Other” includes the costs of executive, legal and elements of the finance departments which are shared by both segments of the Company.

30

Net Sales:
Consolidated net sales were $421.9 million, a decrease of $81.0 million, or 16.1%, compared to the six months ended June 30, 2014. Metals segment net sales during the six months ended June 30, 2015 of $354.9 million were $78.3 million, or 18.1%, lower than the same period last year reflecting lower volume compared to the six months ended June 30, 2014. Plastics segment net sales during the six months ended June 30, 2015 of $67.1 million were $2.7 million, or 3.8%, lower than the six months ended June 30, 2014.
Metals segment pricing increased by 2.5% compared to the six months ended June 30, 2014. The pricing increase was primarily driven by average price increases for stainless and carbon and alloy plate, offset by decreases for nickel, aluminum and tubing products. Metals segment sales volumes declined by 20.4% compared to six months ended June 30, 2014. Tubing, carbon and alloy plate products had the most significant decline in sales volumes while aluminum sales volume registered strength compared to the six months ended June 30, 2014. All of the Metals segment products, except for alloy bar, carbon and alloy plate, and stainless, had lower average selling prices when compared to six months ended June 30, 2014, with most average selling prices lower by 2% to 10%. The slight decrease in Plastics segment net sales during the six months ended June 30, 2015 was primarily due to a generally flat market in the automotive, marine and life sciences sectors.
Cost of Materials:
Cost of materials (exclusive of depreciation and amortization) during the six months ended June 30, 2015 was $340.5 million, a decrease of $39.6 million, or 10.4%, compared to the six months ended June 30, 2014. Cost of materials included LIFO income of $2.0 million and $1.2 million during the six months ended June 30, 2015 and 2014, respectively. The six months ended June 30, 2015 also included a $22.3 million restructuring charge for the write-down of aged and excess inventory. The charge includes a provision for small pieces of inventory at closing branches which will not be moved, as well as, provisions for excess inventory levels based on estimates of current and future market demand. Management decided it was more economically feasible to scrap aged material as opposed to expending the time and effort to sell such material in the normal course.
Material costs for the Metals segment for the six months ended June 30, 2015 including the $22.3 million inventory restructuring charge were $293.2 million, or 82.6% as a percent of net sales, compared to $330.8 million, or 76.4% as a percent of net sales, for the six months ended June 30, 2014. Cost of materials in the Metals segment decreased $37.5 million compared to the six months ended June 30, 2014. The decrease is primarily due to the decrease in demand during the six months of 2015. Metals segment material costs as a percent of net sales for the six months ended June 30, 2015 were higher compared to the same period last year primarily due to restructuring inventory write-downs during the six months ended June 30, 2015. Material costs for the Plastics segment were $47.3 million for the six months ended June 30, 2015 compared to $49.3 million for the same period last year. Plastics segment material costs as a percentage of net sales improved from 70.8% in the six months ended June 30, 2014 to 70.5% in the six months ended June 30, 2015 due to increased fabrication work, which typically generates higher margins and keeps the cost of sales down.
Operating Costs and Expenses and Operating Loss:
On a consolidated basis, operating costs and expenses decreased $63.7 million, or 31.6%, from $202.0 million, or 40.2% of net sales, during the six months ended June 30, 2014 to $138.3 million, or 32.8% of net sales, during the six months ended June 30, 2015. The $63.7 million decrease was due mainly to a $56.2 million non-cash goodwill impairment charge during the six months ended June 30, 2014 offset by a $5.6 million gain on the sale of a facility in the six months ended June 30, 2015. Restructuring charges were $16.4 million in the six months ended June 30, 2015 compared to a $1.6 million charge in the six months ended June 30, 2014. Excluding the goodwill impairment, restructuring charges, and gain on sale of facility, the balance of the operating expenses were $16.7 million lower in the six months ended June 30, 2015 compared to the six months ended June 30, 2014. This is due primarily to lower plant and transportation costs of $8.6 million and lower selling, general, and administrative expenses from lower payroll and payroll related costs of $7.9 million.
Consolidated operating loss for the six months ended June 30, 2015 was $56.9 million compared to an operating loss of $79.2 million for the same period last year.

31

Other Income and Expense, Income Taxes and Net Loss:
Interest expense was $20.9 million during the six months ended June 30, 2015, an increase of $1.1 million versus the same period last year as a result of higher revolver borrowing in 2015.
Other expense related to foreign currency transaction losses was $2.3 million during the six months ended June 30, 2015 compared to a $0.9 million credit for the same period last year. The majority of these transaction gains and losses related to unhedged intercompany financing arrangements between the United States and the United Kingdom and Canada.
The Company recorded an income tax expense of $0.9 million for the six months ended June 30, 2015 compared to a tax benefit of $6.1 million for the same period last year. The Company’s effective tax rate is expressed as ‘Income taxes’, which includes tax expense on the Company’s share of joint venture earnings, as a percentage of ‘Income before income taxes and equity in earnings of joint venture.’ The effective tax rate for the six months ended June 30, 2015 and 2014 was (1.2)% and 6.5%, respectively. The lower effective tax rate resulted from changes in the geographic mix and timing of income (losses), recording valuation allowances against certain deferred tax assets in the U.S. and at certain foreign subsidiaries.
Equity in earnings of the Company’s joint venture was $1.3 million in the six months ended June 30, 2015, which decreased $2.4 million, or 64.2%, compared to the same period last year. Weaker demand and pricing for Kreher’s products, mainly in the energy markets, were the primary factors contributing to the decrease in equity in earnings of the Company’s joint venture.
Consolidated net loss for the six months ended June 30, 2015 was $79.6 million, or $3.39 per diluted share, compared to a net loss of $88.3 million, or $3.78 per diluted share, for the same period in 2014.
Liquidity and Capital Resources
Cash and cash equivalents increased (decreased) as follows:
 
Six months ended June 30,
 
2015
 
2014
Net cash used in operating activities
$
(15.1
)
 
$
(32.5
)
Net cash from (used) in investing activities
4.3

 
(4.2
)
Net cash from financing activities
13.9

 
22.8

Effect of exchange rate changes on cash and cash equivalents
(0.1
)
 
0.1

Net increase (decrease) in cash and cash equivalents
$
3.0

 
$
(13.8
)
The Company’s principal sources of liquidity are cash provided by operations and available revolver borrowing capacity to fund working capital needs and growth initiatives. Cash used in operations for the six months ended June 30, 2015 was $15.1 million compared to cash used in operations of $32.5 million for the six months ended June 30, 2014. Specific components of the change in working capital are highlighted below:
•
During the six months ended June 30, 2015, accounts receivable compared to year-end 2014 resulted in $14.1 million of cash flow source compared to $17.4 million of cash flow use for the same period last year. Average receivable days outstanding was 53.0 days for the six months ended June 30, 2015 compared to 50.7 days for the six months ended June 30, 2014.
•
During the six months ended June 30, 2015, lower inventory levels, compared to year-end 2014, provided $31.3 million of cash compared to higher inventory levels that were a $6.7 million cash flow use for the six months ended June 30, 2014. Approximately $15.0 million of the decrease was related to scrapping restructuring activities. During the six months ended June 30, 2015, the Company has been adjusting the inventory deployment initiatives to better align inventory at the facilities. Each location is expected to carry a mix of inventory to adequately service their customers. Average days sales in inventory was 203.7 days for the six months ended June 30, 2015 compared to 163.9 days for the six months ended June 30, 2014.
•
During the six months ended June 30, 2015, increases in accounts payable and accrued liabilities were a $7.0 million cash flow source compared to a $20.7 million cash flow source for the same period last year. Accounts payable days outstanding was 41.7 days for the six months ended June 30, 2015 compared to 41.4 days for the same period last year.

