8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

February 14, 2007

(Date of report; date of earliest event reported)

Commission file number: 1-9117

RYERSON INC.

(Exact name of registrant as specified in its charter)

Delaware	36-3425828
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2621 West 15^th Place

Chicago, Illinois 60608

(Address of principal executive offices)

(Zip Code)

(773) 762-2121

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.0l Other Events

Ryerson Inc. (the “Registrant,” “Ryerson” or the “Company”) is furnishing investor presentation slides containing the information included in Exhibit 99.1 to this report, that have been prepared for investors in connection with Ryerson’s earnings press release of the fourth quarter 2006 and full year 2006 results. Certain slides in Exhibit 99.1 contain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to comparable GAAP financial measures is included in Exhibit 99.1 and may be accessed on the Company’s website at www.Ryerson.com.

Cautionary Statements regarding Presentation

This filing contains historical information as well as estimates and other forward-looking statements (that is, statements that are not historical facts) that are based on assumptions and on anticipation of future events that are subject to certain risks and uncertainties that could cause actual results to vary materially from the expected results described in the forward-looking statements. The principal risk factors that may cause actual results to differ materially from those expressed in the forward statements are described in various documents Registrant files with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K for the year ended December 31, Quarterly Report on Form 10-Q for the most recent quarter and Current Reports on Form 8-K.

The Registrant expressly disclaims any obligation to update the presentation contained in Exhibit 99.1 of this Report and cautions that the information is only accurate on the date of filing. The inclusion of any data or statements in this presentation does not signify that the information is considered material.

Important Information

Ryerson plans to file with the Securities and Exchange Commission (the “SEC”) and mail to its stockholders a Proxy Statement in connection with its 2007 Annual Meeting, and advises its security holders to read the Proxy Statement relating to the 2007 Annual Meeting when it becomes available because it will contain important information. Security holders may obtain a free copy of the Proxy Statement and any other relevant documents (when available) that the Company files with the SEC at the SEC’s web site at http://www.sec.gov. The Proxy Statement and these other documents may be accessed at www.ryerson.com or obtained free from the Company by directing a request to Ryerson Inc., ATTN: Investor Relations, 2621 West 15th Place, Chicago, IL 60608.

Certain Information Regarding Participants

The Company, its directors and named executive officers may be deemed to be participants in the solicitation of the Company’s security holders in connection with its 2007 Annual Meeting. Security holders may obtain information regarding the names, affiliations and interests of such individuals in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and its proxy statement, dated April 3, 2006, each of which is filed with the SEC. To the extent holdings of the Company’s equity securities have changed since the amounts reflected in the proxy statement, dated April 3, 2006, such changes have been reflected on Statements of Change in Ownership on Form 4 filed with the SEC.

Item 9.01 Financial Statements and Exhibits

(a) None

(b) None

(c) None

(d) A list of exhibits is attached hereto as an Exhibit Index and is incorporated by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 14, 2007		/s/ Lily L. May
	By:	Lily L. May
	Its:	Vice President, Controller and Chief Accounting Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Slide Presentation, dated February 14, 2007

EX-99.1

Investor Presentation

February 2007

Exhibit 99.1

1

Safe harbor provision

During this presentation, we will make forward-looking

statements subject to known and unknown risks and

uncertainties that could cause actual results to differ

materially from those expressed or implied by such

statements. Such risks and uncertainties include, but are not

limited to, the volatility in metals demand and prices, the

cyclicality of the various industries the company serves, and

other risks described in reports filed with the SEC. We

assume no obligation to update the information provided in

this presentation.

2

Important Information

Ryerson Inc. plans to file with the Securities and Exchange Commission (the "SEC") and mail

to its stockholders a Proxy Statement in connection with its 2007 Annual Meeting, and

advises its security holders to read the Proxy Statement relating to the 2007 Annual

Meeting when it becomes available because it will contain important information. Security

holders may obtain a free copy of the Proxy Statement and any other relevant documents

(when available) that Ryerson files with the SEC at the SEC's web site at

http://www.sec.gov. The Proxy Statement and these other documents may be accessed at

www.ryerson.com or obtained free from Ryerson by directing a request to Ryerson Inc.,

ATTN: Investor Relations, 2621 West 15th Place, Chicago, IL 60608.

