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EX-23.1 - CONSENT OF ERNST & YOUNG LLP - Ryerson Holding Corpdex231.htm
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As filed with the Securities and Exchange Commission on June 21, 2011.

Registration No 333-164484

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 12

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

RYERSON HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   5051   26-1251524

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

2621 West 15th Place

Chicago, Illinois 60608

(773) 762-2121

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Terence R. Rogers

Chief Financial Officer

Ryerson Holding Corporation

2621 West 15th Place

Chicago, Illinois 60608

(773) 762-2121

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

 

Cristopher Greer, Esq.  

James J. Clark, Esq.

William J. Miller, Esq.

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
Facsimile: (212) 728-9214
 

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

(212) 701-3000

Facsimile: (212) 269-5420

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

 

Large accelerated filer  ¨    Accelerated filer  ¨
Non-accelerated filer  x    Smaller reporting company  ¨

(Do not check if a smaller reporting company)

  

 

 
Title of Each Class of Securities To Be Registered  

Proposed Maximum

Aggregate Offering
Price(1)(2)

  Amount of
Registration
Fee(3)

Common Stock, par value $0.01 per share

  $300,000,000   $34,830
 
 
(1) Estimated solely for purposes of determining the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes shares of common stock that may be purchased by the underwriters to cover over-allotments, if any. See “Underwriting.”
(3) Previously paid.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 


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The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated                     , 2011

PROSPECTUS

             Shares

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Ryerson Holding Corporation

Common Stock

 

 

We are selling              shares of our common stock. The selling stockholders identified in this prospectus have granted the underwriters an option to purchase up to              additional shares of common stock to cover over-allotments. We will not receive any proceeds from the sale of shares by the selling stockholders.

This is the initial public offering of our common stock. We currently expect the initial public offering price to be between $         and $         per share. We have applied to have our common stock listed on the New York Stock Exchange under the symbol “RYI.”

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 16.

 

 

 

     Per Share   

Total

Public Offering Price

   $    $

Underwriting Discount

   $    $

Proceeds, before expenses, to us.

   $    $

The underwriters may also purchase up to an additional              shares from the selling stockholders, at the public offering price, less the underwriting discount, within 30 days of the date of this prospectus to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about                     , 2011.

 

 

 

BofA Merrill Lynch

  J.P. Morgan

 

 

The date of this prospectus is                     , 2011.


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You should rely only on the information contained in this prospectus and any free writing prospectus we may specifically authorize to be delivered or made available to you. We have not, and the selling stockholders and the underwriters have not, authorized anyone to provide you with different information. We are not, and the selling stockholders and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus and any free writing prospectus we may specifically authorize to be delivered or made available to you is accurate as of any date other than the date on the front of this prospectus, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

TABLE OF CONTENTS

 

     Page  

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     16   

FORWARD-LOOKING STATEMENTS

     28   

USE OF PROCEEDS

     30   

CAPITALIZATION

     31   

DILUTION

     32   

DIVIDEND POLICY

     33   

SELECTED CONSOLIDATED FINANCIAL DATA

     34   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     37   

BUSINESS

     56   

MANAGEMENT

     71   

EXECUTIVE COMPENSATION

     76   

GRANTS OF PLAN-BASED AWARDS

     83   

DIRECTOR COMPENSATION

     86   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     87   

PRINCIPAL AND SELLING STOCKHOLDERS

     89   

DESCRIPTION OF CAPITAL STOCK

     91   

DESCRIPTION OF CERTAIN INDEBTEDNESS

     94   

SHARES ELIGIBLE FOR FUTURE SALE

     101   

MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS

     103   

UNDERWRITING

     105   

LEGAL MATTERS

     112   

EXPERTS

     112   

WHERE YOU CAN FIND MORE INFORMATION

     113   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1   


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INDUSTRY AND MARKET DATA

In this prospectus, we rely on and refer to information and statistics regarding the steel processing industry and our market share in the sectors in which we compete. We obtained this information and these statistics from sources other than us, which we have supplemented where necessary with information from publicly available sources, discussions with our customers and our own internal estimates. References in this prospectus to:

 

   

The Institute of Supply Management refer to its April 2011 Manufacturing ISM Report on Business®;

 

   

The U.S. Congressional Budget Office refer to its January 2011 report entitled “The Budget and Economic Outlook: Fiscal Years 2011 to 2021”;

 

   

The Metals Service Center Institute (“MSCI”) refer to its April 2011 edition of “MSCI Metal Activity Report”;

 

   

The Economist Intelligence Unit refer to its March 2011 country report on China; and

 

   

CRU refers to projections featured in the February 2011 issue of “Stainless Steel Flat Products Quarterly Industry and Market Outlook” by CRU Group.

We use these sources and estimates and believe them to be reliable, but we cannot give you any assurance that any of the projected results will be achieved.


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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus before making an investment decision. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the “Risk Factors” and other sections of this prospectus.

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Ryerson Holding,” “the Company,” “we,” “our,” and “us” refer to Ryerson Holding Corporation and its direct and indirect subsidiaries (including Ryerson Inc.). The term “Ryerson” refers to Ryerson Inc., a direct wholly owned subsidiary of Ryerson Holding, together with its subsidiaries on a consolidated basis. “Platinum” refers to Platinum Equity, LLC and its affiliated investment funds, certain of which are our principal stockholders, and “Platinum Advisors” refers to Platinum Equity Advisors, LLC. We refer to the issuance of our common stock being offered hereby as the “offering.”

Our Company

We believe we are one of the largest processors and distributors of metals in North America measured in terms of sales, with operations in the United States, Canada, Mexico and an established and growing presence in China. Our customer base ranges from local, independently owned fabricators and machine shops to large, national original equipment manufacturers. We process and distribute a full line of over 75,000 products in stainless steel, aluminum, carbon steel and alloy steels, and a limited line of nickel and red metals. More than one-half of the products we sell are processed to meet customer requirements. We use various processing and fabricating techniques to process materials to a specified thickness, length, width, shape and surface quality pursuant to customer orders. For the year ended December 31, 2010, we purchased 2.4 million tons of materials from suppliers throughout the world. For the three months ended March 31, 2011, our net sales were $1.2 billion, Adjusted EBITDA, excluding LIFO expense, was $67.0 million and net loss was $1.6 million. See note 4 in “Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net loss.

We currently operate over 100 facilities across North America and eight facilities in China. Our service centers are strategically located in close proximity to our customers, which allows us to quickly process and deliver our products and services, often within the same day or next day of receiving an order. We own, lease or contract a fleet of tractors and trailers, allowing us to efficiently meet our customers’ delivery demands. In addition, our scale enables us to maintain low operating costs. Our operating expenses as a percentage of sales for the years ended December 31, 2009 and 2010 were 16.2% and 13.3%, respectively.

We serve more than 40,000 customers across a wide range of manufacturing end markets. We believe the diverse end markets we serve reduce the volatility of our business in the aggregate. Our geographic network and broad range of products and services allow us to serve large, national manufacturing companies across multiple locations.

 

 

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We are broadly diversified in our end markets and product lines in North America, as detailed below.

 

North America Sales by End Market   North America Sales by Product

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(1)    Other includes copper, brass, nickel, pipe, valves and fittings.

Industry Outlook

The U.S. manufacturing sector continues to recover from the economic downturn, which affected and may continue to affect our operating results. However, according to the Institute for Supply Management, the Purchasing Managers’ Index (“PMI”) was 60.4% in April 2011, marking the 21st consecutive month the reading was above 50%, which indicates that the manufacturing economy is generally expanding. The PMI measures the economic health of the manufacturing sector and is a composite index based on five indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. PMI readings over 50% suggest growth in the manufacturing industry and if manufacturing is expanding, the general economy should similarly be expanding. As a result, PMI readings can be a good indicator of industry and general economic growth. Although there can be no guarantees on the timing of any overall improvements in the industry, since May 2009, total metal service center industry purchase orders have increased by 48.4%. Furthermore, the overall U.S. economy is expected to continue to grow as evidenced by the U.S. Congressional Budget Office’s forecasted GDP growth rates of 3.1% and 2.8% for 2011 and 2012, respectively.

According to MSCI, total inventory levels of carbon and stainless steel at U.S. service centers reached a trough in August 2009 and bottomed at the lowest levels since the data series began in 1977. Although industry demand recovered in 2010 and into 2011, shipments and inventory are still well below historical averages, which we believe suggests long-term growth potential that may be realized if these metrics return to or exceed their historical averages.

 

 

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U.S. Metals Service Center Shipments & Inventories

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Source: MSCI as of April 2011

China continues to be a key driver in the growth of global metals demand. According to The Economist Intelligence Unit, China’s GDP is projected to grow at 9.0% in 2011 while CRU is forecasting Chinese steel consumption growth of 11.8% (hot-rolled sheet) in the same period.

Metals prices have recovered significantly from the trough levels in 2009 as a result of growing demand and increased raw material costs, despite volume still well below historical levels.

The following charts show the historical mill cost of key metals.

 

North American Midwest
HRC ($/ton)
  USA CR Grade 304 Stainless Steel ($/ton)   Aluminum ($/ton)

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Source: Steel Business Briefing and Bloomberg.

 

 

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Our Competitive Strengths

Leading Market Position with National Scale and Presence in China.

We believe we are one of the largest service center companies for stainless steel, one of the two largest service centers for aluminum, and one of the leading carbon products service center companies based on sales in the combined United States and Canada market. We also believe we are the second largest metals service center in the combined United States and Canada market based on sales. We have a broad geographic presence with over 100 locations in North America. We have leveraged our leadership in North America to establish sizable operations in China and we believe we are the only major global service center company whose activities in China generate a significant portion of our revenue relative to overall operations. Our China operations represented between 4% and 5% of our total revenues in 2010. In China, we have expanded from three metals service centers in 2006 to eight operating facilities currently with several more under consideration. We believe we are the only major North American service center whose activities in China represent a significant portion of overall operations in terms of revenue, making us a leading global service center company in China, which we believe positions us favorably in the largest metals market in the world. Although we maintain operations in China, conducting business in foreign countries has inherent risks and there can be no guarantee of our continued success abroad.

Our service centers are located near our customer locations, enabling us to provide timely delivery to customers across numerous geographic markets. Additionally, our widespread network of locations in the United States, Canada, Mexico and China utilize expertise that allow us to serve customers with complex supply chain requirements across multiple manufacturing locations. Our ability to transfer inventory among our facilities better enables us to timely and profitably source specialized items at regional locations throughout our network than if we were required to maintain inventory of all products at each location.

Diverse Customer Base, End Market and Geographic Focus.

We believe that our broad and diverse customer base in both geography and product provides a strong platform for growth in a recovering economy and helps to protect us from regional and industry-specific downturns. We serve more than 40,000 customers across a diverse range of industries, including metals fabrication, industrial machinery, commercial transportation, electrical equipment and appliances and heavy machinery and construction equipment. During the year ended December 31, 2010, no single customer accounted for more than 5% of our sales, and our top 10 customers accounted for less than 12% of sales. We continue to expand our customer base and added over 4,000 net new customers since December 31, 2009.

Extensive Breadth of Products and Services.

We carry a full range of over 75,000 products, including stainless steel, aluminum, carbon steel and alloy steels and a limited line of nickel and red metals. In addition, we provide a broad range of processing and fabrication services to meet the needs of our customers. We also provide supply chain solutions, including just-in-time delivery, and value-added components to many original equipment manufacturers. We believe our broad product mix, extensive geographic footprint and marketing approach provides customers a “one-stop shop” solution few other service center companies are able to offer.

Experienced Management Team with Diverse Backgrounds Focused on Profitability.

Our senior management team has extensive industry and operational experience and has been instrumental in optimizing and implementing our transformation since Platinum’s acquisition of Ryerson in 2007. Our senior management has an average of more than 21 years of experience in the metals or service center industries. The senior executive team’s extensive experience in international markets and outside the service center industry provides perspective to drive profitable growth. Our CEO, Mr. Michael Arnold, joined the Company in January

 

 

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2011 and has 32 years of diversified industrial experience. After fully implementing Platinum’s acquisition plan to transform our operating and cost structure in 2009, we have increased our focus on growing and enhancing profitability driven by providing customized solutions to diversified industrial customers who value these services.

Broad-Based Product and Geographic Platform Provides Multiple Opportunities for Profitable Growth.

While we expect the service center industry to benefit from improving general economic conditions, several end-markets where we have meaningful exposure (including the heavy and medium truck/transportation, machinery, industrial equipment and appliance sectors) have begun and we believe will continue to experience stronger shipment growth compared to overall industrial growth. In addition, although there can be no guarantee of growth, we believe a number of our other strategies, such as upgrading our sales talent and growing our large national network and diverse operating capabilities, will provide us with growth opportunities.

Strong Relationships with Suppliers.

We are among the largest purchasers of metals in North America. We believe we are frequently one of the largest customers of our suppliers and that concentrating our orders among a core group of suppliers is an effective method for obtaining favorable pricing and service. We believe we have the opportunity to further leverage this strength. Suppliers worldwide are consolidating and large, geographically diversified customers, such as Ryerson, are desirable partners for these larger suppliers. We have long-term relationships with our suppliers and take advantage of purchasing opportunities abroad.

Transformed Decentralized Operating Model.

We have transformed our operating model by decentralizing our operations and reducing our cost base. Decentralization improved our customer service by moving key operational functions such as procurement, credit and operations support to our field operations. From October 2007 through the end of 2009, we reduced annual expenses by $280 million, approximately 61% of which are permanent cost reductions. The cost reductions included a headcount reduction of approximately 1,700, representing 33% of our workforce, and the closure of 14 redundant or underperforming facilities in North America. We have also focused on process improvements in inventory management. Our inventory days improved from an average of 100 days in 2006 to 71 days in 2010. These organizational and operating changes improved our operating structure, working capital management and efficiency. As a result of our initiatives, we believe that we have increased our financial flexibility and have a favorable cost structure compared to many of our peers. We continue to seek out opportunities to improve efficiency and increase cost savings.

Our Strategy

Expand Our Industry Leadership in Selected Products and Diversified Industrial Markets.

We are selective regarding which products, end markets and customers we serve. We believe we are currently the industry leader in stainless steel, and a leader in aluminum and long products. We are constantly evaluating attractive opportunities focused on geographies, end-markets and customers that will allow us to grow the fastest, maximize our margins, leverage our global procurement capabilities and achieve leadership positions. We have increased our focus on higher margin diversified industrial customers that value our customized processing services and are less price sensitive than large volume buyers. We added over 4,000 net new customers since December 31, 2009 across a diverse set of industrial manufacturers.

Additionally, we see significant opportunities to improve our product mix by increasing the amount of long products supplied to our customers. We have established regional product inventory to provide a broad line of

 

 

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stainless, aluminum, carbon and alloy long products as well as the necessary processing equipment to meet demanding requirements of these customers. For the year ended December 31, 2010, we generated $622 million of revenue from long products, which represents an increase of 33% over 2009.

We seek to grow revenue by continuing to complement our standard products with first stage manufacturing and other processing capabilities that add value for our customers. Additionally, for certain customers we have assumed the management and responsibility for complex supply chains involving numerous suppliers, fabricators and processors. For the year ended December 31, 2010, we generated $283 million of revenue from our fabrication operations, which represents an increase of 58% over 2009.

Drive to Industry Leading Financial Performance.

Continue to Improve Margins. We seek to improve our margins through value-based pricing, superior service, improved product mix and improvements in procurement. We leverage our capabilities to deliver the highest value proposition to our customers by providing a wide breadth of competitive products and services, superior customer service and product quality, and responsiveness.

Continue to Improve Our Operating Efficiencies. We are committed to improving our operating capabilities through continuous business improvements and cost reductions. We have made and continue to make improvements in a variety of areas, including working capital management, operations, delivery and administration expenses.

Focus on Profitable Global Growth.

We are focused on increasing our sales to existing customers, as well as expanding our customer base globally. We expect to continue increasing total revenue through a variety of sales initiatives and by targeting attractive markets.

Continue to Revitalize Sales Talent. Since 2008, we have upgraded our talent and believe we have revitalized our North American sales force, as well as adjusted our incentive plans to be consistent with our profitability goals.

Continue to Expand our Customer Base. We will continue expanding our customer base in diversified industrial end markets with an increased focus on transactional business. We will simultaneously continue to serve and opportunistically seek to expand our larger national and global customers.

Continue Expansion in Attractive Markets. We have also opened facilities in several new regions globally, where we identified a geographic or product market opportunity.

 

   

North America. We have expanded and continue to expand in markets where we observe select products, services and end markets are underserved. For example, we have broadened our reach in long and plate products in Texas, California, Utah and Mexico. We continue to pursue sales in the Mexican market through our locations along the U.S.-Mexico border as well as new locations in Mexico.

 

   

China. We believe we are the most established U.S. based service center in China. We have grown our operations in China substantially and continue to enhance the size and quality of the sales talent in our operations, pursue more value-added processing with higher margins, and broaden our product line. Our China operations represented between 4% and 5% of our total revenues in 2010.

 

   

Emerging Markets. We expect to leverage our expertise in North America and experience in China to grow our business in high growth emerging markets, including Asia and Latin America and with particular focus on India and Brazil.

 

 

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Continue to Execute Value-Accretive Acquisitions.

The metals service center industry is highly fragmented with the largest player accounting for only 6% of the total market share and a vast majority of our other competitors operating from a single location or being regionally focused. We believe our significant geographic presence provides a strong platform to capitalize on this fragmentation through acquisitions. In the last fifteen months, we completed four strategic acquisitions: Texas Steel Processing Inc.; assets of Cutting Edge Metals Processing Inc.; SFI-Gray Steel Inc. and Singer Steel Company. These acquisitions have provided various opportunities for long-term value creation through the expansion of our product and service capabilities, geographic reach, operational distribution network, end markets diversification, cross-selling opportunities and the addition of transactional-based customers. We continually evaluate potential acquisitions of service center companies that complement our existing customer base and product offerings, and plan to continue pursuing our disciplined approach to such acquisitions.

Maintain Flexible Capital Structure and Strong Liquidity Profile.

Our management team is focused on maintaining a strong level of liquidity that will facilitate our plans to execute our various growth strategies. Throughout the economic downturn, we maintained liquidity in excess of $350 million. Availability under Ryerson’s senior secured $1.35 billion asset-based revolving credit facility (as amended, the “Ryerson Credit Facility”) at March 31, 2011 was approximately $302 million and we had cash-on-hand of $41.9 million. On March 14, 2011, we amended and extended the maturity date of the Ryerson Credit Facility until the earliest of (i) March 2016, (ii) 90 days prior to the scheduled maturity date of Ryerson Inc.’s Floating Rate Senior Secured Notes due November 1, 2014 (the “2014 Notes”), if any 2014 Notes are then outstanding and (iii) 90 days prior to the scheduled maturity date of Ryerson Inc.’s Senior Secured Notes due November 1, 2015 (the “2015 Notes” and together with the 2014 Notes, the ”Ryerson Notes”), if any 2015 Notes are then outstanding. We have no financial maintenance covenants on our debt unless availability under the Ryerson Credit Facility falls below $125 million. In addition, there are no other significant debt maturities until 2014.

Risk Factors

An investment in our common stock is subject to substantial risks and uncertainties. Before investing in our common stock, you should carefully consider the following, as well as the more detailed discussion of risk factors and other information included in this prospectus:

 

   

although the financial markets are in a state of recovery, the economic downturn reduced both demand for our products and metals prices;

 

   

the global financial and banking crises have caused a lack of credit availability that has limited and may continue to limit the ability of our customers to purchase our products or to pay us in a timely manner;

 

   

the metals distribution business is very competitive and increased competition could reduce our gross margins and net income;

 

   

we may not be able to sustain the annual cost savings realized as part of our recent cost reduction initiatives; and

 

   

we may not be able to successfully consummate and complete the integration of future acquisitions, and if we are unable to do so, we may be unable to increase our growth rates.

 

 

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Recent Developments

Stock Split

On                     , 2011, our Board of Directors approved a          for 1.00 stock split of the Company’s common stock to be effected prior to the closing of this offering. Our consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 give retroactive effect to the stock split.

The Sponsor

Platinum is a global acquisition firm headquartered in Beverly Hills, California with principal offices in Boston, New York and London. Since its founding in 1995, Platinum has acquired more than 100 businesses in a broad range of market sectors including technology, industrials, logistics, distribution, maintenance and service. Platinum’s current portfolio includes 33 companies in a variety of different industries that serve customers around the world. The firm has a diversified capital base that includes the assets of its portfolio companies, which generated more than $11.0 billion in revenue in 2010, as well as capital commitments from institutional investors in private equity funds managed by the firm. Platinum’s Mergers & Acquisitions & Operations (“M&A&O®”) approach to investing focuses on acquiring businesses that need operational support to realize their full potential and can benefit from Platinum’s expertise in transition, integration and operations.

JT Ryerson, one of our subsidiaries, is party to a corporate advisory services agreement (the “Services Agreement”) with Platinum Advisors, an affiliate of Platinum. In connection with this offering, Platinum Advisors and JT Ryerson intend to terminate the Services Agreement, pursuant to which JT Ryerson will pay Platinum Advisors $         million as consideration for terminating the Services Agreement. We refer to this as the “Services Agreement Termination.” See “Certain Relationships and Related Party Transactions—Services Agreement.”

 

 

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Corporate Structure

Our current corporate structure is made up as follows: Ryerson Holding, the issuer of the common stock offered hereby, owns all of the common stock of Ryerson Inc. and all of the membership interests of Rhombus JV Holdings, LLC. Ryerson Inc. owns, directly or indirectly, all of the common stock of the following entities: JT Ryerson; Ryerson Americas, Inc.; Ryerson International, Inc.; Ryerson Pan-Pacific LLC; J.M. Tull Metals Company, Inc.; RdM Holdings, Inc.; RCJV Holdings, Inc.; Ryerson Procurement Corporation; Ryerson International Material Management Services, Inc.; Ryerson International Trading, Inc.; Ryerson (China) Limited; Ryerson Canada, Inc.; Ryerson Metals de Mexico, S. de R.L. de C.V.; 862809 Ontario, Inc.; Leets Assurance, Ltd.; Integris Metals Mexicana, S.A. de C.V.; Servicios Empresariales Ryerson Tull, S.A. de C.V.; Servicios Corporativos RIM, S.A. de C.V.; and Ryerson Holdings (India) Pte Ltd. Platinum currently owns 99% of the capital stock of Ryerson Holding and will own approximately     % of the capital stock following this offering. The chart below illustrates in summary form our material operating subsidiaries.

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1 Platinum refers to the following entities: Platinum Equity Capital Partners, L.P.; Platinum Equity Capital Partners-PF, L.P.; Platinum Equity Capital Partners-A, L.P.; Platinum Equity Capital Partners II, L.P.; Platinum Equity Capital Partners-PF II, L.P.; Platinum Equity Capital Partners-A II, L.P.; and Platinum Rhombus Principals, LLC. For additional detail regarding ownership by Platinum, see “Principal and Selling Stockholders.”

 

 

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Corporate Information

Ryerson Holding and Ryerson Inc. are each incorporated under the laws of the State of Delaware. Ryerson Holding was formed in July 2007. Our principal executive offices are located at 2621 West 15th Place, Chicago, Illinois 60608. Our telephone number is (773) 762-2121.

On January 1, 2006, Ryerson Inc. changed its name from Ryerson Tull, Inc. to Ryerson Inc. On January 4, 2010, Ryerson Holding changed its name from Rhombus Holding Corporation to Ryerson Holding Corporation. Our website is located at www.ryerson.com. Our website and the information contained on the website or connected thereto will not be deemed to be incorporated into this prospectus and you should not rely on any such information in making your decision whether to purchase our securities.

 

 

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The Offering

 

Issuer

Ryerson Holding Corporation.

 

Common stock offered by us

             shares.

 

Underwriters’ over-allotment option to purchase additional common stock from the selling stockholders

Up to              shares.

 

Common stock outstanding before this offering

5,000,000 shares.

 

Common stock to be outstanding immediately following this offering

             shares.

 

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $         million. If the over-allotment is exercised, we will not receive any proceeds from the sale of our common stock by the selling stockholders.

 

  We intend to use the net proceeds from the sale of shares of our common stock offered pursuant to this prospectus and the net proceeds from the exercise, if any, of the underwriters’ over-allotment option (i) to redeem in full our $483 million aggregate principal amount at maturity 14 1/2% Senior Discount Notes due 2015 (the “Ryerson Holding Notes”), plus pay accrued and unpaid interest and additional interest, if any, up to, but not including, the redemption date, (ii) with respect to 50% of any remaining net proceeds following the redemption described in clause (i), subject to certain exceptions, to make an offer to purchase the 2015 Notes at par, (iii) to repay outstanding indebtedness under the Ryerson Credit Facility and (iv) to pay related fees and expenses. See “Use of Proceeds.”