32

Historically, the Company’s primary uses of liquidity and capital resources have been capital expenditures, payments on debt (including interest payments). With the execution of the new restructuring plan and cost savings as a result of the plan, management believes the Company will have access to sufficient cash from operations and planned working capital improvements along with available revolver borrowing capacity to fund its ongoing capital expenditure programs and meet its debt obligations for at least the next twelve months. The Company expects to realize approximately $40 million in operating expense cost savings as a result of the restructuring plan. Furthermore, the Company has available borrowing capacity under the Revolving Credit Facility. The Company's debt agreements impose significant operating and financial restrictions which may prevent the Company from executing certain business opportunities such as: making acquisitions or paying dividends, among other things. The Revolving Credit Facility contains a springing financial maintenance covenant requiring the Company to maintain the ratio (as defined in the Revolving Credit Facility Loan and Security Agreement) of EBITDA to fixed charges of 1.1 to 1.0 when excess availability is less than the greater of 10% of the calculated borrowing base (as defined in the Revolving Credit Facility Loan and Security Agreement) or $12.5 million. In addition, if excess availability is less than the greater of 12.5% of the calculated borrowing base (as defined in the Revolving Credit Facility Loan and Security Agreement) or $15.6 million, the lender has the right to take full dominion of the Company’s cash collections and apply these proceeds to outstanding loans under the Revolving Credit Agreement (“Cash Dominion”). The Company's ratio of EBITDA to fixed charges was negative for the twelve months ended June 30, 2015. At this ratio, the Company's current maximum borrowing capacity would be $101.1 million before triggering Cash Dominion. Based on the Company’s cash projections, it does not anticipate a scenario whereby Cash Dominion would occur during the next twelve months.
Additional unrestricted borrowing capacity under the Revolving Credit Facility at June 30, 2015 was as follows:
Maximum borrowing capacity
$
125.0

Less: Letters of credit and other reserves
(8.2
)
Undrawn maximum availability
116.8

Less: Current borrowings
(73.5
)
Total borrowing capacity
43.3

Less: Minimum excess availability before triggering Cash Dominion
(15.6
)
Total unrestricted borrowing capacity
$
27.6

The Revolving Credit Facility matures on December 10, 2019 (or 91 days prior to the maturity date of the Company's Senior Secured Notes or Convertible Notes if they have not been refinanced).
The Company intends to maintain sufficient levels of available liquidity, manage working capital and monitor the Company’s overall capitalization. Cash and cash equivalents at June 30, 2015 were $11.5 million, and the Company had $27.6 million of additional unrestricted borrowing capacity under its Revolving Credit Facility. Approximately $4.0 million of the Company’s consolidated cash and cash equivalents balance resides in the United States. As foreign earnings are permanently reinvested, availability under the Company’s Revolving Credit Facility would be used to fund operations in the United States as the need arises in the future.
Working capital, defined as current assets less current liabilities, and the balances of its significant components are as follows:
 
June 30,
 
December 31,
 
Increase (Decrease)
 
2015
 
2014
 
to Working Capital
Working capital
$
241.5

 
$
291.9

 
$
(50.4
)
Cash and cash equivalents
11.5

 
8.5

 
3.0

Accounts receivable
115.3

 
131.0

 
(15.7
)
Inventories
203.1

 
236.9

 
(33.8
)
Accounts payable
61.3

 
68.8

 
7.5

Accrued and other liabilities
40.8

 
27.7

 
(13.1
)
The Company monitors its overall capitalization by evaluating total debt to total capitalization. Total debt to total capitalization is defined as the sum of short-term and long-term debt, divided by the sum of total debt and stockholders’ equity. Total debt to total capitalization was 82.6% at June 30, 2015 and 67.4% at December 31, 2014. Over the long-term, the Company plans to continue to improve its total debt to total capitalization by improving operating results,

33

managing working capital and using cash generated from operations to repay outstanding debt. As and when permitted by the terms of agreements noted above, depending on market conditions, and external factors such as credit ratings, the Company will decide in the future when to refinance, redeem or repurchase its debt and take other steps to reduce its debt or lease obligations or otherwise improve its overall financial position.
The Company's credit ratings are periodically reviewed by Moody's Investors Services and Standard and Poor's. With respect to the Company's 12.75% Senior Secured Notes, agency debt ratings were as follows:
 
Senior Debt Rating
 
Outlook
Moody's Investors Services
Caa2
 
Negative
Standard & Poor's
CCC+
 
Negative
In October 2014, Moody's Investor Services downgraded the Company's senior debt rating to Caa2 from Caa1 and revised the Company's outlook to negative from stable. In August 2014, Standard & Poor's revised the Company's outlook to negative from stable and affirmed the Company's B- senior debt rating. In February 2015, Standard & Poor's downgraded the Company's senior debt rating to CCC+ from B- and affirmed the Company's negative outlook. While the agency debt ratings do not result in the Company being in violation of any debt covenants or require it to take any other specified actions, a ratings downgrade could negatively impact the Company's ability to refinance existing debt or increase the cost to refinance its debt. The above ratings are not a recommendation to buy, sell or hold securities. These ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.
Cash paid for capital expenditures for the six months ended June 30, 2015 was $3.3 million, a decrease of $1.0 million from the same period last year. Management believes there will be minimal capital expenditures during the remainder of 2015.
The Company’s principal payments on long-term debt, including the current portion of long-term debt, required during the next five years and thereafter are summarized below:
2015 (remaining six months)
$
0.3

2016
210.5

2017
57.6

2018
—

2019(a)
73.5

2019 and beyond
—

Total debt
$
341.9

(a) Amount represents outstanding balance under the Company's Revolving Credit Facility as of June 30, 2015 which can fluctuate. The maturity date presented above is based on the December 15, 2019 maturity date of the Revolving Credit Facility. Amounts outstanding under the Revolving Credit Facility may become due sooner than the December 15, 2019 maturity date as described in Note 7 to the Condensed Consolidated Financial Statements.
As of June 30, 2015, the Company had $5.1 million of irrevocable letters of credit outstanding, which primarily consisted of $2.0 million for collateral associated with commodity hedges and $1.8 million for compliance with the insurance reserve requirements of its workers’ compensation insurance carriers.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate, commodity price and foreign exchange rate risks that arise in the normal course of business. There have been no significant or material changes to such risks since December 31, 2014. Refer to Item 7a in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2014 for further discussion of such risks.

