Christopher Bona - Head, Telecommunications Eddie Lehner - President and CEO Erich Schnaufer - Interim Chief Financial Officer Kevin Richardson - President, South-East Region Mike Burbach - President, North-West Region.

Matt Duncan - Stephens Jorge Beristain - Deutsche Bank Timna Tanners - Bank of America Joel Tiss - BMO Capital Markets Brett Levy - CRT Capital Michael Gambardella - J.P. Morgan Phil Gibbs - KeyBanc Capital Markets Matthew Fields - Bank of America Merrill Lynch Aldo Mazzaferro - Macquarie.

Please standby, we are about to begin. Good day. And welcome to Ryerson Second Quarter 2015 Earnings Conference Call. 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 second quarter 2015 earnings call. I am here this morning with Eddie Lehner, Ryerson’s President and Chief Executive Officer; and our Interim Chief Financial Officer, Erich Schnaufer.

Kevin Richardson and Mike Burbach, two Regional Presidents in-charge of North American Operations will be joining us for Q&A. Before we get started, let me remind you that certain comments we make on the 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 suggested by the forward-looking statements. Such risks and uncertainties include, but are not limited to the volatility in metals demand and prices, 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, our remarks today 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 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 second quarter 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 Eddie Lehner..

Thanks, Chris, and good morning all. First, I want to thank all my Ryerson teammates for a job well done this past quarter amidst the most challenging industry conditions we have seen since 2009. We are executing well and acting upon the opportunities provided in every market in this case a down market with confidence, clarity and purpose.

As I am sure you are aware, metal prices declined further in the second quarter, a continuation of the deflationary and very challenging operating environment the metal service center industry has faced over the past year. These deflationary conditions had a cliff those present in 2009 when looking at current commodity prices and indices.

In fact, the S&P Commodity Index reached its lowest reading since 2002. In our end markets strengthened transportation has been more than offset by weakness in mining, agriculture and oil and gas, with energy-related spillover effects into industrial machinery and equipment, and fabrication.

Fixed asset investment continues to lag through this recovery as compared to prior post-recession recoveries. That said, Ryerson had a lot to feel good about in the quarter. We posted earnings per share of $0.49 in the second quarter of 2015. The best we have achieved since going public.

We continue to manage the business well in foundational elements under our control, such as expenses and inventory. We generated cash flow from operations of $61 million in the quarter and $163 million in the first half of the year, driven by our focused working capital management. We use some of our cash flow to buyback notes and reduce debt.

In the first half of 2015 we repurchased 45 million of our notes. Those repurchases will reduce annualized interest expense by an estimated $4 million per annum. After the end of the second quarter we had three important developments.

On July 29th, we announced a new $1 billion secured credit facility replacing the old $1.35 billion credit facility, the new facility which reduces the interest rate and extends the maturity which completed with strong lender support. The new facility will reduce our annual interest expense, another $4 million per annum.

On August 4th, we announced the acquisition of Southern Tool Steel. STS brings extensive bar processing capabilities, consistent with our focus on long products and value-added services. It also brings a largely transactional account base and provides outstanding service to customers in the Southeastern U.S. market.

On August 7th, we announced the appointment of Court Carruthers to our Board of Directors. Court’s 13 years experience with W. W. Grainger, including responsibility for e-commerce and technology initiatives will be an asset to Ryerson.

I will turn the call over to Erich, who will talk about our second quarter performance and provide some detail on pricing trends..

Thanks, Eddie, and good morning. For the second quarter of 2015, net sales were $840 million, down 9.8% from the second quarter of 2014. Average selling prices declined 2.2% and volume declined 7.8%. Compared with the first quarter of 2015, net sales were down 3.2%.

While deflationary pressure reduced average selling prices 5.6% sequentially, ton shipped per day increased 0.9%. Ryerson’s gross margins were 19.7% in the second quarter of 2015, compared with 17.3% in the first quarter and 16.6% in the year ago period. Metal prices continue to fall in the second quarter far more than expected.

Since the end of the first quarter, hot roll coil declined 7%, alumi and nickel was also down 7%, and Midwest aluminum dropped 16%. As a result, gross margin excluding LIFO were 15.3% in the second quarter of 2015, compared to 15.9% in the first quarter and 18% in the second quarter of 2014.

