Ryerson Holding Corp - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	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 001-34735

RYERSON HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

26-1251524

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

227 W. Monroe St., 27^th Floor

Chicago, Illinois 60606

(Address of principal executive offices)

(312) 292-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value, 100,000,000 shares authorized	RYI	New York Stock Exchange

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.


Large accelerated filer	☐	Accelerated filer	☒	Emerging growth company	☐

Non-accelerated filer	☐	Smaller reporting company	☐

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 ☐ No ☒

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 October 23, 2020, there were 38,117,397 shares of Common Stock, par value $0.01 per share, outstanding.

RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES

INDEX

			PAGE NO.
Part I. Financial Information:

	Item 1.	Financial Statements:

		Condensed Consolidated Statements of Comprehensive Income (Unaudited)—Three and Nine Months Ended September 30, 2020 and 2019	3

		Condensed Consolidated Statements of Cash Flows (Unaudited)—Nine Months Ended September 30, 2020 and 2019	4

		Condensed Consolidated Balance Sheets—September 30, 2020 (Unaudited) and December 31, 2019	5

		Notes to Condensed Consolidated Financial Statements (Unaudited)	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

	Item 4.	Controls and Procedures	38

Part II. Other Information:

	Item 1.	Legal Proceedings	38

	Item 1A.	Risk Factors	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

	Item 3.	Defaults Upon Senior Securities	40

	Item 4.	Mine Safety Disclosures	40

	Item 5.	Other Information	40

	Item 6.	Exhibits	41

Signature			42

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In millions, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net sales	$	831.5		$	1,104.4		$	2,613.6		$	3,540.1
Cost of materials sold		675.6			900.0			2,146.4			2,892.6
Gross profit		155.9			204.4			467.2			647.5
Warehousing, delivery, selling, general, and administrative		125.4			165.6			405.2			493.9
Gain on insurance settlement		—			(1.5	)		—			(1.5	)
Restructuring and other charges		0.2			0.3			2.2			1.7
Operating profit		30.3			40.0			59.8			153.4
Other income and (expense), net		0.5			(0.3	)		1.3			(1.3	)
Pension settlement charge due to annuitization		(52.5	)		—			(52.5	)		—
Loss on debt extinguishment		(17.1	)		—			(17.1	)		—
Interest and other expense on debt		(20.2	)		(23.2	)		(61.2	)		(71.0	)
Income (loss) before income taxes		(59.0	)		16.5			(69.7	)		81.1
Provision (benefit) for income taxes		(19.3	)		6.3			(20.9	)		24.8
Net income (loss)		(39.7	)		10.2			(48.8	)		56.3
Less: Net income attributable to noncontrolling interest		0.2			0.1			0.3			0.3
Net income (loss) attributable to Ryerson Holding Corporation	$	(39.9	)	$	10.1		$	(49.1	)	$	56.0
Comprehensive income (loss)	$	(32.4	)	$	9.2		$	(48.1	)	$	59.8
Less: Comprehensive income attributable to noncontrolling interest		0.2			—			0.2			0.3
Comprehensive income (loss) attributable to Ryerson Holding Corporation	$	(32.6	)	$	9.2		$	(48.3	)	$	59.5
Basic earnings (loss) per share	$	(1.05	)	$	0.27		$	(1.29	)	$	1.49
Diluted earnings (loss) per share	$	(1.05	)	$	0.27		$	(1.29	)	$	1.48

See Notes to Condensed Consolidated Financial Statements.

RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Nine Months Ended
	September 30,
	2020			2019
Operating activities:
Net income (loss)	$	(48.8	)	$	56.3
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		40.5			44.3
Stock-based compensation		1.4			2.4
Deferred income taxes		(10.9	)		41.4
Provision for allowances, claims, and doubtful accounts		(1.1	)		2.5
Restructuring and other charges		2.2			1.7
Gain on insurance settlement		—			(1.5	)
Pension settlement charge		54.3			0.2
Loss on retirement of debt		16.2			0.2
Non-cash (gain) loss from derivatives		(5.0	)		8.2
Other items		—			0.8
Change in operating assets and liabilities:
Receivables		28.4			12.4
Inventories		169.0			(5.1	)
Other assets		13.5			4.3
Accounts payable		55.8			(1.6	)
Accrued liabilities		(8.5	)		(3.8	)
Accrued taxes payable/receivable		(1.6	)		(8.3	)
Deferred employee benefit costs		(8.7	)		(23.9	)
Net adjustments		345.5			74.2
Net cash provided by operating activities		296.7			130.5
Investing activities:
Capital expenditures		(17.9	)		(32.5	)
Proceeds from sale of property, plant, and equipment		0.1			8.8
Proceeds from insurance settlement		—			1.8
Net cash used in investing activities		(17.8	)		(21.9	)
Financing activities:
Long term debt issued		500.0			—
Repayment of debt		(602.8	)		(12.3	)
Net repayments of short-term borrowings		(73.5	)		(107.4	)
Bond issuance costs		(10.6	)		—
Net increase (decrease) in book overdrafts		(16.2	)		12.6
Principal payments on finance lease obligations		(9.9	)		(9.8	)
Contingent payment related to acquisition		—			(1.3	)
Proceeds from sale-leaseback transactions		—			8.3
Dividends paid to non-controlling interest		(0.2	)		—
Net cash used in financing activities		(213.2	)		(109.9	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		65.7			(1.3	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(2.6	)		(0.1	)
Net change in cash, cash equivalents, and restricted cash		63.1			(1.4	)
Cash, cash equivalents, and restricted cash—beginning of period		59.8			24.3
Cash, cash equivalents, and restricted cash—end of period	$	122.9		$	22.9
Supplemental disclosures:
Cash paid during the period for:
Interest paid to third parties, net	$	57.8		$	51.1
Income taxes, net		(7.1	)		(7.2	)
Noncash investing activities:
Asset additions under adoption of accounting principal ASC 842		—			82.3
Asset additions under operating leases		0.9			12.5
Asset additions under finance leases and sale-leasebacks		1.4			1.2
Asset additions under financing arrangements		—			2.2
Noncash financing activities:
Short term debt converted to finance lease		—			7.6

See Notes to Condensed Consolidated Financial Statements.

RYERSON HOLDING CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

(In millions, except shares and per share data)

	September 30,			December 31,
	2020			2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	121.8		$	11.0
Restricted cash		1.1			48.8
Receivables less provisions of $1.9 in 2020 and $3.5 2019		396.5			425.1
Inventories		572.6			742.9
Prepaid expenses and other current assets		46.3			52.2
Total current assets		1,138.3			1,280.0
Property, plant, and equipment, at cost		814.6			806.5
Less: Accumulated depreciation		392.9			366.8
Property, plant, and equipment, net		421.7			439.7
Operating lease assets		112.3			128.2
Other intangible assets		44.9			50.6
Goodwill		120.3			120.3
Deferred charges and other assets		2.6			2.7
Total assets	$	1,840.1		$	2,021.5
Liabilities
Current liabilities:
Accounts payable	$	351.1		$	311.5
Salaries, wages, and commissions		36.0			35.3
Other accrued liabilities		54.7			68.0
Short-term debt		9.1			49.2
Current portion of operating lease liabilities		20.9			20.9
Current portion of deferred employee benefits		7.0			7.0
Total current liabilities		478.8			491.9
Long-term debt		804.9			932.6
Deferred employee benefits		249.7			217.5
Noncurrent operating lease liabilities		97.1			112.8
Deferred income taxes		56.6			65.2
Other noncurrent liabilities		21.3			22.9
Total liabilities		1,708.4			1,842.9
Commitments and contingencies
Equity
Ryerson Holding Corporation stockholders’ equity:
Preferred stock, $0.01 par value; 7,000,000 shares authorized and no shares issued at 2020 and 2019		—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 38,329,897 and 37,996,261 shares issued at 2020 and 2019, respectively		0.4			0.4
Capital in excess of par value		382.6			381.2
Retained earnings		50.5			99.6
Treasury stock at cost – Common stock of 212,500 shares in 2020 and 2019		(6.6	)		(6.6	)
Accumulated other comprehensive loss		(301.2	)		(302.0	)
Total Ryerson Holding Corporation stockholders’ equity		125.7			172.6
Noncontrolling interest		6.0			6.0
Total equity		131.7			178.6
Total liabilities and equity	$	1,840.1		$	2,021.5

See Notes to Condensed Consolidated Financial Statements.

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 21,037,500 shares of our common stock, which is approximately 55% of our issued and outstanding common stock.

We are a leading value-added processor and distributor of industrial metals with operations in the United States 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 September 30, 2020 and for the three-month and nine-month periods ended September 30, 2020 and 2019 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 accounting principles generally accepted in the United States of America. 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, 2019.

Risks and Uncertainties

The Condensed Consolidated Financial Statements presented herein reflect estimates and assumptions made by management at September 30, 2020 and for the three and nine month periods ended September 30, 2020.

The novel coronavirus (“COVID-19”) continues to spread throughout the United States and other countries across the world, and the duration and severity of the effects of the COVID-19 pandemic are currently unknown. It is possible that the COVID-19 pandemic could impact future accounting estimates and assumptions which could materially impact our results in future periods. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived assets, inventory valuation, assessment of the annual effective tax rate, valuation of deferred income taxes and income tax contingencies, and the allowance for doubtful accounts.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

Impact of Recently Issued Accounting Standards—Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” The standard and subsequently issued amendments require financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, thus eliminating the probable initial recognition threshold and instead reflecting the current estimate of all expected credit losses. The update is effective for interim and annual reporting periods beginning after December 15, 2019. An entity will apply the amendment through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an-other-than-temporary impairment had been recognized before the effective date. The effect of the prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update. We adopted this guidance as of January 1, 2020 and the impact to our consolidated financial statements was immaterial. See Note 13: Provision for Credit Losses for further details.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the guidance requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We adopted this guidance on a prospective basis as of January 1, 2020 and the impact to our consolidated financial statements was immaterial. As of adoption,

license fees and implementation costs that are capitalized for hosting arrangements that are service contracts are classified as prepaid assets on the Company’s Condensed Consolidated Balance Sheet and the amortization of these costs are presented in warehousing, delivery, selling, general, and administrative expense on the Condensed Consolidated Statement of Comprehensive Income.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848).” The amendments in this update provide optional expedients and exceptions for applying Generally Accepted Accounting Principles (“GAAP”) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. We adopted this guidance as of March 12, 2020 and there was no impact to our financial statements as no in-scope contract modifications occurred.

Impact of Recently Issued Accounting Standards—Not Yet Adopted

In December 2019, the FASB issued 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. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. We are still assessing the impact of adoption on our consolidated financial statements.

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:

	September 30,		December 31,
	2020		2019
	(In millions)
Cash and cash equivalents	$	121.8	$	11.0
Restricted cash		1.1		48.8
Total cash, cash equivalents, and restricted cash	$	122.9	$	59.8

As part of the indenture for our $650 million senior secured notes due in 2022 (the “2022 Notes”), which was satisfied and discharged on July 22, 2020, proceeds from the sale of property, plant, and equipment that was collateral under such indenture were deposited into a restricted cash account. The cash could have been withdrawn from this restricted account upon meeting certain requirements, to fund activities such as debt repayment and future capital expenditures. In December 2019, we signed and closed a sale-leaseback transaction for a group of service center properties, resulting in net proceeds of $61.5 million of which $47.6 million was deposited into the restricted cash account. The balance in the restricted account for property, plant, and equipment sales was zero at September 30, 2020 compared to $47.6 million at December 31, 2019 as funds were released during the first nine months of 2020 to repurchase and redeem our 2022 Notes (see Note 7) as well as fund capital expenditures. We also had $1.1 million and $1.2 million of cash restricted for the purposes of covering letters of credit that can be presented for potential insurance claims at September 30, 2020 and December 31, 2019, respectively.