34

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 Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that review and evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act that occurred during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

35

Part II. OTHER INFORMATION
Item 1.
Legal Proceedings
During the quarter ended March 31, 2013, the Company received warranty and other claims from certain customers regarding alleged quality defects with certain alloy round bar products sold by the Company in 2012 and 2013. The Company evaluated the information provided by the customers and issued a notice of potential defect to other affected customers. The Company has incurred costs for warranty and other customer claims associated with these alleged quality defects of $1.2 million to date, of which $0.1 million and $1.1 million were included as reductions of net sales for the years ended December 31, 2014 and December 31, 2013, respectively. As of June 30, 2015, the Company is not aware of any remaining active claims for compensation as a result of the alleged quality defects. The Company is pursuing claims against the original supplier of the products. While the Company does not currently expect further claims related to the alleged quality defects, there can be no assurance that additional claims will not arise or that the Company will not incur further losses related to such claims in the future.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
N/A
Item 6.
Exhibits
Exhibit No.
 
Description
10.8*
 
Separation Agreement and General Release, dated June 30, 2015, between A.M. Castle & Co. and Stephen J. Letnich.

31.1
 
CEO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2
 
CFO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1
 
CEO and CFO Certification Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Label Linkbase Document
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
 
 
 
*
 
This agreement is considered a compensatory plan or arrangement.

36

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
A. M. Castle & Co.
 
 
 
(Registrant)
Date:
August 5, 2015
By:
/s/ Patrick R. Anderson
 
 
 
Patrick R. Anderson
 
 
 
Executive Vice President & Chief Financial Officer
 
 
 
(Mr. Anderson has been authorized to sign on behalf of the Registrant.)

37

Exhibit Index
The following exhibits are filed herewith or incorporated herein by reference:
Exhibit No.
 
Description
Page
10.8*
 
Separation Agreement and General Release, dated June 30, 2015, between A.M. Castle & Co. and Stephen J. Letnich.
E-1
31.1
 
CEO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
E-2
31.2
 
CFO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
E-3
32.1
 
CEO and CFO Certification Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
E-4
101.INS
 
XBRL Instance Document
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
101.LAB
 
XBRL Taxonomy Label Linkbase Document
 
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
 
 
 
 
 
*
 
This agreement is considered a compensatory plan or arrangement.
 

38


EXHIBIT 10.8

CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS SEPARATION AGREEMENT AND GENERAL RELEASE. BY SIGNING THIS SEPARATION AGREEMENT AND GENERAL
RELEASE YOU GIVE UP AND WAIVE IMPORTANT LEGAL RIGHTS.
A.M. Castle & Co.

Separation Agreement and General Release

1.)
Parties: The parties to this Separation Agreement and General Release (“Agreement”) are Stephen J. Letnich (“Employee”) and A. M. Castle & Co. ("Company").

2.)
Separation Date: Employee’s employment with Company will terminate effective June 24, 2015 (“Separation Date”).

3.)
Final Paycheck: Company will provide Employee with a final paycheck, which shall include accrued and unused vacation pay, less all applicable federal, state and local withholdings with the next regular payroll cycle, or earlier as required by law.

4.)
Separation Benefits: In consideration for this Agreement:

a)
Company will provide Employee with the payments and benefits set forth in Sections 4(a) and 4(c) through 4(e) of the Severance Agreement dated July 25, 2013, between Employee and Company (the “Severance Agreement”, attached as Exhibit A). Company will not provide Employee with any benefit pursuant to Section 4(b) of the Severance Agreement, as no short-term incentive plan has been approved for Employee or similar executives as of the date of this Agreement. For the avoidance of doubt, Employee will not be entitled to participate in any way and will not be entitled to any payment under Section 4(b) of the Severance Agreement to the extent any short-term incentive plan is approved for similar Company executives after the Separation Date.

b)
Company and Employee agree that with respect to the continuing car benefit contemplated by Section 4(f) of the Separation Agreement, Company will pay to Employee a lump sum amount of Sixteen Thousand Dollars ($16,000) less applicable withholdings no later than ten (10) days following the expiration of the seven (7) day revocation period for this Agreement. This payment shall be in lieu of and in full satisfaction for any and all obligations of Company under Section 4(f) of the Severance Agreement.

c)
Company and Employee expressly reaffirm and incorporate the terms of Section 6 of the Severance Agreement entitled “Code Section 409A Compliance” into this Agreement.

d)
Employee shall be reimbursed by Company for all reasonable business expenses incurred as of the Separation Date. Such reimbursement shall be subject in full to (i) reasonableness of the expenses and compliance with all applicable Company policies for the same, in the Company’s sole and final discretion; and (ii) Employee submission of expense reports in the appropriate form via Company’s standard expense submission system by no later than July 23, 2015.

E-1


5.)
Release Employee (on behalf of himself, his personal representatives, successors, and assigns) releases, waives, and forever discharges Company, its past, present and future agents, employees, officers, directors, shareholders, principals, predecessors, alter egos, partners, parent corporations, subsidiaries, divisions, affiliates, attorneys, insurers, successors and assigns (collectively, the “Company Released Parties”) from and for any and all of Employee’s potential or actual claims, demands, grievances, causes of action, charges or suits of any kind arising out of, or in any way relating to the dealings between the parties, including the employment relationship and its termination, on or prior to the date Employee executes this Agreement. Employee releases and waives any and all legal or administrative claims, known or unknown, arising under, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq., the Americans with Disabilities Act, 42 U.S.C. §12101 et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., the Fair Labor Standards Act, 29 U.S.C. §201 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §621 et seq., any other federal, state, or local statutory or common law or regulation, and any and all tort and/or express or implied contact claims, including but not limited to any claims arising under his offer letter, Severance Agreement or any other related documents or agreements. Notwithstanding anything to the contrary, Employee does not release (i) any rights to indemnification pursuant to the Indemnification Agreement between Company and Employee, Company’s certificate of incorporation or bylaws or applicable law or (ii) any rights under Companys policies of directors’ and officers’ insurance.

