Ryerson Holding Corp: Form 10-Q for the period ended Jun 30, 2025

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, 2024 filed on February 20, 2025 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 purchase, or a solicitation of an offer to purchase, 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 purchase, or a solicitation of an offer to purchase, 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 viewed by 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, 2024, in our Annual Report on Form 10-K filed on February 20, 2025.

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 approximately 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, flattening, forming, grinding, laser cutting, machining, notching, painting, polishing, punching, rolling, sawing, 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. At the request of our customers, 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 over the subsequent three to six-month period.

The metals service center industry is cyclical, volatile in demand and pricing, and difficult to predict. In the second quarter of 2025, Ryerson’s average selling prices increased by 2.8% and shipments increased by 0.2% compared to the first quarter of 2025. Average selling price increases were supported by tariff policy and rising input prices while demand reflected trade policy uncertainty and greater inventory discipline among customers. Compared to the same quarter last year, Ryerson experienced lower average selling prices of 3.2% and lower shipments of 1.4% in the second quarter of 2025. In the first six months of 2025, Ryerson experienced lower average selling prices of 6.1% and a decrease in shipments of 0.4% compared to the first six months of 2024.

In the second quarter of 2025, key steel industry economic indicators reported soft industrial activity. This is evidenced by the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”), which has reported readings below the growth threshold of 50 for four consecutive months. However, June’s PMI reading of 49 does indicate a slowing rate of contraction relative to the previous three months. U.S. Industrial Production, which measures industrial sector business output, reported a rise in activity of 0.3% year-over-year in June after two months of flat readings in April and May (0.1% and 0.0%, respectively).

According to the Metal Service Center Institute ("MSCI"), North American service center volumes decreased by 2.7% in the first six months of 2025 compared to the first six months of 2024. Ryerson's North American volumes decreased by 1.1% over the same period. On a quarterly sequential basis, MSCI volumes decreased by 2.1%, compared to Ryerson’s North American volume decrease of 1.2%, implying Ryerson North American market share growth on both a year-to-date and a quarter-over-quarter basis.

Ryerson’s second quarter volumes were relatively consistent with the first, up 0.2%, with relative strength among customers in our consumer durable sector, specifically in appliances and recreational vehicles, and also among select customers in the HVAC sector. On the other hand, we saw quarterly sequential volume contraction in our construction equipment and commercial ground transportation sectors.

First Six Months 2025 vs. First Six Months 2024 Performance

*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 (loss) and adjusted diluted earnings (loss) per share figures, which are not U.S. generally accepted accounting principles (“GAAP”) financial measures, to complement the reported GAAP net income (loss) and diluted earnings (loss) per share figures. Management uses these metrics to assess year-over-year performance excluding non-recurring transactions. Adjusted net income (loss) and adjusted diluted income (loss) per share do not represent, and should not be used as a substitute for, net income (loss) or diluted income (loss) per share determined in accordance with GAAP. As illustrated in the below table, the net loss attributable to Ryerson Holding Corporation of $3.7 million in the first six months of 2025 includes a $1.0 million gain on an insurance settlement and impairment charges on assets of $1.8 million compared to the net income attributable to Ryerson Holding Corporation in the first six months of 2024 of $2.3 million which includes a restructuring charge of $1.7 million, as well as a pension settlement loss of $2.2 million, and a $0.3 million curtailment gain related to various retirement benefit plans. After adjusting for these non-core business transactions and the related income taxes, the adjusted net loss attributable to Ryerson Holding Corporation for the first six months 2025 is $3.1 million compared to $5.0 million of net income attributable to Ryerson Holding Corporation in the first six months of 2024.

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

Recent Developments

Tariffs. In 2025, the U.S. government has announced and retracted tariffs repeatedly on imports, including imports of steel and aluminum from all countries, as well as on all U.S. imports not covered under section 232 of the Trade Expansion Act ("Section 232"). All of the individual country exemptions related to quotas and tariff rate quotas have been eliminated. Currently, steel and aluminum import tariffs are 50% and negotiations with various countries are ongoing. Many governments, including Chinese and Canadian governments, have announced reciprocal tariffs on U.S. imports, creating further uncertainty in global trade. The tariffs introduce significant uncertainty towards customers' supply chains and the impact they will have on our financial position, results of operations, and cash flows remains to be determined.