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 September 30, 2020 and December 31, 2019 as follows:

	September 30,		December 31,
	2020		2019
	(In millions)
In process and finished products	$	572.6	$	742.9

If current cost had been used to value inventories, such inventories would have been $74 million and $51 million lower than reported at September 30, 2020 and December 31, 2019, respectively. Approximately 91% of inventories are accounted for under the LIFO method at September 30, 2020 and December 31, 2019. Non-LIFO inventories consist primarily of inventory at our foreign facilities using the moving average cost and the specific cost methods. Substantially all of our inventories consist of finished products.

The Company has consignment inventory at certain customer locations, which totaled $4.7 million and $5.6 million at September 30, 2020 and December 31, 2019, respectively.

NOTE 5: 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 2032 and finance leases expiring at various times through 2027.

The following table summarizes the location and amount of lease assets and lease liabilities reported in our Condensed Consolidated Balance Sheet as of September 30, 2020 and December 31, 2019:

		September 30,		December 31,
Leases	Balance Sheet Location	2020		2019
		(In millions)
Assets
Operating lease assets	Operating lease assets	$	112.3	$	128.2
Finance lease assets	Property, plant, and equipment, net^(a)		50.0		54.2
Total lease assets		$	162.3	$	182.4
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	20.9	$	20.9
Finance	Other accrued liabilities		9.6		12.4
Noncurrent
Operating	Noncurrent operating lease liabilities		97.1		112.8
Finance	Other noncurrent liabilities		14.7		18.7
Total lease liabilities		$	142.3	$	164.8

(a)

Finance lease assets were recorded net of accumulated amortization of $23.5 million and $19.0 million as of September 30, 2020 and December 31, 2019, respectively.

The following table summarizes the location and amount of lease expense reported in our Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2020 and 2019:

		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Expense	Location of Lease Expense Recognized in Income	2020		2019		2020		2019
		(In millions)
Operating lease expense	Warehousing, delivery, selling, general, and administrative	$	6.1	$	5.5	$	18.0	$	16.6
Finance lease expense
Amortization of lease assets	Warehousing, delivery, selling, general, and administrative		2.2		1.7		5.6		5.1
Interest on lease liabilities	Interest and other expense on debt		0.3		0.4		1.0		1.3
Variable lease expense	Warehousing, delivery, selling, general, and administrative		0.7		0.8		2.3		2.2
Short-term lease expense	Warehousing, delivery, selling, general, and administrative		0.5		0.2		1.8		1.3
Total lease expense		$	9.8	$	8.6	$	28.7	$	26.5

The following table presents maturity analysis of lease liabilities at September 30, 2020:

Maturity of Lease Liabilities	Operating Leases^(a)			Finance Leases
	(In millions)
2020	$	6.4		$	3.4
2021		23.8			9.5
2022		20.1			6.0
2023		16.7			3.6
2024		15.5			2.9
After 2024		51.1			0.5
Total lease payments		133.6			25.9
Less: Interest^(b)		(15.6	)		(1.6	)
Present value of lease liabilities^(c)	$	118.0		$	24.3

(a)

There were no operating leases with options to extend lease terms that are reasonably certain of being exercised or operating leases signed but not yet commenced.

(b)

Calculated using the discount rate for each lease.

(c)

Includes the current portion of $20.9 million for operating leases and $9.6 million for finance leases.

The following table shows the weighted-average remaining lease term and discount rate for operating and finance leases, respectively, at September 30, 2020 and December 31, 2019:

	September 30,			December 31,
Lease Term and Discount Rate	2020			2019

Weighted-average remaining lease term (years)
Operating leases		7.5			7.9
Finance leases		2.7			2.8
Weighted-average discount rate
Operating leases		3.4	%		3.6	%
Finance leases		4.6	%		4.8	%

Information reported in our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020 and 2019 is summarized below:

	Nine Months Ended September 30,
Other Information	2020		2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	18.9	$	15.3
Operating cash flows from finance leases		1.0		1.3
Financing cash flows from finance leases		9.9		9.8
Assets obtained in exchange for lease obligations:
Adoption of accounting principal ASC 842		—		82.3
Operating leases		0.9		12.5
Finance leases		1.4		1.2

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $120.3 million at September 30, 2020 and December 31, 2019. Pursuant to ASC 350, “Intangibles – Goodwill and Other,” we review the recoverability of goodwill annually as of October 1 or whenever significant events or changes occur which might impair the recovery of recorded amounts.

Due to the COVID-19 pandemic and its effect on our demand levels and stock price, as well as the overall economy, we performed a quantitative impairment test of goodwill as of May 31, 2020. It was determined that no impairment existed.

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.

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, 2019. 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 7: LONG-TERM DEBT

Long-term debt consisted of the following at September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019
	(In millions)
Ryerson Credit Facility	$	310.0		$	377.7
8.50% Senior Secured Notes due 2028		500.0			—
11.00% Senior Secured Notes due 2022		—			587.9
Foreign debt		7.4			13.2
Other debt		8.2			9.5
Unamortized debt issuance costs and discounts		(11.6	)		(6.5	)
Total debt		814.0			981.8
Less: Ryerson Credit Facility - "first in, last out" subfacility		—			34.3
Less: Short-term foreign debt		7.4			13.2
Less: Other short-term debt		1.7			1.7
Total long-term debt	$	804.9		$	932.6

Ryerson Credit Facility

On November 16, 2016, Ryerson entered into an amendment with respect to its $1.0 billion revolving credit facility (as amended, the “Old Credit Facility”), to reduce the total facility size from $1.0 billion to $750 million, reduce the interest rate on outstanding borrowings by 25 basis points, reduce commitment fees on amounts not borrowed by 2.5 basis points, and to extend the maturity date to November 16, 2021. The Old Credit Facility was amended a second time on June 28, 2018, to increase the facility size from $750 million to $1.0 billion (the “Ryerson Credit Facility”). On September 23, 2019, a third amendment was entered into to supplement the facility and add a U.S. “first-in, last-out” sub-facility of $67.9 million (the “FILO Facility”). The FILO facility is equal in subordination with the other borrowings under the Ryerson Credit Facility and matured as of June 30, 2020. The FILO facility supplemented our borrowing capacity by providing additional collateral on eligible accounts receivable and inventory. The aggregate facility size of $1.0 billion remains unchanged.

At September 30, 2020, Ryerson had $310.0 million of outstanding borrowings, $11 million of letters of credit issued, and $237 million available under the Ryerson Credit Facility compared to $377.7 million of outstanding borrowings, including $34.3 million under the FILO Facility, $11 million of letters of credit issued, and $348 million available at December 31, 2019. Total credit availability is limited by the amount of eligible accounts receivable, inventory, and qualified cash pledged as collateral under the agreement insofar as Ryerson is subject to a borrowing base comprised of the aggregate of these three amounts, less applicable reserves. Eligible accounts receivable, at any date of determination, is comprised of the aggregate value of all accounts directly created by a borrower (and in the case of Canadian accounts, the Canadian borrower) in the ordinary course of business arising out of the sale of goods or the rendering of services, each of which has been invoiced, with such receivables adjusted to exclude various ineligible accounts, including, among other things, those to which a borrower (or guarantor, as applicable) does not have sole and absolute title and accounts arising out of a sale to an employee, officer, director, or affiliate of a borrower (or guarantor, as applicable). Eligible inventory, at any date of determination, is comprised of the net orderly liquidation value of all inventory owned by a borrower (and in the case of Canadian accounts, the Canadian borrower). Qualified cash consists of cash in an eligible deposit account that is subject to customary restrictions and liens in favor of the lenders.

The Ryerson Credit Facility has an allocation of $940 million to the Company’s subsidiaries in the United States and an allocation of $60 million to Ryerson Holding’s Canadian subsidiary that is a borrower. 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 0.50%, Bank of America, N.A.’s prime rate, and the one-month LIBOR rate plus 1.00%) or (B) a LIBOR rate or, (ii) for Ryerson Holding’s

Canadian subsidiary that is a borrower, (A) a rate determined by reference to the Canadian base rate (the greatest of the Federal Funds Rate plus 0.50%, Bank of America-Canada Branch’s “base rate” for commercial loans in U.S. Dollars made at its “base rate”, and the 30 day LIBOR rate plus 1.00%), (B) the prime rate (the greater of Bank of America-Canada Branch’s “prime rate” for commercial loans made by it in Canada in Canadian Dollars and the one-month Canadian bankers’ acceptance rate plus 1.00%), or (C) the bankers’ acceptance rate. The spread over the base rate and prime rate is between 0.25% and 0.50% and the spread over the LIBOR for the bankers’ acceptances is between 1.25% and 1.50%, depending on the amount available to be borrowed under the Ryerson Credit Facility. Amounts outstanding under the FILO Facility bore interest at the same rates as listed above for U.S. borrowings, however the spread over the base rate was between 1.25% and 1.50% and the spread over the LIBOR rate was between 2.25% and 2.50%, depending on the amount available to be borrowed under the Ryerson Credit Facility. Ryerson also pays commitment fees on amounts not borrowed at a rate of 0.23%. Overdue amounts and all amounts owed during the existence of a default bear interest at 2% above the rate otherwise applicable thereto.

We attempt to minimize interest rate risk exposure through the utilization of interest rate swaps, which are derivative financial instruments. In June 2019, we entered into an interest rate swap to fix interest on $60 million of our floating rate debt under the Ryerson Credit Facility at a rate of 1.729% through June 2022. In November 2019, we entered into another interest rate swap to fix interest on $100 million of our floating rate debt under the Ryerson Credit Facility at a rate of 1.539% through November 2022. Both of the swaps have reset dates and critical terms that match our existing debt and the anticipated critical terms of future debt. The weighted average interest rate on the outstanding borrowings under the Ryerson Credit Facility including the interest rate swaps was 2.2% and 3.2% at September 30, 2020 and December 31, 2019, respectively.

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 May 24, 2016, JT Ryerson issued the 2022 Notes that bore interest at a rate of 11.00% per annum. The 2022 Notes were fully and unconditionally guaranteed on a senior secured basis by all of our existing and future domestic subsidiaries that are co-borrowers or that have guarantee obligations under the Ryerson Credit Facility.

The 2022 Notes and the related guarantees were 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 United States (other than receivables, inventory, cash deposit accounts and certain other assets and proceeds thereof, which were secured pursuant to a second-priority security interest), subject to certain exceptions and customary permitted liens.

During the first nine months of 2019, a principal amount of $11.6 million of the 2022 Notes were repurchased for $11.8 million and retired, resulting in the recognition of a $0.2 million loss within other income and (expense), net on the Condensed Consolidated Statement of Comprehensive Income.

During the first six months of 2020, a principal amount of $57.6 million of the 2022 Notes were repurchased for $56.7 million and retired, resulting in the recognition of a $0.9 million gain within other income and (expense), net on the Condensed Consolidated Statement of Comprehensive Income.

On July 22, 2020, JT Ryerson distributed an irrevocable notice of redemption to the holders of its 2022 Notes. The redemption of the remaining $530.3 million of JT Ryerson’s outstanding 2022 Notes occurred on August 21, 2020. On July 22, 2020, JT Ryerson satisfied and discharged the indenture governing the 2022 Notes.

On July 22, 2020, JT Ryerson issued $500 million in aggregate principle amount of its 8.50% senior secured notes due 2028 (the “2028 Notes”). The 2028 Notes bear interest at a rate of 8.50% per annum. The 2028 Notes are fully and unconditionally guaranteed on a senior secured basis by all of our existing and future domestic subsidiaries that are co-borrowers or that have guarantee obligations under the Ryerson Credit Facility.

The net proceeds from the issuance of the 2028 Notes, along with available cash, were used to (i) redeem all of the 2022 Notes and (ii) pay related transaction fees, expenses, and premiums.