Certain Information Regarding Participants

Ryerson Inc., its directors and named executive officers may be deemed to be participants

in the solicitation of Ryerson's security holders in connection with its 2007 Annual Meeting.

Security holders may obtain information regarding the names, affiliations and interests of

such individuals in Ryerson's Annual Report on Form 10-K for the year ended December 31,

2005

and

its

proxy

statement,

dated

April

3,

2006,

each

of

which

is

filed

with

the

SEC.

To

the extent holdings of Ryerson equity securities have changed since the amounts reflected

in the proxy statement, dated April 3, 2006, such changes have been reflected on

Statements of Change in Ownership on Form 4 filed with the SEC.

Proxy Solicitation

3

Use of non-GAAP financial information

The Company uses the LIFO method of inventory accounting in the U.S., which results

in a better matching of costs and revenues than the FIFO method.

To supplement its

consolidated condensed financial statements presented on a GAAP basis, the

company has provided certain non-GAAP financial measures, in some cases adjusted

to reflect the effects of valuing inventory on a FIFO basis.  While FIFO is an

acceptable inventory valuation method under U.S. GAAP, the presentation of FIFO

basis financial information is considered non-GAAP financial information as the

company applies LIFO inventory valuation for its financial reporting purposes.  A

reconciliation of the adjustments from GAAP financial measures to non-GAAP

financial measures is contained in the addendum to this presentation and may be

accessed at www.ryerson.com. This non-GAAP financial information is not meant to

be considered in isolation or as a substitute for financial measures prepared in

accordance with GAAP.

Ryerson believes that providing these non-GAAP financial measures in addition to the

related GAAP measures better enables investors to understand the

company’s

operating performance and also facilitates comparisons of Ryerson’s operating

performance with the performance of other companies in the industry.

4

Agenda

Historical perspective

Short-term improvements

Long-term profitable growth

5

Ryerson Facts

$6 billion in revenue

100+ locations serving the U.S. and Canada

Leading position in stainless steel and aluminum

Consolidation in U.S. fragmented service center industry

International

JVs

in

high

growth

emerging

markets

-

Mexico,

India and China

6

Other

8%

Transportation

11%

Construction,

wholesalers,

mills

13%

Fabricated

metals

28%

Machinery

27%

Electrical

machinery

13%

Bars, tubing,

structurals

9%

Carbon flat

rolled

25%

Stainless and

aluminum

52%

Fabrication &

carbon plate

9%

Other

5%

Rich product mix and end markets

2006 revenues by product

2006 sales by end market

7

Broad geographic footprint

8

Ryerson

Historical perspective

Short term improvements

Long term profitable growth

9

Ryerson: Perspective on historical performance and trends

Industry participants

Comparable measures

•

ROIC % instead of gross margin % or EBITDA

•

ROIC takes into account product mix, customer mix and asset

intensity

Comparable accounting

•

FIFO vs. LIFO

•

Many industry participants are wholly or in part on FIFO;

Ryerson utilizes LIFO in the U.S.

•

A.M. Castle

•

Reliance Steel & Aluminum

•

Olympic Steel

•

Metals USA

•

Earle M. Jorgensen

•

Russel Metals

•

Samuel Manu-Tech

•

Shiloh Industries

•

Steel Technologies

•

Worthington Industries

10

(7.0)

(4.0)

(1.0)

2.0

5.0

8.0

11.0

14.0

17.0

20.0

23.0

26.0

1998

1999

2000

2001

2002

2003

2004

2005

2006

Post-

Restructuring

Pre-

Restructuring

Ryerson’s Programs are Producing Results

Since 1998, Ryerson has implemented significant cost savings initiatives and has

steadily improved results relative to peer median over the last 6 years

Initiatives

$85mm Restructuring

$40mm of annualized

synergies from

Integris acquisition

Source: Company reports

Notes:   

1    Calculated as tax-effected FIFO EBIT/average invested capital; see addendum for detailed assumptions and reconciliation to GAAP results

