UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Emerging growth company |
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Non-accelerated filer |
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Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 30, 2021, there were
RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES
INDEX
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PAGE NO. |
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Item 1. |
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3 |
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Condensed Consolidated Statements of Cash Flows (Unaudited)—Six Months Ended June 30, 2021 and 2020 |
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Condensed Consolidated Balance Sheets—June 30, 2021 (Unaudited) and December 31, 2020 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
38 |
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39 |
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2
PART I. FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In millions, except per share data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of materials sold |
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Gross profit |
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Warehousing, delivery, selling, general, and administrative |
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Gain on sale of assets |
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— |
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— |
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Restructuring and other charges |
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— |
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— |
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Operating profit (loss) |
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Other income and (expense), net |
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Interest and other expense on debt |
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Income (loss) before income taxes |
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Provision (benefit) for income taxes |
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Net income (loss) |
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Less: Net income attributable to noncontrolling interest |
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Net income (loss) attributable to Ryerson Holding Corporation |
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$ |
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$ |
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$ |
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$ |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
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Less: Comprehensive income attributable to noncontrolling interest |
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— |
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— |
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Comprehensive income (loss) attributable to Ryerson Holding Corporation |
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$ |
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$ |
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$ |
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$ |
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Basic earnings (loss) per share |
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$ |
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$ |
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$ |
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$ |
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Diluted earnings (loss) per share |
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$ |
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$ |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
3
RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
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Six Months Ended |
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June 30, |
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2021 |
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2020 |
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Operating activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Deferred income taxes |
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Provision for allowances, claims, and doubtful accounts |
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Restructuring and other charges |
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— |
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Gain on sale of assets |
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— |
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Pension settlement charge |
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Gain on retirement of debt |
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Non-cash (gain) loss from derivatives |
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Other items |
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— |
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Change in operating assets and liabilities: |
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Receivables |
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Inventories |
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Other assets and liabilities |
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Accounts payable |
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Accrued liabilities |
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Accrued taxes payable/receivable |
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Deferred employee benefit costs |
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Net adjustments |
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Net cash provided by (used in) operating activities |
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Investing activities: |
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Capital expenditures |
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Proceeds from sale of property, plant, and equipment |
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Other items |
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— |
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Net cash provided by (used in) investing activities |
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Financing activities: |
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Repayment of debt |
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Net repayments of short-term borrowings |
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Net increase (decrease) in book overdrafts |
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Principal payments on finance lease obligations |
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Dividends paid to non-controlling interest |
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— |
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Net cash used in financing activities |
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Net increase (decrease) in cash, cash equivalents, and restricted cash |
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Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
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Net change in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash—beginning of period |
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Cash, cash equivalents, and restricted cash—end of period |
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$ |
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$ |
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Supplemental disclosures: |
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Cash paid during the period for: |
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Interest paid to third parties, net |
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$ |
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$ |
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Income taxes, net |
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Noncash investing activities: |
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Asset additions under operating leases |
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Asset additions under finance leases |
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See Notes to Condensed Consolidated Financial Statements.
4
RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Balance Sheets
(In millions, except shares and per share data)
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June 30, |
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December 31, |
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2021 |
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2020 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Receivables less provisions of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant, and equipment, at cost |
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Less: Accumulated depreciation |
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Property, plant, and equipment, net |
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Operating lease assets |
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Other intangible assets |
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Goodwill |
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Deferred charges and other assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Salaries, wages, and commissions |
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Other accrued liabilities |
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Short-term debt |
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Current portion of operating lease liabilities |
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Current portion of deferred employee benefits |
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Total current liabilities |
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Long-term debt |
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Deferred employee benefits |
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Noncurrent operating lease liabilities |
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Deferred income taxes |
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Other noncurrent liabilities |
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Total liabilities |
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Commitments and contingencies |
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Equity |
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Ryerson Holding Corporation stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Capital in excess of par value |
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Retained earnings |
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Treasury stock at cost – Common stock of |
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Accumulated other comprehensive loss |
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Total Ryerson Holding Corporation stockholders’ equity |
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Noncontrolling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
5
RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1: FINANCIAL STATEMENTS
Ryerson Holding Corporation (“Ryerson Holding”), a Delaware corporation, is the parent company of Joseph T. Ryerson & Son, Inc. (“JT Ryerson”), a Delaware corporation. Affiliates of Platinum Equity, LLC (“Platinum”) own approximately
We are a leading value-added processor and distributor of industrial metals with operations in the United States (“U.S.”) through JT Ryerson, in Canada through our indirect wholly-owned subsidiary Ryerson Canada, Inc., a Canadian corporation (“Ryerson Canada”), and in Mexico through our indirect wholly-owned subsidiary Ryerson Metals de Mexico, S. de R.L. de C.V., a Mexican corporation (“Ryerson Mexico”). In addition to our North American operations, we conduct materials processing and distribution operations in China through an indirect wholly-owned subsidiary, Ryerson China Limited (“Ryerson China”), a Chinese limited liability company. Unless the context indicates otherwise, Ryerson Holding, JT Ryerson, Ryerson Canada, Ryerson China, and Ryerson Mexico together with their subsidiaries, are collectively referred to herein as “Ryerson,” “we,” “us,” “our,” or the “Company.”
Results of operations for any interim period are not necessarily indicative of results of any future periods or for the year. The condensed consolidated financial statements as of June 30, 2021 and for the three-month and six-month periods ended June 30, 2021 and 2020 are unaudited, but in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. The year-end condensed consolidated balance sheet data contained in this report was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Impact of Recently Issued Accounting Standards—Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes.” The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intraperiod allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. We adopted this guidance as of January 1, 2021 and there was no impact to our consolidated financial statements.
Impact of Recently Issued Accounting Standards—Not Yet Adopted
No accounting pronouncements have been issued that we have not yet adopted.
NOTE 3: CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the beginning and ending cash balances shown in the Condensed Consolidated Statements of Cash Flows:
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June 30, |
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December 31, |
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2021 |
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2020 |
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(In millions) |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents, and restricted cash |
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$ |
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$ |
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We had cash restricted for the purposes of covering letters of credit that can be presented for potential insurance claims.
6
NOTE 4: INVENTORIES
The Company primarily uses the last-in, first-out (LIFO) method of valuing inventory. Interim LIFO calculations are based on actual inventory levels.
Inventories, at stated LIFO value, were classified at June 30, 2021 and December 31, 2020 as follows:
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June 30, |
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December 31, |
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2021 |
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2020 |
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(In millions) |
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In process and finished products |
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$ |
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$ |
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If current cost had been used to value inventories, such inventories would have been $
The Company has consignment inventory at certain customer locations, which totaled $
NOTE 5: PROPERTY, PLANT, AND EQUIPMENT
During the first six months of 2021, the Company completed several asset sales, in part, to generate cash proceeds that will be utilized to redeem a portion of the
The Company also had normal course asset sale activity during the first six months of 2021 which generated additional cash proceeds of $
NOTE 6: LEASES
The Company leases various assets including real estate, trucks, trailers, mobile equipment, processing equipment, and IT equipment. The Company has noncancelable operating leases expiring at various times through
In June 2021, we sold and leased back a group of service center properties located in Delaware, Florida, Kentucky, Minnesota, Missouri, Oklahoma, Pennsylvania, Tennessee, Texas, and Virginia for net proceeds of approximately $
The transaction met the requirements for sale-leaseback accounting under ASC 842 and ASC 606. Accordingly, the Company recognized the sale of the properties, which resulted in a gain of approximately $
7
The following table summarizes the location and amount of lease assets and lease liabilities reported in our Condensed Consolidated Balance Sheet as of June 30, 2021 and December 31, 2020:
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June 30, |
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December 31, |
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Leases |
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Balance Sheet Location |
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2021 |
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2020 |
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(In millions) |
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Assets |
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Operating lease assets |
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Operating lease assets |
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$ |
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$ |
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Finance lease assets |
|
Property, plant, and equipment, net(a) |
|
|
|
|
|
|
|
|
|
Total lease assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
Current portion of operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Finance |
|
Other accrued liabilities |
|
|
|
|
|
|
|
|
|
Noncurrent |
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
Noncurrent operating lease liabilities |
|
|
|
|
|
|
|
|
|
Finance |
|
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
(a) |
|
The following table summarizes the location and amount of lease expense reported in our Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2021 and 2020:
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Lease Expense |
|
Location of Lease Expense Recognized in Income |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
(In millions) |
|
|||||||||||||
|
Operating lease expense |
|
Warehousing, delivery, selling, general, and administrative |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Finance lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of lease assets |
|
Warehousing, delivery, selling, general, and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on lease liabilities |
|
Interest and other expense on debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease expense |
|
Warehousing, delivery, selling, general, and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term lease expense |
|
Warehousing, delivery, selling, general, and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease expense |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
8
The following table presents maturity analysis of lease liabilities at June 30, 2021:
|
Maturity of Lease Liabilities(a) |
|
Operating Leases |
|
|
Finance Leases |
|
||
|
|
|
(In millions) |
|
|||||
|
2021 |
|
$ |
|
|
|
$ |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
After 2025 |
|
|
|
|
|
|
|
|
|
Total lease payments |
|
|
|
|
|
|
|
|
|
Less: Interest(b) |
|
|
( |
) |
|
|
( |
) |
|
Present value of lease liabilities(c) |
|
$ |
|
|
|
$ |
|
|
|
|
(a) |
|
|
|
(b) |
|
|
|
(c) |
|
The following table shows the weighted-average remaining lease term and discount rate for operating and finance leases, respectively, at June 30, 2021 and December 31, 2020:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
Lease Term and Discount Rate |
|
2021 |
|
|
2020 |
|
||
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
Weighted-average discount rate |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
% |
|
|
|
% |
|
Finance leases |
|
|
|
% |
|
|
|
% |
Information reported in our Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2021 and 2020 is summarized below:
|
|
|
Six Months Ended June 30, |
|
|||||
|
Other Information |
|
2021 |
|
|
2020 |
|
||
|
|
|
(In millions) |
|
|||||
|
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
|
|
Operating cash flows from finance leases |
|
|
|
|
|
|
|
|
|
Financing cash flows from finance leases |
|
|
|
|
|
|
|
|
|
Assets obtained in exchange for lease obligations |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $
Other intangible assets with finite useful lives continue to be amortized over their useful lives. We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.