The Company applied the provisions of ASC 470-50, “Modifications and Extinguishments” in accounting for the issuance of the 2028 Notes and redemption of the 2022 Notes. It was determined that while the issuance was private, the terms of the issuance were similar to a public debt issuance due to the facts that (i) no single investor or small group of investors held a significant concentration of both the old and the new debt, (ii) none of the old investors were included in negotiations with the underwriter in setting the terms of the debt issuance, and (iii) and the old investors had the opportunity to participate in the new issuance in the same manner as new investors. As the issuance was similar to a public debt issuance, extinguishment accounting was applied. The Company recorded a $17.1 million loss within other income and (expense), net on the Condensed Consolidated Statement of Comprehensive Income during the third quarter of 2020, which consists of the redemption fees paid to the creditors and unamortized debt issuance costs written off related to the 2022 Notes. Additionally, the costs incurred with third parties for arrangement fees, legal, and other services related to the 2028 Notes were capitalized and are being amortized over the life of the new debt using the effective interest method.

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 United States (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 redemption prices. The redemption price for the 2028 Notes if redeemed during the twelve months beginning (i) August 1, 2023 is 104.250%, (ii) August 1, 2024 is 102.125%, and (iii) August 1, 2025 and thereafter is 100.000%. All redemption amounts also include accrued and unpaid interest, if any, to, but not including, the redemption date. JT Ryerson may also redeem some or all of the 2028 Notes before August 1, 2023 at a redemption price of 100.000% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium. In addition, JT Ryerson may redeem up to 40% of the outstanding 2028 Notes before August 1, 2023 with the net cash proceeds from certain equity offerings at a price equal to 108.500% of the principal amount of the Notes, plus accrued but unpaid interest, if any, to, but not including, the redemption date. Furthermore, JT Ryerson may redeem the 2028 Notes at any time and from time to time prior to August 1, 2023 in an aggregate principal amount equal to up to 10% of the original aggregate principal amount of the 2028 Notes during each twelve month period commencing on July 22, 2020 at a redemption price of 103.000%, plus accrued and unpaid interest, if any, to, but not including, the redemption date. JT Ryerson may also redeem the 2028 Notes at any time prior to August 1, 2022 in an aggregate principal amount equal to $100.0 million on a one-time basis from the net cash proceeds received from the sale of real property, at a redemption price of 104.000% plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, JT Ryerson may be required to make an offer to purchase the 2028 Notes upon the sale of certain assets or upon a change of control.

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.

On September 30, 2020, JT Ryerson delivered to the holders of its 2028 Notes a notice of partial redemption of $50 million aggregate principal amount of the 2028 Notes. The partial redemption is scheduled to occur on October 30, 2020 at a redemption price in cash of 103.000% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date. JT Ryerson expects to fund the redemption using available cash on hand. Upon completion of the partial redemption, $450 million of the aggregate principal amount of the 2028 Notes will remain outstanding.

Foreign Debt

At September 30, 2020, Ryerson China’s foreign borrowings were $7.4 million, which were owed to banks in Asia at a weighted average interest rate of 3.9% per annum and secured by inventory and property, plant, and equipment. At December 31, 2019, Ryerson China’s foreign borrowings were $13.2 million, which were owed to banks in Asia at a weighted average interest rate of 4.3% per annum and secured by inventory and property, plant, and equipment.

Availability under the foreign credit lines was $39 million and $32 million at September 30, 2020 and December 31, 2019, respectively. Letters of credit issued by our foreign subsidiaries were $4 million and $3 million at September 30, 2020 and December 31, 2019, respectively.

NOTE 8: EMPLOYEE BENEFITS

The following tables summarize the components of net periodic benefit cost (credit) for the three and nine month periods ended September 30, 2020 and 2019 for the Ryerson pension plans and postretirement benefit plans other than pension:

	Three Months Ended September 30,
	Pension Benefits						Other Benefits
	2020			2019			2020			2019
	(In millions)
Components of net periodic benefit cost (credit)
Service cost	$	0.8		$	0.8		$	0.1		$	0.1
Interest cost		5.3			7.3			0.4			0.7
Expected return on assets		(8.2	)		(9.2	)		—			—
Settlement expense		53.2			—			—			—
Recognized actuarial (gain) loss		4.2			3.8			(1.7	)		(2.0	)
Amortization of prior service cost (credit)		—			0.1			(0.5	)		(0.8	)
Net periodic benefit cost (credit)	$	55.3		$	2.8		$	(1.7	)	$	(2.0	)

	Nine Months Ended September 30,
	Pension Benefits						Other Benefits
	2020			2019			2020			2019
	(In millions)
Components of net periodic benefit cost (credit)
Service cost	$	2.5		$	2.5		$	0.4		$	0.4
Interest cost		15.7			21.9			1.3			1.9
Expected return on assets		(24.4	)		(27.4	)		—			—
Settlement expense		54.3			0.2			—			—
Recognized actuarial (gain) loss		12.7			11.2			(5.2	)		(5.8	)
Amortization of prior service cost (credit)		0.1			0.1			(1.6	)		(2.3	)
Net periodic benefit cost (credit)	$	60.9		$	8.5		$	(5.1	)	$	(5.8	)

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.

Effective September 28, 2020, the Ryerson Pension Plan purchased $95.2 million of annuities on behalf of a portion of plan participants which, due to the size of the transaction, resulted in settlement accounting. The pension plan was remeasured as of September 30, 2020. The remeasurement resulted in a settlement loss of $52.5 million which was recorded within Other income and (expense), net in the Condensed Consolidated Statement of Comprehensive Income as of September 30, 2020. As a result of the remeasurement, the discount rate decreased from 3.15% to 2.59% and the expected long-term rate of return on pension assets decreased from 5.75% to 5.25%.

The Company contributed $7 million to the pension plan funds through the nine months ended September 30, 2020. The Company has elected to defer the remaining expected 2020 U.S. contributions of $12 million until January 1, 2021, as permitted under The Coronavirus Aid, Relief, and Economic Security Act (“The CARES Act”) that was passed in March 2020.

NOTE 9: COMMITMENTS AND CONTINGENCIES

capping, and enhanced natural recovery that would take approximately thirteen years to construct plus additional time for monitored natural recovery, at an estimated present value cost of $1.05 billion. In a change from its prior stance, at a meeting on December 4, 2018, the EPA indicated that it expected PRPs to submit a plan during 2019 to start remediation of the river and harbor per the original ROD within the next two to three years. The EPA also indicated that it expected allocation of amounts among the parties to be determined in the same two to three-year time frame. The EPA invited certain PRPs to a May 2, 2019 meeting to discuss starting the remedial design process. The EPA did not include JT Ryerson in those meetings.

On December 9, 2019, a PRP group met with Administrator Wheeler, the head of the EPA, to discuss updating the ROD as recent testing indicates that the levels of contamination have “drastically improved” and, thus, remediation should be much less drastic than that in the current ROD. Administrator Wheeler directed regional EPA staff to again review the ROD before moving forward with any enforcement action. On March 3, 2020, the regional EPA issued a letter to the PRP group, essentially rejecting the request but noting that new data would be used for fine-tuning the implementation of the remedy and to that extent could result in less active remediation.

The EPA indicated in a January 2, 2020 “progress update” letter that it is negotiating with certain parties to perform remedial design work at five unspecified areas which comprise 52% of the overall acreage subject to remediation. In late March, the EPA issued a Unilateral Administrative Order for Remedial Design to Schnitzer Steel, ordering it to develop a remedial design plan for the river area which includes the area where our former facilities were. In the meantime, Schnitzer has filed a petition for relief from the remedy required by the ROD.

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.

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 September 30, 2020 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 10: 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 two receive variable, pay fixed, interest rate swaps to manage the exposure to variable interest rates of the Ryerson Credit Facility. In June 2019, we entered into a forward agreement for $60 million of “pay fixed” interest at 1.729% through June 2022 and in November 2019, we entered into a forward agreement for $100 million of “pay fixed” interest at 1.539% through November 2022. The interest rate reset dates and critical terms match the terms of our existing debt and anticipated critical terms of future debt under the Ryerson Credit Facility. The fair value of the interest rate swaps as of September 30, 2020 was a net liability of $4.6 million.

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. The Company accounts for its interest rate swaps as cash flow hedges of floating-rate borrowings with changes in fair value being recorded in accumulated other comprehensive income. The Company has made an accounting policy election to offset the fair value of derivative liabilities with related cash collateral. As of September 30, 2020 and December 31, 2019, the Company offset zero and $2.7 million, respectively, of fair value liabilities with cash held as collateral by the counterparty.

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.

The following table summarizes the location and fair value amount of our derivative instruments reported in our Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019:

	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	September 30, 2020		December 31, 2019		Balance Sheet Location	September 30, 2020			December 31, 2019
Derivatives not designated as hedging instruments under ASC 815	(In millions)
Metal commodity contracts	Prepaid expenses and other current assets	$	1.5	$	5.0	Other accrued liabilities		$	0.8		$	9.4	(a)
Crude oil contracts	Prepaid expenses and other current assets		—		0.1	Other accrued liabilities			—			—
Derivatives designated as hedging instruments under ASC 815
Interest rate swaps	Deferred charges and other assets		—		—	Other noncurrent liabilities			4.6			0.2
Total derivatives		$	1.5	$	5.1			$	5.4		$	9.6	(a)
(a) The offsetting cash collateral balance of $2.7 million held by the derivative counterparty brought the net metal commodity contract liability to $6.7 million and the net total derivative liability balance to $6.9 million as of December 31, 2019.

The following table presents the volume of the Company’s activity in derivative instruments as of September 30, 2020 and December 31, 2019:

	Notional Amount
Derivative Instruments	At September 30, 2020		At December 31, 2019		Unit of Measurement
Hot roll coil swap contracts		28,502		47,155	Tons
Aluminum swap contracts		14,478		23,949	Tons
Nickel swap contracts		67		3,164	Tons
Iron ore swap contracts		—		420,000	Tons
Crude oil swap contracts		—		38,000	Barrels
Foreign currency exchange contracts	1.6 million		2.0 million		U.S. dollars
Interest rate swaps	160 million		310 million		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 nine months ended September 30, 2020 and 2019:

		Amount of Gain/(Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments	Location of Gain/(Loss) Recognized in Income	Three Months Ended September 30,						Nine Months Ended September 30,
under ASC 815	on Derivatives	2020			2019			2020		2019
Metal commodity contracts	Cost of materials sold	$	2.0		$	(4.9	)	$	1.3	$	(12.9	)
Crude oil commodity contracts	Warehousing, delivery, selling, general, and administrative		—			—			—		0.7
Foreign exchange contracts	Other income and (expense), net		(0.1	)		—			—		(0.1	)
Total		$	1.9		$	(4.9	)	$	1.3	$	(12.3	)

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 nine months ended September 30, 2020 and 2019:

		Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as hedging instruments	Location of Gain/(Loss) Recognized in Income	Three Months Ended September 30,					Nine Months Ended September 30,
under ASC 815	on Derivatives	2020			2019		2020			2019
		(In millions)
Interest rate swaps	Interest and other expense on debt	$	(0.5	)	$	0.3	$	(1.1	)	$	0.9

As of September 30, 2020, 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 $2.3 million.

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:

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.

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.

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 September 30, 2020:

	At September 30, 2020
	Level 1		Level 2		Level 3
	(In millions)
Assets
Derivatives:
Derivatives not designated as hedging instruments under ASC 815:
Metal commodity contracts	$	—	$	1.5	$	—
Liabilities
Derivatives:
Derivatives not designated as hedging instruments under ASC 815:
Metal commodity contracts	$	—	$	0.8	$	—
Derivatives designated as hedging instruments under ASC 815:
Interest rate swaps		—		4.6		—
Total derivatives	$	—	$	5.4	$	—

	At December 31, 2019
	Level 1		Level 2			Level 3
	(In millions)
Assets
Derivatives:
Derivatives not designated as hedging instruments under ASC 815:
Metal commodity contracts	$	—	$	5.0		$	—
Foreign exchange contracts		—		0.1			—
Total derivatives	$	—	$	5.1		$	—
Liabilities
Derivatives:
Derivatives not designated as hedging instruments under ASC 815:
Metal commodity contracts	$	—	$	9.4	(a)	$	—
Derivatives designated as hedging instruments under ASC 815:
Interest rate swaps		—		0.2			—
Total derivatives	$	—	$	9.6	(a)	$	—
(a) The offsetting cash collateral balance of $2.7 million held by the derivative counterparty brought the net metal commodity contract liability to $6.7 million and the net total derivative liability balance to $6.9 million.

