Christopher Bona - Head, Telecommunications Mike Arnold - President and CEO Eddie Lehner - Executive Vice President and CFO Erich Schnaufer - Chief Accounting Officer and Corporate Controller.

Brett Levy - Jefferies Luke Folta - Jefferies Jorge Beristain - Deutsche Bank Justine Fisher - Goldman Sachs Joel Tiss - BMO Phil Gibbs - KeyBanc Capital Markets Aldo Mazzaferro - Macquarie.

Please standby, we are about to begin. Good day. And welcome to Ryerson’s First Quarter 2015 Earnings Conference. Today’s conference is being recorded. For opening remarks and introductions, I would like to turn the call over to Ryerson’s Head of Telecommunications, Christopher Bona. Sir, you may begin..

Good morning. Thank you for joining Ryerson Holding Corporation’s first quarter 2015 earnings call. I am here this morning with Mike Arnold, Ryerson’s President and Chief Executive Officer; Eddie Lehner, Executive Vice President and Chief Financial Officer; and our Chief Accounting Officer and Corporate Controller, Erich Schnaufer.

Before we get started, let me remind you that certain comments we make on this call contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those adjusted by the forward-looking statements.

Such risks and uncertainties include, but not limited to the volatility in metals demand and prices and cyclicality of the various industries that we serve. Forward-looking statements provide our current expectations or forecast of future events.

You are cautioned not to place undue reliance on these forward-looking statements which speaks only as of the date they are made and are not guarantees of future performance. Important factors which may cause results to differ from expectations are included under Risk Factors in our annual report on Form 10-K for the year ended December 31, 2014.

In addition to our remarks today we refer to several non-GAAP financial measures which exclude LIFO and certain other expenses. These non-GAAP measures are intended to supplement but not substitute for the most directly comparable GAAP measures.

A reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release filed on Form 8-K yesterday, which is available on the Investor Relations section of our website. With that in mind, I'll turn the call over to President and CEO, Mike Arnold..

Okay. Thanks, Chris, and good morning to everybody. Over the past few years, our priority has been implementing corporate transformation that improved our cost position, increased our gross margins, and of course, enhanced our competitive position in the metal service center industry.

And we witness the benefits of the transformation in our financial results over these past several years. Beginning in the fourth quarter of 2014, those efforts continued but were more than offset by the industry dynamics.

And the deflationary pricing, which occurred in that quarter continued in the first quarter of 2015, commodity metal price environment was the worst we've seen since 2009. At the same time, demand has been mixed. Some of this is the result of customers waiting on the sidelines for lower prices.

But we are seeing some strength and some weaknesses in the various markets that we serve. And with lower than expected industry demand in the fourth quarter of 2014 and into 2015, there has been widespread inventory destocking, which has put some additional pressure on margins.

While market conditions weighed heavily on our performance for the first quarter, we were pleased with the way we manage factors that are under our control namely expenses and inventory.

First quarter expenses were down slightly year-over-year and sequentially, and led by a 10% reduction in inventory levels, we generated strong counter-cyclical cash flow from operating activities of about $100 million.

We’ve had experienced managing through the ups and downs of the metals cycle, throughout we maintained a control of expenses and inventory, and we will continue to aggressively align our inventory and expense levels with metal pricing and metal end market demand.

At the same time, we’ve continued to identify and implement strategies that capitalize on Ryerson's competitive advantages, and continue to be excited about our future. In the past, we've talked about how Ryerson's using technology to link our approximately 100 locations, so we can bring our global capabilities to each local market.

We also have an e-commerce platform that makes Ryerson easier to do business with and set us apart in the metal service center industry. We also see opportunities to leverage Ryerson’s strength and enhance growth opportunities through market segmentation.

We are targeting select end markets that drawn Ryerson's existing expertise and credibility, broad product line and geographic presence, and our value-added fabrication capabilities and quick turn delivery.

As you know at the end of 2014 I announced my intent to retire in 2015 and this morning I'm sure you’ve all seen we've announced that the Board has completed its process and has named Eddie Lehner as the next President and CEO effective June 1st.

This certainly reflects the strong succession planning and talent management that we put in place at Ryerson and absolutely assures a smooth transition as I retire at the end of the month. You all know, Eddie, so it’s my pleasure to turn the call over to him.

Eddie?.

Thanks, Mike. Mike before I get into my remarks, I want to thank you for your leadership and mentorship these past three years, the time allotted, doesn’t allow me to share, all I have appreciate and learned from you, but rest assure we will put it all that excellent use.

