Class

Outstanding at June 30, 2002

Common Stock, $0.01 Par Value

14,861,734 shares

    Item 2.

Conditions and Results of Operations

11-13

    Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

Part II.

Other Information

    Item 1.

Legal Proceedings

14

    Item 6.

Exhibits and Reports on Form 8-K

14

(Unaudited)

June 30,   

December 31,

June 30,   

ASSETS

   2002   

     2001    

   2001   

Cash

$      1,291

$    1,801

$    2,603

Accounts receivable, net

34,399

19,353

80,562

Inventories (principally on last-in, first-out basis)

140,241

129,521

153,683

Income tax receivable

3,711

5,120

2,889

Other current assets

9,767

6,121

2,870

Current assets - discontinued subsidiary

   -   

8,941

8,403

     Total current assets

$   189,409

$ 170,857

$ 251,010

Investment in joint ventures

6,598

9,206

9,591

Prepaid expenses and other assets

67,337

59,193

55,875

Fixed assets, net

87,238

85,529

89,156

Non-current assets - discontinued subsidiary

   -   

2,630

2,565

     Total assets

$ 350,582

$ 327,415

$ 408,197

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$  67,679

$  47,824

$  70,519

Accrued liabilities

15,947

15,397

15,926

Income taxes payable

3,276

703

2,339

Current portion of long-term debt

2,442

2,664

3,425

Current liabilities - discontinued subsidiary

   -   

4,118

2,576

     Total current liabilities

$   89,344

$   70,706

$   94,785

Long-term debt, less current portion

114,310

117,047

164,759

Long-term debt - discontinued subsidiary

    -    

141

1,040

Deferred income taxes

20,859

18,914

18,574

Minority interest

1,316

1,236

1,187

Post retirement benefit obligations

2,230

2,137

2,130

Stockholders' equity

    Common stock

149

142

27,625

    Additional paid in capital

30,184

27,483

0

    Earnings reinvested in the business

93,452

95,644

104,172

    Accumulated other comprehensive (loss) income

(663)

(1,475)

(1,363)

    Other - deferred compensation

(369)

(401)

(553)

    Treasury stock, at cost

(230)

(4,159)

(4,159)

Total stockholders' equity

122,523

117,234

125,722

     Total liabilities and stockholders' equity

$ 350,582

$ 327,415

$ 408,197

(Dollars in thousands)

For the Six Months

Ended June 30,

(Unaudited)

2002                   2001

   Net (loss) income

$ (2,196)

$ 930

   Net loss from discontinued operations

755

-

   Depreciation and amortization

4,189

4,526

   Other

(2,287)

111

     Cash provided from operating activities before

     working capital changes

461

5,567

Net change in accounts receivable sold

1,000

-

Decrease (increase) in working capital

1,659

(2,539)

Net cash provided from operating activities - continuing operations

3,120

3,028

Net cash (used by) provided from operating activities - discontinued operations

(1,194)

1,186

Net cash provided from operating activities

1,926

4,214

Cash flows from investing activities:

     Investments and acquisitions

(842)

-

     Proceeds from disposition of subsidiary

2,486

-

     Advances to joint ventures

(1,789)

-

     Capital expenditures, net of sales proceeds

(275)

(3,746)

Net cash (used by) investing activities - continuing operations

(420)

(3,746)

Net cash provided from (used by) investing activities - discontinued operations

     98

(   159)

Net cash (used by) investing activities

(322)

(3,905)

Cash flows from financing activities:

     Long-term borrowings, net

(3,659)

7,999

     Dividends paid

-

(4,461)

     Other

    608

    200

Net cash (used by) provided from financing activities - continuing operations

(3,051)

3,738

Net cash provided from (used by) financing activities - discontinued operations

    937

(3,203)

Net cash (used by) provided from financing activities

(2,114)

535

Net (decrease) increase in cash

(   510)

    844

     Cash - beginning of year

$ 1,801

$ 1,759

     Cash - end of period

$ 1,291

$ 2,603

Supplemental cash disclosure - cash paid during the period:

     Interest and discount on sale of accounts receivable

$ 4,279

$ 5,303

     Income taxes received

$ (6,663)

$ (2,127)

1.

The condensed financial statements included herein are unaudited, except for the balance sheet at December 31, 2001, which is derived from the audited financial statements at that date. The Company believes that the disclosures are adequate to make the information not misleading. However, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited statements, included herein, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position, the cash flows, and the results of operations for the periods then ended. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest ann ual report on Form 10-K. The 2002 interim results reported herein may not necessarily be indicative of the results of operations for the full year 2002.

2.

