Feb. 15, 2007 — Ryerson Inc. reported a net loss of $4.4 million on sales of $1.4 billion for the fourth quarter and net income of $71.8 million on sales of $5.9 billion for the full year ended December 31, 2006.

Fourth Quarter Results—The $4.4 million net loss ($(0.17) per diluted share) compares with net income of $6.3 million ($0.24 per diluted share) for the fourth quarter of 2005.

"Fourth quarter 2006 volume, as anticipated, reflected the typical year-end slowdown, exacerbated by high inventories in a variety of products throughout the supply chain," said Neil S. Novich, Chairman, President, and CEO of Ryerson. "Additionally, this excess industry-wide inventory, coupled with an extraordinary run up in stainless steel prices, due to nickel surcharges (up an average of approximately $700 per ton from the third quarter to the fourth), exerted margin pressure in the quarter."

Sales increased 8.5% from the fourth quarter of 2005, as the average selling price per ton increased 21.2%, partially offset by a 10.5% decline in tons shipped. Sequentially, sales decreased 8.0% from the third quarter of 2006. While the average selling price per ton increased 3.1%, sequentially, tons shipped declined 10.8%, consistent with industry trends.

Gross profit per ton of $249 compares to $240 in the fourth quarter of 2005 and $267 in the third quarter of 2006. Gross margin declined to 12.9%, compared with 15.1% in the fourth quarter of 2005 and 14.3% in the third quarter of 2006. Ryerson attributes the decrease to rising nickel surcharges on stainless steel, which are passed through without mark-up, and competitive pricing pressure.

Operating expenses per ton were $234, which compares with $207 in the fourth quarter of 2005 and $204 in the third quarter of 2006. Ryerson says the year-over-year increase in operating expenses per ton was primarily due to the effect of reduced shipments as well as higher spending on the SAP conversion and inflationary pressure, particularly in energy and employee benefit costs, partially offset by synergy cost savings associated with the Integris integration. Sequentially, fourth quarter expenses per ton increased due to lower volume and a favorable credit-loss adjustment in the third quarter.

Interest expense was $21.1 million, compared to $16.3 million in the fourth quarter of 2005 and $18.8 million in the third quarter of 2006.

Full Year Results—The $71.8 million net income ($2.50 per diluted share) compares to net income of $98.1 million ($3.78 per diluted share) for 2005.

"For the full year, we accomplished a great deal," continued Novich. "By year-end, we reached annualized cost savings of $42 million from the Integris integration. Additionally, we identified increased cost savings opportunities and raised our target for total synergy savings from $50 million to $60 million. We made steady progress toward consolidating multiple software platforms, shutting down one legacy platform and beginning the SAP conversion of service centers formerly part of the Integris network. We acquired Lancaster Steel Service Co., Inc., which complements our existing capabilities in western New York and creates cross-selling opportunities. With the establishment of VSC-Ryerson China Ltd., we participate in the world's largest and fastest-growing metals-consuming market. And we've improved our procurement capabilities with a new global sourcing office in Hong Kong."

Sales increased 2.2% to $5.9 billion on an 8.7% increase in the average selling price per ton, offset by a 5.9% decline in tons shipped. Gross profit per ton increased to $261, compared to $254 in 2005. Gross margin declined to 14.5% in 2006, compared to 15.3% in 2005. Operating expenses per ton were $205, compared to $187 in 2005.

Results included a $4.5-million pre-tax restructuring charge ($0.10 per diluted share) and a $21.6-million pre-tax gain on the sale of assets ($0.46 per diluted share). 2005 results included a $4.0-million pre-tax restructuring charge ($0.09 per diluted share), a $21.0-million pre-tax pension curtailment gain ($0.49 per diluted share), and a $6.6-million pre-tax gain on the sale of assets ($0.15 per diluted share).

Ryerson says the volume declined was due primarily to two first-quarter 2006 events—the sale of the oil and gas business and the loss of two large accounts. Operating expenses increased, primarily due to greater spending on the SAP rollout, higher employee costs, and inflationary pressure, principally in energy, partially offset by synergy cost savings associated with the Integris integration.

