Ryerson Reports Second Quarter Results

CHICAGO, July 29, 2020 /PRNewswire/ -- Ryerson Holding Corporation (NYSE: RYI), a leading value-added processor and distributor of industrial metals, today reported results for the second quarter ended June 30, 2020.

Q2 2020 Highlights:

• Reduced net debt by $100 million to $793 million, its lowest level in ten years.
• Refinanced our 11.00% Senior Secured Notes due in 2022 through issuance of $500 million of 8.50% Senior Secured Notes due in 2028. The successful refinancing decreases our expected annual cash interest expense by approximately $16 million and includes optional redemption features.
• Continued operating as an essential business, successfully executing on our dual mandate response plan to safeguard the health and safety of our employees and to preserve the liquidity and recovery capacity of the Company.
• Generated $103 million in cash flow from operations, up $30 million from the first quarter, bringing year-to-date cash flows from operations to $176 million.
• Achieved Adjusted EBITDA, excluding LIFO of $21 million on volumes significantly better than the industry as measured by the Metals Service Center Institute ("MSCI").

Management Commentary

Eddie Lehner, Ryerson's President and Chief Executive Officer, said, "I can only express my profound gratitude to my Ryerson teammates, our customers, our suppliers and all essential workers as we continue to navigate through this time of unparalleled collective adversity unlike any other experienced in our lifetimes. Through the extraordinary efforts of my Ryerson colleagues, we are living up to our cultural DNA of  "say yes and figure it out." We are working safer, we are looking out for one another, and we are making the decisions we have to make to in order to weather the crisis and serve our dual mandate to safeguard the health and safety of our workforce while preserving liquidity and recovery capacity for Ryerson."

Mr. Lehner continued, "The second quarter presented a myriad of challenging public health, economic and societal circumstances that were omnipresent. In the second quarter, North American Industry Shipments, as measured by the MSCI, contracted by 26.3 percent compared to the prior quarter. Ryerson outperformed the industry with North American volume contraction of 21.4 percent, while also generating over $100 million in cash from operating activities and reducing net debt by approximately $100 million compared to the first quarter of 2020. Ryerson successfully refinanced its 11.00% Senior Secured Notes due 2022 and issued $500 million of 8.50% Senior Secured Notes with an 8-year tenor, effectively lowering expected annual cash interest expense by approximately $16 million with additional opportunities for reducing leverage during the first three "non-call" years of the Notes duration. This successful refinancing is reflective of Ryerson's improved operating and credit profile since our prior notes issuance in 2016.  Our business model development, improved capital structure and our shared  commitment to social justice and equality will enable our continued progress as we emerge from the pandemic and work toward better days."

Second Quarter Results

Ryerson achieved revenues of $772 million in the second quarter of 2020, a decrease of 35.9 percent compared to $1.20 billion for the same period last year, with average selling prices down 13.6 percent and tons shipped down 25.8 percent. Gross margin contracted to 15.0 percent, compared to 19.4 percent for the first quarter of 2020 and 17.6 percent for the second quarter of 2019. Included in second quarter of 2020 cost of materials sold was LIFO expense of $14.1 million, compared to LIFO income of $20.2 million in the first quarter of 2020, and LIFO income of $12.9 million in the second quarter of 2019. Ryerson generated LIFO expense during the second quarter as the Company aggressively decreased inventory and sold from older, higher cost LIFO layers. Excluding LIFO, gross margin was 16.8 percent in the second quarter of 2020 compared to 17.4 percent in the first quarter of 2020, and 16.5 percent in the second quarter of 2019. A reconciliation of gross margin, excluding LIFO to gross margin is included below in this release.

In the second quarter of 2020, Ryerson reduced warehousing, delivery, selling, general, and administrative expense by $31.6 million, or 20.3 percent compared to the first quarter of 2020. Compared to the same quarter last year, Ryerson reduced warehousing, delivery, selling, and administrative expenses by $40.5 million, or 24.6 percent. Quarter-over-quarter expense reductions were primarily driven by payroll and operating expense reductions which commensurate with demand declines made necessary by the pandemic induced demand shock. Decreases in compensation, benefits, and temporary labor related expenses totaled $17.9 million.  Reductions in operating expenses unrelated to compensation and benefits expense totaled an additional $13.7 million in the second quarter of 2020 as compared to the prior quarter.

Net loss attributable to Ryerson Holding Corporation was $25.6 million, or $0.67 per diluted share, in the second quarter of 2020 compared to net income of $16.4 million, or $0.43 per diluted share, in the prior year period. Adjusted net loss attributable to Ryerson Holding Corporation, excluding restructuring and other charges, gain or loss on retirement of debt, and the associated income taxes on these items, was $24.2 million for the second quarter of 2020, or $0.64 per diluted share compared to $17.2 million of adjusted net income, or $0.45 per diluted share, in the prior year period. Ryerson achieved Adjusted EBITDA, excluding LIFO of $20.6 million in the second quarter of 2020, a decrease of $30.1 million compared to the second quarter of 2019, and a decrease of $13.8 million compared to the first quarter of 2020. A reconciliation of Adjusted net income to net income attributable to Ryerson Holding Corporation and Adjusted EBITDA, excluding LIFO to net income attributable to Ryerson Holding Corporation is included below in this news release.