6.)
Release of Age Discrimination in Employment Act (“ADEA”) Rights: Employee further agrees and acknowledges that he is knowingly and voluntarily waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”). Employee acknowledges that $50,000 of the consideration stated in Paragraph 4 above is being given to him for his waiver and release of any ADEA claims he may have and that this amount is in addition to anything of value to which Employee is already entitled. Employee acknowledges that the remainder of the consideration stated in Paragraph 4 above is consideration for his release of any other claims he may have against the Company Released Parties. Employee further acknowledges that he has been advised in writing, as required by the Older Workers’ Benefit Protection Act (“OWBPA”), that: (a) his waiver and release do not apply to any rights or claims that may arise after the Effective Date of this Agreement; (b) he should consult with an attorney prior to executing this Agreement. Employee acknowledges that Company provided Employee with at least twenty-one (21) days within which to consider the terms of this Agreement. During the seven (7)-day period immediately following Employee’s execution of this Agreement (“Revocation Period”), Employee may revoke the ADEA release portion of this Agremenet by delivering a notice of revocation to Marec E. Edgar, Executive Vice President, General Counsel, Secretary & Chief Administrative Officer, A. M. Castle & Co., 1420 Kensington Road, Suite 220, Oak Brook, Illinois 60523. Employee agrees that if he revokes the ADEA release portion of this Agreement, the remainder of the release will remain in full force and effect.

7.)
Covenant Not to Sue: To the maximum extent permitted by law, Employee (on behalf of himself, his personal representatives, successors, and assigns) covenants not to sue or to institute or cause to be instituted any action in any federal, state, or local agency or court against any of the Company Released Parties, with respect to the claims released in paragraph 5 and paragraph 6 of this Agreement. Employee acknowledges that he does not have any current charge, complaint, grievance or other proceeding against the Company Released Parties pending before any local, state or federal agency regarding his employment. Employee shall not seek or be entitled to any personal recovery, in any action or proceeding that may be commenced on Employee’s behalf in any way arising out of or relating to the matters released under this Agreement.

E-2


8.)
Cooperation; Further Assurances:

a.)
Employee agrees to cooperate with Company in the truthful and honest investigation, prosecution and/or defense of any claim in which the Company Released Parties may have an interest (provided such cooperation does not unreasonably interfere with Employee’s prior business or personal commitments), which may include, without limitation, making himself available on a reasonable basis to participate in any proceeding involving any of the Company Released Parties without claim of privilege against the Company Released Parties, allowing himself to be interviewed by representatives of Company without claim of privilege against the Company Released Parties, participating as requested in interviews and/or preparation by any of the Company Released Parties of other witnesses without claim of privilege against the Company Released Parties, protecting the applicable legal privileges of the Company Released Parties, appearing for depositions and testimony without requiring a subpoena without claim of privilege against the Company Released Parties, and producing and/or providing any documents or names of other persons with relevant information without claim of privilege against the Company Released Parties. Company agrees that it will reimburse Employee for reasonable travel expenses incurred by Employee pursuant to this Paragraph that are approved in advance by Company.

b.)
At Company’s request and without further consideration, Employee shall execute, acknowledge and deliver such documents, instruments or assurances and take such other action as Company may reasonably request to carry out Employee’s rights and obligations under this Agreement.
 
9.)
Acknowledgment: By executing this Agreement, Employee acknowledges and agrees that Employee has entered into this Agreement knowingly and voluntarily and that he is knowingly and voluntarily waiving and releasing his rights and claims in exchange for the consideration set forth in Paragraph 4 above and in the Severance Agreement incorporated herein. Employee hereby acknowledges that Employee has read the Agreement carefully, fully understands all of its provisions, and has had the opportunity to receive independent legal advice with respect to executing this Agreement.

10.)
Confidentiality, Non-Disparagement, Non-Competition, and Non-Solicitation:

a.)
Employee expressly reaffirms and agrees to the obligations on Confidentiality, Non-Disparagement, Non-Competition, and Non-Solicitation set forth in the Severance Agreement. Employee further specifically reaffirms Section 13 of the Severance Agreement concerning the reasonablenesss of these provisions and consideration paid therefor.

b.)
Company expressly reaffirms and agrees to the obligations on Non-Disparagement set forth in the Severance Agreement.

c.)
Employee agrees to keep confidential the terms of the Agreement and agrees to refrain from disclosing any information regarding this Agreement to any third party, except to Employee’s retained attorneys, tax advisors, immediate family (spouse, parents, children), or as required by law.

d.)
Employee agrees that he/she shall not, for a period of two (2) years from the Effective Date, act as an employee, consultant, advisor, or in any other capacity, whether paid or not, for any entity or individual that pursues, evaluates or expresses interest in any kind of transaction with or respecting the Company, its stock or other securities, or any of the Company’s subsidiaries, including any merger, acquisition, investment, joint venture, or other transaction of any kind.

E-3


11.)
Representations and Warranties: Employee represents and warrants that this Agreement constitutes the entire agreement among the parties with respect to all the matters discussed herein, and supersedes all prior or contemporaneous discussions, communications or agreements, expressed or implied, written or oral, by or between the parties, with the exception of the Severance Agreement, which remains in full force and effect and is hereby incorporated fully into this Agreement, except insofar as it is expressly superseded by this Agreement.

12.)
No Re-employment/Service: By signing this Agreement, Employee and Company also agree that Employee will not be re-employed by or re-apply for employment with Company or propose or allow another person or entity to propose that Employee serve on the Board of Directors of the Company, or in any similar capcity, or any of its affiliates, and that signing this Agreement acts as a complete waiver of any and all rights Employee has or may have to reinstatement.

13.)
Equitable Relief; Attorneys’ Fees: Employee agrees that any violation by Employee of any covenant in this Agreement may cause such damage to Company as will be serious and irreparable and the exact amount of which will be difficult to ascertain, and for that reason, Employee agrees that Company may seek a temporary, preliminary and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by Employee. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies Company shall have in law and equity for the enforcement of such covenants. Company agrees that any violation by Company of any covenant in this Agreement may cause such damage to Employee as will be serious and irreparable and the exact amount of which will be difficult to ascertain, and for that reason, Company agrees that Employee may seek a temporary, preliminary and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by Company. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies Employee shall have in law and equity for the enforcement of such covenants. If litigation arises under this Agreement between Company and Employee, the prevailing party in such litigation shall be entitled to recover its or his reasonable attorneys’ fees, court costs and out-of-pocket expenses from the non-prevailing party.

14.)
Miscellaneous:
a.)
Company expressly denies any liability of any kind to Employee and nothing contained in this Agreement shall be construed as an admission of any liability.

b.)
Nothing contained in this Agreement, or the fact of its submission to Employee, shall be admissible evidence in any judicial, administrative, or other legal proceeding. This Agreement shall not constitute precedent with regard to any other party’s dealings with Company.

c.)
This Agreement shall be deemed to have been executed and delivered within the State of Illinois, and its rights and obligations shall be construed and enforced in accordance with and governed by the laws of the State of Illinois.

d.)
Any action arising from this Agreement, or breach thereof, shall be commenced and maintained in a tribunal in DuPage County, Illinois. As a condition precedent to any such action, the complaining party shall submit to the other party, in writing, its position, and must allow the other party to respond within ten (10) business days. No other action can be taken until this time period and process occurs.

e.)
This Agreement may not be amended, modified or altered except by an express written document signed by all parties hereto, wherein specific reference is made to this Agreement.

f.)
This Agreement may be executed in counterparts, and authentic photocopy or facsimile signatures are accepted as originals.