9
Our Critical Accounting Policies and Estimates for goodwill and intangibles assets are disclosed in Note 1 to the Consolidated Financial Statements and in Management's Discussion and Analysis of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. We continue to monitor the significant global economic uncertainty as a result of the COVID-19 pandemic to assess the outlook for demand for our products and the impact on our business and our overall financial performance. A lack of further recovery or a deterioration in current market conditions, a trend of weaker than expected financial performance in our business, or a lack of further recovery or a decline in the Company’s market capitalization, among other factors, could result in an impairment charge in future periods which could have a material adverse effect on our financial statements.
NOTE 8: LONG-TERM DEBT
Long-term debt consisted of the following at June 30, 2021 and December 31, 2020:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
(In millions) |
|
|||||
|
Ryerson Credit Facility |
|
$ |
|
|
|
$ |
|
|
|
8.50% Senior Secured Notes due 2028 |
|
|
|
|
|
|
|
|
|
Foreign debt |
|
|
|
|
|
|
|
|
|
Other debt |
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs and discounts |
|
|
( |
) |
|
|
( |
) |
|
Total debt |
|
|
|
|
|
|
|
|
|
Less: Short-term foreign debt |
|
|
|
|
|
|
|
|
|
Less: Other short-term debt |
|
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
|
|
|
$ |
|
|
Ryerson Credit Facility
On November 16, 2016, Ryerson entered into an amendment with respect to its $
At June 30, 2021, Ryerson had $
10
Amounts outstanding under the Ryerson Credit Facility bear interest at (i) a rate determined by reference to (A) the base rate (the highest of the Federal Funds Rate plus
We attempt to minimize interest rate risk exposure through the utilization of interest rate swaps, which are derivative financial instruments. In
Borrowings under the Ryerson Credit Facility are secured by first-priority liens on all of the inventory, accounts receivables, lockbox accounts, and related assets of the borrowers and the guarantors.
The Ryerson Credit Facility also contains covenants that, among other things, restrict Ryerson Holding and its restricted subsidiaries with respect to the incurrence of debt, the creation of liens, transactions with affiliates, mergers and consolidations, sales of assets, and acquisitions. The Ryerson Credit Facility also requires that, if availability under the Ryerson Credit Facility declines to a certain level, Ryerson maintain a minimum fixed charge coverage ratio as of the end of each fiscal quarter, and includes defaults upon (among other things) the occurrence of a change of control of Ryerson and a cross-default to other financing arrangements.
The Ryerson Credit Facility contains events of default with respect to, among other things, default in the payment of principal when due or the payment of interest, fees, and other amounts due thereunder after a specified grace period, material misrepresentations, failure to perform certain specified covenants, certain bankruptcy events, the invalidity of certain security agreements or guarantees, material judgments, and the occurrence of a change of control of Ryerson. If such an event of default occurs, the lenders under the Ryerson Credit Facility will be entitled to various remedies, including acceleration of amounts outstanding under the Ryerson Credit Facility and all other actions permitted to be taken by secured creditors.
The lenders under the Ryerson Credit Facility could reject a borrowing request if any event, circumstance, or development has occurred that has had or could reasonably be expected to have a material adverse effect on the Company. If Ryerson Holding, JT Ryerson, any of the other borrowers, or any restricted subsidiaries of JT Ryerson becomes insolvent or commences bankruptcy proceedings, all amounts borrowed under the Ryerson Credit Facility will become immediately due and payable.
Net repayments of short-term borrowings that are reflected in the Condensed Consolidated Statements of Cash Flows represent borrowings under the Ryerson Credit Facility with original maturities less than three months.
2022 and 2028 Notes
On July 22, 2020, JT Ryerson issued $
The 2028 Notes and the related guarantees are secured by a first-priority security interest in substantially all of JT Ryerson’s and each guarantor’s present and future assets located in the U.S. (other than receivables, inventory, cash deposit accounts and certain other assets, and proceeds thereof, which are secured pursuant to a second-priority security interest), subject to certain exceptions and customary permitted liens. The 2028 Notes will be redeemable, in whole or in part, at any time on or after August 1, 2023 at certain
11
redemption prices. The redemption price for the 2028 Notes if redeemed during the twelve months beginning (i) August 1, 2023 is
On June 9, 2021, JT Ryerson delivered to holders of the 2028 Notes a notice of partial redemption of $
The Company evaluated the redemption options within the 2028 Notes for embedded derivatives and determined that one redemption option required bifurcation as it is not clearly and closely related to the debt agreement. The Company determined the fair value of the embedded derivative as of December 31, 2020 was $
The 2028 Notes contain customary covenants that, among other things, limit, subject to certain exceptions, our ability, and the ability of our restricted subsidiaries, to incur additional indebtedness, pay dividends on our capital stock or repurchase our capital stock, make investments, sell assets, engage in acquisitions, mergers, or consolidations, or create liens or use assets as security in other transactions.
During the first six months of 2020, a principal amount of $
Foreign Debt
At June 30, 2021, Ryerson China’s foreign borrowings were $
Availability under the foreign credit lines was $
12
NOTE 9: EMPLOYEE BENEFITS
The following table summarizes the components of net periodic benefit cost (credit) for the three and six month periods ended June 30, 2021 and 2020 for the Ryerson pension plans and postretirement benefit plans other than pension:
|
|
|
Three Months Ended June 30, |
|
|||||||||||||
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
(In millions) |
|
|||||||||||||
|
Components of net periodic benefit cost (credit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on assets |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Settlement charge |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Recognized actuarial (gain) loss |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service credit |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Net periodic benefit cost (credit) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
(In millions) |
|
|||||||||||||
|
Components of net periodic benefit cost (credit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on assets |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Settlement expense |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Recognized actuarial (gain) loss |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service credit |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Net periodic benefit cost (credit) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Components of net periodic benefit cost (credit), excluding service cost, are included in Other income and (expense), net in our Condensed Consolidated Statement of Comprehensive Income.
The Company contributed $
NOTE 10: COMMITMENTS AND CONTINGENCIES
In October 2011, the United States Environmental Protection Agency (the “EPA”) named JT Ryerson as one of more than 100 businesses that may be a potentially responsible party (“PRP”) for the Portland Harbor Superfund Site (the “PHS Site”). On January 6, 2017, the EPA issued an initial Record of Decision (“ROD”) regarding the site.
The EPA met with various PRPs throughout 2019 and 2020 regarding remedial design. The EPA did not include JT Ryerson in those meetings. It did include Schnitzer Steel, which is developing a remedial design plan for the river area which includes the area where the former JT Ryerson facilities were located. Schnitzer Steel’s 2020 disclosures acknowledged that Schnitzer Steel is the legal successor to the prior operators (including JT Ryerson) in the designated area. On February 12, 2021, the EPA announced that one hundred percent (
In June 2021, the EPA issued a Fact Sheet setting forth the status of the entire site. The primary area of relevance for JT Ryerson is River Mile 3.5 East, with Swan Island Basin being of secondary interest. For River Mile 3.5, remedial design work is ongoing; the Sufficiency Assessment and the Pre-Design Investigation work plans are finalized, and design investigation sampling is underway. Schnitzer Steel and MMGL Corp. are the working parties for River Mile 3.5. For Swan Island, remedial design is just beginning, with
13
Daimler Trucks, Shipyard Commerce, and various government entities as the working parties. JT Ryerson has not been asked to participate in the remedial design phase.
The PCI Group has engaged a third party to prepare cost estimates for each of the Sediment Management Areas at the site. That work is still in progress and is expected to be completed in the summer of 2021. Once the cost estimates are completed, the voting parties of the PCI Group (which does not include JT Ryerson) will likely begin the “advocacy process,” during which the voting parties submit written arguments to the Allocation Team regarding how costs should be allocated among the various PRPs. This process is anticipated to be completed sometime in 2022. Once the advocacy process is completed, the Allocation Team will prepare a proposed allocation of costs among the PRPs. All PRPs, including JT Ryerson, will then participate in the “mediation process,” during which the PRPs will attempt to agree on a final cost allocation. The mediation process is currently anticipated to occur sometime in 2022 or 2023.
The EPA has stated that it is willing to consider de minimis settlements, which JT Ryerson is trying to pursue; however, the EPA has not begun meeting with any of the smaller parties who have requested de minimis or de micromis status, stating that it does not have sufficient information to determine whether any parties meet such criteria and does not intend to begin those considerations until after the remedial design work is completed. It has met with selected parties that we believe to be larger targets. JT Ryerson has not been invited to meet with the EPA. As a result of the ongoing negotiations and filings over the ROD and the EPA’s decision not to meet with smaller parties, we cannot determine how allocations will be made and whether a de minimus settlement can be reached with the EPA.
As the EPA has not yet allocated responsibility for the contamination among the potentially responsible parties, including JT Ryerson, we do not currently have sufficient information available to us to determine whether the ROD will be executed as currently stated, whether and to what extent JT Ryerson may be held responsible for any of the identified contamination, and how much (if any) of the final plan’s costs might ultimately be allocated to JT Ryerson. Therefore, management cannot predict the ultimate outcome of this matter or estimate a range of potential loss at this time.
There are various other claims and pending actions against the Company. The amount of liability, if any, for those claims and actions at June 30, 2021 is not determinable but, in the opinion of management, such liability, if any, will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. We maintain liability insurance coverage to assist in protecting our assets from losses arising from or related to activities associated with business operations.
