Ryerson Holding Corporation (NYSE: RYI) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide a distinct Q4 financial summary. Amounts are in U.S. dollars unless noted.
Business context
Ryerson is a value-added processor and distributor of industrial metals, operating primarily in North America, with additional operations in China. It served about 40,000 customers through 96 North American facilities and four China facilities. Nearly 80% of products sold were processed to customer specifications. The company reported one operating segment: metals service centers.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $6,323.6 million | $5,675.3 million |
| Gross profit / gross margin | $1,310.1 million / 20.7% | $1,146.8 million / 20.2% |
| Operating profit / operating margin | $578.7 million / 9.2% | $545.2 million / 9.6% |
| Net income attributable to Ryerson | $391.0 million | $294.3 million |
| Diluted EPS | $10.21 | $7.56 |
| Adjusted net income and diluted EPS (non-GAAP) | $403.6 million / $10.54 | $290.0 million / $7.46 |
| Cash from operating activities | $501.2 million | $35.0 million |
- Sales rose 11.4%; average selling price per ton increased 15.1%, while tons shipped declined 3.2%. The company attributed higher prices particularly to supply constraints and stronger demand in the first half of 2022.
- Gross margin increased 50 basis points as selling prices outpaced material costs. Operating margin was lower year over year, in part because 2021 included substantially larger gains on asset sales.
- Operating cash flow improved sharply, aided by earnings and working-capital releases as receivables and inventory declined. Cash and cash equivalents were $39.2 million at year-end, versus $51.2 million a year earlier.
- Total debt fell to $367 million from $639.3 million; net debt was $328 million versus $588 million. Reported total liquidity was $909 million, including $826 million of availability under the Ryerson Credit Facility. Total liquidity and net debt are non-GAAP measures.
- Capital expenditures were $105.1 million; acquisitions used $57.0 million. The company paid $19.9 million in dividends and repurchased $50.0 million of shares during 2022.
Material changes, unusual items, and capital structure
- Ryerson redeemed its remaining 8.50% senior secured notes due 2028 during 2022. The transactions generated a $21.3 million loss on retirement of debt; management cited approximately $25.5 million in annual interest savings following elimination of the notes.
- The $1.3 billion revolving credit facility was amended and upsized from $1.0 billion, with maturity extended to June 2027. Borrowings were $365 million at year-end, and the weighted-average rate was 5.6%, compared with 2.5% in 2021.
- 2021 results included $109.6 million of gains on sale-leasebacks and $98.3 million of pension settlement charges. These items materially affect year-over-year comparisons.
- Four acquisitions in 2022 expanded processing and distribution capabilities: Apogee Steel Fabrication, Ford Tool Steels, Howard Precision Metals, and Excelsior. Ryerson also acquired a 30% interest in FreeFORM Manufacturing for $2.0 million.
- The company declared dividends in all four quarters of 2022. In February 2023, the board declared a quarterly dividend of $0.17 per share.
Outlook, risks, and contingencies
- Management described weakening conditions in the second half of 2022 amid inflation and higher interest rates. The manufacturing PMI moved below 50 in November and December, indicating contraction. The filing does not provide specific company revenue or earnings guidance for 2023.
- Ryerson anticipated up to approximately $95 million in 2023 capital expenditures, subject to economic conditions and investment decisions. It expected to fund these expenditures from operating cash flow and facility borrowings.
- Key risks include the cyclical metals market; volatile commodity prices and inventory costs; difficulty passing cost changes to customers; slowing demand; inflation, freight and interest costs; supplier concentration; and borrowing-base or covenant constraints. Most debt is floating-rate; a 100-basis-point rate increase was estimated to add about $4.3 million of annual interest expense at the stated debt level.
- The pension plans had a reported $73.0 million unfunded status in the financial statement note, and management estimated a minimum required contribution of about $8.6 million for 2023. The auditor’s critical audit matter describes an $84.4 million unfunded defined-benefit obligation; investors should reconcile these disclosed figures.
- JT Ryerson remains a potentially responsible party in the Portland Harbor Superfund matter. EPA has not allocated responsibility, and management cannot predict the outcome or estimate a loss range. Ryerson is seeking consideration for a de minimis settlement.
- Other risks include acquisition integration, foreign currency and international operations, cybersecurity, environmental compliance, labor actions, and goodwill impairment. The company reported no goodwill impairment in its October 2022 test.
- Ernst & Young issued an unqualified opinion on the financial statements and internal controls; management and the auditor concluded internal control over financial reporting was effective at year-end.
Most important facts for investors to verify
- How much of 2022’s sales and cash-flow performance reflects sustainable pricing and operations versus metal-price changes and working-capital movements.
- The pension funding figures and expected future contributions, including the disclosed $73.0 million versus $84.4 million unfunded amounts.
- Current borrowing-base availability, floating-rate exposure, and compliance with facility covenants as market conditions change.
- The eventual cost allocation and settlement outcome for the Portland Harbor Superfund matter, for which no loss estimate is currently available.
- Integration progress and returns from 2022 acquisitions, as well as delivery and funding of planned 2023 capital investments.
- The board’s future dividend and repurchase decisions; neither ongoing dividends nor repurchases are guaranteed.