Enactment of the One Big Beautiful Bill Act. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"), a comprehensive tax reform package that includes significant changes to the Internal Revenue Code. Key provisions of the OBBBA include:

• Modifications to bonus depreciation rules and interest expense limitations;
• Changes to the treatment of research and development expenditures;

Because the legislation was enacted after the June 30, 2025, balance sheet date, the Company has not recognized any financial statement impacts from the OBBBA in this Form 10-Q. The Company is currently evaluating the potential implications of the OBBBA on its financial position, including the impact on deferred tax assets and liabilities, effective tax rate, and future cash flows. While the full financial impact of the legislation is still being assessed, it is expected to affect the Company’s deferred tax assets and liabilities in future periods. At this time, the Company is unable to reasonably estimate the impact of the OBBBA on its financial statements.

Management will continue to monitor developments and expects to reflect the impact of the OBBBA in its financial statements for the third quarter ending September 30, 2025.

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 that 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 six-month periods ended June 30, 2025 and 2024 (certain percentages may not calculate due to rounding):

($ in millions)

($ in millions)

22

Net sales

The following charts show the Company’s percentage of sales by major product lines for the six months ended June 30, 2025 and 2024:

($ in millions)

Revenue for the three-month and six-month periods ended June 30, 2025 decreased from the same periods a year ago due to lower metal commodity prices caused by the effects of contracting industrial manufacturing demand. Compared to the year-ago periods, average selling prices decreased for all of our carbon and stainless product lines in the three-month and six-month periods ended June 30, 2025 with the largest decreases in our carbon plate, carbon flat, and carbon long products, partially offset by increases in all of our aluminum products lines. Tons sold decreased slightly in the three-month and six-month periods ended June 30, 2025, compared to the year-ago periods. The product lines with the largest decreases in tons sold in 2025 are our aluminum flat and carbon long product lines partially offset by an increase in stainless long and aluminum long tons sold.

Cost of materials sold

($ in millions)

The decrease in cost of materials sold in the three-month and six-month periods ended June 30, 2025 compared to the year-ago periods is primarily due to lower metal commodity prices. Compared to the year-ago period the average cost of materials sold decreased across all of our carbon and stainless product lines with the largest decreases in our carbon plate, carbon flat, and stainless plate product lines, partially offset by increases in the average cost of materials sold for all of our aluminum product lines. During the second quarter of 2025, LIFO expense was $13.2 million compared to LIFO income of $10.0 million in the second quarter of 2024. During the first six months of 2025, LIFO expense was $20.0 million compared to LIFO income of $9.0 million in the first six months of 2024.

Gross profit

($ in millions)

Gross profit decreased in the three-month and six-month periods ended June 30, 2025 compared to the year-ago periods primarily due to the impact of lower metals commodity prices which reduced average selling prices.

Operating expenses

($ in millions)

Warehousing, delivery, selling, general, and administrative expenses increased $4.6 million in the second quarter of 2025 compared to the second quarter of 2024 while expenses decreased $10.1 million in the first six-months of 2025 compared to the first six-months of 2024. Expenses in the second quarter of 2025 included $1.4 million of expenses from an acquisition made during the third quarter of 2024, while the first six months of 2025 included expenses of $4.1 million from the same acquisition. Excluding the impact of the acquisition, expenses increased $3.2 million in the second quarter of 2025 compared to the second quarter of 2024 and expenses decreased $14.2 in the six-month period ended June 30, 2025 compared to the year ago period. On a same-store basis, expenses decreased in the second quarter and first six-months of 2025 primarily due to lower reorganization costs as the first six months of 2024 included start-up costs associated with our new state of the art University Park, IL location as well as Enterprise Resource Planning ("ERP") conversion and integration activities. In addition, benefit expenses were lower in the first six-months of 2025 primarily due to lower payroll taxes resulting from refunds received in the second quarter related to Employee Retention Credits for qualified wages paid during the COVID-19 pandemic. Offsetting the decrease in expenses from lower reorganization costs and lower payroll taxes in the second quarter of 2025 and partially offsetting the expense decrease in the first six months of 2025 was an increase in delivery expenses, salaries and wages, and incentive compensation.

The three-month and six-month periods ended June 30, 2024 include a restructuring charge of $1.7 related to severance costs for headcount reductions as we worked to optimize our operating model and improve productivity.