NOTE 11: DERIVATIVES AND FAIR VALUE MEASUREMENTS
Derivatives
The Company may use derivatives to partially offset its business exposure to commodity price, foreign currency, and interest rate fluctuations and their related impact on expected future cash flows and certain existing assets and liabilities. However, the Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, Company policy, accounting considerations, or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in commodity pricing, foreign currency exchange, or interest rates. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s floating-rate borrowings. We use foreign currency exchange contracts to hedge variability in cash flows in our Canada, Mexico, and China operations when a payment currency is different from our functional currency. From time to time, we may enter into fixed price sales contracts with our customers for certain of our inventory components. We may enter into metal commodity futures and options contracts to reduce volatility in the price of these metals. We may also enter into fixed price natural gas contracts and diesel fuel derivative contracts to manage the price risk of forecasted purchases of natural gas and diesel fuel.
We have
The Company currently does not account for its commodity and foreign exchange derivative contracts as hedges but rather marks them to market with a corresponding offset to current earnings.
14
The Company regularly reviews the creditworthiness of its derivative counterparties and does not expect to incur a significant loss from the failure of any counterparties to perform under any agreements.
In connection with the redemption options under the 2028 Notes, the Company recorded an embedded derivative in other current assets on its Condensed Consolidated Balance Sheet, with changes in value recorded within other income and (expense), net within the Condensed Consolidated Statement of Comprehensive Income, see Note 8: Long-term debt, for further details. Embedded derivatives are separated from the host contract and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; (b) the instrument is not measured at fair value under other applicable GAAP standards, and (c) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. The Company has concluded that the embedded derivative within the 2028 Notes met these criteria and, as such, must be valued separate and apart from the 2028 Notes at fair value each reporting period.
The following table summarizes the location and fair value amount of our derivative instruments reported in our Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||||||||||
|
|
|
Balance Sheet Location |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|
Balance Sheet Location |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||
|
Derivatives not designated as hedging instruments under ASC 815 |
|
(In millions) |
|
|||||||||||||||||
|
Metal commodity contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
$ |
|
|
|
Other accrued liabilities |
|
$ |
|
|
|
$ |
|
|
|
2028 Notes embedded derivative |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Other accrued liabilities |
|
|
— |
|
|
|
— |
|
|
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
|
— |
|
|
|
— |
|
|
Other accrued liabilities |
|
|
— |
|
|
|
|
|
|
Interest rate swaps |
|
Deferred charges and other assets |
|
|
— |
|
|
|
— |
|
|
Other noncurrent liabilities |
|
|
2.8 |
|
|
|
4.0 |
|
|
Total derivatives |
|
|
|
$ |
38.9 |
|
|
$ |
18.3 |
|
|
|
|
$ |
|
|
|
$ |
|
|
The following table presents the volume of the Company’s activity in derivative instruments as of June 30, 2021 and December 31, 2020:
|
|
|
Notional Amount |
|
|
|
|||||
|
Derivative Instruments |
|
At June 30, 2021 |
|
|
At December 31, 2020 |
|
|
Unit of Measurement |
||
|
Hot roll coil swap contracts |
|
|
|
|
|
|
|
|
|
Tons |
|
Aluminum swap contracts |
|
|
|
|
|
|
|
|
|
Tons |
|
Nickel swap contracts |
|
|
|
|
|
|
|
|
|
Tons |
|
Foreign currency exchange contracts |
|
|
|
|
|
|
|
U.S. dollars |
||
|
Interest rate swap contracts |
|
|
|
|
|
|
|
U.S. dollars |
||
The following table summarizes the location and amount of gains and losses on derivatives not designated as hedging instruments reported in our Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020:
|
Derivatives not designated as |
|
Location of Gain/(Loss) |
|
Amount of Gain/(Loss) Recognized in Income on Derivatives |
|
|||||||||||||
|
hedging instruments |
|
Recognized in Income |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
under ASC 815 |
|
on Derivatives |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
(In millions) |
|
|||||||||||||
|
Metal commodity contracts |
|
Cost of materials sold |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
2028 Notes embedded derivative |
|
Other income and (expense), net |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Foreign exchange contracts |
|
Other income and (expense), net |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
|
|||||||||||||
|
Interest rate swaps (subsequent to de-designation) |
|
Interest and other expense on debt |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
Total |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
15
The following table summarizes the location and amount of gains and losses on derivatives designated as hedging instruments reported in our Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020:
|
Derivatives designated as |
|
Location of Gain/(Loss) |
|
Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
|
|||||||||||||
|
hedging instruments |
|
Recognized in Income |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
under ASC 815 |
|
on Derivatives |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
(In millions) |
|
|||||||||||||
|
Interest rate swaps (prior to de-designation) |
|
Interest and other expense on debt |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
Total |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
As of June 30, 2021, the portion of the interest rate swap fair value that would be reclassified into earnings during the next 12 months as interest expense is approximately $
Fair Value Measurements
To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
|
|
1. |
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. |
|
|
2. |
Level 2 – inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. |
|
|
3. |
Level 3 – unobservable inputs, such as internally-developed pricing models for the asset or liability due to little or no market activity for the asset or liability. |
The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheet on a recurring basis and their level within the fair value hierarchy as of June 30, 2021:
|
|
|
At June 30, 2021 |
|
|||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
(In millions) |
|
|||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal commodity contracts |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
2028 Notes embedded derivative |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total derivatives |
|
$ |
— |
|
|
$ |
37.6 |
|
|
$ |
1.3 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal commodity contracts |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Interest rate swaps |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Total derivatives |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
16
The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheet on a recurring basis and their level within the fair value hierarchy as of December 31, 2020:
|
|
|
At December 31, 2020 |
|
|||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
(In millions) |
|
|||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal commodity contracts |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
2028 Notes embedded derivative |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total derivatives |
|
$ |
— |
|
|
$ |
16.0 |
|
|
$ |
2.3 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal commodity contracts |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Foreign exchange contracts |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Interest rate swaps |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Total derivatives |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
The fair value of each commodity, diesel fuel, and swap derivative contract is determined using Level 2 inputs and the market approach valuation technique, as described in ASC 820. The Company has various commodity derivatives to lock in hot roll coil, nickel, and aluminum prices for varying time periods. The fair value of hot roll coil, nickel, and aluminum derivatives is determined based on the spot price each individual contract was purchased at and compared with the one-month daily average actual spot price on the Chicago Mercantile Exchange (hot roll coil), and the London Metals Exchange (nickel and aluminum), respectively, for the commodity on the valuation date. In addition, the Company has numerous foreign exchange contracts to hedge variability in cash flows when a payment currency is different from our functional currency. The Company defines the fair value of foreign exchange contracts as the amount of the difference between the contracted and current market value at the end of the period. The Company estimates the current market value of foreign exchange contracts by obtaining month-end market quotes of foreign exchange rates and forward rates for contracts with similar terms. The Company uses the exchange rates provided by Reuters. Each commodity and foreign exchange contract term varies in the number of months, but in general, contracts are between
The fair value of the embedded derivative is determined using Level 3 inputs based on the Black-Derman-Toy lattice model and the “with-and-without” approach. This method estimates the value of the 2028 Notes both with and without the embedded derivative. The value of the embedded derivative is the difference between the two methods. The value of the 2028 Notes with the embedded derivative is based on recent trading prices of the 2028 Notes (Level 1 inputs). Determining the value of the 2028 Notes without the embedded derivative requires significant judgements made by management such as the probability of redemption linked transactions occurring, the cash flows expected to be generated from these transactions, as well as the timing of these transactions (Level 3 inputs). Changes to the projections made by the Company’s management after June 30, 2021 can affect the future value of this asset.
The changes in financial instruments measured at fair value for which the Company has used Level 3 inputs to determine fair value are as follows:
|
|
2028 Notes Embedded Derivative |
|
|
|
|
(In millions) |
|
|
|
Balance at January 1, 2021 |
$ |
|
|
|
Unrealized loss recorded in other income and (expense), net |
|
( |
) |
|
Balance at June 30, 2021 |
$ |
|
|
17
The carrying and estimated fair values of our financial instruments at June 30, 2021 and December 31, 2020 were as follows:
|
|
|
At June 30, 2021 |
|
|
At December 31, 2020 |
|
||||||||||
|
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
|
|
|
(In millions) |
|
|||||||||||||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables less provisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value of the Company’s cash and cash equivalents, restricted cash, receivables less provisions, and accounts payable approximate their carrying amounts due to the short-term nature of these financial instruments. The estimated fair value of the Company’s long-term debt and the current portions thereof is determined by using quoted market prices of Company debt securities (Level 2 inputs).