The fair value of each 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 nickel prices for varying time periods. The fair value of these 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 London Metals Exchange for nickel on the valuation date. The Company also has commodity derivatives to lock in hot roll coil, crude oil, iron ore, and aluminum prices for varying time periods. The fair value of hot roll coil, crude oil, iron ore, 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 crude oil), the Singapore Exchange, and the London Metals Exchange, 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 length, but in general, contracts are between 1 to 12 months. The fair value of our interest rate swap is based on the sum of all future net present value cash flows for the fixed and floating leg of the swap. The future cash flows are derived based on the terms of our interest rate swap, as well as published discount factors, and projected forward LIBOR rates.

The carrying and estimated fair values of our financial instruments at September 30, 2020 and December 31, 2019 were as follows:

	At September 30, 2020				At December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Cash and cash equivalents	$	121.8	$	121.8	$	11.0	$	11.0
Restricted cash		1.1		1.1		48.8		48.8
Receivables less provisions		396.5		396.5		425.1		425.1
Accounts payable		351.1		351.1		311.5		311.5
Long-term debt, including current portion		814.0		840.8		981.8		1,014.4

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 11: STOCKHOLDERS’ EQUITY (DEFICIT), ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), AND NONCONTROLLING INTEREST

The following table details changes in Ryerson Holding Corporation Stockholders’ Equity (Deficit) accounts for each quarterly period of the nine months ended September 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		37,996	$	0.4		213	$	(6.6	)	$	381.2	$	99.6		$	(48.6	)	$	(253.1	)	$	(0.3	)	$	6.0		$	178.6
Net income		—		—		—		—			—		16.4			—			—			—			—			16.4
Foreign currency translation		—		—		—		—			—		—			(8.5	)		—			—			—			(8.5	)
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $0.6		—		—		—		—			—		—			—			1.8			—			—			1.8
Stock-based compensation expense		—		—		—		—			0.6		—			—			—			—			—			0.6
Cash flow hedge - interest rate swap, net of tax of $1.2		—		—		—		—			—		—			—			—			(3.5	)		—			(3.5	)
Balance at March 31, 2020		37,996		0.4		213		(6.6	)		381.8		116.0			(57.1	)		(251.3	)		(3.8	)		6.0			185.4
Net income (loss)		—		—		—		—			—		(25.6	)		—			—			—			0.1			(25.5	)
Foreign currency translation		—		—		—		—			—		—			1.7			—			—			(0.1	)		1.6
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $0.7		—		—		—		—			—		—			—			2.0			—			—			2.0
Stock-based compensation expense		334		—		—		—			0.4		—			—			—			—			—			0.4
Dividends paid to noncontrolling interest		—		—		—		—			—		—			—			—			—			(0.2	)		(0.2	)
Balance at June 30, 2020		38,330		0.4		213		(6.6	)		382.2		90.4			(55.4	)		(249.3	)		(3.8	)		5.8			163.7
Net income (loss)		—		—		—		—			—		(39.9	)		—			—			—			0.2			(39.7	)
Foreign currency translation		—		—		—		—			—		—			1.2			—			—			—			1.2
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $2.0		—		—		—		—			—		—			—			5.8			—			—			5.8
Stock-based compensation expense		—		—		—		—			0.4		—			—			—			—			—			0.4
Cash flow hedge - interest rate swap, net of tax of $0.1		—		—		—		—			—		—			—			—			0.3			—			0.3
Balance at September 30, 2020		38,330	$	0.4		213	$	(6.6	)	$	382.6	$	50.5		$	(54.2	)	$	(243.5	)	$	(3.5	)	$	6.0		$	131.7

The following table details changes in Ryerson Holding Corporation Stockholders’ Equity (Deficit) accounts for each quarterly period of the nine months ended September 30, 2019:

															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, 2019		37,656	$	0.4		213	$	(6.6	)	$	381.0		$	14.2	$	(52.8	)	$	(264.0	)	$	1.0		$	2.7		$	75.9
Net income		—		—		—		—			—			29.5		—			—			—			0.1			29.6
Foreign currency translation		—		—		—		—			—			—		2.9			—			—			0.1			3.0
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $0.3		—		—		—		—			—			—		—			0.9			—			—			0.9
Adoption of accounting principal ASC 842, net of tax of $1.1		—		—		—		—			—			3.0		—			—			—			—			3.0
Stock-based compensation expense		10		—		—		—			0.8			—		—			—			—			—			0.8
Cash flow hedge - interest rate swap, net of tax of $0.1		—		—		—		—			—			—		—			—			(0.4	)		—			(0.4	)
Balance at March 31, 2019		37,666		0.4		213		(6.6	)		381.8			46.7		(49.9	)		(263.1	)		0.6			2.9			112.8
Net income		—		—		—		—			—			16.4		—			—			—			0.1			16.5
Foreign currency translation		—		—		—		—			—			—		0.8			—			—			—			0.8
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $0.3		—		—		—		—			—			—		—			0.8			—			—			0.8
Stock-based compensation expense		330		—		—		—			0.8			—		—			—			—			—			0.8
Purchase of subsidiary shares from noncontrolling interest		—		—		—		—			(2.9	)		—		—			—			—			2.9			—
Cash flow hedge - interest rate swap, net of tax of $0.3		—		—		—		—			—			—		—			—			(0.6	)		—			(0.6	)
Balance at June 30, 2019		37,996		0.4		213		(6.6	)		379.7			63.1		(49.1	)		(262.3	)		—			5.9			131.1
Net income		—		—		—		—			—			10.1		—			—			—			0.1			10.2
Foreign currency translation		—		—		—		—			—			—		(1.3	)		—			—			(0.1	)		(1.4	)
Changes in defined benefit pension and other post-retirement benefit plans, net of tax of $0.3		—		—		—		—			—			—		—			0.8			—			—			0.8
Stock-based compensation expense		—		—		—		—			0.8			—		—			—			—			—			0.8
Cash flow hedge - interest rate swap, net of tax of $0.2		—		—		—		—			—			—		—			—			(0.4	)		—			(0.4	)
Balance at September 30, 2019		37,996	$	0.4		213	$	(6.6	)	$	380.5		$	73.2	$	(50.4	)	$	(261.5	)	$	(0.4	)	$	5.9		$	141.1

The following table details changes in accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2020:

	Changes in Accumulated Other Comprehensive Income (Loss) by Component, net of tax
	Foreign Currency Translation			Benefit Plan Liabilities			Cash Flow Hedge - Interest Rate Swap
	(In millions)
Balance at January 1, 2020	$	(48.6	)	$	(253.1	)	$	(0.3	)
Other comprehensive income (loss) before reclassifications		(5.6	)		(35.1	)		(4.0	)
Amounts reclassified from accumulated other comprehensive income into net income		—			44.7			0.8
Net current-period other comprehensive income (loss)		(5.6	)		9.6			(3.2	)
Balance at September 30, 2020	$	(54.2	)	$	(243.5	)	$	(3.5	)

The following table details the reclassifications out of accumulated other comprehensive income (loss) for the three and nine month periods ended September 30, 2020:

	Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
	Amount reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended			Nine Months Ended			Affected line item in the Consolidated
Details about Accumulated Other	September 30, 2020						Statements of
Comprehensive Income (Loss) Components	(In millions)						Operations / Consolidated Balance Sheets
Amortization of defined benefit pension and other post-retirement benefit plan items
Actuarial loss	$	2.5		$	7.5		Other income and (expense), net
Pension settlement		53.2			54.3		Other income and (expense), net
Prior service credits		(0.5	)		(1.5	)	Other income and (expense), net
Total before tax		55.2			60.3
Tax benefit		(14.3	)		(15.6	)
Net of tax	$	40.9		$	44.7
Cash flow hedge - interest rate swap
Realized swap interest	$	0.5		$	1.1		Interest and other expense on debt
Tax benefit		(0.1	)		(0.3	)
Net of tax	$	0.4		$	0.8

The following table details the reclassifications out of accumulated other comprehensive income (loss) for the three and nine month periods ended September 30, 2019:

	Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
	Amount reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended			Nine Months Ended			Affected line item in the Consolidated
Details about Accumulated Other	September 30, 2019						Statements of
Comprehensive Income (Loss) Components	(In millions)						Operations / Consolidated Balance Sheets
Foreign Currency Translation
Foreign currency translation gain	$	—		$	0.2		Other income and (expense), net
Tax provision		—			—
Net of tax	$	—		$	0.2
Cash flow hedge - interest rate swap
Realized swap interest	$	(0.4	)	$	(1.0	)	Interest and other expense on debt
Tax provision		0.2			0.3
Net of tax	$	(0.2	)	$	(0.7	)
Amortization of defined benefit pension and other post-retirement benefit plan items
Actuarial loss	$	1.8		$	5.4		Other income and (expense), net
Pension settlement		—			0.2		Other income and (expense), net
Prior service credits		(0.7	)		(2.2	)	Other income and (expense), net
Total before tax		1.1			3.4
Tax benefit		(0.3	)		(0.9	)
Net of tax	$	0.8		$	2.5

NOTE 12: 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 75% of the metals products sold 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.

Disaggregated Revenue

We have one operating and reportable segment, metals service centers.

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						Nine Months Ended
	September 30,						September 30,
Product Line	2020			2019			2020			2019
Carbon Steel Flat		28	%		26	%		26	%		25	%
Carbon Steel Plate		8			11			9			11
Carbon Steel Long		13			15			15			16
Stainless Steel Flat		16			15			16			15
Stainless Steel Plate		4			4			5			4
Stainless Steel Long		5			4			5			4
Aluminum Flat		16			16			14			16
Aluminum Plate		3			2			3			2
Aluminum Long		5			5			5			5
Other		2			2			2			2
Total		100	%		100	%		100	%		100	%

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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net Sales	(In millions)
United States		737.9	$	1,000.8	$	2,337.7	$	3,216.6
Foreign countries		93.6		103.6		275.9		323.5
Total	$	831.5	$	1,104.4	$	2,613.6	$	3,540.1

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 September 30,						Nine Months Ended September 30,
Timing of Revenue Recognition	2020			2019			2020			2019
Revenue on products with an alternative use		89	%		88	%		88	%		88	%
Revenue on products with no alternative use		11			12			12			12
Total		100	%		100	%		100	%		100	%

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 30 days from the invoice date. We do not have any contracts with significant financing components.

Receivables, which are included in accounts receivables within the Condensed Consolidated Balance Sheet, from contracts with customers were $398.4 million and $428.6 million as of September 30, 2020 and December 31, 2019, respectively.

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. Significant changes in the contract assets and the contract liabilities balances during the period are as follows:

	Contract Assets			Contract Liabilities
	(In millions)
Beginning Balance at January 1, 2020	$	13.5		$	10.5
Contract liability satisfied during the period		—			(9.8	)
Contract liability incurred during the period		—			8.3
Net change in contract assets and liabilities for products with no alternative use during the period		(1.4	)		—
Changes to reserves		(0.5	)		(2.1	)
Ending Balance at September 30, 2020	$	11.6		$	6.9

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 one year or less.

NOTE 13: PROVISION FOR CREDIT LOSSES

The Company adopted ASU 2016-13 as of January 1, 2020. Results for all reporting periods follow the guidance under ASC 326 “Financial Instruments – Credit Losses” with periods beginning after January 1, 2020 conforming to ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP. Total adjustments as a result of adopting the new guidance were immaterial to the financial statements.

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. We have reviewed recent events and circumstances due to the COVID-19 pandemic in relation to our provision for credit losses and have not made any material adjustments as of September 30, 2020.

