Ryerson(RYI) - 2023 Q3 - Quarterly Report

Part I. Financial Information Financial Statements Presents Ryerson Holding Corporation's unaudited condensed consolidated financial statements, including income, cash flow, and balance sheets, with comparative period data and notes Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Indicator | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,246.7 M | $1,543.1 M | $3,996.3 M | $5,035.4 M | | Gross profit | $249.3 M | $271.0 M | $774.4 M | $1,147.0 M | | Operating profit | $56.3 M | $84.5 M | $184.6 M | $606.1 M | | Net income attributable to Ryerson | $35.0 M | $55.1 M | $119.9 M | $415.1 M | | Diluted EPS | $1.00 | $1.46 | $3.34 | $10.78 | Condensed Consolidated Balance Sheet Highlights (Unaudited) | Indicator | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $1,358.5 M | $1,441.6 M | | Total assets | $2,434.2 M | $2,334.3 M | | Total current liabilities | $633.6 M | $619.2 M | | Long-term debt | $360.0 M | $361.2 M | | Total liabilities | $1,543.1 M | $1,441.3 M | | Total equity | $891.1 M | $893.0 M | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $275.0 M | $319.6 M | | Net cash used in investing activities | ($146.8 M) | ($90.7 M) | | Net cash used in financing activities | ($129.2 M) | ($225.5 M) | | Net change in cash | ($2.0 M) | ($0.3 M) | Note 4: Inventories The company primarily uses the LIFO method for valuing inventory, which was 89% of total inventories at September 30, 2023, with a LIFO reserve of $207M Inventory Valuation (LIFO Method) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Inventory Value (LIFO) | $699.0 M | $798.5 M | | LIFO Reserve (Current Cost Higher) | $207 M | $245 M | | % of Inventory on LIFO | ~89% | ~90% | Note 7: Acquisitions During the first nine months of 2023, the company completed two acquisitions, including BLP Holdings, LLC for $39.9M, expanding value-added processing - On March 1, 2023, JT Ryerson acquired BLP Holdings, LLC, a Houston-based company providing complex fabrication services, for a total of $39.9 M[29] - In the first half of 2023, JT Ryerson also purchased certain assets from ExOne Operating, LLC for $9.7 M[30] Note 8: Long-Term Debt Total long-term debt was $360.0M as of September 30, 2023, primarily from the $1.3B Ryerson Credit Facility, with a weighted average interest rate of 6.5% Long-Term Debt Composition | Component | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Ryerson Credit Facility | $365.0 M | $365.0 M | | Total Long-Term Debt | $360.0 M | $361.2 M | - The Ryerson Credit Facility has a total size of $1.3 B and matures on June 29, 2027[32][33] As of September 30, 2023, $725 M was available for borrowing - The weighted average interest rate on outstanding borrowings under the Ryerson Credit Facility increased to 6.5% at September 30, 2023, from 5.6% at December 31, 2022[36] Note 12: Stockholders' Equity Platinum Equity, LLC significantly reduced its Ryerson ownership from 43% to 11% in 2023, while Ryerson repurchased 2,882,720 shares for $103.0M - Following three secondary offerings in February, May, and August 2023, Platinum Equity's ownership of Ryerson's common stock decreased from approximately 43% to 11%[57] Share Repurchases from Platinum in 2023 | Date | Shares Repurchased | Cost | | :--- | :--- | :--- | | Feb 28, 2023 | 1,513,420 | $53.0 M | | May 8, 2023 | 1,369,300 | $50.0 M | | Total | 2,882,720 | $103.0 M | Note 13: Revenue Recognition Revenue primarily from metals distribution in the U.S., with Carbon Steel accounting for 50% of sales, Stainless Steel 26%, and Aluminum 22% for the nine months ended September 30, 2023 Net Sales by Product Line (Nine Months Ended Sep 30, 2023) | Product Line | % of Sales | | :--- | :--- | | Carbon Steel Flat | 26% | | Carbon Steel Long | 14% | | Aluminum Flat | 15% | | Stainless Steel Flat | 16% | | Other | 29% | Net Sales by Geographic Location (Nine Months Ended) | Region | 2023 | 2022 | | :--- | :--- | :--- | | United States | $3,642.3 M | $4,594.2 M | | Foreign countries | $354.0 M | $441.2 M | | Total | $3,996.3 M | $5,035.4 M | Note 17: Subsequent Events Subsequent to quarter-end, the company acquired Norlen Incorporated for $30.2M and declared a quarterly cash dividend of $0.1850 per share - On October 2, 2023, JT Ryerson acquired Norlen Incorporated, a metal fabricator, for $30.2 M[77] - A quarterly cash dividend of $0.1850 per share was declared on October 30, 2023, payable on December 14, 2023[78] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the cyclical metals service center industry, noting decreased revenue and profitability due to lower commodity prices and slowing demand Industry and Operating Trends The metals service center industry experienced price normalization and slowing demand in 2023, with