Good morning. Thank you for joining Ryerson Holding Corporation's Second Quarter 2020 Earnings Call. I'm here this morning with Eddie Lehner, Ryerson's President and Chief Executive Officer; and our Corporate Controller and Chief Accounting Officer, Molly Kannan.

Kevin Richardson; Mike Burbach; and Jim Claussen, our North American Regional President; along with John Orth, our Executive Vice President of Operations, will be joining us for Q&A. .

Before we get started, let me remind you that certain comments we make on this call contain forward-looking statements within the meaning of the federal securities laws.

These forward-looking statements involve a number of risks and uncertainties, including the impacts of COVID-19 and related economic conditions that could cause actual results to differ materially from those implied by the forward-looking statements.

Such risks and uncertainties include, but are not limited to, those set forth under Risk Factors in our annual report on Form 10-K for the year ended December 31, 2019. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. .

In addition, our remarks today refer to several non-GAAP financial measures that are intended to supplement but not substitute for the most directly comparable GAAP measures.

A reconciliation of the non-GAAP financial measures discussed on today's call to the most directly comparable GAAP measures is provided in our second quarter 2020 earnings release filed on Form 8-K yesterday, which is available on the Investor Relations section of our website. .

I'll now turn the call over to Eddie. .

Thank you, Justine, and thank you all for joining us this morning to discuss our second quarter results and the progress we have made on our dual mandate response to the COVID-19 pandemic. I hope this earnings call finds all of you safe and well. .

I want to begin our call this morning by thanking all the frontline responders and essential workers who have been working tirelessly and courageously in the fight against COVID-19.

I also want to thank my Ryerson colleagues, our customers and our suppliers as we continue to navigate through this time of unparalleled challenge for public health, economic health and societal well-being.

All those who have lost love ones through the pandemic, please accept our deepest sympathies with wishes for peace and strength during this time of solemnity and remembrance. .

As we noted during our first quarter earnings call, we took decisive and effective actions in establishing COVID-19 health and safety protocols in accordance with CDC guidelines and governing jurisdictional orders.

We continued this discipline through the second quarter, making the necessary adaptations along the way as the virus continues to greatly impact daily life. .

Within our Ryerson community our number of confirmed cases has been low, and we are relieved that each confirmed case has either recovered or is expected to recover. We are also looking out for one another and working safer as our OSHA TRI Rate for the first half of 2020 was the lowest recorded within the last 5 years.

I want to reiterate my appreciation to each of my Ryerson teammates for their commitment to the organization and our community's health and safety and for their resolve and resilience as we continue our essential work in safely serving our customers. .

During the second quarter, we took necessary actions to preserve liquidity and recovery capacity. We reduced operating expenses by 25% year-over-year and 20% sequentially. We generated $103 million in cash from operating activities in the second quarter and reduced net debt by approximately $100 million to its lowest level in 10 years. .

In addition, just over a week ago, we issued $500 million of new 8-year senior secured notes through August 1, 2028, at a coupon of 8.50% and retired our 11% senior secured notes due in 2022.

This refinancing reduces our annual cash interest expense by approximately $16 million, with optional redemption features available during the 3-year non-call period to reduce the outstanding notional amount of the bonds by as much as 50% or by $250 million.

This offers Ryerson enhanced optionality as we continue delevering the balance sheet and further reducing annual cash interest outlays. .

Since our bond refinancing in September 2012 and through our bond refinancing in May of 2016, Ryerson has reduced its outstanding notional bond principal by $400 million and bond-related annual interest expense by approximately $45 million.

This is a testament to our transformative efforts, progress and results during the period noted, as we made important investments through acquisitions and growth CapEx aligned with our strategy of creating great customer experiences across a network of intelligently connected service center assets. .

Turning to the economic environment during the second quarter. In the U.S., we experienced the largest plunge in industrial production recorded in 101 years, reflecting the acute economic shocks, which materially affected economic activity.

Second quarter North American industry shipments as measured by the Metals Service Center Institute, or MSCI, contracted by 26.3% compared to the first quarter. At the same time, Ryerson's North American shipments declined 21.4% during the quarter, showing relative strength compared to the industry. .

The North American volume trend during the quarter saw the bottoming of daily tons sold in April, with sequential volume recovery occurring throughout May and June and ending with improvement of 9.3% in the May-June period compared to April. .

Turning to commodities. The pricing environment held up better than anticipated during the second quarter as mill capacities globally and in North America adjusted more responsibly to falling demand than that experienced during the downturns of 2008 and 2009 and 2015 and 2016. .

Carbon sheet and plate prices stabilized in the range through the quarter and ended the first few weeks of July; while LME nickel and LME aluminum prices had recovered by 11.5% and 6.1%, respectively, compared to prices at the end of the first quarter and continued to improve during the first few weeks of the third quarter. .

After the April demand cliff-dive and significant customer shutdowns, customer activity began to improve incrementally and gradually in May and June. Ryerson end markets which showed relative strength in the quarter were ground transportation, consumer durables, food and agriculture, HVAC and automotive.