Mike referenced the challenging macro-environment characterized by an oversupply global metals marketplace and significant base metal price deflation. As we work through the deflationary impacts to our income statement and balance sheet, first quarter sales were essentially unchanged year-over-year and sequentially.

Ton shipped per day was down 5.9% year-over-year and down 2.1% sequentially. The average selling price per ton was 5.6% from a year ago period.

Sequentially, the average selling price was down 1.1%, which was notably less than the underlying commodity price decline as mix shift benefits and pricing discipline helped ease the impacts of margin compression in the quarter. Ryerson gross margins were compressed by a significant inventory devaluation cycle.

Sequentially we saw commodity cost declines of 21% in hot roll coil, 9% for aluminum and 14% in nickel. While Ryerson’s margin on a GAAP basis were up sequentially and year-over-year. Gross margins excluding LIFO declines a 15.9%, compared to 16.4% in the fourth quarter of 2014 and 17.9% in the first quarter of 2014.

As deflationary cycle -- as deflationary cycle countermeasure decrease, we aggressively managed inventory lower to speed the alignment of average cost inventory with commodity prices and signs are emerging that prices are broadening with nickel rebounding from its lows, iron were moving off it recent lows, an indications of hot-rolled carbon sheets forming the bottom with several mills attempting price increases.

During the quarter, we took a non-cash charge of $12.3 million to recognize the decrease in value of Ryerson’s investment in A.M. Castle. That amounted to $0.23 per share after tax.

As a result of these operating and non-operating factors, we reported net loss attributable to Ryerson Holding Corporation of $2.5 million or $0.08 per share in the first quarter of 2015. Excluding the impairment charge on this investment, earnings per share would have been $0.15 in the first quarter of 2015.

That compares with net income attributable to Ryerson Holding Corporation of $4.8 million in the fourth quarter of 2014 and $1.6 million in the year ago period. Adjusted EBITDA, excluding LIFO, was $35.9 million in the first quarter of 2015. That compares with $40.1 million in the fourth quarter of 2014 and $53.2 million in the first quarter of 2014.

Inventory days of supply for the first quarter of 2015 was 82.6 days, down from 88.3 days in the fourth quarter of 2014. With $76 million or 10% reduction in inventory levels, we made significant progress with inventories in line with demand.

And we’ll look for additional opportunities to reduce inventories, improve turns and accelerate the movement of average cost inventory to replacement cost. We continue to make progress toward the deleveraging of our balance sheet and improving our capital structure.

As of March 31, 2015, borrowings under our primary bank revolving credit facility stood at $407 million with additional availability of $235 million. Including our cash and marketable security balances, total liquidity was $332 million. We repurchased $3 million principal amount of our 2017 and 2018 notes in the first quarter.

They were purchased at prices between $10.125 and $10.250 well below Ryerson current call premiums. For the quarter, we reduced total debt $57 million or 4.5%. With that, let's the open the call to your questions..

[Operator Instructions] And we’ll take our first question from Brett Levy with Jefferies..

First off, Mike, thank you for your excellent service over the last three years in this real turnaround situation to help tick company public. And I think, lot of the people who were stakeholders are thankful. Eddie, congratulations, well-deserved, this is a challenge that you do you deserve the opportunity to have..

Brett, Thank you. And make sure you ask Michael lot of questions and give him workout, right..

I will do my best. Listen, there is a lot of price increases being announced, sort of, left and right in flat rolled.

Are you seeing order books building or are you seeing the signs that this might possibly stick?.

Yeah. From an order book standpoint, Brett, I would tell you that as we look at the various industries, we’re seeing a whole mix. I would tell you that, I don’t see any reactive activity in the marketplace because customers have been able to -- to a certain extent, selling in our hands for quite some and just wait for the next pricing move.

There is ample capacity and availability in the short-term, obviously from the sources. So that hasn’t been a big, what I’d call realization at this point. There is some surge in the order book to beat future price increases. I think everybody has watched the last six, seven months and nobody has been right in their prediction.

So we play very close to the bell, as you know. We talk a lot about how we manage our business. Lead times are short, coming in and going out. Either way, we’re able to respond very quickly to our customer needs. And so we’re not going to react one way or the other even building up inventory, anticipating better prices or better demand.

So we have built a capability in both from an IT order examination, daily looks at order books that says we stay very short, very flexible especially in these cycle at this point. So I can tell you that I've seen anything that is remarkable in the industry at this point..