Operating profit

($ in millions)

Our operating profit decreased in the three-month and six-month periods ended June 30, 2025 compared to the three-month and six-month periods ended June 30, 2024, primarily due to the decrease in average selling prices and gross profit discussed above.

Other expenses

($ in millions)

Interest and other expense on debt decreased in the three-month and six-month periods ended June 30, 2025 compared to the year-ago periods primarily due to lower interest rates on our $1.3 billion revolving credit facility (“the Ryerson Credit Facility”) partially offset by a higher level of borrowings outstanding under the Ryerson Credit Facility in the first six months of 2025.

The other income in the first six months of 2025 includes foreign currency translation losses of $2.7 million, partially offset by a $0.5 million settlement gain related to lump-sum buyouts for the Central Steel & Wire ("CSW") pension plan. The other expense in the first six months of 2024 includes a $2.2 million settlement loss resulting from the termination of the Ryerson Canada Bargaining Unit Pension Plan. Partially offsetting the $2.2 million settlement loss was a $1.1 million settlement gain and a $0.3 million curtailment gain related to lump-sum buyouts and a reduction in future years of service for the CSW pension and other post-employment benefit plans resulting from workforce reductions associated with the move of the CSW headquarters and main operations to a new facility in University Park, IL. Other income and (expense), net in the first six months of 2024 also includes foreign currency translation gains of $1.6 million.

Provision for income taxes. Our effective income tax rate was 133.3% in the second quarter of 2025 and 75.8% in the first six months of 2025 compared to 22.6% in the second quarter of 2024 and 23.7% in the first six months of 2024. 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. The decrease in income tax in the first six months of 2025 compared to the first six months of 2024 is primarily a result of the decrease in actual and forecasted earnings between the two periods.

Earnings (loss) per share. The changes in loss per share are due to the results of operations discussed above as well as having fewer shares outstanding in 2025 after the repurchase of 2,526,467 shares of common stock during 2024.

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. Our principal uses of cash are for payments associated with the procurement and processing of metals, costs incurred for the warehousing and delivery of inventories, the selling and administrative costs of the business, capital expenditures, and for interest payments on debt.

We had cash and cash equivalents of $30.8 million at June 30, 2025, compared to $27.7 million at December 31, 2024. Our total debt outstanding at June 30, 2025 increased to $510.2 million compared to $467.4 million at December 31, 2024. We had a debt-to-capitalization ratio of 38% and 36% at June 30, 2025 and December 31, 2024, respectively. We had total liquidity (defined as cash and cash equivalents and availability under the Ryerson Credit Facility and foreign debt facilities) of $485 million at June 30, 2025 versus $451 million at December 31, 2024. Our net debt (defined as total debt less cash and cash equivalents) was $479 million and $440 million at June 30, 2025 and December 31, 2024, 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)

Below is a reconciliation of total debt to net debt:

(In millions)

Of the total cash and cash equivalents as of June 30, 2025, $12.2 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)

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 six months of 2025, working capital requirements increased mainly due to higher sales levels during the second quarter of 2025 compared to the fourth quarter of 2024, driving an increase in accounts receivables. There was a slight decrease in inventory, as commodity price decreases caused lower inventory costs as of June 30, 2025 compared to December 31, 2024. Increased purchasing activity and timing of payments at the end of the second quarter of 2025 resulted in an increase in accounts payable. In the first six months of 2024, working capital requirements increased due to an increase in accounts receivable from higher sales levels compared to the fourth quarter of 2023. Partially offsetting the increase in accounts receivable was a decrease in inventory, as market prices for metals decreased in the first six months of 2024, which also decreased accounts payable balances.

Investing activities. The Company's main investing activities are capital expenditures and acquisitions. Capital expenditures have decreased year-over-year as the Company completed its three-year investment cycle in 2024, which focused on organic growth through the expansion and modernization of existing facilities, addition of new state-of-the-art facilities, and additions of processing equipment to support value-added business.

Financing activities. The Company's main source of liquidity to fund working capital requirements is borrowings on the Ryerson Credit Facility. In the first six months of 2025 and 2024, we increased credit facility borrowings to fund our working capital requirements as business activity increased compared to each prior year's fourth quarter. Book overdrafts fluctuate based on the timing of payments. Cash dividends paid decreased from $12.8 million in the first six months of 2024 to $12.0 million in the first six months of 2025 due to fewer shares outstanding. In the first six months of 2024, we repurchased $15.0 million of common stock.