With our aggressive inventory management, we have taken progressive steps to allowing our average cost of inventory with current prices as a continuation of our first quarter actions and will do so as long as deflation and short lead-times persist.

In fact, over the course of the second quarter, gross margins improved, despite the continued fall in metal prices. We’ve continue to see additional improvement since the end of the second quarter. As Eddie mentioned, we continue to manage expenses well.

In the second quarter warehousing, delivery, selling, general and administrative expenses were down 5% year-over-year and down 2%, sequentially.

As a result of these factors, we reported a net income attributable to Ryerson Holding Corporation of $15.8 million or $0.49 per share in the second quarter of 2015, that’s compared to a loss of $0.08 per share in the first quarter of the year Excluding a non-cash charge to recognize the decrease in value of Ryerson's investment in A.M.

Castle & Co., earnings per share would have been $0.15 in the first quarter of 2015. In the year ago period, we reported net income attributable to Ryerson Holding Corporation of $2.6 million, or $0.13 per share.

Adjusted EBITDA, excluding LIFO, was $29.2 million in the second quarter of 2015, that compares with $35.9 million in the first quarter of 2015 and $62 million in the second quarter of 2014. This underscores the dramatic commodity price decline experienced over the past 12 months.

Looking ahead, on the pricing front we’ve seen carbon flat-rolled stabilized with some expectation for improving prices. Stainless and aluminum are still under pressure.

Even with ongoing deflation as a result of aggressive inventory management and reductions in our average cost of inventory, we expect gross margins, excluding LIFO, to improve in the second half of 2015. In terms of demand, trends are still developing without a clear indication of typical seasonality as demand levels remain industry-specific.

As Eddie said at the start of the call, we continue to effectively manage working capital. In the second quarter, we reduced inventory days of supply to 76 days, compared with 83 days in the first quarter of 2015. As a result, we generated strong countercyclical cash flow of $61 million.

With that, we reduced our debt $57 million, which included $15 million of our 11.25% notes that we purchased on the open market during the second quarter. As of June 30, 2015, borrowings under our primary bank revolving credit facility stood at $367 million, with additional availability of $193 million.

Including our cash and marketable securities balances and availability from foreign sources, our total liquidity was $290 million. We remain confident that we have more than sufficient liquidity and the financial flexibility to pursue prudent growth opportunities concurrent with debt reduction. With that, let's open the call to your questions.

Operator?.

[Operator Instructions] And we will go first to Matt Duncan of Stephens..

Good morning, guys. Good job on the cash flow in the quarter..

Hey, thanks, Matt. Good morning..

Good morning..

So Erich, you mentioned you expect the gross margin, excluding LIFO, to be up some in the back half.

Can you quantify a little bit for us how much based on what you're seeing right now in the inventory actions you’re taking, how much do you think you can improve margins by from that 2Q level?.

Well, we are seeing that the gross margins have ticked up slightly. Most of that is coming from the fact that our average inventory prices are declining and we’re beginning to see some stabilization in carbon. Stainless and aluminum is still dropping.

So it’s too early to see how much progress we’re going to make through the third quarter and the back half of the year..

Okay.

So we should probably expect it to be up, I mean we’re talking you know 20, 30, 40 basis points, nothing substantial at this point until we see prices sort of bottom across the board?.

Yes, Matt. This is Eddie. I mean, I think if you look at our history in past, past being prolong. I mean, in these types of environments, when you have 460 basis points difference between LIFO margins and FIFO margins, you expect some realizations from that as you move to the second half of the year and as pricing starts to stabilize.

So the trend appears to be positive. We just really don't have a great fix on the magnitude yet..

Okay. No worries.

And then in terms of the LIFO benefit you're expecting in the back half, what would you expect that to be at current prices?.

Well, if prices continuing to fall, we are continuing to expect LIFO income..

So was what $37 million I guess this quarter, how much do you think it'll be in the back half?.

Again with where prices are going, it’s hard to quantify exactly. As Eddie has said, you have to take a look at prior periods of price declines. You can come up with a gauge on where third quarter and fourth quarter may come out, but again we don't know exactly where prices are going to end up for the year..