NOTE 12: STOCKHOLDERS’ EQUITY, ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), AND NONCONTROLLING INTEREST
The following table details changes in Ryerson Holding Corporation Stockholders’ Equity accounts for the three and six month periods ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Capital in Excess of Par Value |
|
|
Retained Earnings |
|
|
Foreign Currency Translation |
|
|
Benefit Plan Liabilities |
|
|
Interest Rate Swap |
|
|
Non-controlling Interest |
|
|
Total Equity |
|
|||||||||||||||||
|
|
|
Shares |
|
|
Dollars |
|
|
Shares |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|||||||||||
|
|
|
(In millions, except shares in thousands) |
|
|||||||||||||||||||||||||||||||||||||||||
|
Balance at January 1, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Interest rate swap, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Interest rate swap, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance at June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
18
The following table details changes in Ryerson Holding Corporation Stockholders’ Equity accounts for the three and six month periods ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Capital in Excess of Par Value |
|
|
Retained Earnings |
|
|
Foreign Currency Translation |
|
|
Benefit Plan Liabilities |
|
|
Cash Flow Hedge- Interest Rate Swap |
|
|
Non-controlling Interest |
|
|
Total Equity |
|
|||||||||||||||||
|
|
|
Shares |
|
|
Dollars |
|
|
Shares |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|
Dollars |
|
|||||||||||
|
|
|
(In millions, except shares in thousands) |
|
|||||||||||||||||||||||||||||||||||||||||
|
Balance at January 1, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash flow hedge - interest rate swap, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Balance at March 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Dividends paid to noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance at June 30, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
The following table details changes in accumulated other comprehensive income (loss), net of tax, for the six months ended June 30, 2021:
|
|
|
Changes in Accumulated Other Comprehensive Income (Loss) by Component, net of tax |
|
|||||||||
|
|
|
Foreign Currency Translation |
|
|
Benefit Plan Liabilities |
|
|
Interest Rate Swap |
|
|||
|
|
|
(In millions) |
|
|||||||||
|
Balance at January 1, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive income before reclassifications |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Amounts reclassified from accumulated other comprehensive income into net income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
19
The following table details the reclassifications out of accumulated other comprehensive income (loss) for the three and six month periods ended June 30, 2021:
|
|
|
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) |
||||||||
|
|
|
Amount reclassified from Accumulated |
|
|
|
|||||
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|||||
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Affected line item in the Condensed |
||
|
Details about Accumulated Other |
|
June 30, 2021 |
|
|
Consolidated Statements of |
|||||
|
Comprehensive Income (Loss) Components |
|
(In millions) |
|
|
Comprehensive Income |
|||||
|
Amortization of defined benefit pension and other post-retirement benefit plan items |
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss |
|
$ |
|
|
|
$ |
|
|
|
Other income and (expense), net |
|
Pension settlement |
|
|
|
|
|
|
|
|
|
Other income and (expense), net |
|
Prior service credits |
|
|
( |
) |
|
|
( |
) |
|
Other income and (expense), net |
|
Total before tax |
|
|
|
|
|
|
|
|
|
|
|
Tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
Net of tax |
|
$ |
|
|
|
$ |
|
|
|
|
|
Interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
Realized swap interest (subsequent to de-designation) |
|
$ |
|
|
|
$ |
|
|
|
Interest and other expense on debt |
|
Tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
Net of tax |
|
$ |
|
|
|
$ |
|
|
|
|
The following table details the reclassifications out of accumulated other comprehensive income (loss) for the three and six month periods ended June 30, 2020:
|
|
|
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) |
||||||||
|
|
|
Amount reclassified from Accumulated |
|
|
|
|||||
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|||||
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Affected line item in the Condensed |
||
|
Details about Accumulated Other |
|
June 30, 2020 |
|
|
Consolidated Statements of |
|||||
|
Comprehensive Income (Loss) Components |
|
(In millions) |
|
|
Comprehensive Income |
|||||
|
Amortization of defined benefit pension and other post-retirement benefit plan items |
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss |
|
$ |
|
|
|
$ |
|
|
|
Other income and (expense), net |
|
Pension settlement |
|
|
|
|
|
|
|
|
|
Other income and (expense), net |
|
Prior service credits |
|
|
( |
) |
|
|
( |
) |
|
Other income and (expense), net |
|
Total before tax |
|
|
|
|
|
|
|
|
|
|
|
Tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
Net of tax |
|
$ |
|
|
|
$ |
|
|
|
|
|
Cash flow hedge - interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
Realized swap interest (prior to de-designation) |
|
$ |
|
|
|
$ |
|
|
|
Interest and other expense on debt |
|
Tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
Net of tax |
|
$ |
|
|
|
$ |
|
|
|
|
NOTE 13: REVENUE RECOGNITION
We are a leading value-added processor and distributor 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. More than
Disaggregated Revenue
We have
20
The Company derives substantially all of its sales from the distribution of metals. The following table shows the Company’s percentage of sales by major product line:
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
Product Line |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Carbon Steel Flat |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Carbon Steel Plate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carbon Steel Long |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stainless Steel Flat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stainless Steel Plate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stainless Steel Long |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum Flat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum Plate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum Long |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
A significant majority of the Company’s sales are attributable to its U.S. operations. The only operations attributed to foreign countries relate to the Company’s subsidiaries in Canada, China, and Mexico. The following table summarizes consolidated financial information of our operations by geographic location based on where sales originated:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net Sales |
(In millions) |
|
|||||||||||||
|
United States |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Foreign countries |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Total |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Revenue is recognized either at a point in time or over time based on if the contract has an enforceable right to payment and the type of product that is being sold to the customer, with products that are determined to have no alternative use being recognized over time. The following table summarizes revenues by the type of item sold:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Timing of Revenue Recognition |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Revenue on products with an alternative use |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Revenue on products with no alternative use |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Contract Balances
A receivable is recognized in the period in which an invoice is issued, which is generally when the product is delivered to the customer. Payment terms on invoiced amounts are typically
Receivables, which are included in accounts receivables within the Condensed Consolidated Balance Sheet, from contracts with customers were $
21
Contract assets, which consist primarily of revenues recognized over time that have not yet been invoiced and estimates of the value of inventory that will be received in conjunction with product returns, are reported in prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets. Contract liabilities, which consist primarily of accruals associated with amounts that will be paid to customers for volume rebates, cash discounts, sales returns and allowances, estimates of shipping and handling costs associated with performance obligations recorded over time, and bill and hold transactions are reported in other accrued liabilities within the Condensed Consolidated Balance Sheets.
|
|
|
Contract Assets |
|
|
Contract Liabilities |
|
||
|
|
|
(In millions) |
|
|||||
|
Beginning Balance at January 1, 2021 |
|
$ |
|
|
|
$ |
|
|
|
Contract liability satisfied during the period |
|
|
— |
|
|
|
( |
) |
|
Contract liability incurred during the period |
|
|
— |
|
|
|
|
|
|
Net change in contract assets and liabilities for products with no alternative use during the period |
|
|
|
|
|
|
|
|
|
Changes to reserves |
|
|
|
|
|
|
|
|
|
Ending Balance at June 30, 2021 |
|
$ |
|
|
|
$ |
|
|
The Company’s performance obligations are typically short-term in nature. As a result, the Company has elected the practical expedient that provides an exemption of the disclosure requirements regarding information about remaining performance obligations on contracts that have original expected durations of
NOTE 14: PROVISION FOR CREDIT LOSSES
Provisions for allowances and claims on accounts receivables and contract assets are based upon historical rates, expected trends, and estimates of potential returns, allowances, customer discounts, and incentives. The Company considers all available information when assessing the adequacy of the provision for allowances, claims, and doubtful accounts.
The Company performs ongoing credit evaluations of customers and sets credit limits based upon review of the customers’ current credit information, payment history, and the current economic and industry environments. The Company’s credit loss reserve consists of two parts: a) a provision for estimated credit losses based on historical experience and b) a reserve for specific customer collection issues that the Company has identified. Estimation of credit losses requires adjusting historical loss experience for current economic conditions and judgments about the probable effects of economic conditions on certain customers.
The following table provides a reconciliation of the provision for credit losses reported within the Condensed Consolidated Balance Sheets as of June 30, 2021:
|
|
Changes in Provision for Expected Credit Losses |
|
|
|
|
(In millions) |
|
|
|
Balance at January 1, 2021 |
$ |
|
|
|
Current period provision |
|
|
|
|
Write-offs charged against allowance |
|
( |
) |
|
Recoveries |
|
|
|
|
Foreign currency translation |
|
( |
) |
|
Balance at June 30, 2021 |
$ |
|
|
NOTE 15: INCOME TAXES
For the three months ended June 30, 2021, the Company recorded income tax expense of $
22
As required by ASC 740, the Company assesses the realizability of its deferred tax assets. The Company records a valuation allowance when, based upon the evaluation of all available evidence, it is more-likely-than-not that all or a portion of the deferred tax assets will not be realized. In making this determination, we analyze, among other things, our recent history of earnings, the nature and timing of reversing book-tax temporary differences, tax planning strategies, and future income. The Company maintains a valuation allowance on certain foreign and U.S. federal and state deferred tax assets until such time as in management’s judgment, considering all available positive and negative evidence, the Company determines that these deferred tax assets are more likely than not realizable. The valuation allowance is reviewed quarterly and will be maintained until sufficient positive evidence exists to support the reversal of some or all of the valuation allowance. The valuation allowance was $
The U.S. Tax Cuts and Jobs Act (the “Act”) subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. After considering the two options, the Company has elected to provide for the tax expense related to GILTI in the year the tax will occur. For the three-month and six-month periods ended June 30, 2021, we have included a tax expense of $
The Company accounts for uncertain income tax positions in accordance with ASC 740. In the second quarter of 2021, we released $
NOTE 16: EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share attributable to Ryerson Holding’s common stock is determined based on earnings (loss) for the period divided by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share attributable to Ryerson Holding’s common stock considers the effect of potential common shares, unless inclusion of the potential common shares would have an antidilutive effect. The weighted average number of shares excluded as they would have had an antidilutive effect were
The following table sets forth the calculation of basic and diluted earnings (loss) per share:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Basic and diluted earnings (loss) per share |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
(In millions, except share and per share data) |
|
|||||||||||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Ryerson Holding Corporation |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock-based awards |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Weighted average shares outstanding adjusted for dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Diluted |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
23
NOTE 17: SUBSEQUENT EVENTS
On July 9, 2021, the Company completed a partial redemption of $
On
Additionally, on August 4, 2021, the Board authorized a stock repurchase program that permits the purchase of up to $
24
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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, 2020 filed on February 24, 2021 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 following discussion 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, 2020 in our Annual Report on Form 10-K filed on February 24, 2021.
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 more than 75% 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. At the request of our customers, we have entered into swaps in order to mitigate our customers’ risk of volatility in the price of metals and we have entered into metals 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.
The metals service center industry is cyclical and volatile in both pricing and demand, and difficult to predict. In the first half of 2021, Ryerson experienced both stronger pricing and demand compared to the first half of 2020, with average selling prices 34.3% higher and shipments 7.2% higher, reflective of the strong commodity pricing environment and demand recovering to pre-COVID-19 levels. Changes in average selling prices are primarily driven by commodity metals prices, which impact Ryerson’s selling prices.