 

  This prospectus is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of a consent with respect to the Ryerson Holding Notes or the 2015 Notes.

 

Risk factors

See “Risk Factors” on page 16 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

 

Dividend policy

We do not anticipate declaring or paying any regular cash dividends on our common stock in the foreseeable future. Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions, including under the Ryerson Credit Facility and the Ryerson Notes, and other factors deemed relevant by our Board of Directors.

 

 

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Proposed New York Stock Exchange symbol

“RYI.”

The number of shares to be outstanding after this offering is based on 5,000,000 shares of common stock outstanding immediately before this offering and the              shares of common stock being sold by us in this offering, and assumes no exercise by the underwriters of their option to purchase shares of our common stock in this offering to cover over-allotments, if any. The number of shares to be outstanding after this offering excludes              shares of common stock reserved for future grants under our stock incentive plan assuming such plan is adopted in connection with this offering.

Unless we specifically state otherwise, the information in this prospectus assumes:

 

   

an initial public offering price of $         per share, the mid-point of the offering range set forth on the cover page of this prospectus;

 

   

the underwriters do not exercise their over-allotment option; and

 

   

a          for 1.00 stock split that will occur prior to the closing of this offering.

 

 

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Summary Historical Consolidated Financial and Other Data

The following table presents our summary historical consolidated financial data, as of the dates and for the periods indicated. Our summary historical consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the summary historical balance sheet data as of December 31, 2009 and 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus.

You should read the summary financial and other data set forth below along with the sections in this prospectus entitled “Use of Proceeds,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus. The share and per share information presented below has been adjusted to give effect to the          for 1.00 stock split that will occur immediately prior to the closing of this offering.

 

     Year Ended December 31,     Three Months Ended March 31,  
     2008     2009     2010         2010             2011      
     ($ in millions)  

Statements of Operations Data:

          

Net sales

   $ 5,309.8      $ 3,066.1      $ 3,895.5      $ 871.5      $ 1,187.0   

Cost of materials sold

     4,596.9        2,610.0        3,355.7        737.7        1,030.3   
                                        

Gross profit (1)

     712.9        456.1        539.8        133.8        156.7   

Warehousing, selling, general and administrative

     586.1        483.8        506.9        118.8        135.2   

Restructuring and other charges

     —          —          12.0        —         0.3   

Gain on insurance settlement

     —          —          (2.6     —         —    

Gain on sale of assets

     —          (3.3     —          —         —    

Impairment charge on fixed assets

     —          19.3        1.4        —         —    

Pension and other postretirement benefits curtailment (gain) loss

     —          (2.0     2.0        —         —    
                                        

Operating profit (loss)

     126.8        (41.7     20.1        15.0        21.2   

Other income and (expense), net (2)

     29.2        (10.1     (3.2     (2.5     5.7   

Interest and other expense on debt

     (109.9     (72.9     (107.5     (24.7     (29.7
                                        

Income (loss) before income taxes

     46.1        (124.7     (90.6     (12.2     (2.8

Provision (benefit) for income taxes (3)

     14.8        67.5        13.1        2.6        (1.2
                                        

Net income (loss)

     31.3        (192.2     (103.7     (14.8     (1.6

Less: Net income (loss) attributable to noncontrolling interest

     (1.2     (1.5     0.3        (0.1     0.1   
                                        

Net income (loss) attributable to Ryerson Holding Corporation

   $ 32.5      $ (190.7   $ (104.0   $ (14.7   $ (1.7
                                        

 

 

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     Year Ended December 31,     Three Months
Ended March 31,
 
     2008     2009     2010     2010     2011  
     ($ in millions, except per share data)  

Earnings (loss) per share of common stock:

          

Basic earnings (loss) per share

   $ 6.50      $ (38.14   $ (20.80   $ (2.94   $ (0.34
                                        

Diluted earnings (loss) per share

   $ 6.50      $ (38.14   $ (20.80   $ (2.94   $ (0.34
                                        

Weighted average shares outstanding — Basic (in millions)

     5.0        5.0        5.0        5.0        5.0   

Weighted average shares outstanding — Diluted (in millions)

     5.0        5.0        5.0        5.0        5.0   

Pro forma — basic and diluted earnings (loss) per share of common stock — adjusted for dividends (4)

       $                     $                
                      

Pro forma — weighted average shares outstanding — adjusted for dividends (in millions) (4)

          

Balance Sheet Data (at period end):

          

Cash and cash equivalents

   $ 130.4      $ 115.0      $ 62.6      $ 121.6      $ 41.9   

Restricted cash

     7.0        19.5        15.6        12.8        15.1   

Inventory

     819.5        601.7        783.4        684.0        856.7   

Working capital

     1,084.2        750.4        858.8        805.0        916.4   

Property, plant and equipment, net

     547.7        477.5        479.2        476.1        484.4   

Total assets

     2,281.9        1,775.8        2,053.5        1,983.6        2,269.2   

Long-term debt, including current maturities

     1,030.3        754.2        1,211.3        1,026.7        1,307.7   

Other Financial Data:

          

Cash flows provided by (used in) operations

   $ 280.5      $ 284.9      $ (198.7   $ (51.9   $ (103.8

Cash flows provided by (used in) investing activities

     19.3        32.1        (44.4     2.0        (15.7

Cash flows provided by (used in) financing activities

     (197.0     (342.4     185.1        54.0        98.4   

Capital expenditures

     30.1        22.8        27.0        5.3        6.4   

Depreciation and amortization

     37.6        36.9        38.4        9.1        10.4   

EBITDA (5)

     194.8        (13.4     55.0        21.7        37.2   

Adjusted EBITDA (5)

     185.9        37.5        81.1        28.2        33.7   

Adjusted EBITDA, excluding LIFO (5)

     277.4        (136.7     133.5        40.7        67.0   

Ratio of Tangible Assets to Total Net Debt (6)

     2.1x        2.3x        1.5x        1.8x        1.6x   

Volume and Per Ton Data:

          

Tons shipped (000)

     2,505        1,881        2,252        527        645   

Average number of employees

     4,663        4,192        4,126        4,099        4,178   

Tons shipped per employee

     537        449        546        129        154   

Average selling price per ton

   $ 2,120      $ 1,630      $ 1,730      $ 1,654      $ 1,840   

Gross profit per ton

     285        242        240        254        243   

Operating profit (loss) per ton

     51        (22     9        28        33   

 

(1) The year ended December 31, 2008 includes a LIFO liquidation gain of $15.6 million, or $9.9 million after-tax.
(2) The year ended December 31, 2008 included a $18.2 million gain on the retirement of debt as well as a $6.7 million gain on the sale of corporate bonds. The year ended December 31, 2009 included $11.8 million of foreign exchange losses related to short-term loans from our Canadian operations, offset by the recognition of a $2.7 million gain on the retirement of debt. The year ended December 31, 2010 included $2.6 million of foreign exchange losses related to the repayment of a long-term loan to our Canadian operations. The three months ended March 31, 2011 included a $6.3 million gain on bargain purchase related to our Singer Steel acquisition.
(3) The year ended December 31, 2009 includes a $92.7 million tax expense related to the establishment of a valuation allowance against the Company’s US deferred tax assets and a $14.5 million income tax charge on the sale of our joint venture in India.

 

 

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(4) Pro forma earnings per share – as adjusted for dividends in excess of earnings includes             million and              million additional shares that represent, in accordance with Staff Accounting Bulletin Topic 1.B.3, the number of shares sold in this offering, the proceeds of which are assumed for purposes of this calculation to have been used to fund a termination payment to the principal stockholder in excess of earnings during the year ended December 31, 2010 and the three months ended March 31, 2011, respectively. The calculation assumes an initial offering price of $            per share, the mid-point of the price range on the cover page of this prospectus. These assumed number of additional shares issued to fund the termination payment in excess of earnings for the year ended December 31, 2010 and the three months ended March 31, 2011 are as follows:

 

 

     December 31,
2010
     March 31,
2011
 

Dividends paid:

     

During the period (in millions)

   $ 213.8       $ —     

Termination payment to principal stockholder (in millions)

   $                $            
                 

Dividends in excess of earnings (in millions)

   $         $     

Assumed initial offering price per share

   $         $     

Assumed additional number of shares issued to fund dividends in excess of earnings (in millions)

     

 

(5) EBITDA, for the period presented below, represents net income before interest and other expense on debt, provision for income taxes, depreciation and amortization. Adjusted EBITDA gives further effect to, among other things, gain on the sale of assets, reorganization expenses and the payment of management fees. We believe that EBITDA and Adjusted EBITDA provide additional information for measuring our performance and are measures frequently used by securities analysts and investors. EBITDA and Adjusted EBITDA do not represent, and should not be used as a substitute for, net income or cash flows from operations as determined in accordance with generally accepted accounting principles, and neither EBITDA nor Adjusted EBITDA is necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. Our definitions of EBITDA and Adjusted EBITDA may differ from that of other companies. Set forth below is the reconciliation of net income to EBITDA, as further adjusted to Adjusted EBITDA and Adjusted EBITDA, excluding LIFO.

 

     Year Ended December 31,     Three Months
Ended March 31,
 
     2008     2009     2010     2010     2011  
     ($ in millions)  

Net income (loss) attributable to Ryerson Holding

   $ 32.5      $ (190.7   $ (104.0   $ (14.7   $ (1.7

Interest and other expense on debt

     109.9        72.9        107.5        24.7        29.7   

Provision (benefit) for income taxes

     14.8        67.5        13.1        2.6        (1.2

Depreciation and amortization

     37.6        36.9        38.4        9.1        10.4   
                                        

EBITDA

   $ 194.8      $ (13.4   $ 55.0      $ 21.7      $ 37.2   

Gain on sale of assets

     —          (3.3     —          —          —     

Reorganization

     15.3        19.9        19.1        2.2        0.9   

Advisory service fee

     5.0        5.0        5.0        1.3        1.3   

Foreign currency transaction (gains) losses

     (1.0     14.8        2.7        2.7        0.8   

Debt retirement gains

     (18.2     (2.7     (2.6     —          —     

Gain on bond investment sale

     (6.7     —          —          —          —     

Impairment charge on fixed assets

     —          19.3        1.4        0.5        —     

Gain on bargain purchase

     —          —          —          —          (6.3

Other adjustments

     (3.3     (2.1     0.5        (0.2     (0.2
                                        

Adjusted EBITDA

     185.9        37.5        81.1        28.2        33.7   

LIFO expense (income)

     91.5        (174.2     52.4        12.5        33.3   
                                        

Adjusted EBITDA, excluding LIFO expense (income)

   $ 277.4      $ (136.7   $ 133.5      $ 40.7      $ 67.0   
                                        

 

(6) Tangible Assets are defined as accounts receivable, inventories, assets held for sale and property, plant and equipment, net of any reserves and of accumulated depreciation.

 

 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, before making your decision to invest in shares of our common stock. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and cash flows. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Relating to Our Business

We service industries that are highly cyclical, and any downturn in our customers’ industries could reduce our sales and profitability. The economic downturn has reduced demand for our products and may continue to reduce demand until an economic recovery.

Many of our products are sold to industries that experience significant fluctuations in demand based on economic conditions, energy prices, seasonality, consumer demand and other factors beyond our control. These industries include manufacturing, electrical products and transportation. We do not expect the cyclical nature of our industry to change.

The U.S. economy entered an economic recession in December 2007, which spread to many global markets in 2008 and 2009 and affected Ryerson and other metals service centers. Beginning in late 2008 and continuing through 2010, the metals industry, including Ryerson and other service centers, felt additional effects of the global economic crisis and recovery thereto and the impact of the credit market disruption. These events contributed to a rapid decline in both demand for our products and pricing levels for those products. The Company has implemented a number of actions to conserve cash, reduce costs and strengthen its competitiveness, including curtailing non-critical capital expenditures, initiating headcount reductions and reductions of certain employee benefits, among other actions. However, there can be no assurance that these actions, or any others that the Company may take in response to further deterioration in economic and financial conditions, will be sufficient.

The global financial and banking crises have caused a lack of credit availability that has limited and may continue to limit the ability of our customers to purchase our products or to pay us in a timely manner.

In climates of global financial and banking crises, such as those from which we are currently recovering, the ability of our customers to maintain credit availability has become more challenging. In particular, the financial viability of many of our customers is threatened, which may impact their ability to pay us amounts due, further affecting our financial condition and results of operations.

The metals distribution business is very competitive and increased competition could reduce our gross margins and net income.

The principal markets that we serve are highly competitive. The metals distribution industry is fragmented and competitive, consisting of a large number of small companies and a few relatively large companies. Competition is based principally on price, service, quality, production capabilities, inventory availability and timely delivery. Competition in the various markets in which we participate comes from companies of various sizes, some of which have greater financial resources than we have and some of which have more established brand names in the local markets served by us. Increased competition could force us to lower our prices or to offer increased services at a higher cost, which could reduce our profitability.

 

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The economic downturn has reduced metals prices. Though prices have risen since the onset of the economic downturn, we cannot assure you that prices will continue to rise. Changing metals prices may have a significant impact on our liquidity, net sales, gross margins, operating income and net income.

The metals industry as a whole is cyclical and, at times, pricing and availability of metal can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, labor costs, sales levels, competition, levels of inventory held by other metals service centers, consolidation of metals producers, higher raw material costs for the producers of metals, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of materials for us.

We, like many other metals service centers, maintain substantial inventories of metal to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, 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, contracts with customers and market conditions. When metals prices decline, as they did in 2008 and 2009, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower margins as we use existing metals inventory. Notwithstanding recent price increases, metals prices may decline in 2011, and declines in those prices or further reductions in sales volumes could adversely impact our ability to maintain our liquidity and to remain in compliance with certain financial covenants under the Ryerson Credit Facility, as well as result in us incurring inventory or goodwill impairment charges. Changing metals prices therefore could significantly impact our liquidity, net sales, gross margins, operating income and net income.

We have a substantial amount of indebtedness, which could adversely affect our financial position and prevent us from fulfilling our financial obligations.

We currently have a substantial amount of indebtedness and may incur additional indebtedness in the future. As of March 31, 2011, after giving effect to this offering and the application of net proceeds from this offering, our total indebtedness would have been approximately $         million and we would have had approximately $         million of unused capacity under the Ryerson Credit Facility. Our substantial indebtedness may:

 

   

make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the notes and our other indebtedness;

 

   

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes;

 

   

limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes;

 

   

require us to use a substantial portion of our cash flow from operations to make debt service payments;

 

   

limit our flexibility to plan for, or react to, changes in our business and industry;

 

   

place us at a competitive disadvantage compared to our less leveraged competitors; and

 

   

increase our vulnerability to the impact of adverse economic and industry conditions.

We may be able to incur substantial additional indebtedness in the future. The terms of the Ryerson Credit Facility and the indentures governing our outstanding notes restrict but do not prohibit us from doing so. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

 

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The covenants in the Ryerson Credit Facility and the indentures governing our notes impose, and covenants contained in agreements governing indebtedness that we incur in the future may impose, restrictions that may limit our operating and financial flexibility.

The Ryerson Credit Facility and the indentures governing our notes contain a number of significant restrictions and covenants that limit our ability and the ability of our restricted subsidiaries, including Ryerson Inc., to:

 

   

incur additional debt;

 

   

pay dividends on our capital stock or repurchase our capital stock;

 

   

make certain investments or other restricted payments;

 

   

create liens or use assets as security in other transactions;

 

   

merge, consolidate or transfer or dispose of substantially all of our assets; and

 

   

engage in transactions with affiliates.

The terms of the Ryerson Credit Facility require that, in the event availability under the facility declines to a certain level, we maintain a minimum fixed charge coverage ratio at the end of each fiscal quarter. Total credit availability is limited by the amount of eligible accounts receivable and inventory pledged as collateral under the agreement insofar as the Company is subject to a borrowing base comprised of the aggregate of these two amounts, less applicable reserves. As of March 31, 2011, total credit availability was $302 million based upon eligible accounts receivable and inventory pledged as collateral.

Additionally, subject to certain exceptions, the indenture governing Ryerson’s notes restricts Ryerson’s ability to pay us dividends to the extent of 50% of future net income, once prior losses are offset. Future net income is defined in the indenture governing the notes as net income adjusted for, among other things, the inclusion of dividends from joint ventures actually received in cash by Ryerson, and the exclusion of: (i) all extraordinary gains or losses; (ii) a certain portion of net income allocable to minority interest in unconsolidated persons or investments in unrestricted subsidiaries; (iii) gains or losses in respect of any asset sale on an after tax basis; (iv) the net income from any disposed or discontinued operations or any net gains or losses on disposed or discontinued operations, on an after-tax basis; (v) any gain or loss realized as a result of the cumulative effect of a change in accounting principles; (vi) any fees and expenses paid in connection with the issuance of Ryerson’s notes; (vii) non-cash compensation expense incurred with any issuance of equity interest to an employee; and (viii) any net after-tax gains or losses attributable to the early extinguishment of debt. Our future indebtedness may contain covenants more restrictive in certain respects than the restrictions contained in the Ryerson Credit Facility and the indentures governing our notes. Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in our being unable to comply with financial covenants that are contained in the Ryerson Credit Facility or that may be contained in any future indebtedness. In addition, complying with these covenants may also cause us to take actions that are not favorable to holders of our notes and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions.

We may not be able to generate sufficient cash to service all of our indebtedness.

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. Our outstanding notes, the Ryerson Credit Facility and our other outstanding indebtedness are expected to account for significant cash interest expenses. Accordingly, we will have to generate significant cash flows from operations to meet our debt service requirements. If we do not generate sufficient cash flow to meet our debt service and working capital requirements, we may be required to sell assets, seek additional capital, reduce capital expenditures, restructure or refinance all or a portion of our existing indebtedness, or seek additional financing. Moreover, insufficient cash flow may make it more difficult for us to obtain financing on terms that are

 

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acceptable to us, or at all. Furthermore, Platinum has no obligation to provide us with debt or equity financing and we therefore may be unable to generate sufficient cash to service all of our indebtedness.

Because a substantial portion of our indebtedness bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, we are vulnerable to interest rate increases.

A substantial portion of our indebtedness, including the Ryerson Credit Facility and the 2014 Notes, bears interest at rates that fluctuate with changes in certain short-term prevailing interest rates. As of March 31, 2011, Ryerson Holding’s subsidiaries had approximately $102.9 million of floating rate debt under the 2014 Notes and approximately $533.9 million of outstanding borrowings under the Ryerson Credit Facility, with an additional $302 million available for borrowing under such facility. Assuming a consistent level of debt, a 100 basis point change in the interest rate on our floating rate debt effective from the beginning of the year would increase or decrease our fiscal 2011 interest expense under the Ryerson Credit Facility and the 2014 Notes by approximately $5.9 million on an annual basis. We use derivative financial instruments to manage a portion of the potential impact of our interest rate risk. To some extent, derivative financial instruments can protect against increases in interest rates, but they do not provide complete protection over the long term. If interest rates increase dramatically, we could be unable to service our debt.

We may not be able to successfully consummate and complete the integration of future acquisitions, and if we are unable to do so, we may be unable to increase our growth rates.

We have grown through a combination of internal expansion, acquisitions and joint ventures. We intend to continue to grow through selective acquisitions, but we may not be able to identify appropriate acquisition candidates, obtain financing on satisfactory terms, consummate acquisitions or integrate acquired businesses effectively and profitably into our existing operations. Restrictions contained in the agreements governing our notes, the Ryerson Credit Facility or our other existing or future debt may also inhibit our ability to make certain investments, including acquisitions and participations in joint ventures.

Our future success will depend on our ability to complete the integration of these future acquisitions successfully into our operations. After any acquisition, customers may choose to diversify their supply chains to reduce reliance on a single supplier for a portion of their metals needs. We may not be able to retain all of our and an acquisition’s customers, which may adversely affect our business and sales. Integrating acquisitions, particularly large acquisitions, requires us to enhance our operational and financial systems and employ additional qualified personnel, management and financial resources, and may adversely affect our business by diverting management away from day-to-day operations. Further, failure to successfully integrate acquisitions may adversely affect our profitability by creating significant operating inefficiencies that could increase our operating expenses as a percentage of sales and reduce our operating income. In addition, we may not realize expected cost savings from acquisitions, which may also adversely affect our profitability.

We may not be able to retain or expand our customer base if the North American manufacturing industry continues to erode through moving offshore or through acquisition and merger or consolidation activity in our customers’ industries.

Our customer base primarily includes manufacturing and industrial firms. Some of our customers operate in industries that are undergoing consolidation through acquisition and merger activity; some are considering or have considered relocating production operations overseas or outsourcing particular functions overseas; and some customers have closed as they were unable to compete successfully with overseas competitors. Our facilities are predominately located in the United States and Canada. To the extent that our customers cease U.S. operations, relocate or move operations overseas to regions in which we do not have a presence, we could lose their business. Acquirers of manufacturing and industrial firms may have suppliers of choice that do not include us, which could impact our customer base and market share.

 

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Certain of our operations are located outside of the United States, which subjects us to risks associated with international activities.

Certain of our operations are located outside of the United States, primarily in Canada, Mexico and China. We are subject to the Foreign Corrupt Practices Act (“FCPA”), which generally prohibits U.S. companies and their intermediaries from making corrupt payments or otherwise corruptly giving any other thing of value to foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and requires companies to maintain adequate record-keeping and internal accounting practices. The FCPA applies to covered companies, individual directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for actions taken by strategic or local partners or representatives. If we or our intermediaries fail to comply with the requirements of the FCPA, governmental authorities in the United States could seek to impose civil and/or criminal penalties.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities, particularly with regards to the land our facilities are located on.

The Chinese government has exercised and continues to exercise substantial control over the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Moreover, the Chinese court system does not provide the same property and contract right guarantees as do courts in the United States and, accordingly, disputes may be protracted and resolution of claims may result in significant economic loss.

Additionally, although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, there is no private ownership of land in China and all land ownership is held by the government of China, its agencies, and collectives, which issue land use rights that are generally renewable. We lease the land where our Chinese facilities are located from the Chinese government. Although we believe our relationship with the Chinese government is sound, if the Chinese government decided to terminate our land use rights agreements, our assets could become impaired and our ability to meet customer orders could be impacted.

Operating results may experience seasonal fluctuations.

A portion of our customers experience seasonal slowdowns. Our sales in the months of July, November and December traditionally have been lower than in other months because of a reduced number of shipping days and holiday or vacation closures for some customers. Consequently, our sales in the first two quarters of the year are usually higher than in the third and fourth quarters.

Damage to our information technology infrastructure could harm our business.

The unavailability of any of our computer-based systems for any significant period of time could have a material adverse effect on our operations. In particular, our ability to manage inventory levels successfully largely depends on the efficient operation of our computer hardware and software systems. We use management information systems to track inventory information at individual facilities, communicate customer information and aggregate daily sales, margin and promotional information. Difficulties associated with upgrades, installations of major software or hardware, and integration with new systems could have a material adverse effect on results of operations. We will be required to expend substantial resources to integrate our information systems with the systems of companies we have acquired. The integration of these systems may disrupt our business or lead to operating inefficiencies. In addition, these systems are vulnerable to, among other things, damage or interruption

 

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from fire, flood, tornado and other natural disasters, power loss, computer system and network failures, operator negligence, physical and electronic loss of data, or security breaches and computer viruses.

Any significant work stoppages can harm our business.

As of March 31, 2011, we employed approximately 3,700 persons in North America and 500 persons in China. Our North American workforce was comprised of approximately 1,900 office employees and approximately 1,800 plant employees. Forty percent of our plant employees were members of various unions, including the United Steel Workers and the International Brotherhood of Teamsters unions. Our relationship with the various unions has generally been good. There has been one work stoppage over the last five years.

Six collective bargaining agreements expired in 2008, a year in which we reached agreement on the renewal of four contracts covering 53 employees. Two contracts covering 52 employees were extended into 2009. We reached agreement in 2009 on one of the extended contracts covering 45 employees and the single remaining contract from 2008, covering approximately five persons, remains on an extension. In addition, negotiations over a new collective bargaining agreement at a newly certified location employing four persons began in late 2008 and concluded in 2009. Nine contracts covering 339 persons were scheduled to expire in 2009. We reached agreement on the renewal of eight contracts covering approximately 258 persons and one contract covering approximately 89 persons was extended. During 2010, the parties to this extended contract covering two Chicago area facilities agreed to sever the bargaining unit between the two facilities and bargaining was concluded for one facility, which covers approximately 59 employees. This new contract expires on December 31, 2011. The other facility’s contract, which covers approximately 30 employees, remains on extension. Seven contracts covering approximately 85 persons were scheduled to expire in 2010. We reached agreement on the renewal of all seven contracts. Ten contracts covering approximately 312 persons are scheduled to expire in 2011. One of these contracts, which covers 59 employees, will not be renewed due to facility closure. We may not be able to negotiate extensions of these agreements or new agreements prior to their expiration date. As a result, we may experience additional labor disruptions in the future.