Okay. Fair enough. And the last thing for me just on cash flow, I mean, obviously, it's been pretty strong in the first half of the year.

What are you guys expecting your free cash flow to be in the back half? How much more debt do you think you can pay down in the back half of the year?.

We continue to expect to generate cash. Again, it’s going to depend upon how much we’re able to continue to bring our inventory balances down. With the deflation and pricing, we’re going to continue to try and stay as short as we are and balance that against our customer demands..

Matt, you can project out that if you look at what’s happening in the underlying price environment, there will continue to be working capital release through the second half of the year..

Sure. Yes. Okay. All right. Thanks, guys..

And we will go next to Jorge Beristain of Deutsche Bank..

Hey, good morning. Eddie, you did talk about the really challenging environment you're saying sort of worst than '09. I was wondering if you could kind of comment what your baseline view is on this steel market going forward.

Obviously, there has been a ton of trade cases launched, yet we have not seen -- it would seem like the clients in this steel industry really gearing up purchases of the domestic product.

So could you just talk about what your baseline is for, perhaps what happens to steel imports in the next few months as to how you're preparing your product inventory? And then maybe speculate a little bit about when you see it turn if at all in the plate of the steel sector if these trade cases will stick I guess?.

Yes, Jorge. So let me try to take those one at a time. So we are going to continue to manage our inventories aggressively. Lead times haven't gone out. Prices are stabilizing. And again in aluminum and stainless, prices are still coming down.

So there's really no need to go long on inventory, particularly with the devaluation that we’re seeing in non-ferrous inventories. We think that’s delaying restocking to some extent. So I think people are cautious. They don’t want to take more valuation hits in their inventory.

So we’re going to stay aggressive and we’re going to keep turning our inventories. We were at 76 days in the quarter and that actually affords us the ability to reset those replacement costs back into FIFO average cost, maybe quicker than some of our other peer comparable. So in the market right now, demand is still flattish.

It's really end market specific. You have to go end market by end market. Ag is still down. Mining is still down, as you know all too well. Transportation is still up and oil and gas has really hit with some hard times. And so everybody in that end market has been touched up by that. So the trade cases, we obviously support them.

We think it's important that everybody kind of shoot at a 10 foot hoop, it feels like some folks are shooting at eight foot hoop, some are shooting at 12 foot hoop. So it’s good to level set that playfield.

Probably what’s delayed some of the price increase traction, we might have expected to get is just that scrap has fallen by another $20 to $40 in August. And so, I think -- I think the bias for carbon recording is toward prices stabilizing and going up as we head towards the end of the year.

I don't think it’s going to be dramatic and it looks like it’s going to flow through on a gradual paced basis..

Hey. And this is Kevin Richardson. One thing I would add that’s very different in terms of the import environment is last year at this time, there was a big spread between import and domestic and history would tell you that either domestic prices had to come down or import pricing had to go up and you know how that played out.

So the domestic has come way down. There's not nearly the gap in the products, which again allows us to go short and shift more of our product back to domestics..

Could you remind us again about what your rough spread is, if you publicly comment between domestic product and imported?.

Yeah. What we are seeing right now is we’ve seen those spreads come in. So, really when you look at aluminum and in stainless, now you're really looking at probably less than a $100 hours per ton for both of those.

When you look at cold rolled plate, you're probably right at about $100 a ton and when you look at carbon, you are really somewhere between $40 and $60.

So the spreads are coming in and when you look at on a risk adjusted basis and you think about deliveries not taking place for material that you would order via import now, you wouldn’t see deliveries until December, January of next year.

So imports are coming in where we’ve certainly shifted that opportunistic portion of our buy back towards domestic suppliers..

And so last question.

Can you comment about your mix in terms of how much is domestic versus import?.

We’ve been less than -- we have been between 5% and 20% in terms of import versus domestic. And I would say we are moving towards the lower end of that range..

Perfect. Thank you..

And we will go next to Timna Tanners of Bank of America..

Hey. Good morning, guys..

Good morning, Timna..

Good morning..