Key industry indicators showed continued improvement in the second quarter of 2021. This is evidenced by the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”), which reported strength in April, May and June with readings above 60%, surpassing the growth threshold of 50%, indicating general expansion in factory activity and marking 13 consecutive months of expanding activity. Additionally, following 18 months of contraction, U.S. Industrial Production increased year-over-year for the fourth consecutive month in June, signifying improved conditions.
According to the Metal Service Center Institute, North American service center volumes grew by 13.5% in the first half of 2021 compared to the first half of 2020. On a North American basis, Ryerson’s demand also grew, but at a smaller rate than the industry, with tons sold up by 6.7% over the same period. However, on a quarterly sequential basis, Ryerson gained market share as the Company grew North American tons by 2.9% compared to mild industry contraction of 0.4%. Ryerson’s year-over-year North American demand growth was experienced most strongly in ground transportation and consumer durable sectors while the sectors with the strongest North American year-over-year contraction were oil and gas and food and agriculture.
25
COVID-19
The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March of 2020. As of the date of this filing, COVID-19 continues to be a substantial risk factor for business operations and the Company continues to monitor and address these risks and uncertainties as conditions develop. While we are encouraged by U.S. vaccination rates, variants pose a continuing risk, therefore we remain committed to our implemented policies and procedures to continue protecting the health and welfare of our employees first and foremost while operating as an essential business.
Led by our dedicated COVID-19 response team, we continue to follow the United States Centers for Disease Control and Prevention and other relevant local guidance in the U.S., as well as corresponding authorities in Canada, Mexico, and China, carefully monitoring COVID-19 data in the areas in which we operate, and continue to be both safe and nimble in executing our internal response. We remain committed to operating our business under COVID-19 safety policies until we are certain that related risks have subsided. To support the sustainability of current circumstances, we are supporting our workforce beyond contraction prevention by reinforcing the importance of mental health and promoting the use of existing benefits such as prescription delivery and telemedicine. Further, we have encouraged our workforce to receive the flu and COVID-19 vaccines, and in some locations we have provided the opportunity to receive the COVID-19 vaccine on-site.
The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government and state and local government officials to prevent disease spread, all of which are uncertain and cannot be predicted. At this time, our business and the business of our customers continue to be impacted by economic pressures as well as supply chain disruptions and tightness stemming from COVID-19. This is perpetuated by increasing demand momentum. The ultimate impact of COVID-19 remains uncertain.
The Company continues to monitor its liquidity position as market conditions improve. Specifically, we continue to actively manage relationships with our customers and vendors to ensure that we optimize our receivables and payables cycles, conduct receivables risk assessments, maintain strong expense management practices, and have contingency plans in place to reduce costs while supporting business operations should conditions decline. Due to our effective cash management actions, the strong commodity pricing environment, and property sales completed during the second quarter, as of June 30, 2021, Ryerson had liquidity of $890 million, composed of $852 million of availability under the Company’s $1.0 billion revolving credit facility (the “Ryerson Credit Facility”) and foreign debt facilities, and $38 million of cash and cash equivalents. Total liquidity is not a GAAP financial measure. 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. See the reconciliation of cash and cash equivalents to total liquidity within “Liquidity and Cash Flows.”
First six months ended June 30, 2021 vs. first six months ended June 30, 2020 Performance Highlights
|
$2.57B |
|
|
|
17.7% |
|
|
|
$138M |
|
|
|
Total Revenues |
|
|
Gross Margin |
|
Net Income Attributable to Ryerson |
|
||||
|
|
44% increase |
|
|
20 bps decrease |
|
|
$147M increase |
|||
|
$3.57 |
|
|
|
$1.50 |
|
|
|
($51M) |
|
|
|
Diluted EPS |
|
|
Adj. Diluted EPS* |
|
Cash from Operating Activities |
|||||
|
|
$3.81 increase |
|
|
$1.72 increase |
|
|
$227M decrease |
|||
*A reconciliation of the non-GAAP financial measure to the comparable GAAP measure is included in the subsequent table.
Ryerson generated revenues of $2.57 billion in the first six months of 2021, an increase of 44.0% compared to $1.78 billion for the first six months of 2020, with average selling prices 34.3% higher and tons shipped 7.2% higher. In the first six months of 2021, gross margin expanded to 17.7% compared to 17.5% for the first six months of 2020. Included in the first six months of 2021 cost of materials sold was LIFO expense of $188.6 million, compared to LIFO income of $6.1 million in the first six months of 2020. Net income attributable to Ryerson Holding Corporation was $138.2 million, or earnings of $3.57 per diluted share, in the first six months of 2021 compared to $9.2 million of net loss attributable to Ryerson Holding Corporation, or a loss of $0.24 per diluted share, for the first six months of 2020.
To provide greater insight into the Company’s first six months of 2021 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 compliment the reported GAAP net income (loss) and
26
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 (loss) earnings per share do not represent, and should not be used as a substitute for, net income (loss) or earnings (loss) per share determined in accordance with GAAP. Illustrated in the below table, the first six months of 2021 net income attributable to Ryerson of $138.2 million includes a gain of $107.7 million generated from property sales. See discussion of the significant sale-leaseback transaction in Note 6: Leases in Part 1, Item 1 of this report. After adjusting for these non-core business transactions and the related income tax provision, the adjusted net income attributable to Ryerson for the first half of 2021 is $58.1 million, an increase of $66.5 million compared to the year-ago adjusted net loss attributable to Ryerson of $8.4 million which included restructuring charges, an adjustment for a gain on retirement of debt related to repurchases of the 11.00% Senior Secured Notes due 2022 (the “2022 Notes”), and related income taxes.
|
(Dollars and shares in millions, except per share data) |
|
First Half 2021 |
|
|
First Half 2020 |
|
||
|
Net income (loss) attributable to Ryerson Holding Corporation |
|
$ |
138.2 |
|
|
$ |
(9.2 |
) |
|
Gain on sale of assets |
|
|
(107.7 |
) |
|
|
— |
|
|
Restructuring and other charges |
|
|
— |
|
|
|
2.0 |
|
|
Gain on retirement of debt |
|
|
— |
|
|
|
(0.9 |
) |
|
Provision (benefit) for income taxes on above items |
|
|
27.6 |
|
|
|
(0.3 |
) |
|
Adjusted net income (loss) attributable to Ryerson Holding Corporation |
|
$ |
58.1 |
|
|
$ |
(8.4 |
) |
|
Diluted earnings (loss) per share |
|
$ |
3.57 |
|
|
$ |
(0.24 |
) |
|
Adjusted diluted earnings (loss) per share |
|
|
1.50 |
|
|
|
(0.22 |
) |
|
Shares outstanding – diluted |
|
|
38.7 |
|
|
|
37.9 |
|
Recent Developments
On April 22, 2021, the U.S. International Trade Commission (“USITC”) confirmed the Department of Commerce’s affirmative antidumping duty determinations and injury determinations regarding US imports of common alloy aluminum sheet. As a result, the USITC will issue final antidumping duty orders on U.S. imports of common alloy aluminum sheet from the following sixteen countries: Bahrain, Brazil, Croatia, Egypt, Germany, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, Spain, Taiwan, and Turkey. Antidumping rates differ greatly depending on country of origin and producing mill and range from the low single digits to as high as 243%. Ryerson anticipates that the actions of the USITC will support the prices of domestically produced aluminum sheet and therefore benefit the Company’s average selling prices.
On March 31, 2021, President Biden introduced the American Jobs Plan, a broad $2 trillion, 8-year infrastructure plan. This plan is largely viewed as an opening bid as Congress starts the formal process of developing infrastructure spending legislation. To offset some of the plan’s costs, the Biden Administration proposed a series of tax changes including raising the corporate tax rate to 28%. While changes to corporate taxation, including a higher corporate income tax rate, would adversely affect the Company, we believe the additional government spending on infrastructure projects contemplated under the American Jobs Plan, as proposed, may generate additional demand for our products especially within the industrial equipment, construction, green energy, and transportation industries. Accordingly, we would anticipate that the American Jobs Plan would be beneficial to the Company, but ultimately the impact on the Company’s operations is unclear. The prospects for this proposal also remain unclear. As of the date of this report, the administration continues to work towards a bipartisan infrastructure plan, the size, scope, and funding of which are still being discussed.
On March 1, 2018, the White House announced a 25% tariff on all imported steel products and 10% tariff on all imported aluminum products for an indefinite amount of time under Section 232 of the Trade Expansion Act (“Section 232”). Application of the tariffs commenced March 23, 2018, with temporary or long-term exemptions for a number of countries and subject to a product exemption process. These tariffs, while in effect, have discouraged metal imports from non-exempt countries and have had a favorable impact on the prices of the products we sell and our results of operations. The removal of the Section 232 tariffs could lead to increased levels of imported metals into the U.S. and result in domestic steel producers decreasing the prices of the metals they sell. A rapid decline in metal prices from current levels could result in a significant adverse effect on our revenues, gross profit, and net income. With the current supply constraints and the new administration in the White House, the removal of the Section 232 tariffs is still uncertain.
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.