In accordance with SFAS No. 128 "Earnings per Share," below is a reconciliation of the basic and diluted earnings per share calculations for the periods reported (dollars and shares in thousands):

For the Three

For the Six

Months Ended

Months Ended

June 30,

June 30,

2002              2001

2002              2001

Net (loss) income from continuing operations

$(1,283)

$ 117

$(1,441)

$ 813

Net (loss) from discontinued operations

(761)

    10

(755)

117

Net (loss) income

$(2,044)

$ 127

$(2,196)

$930

Weighted average common shares outstanding

14,812

14,094

14,737

14,077

Dilutive effect of outstanding employees and

directors' common stock option

      -

    38

     -

    10

Diluted common shares outstanding

14,812

14,132

14,737

14,087

Basic and diluted (loss) earnings per share:

Continuing operations

$(0.09)

$ 0.01

$(0.10)

$0.06

Discontinued Operations

  (.05)

    -  

  (.05)

  .01

Net income

$(0.14)

$0.01

$(0.15)

$0.07

Outstanding employee and directors'

common stock options having no

dilutive effect

1,390

939

1,390

939

3.

On September 27, 2001, the Company and certain of its subsidiaries completed arrangements for a $65 million 364-day trade receivables securitization facility with a financial institution. As of June 30, 2002 the Company sold $41 million ($40 million at December 31, 2001) under the agreement. This sale is reflected as a reduction in "Accounts receivable, net" in the Condensed Balance Sheets and the incremental amount of the increase in the sale is reflected as "Sale of accounts receivable" in the Condensed Statements of Cash Flows". Funding under the facility is limited to the lesser of a base amount comprised of eligible receivables or $65 million. The maximum which could be funded at June 30, 2002 was $48.2 million, leaving an additional $7.2 million available for future working capital needs. The discount expense on the sale of the receivables is reported as "Discount on sale of accounts receivable" in the Comparative Statements of Income.

4.

In July, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations completed after June 30, 2001, clarifies the recognition of intangible assets separately from goodwill, and requires that unallocated negative goodwill be written off immediately as an extraordinary gain. SFAS No. 142, which was effective for fiscal years beginning after December 15, 2001, requires that ratable amortization of goodwill be replaced with periodic tests of goodwill impairment and that intangible assets, other than goodwill, which have determinable useful lives, be amortized over their useful lives. The Company has adopted these accounting standards effective January 1, 2002 and has determined that there is no impairment to the goodwill balance of $32.0 million at June 30, 2002. The following is a r econciliation of net income and earnings per share between the amounts reported in the second quarter and six months of 2001 and the adjusted amounts reflecting these new accounting rules:

3 Mos Ended

6 Mos Ended

(Dollars in thousands, except per share data)

June 30, 2001

June 30, 2001

   Continuing Operations:

   Net income:

     Reported net income

$ 117

$ 813

     Goodwill amortization

176

350

          Adjusted net income

$ 293

$ 1,163

Earnings per share (Basic and Diluted)

     Reported

$ 0.01

$ 0.06

     Goodwill

0.01

0.02

          Adjusted earnings per share

$ 0.02

$ 0.08

3 Mos Ended

6 Mos Ended

(Dollars in thousands, except per share data)

June 30, 2001

June 30, 2001

   Net income including discontinued operations:

     Reported net income

$ 127

$ 930

     Goodwill amortization

187

372

          Adjusted net income

$ 314

$ 1,302

Earnings per share (Basic and Diluted)

     Reported

$ 0.01

$ 0.07

     Goodwill

0.01

0.02

          Adjusted earnings per share

$ 0.02

$ 0.09

     5.

During the second quarter of 2002, the Company sold its United Kingdom subsidiary. The after-tax loss on the sale totaled $0.7 million and was based on $2.5 million received in cash and $0.9 million estimated to be received in the future (subject to a final accounting). The purchaser (as part of the agreement) also paid the Company $3.2 million to settle amounts owed by the United Kingdom subsidiary. The financial statements for all periods have been restated to present the subsidiary as a discontinued operation in accordance with generally accepted accounting principles.

Net (loss) gain on discontinued operations for 2002 and 2001, respectively, is as follows:

For the 3 Months

For the 6 Months

Ended June 30,

Ended June 30,

2002

2001

2002

2001

Net sales

$ 919

$4,171

$ 4,480

$ 9,120

Cost of material sold

685

2,984

3,380

6,507

   Gross profit on sales

234

1,187

1,100

2,613

Operating expense

249

1,022

637

2,111

Depreciation and amortization

39

92

448

206

Interest expense, net

20

58

83

125

   (Loss) income before taxes

(74)

15

(68)

171

Income tax

(42)

    5

(42)

54

(Loss) income from discontinued operations

(32)

10

(26)

117

Loss on disposal of subsidiary, net

   of tax of $174

(729)

      -

(729)

     -

(Loss) gain on discontinued operations

$(761)

$     10

$ (755)

$ 117

6.