Ryerson's volumes declining 4.6% while the broader industry increased 0.9% - In the first nine months of 2023, average selling prices were 16.9% lower compared to the same period in 2022, as prices normalized from the highs caused by prior global trade disruptions[85] - The Institute for Supply Management's PMI indicated a continuing contraction in the manufacturing sector through Q3 2023, with readings below the growth threshold of 50 since November 2022[86] - Ryerson's North American volumes declined by 4.6% in the first nine months of 2023, while the broader industry reported a 0.9% increase in volumes over the same period[87] Results of Operations Net sales fell 20.6% to $4.0B for the nine months ended September 30, 2023, driven by lower prices and tons sold, leading to a 69.5% decline in operating profit Key Operational Metrics (Nine Months Ended) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,996.3 M | $5,035.4 M | (20.6)% | | Tons Sold (thousands) | 1,493 | 1,564 | (4.5)% | | Average Selling Price per Ton | $2,677 | $3,220 | (16.9)% | - Gross profit for the first nine months of 2023 decreased by 32.5% to $774.4 M, as the decrease in average selling price outpaced the decrease in the average cost of materials sold[103] - Warehousing, delivery, selling, general, and administrative expenses increased by 8.3% to $589.8 M for the first nine months of 2023, largely due to the inclusion of expenses from companies acquired in 2022 and 2023[104][106] - For the first nine months of 2023, LIFO income was $38.4 M, compared to LIFO income of $92.7 M in the same period of 2022[102] Liquidity and Cash Flows Total liquidity was $807M as of September 30, 2023, with operating cash flow of $275.0M used for acquisitions, capital expenditures, share repurchases, and dividends Liquidity Position | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $37 M | $39 M | | Availability under Credit Facilities | $770 M | $870 M | | Total liquidity | $807 M | $909 M | - Net cash from operating activities was $275.0 M for the first nine months of 2023, supported by a decrease in working capital, primarily from reduced inventory costs[115] - Investing activities used $146.8 M, driven by $96.5 M in capital expenditures and $50.2 M for acquisitions[115][116] - Financing activities used $129.2 M, primarily for share repurchases ($107.6 M) and dividend payments ($18.5 M)[115][117] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate, foreign currency, and commodity price risks, with 99% of debt at variable rates, using derivatives to manage some exposures - A hypothetical 1% increase in interest rates on variable-rate debt would have increased interest expense by approximately $3.5 M for the first nine months of 2023[130] - The company held foreign currency contracts with a notional amount of $2.1 M and various commodity swap contracts, including 11,517 tons of hot roll coil and 16,291 tons of aluminum, to mitigate price risks[131][135] - For the nine months ended September 30, 2023, the company recognized a net gain of $9.5 M associated with its commodity derivatives[135] Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal controls over financial reporting - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[139] - No changes in internal controls over financial reporting occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's controls[140] Part II. Other Information Legal Proceedings No material changes to the company's legal proceedings as of September 30, 2023, from those previously disclosed - Information regarding legal proceedings is referenced in Note 10: Commitments and Contingencies, indicating no material changes[143] Risk Factors No material changes to the risk factors from those disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors have occurred since the filing of the 2022 Form 10-K[144] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, the company repurchased 133,094 shares for $4.0M under its program, with $45.7M remaining available for future repurchases Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jul 2023 | — | $— | | Aug 2023 | 63,751 | $29.75 | | Sep 2023 | 69,343 | $29.83 | | Total | 133,094 | N/A | - The Board of Directors authorized an increase in the share repurchase program to $100.0 M, expiring in April 2025[146] As of September 30, 2023, $45.7 M remained available under this authorization Other Information A Rule 10b5-1 trading arrangement was adopted on August 11, 2023, authorizing the purchase of up to $25M of Ryerson stock until March 1, 2024 - A Rule 10b5-1 trading plan was adopted on August 11, 2023, authorizing the purchase of up to $25,000,000 in company stock[147] Exhibits This section lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer and Inline XBRL documents