# Ryerson Holding Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [Ryerson Holding Corp](/companies/ryz.md) (CIK 1481582)
- Form: 10-Q
- Filed: 2023-10-30
- Accepted by EDGAR: Oct 30, 2023, 16:19 ET
- Period: 2023-09-30
- Accession: 0000950170-23-056356
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1481582/000095017023056356/ryi-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1481582/000095017023056356/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.25bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $4.00bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $997.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.22bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $249.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $774.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $193.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $589.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $56.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $184.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $12.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $39.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $35.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $119.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.00 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $3.34 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $3.40 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 34,895,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 35,857,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $275.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $96.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $18.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $107.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $37.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.36bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $2.43bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $633.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.54bn | us-gaap:Liabilities |
| Current portion of debt | at 2023-09-30 | $5.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $882.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,181 characters.

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Readers are cautioned 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 anticipated or implied in the forward-looking statements as a result of various factors. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 23, 2023 and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Industry and Operating Trends” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

The contents herein are provided for general information purposes only and do not constitute an offer to sell or buy, or a solicitation of an offer to buy, any security (“Security”) of Ryerson Holding or its affiliates in any jurisdiction. Ryerson does not intend to solicit and is not soliciting, any action with respect to any Security or any other contractual relationship with Ryerson. Nothing in this Form 10-Q, individually or taken in the aggregate, constitutes an offer of securities for sale or buy, or a solicitation of an offer to buy, any Security in the United States, or to US persons, or in any other jurisdiction in which such an offer or solicitation is unlawful.

The following Management’s Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations is intended to help the reader understand the Company’s results of operations and financial condition as it is viewed by our management. The MD&A should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes thereto in Item 1, “Financial Statements” in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and related Notes thereto for the year ended December 31, 2022, in our Annual Report on Form 10-K filed on February 23, 2023.

### Industry and Operating Trends

We are a metals service center providing value-added processing and distribution of industrial metals with operations in the United States, Canada, Mexico, and China. We purchase large quantities of metal products from primary producers and sell these materials in smaller quantities to a wide variety of metals-consuming industries. We carry a full line of nearly 75,000 products in stainless steel, aluminum, carbon steel, and alloy steels and a limited line of nickel and red metals in various shapes and forms. In addition to our metals products, we offer numerous value-added processing and fabrication services, and nearly 80% of the metals products we sell are processed by us by bending, beveling, blanking, blasting, burning, cutting-to-length, drilling, embossing, flattening, forming, grinding, laser cutting, machining, notching, painting, perforating, polishing, punching, rolling, sawing, scribing, shearing, slitting, stamping, tapping, threading, welding, or other techniques to process materials to a specified thickness, length, width, shape, and surface quality pursuant to specific customer orders.

Similar to other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, we purchase metals to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts, historic buying practices, supply agreements with customers, mill lead times, and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders. We may enter into swaps in order to mitigate our customers’ risk of volatility in the price of metals, as well as metal hedges to mitigate our own risk of volatility in the price of metals. We have no long-term, fixed-price metals purchase contracts. When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and earnings as we sell existing metals inventory. When metals prices increase, competitive conditions will influence how much of the price increase we may pass on to our customers. Changes in average selling prices are primarily driven by commodity metals prices, which impact Ryerson’s selling prices.

The metals service center industry is cyclical and volatile in both pricing and demand, and difficult to predict. In the first nine months of 2023, metals commodity prices for Ryerson’s product mix were globally lower compared to the first nine months of 2022, with average selling prices 16.9% lower. Average selling prices during the first nine months of 2022 benefited from a supply-demand imbalance due to global trade disruptions caused by the onset of the Russia-Ukraine war, where the uncertainty caused by the war caused global demand to outpace supply availability as customers pulled forward demand in preparation for potential supply chain issues. In the first nine months of 2023, both average selling prices and product sales lacked the benefit from the previous period's macroeconomic events and were impacted by prices normalizing towards long-term averages and higher interest rates contributed to slowing demand.

Key industry indicators showed slowing growth in the third quarter of 2023. This is evidenced by the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”), which reported readings below the growth threshold of 50 in July, August, and September of 2023, continuing a trend of contraction in the manufacturing sector since November 2022. Similarly, U.S. Industrial Production indicated declining year-over-year output increases in the third quarter, compared to the second quarter of 2023, signifying slowing conditions for businesses in the industrial sector of the economy.