Certain employee retirement benefit plans are underfunded and the actual cost of those benefits could exceed current estimates, which would require us to fund the shortfall.

As of December 31, 2010, our pension plan had an unfunded liability of $306 million. Our actual costs for benefits required to be paid may exceed those projected and future actuarial assessments to the extent that those costs exceed the current assessment. Under those circumstances, the adjustments required to be made to our recorded liability for these benefits could have a material adverse effect on our results of operations and financial condition and cash payments to fund these plans could have a material adverse effect on our cash flows. We may be required to make substantial future contributions to improve the plan’s funded status.

Future funding for postretirement employee benefits other than pensions also may require substantial payments from current cash flow.

We provide postretirement life insurance and medical benefits to eligible retired employees. Our unfunded postretirement benefit obligation as of December 31, 2010 was $176 million. Our actual costs for benefits required to be paid may exceed those projected and future actuarial assessments to the extent that those costs exceed the current assessment. Under those circumstances, adjustments will be required to be made to our recorded liability for these benefits.

Any prolonged disruption of our processing centers could harm our business.

We have dedicated processing centers that permit us to produce standardized products in large volumes while maintaining low operating costs. We may suffer prolonged disruption in the operations of any of these facilities, whether due to labor or technical difficulties, destruction or damage to any of the facilities or otherwise.

 

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If we are unable to retain and attract management and key personnel, it may adversely affect our business.

We believe that our success is due, in part, to our experienced management team. Losing the services of one or more members of our management team could adversely affect our business and possibly prevent us from improving our operational, financial and information management systems and controls. In the future, we may need to retain and hire additional qualified sales, marketing, administrative, operating and technical personnel, and to train and manage new personnel. Our ability to implement our business plan is dependent on our ability to retain and hire a large number of qualified employees each year.

Our existing international operations and potential joint ventures may cause us to incur costs and risks that may distract management from effectively operating our North American business, and such operations or joint ventures may not be profitable.

We maintain foreign operations in Canada, China and Mexico. International operations are subject to certain risks inherent in conducting business in, and with, foreign countries, including price controls, exchange controls, export controls, economic sanctions, duties, tariffs, limitations on participation in local enterprises, nationalization, expropriation and other governmental action, and changes in currency exchange rates. While we believe that our current arrangements with local partners provide us with experienced business partners in foreign countries, events or issues, including disagreements with our partners, may occur that require attention of our senior executives and may result in expenses or losses that erode the profitability of our foreign operations or cause our capital investments abroad to be unprofitable.

Lead time and the cost of our products could increase if we were to lose one of our primary suppliers.

If, for any reason, our primary suppliers of aluminum, carbon steel, stainless steel or other metals should curtail or discontinue their delivery of such metals in the quantities needed and at prices that are competitive, our business could suffer. The number of available suppliers could be reduced by factors such as industry consolidation and bankruptcies affecting steel and metal producers. For the year ended December 31, 2010, our top 25 suppliers represented approximately 77% of our purchases, and our largest supplier accounted for approximately 15% of our purchases. We could be significantly and adversely affected if delivery were disrupted from a major supplier. If, in the future, we were unable to obtain sufficient amounts of the necessary metals at competitive prices and on a timely basis from our traditional suppliers, we may not be able to obtain such metals from alternative sources at competitive prices to meet our delivery schedules, which could have a material adverse effect on our sales and profitability.

We could incur substantial costs in order to comply with, or to address any violations or liability under, environmental, health and safety laws that could significantly increase our operating expenses and reduce our operating income.

Our operations are subject to various environmental, health and safety statutes and regulations, including laws and regulations governing materials we use. In addition, certain of our operations are subject to foreign, federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes and remediation of contaminated soil, surface waters and groundwater. Failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could result in substantial operating costs and capital expenditures, in addition to fines and civil or criminal sanctions, third party claims for property damage or personal injury, worker’s compensation or personal injury claims, cleanup costs or temporary or permanent discontinuance of operations. Certain of our facilities are located in industrial areas, have a history of heavy industrial use and have been in operation for many years and, over time, we and other predecessor operators of these facilities have generated, used, handled and disposed of hazardous and other regulated wastes. Environmental liabilities could exist, including cleanup obligations at these facilities or at off-site locations where materials from our operations were disposed of, which could result in future expenditures

 

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that cannot be currently quantified. Future changes to environmental, health and safety laws or regulations, including those related to climate change, could result in material liabilities and costs, constrain operations or make such operations more costly for us, our suppliers and our customers.

We are subject to litigation that could strain our resources and distract management.

From time to time, we are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. These suits concern issues including product liability, contract disputes, employee-related matters and personal injury matters. It is not feasible to predict the outcome of all pending suits and claims, and the ultimate resolution of these matters as well as future lawsuits could have a material adverse effect on our business, financial condition, results of operations or cash flows or reputation.

We may face product liability claims that are costly and create adverse publicity.

If any of the products that we sell cause harm to any of our customers, we could be exposed to product liability lawsuits. If we were found liable under product liability claims, we could be required to pay substantial monetary damages. Further, even if we successfully defended ourself against this type of claim, we could be forced to spend a substantial amount of money in litigation expenses, our management could be required to spend valuable time in the defense against these claims and our reputation could suffer.

The volatility of the market could result in a material impairment of goodwill.

We evaluate goodwill on an annual basis and whenever events or changes in circumstances indicate potential impairment. Events or changes in circumstances that could trigger an impairment review include significant underperformance relative to our historical or projected future operating results, significant changes in the manner or the use of our assets or the strategy for our overall business, and significant negative industry or economic trends. We test for impairment of goodwill by calculating the fair value of a reporting unit using an income approach based on discounted future cash flows. Under this method, the fair value of each reporting unit is estimated based on expected future economic benefits discounted to a present value at a rate of return commensurate with the risk associated with the investment. Projected cash flows are discounted to present value using an estimated weighted average cost of capital, which considers both returns to equity and debt investors. The income approach is subject to a comparison for reasonableness to a market approach at the date of valuation. Significant changes in any one of the assumptions made as part of our analysis, which could occur as a result of actual events, or further declines in the market conditions for our products, could significantly impact our impairment analysis. An impairment charge, if incurred, could be material.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of March 31, 2011, we had U.S. federal net operating loss carryforwards totaling approximately $110 million, which expire on December 31, 2030. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income may be limited significantly. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. It is not expected that the offering will result in an “ownership change.” However, because the potential existence and amount of our “5-percent shareholders,” if any, resulting from the offering is not within our control, there is no assurance that the offering will not result in an ownership change. Moreover, even if an ownership change does not result from the offering, subsequent events over which we will have little or no control (including changes in the direct and indirect ownership of our 5- percent shareholders) may cause us to experience an ownership change in the near future. An ownership change could significantly limit the future use of our pre-change tax attributes and thereby significantly increase our future tax liabilities.

 

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Our risk management strategies may result in losses.

From time to time, we may use fixed-price and/or fixed-volume supplier contracts to offset contracts with customers. Additionally, we may use foreign exchange contracts and interest rate swaps to hedge Canadian dollar and floating rate debt exposures. These risk management strategies pose certain risks, including the risk that losses on a hedge position may exceed the amount invested in such instruments. Moreover, a party in a hedging transaction may be unavailable or unwilling to settle our obligations, which could cause us to suffer corresponding losses. A hedging instrument may not be effective in eliminating all of the risks inherent in any particular position. Our profitability may be adversely affected during any period as a result of use of such instruments.

We may be adversely affected by currency fluctuations in the U.S. dollar versus the Canadian dollar and the Chinese renminbi.

We have significant operations in Canada which incur the majority of their metal supply costs in U.S. dollars but earn the majority of their sales in Canadian dollars. Additionally, we have significant assets in China. We may from time to time experience losses when the value of the U.S. dollar strengthens against the Canadian dollar or the Chinese renminbi, which could have a material adverse effect on our results of operations. In addition, we will be subject to translation risk when we consolidate our Canadian and Chinese subsidiaries’ net assets into our balance sheet. Fluctuations in the value of the U.S. dollar versus the Canadian dollar or Chinese renminbi could reduce the value of these assets as reported in our financial statements, which could, as a result, reduce our stockholders’ equity.

Risks Relating to Our Common Stock and this Offering

There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the New York Stock Exchange (“NYSE”), or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy in this offering. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering. In addition, an inactive trading market may impair our ability to raise additional capital by selling shares and may impair our ability to acquire other companies by using our shares as consideration.

The initial public offering price of the shares has been determined by negotiations between the Company and the representative of the underwriters. Among the factors considered in determining the initial public offering price were our record of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the prices at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our common stock will develop and continue after this offering.

Our stock price may be volatile, and your investment in our common stock could suffer a decline in value.

The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock. The initial public offering price for our common stock was determined by negotiations between the Company and the

 

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representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. You may not be able to resell your shares at or above the initial public offering price due to fluctuations in the market price of our common stock caused by changes in our operating performance or prospects, including possible changes due to the cyclical nature of the metals distribution industry and other factors such as fluctuations in metals prices, which could cause short-term swings in profit margins. If the market price of our ordinary shares after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, companies that have historically experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns.

Future sales of our common stock in the public market could lower our share price.

We may sell additional shares of common stock into the public markets after this offering. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the public markets after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities at a time and at a price that we deem appropriate.

After the consummation of this offering, we will have         shares of common stock outstanding. Of the remaining         outstanding shares, 5,000,000, or     %, of our total outstanding shares will be restricted from immediate resale under the “lock-up” agreements between us and all of our directors, officers and stockholders and the underwriters described in the section entitled “Underwriting” below, but may be sold into the market after those “lock-up” restrictions expire, in certain limited circumstances as set forth in the “lock-up” agreements, or if they are waived by Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC as the representatives of the underwriters, in their discretion. The outstanding shares subject to the “lock-up” restrictions will generally become available for sale following the expiration of the lock-up agreements, which is 180 days after the date of this prospectus, subject to the volume limitations and manner-of-sale requirements under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”).

This offering will cause immediate and substantial dilution in net tangible book value.

The initial public offering price of a share of our common stock is substantially higher than the net tangible book value (deficit) per share of our outstanding common stock immediately after this offering. Net tangible book value (deficit) per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. If you purchase our common stock in this offering, you will incur an immediate dilution of approximately $             in the net tangible book value per share of common stock based on our net tangible book value as of March 31, 2011. You may experience additional dilution if we issue common stock in the future. As a result of this dilution, you may receive significantly less than the full purchase price you paid for the shares in the event of a liquidation. See “Dilution.”

Our controlling stockholder and its affiliates will be able to influence matters requiring stockholder approval and could discourage the purchase of our outstanding shares at a premium.

Prior to this offering, Platinum owned 99% of our outstanding common stock. Upon completion of this offering, Platinum will continue to control all matters submitted for approval by our stockholders through its ownership of approximately     % of our outstanding common stock. These matters could include the election of all of the members of our Board of Directors, amendments to our organizational documents, or the approval of any proxy contests, mergers, tender offers, sales of assets or other major corporate transactions.

The interests of Platinum may not in all cases be aligned with your interests as a holder of common stock. For example, a sale of a substantial number of shares of stock in the future by Platinum could cause our stock price to decline. Further, Platinum could cause us to make acquisitions that increase the amount of the

 

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indebtedness that is secured or senior to the Company’s existing debt or sell revenue-generating assets, impairing our ability to make payments under such debt. Additionally, Platinum is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Accordingly, Platinum may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. In addition, Platinum may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to you as a holder of our common stock. For example on January 29, 2010, we closed an offering (the “Ryerson Holding Offering”) pursuant to which we issued the Ryerson Holding Notes, 96% of the gross proceeds of which were paid to Platinum as a cash dividend. We intend to use a portion of the net proceeds from this offering to redeem in full the Ryerson Holding Notes. See “Use of Proceeds.”

We are exempt from certain corporate governance requirements since we are a “controlled company” within the meaning of the NYSE rules and, as a result, you will not have the protections afforded by these corporate governance requirements.

Because Platinum will control more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for purposes of the NYSE listing requirements. Under the NYSE rules, a “controlled company” may elect not to comply with certain NYSE corporate governance requirements, including (1) the requirement that a majority of our Board of Directors consist of independent directors, (2) the requirement that the nominating and corporate governance committee of our Board of Directors be composed entirely of independent directors, (3) the requirement that the compensation committee of our Board of Directors be composed entirely of independent directors and (4) the requirement for an annual performance evaluation of the nomination/corporate governance and compensation committees. Given that Platinum will control a majority of the voting power of our common stock after this offering, we are permitted, and have elected, to opt out of compliance with certain NYSE corporate governance requirements. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

If we fail to maintain effective internal control over financial reporting, our business, operating results and stock price could be adversely affected.

Beginning with our annual report for our fiscal year ending December 31, 2011, Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), will require us to include a report by our management on our internal control over financial reporting. This report must contain an assessment by management of the effectiveness of our internal control over financial reporting as of the end of our fiscal year and a statement as to whether or not our internal controls are effective. To the extent we become an accelerated or large accelerated filer, our annual reports, beginning with our annual report for the fiscal year ending December 31, 2011, must also contain a statement that our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting.

In order to achieve timely compliance with Section 404, we have begun a process to document and evaluate our internal control over financial reporting. Our efforts to comply with Section 404 have resulted in, and are likely to continue to result in, significant costs, the commitment of time and operational resources and the diversion of management’s attention. If our management identifies one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, market perception of our financial condition and the trading price of our stock may be adversely affected and customer perception of our business may suffer.

 

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Our corporate documents and Delaware law will contain provisions that could discourage, delay or prevent a change in control of the Company.

Our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the acquisition of our company more difficult without the approval of our Board of Directors. These provisions:

 

   

establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time;

 

   

authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;

 

   

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

 

   

provide that the Board of Directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and

 

   

establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Any issuance of preferred stock could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

Upon completion of this offering, our Board of Directors will have the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and adversely affect the market price and the voting and other rights of the holders of our common stock.

We do not intend to pay regular cash dividends on our stock after this offering.

We do not anticipate declaring or paying regular cash dividends on our common stock or any other equity security in the foreseeable future. The amounts that may be available to us to pay cash dividends are restricted under our debt agreements. Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our Board of Directors. Therefore, you should not rely on dividend income from shares of our common stock. For more information, see “Dividend Policy.” Your only opportunity to achieve a return on your investment in us may be if the market price of our common stock appreciates and you sell your shares at a profit but there is no guarantee that the market price for our common stock after this offering will ever exceed the price that you pay for our common stock in this offering.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” Such statements can be identified by the use of forward-looking terminology such as “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 in the forward-looking statements as a result of various factors. Among the factors that significantly impact the metals distribution industry and our business are:

 

   

cyclicality of our business, due to the cyclical nature of our customers’ businesses;

 

   

remaining competitive and maintaining market share in the highly fragmented metals distribution industry, in which price is a competitive tool and in which customers who purchase commodity products are often able to source metals from a variety of sources;

 

   

managing the costs of purchased metals relative to the price at which we sell our products during periods of rapid price escalation, when we may not be able to pass through pricing increases fully to our customers quickly enough to maintain desirable gross margins, or during periods of generally declining prices, when our customers may demand that price decreases be passed fully on to them more quickly than we are able to obtain similar discounts from our suppliers;

 

   

the failure to effectively integrate newly acquired operations;

 

   

our customer base, which, unlike many of our competitors, contains a substantial percentage of large customers, so that the potential loss of one or more large customers could negatively impact tonnage sold and our profitability;

 

   

fluctuating operating costs depending on seasonality;

 

   

our substantial indebtedness and the covenants in instruments governing such indebtedness;

 

   

potential damage to our information technology infrastructure;

 

   

work stoppages;

 

   

certain employee retirement benefit plans that are underfunded and the actual costs could exceed current estimates;

 

   

future funding for postretirement employee benefits may require substantial payments from current cash flow;

 

   

prolonged disruption of our processing centers;

 

   

ability to retain and attract management and key personnel;

 

   

ability of management to focus on North American and foreign operations;

 

   

termination of supplier arrangements;

 

   

the incurrence of substantial costs or liabilities to comply with, or as a result of violations of, environmental laws;

 

   

the impact of new or pending litigation against us;

 

   

impairment of goodwill that could result from, among other things, volatility in the markets in which we operate;

 

   

a risk of product liability claims;

 

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following this offering, a single investor group will continue to control all matters submitted for approval by our stockholders, and the interests of that single investor group may conflict with yours as a holder of our common stock;

 

   

our risk management strategies may result in losses;

 

   

currency fluctuations in the U.S. dollar versus the Canadian dollar, the Chinese renminbi, and the Hong Kong dollar;

 

   

management of inventory and other costs and expenses; and

 

   

consolidation in the metals producer industry, from which we purchase products, which could limit our ability to effectively negotiate and manage costs of inventory or cause material shortages, either of which would impact profitability.

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 in this prospectus under “Risk Factors” and the caption “Industry and Operating Trends” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. 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 prospectus or to reflect the occurrence of unanticipated events.

 

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of the         shares of common stock that we are offering will be approximately $         million after deducting the underwriting discount and estimated offering expenses of $         million and assuming an initial public offering price of $         per share, the mid-point of the estimated initial public offering price range. A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the net proceeds from the sales of shares of common stock that we are offering by $         million after deducting the underwriting discount and estimated offering expenses of $         million.

We intend to use our net proceeds from the sale of shares of our common stock offered pursuant to this prospectus (i) to redeem in full the Ryerson Holding Notes, plus pay accrued and unpaid interest and additional interest, if any, up to, but not including, the redemption date, (ii) with respect to 50% of any remaining net proceeds following the redemption described in clause (i), subject to certain exceptions, to make an offer to repurchase the 2015 Notes at par and (iii) with respect to the remaining 50%, to repay outstanding indebtedness under the Ryerson Credit Facility and to pay related fees and expenses. To the extent that there are additional remaining proceeds after the offer to repurchase in clause (ii) above, we will repay outstanding indebtedness under the Ryerson Credit Facility and pay related fees and expenses as provided in clause (iii) above. See “Underwriting.” The Ryerson Credit Facility matures on the earliest of (i) March 2016, (ii) 90 days prior to the scheduled maturity date of the 2014 Notes, if any 2014 Notes are then outstanding and (iii) 90 days prior to the scheduled maturity date of the 2015 Notes, if any 2015 Notes are then outstanding. The weighted average interest rate on the borrowings under the Ryerson Credit Facility was 2.5% at March 31, 2011. For additional information about the terms of the Ryerson Credit Facility, see “Description of Certain Indebtedness.” We used the proceeds from the issuance of the Ryerson Holding Notes in January 2010 to: (i) pay a cash dividend to our stockholders and (ii) pay fees in connection with the Ryerson Holding Offering and related expenses. This prospectus is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of a consent with respect to the Ryerson Holding Notes or the 2015 Notes.

We will not receive any proceeds resulting from any exercise by the underwriters of the over-allotment option to purchase additional shares from the selling stockholders identified in this prospectus. In the aggregate, if the over-allotment is exercised, the selling stockholders will receive approximately $         million after deducting the underwriting discount and estimated offering expenses of $         million and assuming an initial public offering price of $         per share, the mid-point of the estimated initial public offering price range.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our total capitalization as of March 31, 2011 (1) on a historical basis and (2) on an as adjusted basis to give effect to the sale of shares of our common stock offered hereby assuming an initial public offering price of $         per share, the mid-point of the estimated initial public offering price range, the application of the net proceeds as described in “Use of Proceeds,” and the Services Agreement Termination.

You should read this table together with the information contained in “Use of Proceeds,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related financial information contained elsewhere in this prospectus.

 

     As of March 31, 2011  
     Historical     As
Adjusted(1)
 
     ($ in millions)  

Cash and cash equivalents

   $ 41.9      $ 41.9   
                

Debt:

    

Ryerson Credit Facility(2)(3)

     533.9     

Ryerson Inc. Floating Rate Senior Secured Notes due 2014

     102.9        102.9   

Ryerson Inc. 12% Senior Secured Notes due 2015(4)

     376.2     

Foreign debt

     29.9        29.9   

Ryerson Inc. 8 1/4% Senior Notes due 2011

     4.1        4.1   

Ryerson Holding Senior Discount Notes due 2015

     260.7          
                

Total debt

     1,307.7     

Common Stock, par value $0.01 per share, 10,000,000 shares authorized, and 5,000,000 issued and outstanding; 10,000,000 shares authorized, and             issued and outstanding, as adjusted(5)

              

Paid-in-capital

     224.9     

Accumulated Deficit(6)

     (275.1  

Accumulated other comprehensive loss

     (133.1  

Noncontrolling interest

     4.3        4.3   
                

Total stockholders’ equity

     (179.0  
                

Total capitalization

   $ 1,128.7      $                
                

 

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) total stockholders’ equity by $         million assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses of $         million.
(2) In connection with this offering, Platinum and JT Ryerson intend to terminate the Services Agreement, pursuant to which JT Ryerson will pay Platinum Advisors $         million as consideration for terminating the monitoring fee payable thereunder. The “As Adjusted” amount reflects borrowing under the Ryerson Credit Facility for the payment of the termination fee. For a discussion of the Services Agreement, see “Certain Relationships and Related Party Transactions.”
(3) As of March 31, 2011, we had approximately $533.9 million outstanding and $302 million of availability under the Ryerson Credit Facility.
(4) The “As Adjusted” amount reflects the repurchase of $         million principal amount 2015 Notes, assuming full participation by holders of the 2015 Notes in our offer to repurchase, which we intend to make with a portion of the net proceeds received in this offering.
(5) Share amounts give effect to the         for 1.00 stock split that will occur prior to the closing of this offering.

The number of shares of our common stock shown as issued and outstanding in the table above excludes (i)         shares of our common stock that may be purchased by the underwriters to cover over-allotments and (ii)          shares of common stock reserved for future grants under our stock incentive plan (assuming our stock incentive plan, which is described in “Executive Compensation—Stock Incentive Plan,” is adopted in connection with this offering).

 

(6) The “As Adjusted” amount reflects (i) the payment for the redemption of $260.7 million for the Ryerson Holding Notes, (ii) a $         million redemption premium related thereto and (iii) the $        million fee paid to Platinum Advisors in consideration for terminating the Services Agreement.

 

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DILUTION

Dilution is the amount by which the offering price paid by the purchasers of our common stock to be sold in this offering will exceed the net tangible book value per share of our common stock immediately after this offering. The net tangible book value per share presented below is equal to the amount of our total tangible assets (total assets less intangible assets) less total liabilities as of March 31, 2011, divided by the number of shares of our common stock that would have been held by our common stockholders of record immediately prior to this offering after giving effect to the         for 1.00 stock split. Our net tangible book value as of March 31, 2011, was approximately $         million, or $         per share. After giving effect to the sale of the shares of common stock we propose to offer pursuant to this prospectus at an assumed public offering price of $         per share, the mid-point of the range of estimated initial public offering prices set forth on the cover page of this prospectus and the application of the net proceeds therefrom, and after deducting the underwriting discount and estimated offering expenses, our net tangible book value as of March 31, 2011 would have been $         million, or $         per share. This represents an immediate dilution in net tangible book value of $        per share.

The following tables illustrate this dilution:

 

Initial public offering price per share

      $                
     

Net tangible book value per share at March 31, 2011

   $                   
     

Increase in net tangible book value per share attributable to cash payments made by new investors

     
           

Net tangible book value per share after this offering

     
           

Dilution of net tangible book value per share to new investors

      $                
           

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share (the mid-point of the range on the cover page of this prospectus) would (decrease) increase our net tangible book value (deficit) by $         million, the net tangible book value (deficit) per share after this offering by $         per share and the decrease in net tangible book value (deficit) to new investors in this offering by $         per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

The following table summarizes the number of shares purchased from us and the total consideration and average price per share paid to us, by existing holders of common stock, and the total number of shares purchased from the Company, the total consideration paid to the Company and the price per share paid by new investors purchasing shares in this offering:

 

     Shares Purchased     Total Consideration     Average Price
Per Share
 
     Number      Percent     Amount      Percent    
     (dollars in thousands, except per share amounts)  

Existing holders of common stock

               $                             $                

Investors purchasing common stock in this offering

            
                                    

Total

        100   $                      100   $                

If the underwriters’ over-allotment option is exercised in full:

 

   

the percentage of our shares of common stock held by our existing holders of common stock will decrease to         shares, or approximately     % of the total number of shares of common stock outstanding after this offering; and

 

   

the number of our shares of common stock held by investors purchasing common stock in this offering will increase to         shares, or approximately     % of the total number of shares of common stock outstanding after this offering.