All right. And then in terms of the bond buybacks, are you guys done? Has there been anything done sort of subsequent to this reporting period.

And then, I mean, there was an interesting scenario, where you have some call date strapping the prices that might actually lend themselves to refinancing especially in the phase of posting reasonably strong numbers. I mean, you said flat was down 21, aluminum down 9, nickel down 19. I mean, if you can post good numbers in that scenario.

I think it’s understandable whether the stock is up.

What is the thinking in terms of bond buybacks and then also starting to address refinancing opportunities as you approach your call dates?.

I thought you’re going to say you’re happy because we finally did it. So Brett, as we said in the last quarter instead on prior calls, we just want to be at the ready. We want to manage to position our business so that we have that kind of optionality and as opportunities present themselves, we can look at them and put our best foot forward..

Got it.

In terms of aluminum, can you talk about where you see sort of the input levels coming in? Are you guys participating in the higher level of inputs and do you think that Midwest premium slide further from kind of the current levels?.

I’ll take the first out of that. So Brett, Midwest premium, in fact is fully down. I mean, if you think about where it peaked, where it is today, it’s down 50%. I think that although demand -- certainly, we can’t say demand is terrible. But I think that demand is certainly isn’t enough to absorb what is in general just an oversupply market of metal.

So what has changed though is that I think some of the domestic, and if you look at Alco and [Nobela Solaris] [ph], they’ve all positioned themselves to take advantage of aerospace, plane, automotive, aluminum sheet. And I think more and more common outlays matriculated offshore.

So I think there is structural change in input patterns in aluminum surrounding common outlay aluminum. It’s not that other domestic producers don’t want that business. It’s just that I think strategically they are positioning themselves for higher value added end markets.

So, I think there is somewhat of a step change in imports for aluminum around common alloy..

And this is a tougher question. On the A.M. Castle write-off, should we assume that at some point you are just going to divest these shares or I mean, what’s your strategy because they are still holding at this point..

Brett, we can’t comment obviously with regards to long-term what our intention will be. It’s similar to the past. We made that investment for specific reasons as to potentially an opportunity there long-term. We are constantly reassessing that and as you know, there's a lot going on at A.M. Castle today, with some of the changes that are being made.

So, we will continue to assess that investment over the long-term..

And I know that you guys did not give guidance for the second quarter and it’s harder to have that much visibility. But we're about halfway through and there is a few like things in the second quarter, directionally could be up down or sideways relative to the first quarter based on what you’ve seen out of sort of one week of May and all of April..

Yeah. So, Brett, this one’s easy for me because I won’t be on the next call, so I could say anything I want to say. So, I would tell you that, sequentially looking at the quarters were more positive on Q2 versus Q1. So our thought process is that at least, sequentially we will see better results.

As we come through April, I can't say we've had any parties over the volume demand out of the marketplace, but some early indications in May are for stronger markets so. We are, again optimistic that Q2 plays out better as we move through the quarter. But so far that’s what we’ve been seeing..

Thanks pretty much again. I think that’s enough questions for me. I will get back in the queue..

Thanks, Brett..

Thanks, Brett..

And we will take our next question from Luke Folta with Jefferies..

Hey. Good morning, guys. And congrats to both of you..

Hey. Thanks, Luke..

Thanks, Luke..

I just want to follow-up on Brett’s 11th question there regarding the second quarter.

The margin -- I guess when you we think about the improvement sequentially, are you expecting a higher margin in the second quarter than the first quarter? I’m just trying to understand how pricing falls through on some of the -- on the flat roll side?.

So Luke, it's mixed right now. I think in this quarter, if prices don't take another step down as I noted, there has been some -- we've seen prices come off the bottom certainly in nickel. Aluminum has probably been the most stable of the three it has been.

But really I think, once prices turn up, we can really generally get a better view of when that margin reset is going to take place and really the sooner the better.

But certainly the price declines given that they've really flattened out and hopefully demand picks up through the quarter then that we will start to see an acceleration towards margin expansion. It’s just the visibility right now just isn’t very good. Okay..

On that point, you took a whole bunch of inventory out of system in the first quarter. So, I’m sure that goes along, would help you in terms of margins in the second quarter.

When we think about working capital from here, would you expect additional out cash generation or sort of a neutral impact holding up on a topline constant?.

Yeah. It comes in two steps, Luck. I think the first step is to get your volumes in line with demand and we did that and then the next step is when you start to see that big step down in average cost and you get that that second release of working capital as your average cost falls. So, we are still in the midst of that.