According to the Metal Service Center Institute, North American service center volumes increased by 0.9% in the first nine months of 2023 compared to the first nine months of 2022. On a North American basis, Ryerson performed lower than the industry with volumes declining 4.6% over the same period. On a quarterly sequential basis, industry volume contraction of 5.0% was less than Ryerson’s volume decrease of 5.1%. On a quarterly sequential basis, Ryerson end-market demand decreased most in the Construction Equipment, Food Processing and Agricultural equipment, and Commercial Ground Transportation sectors but was partially offset by demand growth in the Oil & Gas and Metal Fabrication & Machine Shop sectors.

### First Nine Months 2023 vs. First Nine Months 2022 performance highlights

|  |  |  |
| --- | --- | --- |
| **$4.0B** | **19.4%** | **$120M** |
| **Total Revenues** | **Gross Margin** | **Net Income Attributable to Ryerson** |
| 21% decrease | 340bps decrease | $295M decrease |
| **$3.34** | **$3.34** | **$275M** |
| **Diluted EPS** | **Adj. Diluted EPS\*** | **Cash from Operating Activities** |
| $7.44 decrease | $7.77 decrease | $45M decrease |

\*A reconciliation of the non-GAAP financial measure to the comparable GAAP measure is included in the subsequent table.

To provide greater insight into the Company’s operating trends apart from the period’s one-time transactions, Ryerson provides adjusted net income and adjusted diluted earnings per share figures, which are not U.S. generally accepted accounting principles (“GAAP”) financial measures, to compliment the reported GAAP net income and diluted earnings per share figures. Management uses these metrics to assess year-over-year performance excluding non-recurring transactions. Adjusted net income and adjusted diluted earnings per share do not represent, and should not be used as a substitute for, net income or diluted earnings per share determined in accordance with GAAP. Illustrated in the below table, the first nine months of 2023 had no adjustments to net income attributable to Ryerson Holding Corporation of $119.9 million, a decrease of $307.8 million compared to the year-ago adjusted net income attributable to Ryerson Holding Corporation of $427.7 million which was adjusted by a loss on retirement of debt of $21.3 million, a gain on the sale of assets of $3.8 million, a gain on bargain purchase of $0.6 million, and the associated income taxes.

*(Dollars and shares in millions, except per share data)*

|  | First Nine Months 2023 | First Nine Months 2022 |
| --- | ---: | ---: |
| **Net income attributable to Ryerson Holding Corporation** | **$119.9** | **$415.1** |
| Gain on bargain purchase | — | (0.6) |
| Gain on sale of assets | — | (3.8) |
| Loss on retirement of debt | — | 21.3 |
| Benefit for income taxes on above items | — | (4.3) |
| **Adjusted net income attributable to Ryerson Holding Corporation** | **$119.9** | **$427.7** |
| Diluted earnings per share | $3.34 | $10.78 |
| Adjusted diluted earnings per share | $3.34 | $11.11 |
| Shares outstanding – diluted | 35.9 | 38.5 |

20

### Recent Developments

On February 24, 2023, the US government announced trade actions targeting goods and entities from Russia, which included a proclamation to impose 200% ad valorem tariffs on Russian-origin aluminum products and derivative products and other articles made from Russian primary aluminum or Russian aluminum castings. The duties will be imposed under section 232 of the Trade Expansion Act ("Section 232") and cited by the White House due to (1) challenges faced by US aluminum producers in the face of high levels of aluminum imports and high energy prices; (2) recent increases in imports of aluminum from Russia, whose market is especially export-oriented, by 53 percent between March and July 2022; and (3) the fact that the Russian aluminum industry is a key part of Russia's defense industrial base. Ryerson has communicated to all vendors that we will not accept any Russian originating metal. The trade actions announced by the US government are thought to be supportive of prices for Ryerson's product sales mix as the underlying domestic and North American supply-demand balance is protected from oversupply.

After the Russian forces invaded Ukraine on February 24, 2022, the Biden administration issued executive orders prohibiting the importation of goods from covered regions related to Ukraine and Russia. Ryerson takes this very seriously and has reviewed our direct and indirect material purchases to ensure compliance. On April 8, 2022, President Biden signed into law the Suspending Normal Trade Relations with Russia and Belarus Act, which denies "most-favored nation" tariff treatment to products of Russia and Belarus and extends the President’s authority to impose sanctions under the Global Magnitsky Human Rights Accountability Act. Beginning April 9, 2022, the Act imposes a 10.5% import duty on unalloyed primary aluminum and 11.0% on value-add aluminum products. The import duties are not expected to have a meaningful impact on the availability of aluminum for Ryerson. In 2023, the Company has not purchased material from Russia or the named Ukrainian regions and has no open purchases orders issued to Russian suppliers as of September 30, 2023.