Financial Condition—Ryerson ended 2006 with a debt-to-capital ratio of 65.0%, compared to 62.7% at the end of the third quarter and 61.6% at year-end 2005. Availability under the revolving credit facility was $188 million at the end of the fourth quarter of 2006, compared with $323 million at the end of the third quarter and $575 million at year-end 2005. Ryerson says the higher debt levels in 2006 were driven by increased inventory levels, consistent with trends in the service center industry. However, the company has made progress reducing inventories in 2007, which are down approximately $50 million in January, from year-end 2006 levels of $1,632.6 million, as measured on a current-value basis.

In January 2007, Ryerson refinanced its existing $1.1-billion revolving credit facility, replacing it with a 5-year, $750-million revolving credit facility and a 5-year, $450-million accounts-receivable securitization. The new securitization facility will result in annualized interest expense savings of approximately $5 million, compared with interest costs under the prior facility. In the first quarter of 2007, there will be a one-time, $2.7 million write-off of unamortized expense associated with the prior credit facility.

LIFO-FIFO Comparison—With stainless steel and aluminum accounting for roughly one-half of Ryerson's revenues, rising material costs for these metals—up 84% and 25%, respectively, in 2006—had a significant effect on reported earnings. The effect of rising materials costs on reported earnings is more immediate under the LIFO method of inventory accounting than FIFO, as LIFO matches current selling prices with the current replacement cost. Under FIFO inventory accounting, profits would have been higher than reported under LIFO by approximately $190 million pretax in 2006, and by $70 million pretax in the fourth quarter of 2006. Diluted earnings per share on a supplemental FIFO basis would have been $6.52 for the year and $1.35 for the fourth quarter of 2006. In 2005, supplemental FIFO earnings per diluted share would have been $2.32 for the year and $0.15 for the fourth quarter.

Outlook—"Higher inventories throughout the supply chain will continue to affect the industry for at least the first quarter of 2007," concluded Novich. "But we are optimistic that our initiatives will improve the operating performance of the company."

2007 initiatives include:

• Reducing current value of inventory at least $100 million by the end of the first quarter of 2007, compared to year-end 2006 levels; achieving inventory turnover of 5 turns by year-end.
• Addressing underperforming service centers, targeting operating profit improvement of $30 million in 2007, exclusive of any potential restructuring charges.
• Completing the SAP conversion of Integris; consolidating 15 service centers; capturing additional savings of $10 million to achieve annualized Integris synergy savings of $60 million by year-end 2007.

The company has already implemented organizational and management changes in January consistent with the ongoing performance initiatives.

In addition, Ryerson also remains on schedule to complete the conversion to SAP by the end of 2008. Moving to a single, modern platform allows the company to manage inventories in a uniform fashion, significantly reduce overall IT expense, and complete the integration of Integris. Ryerson now expects total project costs for the 2004-to-2008 time frame of $80 million, compared to the earlier estimate of $65 million. The increase is largely to enhance system functionality and productivity and provide additional savings opportunities.

The company says it will also continue to pursue long-term profitable growth based on its three fundamental principles: achieve world-class operations, drive organic growth, and enhance competitive position domestically and globally through targeted acquisitions and joint ventures.

Board of Directors Action—On January 2, 2007, Harbinger Capital Partners announced it is seeking to elect seven nominees, which would be a majority, to Ryerson's Board of Directors at the company's 2007 Annual Meeting.

Ryerson's Board of Directors and its advisors conducted a thorough evaluation of Harbinger's analysis and proposal compared to Ryerson's short-term and long-term plans. Based on this evaluation, Ryerson's Board disagrees with Harbinger's analysis and will oppose its efforts to obtain control of Ryerson's Board and consequently, the company. The Board believes that implementing the company's current strategic plan will significantly enhance value for all shareholders.

In addition, the Board has retained UBS Investment Bank as its financial advisor to assist in comparing the company's current plan with other strategic alternatives that could create additional value. Ryerson may not update its process or disclose developments with respect to potential strategic initiatives unless the Board has approved a definitive course of action or transaction. The company says it will elaborate on its opposition to Harbinger's efforts to obtain control of the Board in appropriate filings with the SEC.

Ryerson Inc. is a leading distributor and processor of metals in North America, with 2006 revenues of $5.9 billion. The company services customers through a network of service centers across the United States and in Canada, Mexico, India, and China.