Joint Ventures

On May 1, 2002 the Company purchased its joint venture partner's 40 percent interest in Metal Express which serves the small order needs of tool and die shops, universities and other research facilities as well as the maintenance, engineering and non-manufacturing needs of its traditional customer base. The purchase price for this 40 percent remaining interest was $1.0 million.

The Company has a buy/sell provision with one of its other joint venture partners. This provision would allow either joint venture partner to effect the sale or purchase of the interests of the other partner by providing notice of their intention to buy or sell its interest. Once notice is given to the opposite joint venture partner, that partner has the option of accepting the original offer or to take the opposite position (buy/sell) for the purchase price specified in the original offer. This provision within the joint venture agreement effectively expires on April 30, 2003.

On either April 30, 2003 or 2004, the joint venture partner has an option to sell its interest to the Company for an amount determined as a multiple of the joint venture's average EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for a two-year period less the debt outstanding at the end of the current fiscal period. On May 1, 2005, the Company must purchase its joint venture partner's interest at a price determined using the same formula as described above. Due to the uncertainty of the joint venture's future operating results, and the timing of the exercise of the option, the Company cannot determine the potential purchase price for the remaining ownership interest. Based upon current performance, if the option could have been exercised on April 2002, the purchase price to the Company would be approximately $8.0 million. However due to market conditions in the future, the purchase price could be higher or lower.

7.

LIFO

Inventory determination under the LIFO method can only be made at the end of each fiscal year based on the inventory levels and costs at that time. Accordingly, interim LIFO determinations, including those at June 30, 2002 and June 30, 2001, must necessarily be based on management's estimates of expected year-end inventory levels and costs. Since future estimates of inventory levels and costs are subject to certain forces beyond the control of management, interim financial results are subject to fiscal year-end LIFO inventory valuations.

Current replacement cost of inventories exceeds book value by $39.5 million and $42.9 million at June 30, 2002 and June 30, 2001, respectively. Taxes on income would become payable on any realization of this excess from reductions in the level of inventories.

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Second quarter demand from the producer durable equipment sector of the economy, which is the Company's primary market, did not sustain the slightly positive momentum which was evidenced earlier in the year. Whereas the daily sales rate had increased in each month of the first quarter, in April it fell back to January levels and stayed essentially flat for the balance of the quarter. It appears that the first quarter may have benefited from customers' restocking inventories following the strong liquidations that took place in November and December of 2001.

In this environment, the Company reports sales for the second quarter of 2002 of $141.2 million, down 8.5% from the $154.4 million for the same period a year ago. Gross margins fell from 30.2% to 29.8% and gross profit declined 9.9% to $42.1 million compared with $46.7 million in the second quarter of 2001. While sales declined 8.5%, physical activity as measured by tons sold and order count fell less than 2.0% due to changes in product mix, lower mill price levels and smaller order sizes. As a result of year-over-year improvements in productivity, current operating expenses decreased 4.4%, or $1.8 million, to $39.9 million on the decline in physical activity of approximately 2.0%. These factors combined to produce a loss from continuing operations of $1.3 million, or 9 cents per share, compared with virtually a breakeven result in the second quarter last year.

For the first half of 2002 sales totaled $277.3 million compared with $333.1 million in the same period last year, a decline of 16.8%. Continuing operations generated an after tax loss of $1.4 million, or $0.10 per share, compared with a profit of $0.8 million, or $.06 per share, in 2001.

The sale of the Company's United Kingdom subsidiary during the second quarter generated an after tax loss from discontinued operations of $0.8 million, or 5 cents per share, for both the current quarter and year-to-date periods.

The company acquired its joint venture partner's interest in Metal Express, which is now a wholly owned subsidiary, and has been consolidated into the Company's financial statements effective May 1, 2002, the date of acquisition.

Results of operations included non-cash income from pensions in accordance with FASB No. 87. For the second quarter of 2002, this income totaled $0.7 million as compared with $0.6 million for the same period last year. For the six months ended June 30, 2002, the income totaled $1.4 million as compared to $1.2 million in the prior year.

The reduction in sales volume reflects the continuing impact of the severe slowdown in activity in most of the industries the Company serves. In response to the prolonged slump in demand, the Company had substantially lowered its expense base during 2001. Additional steps have been initiated this year, which will further reduce these expenses.

The 2001 second quarter and six-month depreciation and amortization expense included $0.2 million and $0.4 million of amortization of goodwill, respectively. Due to changes in generally accepted accounting principles effective January 1, 2002, goodwill is no longer being amortized. Depreciation for both the quarter and six months are comparable year over year.