So our inventory still should come down on average cost basis and then we would expect to still generate cash flow out of inventory..

Can you remind us what your expectations for pension cash -- pension, OPEB cash needs this year and next, if you have any another view?.

Yeah. We are expecting $43 million dollars of contributions to our pension plan and roughly $9 million for OPEB plans..

Okay.

And do have a view what that does in ’16 at this point?.

We still expect to have reductions in our pension contribution, maybe in the area of $5 million to $10 million lower..

Okay. All right, guys. Then last one, Eddie, I got a strategic question for you. I think you guys have done a very nice job over the last several years in terms of maintaining and improving the margin profile and to some extent that’s come at the expense of volume. You sort of exited some less profitable business.

As we move forward -- and this year might not be the right year to talk about volume growth.

But I guess as we move forward, how should we think about how you are going to look at that trade-off between volume growth and maintaining, enhancing margins? I’m just trying to get a sense of two, three years out, how should we think about where your volumes could end up?.

Yeah. Luke, I think if you look at this quarter and there is just a lot smoke in the quarter, especially from the impacts of a price deflation, inventory devaluation and demand that’s really mixed. If you think about where most of the strength has been and it’s been well noted. It’s been in aerospace.

It’s been in non-res construction, certainly in automotive. And you know that our market shares are not that high in those end market. So as we talked about our story over the years, has been levered more towards late cycle market recoveries.

We still expect that spend to occur and we will be well-positioned to grow our share in those end markets in the verticals that we’ve been targeting. Our strategy is right. It's good. It's just that we’ve really not seen the growth in our end markets as of yet that that you would've seen in past cycles. And I'll let Michael penned onto that..

No, it’s your show now. But Luke, I think the key thing to our strategy has been and obviously transitioning to Eddie is just excellent because once to gets to this, he is been a part of it and he understands the pros and the cons of going after volume for volume sake.

And so I anticipate that, that as the organization moves forward, we will continue to look for those opportunity in the higher-margin shapes that we produce, the additional processing that we have added to the capabilities into the company and so we will continue to look for those value-added opportunities on attractive shapes.

But probably more important now and Eddie will wind up talking much more about this I think in future quarters is some markets that we are assessing now, end markets that we don’t have a lot of participation in, but we think are great fits to those capabilities that we put in place and will foster future growth.

And so there is going to be this combination of some markets that we may not have been participated in it as strongly by bringing all of this, what we’ve created Ryerson which is really this kind of global capability brought down to the local markets through all of our tools and the scale that we have fostering hopefully higher than industry growth rate in the products that we’ve chosen to focus on as we move forward.

Now what that looks like is a total industry in tons versus MSCI. I can’t tell you because, as you know, I have never lost any sleep without one way or the other as long as I felt that we were growing market share in the places that we chose to grow and that’s been critical.

So my anticipation would be, and so it’s a little bit of message for Eddie right.

But part obviously as a shareholder, my expectations long-term for Ryerson obviously would be to certainly stay on that path, because I do believe there is enormous attractive growth in places that we can compete very well and add a lot of value and expand those margins continually. And we don’t have to ‘chase’ a lot of volume to do it..

Look in this quarter in particular, I mean, we were successful in managing our balance sheet really well. Our expense control is good. Our inventory management was excellent. But we weren’t the only ones that were trying to raise cash.

And I think when you’re in that type of environment, what obscures you longer-term, be you when your longer-term objectives is.

In this type of environment, people do what they have to do to take orders and we know that there were some orders certainly that were taken throughout the industry that we’re just taking at levels that you just throw us we can’t participate.

So when we look further out, we mentioned fragmentation in this industry and the fragmentation is enormous when you think about really 80 million to 90 million orders that occur in this industry every year.

So our real objective has to be to keep approaching that fragmentation with the better business model, whether it’s alternative sales channel, such as e-commerce, our call centers, phase that we’ve done to get at that fragmentation, mass supply chains, because we know that when the customer calls us, if we can see it and it’s available to us and we can price it and quote it and deliver it within the service window and do all that before the customer hangs up the phone, we got a really good shot at that order..

Thanks a lot. And again congrats to both of you..

We will go to our next question from Jorge Beristain with Deutsche Bank..

Hey, good morning, guys. And again congrats to Eddie on the new position and congrats to Mike on all the good work..

Thanks, Jorge..