E-4


g.)
In the event of litigation or arbitration relating to the enforcement of this Agreement, the prevailing party shall be entitled to recover attorneys’ fees and costs actually expended, regardless of whether the suit proceeds to compromise, arbitration or final judgment.

h.)
Should any provision of this Agreement be declared to be illegal, invalid, or unenforceable, the remaining parts shall remain in full force and effect. Any adjudicating tribunal shall attempt to give the remaining provisions the full force as intended by the parties to the fullest extent allowed by law.

EMPLOYEE
 
A.M. CASTLE & CO.
 
 
 
 
 
 
/s/ Stephen J. Letnich
 
/s/ Marec E. Edgar
Stephen J. Letnich
 
Marec E. Edgar
 
 
Executive Vice President, General Counsel,
 
 
Secretary & Chief Administrative Officer
 
 
 
June 30, 2015
 
June 30, 2015
Date
 
Date


E-5

ATTACHMENT A

The term "Restricted Territory" means the continental United States, Mexico, Canada, Spain, the United Kingdom, France, Singapore, and China. The Restricted Territory also shall include any country in which the Executive (and/or employees of the Company or its affiliates supervised by the Executive) had responsibility or generated or obtained Confidential Information.


E-6

EXHIBIT A

SEVERANCE AGREEMENT
A.M. CASTLE & CO.

THIS AGREEMENT (“Agreement”), made and entered into this 25th day of July, 2013 (the “Effective Date”), by and between A.M. Castle & Co., a Maryland corporation (the “Company”), and Stephen J. Letnich of Valparaiso, Indiana (the “Executive”);
WITNESSETH THAT:
WHEREAS, the Company wishes to assure itself of the continuity of the Executive’s service and has determined that it is appropriate that the Executive receive certain payments in the event, prior to a Change in Control, of an involuntary termination of employment (other than for Cause) or a termination of employment for Good Reason;
WHEREAS, the Company and the Executive accordingly desire to enter into this Agreement on the terms and conditions set forth below; and
WHEREAS, the Company promises to provide, and the Executive acknowledges that the Executive has had, will have, and will develop on behalf of the Company substantial contacts with long-standing, near permanent customers of the Company, including without limitation program accounts, that require the protections against unfair competition set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY AGREED, by and between the parties as follows:
1.Relationship to Other Agreements. Except as otherwise provided in any other agreement between the Company and the Executive which specifically identifies this Agreement and specifically provides that it supersedes this Agreement, this Agreement shall supersede any and all other agreements between the Executive and the Company regarding the payment of benefits upon a termination of the Executive’s employment with the Company. If the Executive is entitled to severance pay or other benefits pursuant to the terms of this Agreement, the Executive shall not be eligible to receive any severance pay or other benefits pursuant to the terms of any other severance agreement or arrangement of the Company (or any affiliate of the Company), including any arrangement of the Company (or any affiliate of the Company) providing benefits upon involuntary termination of employment.

2.Agreement Term. The “Term” of this Agreement shall begin on the Effective Date and shall continue through the second anniversary of the Effective Date (the “Expiration Date”); provided, however, the Expiration Date shall be automatically extended annually for successive one-year periods, effective on the first anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, without further action on the part of any party, unless, not later than 30 days prior to the effective date of any such extension, either party shall have given written notice to the other party that it does not wish to extend the Term.

3.Certain Definitions. In addition to terms otherwise defined herein, the following capitalized terms used in this Agreement shall have the meanings specified below:

E-7


(a)
Cause. The term “Cause” shall mean:
(i)
Conviction of, or entry of a plea of guilty or “nolo contendere” to, a felony (as defined by the laws of the United States of America or by the laws of the State or other jurisdiction in which the Executive was so convicted or entered such plea) by the Executive;

(ii)
Engagement by the Executive in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Company, the Executive’s credibility and reputation no longer conform to the standard of the Company’s executives;

(iii)
Willful misconduct by the Executive that, in the reasonable judgment of the Company, results in a demonstrateable and material injury to the Company or its affiliates, monetarily or otherwise;
(iv)
Willful and continued failure (other than any such failure resulting from the Executive’s incapacity due to mental or physical illness) by the Executive to perform his assigned duties, provided that such assigned duties are consistent with the job duties of the Executive and that the Executive does not cure such failure within 30 days after notice of such failure from the Company; or
(iv)
Material breach of this Agreement by the Executive, provided that the Executive does not cure such breach within 30 days after notice of such breach from the Company.
For purposes of determining whether “Cause” exists, no act, or failure to act, on the Executive’s part will be deemed “willful” unless done, or omitted to be done, in the reasonable judgment of the Company, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company or its affiliates.
(b)
Change in Control. The term “Change in Control” shall mean any of the following that occur after the Effective Date:

(i)
Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including the regulations and other applicable authorities thereunder (the “Exchange Act”)) (“Person”), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) (“Beneficial Owner”), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors (“Outstanding Company Voting Securities”); provided, however, that any acquisition by a Person who on the Effective Date is the Beneficial Owner of thirty percent (30%) or more of the Outstanding Company Voting Securities shall not constitute a Change in Control;

E-8


(ii)
Any change in the composition of the Board of Directors of the Company (the “Board”) over a two-year period which results in a majority of the then present directors of the Company not constituting a majority two years later, provided that in making such determination, directors who are elected by or upon the recommendation of the then current majority of the Board shall be excluded;

(iii)
Approval by the shareholders of the Company of a complete dissolution or liquidation of the Company;

(iv)
Any sale or disposition to a Person of the assets of the Company equal to more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company before such sale or disposition; provided that, for purposes of this subparagraph (b)(iv), the “gross fair market value” shall be determined without regard to any liabilities associated with the assets of the Company or the assets so sold or disposed;

(v)
There is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than (A) a merger or consolidation immediately following which the individuals who comprise the Board of the Company immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation, or, if the Company or the entity surviving such merger or consolidation is then a subsidiary, the ultimate parent thereof, (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes a Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities, or (C) a merger or consolidation of any direct or indirect subsidiary of the Company (y) for whom the Executive is not performing services at the time of such merger or consolidation or (z) that is not a majority shareholder of the corporation for whom the Executive is performing services at the time of such merger or consolidation.

(c)
Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and any regulations and other applicable authorities promulgated thereunder.