2    Includes A.M. Castle, Central Steel & Wire, Earle M. Jorgensen, Gibraltar Industries, Olympic Steel, Metals USA, Novamerican, Reliance Steel & Aluminum,

Russel Metals, Samuel Manu-Tech, Shiloh Industries, Steel Technologies and Worthington Industries

Consolidated over 20 locations

Centralized shared services (credit, IT, accounting,

purchasing, HR)

Increased local accountability for customer service

Strategic sourcing

Created backbone for future acquisitions—J&F

Steel (2004), Integris Metals (2005) and Lancaster

Steel (2006)

Supplier leverage

Reduced overhead

Consolidated 5 service

centers

Return on Invested Capital

1

(LIFO companies adjusted to FIFO)

Sale of Inland Steel

Acquired Thypin Steel,

Washington Specialty Metals

and Cardinal Metals

Ryerson

Peers²

Ryerson

Trendline

6.3

9.7

11.9

12.2

15.1

10.0

15.8

13.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

10-Year

5-Year

3-Year

1-Year

Average

Ryerson

Peers²

11

10.0

12.5

15.0

17.5

20.0

22.5

25.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Ryerson

Peer Average

21.9

Average

19.2

Carbon

Flat Rolled

30%

Stainless and

Aluminum

25%

Bars,

Tubing and

Structuring

20%

Fabrication and

Carbon Plate

20%

Other

5%

Carbon

Flat Rolled

25%

Stainless and

Aluminum

52%

Bars,

Tubing and

Structuring

9%

Fabrication and

Carbon Plate

9%

Other

5%

Ryerson’s Changing Product Mix

Sales

increase

of

over

100%

through

organic

growth

and

strategic

acquisitions;

stainless and aluminum sales have grown to approximately 52% of sales

1998 Sales by Product

$2,783mm

2006 Sales by Product

$5,909mm

FIFO Gross Profit Margin vs Peers

1

Gross margins do not provide the most accurate comparison of Ryerson

to its peers due to differences in product mix and customer type

Nickel surcharge on Ryerson’s stainless products depresses margins as

a percentage of sales compared to peers with less stainless sales since

there is no markup on the surcharge

Ryerson’s reported gross profit has grown from $134 per ton in 2002 to

$261 per ton in 2006

Notes:

1      Adjusted for impact of LIFO and extraordinary and non-recurring items; see addendum for detailed assumptions and reconciliation to GAAP results

12

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

5.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Ryerson

MSCI

3.8

Average

3.6

Inventory Management

On average, Ryerson’s inventory turnover has been consistently higher than the

Metals Service Center Institute’s reported turns

Note:

1      Calculated as cost of goods sold (adjusted for LIFO impact) divided by average inventory over the period (adjusted for LIFO reserve) for Ryerson; MSCI inventory turns calculated as shipments divided by average inventory over period; see

addendum for detailed assumptions and reconciliation to GAAP results

13

36

(18)

(30)

(20)

78

296

463

14

(54)

(22)

349

506

862

(71)

(100)

0

100

200

300

400

500

600

700

800

900

2000

2001

2002

2003

2004

2005

2006

LIFO

FIFO

Ryerson LIFO Overview

Discussion

Ryerson Cumulative EBIT

1

Under Last-In First-Out ("LIFO") the most recently

purchased inventory is costed against sales first

In any given period, there will be a difference

between COGS calculated on a LIFO basis versus

COGS calculated on a FIFO basis—this difference can

be positive (LIFO credit) or negative (LIFO charge)

and is the income statement impact of LIFO

In periods of rising prices, a LIFO company would

experience higher COGS and lower operating profit

resulting in income tax benefits

Ryerson also reports a “LIFO reserve”, which is the

cumulative impact of using LIFO in valuing its

inventory versus replacement costs. Replacement

cost is calculated using the current cost for each

product category in inventory at the end of the

reporting period

•

LIFO reserve at December 31, 2006 of $504

million

Source: Company reports

Note:

1     Reconciliation to GAAP results located in addendum

14

Agenda

Historical perspective

Short term improvements

Long term profitable growth

15

Ryerson Structure

70 individual markets;

each has a separate

P&L

3 International JVs

Under-performing markets with

targeted savings of $30mm in

2007 (before restructuring

charges, if any)

