Ryerson(RYI) - 2021 Q1 - Quarterly Report

Part I Part I. Financial Information Ryerson Holding Corporation reported increased net sales and net income in Q1 2021, with total assets rising and operating cash flow turning negative Condensed Consolidated Statements of Comprehensive Income Q1 2021 net sales increased to $1.15 billion, with operating profit rising to $46.4 million and diluted EPS reaching $0.66 Financial Performance | Financial Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net sales | $1,147.3 million | $1,010.3 million | | Gross profit | $197.9 million | $195.8 million | | Operating profit | $46.4 million | $40.1 million | | Net income attributable to Ryerson | $25.3 million | $16.4 million | | Diluted earnings per share | $0.66 | $0.43 | Condensed Consolidated Statements of Cash Flows Q1 2021 saw a net cash outflow from operations of $47.3 million, primarily due to increased receivables Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($47.3 million) | $72.8 million | | Net cash provided by (used in) investing activities | $22.0 million | ($6.9 million) | | Net cash provided by financing activities | $7.6 million | $79.4 million | | Net change in cash | ($18.1 million) | $144.9 million | Condensed Consolidated Balance Sheets Total assets increased to $1.99 billion as of March 31, 2021, driven by higher receivables, and total equity improved Balance Sheet Overview | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $1,295.1 million | $1,103.4 million | | Total assets | $1,986.2 million | $1,802.1 million | | Total current liabilities | $701.3 million | $527.6 million | | Total liabilities | $1,811.5 million | $1,657.0 million | | Total equity | $174.7 million | $145.1 million | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, LIFO inventory valuation, total debt, derivative usage, and an environmental contingency - Inventories are primarily valued using the Last-In, First-Out (LIFO) method. If valued at current cost, inventories would have been $21 million higher than reported at March 31, 2021[25] Debt Components | Debt Component | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Ryerson Credit Facility | $282.0 million | $285.0 million | | 8.50% Senior Secured Notes due 2028 | $450.0 million | $450.0 million | | Foreign debt & Other | $23.7 million | $19.9 million | | Total Debt (before unamortized costs) | $755.7 million | $754.9 million | - The company is named as a potentially responsible party (PRP) for the Portland Harbor Superfund Site. Management cannot predict the ultimate outcome or estimate a range of potential loss at this time[55][59] - The company uses derivative instruments to manage exposure to commodity prices, foreign currency, and interest rates. As of March 31, 2021, the fair value of derivative assets was $34.0 million and liabilities were $40.4 million[61][66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported stronger pricing and weaker demand in Q1 2021, increasing revenue but contracting gross margin Industry and Operating Trends Q1 2021 saw price volatility in the metals industry, with Ryerson's average selling prices up 18.4% and shipments down 4.1% - Compared to Q1 2020, Ryerson experienced stronger pricing and weaker demand in Q1 2021[95] Key Operating Metrics | Metric | Change (Q1 2021 vs Q1 2020) | | :--- | :--- | | Average Selling Prices | +18.4% | | Shipments | -4.1% | Results of Operations Q1 2021 revenue rose 13.6% to $1.15 billion, driven by higher prices, but gross margin declined due to LIFO expense Revenue and Sales Volume | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,147.3 M | $1,010.3 M | +13.6% | | Tons Sold | 543 k | 566 k | -4.1% | | Avg. Selling Price/Ton | $2,113 | $1,785 | +18.4% | - Gross margin decreased from 19.4% in Q1 2020 to 17.2% in Q1 2021. This was primarily due to a significant LIFO expense of $83.8 million in Q1 2021, compared to LIFO income of $20.2 million in the prior-year period[103][121][122] - Operating expenses decreased as a percentage of sales, largely due to a $20.3 million gain on the sale of the company's Renton, Washington facility[123] Liquidity and Cash Flows Total liquidity increased to $583 million as of March 31, 2021, while operating cash flow became a $47.3 million outflow Liquidity Position | Liquidity Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $43 million | $61 million | | Availability under Credit Facilities | $540 million | $312 million | | Total liquidity | $583 million | $373 million | - Net cash used in operating activities was $47.3 million, a $120.1 million decrease from the prior year, mainly due to a $165.2 million increase in receivables[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk Ryerson manages market risks from interest rates, foreign currency, and commodity prices using debt and derivatives - Interest Rate Risk: The company holds a mix of fixed and variable-rate debt. After accounting for interest rate swaps on $160 million of debt, 81% of total debt was at fixed rates as of March 31, 2021[151][152][154] - Foreign Exchange Rate Risk: Operations in Canada, Mexico, and China expose the company to currency fluctuations. As of March 31, 2021, it held foreign currency contracts with a notional value of $4.8 million[154] - Commodity Price Risk: The company uses derivative financial instruments to manage a portion of its exposure to metal price fluctuations. As of March 31, 2021, it held swap contracts for hot roll coil, aluminum, and nickel[157][158] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2021, with no material changes - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[161] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's controls[162] Part II Part II. Other Information Item 1. Legal Proceedings Legal proceedings, detailed in Note 9, primarily concern the Portland Harbor Superfund Site environmental matter - For information on legal proceedings, the report refers to Note 9, which details the company's involvement as a potentially responsible party in the Portland Harbor Superfund Site environmental matter[165][55] Item 1A. Risk Factors A new risk factor highlights the structural subordination of 2028 Senior Secured Notes to non-guarantor subsidiaries' debt - A new risk factor highlights that the 2028 Notes are structurally subordinated to all indebtedness of non-guarantor subsidiaries, meaning creditors of those subsidiaries have priority claim to their assets[167] - As of March 31, 2021, these non-guarantor subsidiaries represented 10.6% of net sales and 12.7% of assets[168] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - The exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[169]