(d)
Good Reason. The term “Good Reason” shall mean:

(i)
a reduction of 10% or more in the Executive’s base salary (either upon one reduction or during a series of reductions over a period of time), provided, that such reduction neither comprises a part of a general reduction for the Executive’s then-current peers as a group (determined as of the date immediately before the date on which the Executive becomes subject to any such reduction) nor results from a deferral of the Executive’s base salary;

E-9

(ii)
a material diminution in the Executive’s authority (including, but not limited to, the budget over which the Executive retains authority), duties, or responsibilities within the Company;
(iii)
a material change in the geographic location at which the Executive must perform services for the Company more than fifty (50) miles; or
(iv)
any other action or inaction that constitutes a material breach by the Company of this Agreement.
For purposes of this Agreement, in order for a termination of employment by the Executive to be considered to be on account of Good Reason, the following conditions must be met by the Executive:
(i)
the Executive provides written notice to the Company of the existence of the condition(s) described in this subparagraph (d) potentially constituting Good Reason within 90 days of the initial existence of such condition(s), and

(ii)
the Company fails to remedy the conditions which the Executive outlines in his written notice within 30 days of such notice, and

(iii)
the Executive actually terminates employment with the Company within six months of providing the notice described in this subparagraph (d).

(e)
Termination Date. The term “Termination Date” means the date on which the Executive’s employment with the Company and its affiliates terminates for any reason, including voluntary resignation. If the Executive becomes employed by an entity into which the Company has merged, or by the purchaser of substantially all of the assets of the Company, or by a successor to such entity or purchaser, a Termination Date shall not be treated as having occurred for purposes of this Agreement until such time as the Executive terminates employment with the successor and its affiliates (including, without limitation, the merged entity or purchaser). If the Executive is transferred to employment with an affiliate (including a successor to the Company), such transfer shall not constitute a Termination Date for purposes of this Agreement.

4.Payments and Benefits. Subject to the terms and conditions of this Agreement, if the Executive’s employment is terminated during the Term of this Agreement and before a Change in Control (A) by the Company for a reason other than for Cause or (B) by the Executive for Good Reason, the Executive shall be entitled to:

(a)
a lump sum severance payment equal to one times the Executive’s annual base salary in effect immediately prior to the Termination Date.

(b)
a lump sum payment in an amount equal to the annual short-term incentive compensation to which the Executive would have been entitled had he continued in the employ of the Company through the last day of the calendar year in which the Termination Date occurs, pro-rated for the number of days during the calendar year that the Executive was employed prior to the Termination Date; provided, however, that such payment shall be made only if and to the extent the applicable performance measure(s) for such calendar year have actually been met.

E-10


(c)
with respect to each outstanding and nonvested long-term performance award (including an equity-based or a non-equity-based long-term performance award) granted to the Executive by the Company for which the Termination Date precedes the end of the performance period by less than one (1) year, a payment equal to the amount the Executive would have received under each such award had he continued in the employ of the Company through the last day of the applicable performance period, pro-rated for the number of days during such performance period that the Executive was employed prior to the Termination Date; provided, however, that such payment shall be made only if and to the extent the applicable performance measure(s) for such performance period have actually been met.

(d)
with respect to each then-outstanding and vested stock option granted to the Executive by the Company, exercise such option at any time during the period beginning on the Termination Date and ending on the earlier of the original expiration date of each such option (without regard to any accelerated expiration date otherwise resulting from the Executive’s termination of employment) or the expiration of the three-month period following the Termination Date.

(e)
continued health benefit coverage for the Executive and the Executive’s qualified beneficiaries as provided in Section 4980B of the Code (“COBRA”). Such COBRA continuation coverage shall be provided to the Executive and the Executive’s qualified beneficiaries only if and to the extent that the Executive (or his qualified beneficiaries, as applicable) make a timely and proper election to be covered under COBRA and make timely payments for the cost of such coverage; provided, however, that such COBRA coverage shall be at the Company’s expense for the period beginning on the day after the Termination Date and ending on the earlier of (i) the first anniversary of the Termination Date or (ii) the date on which the Executive commences employment with another employer.

(f)
for the period beginning on the Termination Date and ending on the earlier of (i) the first anniversary of the Termination Date and (ii) the date on which the Executive commences employment with another employer, the Executive shall be permitted the use of a Company-owned or leased automobile on the terms and conditions set forth in the Company’s Automobile Policy.

For the avoidance of doubt, the Executive shall not be entitled to any benefits under this Agreement if his termination of employment occurs on account of his death, disability, or voluntary resignation (other than for Good Reason).
5.Time of Payments. Provided that the conditions of paragraph 7 (relating to waiver and release) have been satisfied, payments pursuant to subparagraphs 4(a) and 4(b) shall be paid no later than March 15th of the calendar year following the calendar year in which the Executive’s Termination Date occurs or at such earlier date as may apply in accordance with the following:

(a)
the payment pursuant to subparagraph 4(a) (relating to severance pay) shall be paid within 10 days following the later of (i) the Executive’s Termination Date or (ii) the date on which the conditions of paragraph 7 are satisfied; and

E-11

(b)
the payment pursuant to subparagraph 4(b) (relating to short-term incentive compensation) shall be made within 10 days following the later of (i) the date that the short-term incentive compensation would have been paid if the Executive’s Termination Date had not occurred, or (ii) the date on which the conditions of paragraph 7 are satisfied.

Further provided that the conditions of paragraph 7 (relating to waiver and release) have been satisfied, unless either the Executive has made a valid election to defer receipt of all or any portion of a payment of an award described in subparagraph 4(c) in accordance with the terms of a Company nonqualified deferred compensation plan or the award agreement in respect of any such award provides otherwise, any payment pursuant to subparagraph 4(c) shall be paid no later than the later of (i) the date that is 2-½ months from the end of the Executive’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (ii) the date that is 2-½ months from the end of the Company’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture.
Notwithstanding any other provision of this Agreement, if the requirements of paragraph 7 are not satisfied, the Executive shall not be entitled to any payments or benefits under this Agreement (other than the payments or benefits provided in subparagraph 4(e) or 4(f) on or before the date by which the Executive is required to satisfy the requirements of paragraph 7).
6.Code Section 409A Compliance. Notwithstanding any provision of this Agreement to the contrary:
(a)
If and to the extent any payment or benefits under this Agreement are otherwise subject to the requirements of Code Section 409A, the intent of the parties is that such payment and benefits shall comply with Code Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted, and such payment and benefits shall be paid or provided under such other conditions determined by the Company that cause such payment and benefits, to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the parties hereto of the applicable provision without violating the provisions of Code Section 409A. The Company makes no representation that any or all of the payments or benefits provided under this Agreement will be exempt from or comply with Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to any such payments or benefits. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A.

(b)
A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following the Executive’s Termination Date unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

(c)
Each payment payable to the Executive under this Agreement on or after the Executive’s Termination Date shall be treated as a separate and distinct “payment” for purposes of Code Section 409A and, further, is intended to be exempt from Code Section 409A, including but not limited to the short-term deferral exemption thereunder. If and to the

E-12

extent any such payment is determined to be subject to Code Section 409A and is otherwise payable upon the Executive’s termination of employment, in the event the Executive is a “specified employee” (as defined in Code Section 409A), any such payment that would otherwise have been payable in the first six (6) months following the Executive’s Termination Date will not be paid to the Executive until the date that is six (6) months and one (1) day following the Executive’s Termination Date (or, if earlier, the Executive’s date of death). Any such deferred payments will be paid in a lump sum; provided that no such actions shall reduce the amount of any payments otherwise payable to the Executive under this Agreement. Thereafter, the remainder of any such payments shall be payable in accordance with this Agreement.