 

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DIVIDEND POLICY

We have in the past paid cash dividends to our stockholders. See “Certain Relationships and Related Party Transactions—Dividend Payments.” We do not currently anticipate declaring or paying regular cash dividends on our common stock in the foreseeable future. Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions, including restrictions contained in our existing debt documents or the terms of any of our future debt or other agreements that we may enter into from time to time, and other factors deemed relevant by our Board of Directors. See “Description of Certain Indebtedness,” and “Description of Capital Stock—Common Stock.”

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected historical consolidated financial information. Our selected historical consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the summary historical balance sheet data as of December 31, 2009 and 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated statements of operations data of Ryerson Inc. as predecessor for the year ended December 31, 2006 and the period from January 1, 2007 through October 19, 2007 and of Ryerson Holding as successor for the period from October 20, 2007 to December 31, 2007 and the summary historical balance sheet data as of December 31, 2006 of Ryerson Inc. as predecessor and as of December 31, 2007 and December 31, 2008 of Ryerson Holding as successor were derived from the audited financial statements and related notes thereto, which are not included in this prospectus.

Our selected historical consolidated financial data as of March 31, 2011 and for the three months ended March 31, 2010 and 2011 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The March 31, 2010 and 2011 unaudited financial statements have been prepared on a basis consistent with our audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of any interim period are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year, and the historical results set forth below do not necessarily indicate results expected for any future period.

The information presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included elsewhere in this prospectus. The share and per share information presented below for the periods after October 19, 2007 has been adjusted to give effect to the          for 1.00 stock split that will occur prior to the closing of this offering.

 

    Predecessor           Successor  
    Year Ended
December 31,
2006
    Period from
January 1 to
October 19, 2007
          Period from
October 20 to
December 31, 2007
    Year Ended December 31,     Three Months
Ended March 31,
 
                2008     2009     2010     2010     2011  
    ($ in millions)  

Statements of Operations Data:

                   

Net sales

  $ 5,908.9      $ 5,035.6          $ 966.3      $ 5,309.8      $ 3,066.1      $ 3,895.5      $ 871.5      $ 1,187.0   

Cost of materials sold

    5,050.9        4,307.1            829.1        4,596.9        2,610.0        3,355.7        737.7        1,030.3   
                                                                   

Gross profit(1)

    858.0        728.5            137.2        712.9        456.1        539.8        133.8        156.7   

Warehousing, selling, general and administrative

    691.2        569.5            126.9        586.1        483.8        506.9        118.8        135.2   

Restructuring and other charges

    4.5        5.1                                 12.0               0.3   

Gain on insurance settlement

                                           (2.6              

Gain on sale of assets

    (21.6     (7.2                       (3.3                     

Impairment charge on fixed assets

                                    19.3        1.4                 

Pension and other postretirement benefits curtailment (gain) loss

                                    (2.0     2.0                 
                                                                   

Operating profit (loss)

    183.9        161.1            10.3        126.8        (41.7     20.1        15.0        21.2   

Other income and (expense), net(2)

    1.0        (1.0         2.4        29.2        (10.1     (3.2     (2.5     5.7   

Interest and other expense on debt(3)

    (70.7     (55.1         (30.8     (109.9     (72.9     (107.5     (24.7     (29.7
                                                                   

Income (loss) before income taxes

    114.2        105.0            (18.1     46.1        (124.7     (90.6     (12.2     (2.8

Provision (benefit) for income taxes(4)

    42.4        36.9            (6.9     14.8        67.5        13.1        2.6        (1.2
                                                                   

Net income (loss)

    71.8        68.1            (11.2     31.3        (192.2     (103.7     (14.8     (1.6

Less: Net income (loss) attributable to noncontrolling interest

                             (1.2     (1.5     0.3        (0.1     0.1   
                                                                   

Net income (loss) attributable to Ryerson Holding Corporation

  $ 71.8      $ 68.1          $ (11.2   $ 32.5      $ (190.7   $ (104.0   $ (14.7   $ (1.7
                                                                   

 

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    Predecessor           Successor  
    Year Ended
December 31,
2006
    Period from
January 1 to
October 19, 2007
          Period from
October 20 to
December 31, 2007
    Year Ended
December 31,
    Three Months
Ended March 31,
 
                2008    
2009
   
2010
    2010     2011  

Earnings (loss) per share of common stock:

                   

Basic:

                   

Basic earnings (loss) per share

  $ 2.75      $ 2.56          $ (2.24   $ 6.50      $ (38.14   $ (20.80   $ (2.94   $ (0.34
                                                                   

Diluted:

                   

Diluted earnings (loss) per share

  $ 2.50      $ 2.19          $ (2.24   $ 6.50      $ (38.14   $ (20.80   $ (2.94   $ (0.34
                                                                   

Cash dividends per common share

  $ 0.20      $ 0.10          $      $      $ 11.30      $ 42.76      $ 42.76      $   

Weighted average shares outstanding — Basic (in millions)

    26.1        26.5            5.0        5.0        5.0        5.0        5.0        5.0   

Weighted average shares outstanding — Diluted (in millions)

    28.7        31.1            5.0        5.0        5.0        5.0        5.0        5.0   

Pro forma — basic and diluted earnings (loss) per share of common stock — adjusted for dividends (5)

              $          $     
                             

Pro forma — weighted average shares outstanding — adjusted for dividends (in millions) (5)

                 
 

Balance Sheet Data (at period end):

                   

Cash and cash equivalents

  $ 55.1            $ 35.2      $ 130.4      $ 115.0      $ 62.6      $ 121.6      $ 41.9   

Restricted cash

    0.1              4.5        7.0        19.5        15.6        12.8        15.1   

Inventory

    1,128.6              1,069.7        819.5        601.7        783.4        684.0        856.7   

Working capital

    1,420.1              1,235.7        1,084.2        750.4        858.8        805.0        916.4   

Property, plant and equipment, net

    401.1              587.0        547.7        477.5        479.2        476.1        484.4   

Total assets

    2,537.3              2,576.5        2,281.9        1,775.8        2,053.5        1,983.6        2,269.2   

Long-term debt, including current maturities

    1,206.5              1,228.8        1,030.3        754.2        1,211.3        1,026.7        1,307.7   

Total equity (deficit)

    648.7              499.2        392.2        154.3        (182.5     (68.0     (179.0
 

Other Financial Data:

                   

Cash flows provided by (used in) operations

  $ (261.0   $ 564.0          $ 54.1      $ 280.5      $ 284.9      $ (198.7   $ (51.9   $ (103.8

Cash flows provided by (used in) investing activities

    (16.7     (24.0         (1,069.6     19.3        32.1        (44.4     2.0        (15.7

Cash flows provided by (used in) financing activities

    305.4        (565.6         1,021.2        (197.0     (342.4     185.1        54.0        98.4   

Capital expenditures

    35.7        51.6            9.1        30.1        22.8        27.0        5.3        6.4   

Depreciation and amortization

    40.0        32.5            7.3        37.6        36.9        38.4        9.1        10.4   
 

Volume and Per Ton Data:

                   

Tons shipped (000)

    3,292        2,535            498        2,505        1,881        2,252        527        645   

Average selling price per ton

  $ 1,795      $ 1,987          $ 1,939      $ 2,120      $ 1,630      $ 1,730      $ 1,654      $ 1,840   

Gross profit per ton

    261        287            275        285        242        240        254        243   

Operating expenses per ton

    205        224            254        234        264        231        226        210   

Operating profit (loss) per ton

    56        63            21        51        (22     9        28        33   

 

(1) The period from January 1 to October 19, 2007 includes a LIFO liquidation gain of $69.5 million, or $42.3 million after-tax. The year ended December 31, 2008 includes a LIFO liquidation gain of $15.6 million, or $9.9 million after-tax.
(2) The year ended December 31, 2008 included a $18.2 million gain on the retirement of debt as well as a $6.7 million gain on the sale of corporate bonds. The year ended December 31, 2009 included $11.8 million of foreign exchange losses related to short-term loans from our Canadian operations, offset by the recognition of a $2.7 million gain on the retirement of debt. The year ended December 31, 2010 included $2.6 million of foreign exchange losses related to the repayment of a long-term loan to our Canadian operations. The three months ended March 31, 2011 included a $6.3 million gain on bargain purchase related to our Singer Steel Company acquisition.
(3) The period from January 1 to October 19, 2007 includes a $2.9 million write off of unamortized debt issuance costs associated with the 2024 Notes that was classified as short term debt and a $2.7 million write off of debt issuance costs associated with our prior credit facility upon entering into an amended revolving credit facility relating to that facility during the first quarter of 2007. The three months ended March 31, 2011 included a $1.1 million write off of debt issuance costs associated with our prior credit facility upon entering into an amended revolving credit facility on March 14, 2011.
(4) The period from January 1 to October 19, 2007 includes a $3.9 million income tax benefit as a result of a favorable settlement from an Internal Revenue Service examination. The year ended December 31, 2009 includes a $92.7 million tax expense related to the establishment of a valuation allowance against the Company’s US deferred tax assets and a $14.5 million income tax charge on the sale of our joint venture in India.
(5)

Pro forma earnings per share – as adjusted for dividends in excess of earnings includes             million and              million additional shares that represent, in accordance with Staff Accounting Bulletin Topic 1.B.3, the number of shares sold in this offering, the proceeds of which are assumed for purposes of this calculation to have been used to fund a termination payment to the principal stockholder in excess of earnings during the year ended December 31, 2010 and the three months ended March 31, 2011, respectively. The calculation assumes an initial offering price of $            per share, the

 

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mid-point of the price range on the cover page of this prospectus. These assumed number of additional shares issued to fund the termination payment in excess of earnings for the year ended December 31, 2010 and the three months ended March 31, 2011 are as follows:

 

     December 31,
2010
     March 31,
2011
 

Dividends paid:

     

During the period (in millions)

   $ 213.8       $ —     

Termination payment to principal stockholder (in millions)

   $         $             
                 

Dividends in excess of earnings (in millions)

   $         $     

Assumed initial offering price per share

   $         $     

Assumed additional number of shares issued to fund dividends in excess of earnings (in millions)

     

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Historical Consolidated Financial Data” and the accompanying consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. See the section entitled “Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including those discussed in “Risk Factors” and elsewhere in this prospectus.

Overview

Business

Ryerson Holding is the parent company of Ryerson Inc. Ryerson Holding is 99% owned by Platinum and an affiliate of Platinum.

On October 19, 2007, the merger (the “Platinum Acquisition”) of Rhombus Merger Corporation (“Merger Sub”), a Delaware corporation and a wholly owned subsidiary of Ryerson Holding, with and into Ryerson, was consummated in accordance with the Agreement and Plan of Merger, dated July 24, 2007, by and among Ryerson, Ryerson Holding and Merger Sub (the “Merger Agreement”). Upon the closing of the Platinum Acquisition, Ryerson ceased to be a publicly traded company and became a wholly owned subsidiary of Ryerson Holding.

Ryerson conducts materials distribution operations in the United States through its wholly owned direct subsidiary Joseph T. Ryerson & Son, Inc. (“JT Ryerson”), in Canada through its indirect wholly owned subsidiary Ryerson Canada, Inc., a Canadian corporation (“Ryerson Canada”) and in Mexico through its indirect wholly owned subsidiary Ryerson Metals de Mexico, S. de R.L. de C.V., a Mexican corporation (“Ryerson Mexico”). In the fourth quarter of 2008, Ryerson Holding increased its ownership in Ryerson China Limited (“Ryerson China”), formerly named VSC-Ryerson China Limited, a joint venture with Van Shung Chong Holdings Limited (“VSC”), from 40% to 80%. On July 12, 2010, we acquired VSC’s remaining 20% equity interest in Ryerson China. As a result, Ryerson China is now an indirect wholly owned subsidiary of Ryerson Holding. We consolidated the operations of Ryerson China as of October 31, 2008.

In addition to our United States, Canada, Mexico and China operations, we conducted materials distribution operations in India through Tata Ryerson Limited, a joint venture with the Tata Iron & Steel Corporation, an integrated steel manufacturer in India until July 10, 2009 when we sold our 50% investment to our joint venture partner, Tata Steel Limited.

Industry and Operating Trends

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 one-half of the metals products sold are processed by us by burning, sawing, slitting, blanking, cutting to length or other techniques. We sell our products and services to many industries, including machinery manufacturers, metals fabricators, electrical machinery, transportation equipment, construction, wholesale distributors, and metals mills and foundries. 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.

 

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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 is driven by market demand, which is largely determined by overall industrial production and conditions in 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 both to improve purchasing leverage with suppliers, as we buy larger quantities of metals inventories, and to reduce operating expenses per ton sold.

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 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.

The metals service center industry is generally considered cyclical with periods of strong demand and higher prices followed by periods of weaker demand and lower prices due to the cyclical nature of the industries in which the largest consumers of metals operate. However, domestic metals prices are volatile and remain difficult to predict due to its commodity nature and the extent which prices are affected by interest rates, foreign exchange rates, energy prices, international supply/demand imbalances, surcharges and other factors.

 

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Results of Operations

 

    Three Months
Ended
March 31,
2011
    % of
Net
Sales
    Three Months
Ended
March 31,
2010
    % of
Net
Sales
    Year Ended
December 31,
2010
    % of
Net
Sales
    Year Ended
December 31,
2009
    % of
Net
Sales
    Year Ended
December 31,
2008
    % of
Net
Sales
 

Net sales

  $ 1,187.0        100.0   $ 871.5        100.0   $ 3,895.5        100.0   $ 3,066.1        100.0   $ 5,309.8        100.0

Cost of materials sold

    1,030.3        86.8        737.7        84.6        3,355.7        86.1        2,610.0        85.1        4,596.9        86.6   
                                                                               

Gross profit

    156.7        13.2        133.8        15.4        539.8        13.9        456.1        14.9        712.9        13.4   

Warehousing, delivery, selling, general and administrative expenses

    135.2        11.4        118.8        13.7        506.9        13.0        483.8        15.8        586.1        11.0   

Restructuring and other charges

    0.3        —         —         —         12.0        0.3        —         —         —         —    

Gain on insurance settlement

    —         —         —         —         (2.6     (0.1     —          —         —          —    

Gain on sale of assets

    —         —         —         —         —         —         (3.3     (0.1     —         —    

Impairment charge on fixed assets

    —         —         —         —         1.4        0.1        19.3        0.6        —         —    

Pension and other postretirement benefits curtailment (gain) loss

    —         —         —         —         2.0        0.1        (2.0     —         —         —    
                                                                               

Operating profit (loss)

    21.2        1.8        15.0        1.7        20.1        0.5        (41.7     (1.4     126.8        2.4   

Other expenses

    (24.0     (2.0     (27.2     (3.1     (110.7     (2.8     (83.0     (2.7     (80.7     (1.5
                                                                               

Income (loss) before income taxes

    (2.8     (0.2     (12.2     (1.4     (90.6     (2.3     (124.7     (4.1     46.1        0.9   

Provision (benefit) for income taxes

    (1.2     (0.1     2.6        0.3        13.1        0.3        67.5        2.2        14.8        0.3   
                                                                               

Net income (loss)

    (1.6     (0.1     (14.8     (1.7     (103.7     (2.6     (192.2     (6.3     31.3        0.6   

Less: Net income (loss) attributable to Noncontrolling interest

    0.1        —          (0.1     —          0.3        —          (1.5     —          (1.2     —    
                                                                               

Net income (loss) attributable to Ryerson Holding Corporation

  $ (1.7     (0.1 )%    $ (14.7     (1.7 )%    $ (104.0     (2.6 )%    $ (190.7     (6.3 )%    $ 32.5        0.6
                                                                               

Basic and diluted earnings (loss) per share

  $ (0.34     $ (2.94     $ (20.80     $ (38.14     $ 6.50     
                                                 

Comparison of the three months ended March 31, 2010 with the three months ended March 31, 2011

Net Sales. Revenue for the first quarter of 2011 increased 36.2% from the same period a year ago to $1,187.0 million. Tons sold for the first quarter of 2011 increased 22.4% from the first quarter of 2010 reflecting improvement in market conditions. Tons sold in the first quarter of 2011 increased across all products compared to the year-ago quarter. Average selling price increased 11.3% against the price levels in the first quarter of 2010, as metals prices increased across all products with the largest increase in our stainless steel product line.

Cost of Materials Sold. Cost of materials sold increased 39.7% to $1,030.3 million in the first quarter of 2011 compared to $737.7 million in the first quarter of 2010. The increase in cost of materials sold in 2011 compared to 2010 is due to the increase in tons sold and an increase in the average cost of materials sold per ton. The average cost of materials sold per ton increased to $1,597 in 2011 from $1,400 in 2010. The average cost of materials sold for our stainless steel product line increased more than our other products, in line with the change in average selling price per ton. During the first quarter of 2011, LIFO expense was $33.3 million compared to LIFO expense of $12.5 million in the first quarter of 2010.

Gross Profit. Gross profit increased by $22.9 million to $156.7 million in the first quarter of 2011. Gross profit as a percent of sales in the first quarter of 2011 decreased to 13.2% from 15.4% in the first quarter of 2010. While revenue per ton increased in the first quarter of 2011 as compared to the first quarter of 2010, our cost of material sold per ton increased at a faster pace resulting in lower gross margins.

 

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Operating expenses. Total operating expenses increased by $16.7 million to $135.5 million in the first quarter of 2011 from $118.8 million in the first quarter of 2010. The increase was primarily due to higher employee costs related to salaries and wages of $5.0 million and increased bonus and commission expenses of $2.6 million in addition to higher delivery expenses of $4.1 million, higher facility costs of $3.5 million and higher expenses at our China operations of $1.4 million. On a per ton basis, first quarter of 2011 operating expenses decreased to $210 per ton from $226 per ton in the first quarter of 2010.

Operating profit. For the first quarter of 2011, the Company reported an operating profit of $21.2 million, or $33 per ton, compared to $15.0 million, or $28 per ton, in the first quarter of 2010, as a result of the factors discussed above.

Other expenses. Interest and other expense on debt increased to $29.7 million in the first quarter of 2011 from $24.7 million in the first quarter of 2010, primarily due to the increased interest expense associated with our Ryerson Holding Notes which were issued on January 29, 2010 and recording a charge of $1.1 million in the first quarter of 2011 to write off debt issuance costs associated with our prior credit facility upon entering into an amended revolving credit facility. Other income and (expense), net was income of $5.7 million in the first quarter of 2011 as compared to a charge of $2.5 million in the same period a year ago. The first quarter of 2011 income included a $6.3 million gain on the bargain purchase of our Singer Steel acquisition. The first quarter of 2010 was negatively impacted by foreign exchange losses related to our Canadian operations.

Provision for income taxes. In the first quarter of 2011, the Company recorded an income tax benefit of $1.2 million compared to income tax expense of $2.6 million in the first quarter of 2010. The $1.2 million income tax benefit in the first three months of 2011 primarily represents a release of valuation allowance due to the recognition of deferred tax liabilities related to the acquisition of Singer Steel Company during the period, partially offset by foreign and US state income tax expense. Due to existing US federal tax loss carry forwards and a valuation allowance on related deferred tax assets, no US federal income tax expense was recorded in the quarter. During the first three months of 2010, the $2.6 million of tax expense primarily related to an increase in the valuation allowance on foreign tax credits and to foreign income tax expense.

Earnings (loss) per share. Basic and diluted earnings (loss) per share was (0.34) in the first three months of 2011 compared to (2.94) in the first three months of 2010. The changes in earnings (loss) per share are due to the results of operations discussed above.

Comparison of the year ended December 31, 2009 with the year ended December 31, 2010

Net Sales

Net sales increased 27.1% to $3.9 billion in 2010 as compared to $3.1 billion in 2009. Tons sold per ship day were 8,972 in 2010 as compared to 7,496 in 2009. Volume increased 19.7% in 2010 as improvement in the manufacturing sector of the economy favorably impacted all of our product lines. The average selling price per ton increased in 2010 to $1,730 from $1,630 in 2009 reflecting the improvement in market conditions compared to 2009. Average selling prices per ton increased for all of our product lines in 2010 with the largest increase in our stainless steel product line.

Cost of Materials Sold

Cost of materials sold increased 28.6% to $3.4 billion in 2010 compared to $2.6 billion in 2009. The increase in cost of materials sold in 2010 compared to 2009 was due to the increase in tons sold resulting from the improvement in the economy along with increases in mill prices. The average cost of materials sold per ton increased to $1,490 in 2010 from $1,388 in 2009. The average cost of materials sold for our stainless steel product line increased more than our other products, in line with the change in average selling price per ton.

During 2010, LIFO expense was $52 million, primarily related to increases in the costs of stainless and carbon steel. During 2009, LIFO income was $174 million primarily related to decreases in inventory prices.

 

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Table of Contents

Gross Profit

Gross profit as a percentage of sales was 13.9% in 2010 as compared to 14.9% in 2009. While revenue per ton increased in 2010 as compared to 2009, our cost of materials sold per ton increased at a faster pace resulting in lower gross margins. Gross profit increased 18.4% to $539.8 million in 2010 as compared to $456.1 million in 2009.

Operating Expenses

Operating expenses as a percentage of sales decreased to 13.4% in 2010 from 16.3% in 2009. Operating expenses in 2010 increased $21.9 million from $497.8 million in 2009 primarily due to the following reasons:

 

   

increased bonus and commission expenses of $14.4 million resulting from increased profitability,

 

   

higher salaries and wages of $10.0 million and higher employee benefit costs of $6.7 million,

 

   

higher delivery costs of $7.9 million resulting from higher volume,

 

   

higher facility costs of $7.6 million primarily due to higher operating supply costs,

 

   

the $12.0 million restructuring and other charges along with the $2.0 million pension curtailment loss in 2010, and

 

   

the $1.4 million impairment charges on fixed assets included in 2010 results.

These cost increases were partially offset by:

 

   

the impairment charge of $19.3 million in 2009 to reduce the carrying value of certain assets to their net realizable value,

 

   

lower reorganization costs of $14.7 million in 2010 excluding the $12.0 million restructuring and other charge,

 

   

lower bad debt expense of $5.5 million, and

 

   

lower legal expenses of $3.0 million.

On a per ton basis, 2010 operating expenses decreased to $231 per ton from $265 per ton in 2009 due to the relatively greater increase in volume being partially offset by higher operating expenses.

Operating Profit (Loss)

As a result of the factors above, in 2010 we reported an operating profit of $20.1 million, or 0.5% of sales, compared to an operating loss of $41.7 million, or 1.4% of sales, in 2009.

Other Expenses

Interest and other expense on debt increased to $107.5 million in 2010 from $72.9 million in 2009 primarily due to the interest expense associated with the Ryerson Holding Notes, which were issued in the first quarter of 2010 as well as to higher amortization of credit facility issuance costs in China and higher average credit agreement borrowings in the U.S. as compared to the prior year. Other income and (expense), net was an expense of $3.2 million in 2010 compared to expense of $10.1 million in 2009. The year 2010 was negatively impacted by $2.6 million of foreign exchange loss realized upon the repayment of a long-term loan to our Canadian operations. The year 2009 was negatively impacted by $11.8 million of foreign exchange losses related to short-term loans from our Canadian operations, partially offset by the recognition of a $2.7 million gain on the retirement of a portion of the Ryerson Notes we repurchased at a discount.

 

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Table of Contents

Provision for Income Taxes

Income tax expense was $13.1 million in 2010 as compared to $67.5 million in 2009. The $13.1 million income tax expense in 2010 primarily relates to additional valuation allowance recorded against deferred tax assets due to changes in the deferred tax asset amounts, adjustments to reflect the filing of the Company’s 2009 federal income tax return and to foreign income tax expense. During 2009, the Company recorded a charge of $92.7 million to establish a valuation allowance against its U.S. deferred tax assets, as the Company determined that it was more-likely-than-not that it would not realize the full value of a portion of its U.S. deferred tax assets. In 2009, we also incurred a $14.5 million income tax charge and an $8.5 million capital gains withholding tax in India on the sale of our joint venture interest. Partially offsetting the charges in 2009 is the tax benefit recognized for losses at the statutory tax rates and an $8.5 million foreign tax credit in the jurisdictions of our foreign subsidiaries.

Noncontrolling Interest

The portion of the income attributable to the noncontrolling interest in Ryerson China was $0.3 million for 2010. Ryerson China incurred a loss in 2009. The portion of the loss attributable to the noncontrolling interest in Ryerson China was $3.1 million for 2009.

Earnings Per Share

Basic and diluted earnings (loss) per share was $(20.80) in 2010 and $(38.14) in 2009. The changes in earnings (loss) per share are due to the results of operations discussed above.