27
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 — Comparison of Three and Six Months Ended June 30, 2021 to Three and Six Months Ended June 30, 2020
The following table sets forth our condensed consolidated statements of income data for the three-month and six-month periods ended June 30, 2021 and 2020:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||||||||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
||||||||
|
|
|
($ in millions) |
|
|
($ in millions) |
|
||||||||||||||||||||||||||
|
Net sales |
|
$ |
1,419.0 |
|
|
|
100.0 |
% |
|
$ |
771.8 |
|
|
|
100.0 |
% |
|
$ |
2,566.3 |
|
|
|
100.0 |
% |
|
$ |
1,782.1 |
|
|
|
100.0 |
% |
|
Cost of materials sold |
|
|
1,162.0 |
|
|
|
81.9 |
|
|
|
656.3 |
|
|
|
85.0 |
|
|
|
2,111.4 |
|
|
|
82.3 |
|
|
$ |
1,470.8 |
|
|
|
82.5 |
|
|
Gross profit |
|
|
257.0 |
|
|
|
18.1 |
|
|
|
115.5 |
|
|
|
15.0 |
|
|
|
454.9 |
|
|
|
17.7 |
|
|
|
311.3 |
|
|
|
17.5 |
|
|
Warehousing, delivery, selling, general, and administrative expenses |
|
|
178.3 |
|
|
|
12.6 |
|
|
|
124.1 |
|
|
|
16.1 |
|
|
|
350.1 |
|
|
|
13.6 |
|
|
|
279.8 |
|
|
|
15.7 |
|
|
Gain on sale of assets |
|
|
(87.4 |
) |
|
|
(6.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
(107.7 |
) |
|
|
(4.2 |
) |
|
|
— |
|
|
|
— |
|
|
Restructuring and other charges |
|
|
— |
|
|
|
— |
|
|
|
2.0 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
2.0 |
|
|
|
0.1 |
|
|
Operating profit (loss) |
|
|
166.1 |
|
|
|
11.7 |
|
|
|
(10.6 |
) |
|
|
(1.4 |
) |
|
|
212.5 |
|
|
|
8.3 |
|
|
|
29.5 |
|
|
|
1.7 |
|
|
Other (expenses) and income |
|
|
(14.3 |
) |
|
|
(1.0 |
) |
|
|
(19.4 |
) |
|
|
(2.5 |
) |
|
|
(27.5 |
) |
|
|
(1.1 |
) |
|
|
(40.2 |
) |
|
|
(2.3 |
) |
|
Income (loss) before income taxes |
|
|
151.8 |
|
|
|
10.7 |
|
|
|
(30.0 |
) |
|
|
(3.9 |
) |
|
|
185.0 |
|
|
|
7.2 |
|
|
|
(10.7 |
) |
|
|
(0.6 |
) |
|
Provision (benefit) for income taxes |
|
|
38.5 |
|
|
|
2.7 |
|
|
|
(4.5 |
) |
|
|
(0.6 |
) |
|
|
46.1 |
|
|
|
1.8 |
|
|
|
(1.6 |
) |
|
|
(0.1 |
) |
|
Net income (loss) |
|
|
113.3 |
|
|
|
8.0 |
|
|
|
(25.5 |
) |
|
|
(3.3 |
) |
|
|
138.9 |
|
|
|
5.4 |
|
|
|
(9.1 |
) |
|
|
(0.5 |
) |
|
Less: Net income attributable to noncontrolling interest |
|
|
0.4 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.7 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
Net income (loss) attributable to Ryerson Holding Corporation |
|
$ |
112.9 |
|
|
|
8.0 |
% |
|
$ |
(25.6 |
) |
|
|
(3.3 |
)% |
|
$ |
138.2 |
|
|
|
5.4 |
% |
|
$ |
(9.2 |
) |
|
|
(0.5 |
)% |
|
Basic (loss) earnings per share |
|
$ |
2.94 |
|
|
|
|
|
|
$ |
(0.67 |
) |
|
|
|
|
|
$ |
3.61 |
|
|
|
|
|
|
$ |
(0.24 |
) |
|
|
|
|
|
Diluted earnings (loss) per share |
|
$ |
2.91 |
|
|
|
|
|
|
$ |
(0.67 |
) |
|
|
|
|
|
$ |
3.57 |
|
|
|
|
|
|
$ |
(0.24 |
) |
|
|
|
|
28
Net sales
The following charts show the Company’s percentage of sales by major product lines for the six month periods ended June 30, 2021 and 2020:
|
|
|
June 30, |
|
|
Dollar |
|
|
Percentage |
|
|||||||
|
|
|
2021 |
|
|
2020 |
|
|
change |
|
|
change |
|
||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||
|
Net sales (three-months ended) |
|
$ |
1,419.0 |
|
|
$ |
771.8 |
|
|
$ |
647.2 |
|
|
|
83.9 |
% |
|
Net sales (six-months ended) |
|
$ |
2,566.3 |
|
|
$ |
1,782.1 |
|
|
$ |
784.2 |
|
|
|
44.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Tons |
|
|
Percentage |
|
|||||||
|
|
|
2021 |
|
|
2020 |
|
|
change |
|
|
change |
|
||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|||||
|
Tons sold (three months ended) |
|
|
559 |
|
|
|
462 |
|
|
|
97 |
|
|
|
21.0 |
% |
|
Tons sold (six-months ended) |
|
|
1,102 |
|
|
|
1,028 |
|
|
|
74 |
|
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Price |
|
|
Percentage |
|
|||||||
|
|
|
2021 |
|
|
2020 |
|
|
change |
|
|
change |
|
||||
|
Average selling price per ton sold (three-months ended) |
|
$ |
2,538 |
|
|
$ |
1,671 |
|
|
$ |
867 |
|
|
|
51.9 |
% |
|
Average selling price per ton sold (six-months ended) |
|
$ |
2,329 |
|
|
$ |
1,734 |
|
|
$ |
595 |
|
|
|
34.3 |
% |
Revenue for the three-month and six-month periods ended June 30, 2021 increased from the same period a year ago reflecting metals market business conditions that began to improve in the second half of 2020 after declining sharply at the beginning of the global outbreak of COVID-19, as well as supply constraints that have resulted in higher average selling prices in 2021. Compared to the year ago periods, average selling price increased for all of our product lines in both the three-month and six-month periods ended June 30, 2021 with the largest increases in our carbon plate, carbon flat, stainless plate, and stainless flat products. Tons sold increased in the three-month and six-month periods ended June 30, 2021 overall, with increases in our aluminum flat, stainless flat, carbon flat, and aluminum long product lines partially offset by a decrease in our stainless plate product line.
29
Cost of materials sold
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
Dollar change |
|
|
Percentage change |
|
||||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Cost of materials sold (three-months ended) |
|
$ |
1,162.0 |
|
|
|
81.9 |
% |
|
$ |
656.3 |
|
|
|
85.0 |
% |
|
$ |
505.7 |
|
|
|
77.1 |
% |
|
Cost of materials sold (six-months ended) |
|
$ |
2,111.4 |
|
|
|
82.3 |
% |
|
$ |
1,470.8 |
|
|
|
82.5 |
% |
|
$ |
640.6 |
|
|
|
43.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Cost |
|
|
Percentage |
|
|||||||
|
|
|
2021 |
|
|
2020 |
|
|
change |
|
|
change |
|
||||
|
Average cost of materials sold per ton sold (three-months ended) |
|
$ |
2,078 |
|
|
$ |
1,421 |
|
|
$ |
657 |
|
|
|
46.2 |
% |
|
Average cost of materials sold per ton sold (six-months ended) |
|
$ |
1,916 |
|
|
$ |
1,431 |
|
|
$ |
485 |
|
|
|
33.9 |
% |
The increase in cost of materials sold in the three-month and six-month periods ended June 30, 2021 compared to the year ago periods is primarily due to the increase in average cost of materials sold per ton and to the increase in tons sold. The average cost of materials sold increased across all product lines with the largest increases in our carbon plate, carbon flat, stainless plate, and carbon long product lines during the three-month and six-month periods ended June 30, 2021. During the second quarter of 2021, LIFO expense was $104.8 million compared to LIFO expense of $14.1 million in the second quarter of 2020. During the first six months of 2021, LIFO expense was $188.6 million compared to LIFO income of $6.1 million in the first six months of 2020.
Gross profit
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
Dollar change |
|
|
Percentage change |
|
||||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Gross profit (three-months ended) |
|
$ |
257.0 |
|
|
|
18.1 |
% |
|
$ |
115.5 |
|
|
|
15.0 |
% |
|
$ |
141.5 |
|
|
|
122.5 |
% |
|
Gross profit (six-months ended) |
|
$ |
454.9 |
|
|
|
17.7 |
% |
|
$ |
311.3 |
|
|
|
17.5 |
% |
|
$ |
143.6 |
|
|
|
46.1 |
% |
Gross profit increased in the three-month and six-month periods ended June 30, 2021 compared to the year ago periods as volume increased and as average selling price increased faster than the increase in the average cost of materials sold resulting in an increase in gross margin.
Operating expenses
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
Dollar change |
|
|
Percentage change |
|
||||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Warehousing, delivery, selling, general, and administrative expenses (three months ended) |
|
$ |
178.3 |
|
|
|
12.6 |
% |
|
$ |
124.1 |
|
|
|
16.1 |
% |
|
$ |
54.2 |
|
|
|
43.7 |
% |
|
Warehousing, delivery, selling, general, and administrative expenses (six-months ended) |
|
$ |
350.1 |
|
|
|
13.6 |
% |
|
$ |
279.8 |
|
|
|
15.7 |
% |
|
$ |
70.3 |
|
|
|
25.1 |
% |
|
Gain on sale of assets (three-months ended) |
|
$ |
(87.4 |
) |
|
|
(6.2 |
)% |
|
$ |
— |
|
|
|
— |
|
|
$ |
(87.4 |
) |
|
|
— |
|
|
Gain on sale of assets (six-months ended) |
|
$ |
(107.7 |
) |
|
|
(4.2 |
)% |
|
$ |
— |
|
|
|
— |
|
|
$ |
(107.7 |
) |
|
|
— |
|
|
Restructuring and other charges (three-months ended) |
|
$ |
— |
|
|
|
— |
|
|
$ |
2.0 |
|
|
|
0.3 |
% |
|
$ |
(2.0 |
) |
|
|
(100.0 |
)% |
|
Restructuring and other charges (six-months ended) |
|
$ |
— |
|
|
|
— |
|
|
$ |
2.0 |
|
|
|
0.1 |
% |
|
$ |
(2.0 |
) |
|
|
(100.0 |
)% |
Total operating expenses, inclusive of gain on sale of assets and restructuring and other charges, decreased in the three-month and six-month periods ended June 30, 2021 compared to the year ago periods primarily due to gains on the sale and leaseback of facilities in 2021. In the second quarter of 2021, we recognized a gain of $87.4 million on the sale of twelve facilities across the United States. In the first quarter of 2021, we recognized a gain on sale of assets of $20.3 million from the sale and leaseback of our Renton, Washington facility. Partially offsetting the gains on facility sales were an increase in incentive compensation of $26.8 million in the second quarter of 2021 and $47.4 million in the first six months of 2021, higher benefit costs of $6.1 million in the
30
second quarter of 2021 and $9.1 million in the first six months of 2021 mainly from higher medical costs and payroll taxes on higher incentive compensation, increased salaries and wages expense of $6.6 million in the second quarter of 2021, and a $0.7 million increase in the first six months of 2021 in salaries, overtime, and temporary help, increased delivery expenses of $5.6 million in the second quarter of 2021 and $5.5 million in the first six months of 2021 primarily due to higher tons sold and higher fuel prices, and to higher selling, general, and administrative expenses of $5.7 million in the second quarter of 2021 and $2.9 million in the first six months of 2021 primarily due to higher consulting fees.