(d)
All expenses or other reimbursements to the Executive under this Agreement, if any, shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive (provided that if any such reimbursements constitute taxable income to the Executive, such reimbursements shall be paid no later than March 15th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred), and no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.

(e)
Whenever a payment under this Agreement specifies a period within which such payment may be made, the actual date of payment within the specified period shall be within the sole discretion of the Company.

(f)
In no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be offset by any other payment pursuant to this Agreement or otherwise.

(g)
To the extent required under Code Section 409A, (i) any reference herein to the term “Agreement” shall mean this Agreement and any other plan, agreement, method, program, or other arrangement, with which this Agreement is required to be aggregated under Code Section 409A, and (ii) any reference herein to the term “Company” shall mean the Company and all persons with whom the Company would be considered a single employer under Code Section 414(b) or 414(c).

7.Waiver and Release. Except as expressly provided in paragraph 5, the Executive shall not be entitled to any payments or benefits under this Agreement unless and until the Executive executes and delivers to the Company, within thirty (30) days following the Executive’s Termination Date (or fifty (50) days in the event that 29 CFR 1625.22 requires the Company to provide the Executive forty-five (45) days to consider the release), a valid release of any and all claims against the Company and its affiliates in a form acceptable to the Company and the revocation period for such release has expired without revocation.

8.Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. None of the Company or any of its affiliates shall be entitled to set off against the amounts payable to the Executive under this Agreement any amounts owed to the Company or any of its affiliates by the Executive, any amounts earned by the Executive in other employment after the Termination Date, or any amounts which might have been earned by the Executive in other employment had he sought such other employment.

E-13


9.Withholding. All payments to the Executive under this Agreement will be subject to all applicable withholding of applicable taxes.

10.Confidential Information. The Company and the Executive covenant and agree that:

(a)
The Company will provide the Executive Confidential Information (as defined below) to permit the Executive to perform the Executive’s duties on behalf of the Company and its affiliates, which will include, among other things, generating additional Confidential Information on behalf of the Company and its affiliates.

(b)
Except as may be required by the lawful order of a court or agency of competent jurisdiction, except as necessary to carry out his duties to the Company and its affiliates, or except to the extent that the Executive has express authorization from the Company, the Executive agrees to keep secret and confidential, all Confidential Information (as defined below), and not to disclose the same, either directly or indirectly, to any other person, firm, or business entity, or to use it in any way during the Agreement Term and at all times thereafter, provided, however, if the jurisdiction in which the Company seeks to enforce the confidentiality obligation will not enforce a confidentiality obligation of indefinite duration, then the provisions in this Agreement restricting the disclosure and use of Confidential Information shall survive for a period of five (5) years following the Executive’s Termination Date; provided, however, that trade secrets shall remain confidential indefinitely.

(c)
To the extent that any court or agency seeks to have the Executive disclose Confidential Information, he shall promptly inform the Company, and he shall take such reasonable steps to prevent disclosure of Confidential Information until the Company has been informed of such requested disclosure, and the Company has an opportunity to respond to such court or agency. To the extent that the Executive generates or obtains information on behalf of the Company or any of its affiliates that may be subject to attorney-client privilege as to the Company’s attorneys, the Executive shall take reasonable steps to maintain the confidentiality of such information and to preserve such privilege.

(d)
Nothing in the foregoing provisions of this paragraph 10 shall be construed so as to prevent the Executive from using, in connection with his employment for himself or an employer other than the Company or any of the affiliates, knowledge which was acquired by him during the course of his employment with the Company and its affiliates, and which is generally known to persons of his experience in other companies in the same industry.

(e)
For purposes of this Agreement, the term “Confidential Information” shall include all non-public information (including, without limitation, information regarding litigation and pending litigation, trade secrets, proprietary information, or confidential or proprietary methods) concerning the Company and its affiliates (and their customers) which was generated or acquired by or disclosed to the Executive during the course of his employment with the Company, or during the course of his consultation with the Company following the Termination Date.

E-14


(f)
This paragraph 10 shall not be construed to unreasonably restrict the Executive’s ability to disclose Confidential Information in a court proceeding in connection with the assertion of, or defense against any claim of breach of this Agreement. If there is a dispute between the Company and the Executive as to whether information may be disclosed in accordance with this subparagraph (f), the matter shall be submitted to the court for decision.

11.Non-Competition and Non-Solicitation. During the Term of the Agreement and for a period of 12 months after the Executive’s Termination Date, the Executive covenants and agrees that he shall not, without the express written consent of the Chief Executive Officer of the Company:

(a)
be employed by, serve as a consultant to, or otherwise assist or directly or indirectly provide services to a Competitor (defined below) if: (i) the employment, consulting, assistance or services that the Executive is to provide to the Competitor are the same as, or substantially similar to, any of the services that the Executive provided to the Company or its affiliates and are or will be within the Restricted Territory (as defined in Attachment A); or (ii) the Confidential Information to which the Executive had access could reasonably be expected to benefit the Competitor if the Competitor were to obtain access to such Confidential Information. For purposes of this subparagraph (a), services provided by others shall be deemed to have been provided by the Executive if the Executive had material supervisory responsibilities with respect to the provision of such services.

(b)
solicit or attempt to solicit any party who is then, or during the 12-month period prior to the Executive’s Termination Date was, a customer or supplier of the Company for or with whom the Executive (or the Executive’s subordinates) had Confidential Information or contact on behalf of the Company, provided that the restriction in this subparagraph (b) shall not apply to any activity on behalf of a business that is not a Competitor.

(c)
solicit, entice, persuade or induce any individual who is employed by the Company or its affiliates (or was so employed within 90 days prior to the Executive’s action and not involuntarily terminated for any reason other than Cause) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or its affiliates, and the Executive shall not approach any such employee, either in person or through electronic or social media, for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

(d)
directly or indirectly own an equity interest in any Competitor (other than ownership of 5% or less of the outstanding stock of any corporation listed on the New York Stock Exchange or the American Stock Exchange or included in the NASDAQ System, so long as such ownership is passive in nature).