Comparison of the year ended December 31, 2008 with the year ended December 31, 2009

Net Sales

Net sales decreased 42.3% to $3.1 billion in 2009 as compared to $5.3 billion in 2008. Tons sold per ship day were 7,496 in 2009 as compared to 9,902 in 2008. Volume decreased 24.9% in 2009 due to significant economic weakness in the manufacturing sector impacting all of our product lines. Revenue per ship day was $12.2 million in 2009 as compared to $21.0 million in 2008. The average selling price per ton decreased in 2009 to $1,630 from $2,120 in 2008 reflecting the significant deterioration of market conditions compared to 2008. Average selling prices per ton decreased for each of our product lines in 2009 with the largest decline in our stainless steel product line.

Cost of Materials Sold

Cost of materials sold decreased 43.2% to $2.6 billion as compared to $4.6 billion in 2008. The decrease in cost of materials sold in 2009 compared to 2008 is due to the decrease in tons sold resulting from the economic recession along with decreases in average mill prices. The average cost of materials sold per ton decreased to $1,388 in 2009 from $1,835 in 2008. Our average cost of materials sold per ton decreased for each of our product lines in 2009. The average cost of materials sold for our stainless steel product line declined more than our other products, in line with the change in average selling prices per ton.

Inventory reductions during the year 2008 resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of purchases in the year. The LIFO liquidation gain was $16 million for the year 2008. During 2008, LIFO expense was $91 million, which included the $16 million LIFO liquidation gain primarily related to increases in the costs of carbon steel. During 2009, LIFO income was $174 million primarily related to decreases in inventory prices.

 

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Table of Contents

Gross Profit

Gross profit as a percentage of sales was 14.9% in 2009 as compared to 13.4% in 2008. While revenue per ton declined in 2009 as compared to 2008, we were able to reduce our cost of materials sold per ton at a faster pace resulting in higher gross margins. Gross profit decreased 36.0% to $456.1 million in 2009 as compared to $712.9 million in 2008.

Operating Expenses

Operating expenses as a percentage of sales increased to 16.3% in 2009 from 11.0% in 2008. Operating expenses in 2009 decreased primarily due to lower wages and salaries of $36.0 million and lower employee benefit expenses of $17.7 million resulting from lower employment levels after workforce reductions, lower bonus and commission expenses of $17.8 million resulting from reduced profitability, lower delivery expenses of $27.6 million resulting from reduced volume, lower facility expenses of $13.8 million primarily due to plant closures, the $3.3 million gain on the sale of assets, and the $2.0 million other postretirement benefit curtailment gain, partially offset by an impairment charge of $19.3 million to reduce the carrying value of certain assets to their net realizable value, an incremental $8.4 million impact from a full year of expenses for our joint venture in China, Ryerson China, which we began to fully consolidate in November of 2008 and higher legal expenses of $2.7 million. On a per ton basis, the 2009 operating expenses increased to $264 per ton from $234 per ton in 2008 due to the relatively greater decline in volume being partially offset by lower operating expenses.

Operating Profit (Loss)

As a result of the factors above, in 2009 we incurred an operating loss of $41.7 million, or 1.4% of sales, compared to an operating profit of $126.8 million, or 2.4% of sales, in 2008.

Other Expenses

Interest and other expense on debt decreased to $72.9 million in the year 2009 from $109.9 million in 2008 primarily due to lower average borrowings and lower interest rates on variable rate debt as compared to the same period in the prior year, as well as the impact of retirement of a portion of the Ryerson Notes. Other income and (expense), net was an expense in 2009 in the amount of $10.1 million compared to income of $29.2 million in 2008. The year 2009 was negatively impacted by $11.8 million of foreign exchange losses related to short-term loans from our Canadian operations, partially offset by the recognition of a $2.7 million gain on the retirement of a portion of the Ryerson Notes we repurchased at a discount. In 2008, we recognized a gain of $18.2 million on the retirement of a portion of the Ryerson Notes, which we repurchased at a discount, as well as a $6.7 million gain on the sale of a held-for-sale corporate bond investment.

Provision for Income Taxes

Income tax expense was $67.5 million in 2009 as compared to $14.8 million in 2008. During 2009, the Company recorded a charge of $92.7 million to establish a valuation allowance against its U.S. deferred tax assets, as the Company determined that it was more-likely-than-not that it would not realize the full value of a portion of its U.S. deferred tax assets. In 2009, we also incurred a $14.5 million income tax charge and an $8.5 million capital gains withholding tax in India on the sale of our joint venture interest. Partially offsetting the charges in 2009 is the tax benefit recognized for losses at the statutory tax rates and an $8.5 million foreign tax credit in the jurisdictions of our foreign subsidiaries. The effective tax rate was 32.1% in 2008. The tax rate in 2008 reflected a higher proportion of pretax income from joint ventures with lower foreign income tax rates and the Company’s qualification for and the recognition of a manufacturing tax deduction for the first time in 2008.

Noncontrolling Interest

Based on our increased ownership, we consolidated the operations of Ryerson China as of October 31, 2008. In the period from October 31, 2008 to December 31, 2008, Ryerson China’s results of operations was a loss.

 

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Table of Contents

The portion attributable to the noncontrolling interest in Ryerson China was $1.2 million. Ryerson China also incurred a loss in 2009 due to the economic weakness in the manufacturing industry in China. The portion attributable to the noncontrolling interest in Ryerson China was $1.5 million for 2009.

Earnings Per Share

Basic and diluted earnings (loss) per share was $(38.14) in 2009 and $6.50 in 2008. The changes in earnings (loss) per share are due to the results of operations discussed above.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash and cash equivalents, cash flows from operations and borrowing availability under the Ryerson Credit Facility, which matures on the earliest of (a) March 14, 2016, (b) the date that occurs 90 days prior to the scheduled maturity date of the 2014 Notes, if the 2014 Notes are then outstanding and (c) the date that occurs 90 days prior to the scheduled maturity date of the 2015 Notes, if the 2015 Notes are then outstanding. The Company’s 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 and the selling and administrative costs of the business, capital expenditures, and for interest payments on debt.

The following table summarizes the Company’s cash flows:

 

     Year Ended December 31,     Three Months Ended
March 31,
 
     2008     2009     2010         2010             2011      
     (In millions)     (In millions)  

Net cash provided by (used in) operating activities

   $ 280.5      $ 284.9      $ (198.7     (51.9     (103.8

Net cash provided by (used in) investing activities

     19.3        32.1        (44.4     2.0        (15.7

Net cash provided by (used in) financing activities

     (197.0     (342.4     185.1        54.0        98.4   

Effect of exchange rates on cash

     (7.6     10.0        5.6        2.5        0.4   
                                        

Net increase (decrease) in cash and cash equivalents

   $ 95.2      $ (15.4   $ (52.4     6.6        (20.7
                                        

The Company had cash and cash equivalents at March 31, 2011 of $41.9 million compared to $62.6 million at December 31, 2010. The Company had $1,308 million and $1,211 million of total debt outstanding and a debt-to-capitalization ratio of 116% and 118% at March 31, 2011 and December 31, 2010, respectively. The Company had total liquidity (defined as cash and cash equivalents plus availability under the Ryerson Credit Facility and foreign debt facilities) of $359 million at March 31, 2011(1) versus $394 million at December 31, 2010(1).

The Company had cash and cash equivalents at December 31, 2010 of $62.6 million, compared to $115.0 million at December 31, 2009 and $130.4 million at December 31, 2008. The Company had $1,211 million and $754 million of total debt outstanding, a debt-to-capitalization ratio of 118% and 83% and $317 million and $268 million available under the Ryerson Credit Facility at December 31, 2010 and 2009, respectively. The Company had total liquidity (defined as cash and cash equivalents plus availability under the Ryerson Credit Facility and foreign debt facilities) of $394 million at December 31, 2010(1) versus $391 million at December 31, 2009(1). Total liquidity is a non-GAAP financial measure. We believe that total liquidity provides additional information for measuring our ability to fund our operations. Total liquidity does not represent, and should not be used as a substitute for, net income or cash flows from operations as determined in accordance with GAAP and total liquidity is not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. At December 31, 2008, the Company had $1,030 million of total debt outstanding, a debt-to-capitalization ratio of 72% and $469 million available under the Ryerson Credit Facility.

 

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(1) 

Below is a reconciliation of cash and cash equivalents to total liquidity:

 

      As of
December 31,
2009
     As of
December  31,
2010
     As of
March  31,
2011
 
            (In millions)         

Cash and cash equivalents

   $ 115       $ 63       $ 42   

Availability on Ryerson Credit Facility and foreign debt facilities

     276         331         317   
                          

Total liquidity

   $ 391       $ 394       $ 359   
                          

Net cash used by operating activities of $103.8 million in the first three months of 2011 was primarily due to an increase in inventories of $55.1 million resulting from higher inventory purchases to support increased sales levels in the first three months of 2011 and an increase in accounts receivable of $132.1 million reflecting higher net sales in the first three months of 2011, partially offset by an increase in accounts payable of $71.7 million.

During the year ended December 31, 2010, net cash used by operating activities was $198.7 million. During the years ended December 31, 2009 and 2008, net cash provided by operating activities was $284.9 million and $280.5 million, respectively. Net income (loss) was $(103.7) million, $(192.2) million and $31.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. Cash used by operating activities was $198.7 million during the year ended December 31, 2010 and was primarily the result of an increase in inventories of $170.9 million resulting from higher inventory purchases to support increased sales levels, an increase in accounts receivable of $137.5 million reflecting higher sales levels, partially offset by an increase in accounts payable of $102.3 million. Cash provided by operating activities of $284.9 million during the year ended December 31, 2009 was primarily the result of a decrease in inventories of $226.9 million resulting from management’s efforts to reduce inventory in a weak economic environment, a decrease in accounts receivable of $150.9 million reflecting lower volume in 2009 and a decrease in taxes receivable of $43.2 million. Cash provided by operating activities of $280.5 million during the year ended December 31, 2008 was primarily the result of a decrease in inventories of $262.4 million resulting from management’s efforts to reduce inventory in a weak economic environment and a decrease in accounts receivable of $120.0 million reflecting lower volume in 2008, partially offset by a decrease in accounts payable of $80.0 million and a decrease in accrued liabilities of $50.3 million.

Net cash used in investing activities for the first three months of 2011 was $15.7 million compared to net cash provided by investing activities for the first three months of 2010 of $2.0 million. Capital expenditures during the first three months of 2011 totaled $6.4 million compared to $5.3 million in the first three months of 2010. The Company sold property, plant and equipment and assets held for sale generating cash proceeds of $3.4 million and $0.6 million during the three-month periods ended March 31, 2011 and 2010, respectively. The Company made an acquisition during 2011, resulting in cash outflows of $19.7 million.

Net cash used by investing activities was $44.4 million in 2010. Net cash provided by investing activities $32.1 million and $19.3 million in 2009 and 2008, respectively. Capital expenditures for the years ended December 31, 2010, 2009 and 2008 were $27.0 million, $22.8 million and $30.1 million, respectively. The Company sold property, plant and equipment generating cash proceeds of $5.5 million, $18.4 million and $31.7 million during the years ended December 31, 2010, 2009 and 2008, respectively. In 2010, the Company made two acquisitions, resulting in a cash outflow of $12.0 million. The Company sold its 50 percent investment in Tata Ryerson Limited to its joint venture partner, Tata Steel Limited, during the third quarter of 2009, generating cash proceeds of $49.0 million. In 2008, the Company invested $18.5 million to buy an additional 40% interest in Ryerson China, increasing our ownership percentage to 80%. Cash increased $30.5 million due to fully consolidating the results of Ryerson China as of October 31, 2008. In 2008, the Company purchased corporate bonds as an investment for $24.2 million, which were sold later in 2008 for proceeds of $30.9 million.

 

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Net cash provided by financing activities in the first three months of 2011 was $98.4 million compared to $54.0 million in the first three months of 2010. Net cash provided by financing activities in the first three months of 2011 and 2010 was primarily related to increased credit facility borrowings to finance accounts receivable related to higher sales in 2011 and 2010, respectively.

Net cash provided in financing activities was $185.1 million for the year ended December 31, 2010, primarily related to the issuance of the Ryerson Holding Notes and credit facility borrowings to finance accounts receivable and inventory to support increased sales levels in 2010, offset by a $213.8 million dividend paid to our stockholders. We also acquired VSC’s, our former joint venture partner, remaining 20 percent ownership in Ryerson China for $17.5 million. Net cash used in financing activities was $342.4 million for the year ended December 31, 2009, primarily related to credit facility repayments made possible from lower working capital requirements as well as a $56.5 million dividend paid to our stockholders. Net cash used in financing activities was $197.0 million for the year ended December 31, 2008, primarily due to the repurchase of the Ryerson Notes for $71.7 million and a net reduction in borrowings under the Ryerson Credit Facility of $133.2 million.

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

As a result of the net cash used in operating activities, total debt, less unamortized discount in the Consolidated Balance Sheet increased to $1,307.7 million at March 31, 2011 from $1,211.3 million at December 31, 2010.

Total debt outstanding as of March 31, 2011 consisted of the following amounts: $533.9 million borrowing under the Ryerson Credit Facility, $102.9 million under the 2014 Notes, $376.2 million under the 2015 Notes, $260.7 million under the Ryerson Holding Notes, $29.9 million of foreign debt and $4.1 million under the 8 1/4% Senior Notes due 2011 (“2011 Notes”). Availability at March 31, 2011 and December 31, 2010 under the Ryerson Credit Facility was $302 million and $317 million, respectively. Discussion of our outstanding debt follows.

Ryerson Credit Facility

On October 19, 2007, Ryerson entered into the Ryerson Credit Facility, a 5-year, $1.35 billion revolving credit facility agreement with a maturity date of October 18, 2012. On March 14, 2011, Ryerson amended the terms of the Ryerson Credit Facility to, among other things, extend the maturity date to the earliest of (a) March 14, 2016, (b) the date that occurs 90 days prior to the scheduled maturity date of the 2014 Notes, if the 2014 Notes are then outstanding and (c) the date that occurs 90 days prior to the scheduled maturity date of the 2015 Notes, if the 2015 Notes are then outstanding. At March 31, 2011, Ryerson had $533.9 million of outstanding borrowings, $27 million of letters of credit issued and $302 million available under the $1.35 billion Ryerson Credit Facility compared to $457.3 million of outstanding borrowings, $24 million of letters of credit issued and $317 million available at December 31, 2010. Total credit availability is limited by the amount of eligible account receivables and inventory pledged as collateral under the agreement insofar as the Company is subject to a borrowing base comprised of the aggregate of these two amounts, less applicable reserves. Eligible account receivables, at any date of determination, are comprised of the aggregate value of all accounts directly created by a borrower in the ordinary course of business arising out of the sale of goods or the rendition 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 does not have sole and absolute title and accounts arising out of a sale to an employee, officer, director, or affiliate of a borrower. The weighted average interest rate on the borrowings under the Ryerson Credit Facility was 2.5% and 2.1% at March 31, 2011 and December 31, 2010, respectively.

 

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Amounts outstanding under the Ryerson Credit Facility bear interest at a rate determined by reference to the base rate (Bank of America’s prime rate) or a LIBOR rate or, for the Company’s Canadian subsidiary which is a borrower, a rate determined by reference to the Canadian base rate (Bank of America-Canada Branch’s “Base Rate” for loans in U.S. Dollars in Canada) or the BA rate (average annual rate applicable to Canadian Dollar bankers’ acceptances) or a LIBOR rate and the Canadian prime rate (Bank of America-Canada Branch’s “Prime Rate.”). The spread over the base rate and Canadian prime rate is between 0.75% and 1.50% and the spread over the LIBOR and for the bankers’ acceptances is between 1.75% and 2.50%, depending on the amount available to be borrowed. Overdue amounts and all amounts owed during the existence of a default bear interest at 2% above the rate otherwise applicable thereto. Ryerson also pays commitment fees on amounts not borrowed at a rate between 0.375% and 0.5% depending on the average borrowings as a percentage of the total $1.35 billion agreement during a rolling three month period.

Borrowings under the Ryerson Credit Facility are secured by first-priority liens on all of the inventory, accounts receivable, lockbox accounts and related assets of Ryerson, subsidiary borrowers and certain other U.S. subsidiaries of Ryerson that act as guarantors.

The Ryerson Credit Facility contains covenants that, among other things, restrict Ryerson 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 such facility declines to a certain level, Ryerson maintain a minimum fixed charge coverage ratio as of the end of each fiscal quarter.

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 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 have the ability to 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 Ryerson. If Ryerson or any significant subsidiaries of the other borrowers becomes insolvent or commences bankruptcy proceedings, all amounts borrowed under the Ryerson Credit Facility will become immediately due and payable.

Proceeds from borrowings under the Ryerson Credit Facility and repayments of borrowings thereunder that are reflected in the Consolidated Statements of Cash Flows represent borrowings under the Company’s revolving credit agreement with original maturities greater than three months. Net proceeds (repayments) under the Ryerson Credit Facility represent borrowings under the Ryerson Credit Facility with original maturities less than three months.

Ryerson Holding Notes

On January 29, 2010, Ryerson Holding issued $483 million aggregate principal amount at maturity of Ryerson Holding Notes. No cash interest accrues on the Ryerson Holding Notes. The Ryerson Holding Notes had an initial accreted value of $455.98 per $1,000 principal amount and will accrete from the date of issuance until maturity on a semi-annual basis. The accreted value of each Ryerson Holding Note increases from the date of issuance until October 31, 2010 at a rate of 14.50%. Thereafter the interest rate increases by 1% (to 15.50%) until July 31, 2011, an additional 1.00% (to 16.50%) on August 1, 2011 until April 30, 2012, and increases by an additional 0.50% (to 17.00%) on May 1, 2012 until the maturity date. Interest compounds semi-annually such that the accreted value will equal the principal amount at maturity of each note on that date. At March 31, 2011, the accreted value of the Ryerson Holding Notes was $260.7 million. The Ryerson Holding Notes are not guaranteed by any of Ryerson Holding’s subsidiaries and are secured by a first priority security interest in the

 

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capital stock of Ryerson. The Ryerson Holding Notes rank equally in right of payment with all of Ryerson Holding’s senior debt and senior in right of payment to all of Ryerson Holding’s subordinated debt. The Ryerson Holding Notes are effectively junior to Ryerson Holding’s other secured debt to the extent of the collateral securing such debt (other than the capital stock of Ryerson). Because the Ryerson Holding Notes are not guaranteed by any of Ryerson Holding’s subsidiaries, the notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of Ryerson Holding’s subsidiaries, including Ryerson.

The Ryerson Holding Notes contain customary covenants that, among other things, limit, subject to certain exceptions, Ryerson Holding’s ability to incur additional indebtedness, pay dividends on its capital stock or repurchase its capital stock, make certain investments or other restricted payments, create liens or use assets as security in other transactions, enter into sale and leaseback transactions, merge, consolidate or transfer or dispose of substantially all of Ryerson Holding’s assets, and engage in certain transactions with affiliates.

The Ryerson Holding Notes are redeemable, at our option, in whole or in part, at any time at specified redemption prices. We are required to redeem the Ryerson Holding Notes upon the receipt of net proceeds of certain qualified equity issuances, specified change of controls and/or specified receipt of dividends.

The terms of the Ryerson Notes (discussed below) restrict Ryerson from making dividends to Ryerson Holding. Subject to certain exceptions, Ryerson may only pay dividends to Ryerson Holding to the extent of 50% of future net income, once prior losses are offset. In the event Ryerson is restricted from providing Ryerson Holding with sufficient distributions to fund the retirement of the Ryerson Holding Notes at maturity, Ryerson Holding may default on the Ryerson Holding Notes unless other sources of funding are available.

Pursuant to a registration rights agreement, Ryerson Holding agreed to offer to exchange each of the Ryerson Holding Notes for a new issue of Ryerson Holding’s debt securities registered under the Securities Act, with terms substantially identical to those of the Ryerson Holding Notes. Ryerson Holding completed the exchange offer on December 7, 2010. As a result of completing the exchange offer, Ryerson Holding satisfied its obligations under the registration rights agreement covering the Ryerson Holding Notes.

The Ryerson Notes

On October 19, 2007, Merger Sub issued the Ryerson Notes. The 2014 Notes bear interest at a rate, reset quarterly, of LIBOR plus 7.375% per annum. The 2015 Notes bear interest at a rate of 12% per annum. The Ryerson Notes are fully and unconditionally guaranteed on a senior secured basis by certain of Ryerson’s existing and future subsidiaries (including those existing and future domestic subsidiaries that are co-borrowers or guarantee obligations under the Ryerson Credit Facility). At March 31, 2011, $376.2 million of the 2015 Notes and $102.9 million of the 2014 Notes remain outstanding.

The Ryerson Notes and guarantees are secured by a first-priority lien on substantially all of Ryerson and its guarantors’ present and future assets located in the United States (other than receivables, inventory, related general intangibles, certain other assets and proceeds thereof) including equipment, owned real property interests valued at $1 million or more, and all present and future shares of capital stock or other equity interests of each of Ryerson and its guarantors’ directly owned domestic subsidiaries and 65% of the present and future shares of capital stock or other equity interests, of each of Ryerson and its guarantor’s directly owned foreign restricted subsidiaries, in each case subject to certain exceptions and customary permitted liens. The Ryerson Notes and guarantees are secured on a second-priority basis by a lien on the assets that secure Ryerson’s obligations under the Ryerson Credit Facility. The Ryerson Notes contain customary covenants that, among other things, limit, subject to certain exceptions, Ryerson’s ability, and the ability of its restricted subsidiaries, to incur additional indebtedness, pay dividends on its capital stock or repurchase its capital stock, make investments, sell assets, engage in acquisitions, mergers or consolidations or create liens or use assets as security in other transactions. Subject to certain exceptions, Ryerson may only pay dividends to Ryerson Holding to the extent of 50% of future net income, once prior losses are offset.

 

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The Ryerson Notes will be redeemable by Ryerson, in whole or in part, at any time on or after November 1, 2011 at specified redemption prices. If a change of control occurs, Ryerson must offer to purchase the Ryerson Notes at 101% of their principal amount, plus accrued and unpaid interest.

Pursuant to a registration rights agreement, Ryerson agreed to offer to exchange each of the notes for a new issue of our debt securities registered under the Securities Act, with terms substantially identical to those of the Ryerson Notes. Ryerson completed the exchange offer on April 9, 2009. As a result of completing the exchange offer, Ryerson satisfied its obligation under the registration rights agreement covering the Ryerson Notes.

Foreign Debt

At March 31, 2011, Ryerson China’s total foreign borrowings were $29.9 million, of which, $27.2 million was owed to banks in Asia at a weighted average interest rate of 5.1% secured by inventory and property, plant and equipment. Ryerson China also owed $2.7 million at March 31, 2011 to other parties at a weighted average interest rate of 1.0%. At December 31, 2010, Ryerson China’s total foreign borrowings were $19.7 million, of which, $17.9 million was owed to banks in Asia at a weighted average interest rate of 4.3% secured by inventory and property, plant and equipment. Ryerson China also owed $1.8 million at December 31, 2010 to other parties at a weighted average interest rate of 1.0%. Availability under the foreign credit lines was $15 million and $14 million at March 31, 2011 and December 31, 2010, respectively. Letters of credit issued by our foreign subsidiaries totaled $8 million and $7 million at March 31, 2011 and December 31, 2010, respectively.

$150 Million 8  1/4% Senior Notes due 2011

At March 31, 2011, $4.1 million of the 2011 Notes remained outstanding. The 2011 Notes pay interest semi-annually and mature on December 15, 2011.

The 2011 Notes contained covenants, substantially all of which were removed pursuant to an amendment of the 2011 Notes as a result of the tender offer to repurchase the notes during 2007.

Pension Funding

At December 31, 2010, pension liabilities exceeded plan assets by $306 million. The Company anticipates that it will have a minimum required pension contribution of approximately $44 million in 2011 under the Employee Retirement Income Security Act of 1974 (“ERISA”) and Pension Protection Act (“PPA”) in the U.S and the Ontario Pension Benefits Act in Canada. Through the three months ended March 31, 2011, the Company has made $8 million in pension contributions, and anticipates an additional $36 million contribution in the remaining nine months of 2011. Future contribution requirements depend on the investment returns on plan assets, the impact of discount rates on pension liabilities, and changes in regulatory requirements. The Company is 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 the Company’s financial position or cash flows. The Company believes that cash flow from operations and the Ryerson Credit Facility described above will provide sufficient funds to make the minimum required contribution in 2011.

Income Tax Payments

The Company received income tax refunds of $46.8 million and $29.1 million in 2010 and 2009, respectively. The Company paid income taxes of $9.7 million in 2008.