### Components of Results of Operations

We generate substantially all of our revenue from sales of our metals products. The majority of revenue is recognized upon delivery of product to customers. The timing of shipment is substantially the same as the timing of delivery to customers given the proximity of our distribution sites to our customers. Revenues associated with products which we believe have no alternative use, and where the Company has an enforceable right to payment, are recognized on an over-time basis. Over-time revenues are recorded in proportion with the progress made toward completing the performance obligation.

Sales, cost of materials sold, gross profit, and operating expense control are the principal factors that impact our profitability.

*Net sales*. Our sales volume and pricing are driven by market demand, which is largely determined by overall industrial production and conditions in the specific industries in which our customers operate. Sales prices are also primarily driven by market factors such as overall demand and availability of product. Our net sales include revenue from product sales, net of returns, allowances, customer discounts, and incentives.

*Cost of materials sold*. Cost of materials sold includes metal purchase and in-bound freight costs, third-party processing costs, and direct and indirect internal processing costs. The cost of materials sold fluctuates with our sales volume and our ability to purchase metals at competitive prices. Increases in sales volume generally enable us to improve purchasing leverage with suppliers, as we buy larger quantities of metals inventories.

*Gross profit*. Gross profit is the difference between net sales and the cost of materials sold. Our sales prices to our customers are subject to market competition. Achieving acceptable levels of gross profit is dependent on our acquiring metals at competitive prices, our ability to manage the impact of changing prices, and efficiently managing our internal and external processing costs.

*Operating expenses*. Optimizing business processes and asset utilization to lower fixed expenses such as employee, facility, and truck fleet costs, which cannot be rapidly reduced in times of declining volume, and maintaining a low fixed cost structure in times of increasing sales volume, have a significant impact on our profitability. Operating expenses include costs related to warehousing and distributing our products as well as selling, general, and administrative expenses.

### Results of Operations

The following table sets forth our condensed consolidated statements of income data for the three-month and nine-month periods ended September 30, 2023 and 2022 (certain percentages may not calculate due to rounding):

*($ in millions)*

*($ in millions)*

|  | Three Months Ended September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Nine Months Ended September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $1,246.7 | 100.0% | $1,543.1 | 100.0% | $3,996.3 | 100.0% | $5,035.4 | 100.0% |
| Cost of materials sold | 997.4 | 80.0 | 1,272.1 | 82.4 | 3,221.9 | 80.6 | 3,888.4 | 77.2 |
| Gross profit | 249.3 | 20.0 | 271.0 | 17.6 | 774.4 | 19.4 | 1,147.0 | 22.8 |
| Warehousing, delivery, selling, general, and administrative expenses | 193.0 | 15.5 | 186.5 | 12.1 | 589.8 | 14.8 | 544.7 | 10.8 |
| Gain on sale of assets | — | — | — | — | — | — | (3.8) | (0.1) |
| Operating profit | 56.3 | 4.5 | 84.5 | 5.5 | 184.6 | 4.6 | 606.1 | 12.0 |
| Other (expenses) and income | (8.1) | (0.6) | (8.9) | (0.6) | (24.4) | (0.6) | (48.5) | (0.9) |
| Income before income taxes | 48.2 | 3.9 | 75.6 | 4.9 | 160.2 | 4.0 | 557.6 | 11.1 |
| Provision for income taxes | 12.9 | 1.0 | 20.5 | 1.3 | 39.8 | 1.0 | 142.3 | 2.8 |
| Net income | 35.3 | 2.8 | 55.1 | 3.6 | 120.4 | 3.0 | 415.3 | 8.2 |
| Less: Net income attributable to noncontrolling interest | 0.3 | — | — | — | 0.5 | — | 0.2 | — |
| Net income attributable to Ryerson Holding Corporation | $35.0 | 2.8% | $55.1 | 3.6% | $119.9 | 3.0% | $415.1 | 8.2% |
| Basic earnings per share | $1.02 |  | $1.49 |  | $3.40 |  | $11.00 |  |
| Diluted earnings per share | $1.00 |  | $1.46 |  | $3.34 |  | $10.78 |  |

22

#### Net sales

The following charts show the Company’s percentage of sales by major product lines for the nine months ended September 30, 2023 and 2022:

*($ in millions)*

|  | September 30, 2023 2022 | Dollar change | Percentage change |
| --- | ---: | ---: | ---: |
| Net sales (three months ended) | $1,246.7 $1,543.1 | $(296.4) | (19.2)% |
| Net sales (nine months ended) | $3,996.3 $5,035.4 | $(1,039.1) | (20.6)% |
|  | **September 30,** | **Tons** | **Percentage** |
|  | **2023** **2022** | **change** | **change** |
|  | **(in thousands)** |  |  |
| Tons sold (three months ended) | 478 512 | (34) | (6.6)% |
| Tons sold (nine months ended) | 1,493 1,564 | (71) | (4.5)% |
|  | **September 30,** | **Price** | **Percentage** |
|  | **2023** **2022** | **change** | **change** |
| Average selling price per ton sold (three months ended) | $2,608 $3,014 | $(406) | (13.5)% |
| Average selling price per ton sold (nine months ended) | $2,677 $3,220 | $(543) | (16.9)% |

Revenue for the three-month and nine-month periods ended September 30, 2023 decreased from the same periods a year ago due to lower average selling prices caused by lower commodity prices and to lower volume caused by slower economic conditions in metal markets in 2023. Commodity prices were at cyclical highs in 2021 and 2022 before beginning to decline in the second half of 2022. Compared to the year ago periods, average selling prices decreased for all of our product lines in the three-month and nine-month periods ended September 30, 2023 with the largest decreases in our carbon flat, stainless flat, and carbon plate products. Tons sold decreased in the three-month and nine-month periods ended September 30, 2023, compared to the year ago periods, for most of our product lines with the largest decreases in our stainless flat, carbon flat, aluminum long, and carbon long product lines partially offset by increases in stainless plate, and aluminum plate tons sold.

#### Cost of materials sold

*($ in millions)*

|  | September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Dollar change | Percentage change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of materials sold (three months ended) | $997.4 | 80.0% | $1,272.1 | 82.4% | $(274.7) | (21.6)% |
| Cost of materials sold (nine months ended) | $3,221.9 | 80.6% | $3,888.4 | 77.2% | $(666.5) | (17.1)% |

|  | September 30, 2023 | 2022 | Cost change | Percentage change |
| --- | ---: | ---: | ---: | ---: |
| Average cost of materials sold per ton sold (three months ended) | $2,087 | $2,485 | $(398) | (16.0)% |
| Average cost of materials sold per ton sold (nine months ended) | $2,158 | $2,487 | $(329) | (13.2)% |

The decrease in cost of materials sold in the three-month and nine-month periods ended September 30, 2023 compared to the year ago periods is primarily due to a decrease in average cost of materials sold per ton and to lower tons sold. The average cost of materials sold decreased across nearly all product lines with the largest decreases in our carbon flat, carbon plate, and carbon long product lines during the three-month and nine-month periods ended September 30, 2023. During the third quarter of 2023, LIFO income was $33.4 million compared to LIFO income of $21.1 million in the third quarter of 2022. During the first nine months of 2023, LIFO income was $38.4 million compared to LIFO income of $92.7 million in the first nine months of 2022.

#### Gross profit

*($ in millions)*

|  | September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Dollar change | Percentage change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Gross profit (three months ended) | $249.3 | 20.0% | $271.0 | 17.6% | $(21.7) | (8.0)% |
| Gross profit (nine months ended) | $774.4 | 19.4% | $1,147.0 | 22.8% | $(372.6) | (32.5)% |

Gross profit decreased in the nine-month period ended September 30, 2023 compared to the year ago period as average selling price decreased faster than the decrease in the average cost of materials sold resulting in a decrease in gross margin. Gross profit decreased in the three-month period ended September 30, 2023 compared to the year ago period primarily due to lower tons shipped as economic conditions in metal markets slowed.

#### Operating expenses

*($ in millions)*

|  | September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Dollar change | Percentage change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Warehousing, delivery, selling, general, and administrative expenses (three months ended) | $193.0 | 15.5% | $186.5 | 12.1% | $6.5 | 3.5% |
| Warehousing, delivery, selling, general, and administrative expenses (nine months ended) | $589.8 | 14.8% | $544.7 | 10.8% | $45.1 | 8.3% |
| Gain on sale of assets (nine months ended) | $— | — | $(3.8) | (0.1)% | $3.8 | (100.0)% |

24

Warehousing, delivery, selling, general, and administrative expenses increased in the three-month and nine-month periods ended September 30, 2023 compared to the year ago periods with the largest impact from including expenses of companies acquired during 2022 and the first nine months of 2023. Excluding the impact of acquisitions, which added $5.6 million to expenses in the third quarter of 2023 compared to the third quarter of 2022, and $21.1 million to expenses in the first nine months of 2023 compared to the first nine months of 2022, expenses changed in the following categories:

- higher reorganization costs of $7.4 million in the third quarter of 2023 and $12.9 million in the first nine months of 2023 primarily due to increased system implementation activity as well as start up costs associated with our new state of the art University Park location;
- higher salaries and wage expense of $0.6 million in the third quarter of 2023 and $8.9 million in the first nine months of 2023 primarily due to compensation increases;
- higher employee benefit costs of $2.3 million in the third quarter of 2023 and $8.4 million in the first nine months of 2023, primarily due to higher medical costs and stock compensation;
- higher operating expenses of $3.7 million in the first nine months of 2023 primarily due to higher repair & maintenance costs, higher insurance costs, higher information technology expenses, and higher rent expense;
- higher selling, general, and administrative expenses of $2.2 million in the first nine months of 2023 resulting from higher travel and entertainment expenses and higher consulting fees; and
- a gain on the sale of assets of $3.8 million in 2022;
- partially offset by lower incentive compensation expense of $7.3 million in the third quarter of 2023 and $16.6 million in the first nine months of 2023; and
- lower selling, general, and administrative expenses of $2.6 million in the third quarter of 2023 resulting from lower consulting fees and lower credit losses.

#### Operating profit

*($ in millions)*

|  | September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Dollar change | Percentage change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating profit (three months ended) | $56.3 | 4.5% | $84.5 | 5.5% | $(28.2) | (33.4)% |
| Operating profit (nine months ended) | $184.6 | 4.6% | $606.1 | 12.0% | $(421.5) | (69.5)% |

Our operating profit decreased in the three-month and nine-month periods ended September 30, 2023 compared to the three-month and nine-month periods ended September 30, 2022, primarily due to the decrease in average selling prices and gross profit discussed above.

#### Other expenses

*($ in millions)*

|  | September 30, 2023 $% of Net Sales |  | 2022 $% of Net Sales |  | Dollar change | Percentage change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest and other expense on debt (three months ended) | $(9.3) | (0.7)% | $(7.6) | (0.5)% | $1.7 | 22.4% |
| Interest and other expense on debt (nine months ended) | $(25.2) | (0.6)% | $(26.2) | (0.5)% | $(1.0) | (3.8)% |
| Other income and (expense), net (three months ended) | $1.2 | 0.1% | $(1.3) | (0.1)% | $2.5 | 192.3% |
| Other income and (expense), net (nine months ended) | $0.8 | — | $(22.3) | (0.4)% | $23.1 | 103.6% |

Interest and other expense on debt decreased in the nine-month period ended September 30, 2023 compared to the year ago period primarily due to the redemption and repurchase of $300.0 million principal amount of our 8.50% senior secured notes due 2028 (the “2028 Notes”) during 2022, bringing the outstanding principal balance to zero in July 2022, partially offset by higher interest rates on credit facility borrowings and to a higher level of borrowings outstanding under our $1.3 billion revolving credit facility (“the Ryerson Credit Facility”) compared to the year ago period. Interest and other expense on debt increased in the three-month period ended September 30, 2023 compared to the year ago period primarily due to higher interest rates on credit facility borrowings.

The other income in the third quarter and first nine months of 2023 is primarily related to foreign exchange gains. The other expense in the third quarter and first nine months of 2022 includes a $1.5 million loss and a $21.3 million loss, respectively, on the repurchases of the 2028 Notes. In addition, the other expense in the third quarter and first nine months of 2022 includes foreign exchange losses of $0.5 million and $1.2 million, respectively, and a bargain purchase gain of $0.6 million in both periods related to our acquisition of Ford Tool Steels, Inc. in 2022.

*Provision for income taxes*. Our effective income tax rate was 26.8% in the third quarter of 2023 and 24.8% in the first nine months of 2023 compared to 27.1% in the third quarter of 2022 and 25.5% in the first nine months of 2022. The differences between our effective income tax rates and the U.S. federal statutory rate of 21.0% were mainly due to state and foreign income taxes partially offset by the effects of certain discrete items recorded during the periods.

*Earnings per share*. Basic earnings per share was $1.02 in the third quarter of 2023 and $3.40 in the first nine months of 2023 compared to basic income per share of $1.49 in the third quarter of 2022 and $11.00 in the first nine months of 2022. Diluted earnings per share was $1.00 in the third quarter of 2023 and $3.34 in the first nine months of 2023 compared to diluted income per share of $1.46 in the third quarter of 2022 and $10.78 in the first six months of 2022. The changes in earnings per share are due to the results of operations discussed above as well as having fewer shares outstanding in the third quarter of 2023 and the first nine months of 2023 after the repurchase from Platinum of 1,369,300 shares of common stock in the second quarter of 2023, 1,513,420 shares of common stock in the first quarter of 2023, as well as the repurchase of 1,700,766 shares of common stock during 2022.