At this time as I’m that you won’t tell us where prices are going to be in the second half. I thought I would ask you about what you can control if I could. I wanted to know what if you could -- how do you feel about your inventory levels right now. You talked about more working capital release.

But it looks like the overall inventory levels are getting a little closer to normalized levels.

And in line with that question, do you feel any need to build inventory in an event to go past the follow-up strike?.

Tim, I’m going to let Mike and Kevin provide some color on that. I would say that we had a call with our multi-market GMs this week and we feel like we are well supplied and we are well supported to meet demand. But I would like Kevin and Mike to provide some additional color on that..

Hey, Tim. Mike Burbach here and thanks, Eddie. I think Eddie said it right. When we look at our inventories today in the situation that we are looking at with aluminum and stainless prices continuing to slide, we like where we are at. Our focus has been and it continues to be to keep the days of supply in the low to mid 70s.

And we think that’s the proper place to be and stay nimble to stay in front of this. Domestic lead times today are short. It really puts us in a good position to stay in front of what our customers are telling us and make sure we’ve got, not the right amount of inventory but the right inventory at the right place at the right time.

So this was the third time I think we like where we are at. There is plenty of supply and so we're going to stay nimble and lean and get through these times thinking like that..

Can I interpret -- that doesn’t sound that you are worried about the stake or worried about this figure turning off entirely for import sometime later in the next couple of months?.

No, Timna. We are not worried about that..

Hey, Timna. It’s Kevin Richardson. The other advantage that we have is we’ve got redundancy of supply. So given all the processing centers that we have and the relationships that we have with different domestic mills, we are not worried about where obviously we’d stay close to the situation as it turns. But we feel very comfortable right now..

Okay. Cool. And I just wanted to drill down a little bit more on the margin discussion just because -- and your volumes because volumes in the first half of the year were back to kind of more of your run rate and 2009, if I recall. And I know in the past you’ve talked about sacrificing some volumes in order to maintain the higher margin opportunities.

But it’s kind of matched I think by the current environment.

So at what level do you think you want to be in the market in terms of volume? How much can your volumes improve assuming a better market, or how much might they be kind of still seeking better margins? And then when you talked about margins, do you think you will get back to historical levels once the market stabilizes if you can comment on that?.

So, I will start and then, I will ask Kevin and Mike to contribute. Yeah, we do think that markets will start expanding again. We do think those will start to normalize and that the transformational things we’ve been doing in the business will continue to take hold and provide benefits moving forward.

Everything is being so camouflaged right now by just really such steep deflation that really has continued through the year and is really come more from nickel and aluminum. And in the last say 60 days, carbon has stabilized. So, when we drive through that smoke and haze on the other side, we see good margin profile providers.

And we also see us growing organically as well..

The only thing I would add, Timna, is we are not worried at all in terms of capacity on the upside as we grow. We’ve got plenty of capacity in our network of facility so. And our commercial teams are very focused on growth..

Yeah, Timna. I would also add that when you look at activity levels and these are interesting times. But we are proud of the fact that in Q2, we didn't increase our share relative to what the industry was reporting. We had slackings, Q2 compared to Q1 in virtually all products. And it’s really a direct result of our people in the field.

We've got great people running the businesses, taking care of the short-term needs and controlling what we can control, at the same time focusing on our customers and able to achieve growth in a very difficult environment..

Tim, if you look at our end market exposures, we’ve said before that we don't have exposure to automotive, except for just a couple percentage points. We really don't have big exposure to non-residential construction other than construction machinery and equipment.

So when you look at our end markets and you kind of look at it which way the arrows are pointing, you look at ag. Ag is down. You look at mining. Mining is down. And you look at oil and gas and it's really way, way down. And so you have those pressures on demand from those end markets and transportation has been a good offset to that.

But transportation by itself hasn’t been able to override the direction of some of those other end markets, which are key contributors to our demand profile.

So as those end markets recover and based on the things we're doing and so the business where I think our execution is really good at getting better every day, we are very optimistic on the other side of this in terms of how our company grows..

Okay. Great. Thank you..

And we’ll go next to Joel Tiss of BMO Capital Markets..

Hey guys.

How is it going?.

Hi Joe.

How are you?.

Good morning..