 

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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 $31 million as of December 31, 2010. Additionally, other than normal course long-term operating leases included in the following Contractual Obligations table, we do not have any 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 March 31, 2011:

 

     Payments Due by Period  

Contractual Obligations(1)    

   Total      Less than
1 year
     1 –3
years
     4 – 5
years
     After 5
years
 
     (In millions)  

Floating Rate Notes

   $ 103       $ —        $ —        $ 103      $ —    

Fixed Rate Long Term Notes

     376         —          —          376        —    

Senior Discount Notes

     483         —          —          483         —     

Other Long Term Notes

     4         4        —           —          —    

Ryerson Credit Facility

     534         —          —           534        —    

Foreign Debt

     30         30         —          —          —    

Interest on Floating Rate Notes, Fixed Rate Notes, Other Long Term Notes, Ryerson Credit Facility and Foreign Debt (2)

     295         67         134         94         —    

Purchase Obligations (3)

     49         49         —          —          —    

Capital leases

     1         —          1         —          —    

Operating leases

     102         21         30         19         32   
                                            

Total

   $ 1,977       $ 171       $ 165       $ 1,609       $ 32   
                                            

 

(1) The contractual obligations disclosed above do not include the Company’s potential future pension funding obligations (see discussion above).
(2) Interest payments related to the variable rate debt were estimated using the weighted average interest rate for the Ryerson Credit Facility and the 2014 Notes.
(3) The purchase obligations with suppliers are entered into when we receive firm sales commitments with certain of our customers.

Subsequent Events

Ryerson Holding filed a Form S-1 (the “Form S-1”) on January 22, 2010 for the possible issuance of common stock to public stockholders. A number of amendments to the Form S-1 were subsequently filed. In May 2010, the Company decided not to proceed with the offering of its common stock due to unfavorable market conditions caused by volatility in the global equity markets. In April 2011, the Company decided to file an additional amendment to the Form S-1. The number of shares and offering price per share are unknown at this time. Upon completion of an offering of common stock, Platinum will continue to control all matters submitted for approval by our stockholders through its ownership of a majority of our outstanding common stock. These matters could include the election of all of the members of our Board of Directors, amendments to our organizational documents, or the approval of any proxy contests, mergers, tender offers, sales of assets or other major corporate transactions. The interests of Platinum may not in all cases be aligned with the interests of our other common stock stockholders.

 

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JT Ryerson, one of our subsidiaries, is party to a corporate advisory services agreement with Platinum Advisors, an affiliate of Platinum, pursuant to which Platinum Advisors provides JT Ryerson certain business, management, administrative and financial advice. On                     , JT Ryerson’s Board of Directors approved the termination of this services agreement contingent on the closing of the initial public offering. As consideration for terminating the monitoring fee payable thereunder, JT Ryerson will pay Platinum Advisors $             million.

On             , our Board of Directors approved a              for 1.00 stock split of the Company’s common stock to be effected prior to the closing of this offering.

Capital Expenditures

Capital expenditures during the first three months of 2011 totaled $6.4 million compared to $5.3 million in the first three months of 2010, and were primarily for machinery and equipment.

Capital expenditures during 2010, 2009 and 2008 totaled $27.0 million, $22.8 million and $30.1 million, respectively. Capital expenditures were primarily for machinery and equipment in 2010, 2009 and 2008.

The Company anticipates capital expenditures, excluding acquisitions, to be approximately $50 million in 2011. The increased spending over prior years includes improvements in the Company’s North American processing capabilities and expansion in emerging markets.

Restructuring

2010

During 2010, the Company paid $0.7 million related to the exit plan liability recorded on October 19, 2007, as part of the Platinum Acquisition. The remaining balance of $0.2 million of tenancy and other costs related to the Platinum Acquisition exit plan liability as of December 31, 2010 is expected to be paid during 2011.

In the fourth quarter of 2010, the Company recorded a $12.5 million charge related to the closure of one of its facilities. The charge consists of restructuring expenses of $0.4 million for employee-related costs, including severance for 66 employees, and additional, non-cash pensions and other post-retirement benefits costs totaling $12.1 million. Included in the non-cash pension charge is a pension curtailment loss of $2.0 million. In the fourth quarter of 2010, the Company paid $0.3 million in employee costs related to this facility closure. The remaining $0.1 million balance is expected be paid in 2011. The Company expects to record additional restructuring charges of less than $1 million related to this facility closure in 2011.

2009

During 2009, the Company paid $6.4 million related to the exit plan liability recorded on October 19, 2007, as part of the Platinum Acquisition. The Company also recorded a $0.3 million reduction to the exit plan liability primarily due to lower property taxes on closed facilities than estimated in the initial restructuring plan.

2008

During 2008, the Company paid $29.3 million related to the exit plan liability recorded on October 19, 2007, as part of the Platinum Acquisition. The Company also recorded a $4.4 million reduction to the exit plan liability primarily due to 277 fewer employee terminations than anticipated in the initial restructuring plan. The reduction to the exit plan liability reduced goodwill by $2.6 million, net of tax. The Company also recorded a $0.4 million reduction to the exit plan liability in the fourth quarter of 2008 which was credited to “Warehousing, delivery, selling, general and administrative expense.”

 

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Other Charges

In the fourth quarter of 2010, the Company also recorded a charge of $1.5 million for costs related to the retirement of its former Chief Executive Officer, which is recorded within the “Restructuring and other charges” line of the consolidated statement of operations.

Deferred Tax Amounts

At December 31, 2010, the Company had a net deferred tax liability of $88 million comprised primarily of a deferred tax asset of $120 million related to pension liabilities, a deferred tax asset related to postretirement benefits other than pensions of $67 million, $38 million of Alternative Minimum Tax (“AMT”) credit carryforwards, and deferred tax assets of $54 million related to federal and local loss carryforwards, offset by a valuation allowance of $137 million, and deferred tax liabilities of $115 million related to fixed asset and $135 million related to inventory.

The Company’s deferred tax assets include $39 million related to US federal net operating loss (“NOL”) carryforwards, $12 million related to state NOL carryforwards and $3 million related to non-US NOL carryforwards, available at December 31, 2010.

In accordance with FASB ASC 740, “Income Taxes,” the Company assesses, on a quarterly basis, the realizability of its deferred tax assets. A valuation allowance must be established 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 and cash flows and the nature and timing of future deductions and benefits represented by the deferred tax assets. As a result of U.S. pre-tax losses incurred in periods leading up to the second quarter of 2009, we were unable to rely on the positive evidence of projected future income to support all deferred tax assets. After considering both the positive and negative evidence available at the end of the second quarter of fiscal year 2009, the Company determined that it was more-likely-than-not that it would not realize the full value of a portion of its U.S. deferred tax assets. As a result, during the second quarter of 2009, the Company established a valuation allowance against its deferred tax assets in the U.S. to reduce them to the amount that is more-likely-than-not to be realized with a corresponding non-cash charge of $74.7 million to the provision for income taxes. During the second half of 2009 an additional non-cash charge of $23.9 million was recorded, increasing the valuation allowance to $98.8 million at December 31, 2009. Of the charges recorded during 2009, $92.7 million of this valuation allowance was charged to income tax provision and $5.9 million was charged to other comprehensive income in 2009. The valuation allowance was increased to $136.6 million at December 31, 2010. Of the charges recorded during 2010, $36.5 million was charged to income tax provision and $4.4 million was charged to other comprehensive income offset by $3.1 million of a change in net deferred tax assets for which a valuation allowance was fully provided. 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.

Critical Accounting Estimates

Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of sales and expenses during the reporting period. Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed under the caption “NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Note 1: Statement of Accounting and Financial Policies.” These policies have been consistently applied and address such matters as revenue recognition, depreciation methods, inventory valuation, asset impairment recognition and pension and postretirement expense. While policies associated with estimates and judgments may be affected by different assumptions or conditions, we believe our estimates and judgments associated with the reported amounts are appropriate in the circumstances. Actual results may differ from those estimates.

 

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We consider the policies discussed below as critical to an understanding of our financial statements, as application of these policies places the most significant demands on management’s judgment, with financial reporting results relying on estimation of matters that are uncertain.

Provision for allowances, claims and doubtful accounts: We perform ongoing credit evaluations of customers and set credit limits based upon review of the customers’ current credit information and payment history. We monitor customer payments and maintain a provision for estimated credit losses based on historical experience and specific customer collection issues that we have identified. Estimation of such losses requires adjusting historical loss experience for current economic conditions and judgments about the probable effects of economic conditions on certain customers. We cannot guarantee that the rate of future credit losses will be similar to past experience. Provisions for allowances and claims are based upon historical rates, expected trends and estimates of potential returns, allowances, customer discounts and incentives. We consider all available information when assessing the adequacy of the provision for allowances, claims and doubtful accounts.

Inventory valuation: Our inventories are valued at cost, which is not in excess of market. Inventory costs reflect metal and in-bound freight purchase costs, third-party processing costs and internal direct and allocated indirect processing costs. Cost is primarily determined by the LIFO method. We regularly review inventory on hand and record provisions for obsolete and slow-moving inventory based on historical and current sales trends. Changes in product demand and our customer base may affect the value of inventory on hand which may require higher provisions for obsolete inventory.

Deferred tax asset: We record operating loss and tax credit carryforwards and the estimated effect of temporary differences between the tax basis of assets and liabilities and the reported amounts in the Consolidated Balance Sheet. We follow detailed guidelines in each tax jurisdiction when reviewing tax assets recorded on the balance sheet and provide for valuation allowances as required. Deferred tax assets are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax planning strategies and on forecasts of future taxable income. The forecasts of future taxable income require assumptions regarding volume, selling prices, margins, expense levels and industry cyclicality. If we are unable to generate sufficient future taxable income in certain tax jurisdictions, we will be required to record additional valuation allowances against our deferred tax assets related to those jurisdictions.

Long-lived Assets and Other Intangible Assets: Long-lived assets held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment is recognized. Any related impairment loss is calculated based upon comparison of the fair value to the carrying value of the asset. Separate intangible assets that have finite useful lives are amortized over their useful lives. An impaired intangible asset would be written down to fair value, using the discounted cash flow method.

Goodwill: In assessing the recoverability of our goodwill and other intangibles we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. We perform an annual review in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill is impaired. Our impairment review is a two-step process. In step one, we compare the fair value of the reporting unit in which goodwill resides to its carrying value. If the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. We estimate the reporting unit’s fair value using an income approach based on discounted future cash flows that requires us to estimate income from operations based on projected results and discount rates based on a weighted average cost of capital of comparable companies. The income approach is subject to a comparison for reasonableness to a market approach at the date of valuation. If these estimates or their related assumptions for commodity prices and demand change in the future, we may be required to record impairment charges for these assets not previously recorded. The Company

 

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cannot predict the occurrence of events that might adversely affect the reported value of goodwill. During the fourth quarter of 2010, we reviewed goodwill for impairment and determined that none of the reporting units were at risk of failing step one of the impairment testing.

Pension and postretirement benefit plan assumptions: We sponsor various benefit plans covering a substantial portion of its employees for pension and postretirement medical costs. Statistical methods are used to anticipate future events when calculating expenses and liabilities related to the plans. The statistical methods include assumptions about, among other things, the discount rate, expected return on plan assets, rate of increase of health care costs and the rate of future compensation increases. Our actuarial consultants also use subjective factors such as withdrawal and mortality rates when estimating expenses and liabilities. The discount rate used for U.S. plans reflects the market rate for high-quality fixed-income investments on our annual measurement date (December 31) and is subject to change each year. The discount rate was determined by matching, on an approximate basis, the coupons and maturities for a portfolio of corporate bonds (rated Aa or better by Moody’s Investor Services or AA or better by Standard and Poor’s) to the expected plan benefit payments defined by the projected benefit obligation. The discount rates used for plans outside the U.S. are based on a combination of relevant indices regarding corporate and government securities, the duration of the liability and appropriate judgment. The assumptions used in the actuarial calculation of expenses and liabilities may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact on the amount of pension or postretirement benefit expense we may record in the future.

Legal contingencies: We are involved in a number of legal and regulatory matters including those discussed in Item 8 “NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Note 11: Commitments and Contingencies.” We determine whether an estimated loss from a loss contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We analyze our legal matters based on available information to assess potential liability. We consult with outside counsel involved in our legal matters when analyzing potential outcomes. We cannot determine at this time whether any potential liability related to this litigation would materially affect our financial position, results of operations or cash flows.

Recent Accounting Pronouncements

Recent accounting pronouncements are discussed within Note 1 of the footnote disclosures included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

We are exposed to market risk related to our fixed-rate and variable-rate long-term debt. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. 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 $1,332 million at March 31, 2011 and $1,206 million at December 31, 2010 as compared with the carrying value of $1,308 million and $1,211 million at March 31, 2011 and December 31, 2010, respectively.

We had interest rate swap agreements for $100 million notional amount of pay fixed, receive floating interest rate swaps at March 31, 2011 and December 31, 2010, to effectively convert the interest rate from floating to fixed through July 2011. We do not currently account for these contracts as hedges but rather mark them to market with a corresponding offset to current earnings. At March 31, 2011, these agreements had a liability value of $0.5 million. A hypothetical 1% increase in interest rates on variable rate debt would have increased interest expense for the first three months of 2011 by approximately $1.5 million.

 

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Foreign exchange rate risk

We are subject to exposure from fluctuations in foreign currencies. We use foreign currency exchange contracts to hedge our Canadian subsidiaries variability in cash flows from the forecasted payment of currencies other than the functional currency. The Canadian subsidiaries’ foreign currency contracts were principally used to purchase U.S. dollars. We had foreign currency contracts with a U.S. dollar notional amount of $11.6 million outstanding at March 31, 2011 and a liability value of $0.4 million. We do not currently account for these contracts as hedges but rather mark these contracts to market with a corresponding offset to current earnings.

Commodity price risk

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. Declining metal prices could reduce our revenues, gross profit and net income. 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 do not currently account for these contracts as hedges, but rather mark these contracts to market with a corresponding offset to current earnings. As of March 31, 2011, we had 143 tons of nickel futures or option contracts, 750 tons of hot roll coil swaps, and 40 tons of aluminum price swaps outstanding with asset values of $0.5 million, $0.2 million, and a value of zero, respectively.

 

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BUSINESS

Our Company

We believe we are one of the largest processors and distributors of metals in North America measured in terms of sales, with operations in the United States, Canada, Mexico and an established and growing presence in China. Our customer base ranges from local, independently owned fabricators and machine shops to large, national original equipment manufacturers. We process and distribute a full line of over 75,000 products in stainless steel, aluminum, carbon steel and alloy steels, and a limited line of nickel and red metals. More than one-half of the products we sell are processed to meet customer requirements. We use various processing and fabricating techniques to process materials to a specified thickness, length, width, shape and surface quality pursuant to customer orders. For the year ended December 31, 2010, we purchased 2.4 million tons of materials from many suppliers throughout the world. For the three months ended March 31, 2011, our net sales were $1.2 billion, Adjusted EBITDA, excluding LIFO expense, was $67.0 million and net loss was $1.6 million. See note 4 in “Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net loss.

We currently operate over 100 facilities across North America and eight facilities in China. Our service centers are strategically located in close proximity to our customers, which allows us to quickly process and deliver our products and services, often within the same day or next day of receiving an order. We own, lease or contract a fleet of tractors and trailers, allowing us to efficiently meet our customers’ delivery demands. In addition, our scale enables us to maintain low operating costs. Our operating expenses as a percentage of sales for the years ended December 31, 2009 and 2010 were 16.2% and 13.3%, respectively.

In addition to providing a wide range of flat and long metals products, we offer numerous value-added processing and fabrication services such as sawing, slitting, blanking, cutting to length, leveling, flame cutting, laser cutting, edge trimming, edge rolling, roll forming, tube manufacturing, polishing, shearing, forming, stamping, punching, rolling shell plate to radius and beveling to process materials to a specified thickness, length, width, shape and surface quality pursuant to specific customer orders. Our value proposition also includes providing a superior level of customer service and responsiveness, technical services and inventory management solutions. Our breadth of services allows us to create long-term partnerships with our customers and enhances our profitability.

We serve more than 40,000 customers across a wide range of manufacturing end markets. We believe the diverse end markets we serve reduce the volatility of our business in the aggregate. Our geographic network and broad range of products and services allow us to serve large, national manufacturing companies across multiple locations.

We are broadly diversified our end markets and product lines in North America, as detailed below.

 

North America Sales by End Market   North America Sales by Product

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(1)    Other includes copper, brass, nickel, pipe, valves and fittings.

 

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Industry Overview

Metals service centers serve as key intermediaries between metal producers and end users of metal products. Metal producers offer commodity products and typically sell metals in the form of standard-sized coils, sheets, plates, structurals, bars and tubes. Producers prefer large order quantities, longer lead times and limited inventory in order to maximize capacity utilization. End users of metal products seek to purchase metals with customized specifications, including value-added processing. End market customers look for “one-stop” suppliers that can offer processing services along with lower order volumes, shorter lead times, and more reliable delivery. As an intermediary, metals service centers aggregate end-users’ demand, purchase metal in bulk to take advantage of economies of scale and then process and sell metal that meets specific customer requirements. The end-markets for metals service centers are highly diverse and include machinery, manufacturing, construction and transportation.

The metals service center industry is comprised of many companies, the majority of which have limited product lines and inventories, with customers located in a specific geographic area. The industry is highly fragmented, with a large number of small companies and few relatively large companies. In general, competition is based on quality, service, price and geographic proximity.

The metals service center industry typically experiences cash flow trends that are counter-cyclical to the revenue and volume growth of the industry. Companies that participate in the industry have assets that are composed primarily of working capital. During an industry downturn, companies generally reduce working capital investments and generate cash as inventory and accounts receivable balances decline. As a result, operating cash flow and liquidity tend to increase during a downturn, which typically facilitates industry participants’ ability to cover fixed costs and repay outstanding debt.

The industry is divided into three major groups: general line service centers, specialized service centers, and processing centers, each of which targets different market segments. General line service centers handle a broad line of metals products and tend to concentrate on distribution rather than processing. General line service centers range in size from a single location to a nationwide network of locations. For general line service centers, individual order size in terms of dollars and tons tends to be small relative to processing centers, while the total number of orders is typically high. Specialized service centers focus their activities on a narrower range of product and service offerings than do general line companies. Such service centers provide a narrower range of services to their customers and emphasize product expertise and lower operating costs, while maintaining a moderate level of investment in processing equipment. Processing centers typically process large quantities of metals purchased from primary producers for resale to large industrial customers, such as the automotive industry. Because orders are typically large, operation of a processing center requires a significant investment in processing equipment.

We compete with many other general line service centers, specialized service centers and processing centers on a regional and local basis, some of which may have greater financial resources and flexibility than us. We also compete to a lesser extent with primary metal producers. Primary metal producers typically sell to very large customers that require regular shipments of large volumes of steel. Although these large customers sometimes use metals service centers to supply a portion of their metals needs, metals service center customers typically are consumers of smaller volumes of metals than are customers of primary steel producers. Although we purchase from foreign steelmakers, some of our competitors purchase a higher percentage of metals than us from foreign steelmakers. Such competitors may benefit from favorable exchange rates or other economic or regulatory factors that may result in a competitive advantage. This competitive advantage may be offset somewhat by higher transportation costs and less dependable delivery times associated with importing metals into North America.

 

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Competitive Strengths

Leading Market Position with National Scale and Presence in China.

We believe we are one of the largest service center companies for stainless steel, one of the two largest service centers for aluminum, and one of the leading carbon products service center companies based on sales in the combined United States and Canada market. We also believe we are the second largest metals service center in the combined United States and Canada market based on sales. We have a broad geographic presence with over 100 locations in North America. We have leveraged our leadership in North America to establish sizable operations in China and we believe we are the only major global service center company whose activities in China generate a significant portion of our revenue relative to overall operations. Our China operations represented between 4% and 5% of our total revenues in 2010. In China, we have expanded from three metals service centers in 2006 to eight operating facilities currently with several more under consideration. We believe we are the only major North American service center whose activities in China represent a significant portion of overall operations in terms of revenue, making us a leading global service center company in China, which we believe positions us favorably in the largest metals market in the world. Although we maintain operations in China, conducting business in foreign countries has inherent risks and there can be no guarantee of our continued success abroad.

Our service centers are located near our customer locations, enabling us to provide timely delivery to customers across numerous geographic markets. Additionally, our widespread network of locations in the United States, Canada, Mexico and China utilize expertise that allow us to serve customers with complex supply chain requirements across multiple manufacturing locations. Our ability to transfer inventory among our facilities better enables us to timely and profitably source specialized items at regional locations throughout our network than if we were required to maintain inventory of all products at each location.

Diverse Customer Base, End Market and Geographic Focus.

We believe that our broad and diverse customer base in both geography and product provides a strong platform for growth in a recovering economy and helps to protect us from regional and industry-specific downturns. We serve more than 40,000 customers across a diverse range of industries, including metals fabrication, industrial machinery, commercial transportation, electrical equipment and appliances and heavy machinery and construction equipment. During the year ended December 31, 2010, no single customer accounted for more than 5% of our sales, and our top 10 customers accounted for less than 12% of sales. We continue to expand our customer base and added over 4,000 net new customers since December 31, 2009. Consistent with our growth strategy, these new customers are primarily from the diversified industrial base that utilizes our customized value added services, which typically exhibit relatively high margins.

Extensive Breadth of Products and Services.

We carry a full range of over 75,000 products, including stainless steel, aluminum, carbon steel and alloy steels and a limited line of nickel and red metals. In addition, we provide a broad range of processing and fabrication services to meet the needs of our customers. We also provide supply chain solutions, including just-in-time delivery, and value-added components to many original equipment manufacturers. We believe our broad product mix, extensive geographic footprint and marketing approach provides customers a “one-stop shop” solution few other service center companies are able to offer.

Experienced Management Team with Diverse Backgrounds Focused on Profitability.

Our senior management team has extensive industry and operational experience and has been instrumental in optimizing and implementing our transformation since Platinum’s acquisition of Ryerson in 2007. Our senior management has an average of more than 21 years of experience in the metals or service center industries. The senior executive team’s extensive experience in international markets and outside the service center industry provides perspective to drive profitable growth. Our CEO, Mr. Michael Arnold, joined the Company in January 2011 and has 32 years of diversified industrial experience. After fully implementing Platinum’s acquisition plan

 

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to transform our operating and cost structure in 2009, we have increased our focus on growing and enhancing profitability driven by providing customized solutions to diversified industrial customers who value these services.

Broad-Based Product and Geographic Platform Provides Multiple Opportunities for Profitable Growth.

While we expect the service center industry to benefit from improving general economic conditions, several end-markets where we have meaningful exposure (including the heavy and medium truck/transportation, machinery, industrial equipment and appliance sectors) have begun and we believe will continue to experience stronger shipment growth compared to overall industrial growth. In addition, although there can be no guarantee of growth, we believe a number of our other strategies, such as upgrading our sales talent and growing our large national network and diverse operating capabilities, will provide us with growth opportunities.

Strong Relationships with Suppliers.

We are among the largest purchasers of metals in North America. We believe we are frequently one of the largest customers of our suppliers and that concentrating our orders among a core group of suppliers is an effective method for obtaining favorable pricing and service. We believe we have the opportunity to further leverage this strength. Suppliers worldwide are consolidating and large, geographically diversified customers, such as Ryerson, are desirable partners for these larger suppliers. We have long-term relationships with our suppliers and take advantage of purchasing opportunities abroad.

Transformed Decentralized Operating Model.

We have transformed our operating model by decentralizing our operations and reducing our cost base. Decentralization improved our customer service by moving key operational functions such as procurement, credit and operations support to our field operations. From October 2007 through the end of 2009, we reduced annual expenses by $280 million, approximately 61% of which are permanent cost reductions. The cost reductions included a headcount reduction of approximately 1,700, representing 33% of our workforce, and the closure of 14 redundant or underperforming facilities in North America. We have also focused on process improvements in inventory management. Our inventory days improved from an average of 100 days in 2006 to 71 days in 2010. These organizational and operational changes improved our operating structure, working capital management and efficiency. As a result of our initiatives, we believe that we have increased our financial flexibility and have a favorable cost structure compared to many of our peers. We continue to seek out opportunities to improve efficiency and increase cost savings.

Our Strategy

Expand Our Industry Leadership in Selected Products and Diversified Industrial Markets.

We are selective regarding which products, end markets and customers we serve. We believe we are currently the industry leader in stainless steel, and a leader in aluminum and long products. As a leader in these selected products, we aim to be the supplier of choice for our customers. We are constantly evaluating attractive opportunities focused on geographies, end-markets and customers that will allow us to grow the fastest, maximize our margins, leverage our global procurement capabilities and achieve leadership positions. We have increased our focus on higher margin diversified industrial customers that value our customized processing services and are less price sensitive than large volume buyers. We added over 4,000 net new customers since December 31, 2009 across a diverse set of industrial manufacturers.

Additionally, we see significant opportunities to improve our product mix by increasing the amount of long products supplied to our customers. We have established regional product inventory to provide a broad line of stainless, aluminum, carbon and alloy long products as well as the necessary processing equipment to meet demanding requirements of these customers. For the year ended December 31, 2010 we generated $622 million of revenue from long products, which represents an increase of 33% over 2009.