First Half Results

Revenues in the first six months of 2020 were $1.78 billion, a decrease of 26.8 percent compared to the first six months of 2019, as tons shipped decreased 17.2 percent and average selling prices decreased 11.6 percent. Net loss attributable to Ryerson Holding Corporation was $9.2 million, or a loss of $0.24 per diluted share, in the first six months of 2020 compared to $45.9 million of net income, or $1.21 per diluted share, for the same period of 2019. Adjusted net loss attributable to Ryerson Holding Corporation, excluding restructuring and other charges, gain or loss on retirement of debt, and the associated income taxes on these items, was $8.4 million for the first six months of 2020, or  a loss of $0.22 per diluted share compared to $47.1 million of income, or $1.24 per diluted share for the first six months of 2019. Adjusted EBITDA, excluding LIFO was $55.0 million in the first six months of 2020 compared to $113.7 million in the first six months of 2019. Reconciliations of Adjusted EBITDA, excluding LIFO and adjusted net income to net income attributable to Ryerson Holding Corporation is included below in this news release.

Liquidity & Debt Management

Ryerson generated $103.3 million in cash from operating activities in the second quarter of 2020 on excellent working capital and expense management execution as compared to $66.5 million in the year-ago period. The Company also significantly decreased its outstanding net debt during the period, driving it down by nearly $100 million since March 31, 2020 to $793 million as of June 30, 2020 which is the lowest level in ten years. Most of this reduction was achieved through decreasing credit facility borrowings, as well as repurchasing $3.0 million of our then outstanding 11.00% Senior Secured Notes at an average price of 96.8. These second quarter repurchases contributed to a total of $57.6 million in repurchases for the first half of 2020 at an average price of 98.4. The year-to-date repurchase transactions were funded through a combination of restricted cash, which is a portion of the proceeds generated through the sale-leaseback transaction completed in the fourth quarter of 2019, and the Company's unrestricted operating cash flows. As of June 30, 2020, Ryerson retained a strong liquidity position of $350 million, compared to $396 million as of March 31, 2020.

Corporate Controller and Chief Accounting Officer Molly Kannan said, "I want to commend all of my Ryerson colleagues for the outstanding job managing working capital and operating expenses in response to the acute demand shock induced by the COVID-19 pandemic. Ryerson generated free cash flow in the second quarter while significantly reducing inventories. Because of Ryerson's excellent supply chain response, we recognized LIFO expense during the quarter despite a falling price environment as we moved into higher costed inventory layers in relation to current average costs. With respect to operating expenses, Ryerson executed decisively and adaptively as warehousing, delivery, selling, general, and administrative expenses declined by approximately 20 percent sequentially and approximately 25 percent year-over-year. And finally, after the end of the second quarter, we recognized a significant milestone with the successful refinance of our 2022 Senior Secured Notes, which will not only secure lower fixed cash commitments, but also afford us a runway for further operating improvements over its 8-year tenor as well as optionality through its redemption terms as we continue to optimize our balance sheet."

Outlook Commentary

The Company expects the third quarter to be impacted by continued COVID-19 pandemic-induced economic stresses. Through the first few weeks of third quarter, the Company noted favorable trends in average selling prices, gross margins excluding LIFO, shipments and bookings relative to the second quarter as it appears that carbon prices are stabilizing in a range, stainless and aluminum prices are on an improving trajectory and demand conditions continue to see incremental improvement in the majority of Ryerson's end-markets.  Due to the persisting macroeconomic uncertainty stemming from the COVID-19 pandemic and overall lack of visibility into future demand trends and market conditions in the end-markets in which Ryerson operates, the Company will not provide guidance for the third quarter ending September 30, 2020.

Earnings Call Information

Ryerson will host a conference call to discuss its second quarter results Thursday, July 30, 2020 at 10 a.m. Eastern Time. Participants may access the conference call by dialing (833) 241-7253 (Domestic) or (647) 689-4217 (International) and using conference ID 7995746. The live online broadcast will be available on the Company's investor relations website, ir.ryerson.com. A replay will be available at the same website for 90 days.

About Ryerson

Ryerson is a leading value-added processor and distributor of industrial metals, with operations in the United States, Canada, Mexico, and China. Founded in 1842, Ryerson has around 3,900 employees in approximately 100 locations. Visit Ryerson at www.ryerson.com.

Safe Harbor Provision

Certain statements made in this presentation and other written or oral statements made by or on behalf of the Company constitute "forward-looking statements" within the meaning of the federal securities laws, including statements regarding our future performance, as well as management's expectations, beliefs, intentions, plans, estimates, objectives, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as "objectives," "goals," "preliminary," "range," "believes," "expects," "may," "estimates," "will," "should," "plans," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company cautions that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented metals industry in which we operate; fluctuating metal prices; our substantial indebtedness and the covenants in instruments governing such indebtedness; the integration of acquired operations; regulatory and other operational risks associated with our operations located inside and outside of the United States; impacts and implications of adverse health events, including the COVID-19 pandemic; work stoppages; obligations under certain employee retirement benefit plans; the ownership of a majority of our equity securities by a single investor group; currency fluctuations; and consolidation in the metals industry. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth above and those set forth under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2019, and in our other filings with the Securities and Exchange Commission. Moreover, we caution against placing undue reliance on these statements, which speak only as of the date they were made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.