I don’t usually suck up the management, but that really was a great quarter..

Joel, thank you. That does us lot of good to hear. Thank you..

And is there anything that you guys -- can you talk a little bit about what you can learn from some of the acquisitions you’ve made and some of the relationships that they bring and maybe how to go to market like what are some of the things that these new guys can really contribute?.

Let me give you a summary statement. And then I want Mike and Kevin to answer as well because Fay Industries is in Mike's region and STS is in Kevin's region. Joel, the thing they bring is they bring a customer service mentality that sometimes can get a little bit lost across 105 service centers.

We have great sensitivity to our customers but you find that these businesses when you acquire them, you see how close they are to the customer and how well they service those transactional markets day in and day out in term of meeting customer service expectations which can be one hour, two hours, eight hours, one day or two days.

And they hit those windows and they are just very, very close to their customers. And when you look at the synergy cases, in terms of the scalable benefits that Ryerson provides, you really start to see some really nice synergy upside case as we move forward and as we have the benefits of cyclical recovery.

So I would -- I would ask Kevin and Mike to comment on it as well..

Eddie and Joel, specifically, I would echo a lot of what Eddie just said. The thing that jumped out at you when we look at Fay and some of the other deals we’ve done in recent years, it just drives home the importance of service. These companies are good companies. They are accretive to our earnings.

They are not fixed wrappers and we are very pleased with the fact that what we get with them is really a commitment to the customer. These are things that I caught at Ryerson as well but it certainly doesn't hurt to see this in practice elsewhere and quite frankly, in some cases bringing it into a new level.

Demands from our customers continue to push towards quicker, faster, better. And so it's not uncommon to have same day needs after our needs, certainly next day is kind of table stake these day in terms of what people are expecting from us.

So we see that, reinforces everything we’ve been working on and really keeps us focused on what’s really important..

Hey Joel, Kevin Richardson. The other thing I would add is they tend to have exposure into end markets or products that we don't or don’t have as much exposure to. So even if you rewind the clock a few years and you look at the acquisitions we made in oil and gas, that gave us expertise that we could then take to Oklahoman and Western Canada.

So part of it is what Eddie and Mike just described in terms of the business model than nimbleness, part of it is the cross-selling synergies. And we’ve been -- I think, we have a very good playbook now in terms of how to integrate..

And Joel, the compatibility of Ryerson to those acquired management team has been outstanding.

I really can’t complement our teams enough for the way that we partner with these acquisitions in terms of knowledge sharing and exchanging best practices and really, really developing close working relationship so that we retain and really enhance all that’s good when you actually acquire another organization..

Well, sound goods. All right.

And then, I don't know if you answered this before but the growth in the ton ship is that that from acquisitions or is that from share gains?.

Well, there is a small piece of that, it was Fay Industries, which was included but if you were to look at same-store, you would see there is some growth.

And again when you back out energy, which has been tough market in SBQ, alloy bar and carbon plate, you will see growth in stainless, you'll see growth in aluminum and you'll see growth away from those end markets. And certainly in specific geographies with other end market exposures. So the answer is yes..

Okay. All right. Thank you very much..

One other comment I would make is, I was at a customer visit recently and it's really interesting, because we had an investor a while back [indiscernible] can you increase your share while the market is declining and so the example that that we gave which is a real example without using proper nouns is you have a customer that makes 10 units of machinery.

And that's what the plant was built for. It has 10 units of capacity per day and the most of them you never hit. While they have been going through some of a cyclical downturn on their own, mostly they may produce is six and in the current environment they are making three.

However, we continue to increase although a material share in terms of pounds per vehicle as last three to four years have gone by. So as we keep increasing our share per unit, we are growing as these end markets recover and as these customers start to produce more up to their weighted capacity in those facilities.

So the answer is yes, you can grow but you also need that recovery in that cyclical end market..

Hey, Joel, the other thing that I would add in terms of market share gains where we feel very good and optimistic is we deploy the lot of capital two or three years ago into value-added processing, that gave us capabilities that we didn't have before.

And when we look at the metrics of processed material, in particular, plate and we bench that market and we benchmark that against industry. It’s clear that we’re gaining share. So a lot of it has to do with the capital that we have deployed..