Redundant facilities and

remaining IM integration –

$10mm

savings in 2007

Inventory turns –

achieve 5 turns

by year-end 2007

Operating efficiency

Organic growth

Acquisitions in fragmented

domestic business

Targeted international markets

poised for growth

Ryerson has opportunities to both improve performance in the

short run and achieve long-term profitable growth

Short-Term Improvements

Long-Term Profitable Growth

Performance differs by market

16

Most service centers are performing well, but 5

large service centers targeted for improvement

Average weighted ROIC 11.8%

80% of assets

5 Service Centers

Changes in process

New management in

place as of Jan. 1, 2007

Targeted savings of

$30mm in 2007 (before

restructuring charges, if

any)

5 service centers

ROIC = (4%)

20% of assets

Service Center ROIC Distribution

(5%)

0%

5%

10%

15%

20%

25%

17

$42 million of annualized cost savings through 2006

15 markets remain with redundant facilities to be consolidated

in 2007

Complete SAP roll-out to remaining Integris locations by year-

end allows

1.

Facility consolidation

2.

Shut down of Integris legacy IT platform

Additional $18 million annualized savings in 2007 raising

total target to $60 million from $50 million

Remaining Integris integration synergies

18

Inventory bulge over 2H06

Strong volume, tight

supply 1H06

Market weakens, mills cut

lead times and ship early

during 2H06

Ryerson and peer

inventories grew

Days Sales in Inventory

88

110

121

85

105

122

80

85

90

95

100

105

110

115

120

125

130

6/30/06

9/30/2006

12/31/2006

Ryerson

MSCI

19

Inventory actions

New organization

•

New supply chain leadership and

staff in place

Better process management

•

Improved forecasting capability

•

Revised ordering parameters and

safety stock levels

Upgraded software tools

•

SAP provides better capabilities,

reporting and process

standardization

Improved communication

•

Internally on market conditions

•

With mills on shipment parameters

$50mm improvement achieved by

January 31, 2007

$100mm expected by end of 1Q07

5x by year-end 2007

899

1,052

1,103

1,083

1,046

1,007

800

850

900

950

1,000

1,050

1,100

1,150

Jun

Sept

Oct

Nov

Dec

Jan

1,250

1,350

1,450

1,550

1,650

1,750

1,850

Tons

Current Value of Inventory

2006

2007

20

Ryerson Structure

70 individual markets;

each has a separate

P&L

3 International JVs

Under-performing markets with

targeted savings of $30mm in

2007 (before restructuring

charges, if any)

Redundant facilities and

remaining IM integration –

$10mm savings in 2007

Inventory turns –

achieve 5 turns

by year-end 2007

Operating efficiency

Organic growth

Acquisitions in fragmented

domestic business

Targeted international markets

poised for growth

Ryerson has opportunities to both improve performance in the

short run and achieve long-term profitable growth

Short-Term Improvements

Long-Term Profitable Growth

Performance differs by market

21

Ryerson

Historical perspective

Short term improvements

Long-term profitable growth

22

Long-term profitable growth based on three

fundamental principles

1. Focus on operating efficiency

2.

Capture organic growth

3.

Seek acquisitions and joint ventures to: 

Structurally enhance competitive

positions

Provide additional earnings growth in

domestic and global markets

Part way through a multi-year process

A lot completed

More to be done

23

Upgrade information systems with SAP

Consolidate 5 legacy platforms into one

Estimated $80 million project to be completed by year-end

2008

Estimated cost reductions alone should generate a high return

on the investment

Additional benefits: 