 

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We seek to grow revenue by continuing to complement our standard products with first stage manufacturing and other processing capabilities that add value for our customers. Additionally, for certain customers we have assumed the management and responsibility for complex supply chains involving numerous suppliers, fabricators and processors. For the year ended December 31, 2010, we generated $283 million of revenue from our fabrication operations, which represents an increase of 58% over 2009.

Drive to Industry Leading Financial Performance.

Continue to Improve Margins. We seek to improve our margins through value-based pricing, superior service, improved product mix and improvements in procurement. We leverage our capabilities to deliver the highest value proposition to our customers by providing a wide breadth of competitive products and services, superior customer service and product quality and responsiveness. We are focused on pricing our products and services to maximize price realization and generate higher margins to achieve industry leading financial performance. We expect to continue achieving attractive procurement costs and create the value proposition in all market cycles to create price leadership and competitive, value based pricing which will improve our margins.

Continue to Improve Our Operating Efficiencies. We are committed to improving our operating capabilities through continuous business improvements and cost reductions. We have made and continue to make improvements in a variety of areas, including working capital management, operations, delivery and administration expenses.

Focus on Profitable Global Growth.

We are focused on increasing our sales to existing customers, as well as expanding our customer base globally. We expect to continue increasing total revenue through a variety of sales initiatives and by targeting attractive markets.

Continue to Revitalize Sales Talent. Since 2008, we have upgraded our talent and believe we have revitalized our North American sales force, as well as adjusted our incentive plans to be consistent with our profitability goals. We have targeted our sales force to have specific skills aligned with our new product and end market strategies. Approximately 30% of our sales force has joined the Company since 2009, many of whom have significant product and market expertise.

Continue to Expand our Customer Base. We will continue expanding our customer base in diversified industrial end markets with an increased focus on transactional business. We will simultaneously continue to serve and opportunistically seek to expand our larger national and global customers. In addition, we will continue leveraging our China infrastructure to service both Chinese national accounts and existing North American based customers with Chinese operations.

Continue Expansion in Attractive Markets. We have also opened facilities in several new regions globally, where we identified a geographic or product market opportunity.

 

   

North America. We have expanded and continue to expand in markets where we observe select products, services and end markets are underserved. For example, we have broadened our reach in long and plate products in Texas, California, Utah and Mexico. We continue to pursue sales in the Mexican market through our locations along the U.S.-Mexico border as well as new locations in Mexico.

 

   

China. We believe we are the most established U.S. based service center in China. We have grown our operations in China substantially and continue to enhance the size and quality of the sales talent in our operations, pursue more value-added processing with higher margins, and broaden our product line. Our China operations represented between 4% and 5% of our total revenues in 2010. We currently have eight facilities in China with several other locations under consideration. We expect to benefit as Chinese metals consumption grows and the Chinese service center industry becomes a more prominent part of the local supply chain.

 

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Emerging Markets. We expect to leverage our expertise in North America and experience in China to grow our business in high growth emerging markets, including Asia and Latin America, and with particular focus on India and Brazil. We are currently building a framework to consider which of these markets to target, as well as how we would finance and develop operations in such markets. We will evaluate acquisitions, joint ventures and organic expansion opportunities in these regions by capitalizing on our previous experience in China, India and Mexico.

Continue to Execute Value-Accretive Acquisitions.

The metals service center industry is highly fragmented with the largest player accounting for only 6% of the total market share and a vast majority of our other competitors operating from a single location or being regionally focused. We believe our significant geographic presence provides a strong platform to capitalize on this fragmentation through acquisitions. In the last fifteen months, we completed four strategic acquisitions: Texas Steel Processing Inc.; assets of Cutting Edge Metals Processing Inc.; SFI-Gray Steel Inc. and Singer Steel Company. These acquisitions have provided various opportunities for long-term value creation through the expansion of our product and service capabilities, geographic reach, operational distribution network, end markets diversification, cross-selling opportunities, and the addition of transactional-based customers. We continually evaluate potential acquisitions of service center companies to complement our existing customer base and product offerings, and plan to continue pursuing our disciplined approach to such acquisitions.

Maintain Flexible Capital Structure and Strong Liquidity Profile.

Our management team is focused on maintaining a strong level of liquidity that will facilitate our plans to execute our various growth strategies. Throughout the economic downturn, we maintained liquidity in excess of $350 million. Availability under the Ryerson Credit Facility at March 31, 2011 was approximately $302 million and we had cash-on-hand of $41.9 million. On March 14, 2011, we amended and extended the maturity date of the Ryerson Credit Facility unit the earliest of (i) March 2016, (ii) 90 days prior to the scheduled maturity date of the 2014 Notes, if any 2014 Notes are then outstanding and (iii) 90 days prior to the scheduled maturity date of the 2015 Notes, if any 2015 Notes are then outstanding. We have no financial maintenance covenants on our debt unless availability under the Ryerson Credit Facility falls below $125 million. In addition, there are no other significant debt maturities until 2014.

Industry Outlook

The U.S. manufacturing sector continues to recover from the economic downturn, which affected and may continue to affect our operating results. However, according to the Institute for Supply Management, the Purchasing Managers’ Index (“PMI”) was 60.4% in April 2011, marking the 21st consecutive month the reading was above 50%, which indicates that the manufacturing economy is generally expanding. The PMI measures the economic health of the manufacturing sector and is a composite index based on five indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. PMI readings over 50% suggest growth in the manufacturing industry and if manufacturing is expanding, the general economy should similarly be expanding. As a result, PMI readings can be a good indicator of industry and general economic growth. Although there can be no guarantees on the timing of any overall improvements in the industry, since May 2009, total metal service center industry purchase orders have increased by 48.4%. Furthermore, the overall U.S. economy is expected to continue to grow as evidenced by the U.S. Congressional Budget Office’s forecasted GDP growth rates of 3.1% and 2.8% for 2011 and 2012, respectively.

According to MSCI, total inventory levels of carbon and stainless steel at U.S. service centers reached a trough in August 2009 and bottomed at the lowest levels since the data series began in 1977. Although industry demand recovered in 2010 and into 2011, shipments and inventory are still well below historical averages, which we believe suggests long-term growth potential that may be realized if these metrics return to or exceed their historical averages.

 

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U.S. Metals Service Center Shipments & Inventories

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Source: MSCI as of April 2011.

China continues to be a key driver in the growth of global metals demand. According to The Economist Intelligence Unit, China’s GDP is projected to grow at 9.0% in 2011 while CRU is forecasting Chinese steel consumption growth of 11.8% (hot-rolled sheet) in the same period.

Metals prices have recovered significantly from the trough levels in 2009 as a result of growing demand and increased raw material costs, despite volume still well below historical levels.

The following charts show the historical mill cost of key metals.

 

North American Midwest
HRC ($/ton)
  USA CR Grade 304 Stainless Steel ($/ton)   Aluminum ($/ton)

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Source: Steel Business Briefing and Bloomberg.

Products and Services

We carry a full line of carbon steel, stainless steel, alloy steels and aluminum, and a limited line of nickel and red metals. These materials are inventoried in a number of shapes, including coils, sheets, rounds, hexagons, square and flat bars, plates, structurals and tubing.

 

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The following table shows our percentage of sales by major product lines for 2008, 2009 and 2010:

 

     Year Ended
December 31,
 

Product Line

   2008     2009     2010  

Carbon Steel Flat

     26     28     29

Carbon Steel Plate

     9        6        8   

Carbon Steel Long

     9        8        9   

Stainless Steel Flat

     22        19        21   

Stainless Steel Plate

     5        4        4   

Stainless Steel Long

     3        3        3   

Aluminum Flat

     13        15        15   

Aluminum Plate

     4        4        3   

Aluminum Long

     3        4        4   

Other

     6        9        4   
                        

Total

     100     100     100
                        

More than one-half of the materials sold by us are processed. We use processing and fabricating techniques such as sawing, slitting, blanking, cutting to length, leveling, flame cutting, laser cutting, edge trimming, edge rolling, polishing and shearing to process materials to specified thickness, length, width, shape and surface quality pursuant to specific customer orders. Among the most common processing techniques used by us are slitting, which involves cutting coiled metals to specified widths along the length of the coil, and leveling, which involves flattening metals and cutting them to exact lengths. We also use third-party fabricators to outsource certain processes that we are not able to perform internally (such as pickling, painting, forming and drilling) to enhance our value-added services.

The plate burning and fabrication processes are particularly important to us. These processes require sophisticated and expensive processing equipment. As a result, rather than making investments in such equipment, manufacturers have increasingly outsourced these processes to metals service centers.

As part of securing customer orders, we also provide services to our customers to assure cost effective material application while maintaining or improving the customers’ product quality.

Our services include: just-in-time inventory programs, production of kits containing multiple products for ease of assembly by the customer, consignment arrangements and the placement of our employees at a customer’s site for inventory management and production and technical assistance. We also provide special stocking programs in which products that would not otherwise be stocked by us are held in inventory to meet certain customers’ needs. These services are designed to reduce customers’ costs by minimizing their investment in inventory and improving their production efficiency.

Customers

Our customer base is diverse, numbering approximately 40,000 and includes most metal-consuming industries, most of which are cyclical. For the year ended December 31, 2010, no single customer accounted for more than 5% of our sales, and the top 10 customers accounted for less than 12% of our sales. Substantially all of our sales are attributable to our U.S. operations and substantially all of our long-lived assets are located in the United States. Our Canadian operations comprised 10% of our sales in each of 2008, 2009 and 2010, and our China operations comprised 0%, 4% and 4% of our sales in 2008, 2009 and 2010, respectively. Canadian assets were 9%, 13% and 10% of consolidated assets at December 31, 2008, 2009 and 2010, respectively. Chinese assets were 4%, 4% and 5% of consolidated assets at December 31, 2008, 2009 and 2010, respectively. During 2010, we started operations in Mexico. Our Mexican operations’ sales and assets were less than 1% of our worldwide sales and assets in 2010.

Some of our largest customers have procurement programs with us, typically ranging from three months to one year in duration. Pricing for these contracts is generally based on a pricing formula rather than a fixed price

 

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for the program duration. However, certain customer contracts are at fixed prices; in order to minimize our financial exposure, we generally match these fixed-price sales programs with fixed-price supply programs. In general, sales to customers are priced at the time of sale based on prevailing market prices.

Suppliers

For the year ended December 31, 2010, our top 25 suppliers accounted for approximately 77% of our purchase dollars.

We purchase the majority of our inventories at prevailing market prices from key suppliers with which we have established relationships to obtain improvements in price, quality, delivery and service. We are generally able to meet our materials requirements because we use many suppliers, because there is a substantial overlap of product offerings from these suppliers, and because there are a number of other suppliers able to provide identical or similar products. Because of the competitive nature of the business, when metal prices increase due to product demand, mill surcharges, supplier consolidation or other factors that in turn lead to supply constraints or longer mill lead times, we may not be able to pass our increased material costs fully to customers. In recent years, there have been significant consolidations among suppliers of carbon steel, stainless steel, and aluminum. Continued consolidation among suppliers could lead to disruptions in our ability to meet our material requirements as the sources of our products become more concentrated from fewer producers. We believe we will be able to meet our material requirements because we believe that we have good relationships with our suppliers and believe we will continue to be among the largest customers of our suppliers.

Facilities

Our owned and leased facilities as of March 31, 2011 are set forth below.

Operations in the United States

Ryerson, through JT Ryerson, maintains 84 operational facilities, including 7 locations that are dedicated to administration services. All of our metals service center facilities are in good condition and are adequate for JT Ryerson’s existing operations. Approximately 38% of these facilities are leased. The lease terms expire at various times through 2025. Owned properties noted as vacated below have been closed and are in the process of being sold. JT Ryerson’s properties and facilities are adequate to serve its present and anticipated needs.

The following table sets forth certain information with respect to each facility as of March 31, 2011:

 

Location

   Own/Lease

Birmingham, AL

   Owned

Mobile, AL

   Leased

Fort Smith, AR

   Owned

Hickman, AR**

   Leased

Little Rock, AR (2)

   Owned

Phoenix, AZ

   Owned

Fresno, CA

   Leased

Livermore, CA

   Leased

Vernon, CA

   Owned

Commerce City, CO

   Owned

Greenwood, CO*

   Leased

 

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Location

   Own/Lease

Wilmington, DE

   Owned

Jacksonville, FL

   Owned

Miami, FL

   Owned/Vacated

Orlando, FL*

   Leased

Tampa Bay, FL

   Owned

Duluth, GA

   Owned

Norcross, GA

   Owned

Cedar Rapids, IA

   Owned

Eldridge, IA

   Leased

Des Moines, IA

   Owned

Marshalltown, IA

   Owned

Boise, ID

   Leased

Elgin, IL

   Leased

Chicago, IL (Headquarters)*

   Owned

Chicago, IL (16th Street Facility)

   Owned

Lisle, IL*

   Leased

Burns Harbor, IN

   Owned

Indianapolis, IN

   Owned

Wichita, KS

   Leased

Louisville, KY

   Owned

Shelbyville, KY**

   Owned

Shreveport, LA

   Owned

St. Rose, LA

   Owned

Devens, MA

   Owned

Grand Rapids, MI*

   Leased

Jenison, MI

   Owned

Lansing, MI

   Leased

Minneapolis, MN

   Owned

Plymouth, MN

   Owned

Maryland Heights, MO

   Leased

North Kansas City, MO

   Owned

St. Louis, MO

   Leased

Greenwood, MS

   Leased

Jackson, MS

   Owned

Billings, MT

   Leased

Charlotte, NC

   Owned

Charlotte, NC

   Owned/Vacated

Greensboro, NC

   Owned

 

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Location

   Own/Lease

Pikeville, NC

   Leased

Youngsville, NC

   Leased

Omaha, NE

   Owned

Lancaster, NY

   Owned

Liverpool, NY

   Leased

New York, NY*

   Leased/Vacated

Cincinnati, OH

   Owned/Vacated

Cleveland, OH

   Owned

Columbus, OH

   Leased

Hamilton, OH*

   Leased

Streetsboro, OH

   Leased

Tulsa, OK

   Owned

Oklahoma City, OK

   Owned

Portland, OR (2)

   Leased

Ambridge, PA**

   Owned

Fairless Hills, PA

   Leased

Charleston, SC

   Owned

Greenville, SC

   Owned

Chattanooga, TN

   Owned

Knoxville, TN

   Leased/Vacated

Memphis, TN

   Owned

Nashville, TN

   Owned/Vacated

Nashville, TN*

   Leased

Dallas, TX (2)

   Owned

EI Paso, TX

   Leased

Houston, TX

   Owned

Houston, TX (2)

   Leased

Houston, TX

   Leased/Vacated

McAllen, TX

   Leased

Clearfield, UT (2)

   Leased

Pounding Mill, VA

   Owned

Richmond, VA

   Owned

Renton, WA

   Owned

Spokane, WA

   Owned

Baldwin, WI

   Leased

Green Bay, WI

   Owned

Milwaukee, WI

   Owned

 

* Office space only
** Processing centers

 

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Operations in Canada

Ryerson Canada, a wholly owned indirect Canadian subsidiary of Ryerson, has 13 facilities in Canada. All of the metals service center facilities are in good condition and are adequate for Ryerson Canada’s existing and anticipated operations. Five facilities are leased.

 

Location

   Own/Lease

Calgary, AB

   Owned

Edmonton, AB

   Owned

Richmond, BC

   Owned

Winnipeg, MB

   Owned

Winnipeg, MB

   Leased

Saint John, NB

   Owned

Brampton, ON

   Leased

Sudbury, ON

   Owned

Toronto, ON (includes Canadian Headquarters)

   Owned

Laval, QC

   Leased

Vaudreuil, QC

   Leased

Saskatoon, SK

   Owned

Saskatoon, SK

   Leased

Operations in China

Ryerson China, an indirect wholly owned subsidiary of Ryerson, has five service and processing centers in China, at Guangzhou, Dongguan, Kunshan, Tianjin and Wuhan, performing coil processing, sheet metal fabrication and plate processing. Ryerson China’s headquarters office building is located in Shanghai. Ryerson China also has three sales offices in Beijing, Wuxi and Shenzhen. We own three buildings in China and have purchased the related land use rights. The remainder of our facilities are leased. All of the facilities are in good condition and are adequate for Ryerson China’s existing and anticipated operations.

Operations in Mexico

Ryerson Mexico, an indirect wholly owned subsidiary of Ryerson, has two facilities in Mexico; We have one sales office in Mexicali and a service center in Monterrey, both of which are leased. The facilities are in good condition and are adequate for Ryerson Mexico’s existing and anticipated operations.

Sales and Marketing

We maintain our own sales force. In addition to our office sales staff, we market and sell our products through the use of our field sales force that has extensive product and customer knowledge and through a comprehensive catalog of our products. Our office and field sales staffs, which together consist of approximately 900 employees, include technical and metallurgical personnel.

A portion of our customers experience seasonal slowdowns. Our sales in the months of July, November and December traditionally have been lower than in other months because of a reduced number of shipping days and holiday or vacation closures for some customers. Consequently, our sales in the first two quarters of the year are usually higher than in the third and fourth quarters.

 

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Capital Expenditures

In recent years we have made capital expenditures to maintain, improve and expand processing capabilities. Additions by us to property, plant and equipment, together with retirements for the five years ended December 31, 2010, excluding the initial purchase price of acquisitions and the initial effect of fully consolidating a joint venture, are set forth below. The net capital change during such period aggregated to a reduction of $4.7 million.

 

     Additions      Retirements
or Sale
     Net  
     (In millions)  

2010

   $ 27.0       $ 5.5       $ 21.5   

2009

     22.8         17.4         5.4   

2008

     30.1         52.0         (21.9

2007

     60.7         54.4         6.3   

2006

     35.7         51.7         (16.0

We currently anticipate capital expenditures, excluding acquisitions, of up to approximately $50.0 million for 2011. We expect capital expenditures will be funded from cash generated by operations and available borrowings.

Employees

As of March 31, 2011, we employed approximately 3,700 persons in North America and 500 persons in China. Our North American workforce was comprised of approximately 1,900 office employees and approximately 1,800 plant employees. Forty percent of our plant employees were members of various unions, including the United Steel Workers and the International Brotherhood of Teamsters. Our relationship with the various unions has generally been good. There has been one work stoppage over the last five years.

Six collective bargaining agreements expired in 2008, a year in which we reached agreement on the renewal of four contracts covering 53 employees. Two contracts covering 52 employees were extended into 2009. We reached agreement in 2009 on one of the extended contracts covering 45 employees and the single remaining contract from 2008, covering approximately five persons, remains on an extension. In addition, negotiations over a new collective bargaining agreement at a newly certified location employing four persons began in late 2008 and was concluded in 2009. Nine contracts covering 339 persons were scheduled to expire in 2009. We reached agreement on the renewal of eight contracts covering approximately 258 persons and one contract covering approximately 89 persons was extended. During 2010, the parties to this extended contact covering two Chicago area facilities agreed to sever the bargaining unit between the two facilities and bargaining was concluded for one facility, which covers approximately 59 employees. This new contract expires on December 31, 2011. The other facility’s contract, which covers approximately 30 employees, remains on extension. Seven contracts covering approximately 85 persons were scheduled to expire in 2010. We reached agreement on the renewal of all seven contracts. Ten contracts covering approximately 312 persons are scheduled to expire in 2011. One of these contracts, which covers 59 employees, will not to be renewed due to facility closure. We may not be able to negotiate extensions of these agreements or new agreements prior to their expiration date. As a result, we may experience additional labor disruptions in the future. A widespread work stoppage could have a material adverse effect on our results of operations, financial position and cash flows if it were to last for a significant period of time.

Environmental, Health and Safety Matters

Our operations are subject to many foreign, federal, state and local laws and regulations relating to the protection of the environment and to health and safety. In particular, our operations are subject to extensive requirements relating to waste disposal, recycling, air and water emissions, the handling of hazardous substances,

 

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environmental protection, remediation, underground storage tanks, asbestos-containing building materials, workplace exposure and other matters. Our management believes that our operations are presently in substantial compliance with all such laws and does not presently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet present environmental, workplace health or safety requirements. Any related proceedings or investigations regarding personal injury or governmental claims could result in substantial costs to us, divert our management’s attention and result in significant liabilities, fines, or the suspension or interruption of our facilities.

We continue to analyze and implement improvements for protection of the environment, health and safety risks. As a result, additional costs and liabilities may be incurred to comply with future requirements or to address newly discovered conditions, which costs and liabilities could have a material adverse effect on our results of operations, financial condition or cash flows. For example, there is increasing likelihood that additional regulation of greenhouse gas emissions will occur at the foreign, federal, state and local level, which could affect us, our suppliers, and our customers. While the costs of compliance could be significant, given the highly uncertain outcome and timing of future action by the U.S. federal government and states on this issue, we cannot predict the financial impact of future greenhouse gas emission reduction programs on our operations or our customers at this time. We do not currently anticipate any new programs disproportionately impacting us compared to our competitors.

Some of the properties owned or leased by us are located in industrial areas or have a history of heavy industrial use. We may incur environmental liabilities with respect to these properties in the future that could have a material adverse effect on our financial condition or results of operations. We may also incur environmental liabilities at sites to which we sent our waste. We do not expect any related investigation or remediation costs or any pending remedial actions or claims at properties presently or formerly used for our operations or to which we sent waste that are expected to have a material adverse effect on our financial condition, results of operations or cash flows. However, we cannot rule out the possibility that we could be notified of such claims in the future.

Capital and operating expenses for pollution control projects were less than $500,000 per year for the past five years. Excluding any potential additional remediation costs resulting from the environmental remediation for the properties described above, we expect spending for pollution control projects to remain at historical levels.

Our United States operations are also subject to the Department of Transportation Federal Motor Carrier Safety Regulations. We operate a private trucking motor fleet for making deliveries to some of our customers. Our drivers do not carry any material quantities of hazardous materials. Our foreign operations are subject to similar regulations. Future regulations could increase maintenance, replacement, and fuel costs for our fleet. These costs could have a material adverse effect on our results of operations, financial condition or cash flows.

Intellectual Property

We own several U.S. and foreign trademarks, service marks and copyrights. Certain of the trademarks are registered with the U.S. Patent and Trademark Office and, in certain circumstances, with the trademark offices of various foreign countries. We consider certain other information owned by us to be trade secrets. We protect our trade secrets by, among other things, entering into confidentiality agreements with our employees regarding such matters and implementing measures to restrict access to sensitive data and computer software source code on a need-to-know basis. We believe that these safeguards adequately protect our proprietary rights and vigorously defend these rights. While we consider all of our intellectual property rights as a whole to be important, we do not consider any single right to be essential to our operations as a whole. The Ryerson Notes are secured by our intellectual property.

 

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Foreign Operations

Ryerson Canada

Ryerson Canada, an indirect wholly owned Canadian subsidiary of Ryerson, is a metals service center and processor. Ryerson Canada has facilities in Calgary (AB), Edmonton (AB), Richmond (BC), Winnipeg (MB), Saint John (NB), Brampton (ON), Sudbury (ON), Toronto (ON) (includes Canadian headquarters), Laval (QC), Vaudreuil (QC) and Saskatoon (SK), Canada.

Ryerson China

In 2006, Ryerson Inc. and VSC and its subsidiary, CAMP BVI, formed Ryerson China to enable us, through this foreign operation, to provide metals distribution services in China. We invested $28.3 million in Ryerson China for a 40% equity interest. We increased ownership of Ryerson China from 40% to 80% in the fourth quarter of 2008 for a total purchase cost of $18.5 million. We consolidated the operations of Ryerson China as of October 31, 2008. On July 12, 2010, we acquired VSC’s remaining 20% equity interest in Ryerson China for $17.5 million. As a result, Ryerson China is now an indirect wholly owned subsidiary of Ryerson Holding. Ryerson China is based in Shanghai and operates processing and service centers in Guangzhou, Dongguan, Kunshan, Tianjin and Wuhan and three sales offices in Beijing, Wuxi, and Shenshen.

Ryerson Mexico

Ryerson Mexico, an indirect wholly owned subsidiary of Ryerson, operates as a metals service center and processor. Ryerson formed Ryerson Mexico in 2010 to expand operations into the Mexican market. Ryerson Mexico has a service center in Monterrey, Mexico and a sales office in Mexicali, Mexico.

Legal Proceedings

From time to time, we are named as a defendant in legal actions incidental to our ordinary course of business. We do not believe that the resolution of these claims will have a material adverse effect on our 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.