The following table provides a reconciliation of the provision for credit losses reported within the Consolidated Balance Sheets as of September 30, 2020:

	Changes in Provision for Expected Credit Losses
	(In millions)
Balance at January 1, 2020	$	3.5
Current period provision		(0.3	)
Write-offs charged against allowance		(1.4	)
Recoveries against allowance		0.2
Effect of foreign exchange rates		(0.1	)
Balance at September 30, 2020	$	1.9

NOTE 14: INCOME TAXES

For the three months ended September 30, 2020, the Company recorded an income tax benefit of $19.3 million compared to income tax expense of $6.3 million in the prior year. The $19.3 million tax benefit and the $6.3 million tax expense for the three months ended September 30, 2020, and 2019, respectively, primarily represent taxes at federal and local statutory rates where the Company operates, but generally exclude any tax benefit for losses in jurisdictions with historical losses. For the nine months ended September 30, 2020, the Company recorded an income tax benefit of $20.9 million compared to income tax expense of $24.8 million in the prior year. The $20.9 million tax benefit and the $24.8 million tax expense for the nine months ended September 30, 2020, and 2019, respectively, primarily represent taxes at federal and local statutory rates where the Company operates, but generally exclude any tax benefit for losses in jurisdictions with historical losses. The higher effective tax rate in the first nine months of 2020 is primarily a result of the mix of pretax income or loss by jurisdiction during the period compared to projected pre-tax results for the full year in addition to discrete benefits recorded during the year.

In accordance with ASC 740, “Income Taxes,” the Company calculates its quarterly tax provision based on an estimated effective tax rate for the year, applies it to the results of each interim period and then adjusts that amount by certain discrete items. Due to volatility in macro-economic conditions associated with the COVID-19 pandemic, we may experience fluctuations in our forecasted earnings before income taxes as a result of events which cannot be predicted. As such, the Company's effective tax rate could be subject to unusual volatility as forecasted earnings before income taxes change.

On March 27, 2020, President Trump signed into law the CARES Act, which, along with earlier issued IRS guidance, provides for deferral of certain taxes. The Company currently plans to defer the timing of estimated federal tax payments and payroll taxes as permitted by the CARES Act. Additionally, the Company did take advantage of accelerated Alternative Minimum Tax refunds as provided for in the CARES Act and received a refund of $12 million in the third quarter of 2020.

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 $13.7 million at September 30, 2020 and December 31, 2019.

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 nine-month periods ended September 30, 2020, we have included a tax benefit of $2.0 million and $0.5 million, respectively, related to GILTI as part of our tax provision. For the three-month and nine-month periods ended September 30, 2019, we have included a $0.9 million tax benefit and a $1.9 million income tax expense, respectively, related to GILTI as part of our tax provision.

The Company accounts for uncertain income tax positions in accordance with ASC 740. We anticipate that certain statutes of limitation will close within the next twelve months resulting in the reduction of the reserve for uncertain tax benefits related to various intercompany transactions. In the second quarter of 2020 we released $1.9 million of reserves bringing the unrecognized tax benefits balance from $4.4 million at December 31, 2019 to $2.5 million at September 30, 2020. We do not believe future release amounts will be material.

NOTE 15: 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 250,356 and 259,244 for the three and nine-month periods ended September 30, 2020, respectively.

The following table sets forth the calculation of basic and diluted earnings (loss) per share:

	Three Months Ended September 30,					Nine Months Ended September 30,
Basic and diluted earnings (loss) per share		2020			2019		2020			2019
	(In millions, except share and per share data)
Numerator:
Net income (loss) attributable to Ryerson Holding Corporation	$	(39.9	)	$	10.1	$	(49.1	)	$	56.0
Denominator:
Weighted average shares outstanding		38,117,397			37,783,761		37,994,139			37,668,629
Dilutive effect of stock-based awards		—			182,090		—			240,814
Weighted average shares outstanding adjusted for dilutive securities		38,117,397			37,965,851		37,994,139			37,909,443

Earnings (loss) per share
Basic	$	(1.05	)	$	0.27	$	(1.29	)	$	1.49
Diluted	$	(1.05	)	$	0.27	$	(1.29	)	$	1.48

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, 2019 filed on March 4, 2020 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, 2019 in our Annual Report on Form 10-K filed on March 4, 2020.

Industry and Operating Trends

We are a metals service center with over 175 years of experience 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 products we sell are processed to meet customer requirements. See Note 12: Revenue Recognition in Part I, Item I - Notes to the Condensed Consolidated Financial Statements.

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. Conversely, 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 therefore difficult to predict. In the first nine months of 2020, Ryerson experienced both weaker pricing and demand compared to the nine-month period ended September 30, 2019, with shipments 17.6% lower and average selling prices 10.4% lower, affected by economic impacts of the novel coronavirus (“COVID-19”) in North America and China and end-market weakness in the U.S. prior to the start of the pandemic. Changes in average selling prices are primarily driven by commodity metals prices, which typically impact Ryerson’s selling prices over the subsequent three to six-month period.

Recently, indicators in the key steel industry end markets that reported weakness as demand conditions were impacted by temporary customer closures as a result of the COVID-19 pandemic have begun to improve and, in some cases, inflect. This is evidenced by the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”), which reported strength in June, July, August, and September with readings above 50%, indicating general expansion in factory activity. This follows three months of PMI contraction in March, April, and May. However, while PMI reports an increase in month-over-month activity, U.S. Industrial Production, while improved from historically low levels, has reported an average year-over-year contraction of 7% for the past three months. This indicates that conditions have improved recently, but are still well below year-ago levels.

According to the Metal Service Center Institute, North American service center volumes declined by 13.5% in the first nine months of 2020 compared to the first nine months of 2019. On a North American basis, Ryerson experienced demand contraction more severe than the industry, with tons sold down by 19.0% over the same period. Demand softness was experienced across all of Ryerson’s end markets in the first nine months of 2020, most significantly in oil and gas, commercial ground transportation, and food processing and agricultural equipment sectors on a year-over-year basis. When customer demand falls, our operations typically generate countercyclical cash flow as our working capital needs decrease.

Recent Developments

On July 22, 2020, Ryerson and its wholly-owned subsidiary, JT Ryerson, issued $500 million in aggregate principal amount of its 8.50% Senior Secured Notes due 2028 (the “2028 Notes”). JT Ryerson’s obligations under the 2028 Notes are guaranteed by the Company as well as certain subsidiaries of the Company. 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 United States (other than receivables, inventory, money, deposit accounts and related general intangibles, certain other assets, and proceeds thereof), subject to certain exceptions and customary permitted liens. The 2028 Notes and the related guarantees are also secured on a second-priority basis by a lien on the assets that secure JT Ryerson’s and the Company’s obligations under the $1.0 billion revolving credit facility (the “Ryerson Credit Facility”).

The net proceeds from the issuance of the 2028 Notes, along with available cash, was used to (i) redeem in full the $530.3 million balance of JT Ryerson’s 11.00% Senior Secured Notes due 2022 (the “2022 Notes”), plus accrued and unpaid interest thereon up to, but not including, the repayment date, and (ii) pay related fees, expenses, and premiums.

As a result of this transaction, the Company anticipates approximately $16 million of annual interest savings. Further, the Company secured favorable optional redemption terms, which provide opportunities for further reducing outstanding debt. Specifically, JT Ryerson may redeem the 2028 Notes at any time and from time to time prior to August 1, 2023 in an aggregate principal amount equal to up to 10.0% of the original aggregate principal amount of the 2028 Notes during each twelve month period commencing on July 22, 2020 at a redemption price of 103.0%, plus accrued and unpaid interest, if any, to, but not including, the redemption date. JT Ryerson may also redeem the 2028 Notes at any time prior to August 1, 2022 in an aggregate principal amount equal to $100 million on a one-time basis from the net cash proceeds received from the sale of real property, at a redemption price of 104.0% plus accrued and unpaid interest, if any, to, but not including, the redemption date.

On September 30, 2020, JT Ryerson delivered to the holders of its 2028 Notes a notice of partial redemption of $50 million aggregate principal amount of the 2028 Notes on October 30, 2020 at a price of 103.0%, plus accrued and unpaid interest to, but not including, the redemption date. Ryerson expects to fund the transaction using cash on hand and expects to save approximately $4.3 million in annual interest expense. Upon completion of the partial redemption, $450 million aggregate principal amount of the notes will remain outstanding.

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 2020 and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, mandated closures and stay-at-home orders, and created significant disruption of the financial markets. 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.

In response to the COVID-19 pandemic, Ryerson implemented several policies and procedures to protect the health and welfare of our employees first and foremost while operating as an essential business, and maintaining our liquidity.

At the beginning of the pandemic, we communicated and enforced social distancing practices by implementing work from home arrangements, alternating employee shifts, eliminating congregation, and suspending non-essential travel. We also mobilized a task force and engaged our communications team to establish open lines of communications for our employees to ensure that all members of the Ryerson team are informed and supported throughout the pandemic.

Even as the pandemic continues into the fourth quarter of 2020, we remain resilient and committed to protecting our workforce. Led by our dedicated COVID-19 response team, we continue to follow CDC 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 realize that some of our locations are more likely to progress through our phased approach back to normal business activity more quickly than others, but 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 are encouraging our workforce to receive the flu vaccine, and in some locations providing the opportunity to receive the 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. Certain of our facilities have experienced temporary work disruptions as a result of COVID-19, but we have generally continued to operate during stay-at-home mandates due to Ryerson being deemed an essential business by state and local government authorities. While the majority of our customers that announced temporary closures have at this time resumed operations, our business and the business of our customers continues to be impacted by economic pressures and the ultimate impact of COVID-19 remains uncertain.

Furthermore, although Ryerson is always mindful of our liquidity position, in response to the COVID-19 pandemic, we deployed a dedicated team to closely monitor all critical areas daily including cash positioning and credit line availability and projections, while being ever mindful of our covenant requirements and working capital needs. We continue to actively manage relationships with our customers and vendors to ensure that we balance our receivables and payables cycles. Examples of specific actions taken in response to COVID-19 include increased focus on working capital management with targeted inventory reductions, receivables risk assessment, limiting discretionary spending, temporarily furloughing employees or reducing work hours, reducing executive and salaried employee pay, delaying salary increases, eliminating non-essential travel, delaying or reducing hiring activities, deferring certain discretionary capital expenditures, payroll tax and pension contribution deferrals, and accelerating Alternative Minimum Tax credit refunds as provided for under the Coronavirus Aid, Relief, and Economic Security Act (“The CARES Act”). The CARES Act, among other newly issued legislation, contains numerous other provisions which may benefit the Company. The Company intends to continue to assess the effect of the CARES Act and ongoing government guidance related to COVID-19 that may be issued and intends to take advantage of opportunities that support our balance sheet. With respect to liquidity, we took the actions listed above to bolster our financial condition and have contingency plans in place to reduce costs while supporting business operations. As of September 30, 2020, Ryerson had liquidity of $398 million, composed of $276 million of availability under the Ryerson Credit Facility and foreign debt facilities, and $122 million of cash and cash equivalents. As of September 30, 2020, we had excess borrowings of $101 million under the Ryerson Credit Facility to ensure access to cash during the COVID-19 pandemic.

Trade Matters

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. Subsequently, the White House announced steel quotas, in lieu of tariffs, with South Korea. On May 1, 2018, the White House further announced agreements-in-principle with Argentina, Australia, and Brazil for permanent exemptions from the tariffs in exchange for export quotas or voluntary export restraints, with the exception of Australia which has not agreed to quotas at the time of this report. In May 2019, steel tariffs put in place on Turkey in August of 2018 with the intention of offsetting the weakening Turkish Lira were revised down to 25% from 50%.

Further trade actions announced by the U.S. under Section 301 of the Trade Act of 1974 imposed various levels of tariffs and duties on imported Chinese goods with China reciprocating in kind on American goods. If these or other tariffs or duties expire or if others are relaxed or repealed, or if relatively higher U.S. metal prices make it attractive for foreign metal producers to export their products to the U.S., despite the presence of duties or tariffs, the resurgence of substantial imports of foreign steel could create downward pressure on U.S. metal prices which could have a material adverse effect on our potential earnings and future results of operations.