Erich, thank you..

[Operator Instructions] And we’ll go next to Brett Levy of CRT Capital..

Hey guys, Eddie, Kevin, Mark, thanks for taking my question.

First off, how much did the Midwest premium collapsed for you guys in this quarter and how much do you anticipate next quarter?.

Hey Brett, it’s good to hear from you, wouldn’t be an earnings call, if you weren’t on it. Hey, I’m going to let Kevin speak to that..

It’s sort of the Midwest premium peaked to $0.24 a pound and it is now around $0.08 a pound. So it has been a dramatic drop of 65%. What’s interesting about this Brent is, it probably impacts the mills more than it does the distribution channels because the $0.24 a big run-up in the Midwest premium never really made it into the market.

What happened was is that distributors, big distributors like us had to take a bigger import position. And so when you think about what it’s done and the resale price is really not $0.24, down to $0.08. It’s probably about half of the effect.

But the range that it’s in now, if you look at the historical average in terms of the Midwest premium over the LME, today's rate is actually closer to what the 10, 15 year averages. That was really the 20 -- $0.15 to $0.20 to $0.24 that was at a whack on a historical basis..

And then we’ll let hit you again in the third quarter to a more minor extent or is it kind of out of the system now?.

Well, one of the benefits we’ve had in 75 days of inventory is we don’t have that much exposure. But the other thing that’s unique about our book of business and aluminum in particular is we have a fair amount of business that is hedged and there is lot on buy and the sell.

So that portion of the business doesn’t get any exposure because they are firm commitments through certain amounts of volumes. So will it hit us? It will but we are not anticipating any more of an effect than what we saw in the last quarter..

And last question, I mean, obviously there is anticipation that there will be a plate case and there will be a stainless case. You guys are significantly involved in both.

Do you see any level of customer speculation or any desire on your part to kind of speculate ahead of the filing of those cases in terms of your own inventory levels?.

Are you talking about aluminum in particular?.

No, plate and stainless..

So, Brett, what I would say is we don’t. I mean, we think markets are still really well supplied across all metals categories. And trying to anticipate what may happen with trade cases. We think we’ve represented great risk than really just staying nimble and quick, turn your inventories and staying very close to our suppliers..

All right. Thanks very much guys. Nice quarter..

Thanks..

And we’ll go next to Michael Gambardella of J.P. Morgan..

Yes. Good morning..

Hi. Good morning, Michael.

How are you?.

Good morning..

Good. I have a question, just a follow-up on the trade situation.

Do you guys have any material that still has not been delivered from any of the country subject to the hot roll, cold roll or coated cases?.

Mike, I wouldn’t comment specifically on any country or any import. I would tell you that we don’t have any exposure with respect to the question you just asked. So we’re very comfortable with our import inventory. And it is going down as we mentioned as we ship more to domestic and we don’t have any exposure to such trade cases..

So you don’t have any material coming in from any of the countries covered on the sheet cases at all.

If I was just wondering about the critical circumstances if you’d be subject to duties, which are retroactive 90 days on the preliminary numbers come out?.

Yeah. No, we looked at those deliveries and we looked at those points of origin and we don't feel that we have any exposure..

Okay. And then just in terms of the possibility in stainless case, I don’t know how close you are to it but given the fact that the two largest producers of stainless sheet in the U.S. part fine mills.

Do you think of stainless case is really likely?.

Michael, I don’t -- the real answer is I don’t know. I mean, when we look at spreads right now between import and domestic and we look at our own supply chains and the fact that we tend to only import on the stainless side relative to customer specific inventory. We really rely on our domestic suppliers to support us on the stainless market.

So the answer that I have is I don't know but I know Mike Burbach is very close to it as well, so I would ask Mike to comment..

Yeah. Thanks, Eddie. We hear the rumors that there could be cases coming just like I think most people are hearing, but at the end of the day, we really don’t have a sense one way or the other, how this is going to play out. Interesting enough, I feel the big piece of the degradation in stainless products has more to do with nickel than anything else.

And so that's a real problem with or without a trade situation causing change. So it’s -- but we’ll see what happens. Right now we just don't have a clear view of what that’s going to look like..