### Liquidity and Cash Flows

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowing availability under the Ryerson Credit Facility. Our principal source of operating cash is from the sale of metals and other materials. Our principal uses of cash are for payments associated with the procurement and processing of metals and other materials inventories, costs incurred for the warehousing and delivery of inventories, the selling and administrative costs of the business, and capital expenditures.

We had cash and cash equivalents of $37.4 million at September 30, 2023, compared to $39.2 million at December 31, 2022. Our total debt outstanding at September 30, 2023 decreased to $366 million compared to $367 million at December 31, 2022. We had a debt-to-capitalization ratio of 29% at both September 30, 2023 and December 31, 2022. We had total liquidity (defined as cash and cash equivalents and availability under the Ryerson Credit Facility and foreign debt facilities) of $807 million at September 30, 2023 versus $909 million at December 31, 2022. Our net debt (defined as total debt less cash and cash equivalents) was $329 million and $328 million at September 30, 2023 and December 31, 2022, respectively. Total liquidity and net debt are not U.S. generally accepted accounting principles (“GAAP”) financial measures. We believe that total liquidity provides additional information for measuring our ability to fund our operations. Total liquidity does not represent, and should not be used as a substitute for, net income or cash flows from operations as determined in accordance with GAAP and total liquidity is not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. We believe that net debt provides a clearer perspective of the Company’s overall debt profile. Net debt should not be used as a substitute for total debt outstanding as determined in accordance with GAAP.

Below is a reconciliation of cash and cash equivalents to total liquidity:

*(In millions)*

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | $37 | $39 |
| Availability under Ryerson Credit Facility and foreign debt facilities | 770 | 870 |
| Total liquidity | $807 | $909 |

Below is a reconciliation of total debt to net debt:

*(In millions)*

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Total debt | $365.9 | $367.0 |
| Less: cash and cash equivalents | (37.4) | (39.2) |
| Net debt | $328.5 | $327.8 |

Of the total cash and cash equivalents, as of September 30, 2023, $21.6 million was held in subsidiaries outside the U.S. which is deemed to be permanently reinvested. Ryerson does not currently foresee a need to repatriate earnings from its non-U.S. subsidiaries. Although Ryerson has historically satisfied needs for more capital in the U.S. through debt or equity issuances, Ryerson could elect to repatriate earnings held in foreign jurisdictions, which could result in higher effective tax rates. We have not recorded a deferred tax liability for the effect of a possible repatriation of these earnings as management intends to permanently reinvest these earnings outside of the U.S. Specific plans for reinvestment include funding for future international acquisitions and funding of existing international operations.

The following table summarizes the Company’s cash flows:

*(In millions)*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net income | $120.4 | $415.3 |
| Loss on retirement of debt | — | 21.3 |
| Non-cash gain from derivatives | (8.3) | (18.0) |
| Change in operating assets and liabilities: |  |  |
| Receivables | (25.2) | (13.8) |
| Inventories | 101.1 | (96.3) |
| Accounts payable | 30.5 | (2.8) |
| All other operating cash flows | 56.5 | 13.9 |
| **Net cash provided by operating activities** | 275.0 | 319.6 |
| Acquisitions, net of cash acquired | (50.2) | (25.5) |
| Capital expenditures | (96.5) | (71.2) |
| Proceeds from sale of property, plant, and equipment | 0.1 | 8.0 |
| All other investing cash flows | (0.2) | (2.0) |
| **Net cash used in investing activities** | (146.8) | (90.7) |
| Repayment of debt | (1.3) | (320.8) |
| Net proceeds (repayments) of short-term borrowings | (0.8) | 136.0 |
| Net increase in book overdrafts | 7.3 | 35.0 |
| Dividends paid to shareholders | (18.5) | (14.0) |
| Share repurchases | (107.6) | (49.1) |
| All other financing cash flows | (8.3) | (12.6) |
| **Net cash used in financing activities** | (129.2) | (225.5) |
| Effect of exchange rates on cash and cash equivalents | (1.0) | (3.7) |
| Net change in cash and cash equivalents | $(2.0) | $(0.3) |

*Operating activities.* Working capital fluctuates throughout the year based on business needs. Working capital needs tend to be counter-cyclical, meaning that in periods of expansion the Company will use cash to fund working capital requirements, but in periods of contraction the Company will generate cash from reduced working capital requirements. In the first nine months of 2023, working capital requirements decreased primarily due to decreased inventory costs as market prices for metals decreased in the first nine months of 2023. Material purchases were higher at the end of the third quarter of 2023 compared to the end of the fourth quarter of 2022 resulting in an increase in accounts payable in the third quarter of 2023. The remaining cash flows generated in the first nine months of 2023 were due to net income generation. In the first nine months of 2022, average selling prices increased due to supply constraints and briefly, due to the war between Russia and Ukraine, resulting in significantly higher operating profits which more than offset a build in working capital.