On January 15, 2020, the United States and China signed a phase one trade agreement in which the U.S. agreed not to proceed with tariffs that had been scheduled to take effect December 15, 2019 and cut Section 301 duties related to the September 1, 2019 tariffs on $120 billion in Chinese goods in half, from 15% to 7.5%, effective February 14, 2020. In return, China agreed to increase its purchases of U.S. manufactured goods, agricultural products, energy, and services by a total of $200 billion over 2017 levels in the two years through December 2021. However, negotiations with China are ongoing and as of the agreement the U.S. will maintain 25% tariffs on another $250 billion of Chinese products while China maintains retaliatory tariffs on some U.S. goods. Since the agreement, China has unveiled new tariff exemptions and the countries reaffirmed their phase one trade deal in early May.

The U.S.-Mexico-Canada-Agreement (“USMCA”), which is designed to replace the North American Free Trade Agreement (“NAFTA”), was ratified by all three countries as of March 13, 2020, and became effective on July 1, 2020. Ryerson expects that implementation of the USMCA will support demand for North American steel through strengthening of rules of origin for steel-intensive goods and will continue to provide tariff-free trade access in North American markets.

In August 2020, President Trump re-imposed a tariff of 10% on some aluminum goods imported from Canada, after having lifted the tariffs in May 2019. However, on September 15, 2020, the administration determined that the imports of Canadian aluminum would normalize, and based on this assumption, the administration decided to remove the 10% tariffs. Additionally, the import quota set for Brazil was lowered in September 2020 for shipments of semi-finished steel for the remainder of 2020. According to the Steel Manufacturers Association, the remaining quota for Brazilian semi-finished steel products has been lowered to 60,000 metric tons, down from 350,000 metric tons.

Further, on October 9, 2020, the U.S. Department of Commerce issued affirmative preliminary antidumping duty determinations on common alloy aluminum sheet from 18 countries, including Bahrain, Brazil, Croatia, Egypt, Germany, Greece, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, South Korea, Spain, Taiwan, and Turkey. The alleged dumping margins range from single digits up through triple digits. The Department of Commerce will investigate whether or not common alloy aluminum sheet is being unfairly dumped or subsidized and whether or not the U.S. is being harmed by the imports of these countries. Preliminary determinations are to be made by the Department of Commerce on or before April 23, 2021.

Components of Results of Operations

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

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

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

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

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

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

Results of Operations — Comparison of Three and Nine Months Ended September 30, 2020 to Three and Nine Months Ended September 30, 2019

The following table sets forth our condensed consolidated statements of income data for the three-month and nine-month periods ended September 30, 2020 and 2019:

	Three Months Ended September 30,												Nine Months Ended September 30,
	2020						2019						2020						2019
	$			% of Net Sales			$			% of Net Sales			$			% of Net Sales			$			% of Net Sales
	($ in millions)												($ in millions)
Net sales	$	831.5			100.0	%	$	1,104.4			100.0	%	$	2,613.6			100.0	%	$	3,540.1			100.0	%
Cost of materials sold		675.6			81.3			900.0			81.5			2,146.4			82.1		$	2,892.6			81.7
Gross profit		155.9			18.7			204.4			18.5			467.2			17.9			647.5			18.3
Warehousing, delivery, selling, general, and administrative expenses		125.4			15.1			165.6			15.0			405.2			15.5			493.9			14.0
Gain on insurance settlement		—			—			(1.5	)		(0.1	)		—			—			(1.5	)		—
Restructuring and other charges		0.2			—			0.3			—			2.2			0.1			1.7			—
Operating profit		30.3			3.6			40.0			3.6			59.8			2.3			153.4			4.3
Other (expenses) and income		(89.3	)		(10.7	)		(23.5	)		(2.1	)		(129.5	)		(5.0	)		(72.3	)		(2.0	)
Income (loss) before income taxes		(59.0	)		(7.1	)		16.5			1.5			(69.7	)		(2.7	)		81.1			2.3
Provision (benefit) for income taxes		(19.3	)		(2.3	)		6.3			0.6			(20.9	)		(0.8	)		24.8			0.7
Net income (loss)		(39.7	)		(4.8	)		10.2			0.9			(48.8	)		(1.9	)		56.3			1.6
Less: Net income attributable to noncontrolling interest		0.2			—			0.1			—			0.3			—			0.3			—
Net income (loss) attributable to Ryerson Holding Corporation	$	(39.9	)		(4.8	)%	$	10.1			0.9	%	$	(49.1	)		(1.9	)%	$	56.0			1.6	%
Basic earnings (loss) per share	$	(1.05	)				$	0.27					$	(1.29	)				$	1.49
Diluted earnings (loss) per share	$	(1.05	)				$	0.27					$	(1.29	)				$	1.48

Net sales

The following table shows our percentage of sales revenue by major product lines for the three and nine month periods ended September 30, 2020 and 2019:

	Three Months Ended September 30,						Nine Months Ended September 30,
Product Line	2020			2019			2020			2019
Carbon Steel Flat		28	%		26	%		26	%		25	%
Carbon Steel Plate		8			11			9			11
Carbon Steel Long		13			15			15			16
Stainless Steel Flat		16			15			16			15
Stainless Steel Plate		4			4			5			4
Stainless Steel Long		5			4			5			4
Aluminum Flat		16			16			14			16
Aluminum Plate		3			2			3			2
Aluminum Long		5			5			5			5
Other		2			2			2			2
Total		100	%		100	%		100	%		100	%

	September 30,				Dollar			Percentage
	2020		2019		change			change
	($ in millions)
Net sales (three-months ended)	$	831.5	$	1,104.4	$	(272.9	)		(24.7	)%
Net sales (nine-months ended)	$	2,613.6	$	3,540.1	$	(926.5	)		(26.2	)%

	September 30,				Tons			Percentage
	2020		2019		change			change
	(in thousands)
Tons sold (three-months ended)		489		598		(109	)		(18.2	)%
Tons sold (nine-months ended)		1,517		1,840		(323	)		(17.6	)%

	September 30,				Price			Percentage
	2020		2019		change			change
Average selling price per ton sold (three-months ended)	$	1,700	$	1,847	$	(147	)		(8.0	)%
Average selling price per ton sold (nine-months ended)	$	1,723	$	1,924	$	(201	)		(10.4	)%

Revenue for the three-month and nine-month periods ended September 30, 2020 decreased from the same periods a year ago reflecting the impact of the global outbreak of COVID-19 and a slowdown in the metals market that was a continuation from the decline in the industry in 2019. Compared to the year ago period, average selling price decreased for all of our product lines in the three-month and nine-month periods ended September 30, 2020 with the largest decreases in our carbon plate, aluminum plate, carbon flat, and aluminum flat products. Tons sold decreased in the three-month and nine-month periods ended September 30, 2020 for all of our product lines with the largest decreases in our carbon plate, carbon long, aluminum flat, and stainless plate product lines.

Cost of materials sold

	September 30,
	2020					2019
	$		% of Net Sales			$		% of Net Sales			Dollar change			Percentage change
	($ in millions)
Cost of materials sold (three-months ended)	$	675.6		81.3	%	$	900.0		81.5	%	$	(224.4	)		(24.9	)%
Cost of materials sold (nine-months ended)	$	2,146.4		82.1	%	$	2,892.6		81.7	%	$	(746.2	)		(25.8	)%

	September 30,				Cost			Percentage
	2020		2019		change			change
Average cost of materials sold per ton sold (three-months ended)	$	1,381	$	1,505	$	(124	)		(8.2	)%
Average cost of materials sold per ton sold (nine-months ended)	$	1,415	$	1,572	$	(157	)		(10.0	)%

The decrease in cost of materials sold in the three-month and nine-month periods ended September 30, 2020 compared to the year ago period is primarily due to the decrease in tons sold and to a decrease in average cost of materials sold per ton. The average cost of materials sold decreased across almost all product lines with the average cost of materials sold for our carbon plate, carbon flat, carbon long, and aluminum plate product lines decreasing more than our other product lines during the three-month and nine-month periods ended September 30, 2020. During the third quarter of 2020, LIFO income was $16.9 million compared to LIFO income of $29.6 million in the third quarter of 2019. During the first nine months of 2020, LIFO income was $23.0 million compared to LIFO income of $62.6 million in the first nine months of 2019.

Gross profit

	September 30,
	2020					2019
	$		% of Net Sales			$		% of Net Sales			Dollar change			Percentage change
	($ in millions)
Gross profit (three-months ended)	$	155.9		18.7	%	$	204.4		18.5	%	$	(48.5	)		(23.7	)%
Gross profit (nine-months ended)	$	467.2		17.9	%	$	647.5		18.3	%	$	(180.3	)		(27.8	)%

Gross profit decreased in the three-month and nine-month periods ended September 30, 2020 compared to the year ago periods due to the decrease in tons sold. While our revenue per ton decreased in the three and nine month periods ended September 30, 2020 as compared to the three and nine months ended September 30, 2019, cost of materials sold per ton decreased at nearly the same pace resulting in gross margins that were relatively unchanged.

Operating expenses

	September 30,
	2020					2019
	$		% of Net Sales			$		% of Net Sales			Dollar change			Percentage change
	($ in millions)
Warehousing, delivery, selling, general, and administrative expenses (three-months ended)	$	125.4		15.1	%	$	165.6		15.0	%	$	(40.2	)		(24.3	)%
Warehousing, delivery, selling, general, and administrative expenses (nine-months ended)	$	405.2		15.5	%	$	493.9		14.0	%	$	(88.7	)		(18.0	)%
Restructuring and other charges (three-months ended)	$	0.2		—		$	0.3		—		$	(0.1	)		(33.3	)%
Restructuring and other charges (nine-months ended)	$	2.2		0.1	%	$	1.7		—		$	0.5			29.4	%

Total operating expenses decreased in the three-month and nine-month periods ended September 30, 2020 compared to the year ago periods primarily due to lower salaries and wages due to workforce and compensation reductions ($15.7 million lower in the third quarter of 2020 and $31.1 million in the first nine months of 2020) in response to the outbreak of COVID-19. The lower headcount also reduced employee benefit expenses by $5.1 million in the third quarter of 2020 and $10.0 million in the first nine months of 2020. In addition, selling, general, and administrative expenses were $8.7 million lower in the third quarter of 2020 and $19.9 million lower in the first nine months of 2020 primarily due to lower use of outside technical services and reduced travel and entertainment expenses, delivery expenses were $5.1 million lower in the third quarter of 2020 and $12.0 million lower in the first nine months of 2020 due to lower shipments, operating supplies were $2.6 million lower in the third quarter of 2020 and $7.4 million lower in the first nine months of 2020, and depreciation expense was $2.1 million lower in the third quarter of 2020 and $3.9 million lower in the first nine months of 2020. Finally, incentive compensation was $4.3 million lower in the first nine months of 2020, although it increased $0.6 million in the third quarter of 2020 compared to the year-ago period. Partially offsetting the decreases was higher rent expense of $0.7 million in the third quarter of 2020 and $2.5 million in the first nine months of 2020 due to a sale-leaseback transaction on nine of our real estate properties that was executed in the fourth quarter of 2019.

Operating profit

	September 30,
	2020					2019
	$		% of Net Sales			$		% of Net Sales			Dollar change			Percentage change
	($ in millions)
Operating profit (loss) (three-months ended)	$	30.3		3.6	%	$	40.0		3.6	%	$	(9.7	)		(24.3	)%
Operating profit (nine-months ended)	$	59.8		2.3	%	$	153.4		4.3	%	$	(93.6	)		(61.0	)%

Our operating profit decreased in the three-month and nine-month periods ended September 30, 2020 compared to the three-month and nine-month periods ended September 30, 2019, primarily due to decreases in tons sold and average selling prices, slightly offset by lower operating expenses.