I guess my question is just on carbon steel, I guess the stock is reacting very positively, given good performance in a really ugly macro environment. Could you just talk about carbon steel realizations on a per ton basis? They were kind of most flat sequentially in a really down market versus spot.

Can you just talk about how much it is was based on you guys kind of stepping away from business -- maybe so maybe it was mix, or is there some timing issue there that there could be some flow through into the 2Q on lower realizations?.

Yes. Jorge, this is Eddie.

I would really comment our Region President for Multimarket GMs and the entire Ryerson team, I think they did a very job of managing that tradeoff in the price book and really working through a lot of the segmentation routine that we put in, in terms of understanding our customers, what they like to buy, how they like to buy, and really making good decisions in those tradeoffs throughout the quarter as to what business to take.

And when I say what business to take, it’s really what business to quote and where to quote it at, because it’s a very fluid market and we are not the only ones that are competing for business. So I think the field did a wonderful job in managing the price book in the quarter..

Do you expect any follow-on into 2Q as carbon prices catch up with the market? Or do you think that this marks the bottom and we are actually starting to see an inflection up in realized prices?.

I mean, look, we would like to see the price increases to take hold. We would like to see demand support those price increases and people start to order to their backlogs. And if that happens, I think it gives us a good chance to inflect backup again and start to see margin expansion..

Okay. And then just maybe a strategic question, you mentioned that we have not yet really seen the kick-in effect on your late cycle markets where you’re targeting.

Could you kind of reiterate what those are? And then just should we think about M&A in a market where if we do see an upturn in steel prices and then there is going to be a lot of stress in the industry on working capital? How you guys could see further consolidation? Would there be any opportunities to sort of cherry-pick and further enhance those end markets that you’re targeting?.

Yes. Let me talk about the markets a little bit Jorge and then I will take Eddie on the acquisitions in the M&A environment and particular for the future. As you know and we talked a lot about this with you all on the roadshow, our industry base that we sell to is kind of meat and potatoes industrial.

We talked a lot about, this is everything from kind of the general industrial equipment machinery, some of the on-highway stuff, but that’s in Class A trucks, things that move rail, we’re participating in, we are growing in the marine side of the business. We do a lot of heavy equipment.

So heavy construction equipment, mining, ag, the off-highway, and then electrical machinery, which can be any kind of electronics appliances, those sorts of things. And of course we had been increasing our position in oil and gas. So those are typically the markets that we participate in and do for well in.

The strength of those all have been the transportation markets as you know you can see that. We’ve seen in both sequentially and also year-on-year significant growth continuing in particular in the Class A trucks, so that’s been good.

Year-on-year the rest of them haven’t been attractive, but sequentially we have seen some pick up at least for fourth quarter. And now you have got to put that all in the context of our revenue and what we are selling and what was going on through the fourth quarter of last year.

And people sitting on their hands, not want to put inventory and letting prices drop. But those are the areas that we've targeted.

What we’re now doing is peeling back the onion in each one of those industries to understand what all the sub-segments are, because there's a lot of places where we bring enormous value and especially with our value proposition now and our ability to kind of bring all these capabilities to local market, maybe better than anybody else might be able to do long-term and then that will still play out in the marketplace.

But we’re finding sub-segments of areas that we just don’t participate in all. And in many cases, it’s as a result of the types of products and shapes that they were buying, which now are strategically important to us, but before weren’t and therefore we didn't have much penetration.

And so we've actually created insider organization now what we call vertical market organizations that cut across the company that are focused on some of these markets in particular. And so in coming quarters, we’ll begin to talk more and more on these calls with regards to what's going on in those specific markets and as we move forward.

So we’ll still talk about shapes. We’ll still talk about aluminum, stainless and carbon and because you all want to converse with regards to that.

But we’ll now begin to start talking about packaging equipment and trailers and different markets where we’re finding interesting niches that are looking for our capabilities and we have those on a broad basis that we’re bringing to the local markets where a lot of these customers are.

So I think strategy -- I don't think and I’ll look at Eddie, but certainly as we’ve talked on the calls before, markets like aerospace has always been interesting to us. We think that’s a M&A play. We’ve actually grown business in our aerospace business. But to really become a player in there would have to be some M&A work.

And the other two markets that are strong right now, we really haven't established a position, nor have intended to establish and make a position. So Eddie, the M&A..

Yes. Sure. So Jorge, you remember we acquired the industries at the end of the year, which was a really great bolt-on for us. And what we’re seeing in the M&A market really follow suit where there are smaller deals where we can add capabilities in our multimarket and those are the deals that are holding up well.