*Investing activities.* The Company's main investing activities are capital expenditures, acquisitions, and proceeds from the sale of property, plant, and equipment. Capital expenditures have increased year-over-year to $96.5 million for the first nine months of 2023 compared to $71.2 million in the first nine months of 2022 as the Company purchased the BLP Holdings, LLC building subsequent to the acquisition and continued its investment in a new facility in University Park, Illinois, a project which began in 2022. In the first nine months of 2023, the Company paid $39.9 million to acquire BLP Holdings, LLC and $9.7 million to purchase certain assets from ExOne Operating, LLC. The Company paid $25.5 million in the first nine months of 2022 to acquire Apogee Steel Fabrication Incorporated, Ford Tool Steels, Inc., and Howard Precision Metals, Inc. See Note 7: Acquisitions within Part I, Item I of this report, for further discussion of the 2023 acquisitions. The Company sold property, plant, and equipment and assets held for sale generating cash proceeds of $8.0 million in the first nine months of 2022.

*Financing activities.* The Company's main source of liquidity to fund working capital requirements is borrowings on the Ryerson Credit Facility. In the first nine months of 2023, cash generated from operating activities was sufficient to fund capital expenditures and acquisitions, as well as share repurchases and dividends, such that borrowings on the Ryerson Credit Facility did not change from year end. In the first nine months of 2022, we repurchased, redeemed, and retired $300.0 million principal of our 2028 Notes, which was partially offset by an increase of $155.0 million in Credit Facility borrowings. Book overdrafts fluctuate based on the timing of payments. Cash dividends paid in the first nine months of 2023 were $18.5 million compared to $14.0 million paid to shareholders in the first nine months of 2022. We repurchased $107.6 million of common stock during the first nine months of 2023 compared to $49.1 of common stock repurchased in the first nine months of 2022.

*Off-Balance Sheet Arrangements.* In the normal course of business with customers, vendors, and others, we have entered into off-balance sheet arrangements, such as letters of credit, which totaled $15 million as of September 30, 2023. We do not have any other material off-balance sheet financing arrangements. Our off-balance sheet arrangements are not likely to have a material effect on our current or future financial condition, results of operations, liquidity, or capital resources.

### Capital Resources

We believe that cash flow from operations and proceeds from the Ryerson Credit Facility will provide sufficient funds to meet our contractual obligations and operating requirements in the normal course of business.

Total debt in the Condensed Consolidated Balance Sheet decreased to $365.9 million at September 30, 2023 from $367.0 million at December 31, 2022, mainly due to cash generated from operating activities in the first nine months of 2023.

Total debt outstanding as of September 30, 2023 consisted of the following amounts: $365.0 million borrowings under the Ryerson Credit Facility, $3.2 million of foreign debt, and $2.7 million of other debt, less $5.0 million of unamortized debt issuance costs. For further information, see Note 8: Long Term Debt in Part I, Item I - Notes to Condensed Consolidated Financial Statements.

### Pension Funding

At December 31, 2022, pension liabilities exceeded plan assets by $73.0 million. Through the nine months ended September 30, 2023, we have made $7.9 million in pension contributions and we anticipate an additional minimum required pension contribution of approximately $1.0 million in the remaining three months of 2023 under the Employee Retirement Income Security Act of 1974 (“ERISA”) and Pension Protection Act in the U.S. and Ontario Pension Benefits Act in Canada. The expected future contributions reflect recent pension funding relief measures under the American Rescue Plan Act (“ARPA”) passed in March 2021. Future contribution requirements depend on the investment returns on plan assets, the impact of discount rates on pension liabilities, and changes in regulatory requirements. We are unable to determine the amount or timing of any such contributions required by ERISA or whether any such contributions would have a material adverse effect on our financial position or cash flows.

Changes in returns on plan assets may affect our plan funding, cash flows, and financial condition. Differences between actual plan asset returns and the expected long-term rate of return on plan assets impact the measurement of the following year’s pension expense and pension funding requirements. However, we believe that cash flow from operations and the Ryerson Credit Facility described above will provide sufficient funds to make the minimum required contributions.

### Material Cash Requirements

The Company expects to make approximately $370.9 million in principal payments to satisfy its debt obligations, consisting of $3.2 million of foreign debt and $2.7 million of other debt coming due within a year, and $365.0 million for the Ryerson Credit Facility coming due in 2027. Please refer to Part I, Item I - Notes to the Condensed Consolidated Financial Statements, Note 8: Long-term Debt for further information.