Operating profit
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
Dollar change |
|
|
Percentage change |
|
||||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating profit (loss) (three-months ended) |
|
$ |
166.1 |
|
|
|
11.7 |
% |
|
$ |
(10.6 |
) |
|
|
(1.4 |
)% |
|
$ |
176.7 |
|
|
|
(1667.0 |
)% |
|
Operating profit (six-months ended) |
|
$ |
212.5 |
|
|
|
8.3 |
% |
|
$ |
29.5 |
|
|
|
1.7 |
% |
|
$ |
183.0 |
|
|
|
620.3 |
% |
Our operating profit increased in the three-month and six-month periods ended June 30, 2021 compared to the three-month and six-month periods ended June 30, 2020, primarily due to the increases in average selling prices and tons sold, and lower operating expenses as discussed above.
Other expenses
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
$ |
|
|
% of Net Sales |
|
|
$ |
|
|
% of Net Sales |
|
|
Dollar change |
|
|
Percentage change |
|
||||||
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest and other expense on debt (three-months ended) |
|
$ |
(13.6 |
) |
|
|
(1.0 |
)% |
|
$ |
(19.3 |
) |
|
|
(2.5 |
)% |
|
$ |
(5.7 |
) |
|
|
(29.5 |
)% |
|
Interest and other expense on debt (six-months ended) |
|
$ |
(27.1 |
) |
|
|
(1.1 |
)% |
|
$ |
(41.0 |
) |
|
|
(2.3 |
)% |
|
$ |
(13.9 |
) |
|
|
(33.9 |
)% |
|
Other income and (expense), net (three-months ended) |
|
$ |
(0.7 |
) |
|
|
— |
|
|
$ |
(0.1 |
) |
|
|
— |
|
|
$ |
(0.6 |
) |
|
|
(600.0 |
)% |
|
Other income and (expense), net (six-months ended) |
|
$ |
(0.4 |
) |
|
|
— |
|
|
$ |
0.8 |
|
|
|
— |
|
|
$ |
(1.2 |
) |
|
|
(150.0 |
)% |
Interest and other expense on debt decreased in the three-month and six-month periods ended June 30, 2021 compared to the year ago periods primarily due to the redemption of our 2022 Notes which had an outstanding balance of $530.3 million at June 30, 2020. The 2022 Notes were replaced by a lower level of debt at a lower interest rate with the issuance of $500.0 million of the 2028 Notes. In October 2020, $50.0 million of the 2028 Notes were redeemed. In addition, interest and other expense on debt was lower in the three-month and six-month periods ended June 30, 2021 due to a lower level of Ryerson Credit Facility borrowings outstanding compared to the year ago periods as excess funds were borrowed in 2020 to maintain access to cash during the COVID-19 pandemic. The other income in the second quarter and first six months of 2021 includes a $1.3 million loss and a $1.0 loss, respectively, resulting from the change in the fair value of the embedded derivative connected with the redemption options under the 2028 Notes. The other income and (expense), net in the second quarter and first six months of 2020 includes a $0.1 million gain and a $0.9 million gain on the repurchase of the 2022 Notes, respectively.
Provision for income taxes. In the second quarter of 2021, the Company recorded income tax expense of $38.5 million compared to a tax benefit of $4.5 million in the second quarter of 2020. In the first six months of 2021, the Company recorded income tax expense of $46.1 million compared to an income tax benefit of $1.6 million in the first six months of 2020. The income tax recorded in all periods primarily represents taxes at federal and local statutory rates where the Company operates, but generally excludes any tax benefit for losses in jurisdictions with historical losses.
Earnings per share. Basic earnings per share was $2.94 in the second quarter of 2021 and $3.61 in the first six months of 2021 compared to basic loss per share of $0.67 in the second quarter of 2020 and $0.24 in the first six months of 2020. Diluted earnings per share was $2.91 in the second quarter of 2021 and $3.57 in the first six months of 2021 compared to a diluted loss per share of $0.67 in the second quarter of 2020 and $0.24 in the first six months of 2020. The changes in earnings per share are due to the results of operations discussed above.
31
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, capital expenditures, and for interest payments on debt.
The global COVID-19 pandemic has led to disruption and volatility in the global capital markets, which, depending on future developments, could adversely impact our capital resources and liquidity in the future. As a proactive, precautionary measure, we borrowed approximately $166 million under the Ryerson Credit Facility in the first quarter of 2020 to maintain access to cash during the COVID-19 pandemic. We reduced this balance to approximately $40 million as of December 31, 2020. As of June 30, 2021, we are no longer holding excess cash due to COVID-19 cash access concerns. We had cash and cash equivalents of $38.1 million at June 30, 2021, compared to $61.4 million at December 31, 2020. Our total debt outstanding at June 30, 2021 decreased to $601 million compared to $740 million total debt outstanding at December 31, 2020 after receiving proceeds of $163.2 million from facility sale and leaseback transactions in the first six months of 2021 (See Note 5: Property, Plant and Equipment within Part 1, Item 1 of this report on Form 10-Q for further discussion). We had a debt-to-capitalization ratio of 67% and 84% at June 30, 2021 and at December 31, 2020 respectively. We had total liquidity (defined as cash and cash equivalents and availability under the Ryerson Credit Facility and foreign debt facilities) of $890 million at June 30, 2021 versus $373 million at December 31, 2020. Our net debt (defined as total debt less cash and cash equivalents) was $563 million and $679 million at June 30, 2021 and December 31, 2020, respectively. Total liquidity and net debt are not 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 situation given the excess borrowings discussed above. 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:
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
|
|
(In millions) |
|
|||||
|
Cash and cash equivalents |
|
$ |
38 |
|
|
$ |
61 |
|
|
Availability under Ryerson Credit Facility and foreign debt facilities |
|
|
852 |
|
|
|
312 |
|
|
Total liquidity |
|
$ |
890 |
|
|
$ |
373 |
|
Below is a reconciliation of total debt to net debt:
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
|
|
(In millions) |
|
|||||
|
Total debt |
|
$ |
601 |
|
|
$ |
740 |
|
|
Less: cash and cash equivalents |
|
|
(38 |
) |
|
|
(61 |
) |
|
Net debt |
|
$ |
563 |
|
|
$ |
679 |
|
Of the total cash and cash equivalents, as of June 30, 2021, $10.3 million was held in subsidiaries outside the United States 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.
32
The following table summarizes the Company’s cash flows:
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
(In millions) |
|
|||||
|
Net income (loss) |
|
$ |
138.9 |
|
|
$ |
(9.1 |
) |
|
Depreciation and amortization |
|
|
26.7 |
|
|
|
26.9 |
|
|
Deferred income taxes |
|
|
29.1 |
|
|
|
11.5 |
|
|
Gain on sale of assets |
|
|
(107.7 |
) |
|
|
— |
|
|
Non-cash (gain) loss from derivatives |
|
|
40.4 |
|
|
|
(1.7 |
) |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(275.9 |
) |
|
|
50.5 |
|
|
Inventories |
|
|
(109.1 |
) |
|
|
141.4 |
|
|
Accounts payable |
|
|
200.0 |
|
|
|
(26.7 |
) |
|
All other operating cash flows |
|
|
6.5 |
|
|
|
(16.7 |
) |
|
Net cash provided by (used in) operating activities |
|
|
(51.1 |
) |
|
|
176.1 |
|
|
Capital expenditures |
|
|
(13.3 |
) |
|
|
(11.8 |
) |
|
Proceeds from sale of property, plant, and equipment |
|
|
165.9 |
|
|
|
0.1 |
|
|
Other items |
|
|
(0.5 |
) |
|
|
— |
|
|
Net cash provided by (used in) investing activities |
|
|
152.1 |
|
|
|
(11.7 |
) |
|
Repayment of debt |
|
|
(0.9 |
) |
|
|
(57.5 |
) |
|
Net repayments of short-term borrowings |
|
|
(139.6 |
) |
|
|
(21.5 |
) |
|
Net increase (decrease) in book overdrafts |
|
|
21.6 |
|
|
|
(24.4 |
) |
|
All other financing cash flows |
|
|
(5.1 |
) |
|
|
(6.9 |
) |
|
Net cash used in financing activities |
|
|
(124.0 |
) |
|
|
(110.3 |
) |
|
Effect of exchange rates on cash and cash equivalents |
|
|
(0.3 |
) |
|
|
(2.0 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
(23.3 |
) |
|
$ |
52.1 |
|
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. The increase in accounts receivable in the first six months of 2021 is the result of higher sales levels during the second half of the second quarter of 2021 compared to the second half of the fourth quarter of the prior year. Inventory levels also increased in the first six months of 2021 as inventory was purchased to meet higher sales levels resulting from stronger metals market conditions. The increase in accounts payable at the end of the second quarter of 2021 is related to increased purchases and operating activities in the first six months of 2021 associated with increased sales compared to the fourth quarter of the prior year. In comparison, the decrease in accounts receivable in the first six months of 2020 is the result of lower sales levels due to the weak market conditions resulting from the COVID-19 outbreak in 2020. Inventory levels also decreased significantly in the first six months of 2020 as the Company brought inventory levels in line with the weak market conditions.