The term “Competitor” means any enterprise (including a person, firm or business, whether or not incorporated) during any period in which it is materially competitive in any way with any business in which the Company or any of its affiliates was engaged during the 12-month period prior to the Executive’s Termination Date. Upon the written request of the Executive, the Company’s Chief Executive Officer will determine whether a business or other entity constitutes a “Competitor” for purposes of this paragraph 11 and may require the Executive to provide such information as the Chief Executive Officer determines to be necessary to make such determination. The current and continuing

E-15

effectiveness of such determination may be conditioned on the continuing accuracy of such information, and on such other factors as the Chief Executive Officer may determine.
12.Non-Disparagement. The Executive covenants and agrees that, while he is employed by the Company, and after his Termination Date, he shall not make any false, defamatory or disparaging statements about the Company, its affiliates, or the officers or directors of the Company or its affiliates that are reasonably likely to cause material damage to the Company, its affiliates, or the officers or directors of the Company or its affiliates. While the Executive is employed by the Company, and after the Termination Date, the Company agrees, on behalf of itself and its affiliates, that neither the officers nor the directors of the Company or its affiliates in their external communications shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive. Nothing in this paragraph 12 shall preclude the Executive or the Company from making truthful statements that are required by applicable law, regulation or legal process.

13.Reasonable Scope and Duration. The Executive acknowledges that the restrictions in paragraphs 10, 11 and 12 are reasonable in scope, are necessary to protect the trade secrets and other confidential and proprietary information of the Company and its affiliates, that the benefits provided under this Agreement are full and fair compensation for these covenants and that these covenants do not impair the Executive’s ability to be employed in other areas of his expertise and experience. Specifically, the Executive acknowledges the reasonableness of the international scope of these covenants by reason of the international customer base and prospective customer base and activities of the Company and its affiliates, the widespread domestic and international scope of the Executive’s contacts created during his employment with the Company, the domestic and international scope of the Executive’s responsibilities while employed by the Company and his access to marketing strategies of the Company and its affiliates. Notwithstanding the foregoing, if any court determines that the terms of any of the restrictions herein are unreasonable or unenforceable, such court may interpret, alter, amend or modify any or all of such terms to include as much of the scope, time period and intent as will render such restrictions enforceable, and then in such reduced form, enforce such terms. In the event of the Executive’s breach of any such covenant, the term of the covenant shall be extended for a period equal to the period that the breach continues.

14.Equitable Relief. The Executive agrees that any violation by the Executive of any covenant in paragraph 10, 11 or 12 may cause such damage to the Company as will be serious and irreparable and the exact amount of which will be difficult to ascertain, and for that reason, the Executive agrees that the Company shall be entitled, as a matter of right, to a temporary, preliminary and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by the Executive. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies the Company shall have in law and equity for the enforcement of such covenants.

15.Nonalienation. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive’s beneficiary.

16.Amendment. This Agreement may be amended or canceled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.

E-16


17.Applicable Law. The provisions of this Agreement shall be construed in accordance with and governed by applicable federal laws and, to the extent not pre-empted thereby or inconsistent therewith, the laws of the State of Illinois, without regard to the conflict of law provisions of any jurisdiction.

18.Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

19.Obligation of Company. Except as otherwise specifically provided in this Agreement, nothing in this Agreement shall be construed to affect the Company’s right to modify the Executive’s position or duties, compensation, or other terms of employment, or to terminate the Executive’s employment. Nothing in this Agreement shall be construed to provide to the Executive any rights upon termination of the Executive’s employment with the Company other than as specifically described in paragraph 4. If the Executive’s employment is terminated before a Change in Control for any reason other than by the Company (other than for Cause) or by the Executive for Good Reason, the Executive’s benefits shall be determined in accordance with the applicable retirement, insurance and other programs of the Company as may then be in effect.

20.Waiver of Breach. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.

21.Successors, Assumption of Contract. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive’s death, the Executive’s heirs and estate shall succeed to such rights and benefits pursuant to the Executive’s will or the laws of descent and distribution. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company and the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

22.Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below. Such notices, demands, claims and other communications shall be deemed given:

(a)
in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;
(b)
in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or
(c)
in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

E-17


provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service or two-day delivery service are to be delivered to the addresses set forth below:
to the Company:
A.M. Castle & Co.
1420 Kensington Road, Suite 220
Oak Brook, IL 60523
Attn: Corporate Secretary

or to the Executive at the Executive’s most recent address on file with the Company.
Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.
23.Exclusive Jurisdiction and Venue. Any suit, claim or other legal proceeding arising out of or related to this Agreement in any way must be brought in a federal or state court located in Cook County, Illinois, and the Company and the Executive hereby consent to the exclusive jurisdiction of such court for such purpose. The Company and the Executive irrevocably consent and submit itself and himself to the jurisdiction of such court(s) for the purposes of any such suit, claim or other legal proceeding.

24.Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

25.Survival of Agreement. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive’s employment with the Company.

26.Counterparts. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.

27.Effect on Prior Agreements. This Agreement hereby amends and supersedes any and all previous Severance Agreements (and such other severance agreements, written or unwritten), including amendments thereto, entered into by the parties.

[remainder of page intentionally left blank]

E-18

IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Effective Date.

 
 
Executive:
 
 
 
 
 
/s/ Stephen J. Letnich
 
 
Stephen J. Letnich
 
 
 
 
 
A.M. Castle & Co.
 
 
 
 
 
By: /s/ Robert J. Perna
 
 
Its: Vice President, General Counsel & Secretary


E-19

Attachment A


The term “Restricted Territory” means the continental United States, Mexico, Canada, Spain, the United Kingdom, France, Singapore, and China. The Restricted Territory also shall include any country in which the Executive (and/or employees of the Company or its affiliates supervised by the Executive) had responsibility or generated or obtained Confidential Information.


E-20


Exhibit 31.1



CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven W. Scheinkman, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of A. M. Castle & Co. (the “Company”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Company and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date:
August 5, 2015
 
/s/ Steven W. Scheinkman
 
 
 
Steven W. Scheinkman
 
 
 
President and Chief Executive Officer
 
 
 
(Principal Executive Officer)

E-2


Exhibit 31.2



CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Patrick R. Anderson, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of A. M. Castle & Co. (the “Company”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Company and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date:
August 5, 2015
 
/s/ Patrick R. Anderson
 
 
 
Patrick R. Anderson
 
 
 
Interim Vice President, Chief Financial Officer & Treasurer and Vice President, Corporate Controller & Chief Accounting Officer
 
 
 
(Principal Accounting Officer)

E-3


Exhibit 32.1



CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report of A. M. Castle & Co. (the "Company") on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Steven W. Scheinkman, President and Chief Executive Officer (Principal Executive Officer) and Patrick R. Anderson, Interim Vice President, Chief Financial Officer & Treasurer and Vice President, Corporate Controller & Chief Accounting Officer (Principal Accounting Officer) of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.
 
 
/s/ Steven W. Scheinkman
 
 
Steven W. Scheinkman
 
 
President and Chief Executive Officer
 
 
August 5, 2015
 
 
 
 
 
/s/ Patrick R. Anderson
 
 
Patrick R. Anderson
 
 
Interim Vice President, Chief Financial Officer & Treasurer and Vice President, Corporate Controller & Chief Accounting Officer
 
 
August 5, 2015
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

E-4