Some of the bigger deals where the EBITDA has become lumpy business has been really mixed. What’s happened as we've seen valuations collapse and the gap between what we can pay and what the seller might want is become too wide because they're experiencing stress in their business as well.

So the opportunities in our funnel right now are more towards the small bolt-on side. But again, we keep that funnel well stock and we’re always looking at eight to 10 deals at any time..

Thank you..

And we’ll take our next question from Justine Fisher with Goldman Sachs..

Good morning..

Good morning.

And I echoes all around, congratulations..

Thank you..

The first question is just specific on the bond buybacks.

Have you guys disclosed or could you disclose how many of each bond you bought back?.

Yes. Justine, we bought back $17 million of a 9 and $13 million of the 11 in the quarters..

Okay. Thanks. And then my second question is just on import environment.

And I was wondering do you think imports are interesting at this level? And what do you think is the right premium that stays of imports to the U.S.? And then I guess, following-up on that, someone phrased it on a previous earnings call, so I’m going to play your edges, but it’s not a matter of the U.S.

stopping imports, but it’s a matter of other country stopping to exports to really kind of solve the problem. And do you guys feel as others just going to be this overhang of price pressure in the U.S.

as long as the tide of exports from other countries isn’t necessarily stemmed?.

So there’s a lot of factors in play right now, as you know.

And so what I’ll do first is because I know that this question will be coming and so I’ll go ahead and I will just put this out there that the spreads that we're seeing right now are $10 on hot rolled sheet and about $75 on a carbon plate, about $300 in that ton on stainless and about $240 in that ton on aluminum.

So when you look at those spreads, what I would say Justine is the trend is definitely softened on import intensity. People were still taking deliveries obviously in Q1, even through Q2.

The order rate of imports are slowed because it's starting to look more like 2013 was, albeit at a higher level of import just because I think the mills are real -- frankly, I think the mills are still trying to figure out how they want to respond to it. And we have a wonderful domestic supplier base that we looked in first.

But I do think that this starts to look like 2013 when you really have to go on the specific categories, whether it’s steel, a wide enough spread. When you look at first importing into various coastal locations and if you really selling against the import price in coastal locations, you really have to stay competitive.

But when you get inland, that spread have to go up by 30 to 40 bucks when you get down with the transportation and the handling. So I think overall, the trend is down. I think it will stay down, unless factors change from where they are right now.

That’s said, I mean, there is still seems to be opportunities in cold rolled sheet, there is still opportunities in hot-dipped gal and still some opportunities in plate and then on the ferrous side, it really just depends who you are, what your supply chain as overseas as to how much you bringing?.

Okay. Thanks. And then my last question is just on the overall kind of growth flash leverage profile. I know that you guys are now spoken about getting into some new end markets, which I think makes a lot of sense.

If the existing exposure is a lot to mining and other sectors that may not be as high growth? But if people are looking from a high level view that leverages the company and saying, okay, what really needs to rev up EBITDA in order to get the leverage down to a level -- to a lower level.

Do we need to see volume -- do we really need to see that volume pickup increase or do you think there is enough to be done on the margin side with new business wins, et cetera, to make a meaningful difference in leverage?.

Justine, a couple of things that I would tell you, obviously, any topline growth leads to bottomline growth, because of that operating leverage that we feel to the business, so we’ll never turn away from the fact that either an economic recovery, the strength of the late cycle markets that we serve or penetration increases, where the margins are good and it business that we want long-term.

I won’t be a sick if it can held back. But that’s something that -- in most of those as I just said, we can’t bet on right them, they’re not necessarily controllable.

So the thing that we’ve continued to do here’s the shift that mix of our business because when you look at the business that we don’t quite like and the business that we really do like and we are moving, where we look at 600, 700, 800 basis points difference margin lines on basically selling a different shape to the same customer or it could be selling to different types of customers and analytically we are laser focused on continuing to change that mix.

So without any topline growth we know that except in a condition like we’ve seen over the last six months with the deteriorate pricing it’s just not out of control, we know that we can continue to expand those margins. But we do and that's what we kind of prove to the transformation.

But coupling to that with accelerating the topline growth is really the secret of this whole thing right. So we can do all these things internally to continue that margin movement and expansion, and its very attractive and it improves the bottomline that we don’t have to chase the volume.