End markets that remained neutral through the quarter were construction and fabrication and machine shops; while industrial equipment, oil and gas and commercial aerospace continued to struggle. .

Since Ryerson acquired Central Steel & Wire, or CS&W, on July 1, 2018, CS&W has generated cumulative positive cash flows of $146.2 million or approximately 90% of Ryerson's $164 million purchase price.

Second quarter 2020 results were impacted by the pandemic-induced demand weakness as volume contracted by 17.1% and average selling prices fell by 10% sequentially, resulting in revenue generation of $92.1 million compared to $123.5 million for the first quarter of 2020. .

CS&W's second quarter gross margin excluding LIFO was affected by declining carbon prices and contracted sequentially by 250 basis points to 20.4% but still tracked above 2019 levels. Second quarter operating expenses were $21.2 million, a decrease of 22.1% compared to the first quarter, outpacing the aforementioned volume decline. .

As we expect carbon prices to stabilize and margins to begin moving higher on replacement cost inventory resets, CS&W should see expense leverage positively impact the business in the third quarter. .

Given the significant improvements realized by the CS&W team over the past 2 years, management remains confident in the company's mid-cycle annualized target of $600 million of revenue and $50 million of adjusted EBITDA, excluding LIFO. .

Due to the persisting macroeconomic uncertainty stemming from the coronavirus pandemic and overall lack of visibility into future demand trends and market conditions in the end markets in which Ryerson operates, the company will not provide guidance for the third quarter ending September 30, 2020.

However, we note the following current third quarter trends being observed in the business as of the date of our earnings release. .

At this point in the third quarter, average selling prices, gross margins excluding LIFO and order rates appear to be trending positively compared to the second quarter. North American average selling prices are approximately 2% higher. Managerial price margins have expanded by approximately 50 basis points.

And bookings have increased by approximately 5% to 6% compared to second quarter per day shipments. Overall, we believe the industrial metals manufacturing environment is gradually improving through a combination of customer restarts, restocking and growth in some end markets, offsetting decline in others. .

With that, I'll turn the call over to Molly, who will discuss the highlights of our second quarter performance. .

Thanks, Eddie, and good morning, everyone. In the second quarter of 2020, Ryerson achieved revenues of $771.8 million, a decrease of 23.6% compared to $1.01 billion in the first quarter of 2020, with tons shipped down 18.4% and average selling prices down 6.4%.

Compared to the second quarter of 2019, revenues were down by $433.1 million or 35.9%, with tons shipped 25.8% lower and average selling prices 13.6% lower. .

Gross margin contracted to 15% in the second quarter of 2020, primarily due to pandemic-driven price reactions and by LIFO expense of $14.1 million in the quarter, which is a $34 million swing compared to the first quarter or a swing of $27 million compared to the same quarter last year.

This 15% gross margin in the second quarter of 2020 compares to 19.4% in first quarter of 2020 and 17.6% in the same quarter last year. .

Ryerson generated LIFO expense during the second quarter as the company aggressively decreased inventory and sold from older, higher-cost LIFO layers. Excluding LIFO, gross margin was 16.8% in the second quarter of 2020 compared to 17.4% in the first quarter of 2020 and 16.5% in the second quarter of 2019. .

In the second quarter of 2020, Ryerson reduced warehousing, delivery, selling, general and administrative expense by $31.6 million or 20.3% compared to the prior quarter. Compared to the same quarter last year, Ryerson reduced warehousing, delivery, selling, general and administrative expenses by $40.5 million or 24.6%.

Quarter-over-quarter expense reductions were primarily driven by adjusting staffing and labor costs to demand as well as further variabilization of the company's operating cost structure. .

Net loss attributable to Ryerson Holding Corporation was $25.6 million or $0.67 per diluted share, which includes $14.1 million of LIFO expense in the second quarter of 2020, compared to net income of $16.4 million or $0.43 per diluted share in the prior year period.

Adjusted net loss attributable to Ryerson Holding Corporation excluding restructuring and other charges, gain or loss on retirement of debt and the associated income taxes on these items, was $24.2 million for the second quarter of 2020 or $0.64 per diluted share compared to income of $17.2 million or $0.45 per diluted share in the prior year period.

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Ryerson achieved adjusted EBITDA excluding LIFO of $20.6 million in the second quarter of 2020, a decrease of $13.8 million compared to the first quarter of 2020 and a decrease of $30.1 million compared to the second quarter of 2019. .

Turning to first half results. Revenues in the first 6 months of 2020 were $1.78 billion, a decrease of 26.8% compared to the first 6 months of 2019, as tons shipped decreased 17.2% and average selling prices decreased 11.6%.

Net loss attributable to Ryerson Holding Corporation was $9.2 million or $0.24 per diluted share in the first 6 months of 2020 compared to income of $45.9 million or $1.21 per diluted share for the same period of 2019. .

Adjusted net loss attributable to Ryerson Holding Corporation excluding restructuring and other charges, gain or loss on retirement of debt and the associated income taxes on these items, was $8.4 million for the first 6 months of 2020 or $0.22 per diluted share compared to $47.1 million of income or $1.24 per diluted share for the first 6 months of 2019.