Michael, if you’re looking for a triggering variable, the pattern seems to be that when imports do increase to a really great extent on a year-over-year and that percentage of import really jumps up, it seems to be the triggering variable that finally creates conditions in the event of the trade case filing.

So I mean if that were to continue in stainless import levels, we’ll continue to jump from certain countries on a year-over-year basis. Then just on that probability alone, it would seem that the case could be likely..

And then just final question, and when you look at growth opportunities through acquisitions, do you consider both company’s that have well-run businesses and also ones that you’d have to fix?.

Yeah. I mean, Michael, right now we’re really focused on debt reduction and really preservation and enhancement and liquidity. However that said, we have proven certainly over the last year that that we’re going to grow and we’re going to take our shot, and so, I think, it’s more a question of how that acquisition fits into our strategy.

And so, it’s, I guess, it’s an easy categorization to say, distressed versus well-run business with a lot of goodwill. But it's really more inline with how do we feel it supports our strategy and how we feel it supports our transformation.

I mean, we did an acquisition several years ago back in 2010, some distressed assets in Mobile, Alabama, which really turned out to be an excellent purchase for us in terms of what it did for us in the transportation and marketing and process plates.

So we’re not -- we certainly wouldn’t dismiss an opportunity that was “distressed” but it just really has to fit our strategy and where we want to go and who we want to be as a company..

Okay. Thanks..

And we’ll go next to Phil Gibbs of KeyBanc Capital Markets..

Good morning..

Good morning, Phil..

Good morning, Phil..

I had a question just on CRU resets? Do you as a company see those in 3Q relative to 2Q? And how much of your business these days is on contract versus transactional and how is that change during the course of last couple years?.

Mike Burbach.

Yeah. Hey, Phil. Yeah..

Hi..

We do have some business that’s tied to the CRU and reset in Q3. Today, that’s not a major piece of our business and so we handle that like we handle all the other price deflation issues we been faced within its all throughout in inventory management. So we've had some. It’s a very minor piece of the overall scope of our transactions.

But like the decrease as we’ve seen everywhere, it’s we have to stay close to your customer. You have to have the right inventory at the right time and nothing more. So we’re weathering to it at this time..

Okay.

Eddie, in terms of the contract versus call it transactional business, how -- where we stand right now and how is that developed over the last couple years?.

Phil, it’s been consistent. It stayed within that range of say, 50-50 contracted transactional..

Okay. And then just a couple of questions….

Yeah..

… on the balance sheet, if I could here. The first one is just on the potential for refinancing.

You obviously have some pretty good chunk of high cost debt, the nines and the 11 and change? Is there any potential to actually go out and refinance those or is that not an option for you?.

Phil, we think it’s always an option for us. We really want to be in the market when there's really good receptivity and when the pricing we feel is going to be helpful. So we stay ready.

We stay ready and if that windows there a week from now than we’re in the market and that windows there a month from now are in the market and we have to wait a little bit longer to really need that receptivity and that pricing, those pricing objectives that we have and we'll wait a little bit longer.

But we know there is refi opportunity out there for us and we’re prepared..

Okay.

And then, Erich, can you update us on where your NOLs are right now?.

Yeah. NOLs at the end of last year were $217 million..

Okay.

And then is that roughly where we are today?.

It’s about where we are at today..

Okay. Thanks so much..

Thanks, Phil..

And we will go next to Matthew Fields of Bank of America Merrill Lynch..

Hey guys. Going up hard on the balance sheet, I know you feel a lot of questions. But obviously, we’ve got maturities coming up in two years now I guess. The ABL matures in August of 17. Those nines aren’t gone. So other than sort of await and be prepared, you guys talk a lot about focusing and the things that you can control.

What’s the plan as far as doing things to make a refi accessible, if the markets don’t suddenly come back to you?.

Yeah. Matthew, I think if you look at our execution, you look at our cash flow generation based on conditions in the industry on a relative basis to our peer comparables. I think Ryerson has a very season credit. I think we performed very well in credit markets over extended period of time now.

And so we feel that we would be received very well in the credit markets. In the higher markets in particular, then it just becomes really a matter of pricing and when do you we take that shot..