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 and surety bonds which totaled $2 million and $12 million, respectively as of June 30, 2025. 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 increased to $510.2 million at June 30, 2025 from $467.4 million at December 31, 2024, mainly due to cash utilized in operating activities in the first six months of 2025 related to increased working capital requirements.

Total debt outstanding as of June 30, 2025 consisted of the following amounts: $511.5 million of borrowings under the Ryerson Credit Facility, $1.4 million of foreign debt, less $2.7 million of unamortized debt issuance costs. For further information, see Note 6: Long Term Debt in Part I, Item I - Notes to Condensed Consolidated Financial Statements.

Pension Funding

At December 31, 2024, pension liabilities exceeded plan assets by $52.9 million. Through the six months ended June 30, 2025, we have made $10.3 million in pension contributions and we anticipate an additional minimum required pension contribution of approximately $4.9 million in the remaining six months of 2025 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. 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.

For further information regarding our pension and postretirement benefit plans, see Note 7: Employee Benefits in Part I, Item I - Notes to Condensed Consolidated Financial Statements.

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 $513 million in principal payments to satisfy its debt obligations, consisting of $1 million in foreign debt coming due in 2025, and $512 million related to the Ryerson Credit Facility coming due in 2027. Please refer to Part I, Item I - Notes to the Condensed Consolidated Financial Statements, Note 6: Long-term Debt for further information.

The Company expects to pay approximately $30 million of interest on the Ryerson Credit Facility over the next 12 months and $29 million thereafter. Interest payments related to the variable rate debt were estimated using the weighted average interest rate for the debt instrument.

The Company leases various assets including real estate, trucks, trailers, mobile equipment, processing equipment, and IT equipment. We have non-cancelable operating leases expiring at various times through 2045 and finance leases expiring at various times through 2031. The total amount of future lease payments is estimated to be $480 million, with $50 million due over the next 12 months. We did not have any material leases signed but not yet commenced as of June 30, 2025.

Purchase obligations with suppliers are entered into when we receive firm sales commitments with certain of our customers. As of June 30, 2025, we had outstanding purchase obligations of approximately $31 million expiring within a year. The Company has purchased $21 million under these obligations for the period ended June 30, 2025, leaving $10 million remaining..

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.

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 variable-rate long-term debt. As of June 30, 2025 and December 31, 2024, we have no publicly traded debt. The carrying value of our debt was $510.2 million and $467.4 million at June 30, 2025 and December 31, 2024, respectively. The carrying value approximates our fair value due to the short-term nature of the underlying borrowings on the Ryerson Credit Facility.

From time to time, we may use interest rate swaps to manage our exposure to interest rate changes. As of June 30, 2025, we have no outstanding interest rate swaps.

As of June 30, 2025, all of our debt is at variable interest rates. A hypothetical 1% increase in interest rates on variable debt would have increased interest expense for the first six months of 2025 by approximately $3.0 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 $3.4 million outstanding at June 30, 2025 and a liability value of $0.1 million. 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 six months ended June 30, 2025, the Company recognized a loss of $0.1 million 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 June 30, 2025 would increase or decrease the fair value of the foreign currency contracts by $0.3 million and $0.4 million, respectively.

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. Fuel and gas prices can fluctuate based on input costs, economic conditions, international instability, and supply disruptions. Derivative financial instruments are used to manage a limited portion of our exposure to fluctuations in the cost of certain metal and energy commodities. No derivatives are held for trading purposes.

As of June 30, 2025, we had 17,204 tons of hot roll coil swap contracts with a net liability value of $0.1 million, 8,233 tons of aluminum swap contracts with a net asset value of $2.2 million, 389 tons of nickel swap contracts with a net liability value of $0.2 million, 2,274 tons of copper swap contracts with a net asset value of $1.9 million, 1,916,000 gallons of diesel fuel contracts with zero value, and 215,080 gallons of natural gas contracts with a net asset value of $0.2 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 six months ended June 30, 2025, the Company recognized a gain of $7.1 million associated with its metal and energy commodity derivatives.

A hypothetical strengthening or weakening of 10% in the commodity and energy prices underlying the derivative contracts from the market rate as of June 30, 2025 would increase or decrease the fair value of derivative contracts by $6.9 million.

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 June 30, 2025.

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 June 30, 2025.

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, 2024.