But the end of the day that volume’s going to come on the top side and we think that both with the late cycle recovery, so recovery in the U.S.

markets better behavior on this pricing as we’ve already talked a lot about and then the tactical things that we are doing internally to find new markets customers who want to do business with a company who can bring at all to them in any location, at anytime and bring quick service and connected all kind of electronically and digitally, so they can do business with us 24x7, that's really going to feel some growth.

But we still got to get through this kind of conundrum of the cycle that we are in. So it’s a combination of the two. I’ll tell you I don't think we’ll leave either one of the two. So they both got to go together. Long-term they got to go together and that's what’s really going to create a normal shareholder value..

Great. Thanks so much for the color. I Appreciate it..

You bet..

Thank Justine..

[Operator instructions] Our next question comes from Joel Tiss with BMO..

Hey, guys.

How is it going?.

Hey Joel..

Hi Joel..

I wonder if the mix of inventory that was liquidated had any impact on the earnings or the profitability?.

No..

Okay..

It was really, Joel, it was really getting those inventories inline to where demand was..

And where you are now that’s pretty much the right place to be or you think there's more to go?.

Well, it depends on where we go from here, but I think, as I said earlier, it looks like its the average cost piece now with that's falling is where we are to going to get additional working capital release. And we are really tactical at this point in terms of looking at our inventory position.

I mean we want to support our service levels and we really want to support our customer backlogs.

But you look at what’s happening in certain end markets like oil and gas, for example, where you just have such a steep, steep declined in demand and you really have to work through those inventories and you don't need to do a lot of replenishment there until you can sell those off and then get really near to replacement cost..

Have you guys given us a free cash flow estimate for the full year?.

We have not..

Okay.

Any chance of getting a ballpark or it’s too early?.

Not today..

All right. I guess, Mike, you still have work to do. You said he was going to answer all the questions..

And more people to jump in the queue..

And then I just wonder a little more formally, if you could run through a bunch of the end markets.

You’ve given us little bits in pieces, maybe some of the strengths and the weaknesses within the end markets, just to help us balance it out?.

Sure..

Thank you..

Joel. So far, I mean -- I will just take it sequentially because that's I think kind of, real-time now what's going on in the industry. So, obviously, the transportation that I talked about before in [Class A] [ph], that continues to be strong. It continues to be good and we are -- it’s a good place for us to participate and we’ve got a nice position.

We are starting to see the general industrial equipment pickup. We saw some early numbers on industrial machinery from the industry that we were scratching our heads out a little bit because it seemed to be much stronger than the actual demand in the marketplace. So we are seeing sequentially that began to pickup.

Fabricators are beginning to get active again, which is our first indication that people are outsourcing and they are starting to ramp up some production in areas where they may not be bringing all their people back but they are outsourcing.

And so the fabricators are starting to pickup, as you know that’s a lot of -- that's a big part of our business.

And then at least, we think this electrical machinery has stopped the -- or the degradation we saw year-on-year that being down and so as we saw sequentially coming out of the fourth quarter, at least that's coming to kind of a flatness and so we would expect the demand to start to come up in there.

And then of course, as you know oil and gas, you know far more about it than we do. But we’ve seen the impact in the central part of the U.S. and down through Texas, Oklahoma et cetera and that's not a huge part of our business. So far that's kind of what we are seeing. You break it down out of the heavy equipment you still see the lagging in mining.

You know what’s going on in ag. I don’t think ag hits the bottom yet. So they are probably in for still another tough year and then we’ll start to see them come back, come back up.

But interesting when we look at couple of those industries, as those industries have continued to degrade, looks like we may be picking up some penetration with the customers that we do business in, because our numbers aren’t down as much as those industries have been even as we come sequentially out of the quarter.

So some bright spots, but we are still cautiously optimistic. I would say that this delayed cycle recovery is going to come in much stronger at some point. But that's what we are seeing, Joel..

Awesome. Thank you very much..

Thank you..

We’ll take our next question from Phil Gibbs with KeyBanc Capital Markets..

Good Morning, Mike, Eddie..

Good morning, Phil..

Had a question just on how the FIFO gross margins per ton trended through the first quarter and how are you seeing those trending into the second quarter?.

Yeah. So on a trending basis, they were certainly trending down in the first quarter started to -- on a FIFO basis started to flatten out and then again as Mike pointed out in his comments, we are starting to see those margins stabilize.

And now, we are hopeful that with demand pickups through the remainder of the quarter, we’ll start to see those margins pickup, Phil..