Okay. And then to sort of de-lever a little bit and sort of help your credit profile in advance in case, seems like metals and mining investors now don’t want to buy par bonds anymore.

But would you look to further acquisitions using your equity as a currency? Is platinum okay with that today, they have to okay that, or can you go out and buy a company using Ryerson stock?.

Matthew, we wouldn’t comment on that. What we would say is three months is an eternity in this industry. Things can shift pretty quickly and conditions and fundamentals can change and we perceive differently over a pretty short interval. So, we are going to stay nimble and quick and we want to preserve as much optionality as we can..

All right. Thanks very much..

Thanks Matthew..

And we go next to Aldo Mazzaferro of Macquarie..

Hey. Good morning, Eddie.

How are you?.

Aldo, how you doing?.

I’m good. Sorry, I missed the first few minutes of the call, so I want to apologize if these have been answered already. But I just -- on the working capital that you generated in the first half was extremely strong on the inventories and even some receivable payable.

Is there anymore to go on that for the rest of the year, how do you feel on that?.

I mean based on looking at how things would continue, when you look at present trends, Aldo, the answer is yes. We would expect to continue to generate countercyclical cash flow through the balance of the year based on what we can see and project to right now..

And will that be mostly on inventory you think?.

I think it’s across the board..

Across the board..

Yeah, I think it’s across the board, yeah inventory..

All right.

And I have to ask you on this LIFO, any big number and I'm just wondering, can you breakout at all how much might have been due to digging into cheaper and older layers or was it just straight deflation on the inventory cost?.

Yeah. It’s straight pricing deflation..

Yeah. Because your older layers are probably more expensive, right..

Yeah. Our layers of inventory, I will go back to 2007, when we’ll predict to spike platinum where we reset all of our inventory layers. So pricing since then has come down, which is what’s generating the debit balance and our LIFO reserve. And most of our inventory is effectively at that 2007 layer price..

Okay.

And then none of the LIFO that you took in the first half would have any implication on what you plan to take on rest of the year, correct, is that?.

That is correct. So we do a full LIFO calculation at the end of each quarter..

Right..

So, all of the changes in prices are fully baked into our numbers..

Great. Okay. Another question I had on the expenses, it seemed to me and it’s just I guess my estimates, but it seemed like the warehouse costs were a lot more down than the SG&A.

Can you talk about what might be going on within the company? You’re doing more cost reduction on the warehousing side of it versus SG&A, is that what’s going on would you say?.

Yes. This is Eddie. I would say that we’re always looking at our structural cost with prudent. I think we have done a very effective and quiet job of looking at markets that we serve where we can very effectively and very positively go from, for instance, maybe four service centers to three or five to four or three to two or two to one.

So I’ll let Kevin and Mike comment on that further, but I think we’ve done a very good job of structural cost reduction. We've done in a very quite an effective way. So it’s not to disrupt any of our commercial relationships..

The only thing I would add is in environment like we are in where there is clearly slack capacity. The operations tend to adjust quickly because overtime comes out. We're looking at taking temporary employees out.

We are more willing to carry slack capacity when it comes to SG&A in terms of the commercial sales force, because we don't want to do anything that’s going to damage the business on the upside. And so we’re inclined to not make on taking headcount out as and relative to inside sales and outside sales reps..

I get it. That makes sense. I appreciate that color. So the last question I just want to ask you. How soon we have to wait to get a W. W.

Grainger multiple on the stock?.

Well, I’ll tell you I wouldn’t venture a guess, but we are surely going to work hard at it..

No. Thank you very much. And good luck going forward, Eddie..

Thanks, Aldo. I really appreciate it..

And this concludes today’s question-and-answer session. At this time, I would like to turn the call back to Eddie Lehner, Ryerson’s President and Chief Executive Officer for any additional or closing remarks..

As you can see, Ryerson is continued to manage things under our control, such as expenses and working capital. And we have taken actions in 2015, including paying down debt, completing a new credit facility, and announcing two bolt-on acquisitions that advance our strategic transformation. Thank you for your interest in Ryerson.

We look forward to speaking with you next quarter..

And this concludes today's conference. We thank you for your participation. You may now disconnect..