•

Seamless link with customers and suppliers

•

More detailed and timely decision-making information

•

Facilitate sharing of inventory and pricing information among

service centers

Conversion process to date

•

21 service centers, including the largest and most complex are 

complete

•

40% of all field employees

24

Lean Six Sigma problem solving and continuous

improvement process to increase operating efficiencies

Target improvements throughout the company/

across all strategic initiatives

Specific financial goals

Quantitative measurement of progress

2006 set-up team; benefit of $3MM

Anticipated future benefits of $10 –

15 million per

annum

Lean Six

Sigma

Sell the

Change

Transfer

Knowledge

Operating efficiency

25

Organic growth

National Marketing Programs

Global Account Sales

Integrated national footprint servicing large, multi-location customers

through a single point of accountability

Targets customers consolidating suppliers

Currently about 20% of Ryerson’s revenue with opportunity to expand with

existing and new customers

New opportunities with multinational manufacturers

Aggressive

marketing

and brand

creation

•

Promotions

•

Targeted

vertical markets

•

Direct outbound

telesales

Leads to trial

•

Good experience

leads to

retention

•

Extensive

external and

internal metrics

Added 10,000 accounts and $200MM of revenue since 2004

•

•

•

•

26

Acquisition and joint venture strategy

Product/supply chain

Product/supply chain

Different

Different

Same

Same

Service center industry is fragmented and consolidating

“Add strength

to strength”

Highest overall

potential

Cross-selling

opportunities

“Buying a cash

flow”

Very risky

New markets

Completed 8

Completed 8

acquisitions since 1997

acquisitions since 1997

Won’t overpay

Won’t overpay

Priority on keeping

Priority on keeping

customers and key

customers and key

employees

employees

Capture integration

Capture integration

value

value

27

International JVs provide opportunities in growth

markets

JV partners are established local players

Can provide services to U.S. customers global operations in

Mexico, India and China

JV financial performance

•

Combined sales of JVs exceeds $500MM in 2006

•

Five year compound annual growth rate in excess of 40%

•

ROIC of 17% in 2006

Economic and manufacturing growth prospects superior to

U.S. market

28

International JVs

Mexico

India

China

Collado Ryerson Mexico –

approximately $75MM of annual

revenue; 50/50 fabrication venture

Tata Ryerson India –

approximately $200MM of annual

revenue

50/50 venture

Indian metals distribution in its infancy

Expanded product line to include stainless and fabrication

VSC Ryerson China Limited –

approximately $150MM of

annual revenue; 40% stake with option to take majority

ownership in 3 years

Chinese metals market 4x size of U.S. market

Fragmented and growing service center industry

Expanding number of service centers and capabilities

29

Ryerson Structure

70 individual markets;

each has a separate

P&L

3 International JVs

Under-performing markets with

targeted savings of $30mm in

2007 (before restructuring

changes, if any)

Redundant facilities and

remaining IM integration –

$10mm savings in 2007

Inventory turns –

achieve 5 turns

by year-end 2007

Operating efficiency

Organic growth

Acquisitions in fragmented

domestic business

Targeted international markets

poised for growth

Ryerson has opportunities to both improve performance in the

short run and achieve long-term profitable growth

Short-Term Improvements

Long-Term Profitable Growth

Performance differs by market

30

Management and Governance

Ryerson develops its leadership through internal

programs and external recruiting

Short-

and Long-term incentive plans aligned

with shareholders

Highly qualified board with many years of

relevant experience

31

Ryerson leadership development process

Internal Development

Comprehensive training

Early identification of high

potential managers

Rotational assignments

Mentoring

Educational opportunities and

additional external training

External Recruiting

Executives with specialized expertise

•

Supply chain management

•

Operations/lean manufacturing

•

Six Sigma

•

Marketing

•

Value-added processing

•

Divisional P&L management

•

Global account management

•

International M&A and

operations

32

Incentive compensation aligned with stockholders

Short-

and Long-Term Incentive Plans

Short-term incentive:

Annual incentive tied to OROOA (operating return on operating assets)

Target set by Compensation Committee

Corporate staff: Tied to corporate performance

Service center staff: Tied to individual service center

Long-term incentive:

Awards of performance share units

Tied to 4-year return on net assets (no payout if minimum thresholds

are not met)