Other expenses

	September 30,
	2020						2019
	$			% of Net Sales			$			% of Net Sales			Dollar change			Percentage change
	($ in millions)
Interest and other expense on debt (three-months ended)	$	(20.2	)		(2.4	)%	$	(23.2	)		(2.1	)%	$	3.0			(12.9	)%
Interest and other expense on debt (nine-months ended)	$	(61.2	)		(2.4	)%	$	(71.0	)		(2.0	)%	$	9.8			(13.8	)%
Other income and (expense), net (three-months ended)	$	(69.1	)		(8.3	)%	$	(0.3	)		—		$	(68.8	)		22933.3	%
Other income and (expense), net (nine-months ended)	$	(68.3	)		(2.6	)%	$	(1.3	)		—		$	(67.0	)		5153.8	%

Interest and other expense on debt decreased in the three-month and nine-month periods ended September 30, 2020 compared to the year ago periods primarily due to the redemption of the $530.3 million outstanding balance of our 11.00% Senior Secured Notes due 2022 (the “2022 Notes”) which was preceded by the redemption of $57.6 million of the 2022 Notes during the first six months of 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 at 8.50%. In addition, interest and other expense on debt was lower in the three-month and nine-month periods ended September 30, 2020 due to a lower level of credit facility borrowings outstanding compared to the year ago period related to lower working capital requirements resulting from a slowing metals market, and lower interest rates on credit facility borrowings. Credit facility borrowings were at a lower level in the first nine months of 2020 compared to the first nine months of 2019 despite having borrowed between $80 million and $166 million of excess funds during the first nine months of 2020 to maintain access to cash during the COVID-19 pandemic. Interest expense in the first nine months of 2020 included a $0.4 million charge to writeoff unamortized bond issuance costs related to the $57.6 million of 2022 Notes repurchased during the first six months of 2020.

The other income and (expense), net in the third quarter and first nine months of 2020 includes a $52.5 million pension settlement loss and $16.2 million loss on the repurchase and redemption of the 2022 Notes. See Pension Funding section below for further details on the transaction that resulted in the pension settlement loss. The other expense in the three-month and nine-month periods ended September 30, 2019 includes $0.4 million and $1.2 million of foreign currency losses, respectively.

Provision for income taxes. In the third quarter of 2020, the Company recorded an income tax benefit of $19.3 million compared to income tax expense of $6.3 million in the third quarter of 2019. In the first nine months of 2020, the Company recorded an income tax benefit of $20.9 million compared to income tax expense of $24.8 million in the first nine months of 2019. 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 (loss) per share. Basic loss per share was $1.05 in the third quarter of 2020 and $1.29 in the first nine months of 2020 compared to basic earnings per share of $0.27 in the third quarter of 2019 and $1.49 in the first nine months of 2019. Diluted loss per share was $1.05 in the third quarter of 2020 and $1.29 in the first nine months of 2020 compared to diluted earnings per share of $0.27 in the third quarter of 2019 and $1.48 in the first nine months of 2019. The changes in earnings per share are due to the results of operations discussed above.

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 that matures on November 16, 2021. Its principal source of operating cash is from the sale of metals and other materials. Its 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 $101 million as of September 30, 2020. Accordingly, we had cash and cash equivalents of $121.8 million at September 30, 2020, compared to $11.0 million at December 31, 2019. Despite the extra borrowing, our total debt outstanding at September 30, 2020 decreased to $814 million compared to $982 million of total debt outstanding at December 31, 2019 due to decreased working capital requirements. We had a debt-to-capitalization ratio of 86% and 85% at September 30, 2020 and at December 31, 2019, respectively. We had total liquidity (defined as cash and cash equivalents, restricted cash from sales of property, plant, and equipment, and availability under the Ryerson Credit Facility and foreign debt facilities) of $398 million at September 30, 2020 versus $439 million at December 31, 2019. Our net debt (defined as total debt less cash and cash equivalents, and restricted cash from sales of property, plant, and equipment) was $692 million and $923 million at

September 30, 2020 and December 31, 2019, respectively. Total liquidity and net debt are not U.S. generally accepted accounting principles (“GAAP”) financial measures. We believe that total liquidity provides additional information for measuring our ability to fund our operations. Total liquidity does not represent, and should not be used as a substitute for, net income or cash flows from operations as determined in accordance with GAAP and total liquidity is not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. We believe that net debt provides a clearer perspective of the Company’s overall debt 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:

	September 30, 2020		December 31, 2019
	(In millions)

Cash and cash equivalents	$	122	$	11
Restricted cash from sales of property, plant, and equipment		—		48
Availability under Ryerson Credit Facility and foreign debt facilities		276		380
Total liquidity	$	398	$	439

Below is a reconciliation of total debt to net debt:

	September 30, 2020			December 31, 2019
	(In millions)

Total debt	$	814		$	982
Less: cash and cash equivalents		(122	)		(11	)
Less: restricted cash from sales of property, plant, and equipment		—			(48	)
Net debt	$	692		$	923

Of the total cash and cash equivalents, as of September 30, 2020, $12.2 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.

The following table summarizes the Company’s cash flows:

	Nine Months Ended September 30,
	2020			2019
	(In millions)
Net income (loss)	$	(48.8	)	$	56.3
Depreciation and amortization		40.5			44.3
Deferred income taxes		(10.9	)		41.4
Pension settlement charge		54.3			0.2
Change in operating assets and liabilities:
Receivables		28.4			12.4
Inventories		169.0			(5.1	)
Accounts payable		55.8			(1.6	)
Accrued liabilities		(8.5	)		(3.8	)
Deferred employee benefit costs		(8.7	)		(23.9	)
Other operating asset and liability balances		11.9			(4.0	)
All other operating cash flows		13.7			14.3
Net cash provided by operating activities		296.7			130.5
Capital expenditures		(17.9	)		(32.5	)
Proceeds from sale of property, plant, and equipment		0.1			8.8
Proceeds from insurance settlement		—			1.8
Net cash used in investing activities		(17.8	)		(21.9	)
Long term debt issued		500.0			—
Repayment of debt		(602.8	)		(12.3	)
Net repayments of short-term borrowings		(73.5	)		(107.4	)
Bond issuance costs		(10.6	)		—
Net increase (decrease) in book overdrafts		(16.2	)		12.6
All other financing cash flows		(10.1	)		(2.8	)
Net cash used in financing activities		(213.2	)		(109.9	)
Effect of exchange rates on cash and cash equivalents		(2.6	)		(0.1	)
Net increase (decrease) in cash and cash equivalents	$	63.1		$	(1.4	)

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. Inventory levels decreased significantly in the first nine months of 2020 as the Company brought inventory levels in line with the weak market conditions resulting from the COVID-19 outbreak in 2020. Accounts receivable also decreased in the first nine months of 2020 as a result of lower sales levels due to the weak market conditions in 2020. In comparison, inventory increased in the first nine months of 2019 to support higher sales levels in 2019 while accounts receivable decreased in the first nine months of 2019 as sales levels decreased during the third quarter of 2019 compared to the fourth quarter of 2018. The increase in accounts payable for the first nine months of 2020 is related to increased purchases and operating activities compared to the fourth quarter of the prior year and in comparison to a decrease in accounts payable in the first nine months of 2019 as purchases and operating activity decreased compared to the fourth quarter of 2018. In the first nine months of 2020, we recorded a non-cash pension settlement charge of $54.3 million compared to a charge of $0.2 million in the first nine months of 2019. The increase in the charge in 2020 resulted from the purchase of annuities by the Ryerson Pension Plan on behalf of a portion of plan participants which resulted in a settlement loss of $52.5 million in the third quarter of 2020.

Investing activities. The Company's main investing activities are capital expenditures and proceeds from the sale of property, plant, and equipment. Capital expenditures have decreased year-over-year as the Company reduced the annual capital expenditures budget from $45 million to $25 million due to the COVID-19 pandemic. At this time, we are limiting capital spending to critical sustaining projects.

Financing activities. The Company's main source of liquidity to fund working capital requirements is borrowings on its credit facility. While the Company anticipates its current cash balances, cash flows from operations, and available sources of liquidity will be sufficient to meet its cash requirements, approximately $101 million of excess funds were borrowed at September 30, 2020 to maintain access to cash during the COVID-19 pandemic. This borrowing was offset by credit facility repayments from the operating cash flow that was generated in the first nine months of 2020. In addition, during the first nine months of 2020 we redeemed and repurchased the outstanding principal amount of $587.9 million of our 2022 Notes compared to repurchases of $11.8 million in the first nine months of 2019. In the third quarter of 2020 we issued $500 million of our 2028 Notes to replace the 2022 Notes at a lower

interest rate and debt level and paid $10.3 million of issuance fees on the transaction. Book overdrafts fluctuate based on the timing of payments.

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 $814.0 million at September 30, 2020 from $981.8 million at December 31, 2019, mainly due to the net cash provided by operating activities in the first nine months of 2020.

Total debt outstanding as of September 30, 2020 consisted of the following amounts: $310.0 million borrowings under the Ryerson Credit Facility, $500.0 million under the 2028 Notes, $7.4 million of foreign debt, and $8.2 million of other debt, less $11.6 million of unamortized debt issuance costs. For further information, see Note 7: Long Term Debt in Part I, Item I - Notes to the Condensed Consolidated Financial Statements.

Pension Funding

At December 31, 2019, pension liabilities exceeded plan assets by $140 million. Through the nine months ended September 30, 2020, we have made $7 million in pension contributions. The Company has elected to defer the remaining expected 2020 U.S. contributions of $12 million until January 1, 2021, as permitted under The CARES Act that was passed in March 2020. We anticipate that we will have zero minimum required pension contributions in 2020 under the Ontario Pension Benefits Act in Canada. Future contribution requirements depend on the investment returns on plan assets, the impact of discount rates on pension liabilities, and changes in regulatory requirements. We are unable to determine the amount or timing of any such contributions required by ERISA or whether any such contributions would have a material adverse effect on our financial position or cash flows.

Effective September 28, 2020, the Ryerson Pension Plan purchased annuities on behalf of a portion of plan participants which resulted in settlement accounting. The purchase price was $95.2 million and the settled benefit obligation, using the assumptions utilized in measuring the unsettled obligation, was $99.5 million. The pension plan was remeasured as of September 30, 2020. The remeasurement resulted in a settlement loss of $52.5 million which was recorded within Other income and (expense), net in the Condensed Consolidated Statement of Comprehensive Income as of September 30, 2020. As a result of the remeasurement, the discount rate decreased from 3.15% to 2.59% and the expected long-term rate of return on pension assets decreased from 5.75% to 5.25%.

COVID-19 has negatively affected the financial markets and our returns on pension assets. 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.

Off-Balance Sheet Arrangements

In the normal course of business with customers, vendors, and others, we have entered into off-balance sheet arrangements, such as letters of credit, which totaled $15 million as of September 30, 2020. We do not have any other material off-balance sheet financing arrangements. None of these off-balance sheet arrangements are likely to have a material effect on our current or future financial condition, results of operations, liquidity, or capital resources.

Contractual Obligations

The following table presents contractual obligations at September 30, 2020:

	Payments Due by Period
Contractual Obligations ^{(1) (2)}	Total		Less than 1 year		1 – 3 years		4 – 5 years		After 5 years
	(In millions)

2028 Notes		500		—		—		—		500
Ryerson Credit Facility		310		—		310		—		—
Foreign Debt		7		7		—		—		—
Other Debt		8		2		3		3		—
Interest on 2028 Notes, Foreign Debt, Other Debt, and Ryerson Credit Facility ⁽³⁾		342		50		86		85		121
Purchase Obligations ⁽⁴⁾		7		7		—		—		—
Operating Leases ⁽⁵⁾		134		25		39		29		41
Finance Lease Obligations ⁽⁵⁾		26		11		11		4		—
Pension Withdrawal Liability		1		—		—		—		1
Total	$	1,335	$	102	$	449	$	121	$	663

(1)	The contractual obligations disclosed above do not include the Company’s potential future pension funding obligations (see discussion under “Pension Funding” caption).

(2)	Due to uncertainty regarding the completion of tax audits and possible outcomes, we do not know when our obligations related to unrecognized tax benefits will occur, if at all.