Okay.

And then in your energy book of business, any characterization you could give us there as how much it was, was it off either sequentially or year-on-year?.

Yeah. The year-on-year, sequentially, was up about the same, which means you still see some degradation and of course, a lot of it accelerated in the end of the year, so kind of middle teens for us..

Middle teens relatively to Q4 or Q1? I’m sorry..

Okay. And then the 82.6 days of supply that you had in the quarter.

Is that an optimal number for you or what are your targets for this year or targets longer term as far as where you want that number?.

Yes. So, I mean, I think you know from history, we’ve been between 75 and 92, depending on the time of the year when we made opportunistic buys.

We've always said that working capital is an investment and if we’re going to generate a really good return on working capital vis-à-vis service levels, particular orders that we’ve won, we will make that investment in working capital. I mean, right now, I mean in this environment, we would be more biased to try to work that down some more.

However, we’re not against business picking up. And so when business picks up we will make the right investment in inventory to support those customers..

Okay. Thanks very much..

Thank you..

And we will go to our next question from Aldo Mazzaferro with Macquarie..

Hi. Good morning, Mike and Eddie..

Good morning Aldo..

And congratulations to both year..

Thank you..

I just had a couple of quick one on the -- I wonder if you can give us some help on the LIFO outlook for the year. I'm just wondering if prices were to stay flat from here through the second quarter. They probably end the second quarter down versus the average for the first quarter.

I wondering, would that reflect a more of LIFO credit in the quarter for you?.

Yeah. This is Erich. Let me just give you a little bit color on LIFO. What we do is, we true-up and do a full LIFO calculation at the end of each quarter. So if prices stay flat, we wouldn't have any LIFO income or expense for the rest the year.

So it’s really going to dictate on what happens with commodity prices, which direction they go, whether or not we’d have any additional LIFO income or expense for the year..

I get it. So you take the each quarter individually rather than take the full year and then….

That’s correct..

Yeah. Okay. Eddie, could you give us a couple of views on your head count change.

I mean, what do you think your normal attrition rate might be over the next couple of years?.

Yeah, Aldo. What we've done is, I think we’ve done a really efficient job of just looking at our footprint. I mean on a variable cost basis, you look at our expense ratios. We stack up very well in the industry. So then it really becomes a question of, do you rationalize additional footprint.

So very quietly but effectively we’ve gone through under its multi-markets and where we could consolidate branches and still maintain the density and the service levels. And the relations with customers we wanted to. We went ahead and maybe went from 3 to 2 or 2 to 1 or 6 to 5.

And that’s really in this industry, that’s really we are now, you are going to get those cost step downs. And when you do, you would variably lose headcount along the away.

So we’ve been around 3600 plus a component of temps and it’s really going to be more determined now by what we do and manage in our portfolio of assets in that footprint moving forward..

Right.

The last two year it’s been 3% or so, hasn’t it in that neighborhood?.

Yeah. And again, that would reflect those consolidations..

Okay..

And the rest, the work we do certainly whether it's on the fuel side, non-metal spend, transportation and material handling. There are always opportunities there to lean out and get cost reduction that, that you want that to match your productivity target..

Right. Thanks. Thanks very much..

Thank you..

And we will go to another question from Phil Gibbs with KeyBanc Capital Markets..

Thanks. Just had a housekeeping question for Erich, the tax rates been sort of goofy here but kind of mid-50s in what do we see the cadence, they are moving forward and then if you could give us an update on your NOLs? Thanks..

Yeah. Sure. So NOL at the end of the year was $217 million. And as far as our expectations on tax rate since our pretax income has been relatively low, it has looked kind of unusual. But I would expect as our pretax income grows, we would have a tax rate of about 39% going forward..

Thanks guys. Best of luck..

Thanks Bill. Thank you..

And that concludes today's question-and-answer session. At this time, I would like to turn the conference back to Mr. Mike Arnold, President and CEO for any additional or closing remarks..

Okay. So, as we discussed today, current macro environment still presents some sizable challenges for everybody. But we are confident in our ability to continue to manage through the ups and downs of these metal cycles. I'm sure you’d agree, we continue to effectively manage the areas that are under our control.

At same time, we continue to advance our transformation or creating at Ryerson that capitalizes on its competitive advantages and laying the foundation for enhanced growth and profitability for years to come. So, thank you for your interest. Thank you for all your well wishes and we’ll be speaking to you next quarter..

That concludes today's conference. We appreciate your participation..