The Company expects to pay approximately $24 million of interest on the Ryerson Credit Facility, foreign debt, and other debt over the next 12 months and $67 million thereafter. Interest payments related to the variable rate debt were estimated using the weighted average interest rate for the respective debt instrument.

The Company leases various assets including real estate, trucks, trailers, mobile equipment, processing equipment, and IT equipment. We have noncancelable operating leases expiring at various times through 2042, and finance leases expiring at various times through 2030. The total amount of future lease payments is estimated to be $422 million, with $45 million over the next 12 months. We did not have material leases signed but not yet commenced as of September 30, 2023.

Purchase obligations with suppliers are entered into when we receive firm sales commitments with certain of our customers. As of September 30, 2023, we had outstanding purchase obligations of approximately $23 million expiring within a year.

### Income Taxes

We maintain a valuation allowance on certain foreign and U.S. federal deferred tax assets until such time as in management’s judgment, considering all available positive and negative evidence, and consistent with its past determinations, we determine that these deferred tax assets are more likely than not realizable.

## Market risk

As filed, 4,056 characters.

Our primary areas of market risk include changes in interest rates, foreign currency exchange rates, and commodity prices. We continually monitor these risks and develop strategies to manage them.

#### Interest rate risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We are exposed to market risk related to our fixed-rate and variable-rate long-term debt. As of September 30, 2023 and December 31, 2022, we have no publicly traded debt. The carrying value of our debt was $365.9 million and $367.0 million at September 30, 2023 and December 31, 2022, respectively. The carrying value approximates our fair value due to the short-term nature of the underlying borrowings on the Ryerson Credit Facility.

We may use interest rate swaps to manage our exposure to interest rate changes. As of September 30, 2023, we have no outstanding interest rate swaps.

Approximately 1% of our debt is at fixed interest rates as of September 30, 2023. A hypothetical 1% increase in interest rates on variable debt would have increased interest expense for the first nine months of 2023 by approximately $3.5 million.

#### Foreign exchange rate risk

We are subject to foreign currency risks primarily through our operations in Canada, Mexico, and China and we use foreign currency exchange contracts to reduce our exposure to currency price fluctuations. Foreign currency contracts are principally used to purchase U.S. dollars. We had foreign currency contracts with a U.S. dollar notional amount of $2.1 million outstanding at September 30, 2023 and a fair value of zero. We do not currently account for these contracts as hedges but rather mark these contracts to market with a corresponding offset to current earnings. For the nine months ended September 30, 2023, the Company recognized no gain or loss associated with its foreign currency contracts. A hypothetical strengthening or weakening of 10% in the foreign exchange rates underlying the foreign currency contracts from the market rate as of September 30, 2023 would increase or decrease the fair value of the foreign currency contracts by $0.2 million.

The currency effects of translating the financial statements of our foreign subsidiaries are included in accumulated other comprehensive loss and will not be recognized in the Condensed Consolidated Statements of Comprehensive Income until there is a liquidation or sale of those foreign subsidiaries.

#### Commodity price risk

In general, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, customer contracts, and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders.

Metal prices can fluctuate significantly due to several factors including changes in foreign and domestic production capacity, raw material availability, metals consumption, and foreign currency rates. Derivative financial instruments are used to manage a limited portion of our exposure to fluctuations in the cost of certain commodities. No derivatives are held for trading purposes.

As of September 30, 2023, we had 11,517 tons of hot roll coil swap contracts with a net value of zero, 16,291 tons of aluminum swap contracts with a net liability value of $1.5 million, and 1,111 tons of nickel swap contracts with a net asset value of $6.3 million. We do not currently account for these swaps as hedges, but rather mark these contracts to market with a corresponding offset to current earnings. For the nine months ended September 30, 2023, the Company recognized a gain of $9.5 million associated with its commodity derivatives.

A hypothetical strengthening or weakening of 10% in the commodity prices underlying the commodity derivative contracts from the market rate as of September 30, 2023 would increase or decrease the fair value of commodity derivative contracts by $3.1 million.

## Controls and procedures

As filed, 1,803 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.

### Changes in Internal Controls Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s controls over financial reporting during the quarter ended September 30, 2023.

## Risk factors

As filed, 171 characters.

There have been no material changes relating to this Item from those set forth in Item 1A on the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Filed Oct 30, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-056356. Last ingested by Listed: Nov 3, 2026, 21:00 ET. No prices; not investment advice.