(3)	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.

(4)	The purchase obligations with suppliers are entered into when we receive firm sales commitments with certain of our customers.

(5)	Future lease payments are undiscounted.

Income Taxes

In accordance with ASC 740, “Income Taxes,” the Company calculates its quarterly tax provision based on an estimated effective tax rate for the year, applies it to the results of each interim period, and then adjusts that amount by certain discrete items. Due to volatile macro-economic conditions associated with the COVID-19 pandemic, we may experience fluctuations in our forecasted earnings before income taxes as a result of events which cannot be predicted. As such, the Company's effective tax rate could be subject to unusual volatility as forecasted earnings before income taxes change.

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.

We anticipate that certain statutes of limitation will close within the next twelve months resulting in the reduction of the reserve for uncertain tax benefits related to various intercompany transactions. Although we released $1.9 million of reserves in the second quarter of 2020, we do not believe future amounts will be material.

Critical Accounting Estimates

Goodwill: We assess the recoverability of goodwill annually in the fourth quarter of every year or whenever indicators of potential impairment exist. We test for impairment of goodwill by assessing various qualitative factors with respect to developments in our business and the overall economy and calculating the fair value of a reporting unit using the discounted cash flow method, as necessary. If we determine that it is more likely than not that the fair value of a reporting unit is less than the carrying value based on our qualitative assessment, we will proceed to the quantitative goodwill impairment test, in which we compare the fair value of the reporting unit where the goodwill resides to its carrying value. If the carrying amount of the goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. The fair value of the reporting unit is estimated using a combination of an income approach and a market approach as this combination is deemed to be the most indicative of fair value in an orderly transaction between market participants. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows, and discount rates. The market approach estimates fair value using market multiples of various financial measures of comparable public companies.

Due to the COVID-19 pandemic and its effect on our business and the overall economy, we performed a quantitative impairment test of goodwill as of May 31, 2020. The entire balance of goodwill for the Company as of the date of our quantitative assessment and September 30, 2020 of $120.3 million, resides at the U.S. reporting unit. Based upon the quantitative assessment performed for the U.S. reporting unit, the fair value of the U.S. reporting unit exceeded its carrying value by 9% and as such it was determined that no impairment existed.

The determination of the fair value of the reporting units requires the Company to make significant estimates including business and financial performance of the Company’s reporting units, taking into consideration how such performance may be impacted by COVID-19. These estimates and assumptions primarily include but are not limited to: the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, discount rates, terminal growth rates, and forecasts of revenue, operating income, depreciation, amortization, and capital expenditures.

In evaluating the U.S. reporting unit significant weight is placed on forecasted EBITDA and the weighted average cost of capital (“WACC”) used in the discounted cash flow model, as we determined these items have the most significant impact on the fair value of the reporting unit.

•

EBITDA is expected to recover provided that pricing and volumes stabilize, and we expect to gain operating leverage through some of the cost savings initiatives undertaken in response to the COVID-19 pandemic that are expected to continue post-pandemic.

•

We used a WACC of 15.5% based upon market participants assumptions. We performed a sensitivity analysis on our estimated fair value noting that a 100 basis points increase in the discount rate results in a decrease of 4% of the excess fair value over the carrying value of the reporting unit.

Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to inherent uncertainty in making such estimates. A lack of recovery or further deterioration in market conditions, a trend of weaker than expected financial performance in our business, or a lack of recovery or further 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.

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 $840.8 million at September 30, 2020 and $1,014.4 million at December 31, 2019 as compared with the carrying value of $814.0 million and $981.8 million at September 30, 2020 and December 31, 2019, 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 September 30, 2020, we have two receive variable, pay fixed, interest rate swaps to manage the exposure to variable interest rates of the Ryerson Credit Facility. In June 2019, we entered into a forward agreement for $60 million of “pay fixed” interest at 1.729% through June 2022 and in November 2019, we entered into a forward agreement for $100 million of “pay fixed” interest at 1.539% through November 2022. We account for these interest rate swaps as cash flow hedges of floating-rate borrowings with changes in fair value being recorded in accumulated other comprehensive income. The fair value of the interest rate swaps as of September 30, 2020 was a net liability of $4.6 million. After considering the effects of our interest rate swaps, 81% of our debt was at fixed interest rates as of September 30, 2020. Considering the impact of interest rate swaps, a hypothetical 1% increase in interest rates on variable rate debt would have increased interest expense for the first nine months of 2020 by approximately $2.0 million.

Foreign exchange rate risk

We are subject to foreign currency risks primarily through our operations in Canada, Mexico, and China and we use foreign currency exchange contracts to reduce our exposure to currency price fluctuations. Foreign currency contracts are principally used to purchase U.S. dollars. We had foreign currency contracts with a U.S. dollar notional amount of $1.6 million outstanding at September 30, 2020 and value of zero. We do not currently account for these contracts as hedges but rather mark these contracts to market with a corresponding offset to current earnings. For the nine months ended September 30, 2020, the Company recognized zero gain or loss associated with its foreign currency contracts. A hypothetical strengthening or weakening of 10% in the foreign exchange

rates underlying the foreign currency contracts from the market rate as of September 30, 2020 would increase or decrease the fair value of the foreign currency contracts by $0.1 million and $0.2 million, respectively.

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

Commodity price risk

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

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

As of September 30, 2020, we had 28,502 tons of hot roll coil swaps contracts with a net asset value of $0.4 million, 14,478 tons of aluminum swap contracts with a net asset value of $0.2 million, and 67 tons of nickel swap contracts with a net asset value of $0.1 million. We do not currently account for these swaps as hedges, but rather mark these contracts to market with a corresponding offset to current earnings. For the nine months ended September 30, 2020, the Company recognized a gain of $1.3 million associated with its commodity derivatives.

A hypothetical strengthening or weakening of 10% in the commodity prices underlying the commodity derivative contracts from the market rate as of September 30, 2020 would increase or decrease the fair value of commodity derivative contracts by $4.2 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 Interim Principal 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 Interim Principal 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 Interim Principal Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2020.

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s controls over financial reporting during the quarter ended September 30, 2020.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

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 ROD includes a combination of dredging, capping, and enhanced natural recovery that would take approximately thirteen years to construct plus additional time for monitored natural recovery, at an estimated present value cost of $1.05 billion. In a change from its prior stance, at a meeting on December 4, 2018, the EPA indicated that it expected PRPs to submit a plan during 2019 to start remediation of the river and harbor per the original ROD within the next two to three years. The EPA also indicated that it expected allocation of amounts among the parties to be determined in the same two to three-year time frame. The EPA invited certain PRPs to a May 2, 2019 meeting to discuss starting the remedial design process. The EPA did not include JT Ryerson in those meetings.

Item 1A.

Risk Factors

Except for the risk factors 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, 2019.

The effects of the COVID-19 pandemic have had, and are expected to continue to have, an adverse impact on our business, operating results, and financial condition.

The global outbreak of a novel strain of coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020 and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, mandated closures and stay-at-home orders, and created significant disruptions in the financial markets. We are monitoring the impact of the COVID-19 pandemic across our business. The global spread of COVID-19, and the various governmental, industry, and consumer actions related thereto, have had and could continue to have negative impacts on our business and operations, including softening demand for our products, disruptions in our supply chain and operations, and related restrictions on our employees, including quarantines, stay-at-home orders, and restrictions on travel.

In response to the COVID-19 pandemic, we have implemented several policies and procedures to protect the health and welfare of our employees first and foremost, while operating as an essential business, and maintaining our liquidity. We have communicated and enforced social distancing practices by implementing work from home arrangements, alternating employee shifts, eliminating congregation, and suspending non-essential travel. COVID-19 has disrupted our internal operations, including by heightening the risk that our employees will suffer illness or otherwise not be permitted to work and exposing us to cybersecurity and other risks associated with a large number of our employees working remotely. Certain of our facilities have experienced temporary work disruptions as a result of COVID-19, and we cannot predict whether these will continue or if our facilities will experience more significant or frequent disruptions in the future. Furthermore, we have and may need to further reduce our workforce as a result of declines in our business caused by COVID-19, and any such reduction would cause us to incur costs. Moreover, there can be no assurance that we would be able to rehire our workforce in the event our business experiences a subsequent recovery.

On the whole, because manufacturing demand is tied closely to overall economic strength, economic uncertainty and/or increased unemployment that results from the COVID-19 pandemic or measures undertaken in response has led and could continue to lead to lower demand for our products. Although our end-markets are diverse, concerns regarding and measures implemented in

response to the COVID-19 pandemic have and could further negatively influence overall demand, particularly for the consumer durable sector, resulting in cancellations or deferrals of orders and/or decreases in new deliveries.

COVID-19 has also led to disruption and volatility in the capital markets, which depending on future developments could adversely impact our capital resources and liquidity in the future.

We are also monitoring the impacts of the COVID-19 pandemic on the fair value of our assets. While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings, and cash flows related to intangible assets and goodwill below our current projections could cause these assets to be impaired.

We are continuing to monitor the impact of the COVID-19 pandemic across our business and will take appropriate actions in an effort to mitigate adverse consequences. The full extent to which the COVID-19 pandemic and measures taken in response thereto adversely impacts our business, financial condition, and results of operations will depend on numerous evolving factors and future developments, which are highly uncertain, rapidly changing, and cannot be predicted, including: the duration and scope of the outbreak; governmental, business, and individual actions that have been and continue to be taken in response to the outbreak, including travel restrictions, quarantines, social distancing, work-at-home and stay-at-home orders; the impact of the outbreak on the financial markets and economic activity generally; the effect of the outbreak on our customers, suppliers, and other business partners; our ability to access usual sources of liquidity on reasonable terms; and our ability to comply with the financial covenants in our Ryerson Credit Facility if a material economic downturn results in increased indebtedness or substantially lower EBITDA. All of the foregoing will likely impact our business, financial condition, results of operations, and forward-looking expectations. In addition, the impact of the COVID-19 pandemic may also have the effect of heightening many of the other risks described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Poor investment performance or other factors could require us to make significant unplanned contributions to our pension plan.

We provide defined benefit pension plans for certain eligible employees and retirees. The performance of the debt and equity markets affect the value of plan assets. A decline in the market value may increase the funding requirements for these plans. The cost of providing pension benefits is also affected by other factors, including interest rates used to measure the required minimum funding levels, the rate of return on plan assets, discount rates used in determining future benefit obligations, future government regulation, and prior contributions to the plans. Significant unanticipated changes in any of these factors may have an adverse effect on our financial condition, results of operations, liquidity, and cash flows. The COVID-19 pandemic has negatively affected financial markets and our returns on our pension assets which could adversely impact our plan funding, cash flows, and pension expense.

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, 10.6% and 50.6% of our net sales and EBITDA for the nine months ended September 30, 2020. In addition, these non-guarantor subsidiaries represented respectively, 11.3% and 7.3% of our assets and liabilities, as of September 30, 2020.

Accordingly, in the event that any of the non-guarantor subsidiaries or joint venture entities become insolvent, liquidates, or otherwise reorganizes:

•

the creditors of the guarantors (including the holders of the 2028 Notes) will have no right to proceed against such subsidiary’s assets; and

•

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.

Item 6.

Exhibits

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

File No.

Filing Date

Herewith

4.1

Indenture, dated as of July 22, 2020, by and among Joseph T. Ryerson & Son, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee and collateral agent.

8-K

001-34735

July 22, 2020

31.1

Certificate of the Principal Executive Officer of the Company, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certificate of the Interim Principal Financial Officer of the Company, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Written Statement of Edward J. Lehner, President and Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Written Statement of Molly D. Kannan, Interim Principal Financial Officer, Chief Accounting Officer and Controller of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

*In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished herewith and not filed.

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.


RYERSON HOLDING CORPORATION

By:		/s/ Molly D. Kannan
		Molly D. Kannan Interim Principal Financial Officer, Chief Accounting Officer and Controller (duly authorized signatory of the registrant)

Date: October 28, 2020