During the third quarter of 2001, the outstanding domestic revolving debt was fully paid down with funds generated from the accounts receivable securitization facility, which has become the Company's primary source for working capital funds. This is the main reason for the reduction in net interest expense from quarter to quarter. The discount amount on the securitization facility is recorded as "Discount on accounts receivable." The overall reduction of interest and discount of $0.4 million in the second quarter of 2002 and $0.9 million for the first half of 2002 is the result of both the reduction in general interest rates, more favorable rates for the securitization facility than the domestic revolving debt which was outstanding during the second quarter of last year and an overall reduction in average month-end borrowings (long-term debt plus the receivables sold) of $10.4 million and $5.1 million in the second quarter and first half of the year, respectively.

Liquidity and Capital Resources

In the third quarter of 2001, the Company entered into an Accounts Receivable Securitization Program ("Securitization Program") and paid down its domestic revolver credit debt. This program is currently the primary source of funds for working capital. Due primarily to the $41.0 million of cash generated from this program, total long-term debt was reduced to $116.8 million at June 30, 2002 from $169.2 million a year ago. Negotiations are currently underway for the extension of this facility which the Company believes will be successfully completed in advance of the September 26, 2002 expiration date of the current agreement. The reduction of accounts receivable (the proceeds of the Securitization Program are recorded as payment of accounts receivable and not as debt on the Balance Sheet), along with a $6.5 million contribution of Company stock to its Defined Benefit Pension Plans were the primary factors contributing to a reduction of the debt-to-capital ratio from 57.4% in June of 2001 to its current level of 48.9%.

The Company's cash commitments for the next five years have not changed significantly from December 31, 2001.

The Company is pursuing several courses of action to further strengthen its capital structure. Actions to improve operating efficiency and reduce structural expense levels continue in response to disappointing business activity levels. Inventory reduction programs are targeted to generate an additional $10.0 million of cash for debt reduction by year-end 2002. The Company continues to seek strategic purchasers for its non-synergistic or under-performing business units to generate cash for further debt reduction. (The United Kingdom facility was sold during the second quarter of 2002.).

In addition to those initiatives, the Company is evaluating other options for strengthening its capital base. These include the reconfiguration of some parts of its metal distribution network along the lines of the recently announced consolidation of operations between its Charlotte, North Carolina and Atlanta, Georgia distribution centers. Also, the Company is studying the possible restructuring or re-capitalization of one or more of its joint ventures and is initiating an assessment of its capital structure in light of current financial markets and industry conditions.

Working Capital totaled $100.1 million at June 30, 2002 as compared to $156.2 million at June 30,2001. The majority of the decrease was due to the $41.0 million sale of accounts receivables under the Securitization Program. Accounts receivable decreased an additional $5.2 million, mainly due to reduced sales activity. Inventories decreased by $13.4 million from the second quarter 2001 levels. The decrease was both volume related and due to continuing programs instituted by the Company to decrease the inventory investment in order to improve cash flow. During the first quarter of 2002, the Company received a $4.7 million loss carry-back income tax refund which was reflected as income tax receivable on the December 31, 2001 Balance Sheet. An additional $2.2 million was received in the second quarter representing an additional loss carry-back from 2001 as a result of legislation signed on March 8, 2002 temporarily increasing the loss carry-back period from two years to five years. The majo rity of the remainder of the income tax receivable for the current quarter was generated as a result of the deductibility of the common stock pension contribution, which will be realized either as an offset against taxes that would otherwise be payable in 2002 due to earnings or as additional loss carry-back during 2003.

During the second quarter of 2002 the Company received $2.5 million in cash from the sale of the United Kingdom subsidiary (an additional $0.9 million is anticipated to be received subject to a final accounting), along with $3.2 million to settle amounts owed by the subsidiary. Also during the period, $1.0 million was expended on the purchase of the remaining 40 percent joint venture interest in Metal Express.

The Company's financial agreements require it to maintain certain funded debt-to-capital ratios, working capital-to-debt ratios and minimum equity values. At June 30, 2002, the Company was in compliance with all restrictive covenants. The steps outlined previously to further strengthen the Company's capital structure are designed to expand capacity under each of these covenants.

The Company's primary source of short-term funds is the accounts receivable securitization facility of which $41.0 million was utilized at June 30, 2002. There remains $7.2 million of immediately available funds under this facility along with $0.4 million of other committed lines of credit. Management believes that funds generated from future operations and the existing $7.6 million of cash availability should provide adequate funding for current business operations.

Major Accounting Policies

There have been no changes in the Company's major accounting policies since December 31, 2001.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 1.

Legal Proceedings

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

Item 4.

Submission of Matters to a Vote of Security Holders

(a)

The Annual Meeting of Stockholders was held on April 25, 2002.

(b)

At the Annual Meeting the full Board of Directors were elected. The following are the individual members and the voting results:

            A. M. Castle & Co.              

(Registrant)

Date:    August 14, 2002

By:        / ss/J.A. Podojil                  

J. A. Podojil - Treasurer/Controller

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