Investing activities. The Company's main investing activities are capital expenditures and proceeds from the sale of property, plant, and equipment. Capital expenditures have increased slightly year-over-year to $13.3 million for the first six months of 2021 compared to $11.8 million in the first six months of 2020. The Company sold property, plant, and equipment and assets held for sale generating cash proceeds of $165.9 million during the first six months of 2021.
Financing activities. The Company's main source of liquidity to fund working capital requirements is borrowings on the Ryerson Credit Facility. Net cash used in financing activities in the first six months of 2021 was primarily related to the repayment of $139.6 million of Ryerson Credit Facility borrowings using proceeds from the sale and leaseback of certain facilities. Net cash used in financing activities in the first six months of 2020 was primarily related to Ryerson Credit Facility repayments from the operating cash flow that was generated, partially offset by approximately $80 million of additional funds borrowed at June 30, 2020 to maintain access to cash during the COVID-19 pandemic, and to the repurchase of $57.6 million of our 2022 Notes in the first six months of 2020. Book overdrafts fluctuate based on the timing of payments.
As market conditions warrant and subject to our contractual restrictions, liquidity position, and other factors, we may from time to time seek to repurchase or retire our outstanding debt through cash purchases and/or exchanges for other debt or equity securities in open market transactions, privately negotiated transactions, by tender offer, or otherwise. Any such cash repurchases by us may be funded by cash on hand or by incurring new debt. The amounts involved in any such transactions, individually or in the aggregate, may be material. Furthermore, any such repurchases or exchanges may result in our acquiring and retiring a substantial amount of such indebtedness, which would impact the trading liquidity of such indebtedness.
33
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 $18 million as of June 30, 2021. 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 $600.9 million at June 30, 2021 from $740.0 million at December 31, 2020, mainly due to cash generated from asset sale proceeds in the first six months of 2021, partially offset by the net cash used in operating activities.
Total debt outstanding as of June 30, 2021 consisted of the following amounts: $132.5 million borrowings under the Ryerson Credit Facility, $450.0 million under the 2028 Notes, $25.0 million of foreign debt, and $7.0 million of other debt, less $13.6 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.
On July 9, 2021 a principal amount of $100.0 million of our 8.50% Senior Secured Notes due 2028 (the “2028 Notes”) were repurchased for $104.0 million and retired, resulting in the recognition of a $4.0 million loss within other income and (expense), net in the third quarter Condensed Consolidated Statement of Comprehensive Income. The Company funded the transaction with cash from the sale leaseback transaction that occurred on June 9, 2021 (See discussion in Note 6: Leases within Part I, Item I of this report). On July 23, 2021 a principal amount of $50.0 million of the 2028 Notes were repurchased for $51.5 million resulting in the recognition of a $1.5 million loss within other income and (expense), net in the third quarter Condensed Consolidated Statement of Comprehensive Income. The Company funded the transaction with cash on hand. Upon competition of these partial redemptions, $300.0 million aggregate principal amount of the 2028 Notes remains outstanding. As a result of the repurchases, the Company will write-off a portion of the 2028 Notes issuance costs and will record a charge of $2.8 million within other interest and other expense on debt in the third quarter Condensed Consolidated Statement of Comprehensive Income.
Pension Funding
At December 31, 2020, pension liabilities exceeded plan assets by $154 million. Through the six months ended June 30, 2021, we have made $20 million in pension contributions and we anticipate an additional minimum required pension contribution of approximately $4 million in the remaining six months of 2021 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. We will continue to monitor and update our expected contributions as further guidance related to ARPA is released. 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.
As financial markets continue to stabilize from the negative effects of COVID-19, the return on our pension assets continue to be impacted. 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 in 2021.
Material Cash Requirements
The Company expects to make approximately $615 million in principal payments to satisfy its debt obligations, consisting of $25 million in foreign debt coming due within a year, $7 million of other debt coming due now through 2024, $133 million for the Ryerson Credit Facility coming due in 2025, and $450 million for the 2028 Notes due in 2028. 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 $44 million of interest on the 2028 Notes, Ryerson Credit Facility, foreign debt, and other debt over the next 12 months and $245 million thereafter. Interest payments related to the variable rate debt were estimated using the weighted average interest rate for the Ryerson Credit Facility, including the effect of the interest rate swaps.
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 2036, and finance leases expiring at various times through 2027. The total amount of future lease payments is estimated to be $265 million, with $41 million for the next 12
34
months. Please refer to Part I, Item I - Notes to the Condensed Consolidated Financial Statements, Note 6: Leases for further information.
Purchase obligations with suppliers are entered into when we receive firm sales commitments with certain of our customers. As of June 30, 2021, we had outstanding purchase obligations of approximately $38 million expiring within a year.
Income Taxes
We maintain a valuation allowance on certain foreign and U.S. federal and state 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.
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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. Changes in interest rates may affect the market value of our fixed-rate debt. The estimated fair value of our long-term debt and the current portions thereof using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $650.9 million at June 30, 2021 and $800.3 million at December 31, 2020 as compared with the carrying value of $600.9 million and $740.0 million at June 30, 2021 and December 31, 2020, respectively. We manage interest rate risk in our capital structure by holding a combination of variable and fixed-rate debt.
We use interest rate swaps to manage our exposure to interest rate changes. As of June 30, 2021, we have
Effective November 1, 2020, the Company de-designated its interest rate swaps as cash flow hedges and terminated its hedge accounting treatment. Prior to de-designation, the Company would mark these interest rate swaps to market with all changes in fair value recorded in accumulated other comprehensive income. Subsequent to de-designation, changes in fair value are recorded in current earnings. The fair value of the interest rate swaps as of June 30, 2021 was a net liability of $2.8 million. The Company recognized a gain of $1.2 million related to mark-to-market changes and interest expense of $2.3 million in current earnings for the six months ended June 30, 2021. After de-designation, the amounts reclassified from other comprehensive income relate to prior gains and losses that are being amortized into income as the forecasted interest payments affect earnings. The amount reclassified from other comprehensive income for the six-month period ended June 30, 2021 into earnings was a loss of $1.1 million.
After considering the effects of our interest rate swaps, 100% of our debt was at fixed interest rates as of June 30, 2021. Considering the impact of interest rate swaps, a hypothetical 1% increase in interest rates on variable debt would have increased interest expense for the first six months of 2021 by approximately $0.9 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 $2.8 million outstanding at June 30, 2021 and a net liability 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 six months ended June 30, 2021, the Company recognized a $0.2 million gain 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, 2021 would increase or decrease the fair value of the foreign currency contracts by $0.3 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.
35
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 June 30, 2021, we had 129,903 tons of hot roll coil swaps contracts with a net liability value of $40.4 million, 18,100 tons of aluminum swap contracts with a net asset value of $5.0 million, and 644 tons of nickel swap contracts with a net liability 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, 2021, the Company recognized a loss of $40.1 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 June 30, 2021 would increase or decrease the fair value of commodity derivative contracts by $9.0 million.
|
Item 4. |
Controls and Procedures |
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, 2021.
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, 2021.
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PART II. OTHER INFORMATION
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Item 1. |
Legal Proceedings |
For information concerning legal proceedings as of June 30, 2021, please refer to Note 10: Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report on Form 10-Q, which is incorporated into this item by reference.
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Item 1A. |
Risk Factors |
Except for the risk factor below, 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, 2020.
The right to receive payment on the 2028 Notes and the guarantees will be subordinated to the liabilities of non-guarantor subsidiaries.
The notes and related guarantees are structurally subordinated to all indebtedness of our subsidiaries that are not guarantors of the 2028 Senior Secured Notes (the “2028 Notes”). While the indenture governing the 2028 Notes limits the indebtedness and activities of these non-guarantor subsidiaries, holders of indebtedness of, and trade creditors of, non-guarantor subsidiaries, including lenders under bank financing agreements, are entitled to payments of their claims from the assets of such subsidiaries before those assets are made available for distribution to any guarantor, as direct or indirect shareholder. While the non-guarantor subsidiaries have agreed under the indenture not to pledge or encumber their assets (other than with respect to permitted liens) without equally and ratably securing the notes, they will not guarantee the 2028 Notes notwithstanding any such pledge or encumbrance in favor of the 2028 Notes.
The non-guarantor subsidiaries represented, respectively, 10.3% and 13.4% of our net sales and EBITDA for the six months ended June 30, 2021. In addition, these non-guarantor subsidiaries represented respectively, 12.3% and 8.0% of our assets and liabilities, as of June 30, 2021.
Accordingly, in the event that any of the non-guarantor subsidiaries or joint venture entities become insolvent, liquidates, or otherwise reorganizes:
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the creditors of the guarantors (including the holders of the 2028 Notes) will have no right to proceed against such subsidiary’s assets; and |
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the creditors of such non-guarantor subsidiary, including trade creditors, will generally be entitled to payment in full from the sale or other disposal of assets of such subsidiary, as direct or indirect shareholder, and will be entitled to receive any distributions from such subsidiary. |
Items 2, 3, 4, and 5 are not applicable and have been omitted.
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Item 6. |
Exhibits |
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Exhibit |
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Incorporated by Reference |
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Filed |
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Exhibit Description |
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Form |
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File No. |
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Filing Date |
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Herewith |
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31.1 |
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X |
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31.2 |
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X |
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32.1* |
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X |
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32.2* |
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X |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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X |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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X |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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X |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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X |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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*In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished herewith and not filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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RYERSON HOLDING CORPORATION |
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By: |
/s/ James J. Claussen |
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James J. Claussen Executive Vice President and Chief Financial Officer (duly authorized signatory and principal financial officer of the registrant) |
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Date: August 4, 2021
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