Adjusted EBITDA excluding LIFO was $55.0 million for the first 6 months of 2020 compared to $113.7 million in the first 6 months of 2019. .

At the end of the second quarter of 2020, Ryerson had 85 days of supply in inventory, up from 74 days at the end of the first quarter. However, on a tons basis, Ryerson's excellent working capital management is clearly visible.

We reduced inventories by more than 95,000 tons or approximately 20% in the second quarter while repositioning our inventory to match current levels of demand and preparing for margin recovery and expansion. .

The company's cash conversion cycle increased sequentially from 77 days in the first quarter to 91 days in the second, driven by the acute demand shock. However, in the month of June, the company's cash conversion cycle substantially improved to 81 days from the elevated levels seen in April and May.

And we expect to return to our pre-COVID-19 levels by the fourth quarter as the company continues to work with our customers and suppliers to minimize the gap between our receivable and payable cycles and continues to manage our inventory investment in line with demand levels. .

Ryerson generated strong cash from operating activities during the second quarter of $103.3 million compared to $66.5 million in the year ago period.

Our free cash flow, calculated as cash flow from operating activities and asset sales less capital expenditures, was also strong in the second quarter at $98.5 million and has resulted in average annualized free cash flows of $133 million in the period from 2015 through the second quarter. .

Our improved operating model and countercyclical cash flows have driven our average free cash flow yield as measured by its portion of our market capitalization, up to 42% over the same period, exceeding the yields of our publicly traded peer group. .

We also significantly decreased our outstanding net debt during the period, driving it down by $100 million since March 31, 2020, to $793 million as of June 30, 2020. As Eddie mentioned, this is our lowest net debt level achieved in 10 years.

Most of this reduction was accomplished through decreasing our credit facility borrowings, and a small part of the decrease was due to repurchasing $3 million of our then outstanding 11% senior secured notes at an average price of $96.8.

These second quarter repurchases contributed to a year-to-date total of $57.6 million in repurchases for the first half of 2020 at an average price of $98.4.

The year-to-date repurchase transactions were funded through a combination of restricted cash, which is a portion of the proceeds generated through the sale-leaseback transaction completed in the fourth quarter of 2019, and the company's unrestricted operating cash flow. .

Even with having completed the small amount of additional repurchases, we maintained ample liquidity throughout the quarter. Including cash, restricted cash from the sale of real estate under the sale-leaseback transaction and availability from U.S. and foreign sources, Ryerson's total liquidity was $350 million as of June 30, 2020. .

As of the end of the second quarter, we have invested $11.8 million into capital expenditures through the first half of 2020 and expect to meet our COVID-19 revised CapEx budget target of $25 million for the full year 2020.

We are also continuing to take necessary cost control measures as dictated by pandemic-driven economic stresses, as expenses per day less depreciation and amortization continued to fall through the quarter. .

And finally, we were proud to announce the closing of our debt refinancing just over a week ago. We retired our 11% 2022 senior secured notes which were issued in 2016 for $650 million and issued $500 million of 8.50% senior secured notes due in 2028.

This refinancing marks a significant milestone for the company as it comes with the recognition of Ryerson's improve-through-the-cycle operating model, increased asset coverage with a higher tangible asset value, strong real estate asset portfolio underscored by the fourth quarter 2019 sale-leaseback transaction, decreased legacy liabilities and increased book value of equity.

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Along with lowering our annual fixed cash commitments by approximately $16 million through decreasing our interest payments, we also secured certain optional redemption terms within the non-call period of the tenor, allowing Ryerson the option to reduce the outstanding amount of bonds by as much as $250 million within the first 3 years of issuance beginning August 1, 2020.

After which, we can call the bonds according to the terms within the bonds' indenture. These terms provide Ryerson with attractive flexibility as we continue improving our balance sheet and overall capital structure. .

Now I'll turn the call back over to Eddie to conclude. .

Thanks, Molly.

As we move through the third quarter end with hope and optimism towards improving public health, economic recovery as well as toward higher and better norms of social justice and equality, we will continue building our culture of resiliency, empowerment and growth around great customer experiences delivered at speed, scale, value-add and consistency across our network of intelligently connected service centers.

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It is clear as we have managed through multiple crises over the past 100-plus days that we have opportunities to drive free cash flow generation and additional deleveraging of our balance sheet while building operating leverage for the economic recovery that will come even if we don't know exactly when.

Throughout this period, we have talked about and acted upon phrases created within Ryerson such as #CohereandPersevere; and clearality, defined as the ability to see and act upon reality clearly. .

I could not be more proud to work alongside my Ryerson colleagues as we continue on our path of progress and journey through Ryerson's 178th year in business and beyond. .

With that, we look forward to your questions.

Operator?.

[Operator Instructions].

And there are no audio questions at this time. .

Okay. It looks like we've got a light workload today. So thank you for spending part of your Thursday with us. Stay healthy, safe and well. And we look forward to being with all of you next quarter. .

That does conclude today's call. You may now disconnect..