 

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MANAGEMENT

Set forth below is a list of the names, ages and positions of the executive officers and directors of Ryerson Holding as of the closing of this offering. All directors are elected to serve until their successors are elected and qualified. Following this offering, our amended and restated certificate of incorporation and our amended and restated bylaws will provide for a classified Board of Directors consisting of three classes of directors, each serving staggered three-year terms. See “Board of Directors, Committees and Executive Officers—Term and Class of Directors” below and “Description of Capital Stock—Anti-Takeover provisions of Delaware law,” and “—Charter and bylaw’s anti-takeover provisions” for more information.

 

Name

   Age     

Position

Michael C. Arnold

     54       Chief Executive Officer and President

Terence R. Rogers

     52       Chief Financial Officer

Matthias L. Heilmann

     42       Chief Operating Officer

Robert L. Archambault

     47       Director

Kirk K. Calhoun*

     67       Director

Eva M. Kalawski

     56       Director

Jacob Kotzubei

     42       Director

Mary Ann Sigler

     56       Director

 

* Mr. Calhoun will be joining the Board of Directors upon the closing of this offering.

Biographies of Executive Officers

Michael C. Arnold has been our Chief Executive Officer and President since January 2011. Prior to joining Ryerson, he served as executive vice president and president for The Timken Company (“Timken”) from 2007 to 2010 and president of Timken’s Bearings and Power Transmission Group from 2007 to 2010. Timken is a global company that manufactures steel, bearings and related components. Mr. Arnold earned a Bachelor’s degree in Mechanical Engineering and an MBA in sales and marketing from the University of Akron.

Terence R. Rogers has been Chief Financial Officer of Ryerson Holding since January 2010 and has been Chief Financial Officer of Ryerson since October 2007. He was Vice President—Finance of Ryerson from September 2001 to October 2007 and Treasurer of Ryerson from February 1999 to October 2007. Mr. Rogers earned a B.S. in Accounting from Illinois State University and an M.B.A. in Finance from the University of Michigan.

Matthias L. Heilmann has been Chief Operating Officer of Ryerson Holding since March 2010 and Chief Operating Officer of Ryerson since January 2009. Mr. Heilmann was a Vice President and Operating Executive at Platinum since joining in 2005. He was a partner at Roland Berger Strategy Consultants from 2003 to 2005. From 2000 to 2003 he was Vice President Sales and Business Development at SAP and from 1996 to 2000 he was a partner at A.T. Kearney. Mr. Heilmann received a BS in Economics, MBA and Doctorate degrees in Corporate Finance and Management Accounting from University of St. Gall, Switzerland.

In addition to the above-named executive officers, there are a number of Platinum employees who perform non-policy making officer functions at the Company.

Biographies of Directors

Robert L. Archambault has been a director since April 2010. Mr. Archambault joined Platinum in 1997 and is a Partner at the firm. Prior to joining Platinum, Mr. Archambault worked at Pilot Software, Inc., where he held the positions of VP Business Development, VP Professional Services and VP Channels, Americas. Mr. Archambault received a B.S. in Management from New York Maritime College. Mr. Archambault served as acting president of Ryerson from October 2007 through August 2008 and his familiarity with Ryerson and its business has led the Board of Directors to conclude that he has the necessary expertise to serve as a director of the Company.

 

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Kirk K. Calhoun will join our Board of Directors as the chairman of the audit committee upon the completion of this offering. Mr. Calhoun joined the public accounting firm Ernst & Young, LLP in 1965 and served as a partner of the firm from 1975 until his retirement in 2002. Mr. Calhoun has a B.S. in Accounting from the University of Southern California and is a Certified Public Accountant (non-practicing) in California, as well as a member of the American Institute of Certified Public Accountants, California Society of Certified Public Accountants and National Association of Corporate Directors. He is currently chairman of the board of directors of Response Genetics, Inc. Previously Mr. Calhoun served on the board of directors of Abraxis Bioscience, Inc. until its sale in October of 2010. Mr. Calhoun’s experience serving on public company audit committees and boards of directors and his past work as a partner with Ernst & Young, LLP has led the Board of Directors to conclude that Mr. Calhoun has the requisite expertise to serve as a director of the Company and qualifies as a financial expert for audit committee purposes.

Eva M. Kalawski has been a director since October 2007. Ms. Kalawski joined Platinum in 1997, is a Partner and serves as the firm’s General Counsel and Secretary. Ms. Kalawski serves or has served as an officer and/or director of many of Platinum’s portfolio companies. Prior to joining Platinum in 1997, Ms. Kalawski was Vice President of Human Resources, General Counsel and Secretary for Pilot Software, Inc. Ms. Kalawski earned a Bachelor’s Degree in Political Science and French from Mount Holyoke College and a Juris Doctor from Georgetown University Law Center. Ms. Kalawski’s expertise and experience managing the legal operations of many portfolio companies has led the Board of Directors to conclude that she has the background and skills necessary to serve as a director of the Company.

Jacob Kotzubei has been a director since January 2010. Mr. Kotzubei joined Platinum in 2002 and is a Partner at the firm. Mr. Kotzubei serves as an officer and/or director of a number of Platinum’s portfolio companies. Prior to joining Platinum in 2002, Mr. Kotzubei worked for 4 1/2 years for Goldman Sachs’ Investment Banking Division in New York City. Previously, he was an attorney at Sullivan & Cromwell LLP in New York City, specializing in mergers and acquisitions. Mr. Kotzubei received a Bachelor’s degree from Wesleyan University and holds a Juris Doctor from Columbia University School of Law where he was elected a member of the Columbia Law Review. Mr. Kotzubei’s experience in executive management oversight, private equity, capital markets and transactional matters has led the Board of Directors to conclude that he has the varied expertise necessary to serve as a director of the Company.

Mary Ann Sigler has been a director since January 2010. Ms. Sigler is the Chief Financial Officer of Platinum. Ms. Sigler joined Platinum in 2004 and is responsible for overall accounting, tax, and financial reporting as well as managing strategic planning projects for the firm. Prior to joining Platinum, Ms. Sigler was with Ernst & Young LLP for 25 years where she was a partner. Ms. Sigler has a B.A. in Accounting from California State University Fullerton and a Masters in Business Taxation from the University of Southern California. Ms. Sigler is a Certified Public Accountant in California, as well as a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Ms. Sigler’s experience in accounting and strategic planning matters has led the Board of Directors to conclude that she has the requisite qualifications to serve as a director of the Company and facilitate its continued growth.

Board of Directors, Committees and Executive Officers

Composition of Board of Directors

Our amended and restated certificate of incorporation and bylaws provide that the authorized number of directors shall be fixed from time to time by a resolution of the majority of our Board of Directors. As of the closing of this offering, our Board of Directors will be comprised of the following five members: Messrs. Archambault, Calhoun and Kotzubei, and Mses. Kalawski and Sigler.

Because Platinum will own more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for purposes of the NYSE listing requirements. As such, we are permitted, and have elected, to opt out of the NYSE listing requirements that would otherwise require our Board of Directors to be comprised of a majority of independent directors and require our compensation committee and

 

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nominating and corporate governance committee to be comprised entirely of independent directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements. Our Board of Directors has determined that upon the closing of this offering, Mr. Calhoun will be independent.

Term and Class of Directors

Upon the closing of this offering, our Board of Directors will be divided into three staggered classes of directors of the same or nearly the same number. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon election and qualification of successor directors at the Annual Meeting of Stockholders to be held during the years 2012 for the Class I directors, 2013 for the Class II directors and 2014 for the Class III directors.

 

   

Our Class I directors will be Mses. Kalawski and Sigler;

 

   

Our Class II director will be Mr. Archambault; and

 

   

Our Class III directors will be Messrs. Calhoun and Kotzubei.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class shall consist of one-third of the directors. The division of our Board of Directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Term of Executive Officers

Each executive officer is appointed and serves at the discretion of the Board of Directors and holds office until his or her successor is elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Director Compensation

Following the completion of this offering, we intend to pay our independent director, and any additional independent directors, an annual retainer fee that is commensurate with market practice for public companies of similar size. Other than independent directors, we do not intend to compensate directors for serving on our Board of Directors or any of its committees. We do, however, intend to reimburse each member of our Board of Directors for out-of-pocket expenses incurred by them in connection with attending meetings of the Board of Directors and its committees.

Board Committees

In connection with the consummation of this offering, our Board of Directors will continue to have an audit committee, and will have a compensation committee and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below.

Audit Committee. Our audit committee will oversee a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements, including the following: (i) monitor the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent registered public accounting firm’s qualifications and independence, and the performance of our internal audit function and independent registered public accounting firm, (ii) assume direct responsibility for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of performing any audit, review or attest services and for dealing directly with any such accounting firm, (iii) provide a medium for consideration of matters relating to any audit issues and (iv) prepare the audit committee report that the

 

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rules require be included in our filings with the SEC. Upon completion of this offering, the members of our audit committee will be Messrs. Kotzubei and Calhoun and Ms. Sigler. Mr. Calhoun will serve as chairman of the audit committee and the composition of our audit committee will comply with all applicable NYSE rules, including the requirement that at least one member of the audit committee have accounting or related financial management expertise. Mr. Calhoun will qualify as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K and will be “independent” as such term is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules of the NYSE. Neither Mr. Kotzubei nor Ms. Sigler is so independent.

In accordance with NYSE rules, we plan to appoint a second independent director to our Board of Directors within 90 days of the effective date of the registration statement of which this prospectus is a part, who will replace Mr. Kotzubei as a member of the audit committee and to appoint a third independent director to our Board of Directors within 12 months of the effective date of the registration statement of which this prospectus is a part, who will replace Ms. Sigler as a member of the audit committee such that all of our audit committee members will be independent as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and applicable NYSE rules.

Our Board of Directors will adopt a written charter for the audit committee, which will be available on our website upon consummation of this offering.

Compensation Committee. Our compensation committee will review and recommend policy relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives and setting compensation of these officers based on such evaluations. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. Upon the closing of this offering, the members of our compensation committee will be Messrs. Archambault and Kotzubei, neither of which is independent as such term is defined in the rules of the NYSE, and Mr. Calhoun. Because Platinum will own more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for the purposes of the NYSE listing requirements. As such, we are permitted, and have elected, to opt out of the NYSE listing requirements that would otherwise require our compensation committee to be comprised entirely of independent directors.

Our Board of Directors will adopt a written charter for the compensation committee, which will be available on our website upon consummation of this offering.

Nominating and Corporate Governance Committee. The nominating and corporate governance committee will oversee and assist our Board of Directors in identifying, reviewing and recommending nominees for election as directors; evaluate our Board of Directors and our management; develop, review and recommend corporate governance guidelines and a corporate code of business conduct and ethics; and generally advise our Board of Directors on corporate governance and related matters. Upon the closing of this offering, we will establish a nominating and corporate governance committee consisting of Mses. Kalawski and Sigler, none of whom are independent as such term is defined in the rules of the NYSE. Because Platinum will own more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for the purposes of the NYSE listing requirements. As such, we are permitted, and have elected, to opt out of the NYSE listing requirements that would otherwise require our nominating and corporate governance committee to be comprised entirely of independent directors.

Our Board of Directors will adopt a written charter for the nominating and corporate governance committee, which will be available on our website upon consummation of this offering.

Our Board of Directors may from time to time establish other committees.

 

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Compensation Committee Interlocks and Insider Participation

We do not currently have a designated compensation committee. None of our executive officers has served as a member of the Board of Directors or compensation committee of any entity that has an executive officer serving as a member of our Board of Directors.

Indemnification

We maintain directors’ and officers’ liability insurance. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions limiting the liability of directors and officers and indemnifying them under certain circumstances. We expect to enter into indemnification agreements with our directors to provide our directors and certain of their affiliated parties with additional indemnification and related rights. See “Description of Capital Stock—Limitation on liability of directors and indemnification” for further information.

Code of Ethics

Our Board of Directors has adopted a Code of Ethics that contains the ethical principles by which our chief executive officer and chief financial officer, among others, are expected to conduct themselves when carrying out their duties and responsibilities. A copy of our Code of Ethics may be found on our website at www.ryerson.com. We will provide a copy of our Code of Ethics to any person, without charge, upon request, by writing to the Compliance Officer, Ryerson Inc., 2621 West 15th Place, Chicago, Illinois 60608 (telephone number (773) 762-2121). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Ethics by posting such information on Ryerson Inc.’s website at www.ryerson.com.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Overview and Objectives

As a private company, our compensation decisions with respect to our named executive officers have historically been based on the goal of achieving performance at levels necessary to provide meaningful returns to our primary stockholder upon an ultimate liquidity event. To this end, our compensation decisions in 2010 were primarily based on the goal of recruiting, retaining, and motivating individuals who can help us meet and exceed our financial and operational goals.

Determination of Compensation

Our Board of Directors, in consultation with our primary stockholder, was principally responsible for establishing and making decisions with respect to our compensation and benefit plans generally in 2010, including all compensation decisions relating to our named executive officers. Following the effective date of this filing, we anticipate that compensation decisions will primarily be made by our new compensation committee. The following individuals served as our named executive officers in 2010: (i) Stephen E. Makarewicz, our former President and Chief Executive Officer, who retired as of the close of business on December 31, 2010, (ii) Matthias Heilmann, our Chief Operating Officer, and (iii) Terence R. Rogers, our Chief Financial Officer.

In determining the levels and mix of compensation, our Board of Directors has not generally relied on formulaic guidelines but rather sought to maintain a flexible compensation program that allowed it to adapt components and levels of compensation to motivate and reward individual executives within the context of our desire to maximize stockholder value. Subjective factors considered in compensation determinations included an executive’s skills and capabilities, contributions as a member of the executive management team, contributions to our overall performance, and whether the total compensation potential and structure was sufficient to ensure the retention of an executive when considering the compensation potential that may be available elsewhere. In making its determination, our Board of Directors has not undertaken any formal benchmarking or reviewed any formal surveys of compensation for our competitors. Our Board of Directors consulted with each of our named executive officers during the first few months of 2010 for recommendations regarding annual bonus targets and other compensation matters (including their own) and for financial analysis concerning the impact of various benefits and compensations structures. Our Board of Directors had no formal, regularly scheduled meetings to set compensation policy and instead met as circumstances required from time to time.

Our Board of Directors considered the economy and its impact on our business as the biggest factor impacting compensation decisions during 2010. Our Board of Directors weighed the conflicting goals of providing an attractive and competitive compensation package against making appropriate adjustments to our cost structure in recognition of the slow recovery of the economy. Our Board of Directors considered the impact on employee morale and potential loss of key employees versus the need to cut costs. Our Board of Directors believes that its compensation decisions in 2010 accomplished both goals.

Components of Compensation for 2010

The compensation provided to our named executive officers in 2010 consisted of the same elements generally available to our non-executive employees, including base salary, bonuses, perquisites and retirement and other benefits, each of which is described in more detail below. Additionally, our named executive officers participated in a long-term incentive program, also described in more detail below.

Base Salary

The base salary payable to each named executive officer was intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities, as well as recruit well-qualified executives. In determining base salary for any particular year, our Board of Directors generally

 

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considered, among other factors, competitive market practice, individual performance for the prior year, the mix of fixed compensation to overall compensation, and any minimum guarantees afforded to the named executive officer pursuant to any agreement. In February of 2009, all salaries were frozen unless adjustments were merited due to promotion or special circumstances. None of the named executive officers received salary increases during 2009. Our Board of Directors considered the worsening economy, overall business performance, and the desire to cut costs and, in May of 2009, reduced salaries. The salaries of Messrs. Makarewicz, Heilmann, and Rogers were reduced by 15% and remained at that reduced level through the end of 2009. Effective January 1, 2010, our Board of Directors restored their base salaries based on several factors, including improving business performance and the desire to minimize the negative impact of the salary reduction on employee morale. Effective May 3, 2010, Mr. Heilmann and Mr. Rogers each received a 5% increase in annual base salary in recognition of their superior performance during a difficult 2009 economic climate.

Annual Bonus

The Company maintains the Ryerson Annual Incentive Plan (the “AIP”), pursuant to which our key managers (including our named executive officers) were eligible to receive a performance-based cash bonus tied to our achievement of specified financial performance targets in 2010. Each participant’s threshold and target performance measures, as well as each participant’s target award (expressed as a percentage of the participant’s base salary) were established by our Board of Directors. No cash AIP bonuses were payable unless we achieved the threshold set for the performance period. Our Board of Directors generally viewed the use of cash AIP bonuses as an effective means to compensate our named executive officers for achieving our annual financial goals and to provide meaningful returns to our primary stockholder upon a future liquidity event. The target AIP bonuses for Messrs. Makarewicz, Heilmann and Rogers were 100%, 100% and 75% of their respective base salaries for 2010. For 2010, our Board of Directors set the performance targets on March 29, 2010 and these targets were communicated to the named executive officers shortly thereafter. The target AIP bonus levels were set to reflect the relative responsibility for our performance and to appropriately allocate the total cash opportunity between base salary and incentive based compensation. For 2010, annual AIP targets were split into two six month incentive periods (January 1 through June 30 and July 1 through December 31). Performance against targets was evaluated separately for each six month period, and AIP earnings calculations for each period were not affected by performance in the other period.

For 2010, our Board of Directors determined that “economic value added” (“EVA”) should be used as the performance measure for determining the cash AIP bonus payable to our named executive officers. EVA is the amount by which (i) our 2010 earnings before interest, tax, depreciation, amortization, and reorganization expenses plus adjustments established by the Board, if any, exceeded (ii) a carrying cost of capital applied to certain of our assets. Our Board of Directors chose EVA as the appropriate performance measure to motivate our key executives, including the named executive officers, to maximize earnings by more effectively utilizing and managing our assets. Fifty percent (50%) of each named executive officer’s bonus opportunity for 2010 was based on the EVA during the first half of 2010 and the remaining fifty percent (50%) was based on the EVA during the second half of 2010. For the first half of 2010, threshold EVA was set at approximately $(26.5) million, target EVA was set at approximately $(2.7) million and maximum EVA was $17.9 million. For this first half of 2010, the actual EVA reached was $5.8 million, which was in excess of target EVA and resulted in a cash bonuses of approximately 140% of each individual’s target AIP percentage being paid to each of our named executive officers for the first half of 2010. The actual EVA of $5.8 million for the first half of 2010 was the amount by which (i) our earnings before interest, tax, depreciation, amortization, and reorganization expenses for the first half of 2010, excluding LIFO, of $93.4 million, adjusted to add back an impairment charge on fixed assets and to exclude results from mid-year acquisitions exceeded (ii) the carrying cost of capital of $87.6 million, adjusted to exclude acquisition assets, applied to certain of our assets for the first half of 2010. For the second half of 2010, the threshold EVA was set at approximately $(22.5) million, target EVA was set at approximately $5.6 million, and maximum EVA was $36.1 million. Actual EVA for the second half of 2010 was $(57.8) million, which did not reach the minimum required threshold and, therefore, no cash bonuses for the second half of 2010 were paid to our named executive officers. The actual EVA of $(57.8) million for the second

 

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half of 2010 was the amount by which (i) the carrying cost of capital of $95.1 million, adjusted to exclude acquisition assets, applied to certain of our assets for the second half of 2010 exceeded (ii) our earnings before interest, tax, depreciation, amortization, and reorganization expenses, excluding LIFO, for the second half of 2010 of $37.3 million, adjusted to include an impairment charge on fixed assets and to exclude acquisition costs. Overall, the cash bonuses paid to each of our named executive officers pursuant to the AIP in respect of service during 2010 were approximately 70% of each individual’s target AIP percentage. Total 2010 bonus amounts for each of our named executive officers are set forth below in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.

Long Term Incentive Bonus

In February of 2009, Ryerson Holding Corporation adopted the Rhombus Holding Corporation 2009 Participation Plan (the “Participation Plan”), designed to provide incentive to key employees, including our named executive officers, to maximize our performance and to provide maximum returns to our stockholders. Under the Participation Plan, participants are granted performance units, the value of which appreciate when and as the value of Ryerson Holding Corporation increases from and after the date of grant, and it is this appreciation in value which is the basis upon which incentive compensation may become payable upon the occurrence of certain qualifying events, which are described below. The Compensation Committee for the Participation Plan determines who is eligible to receive an award, the size and timing of the award, and the value of the award at the time of grant. The maximum number of performance units that may be awarded under the Participation Plan is 87,500,000. The performance units generally mature over a 44-month period of time which the Compensation Committee believes acts as an incentive for participants to remain in our employ and to strive to create value throughout the investment cycle. Subject to certain thresholds, payment on the performance units is contingent upon the occurrence of either (i) a sale of some or all of Ryerson Holding Corporation’s common stock by its stockholders, or (ii) Ryerson Holding Corporation’s payment of a cash dividend. The Participation Plan will expire February 15, 2014 and all performance units will terminate upon the expiration of the Participation Plan. Performance units are generally forfeited upon a participant’s termination of employment. No performance units were granted in 2010. We intend to require participants in our Participation Plan to waive any and all rights thereunder in connection with their receipt of any award under the stock incentive plan that we intend to adopt prior to completion of this offering and intend to terminate the Participation Plan following receipt of such waiver from each participant therein. For additional information on the stock incentive plan, see “—Stock Incentive Plan.”

Retirement Benefits

We currently sponsor both a qualified defined benefit pension plan and a nonqualified supplemental pension plan, both of which were frozen as of December 31, 1997. These plans are described in further detail below under the caption “Narrative Disclosure of the Pension Benefits Table.”

Our tax-qualified employee savings and retirement plan (“401(k) Plan”) covers certain full- and part-time employees, including our named executive officers. Under the 401(k) Plan, employees may elect to reduce their current compensation up to the statutorily prescribed annual limit and have the amount of such reduction contributed to the 401(k) Plan. We generally match contributions up to 4% of base salaries made by our employees and, from time to time, make other contributions, up to certain pre-established limits. Our Board of Directors believes that the 401(k) Plan provides an important and highly valued means for employees to save for retirement.

Our Board of Directors reviewed the basic 4% match in 2010 and concluded that it was competitive as compared to other employers. We matched 4% of the named executive officers’ contributed base salary until our match was suspended as of February 6, 2009. Effective January 22, 2010, we resumed matching up to 4% of employee contributions, including those of our named executive officers, to the 401(k) Plan. All of our named executive officers participated in the 401(k) Plan on the same basis as our other employees in 2010, except that

 

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the rules governing qualified plans with regard to highly compensated employees may limit our named executive officers from achieving the maximum amount of contributions under the 401(k) Plan.

We also maintain a nonqualified savings plan, which is an unfunded, nonqualified plan that allows highly compensated employees who make the maximum annual 401(k) contributions allowed by applicable law to the 401(k) Plan to make additional deferrals in excess of the statutory limits. We match up to 4% of all contributed base salary of the participants. Our Board of Directors believes that our nonqualified savings plan provides an enhanced opportunity for our eligible employees, including our named executive officers, to plan for and meet their retirement savings needs. Messrs. Makarewicz, Heilmann, and Rogers participated in this plan on the same terms as other eligible employees.

Perquisites and Other Benefits

In 2010, we provided Mr. Makarewicz with financial planning and tax preparation services.

Mr. Heilmann’s offer letter provides for 12 months housing and payments pursuant to the relocation policy which provides for payment of or reimbursement for certain expenses such as moving expenses, buying or selling a home, and tax gross-up. The Board believed that Mr. Heilmann should not suffer any adverse financial impact due to his relocation from California to Illinois.

Employment/Severance, Non-compete, and Non-solicitation Agreements

During 2010, the terms of employment for Messrs. Makarewicz and Rogers were governed by employment/severance, non-compete, confidentiality, and similar arrangements with us, pursuant to which Mr. Rogers will continue to serve as Chief Financial Officer, and pursuant to which Mr. Makarewicz served until his retirement, which set the executive’s title, base salary, target cash AIP bonus, and other compensation elements, and imposed post-termination confidentiality, non-compete, and non-solicitation obligations that apply following the termination of employment for any reason. Additionally, each employment agreement provided for severance upon a termination by us without cause or by the named executive officer for good reason.

The employment letter with Mr. Heilmann provides for base salary of $350,000 and a target AIP bonus of 100% of base salary. Additionally, the letter provides that we will provide Mr. Heilmann with temporary housing and relocation expenses in connection with his move from California to Chicago. In the event Mr. Heilmann’s employment is terminated by us for reasons other than cause, he is entitled to receive an enhanced 52 weeks of severance pay based on his weekly base pay rate and to receive medical and dental benefits pursuant to our Severance Plan. Mr. Heilmann is subject to invention assignment provisions and confidentiality provisions which run for a 3 year period following any termination of employment, as well as post-termination non-compete and non-solicitation covenants which run for a 12 month period following any termination.

Our Board of Directors believes that employment agreements with our named executive officers are valuable tools to both enhance our efforts to retain these executives and to protect our competitive and confidential information. The estimates of the value of the benefits potentially payable under these agreements upon a termination of employment, are set out below under the captions “Potential Payments Upon Termination or Change in Control.”

Changes in Compensation Components after 2010