Targets set by Compensation Committee relative to industry and

cyclical sector returns

Designed to pay for performance and create long-term value

Incentive pay represents over one-half of senior executives’

total

target compensation

Stock ownership guidelines

33

Board of Directors

40% of the Board has been newly elected in last four years

Ryerson’s Board members have a variety of backgrounds in core areas

relevant to operations, including complex multi-location service

businesses, finance, marketing, technology, M&A and International

Board has active operational and strategic focus

Compensation and Audit committees are entirely comprised of

independents

Incentive-based compensation system

Directors

are

accomplished

executives,

having

significant

public

board

and executive management experience

ISS governance rating of 98%

34

Conclusion:

In process of multi-year program

Short-term benefits

Long-term profitable growth

35

Addendum

36

Industry Analysis Assumptions

Methodology:

•

Gross Margin excludes impact of Depreciation and Amortization (D&A); if a company does not break out D&A on the income

statement

(such

as

Ryerson

post

2002)

50%

of

D&A

is

allocated

to

Cost

of

Goods

Sold

and

50%

is

allocated

to

Operating

Expenses (unless allocation noted otherwise in filings)

•

ROIC is calculated as tax-effected FIFO EBIT (adjusted for tax-effected LIFO charge) plus earnings from equity in affiliates,

divided by the average invested capital over the period; invested capital is equal to total debt + minority interest +

shareholders’

equity (adjusted for tax-effected LIFO reserve)

•

Inventory Turns:

•

RYI and Peers: Cost of Goods Sold (adjusted for LIFO impact) divided by the average inventory over the period (adjusted

for LIFO reserve)

•

Metals

Service

Center

Institute

(MSCI):

annual

shipments

divided

by

average

inventory

over

the

period;

includes

US

and

Canada; includes aluminum data since 2001

Ryerson Peer Group includes: A.M. Castle, Central Steel & Wire, Gibraltar Industries, Olympic Steel, Metals USA, Novamerican,

Reliance Steel & Aluminum, Russel Metals, Samuel Manu-Tech, Shiloh Industries, Steel Technologies and Worthington Industries

•

Source of financials is company reports from SEC filings for public US companies, SEDAR for Canadian public companies,

Central Steel & Wire Report to Stockholders through most recent period available; last reporting period ending 12/31/06

(Ryerson), 11/30/06 (Novamerican and Worthington), 10/31/06 (Shiloh Industries), 6/30/06 (Earle M. Jorgensen), 12/31/05

(Central Steel & Wire) and 9/30/06 for all other peers

•

Ryerson’s 1997 and 1998 results exclude the Inland Steel Company operations which were sold in 1998

Certain adjustments made to reported results:

•

all

non-recurring

items

listed

on

the

income

statement;

35%

tax

rate

for

net

income

adjustment

used

•

equity in earnings of affiliates was excluded from gross and operating margins when broken out in the income statement

•

Ryerson adjustments which are not broken out on the Company's income statement: $9.6mm charge from a change in the

method of applying LIFO (2005) and a $16.2mm charge related to customer bankruptcy (2000)

•

Earle M. Jorgensen’s COLI income, which is treated as a credit against SG&A in its financials

•

All companies calendarized to December year end

37

($mm)

1997 ¹

1998 ¹

1999

2000

2001

2002

2003

2004

2005

2006

Operating Profit

133.1

96.0

97.1

(4.1)

(76.0)

(7.9)

3.4

99.7

232.9

183.9

Adjustments:

+ Gain on Sale of Asset

(8.9)

(5.9)

(1.8)

-

(1.3)

(10.9)

-

(5.6)

(6.6)

(21.6)

+ Pension Curtailment Gain

(8.9)

-

-

(4.4)

-

-

-

-

(21.0)

-

+ Restructuring & Plant Closure Costs

-

-

3.6

27.8

19.4

2.7

6.2

3.6

4.0

4.5

+ Charge Related to Customer Bankruptcy

-

-

-

16.2

-

-

-

-

-

-

+ Gain on Sale of Company Interests

-

-

-

-

3.3

(4.1)

-

-

-

-

+ Write-Off

-

-

-

-

1.0

-

-

-

-

-

+ Adjustment to Sale of IEMC

-

-

-

-

-

8.5

-

-

-

-

+ Charge from Change in Method of Applying LIFO

-

-

-

-

-

-

-

-

9.6

-

EBIT

115.3

90.1

98.9

35.5

(53.6)

(11.7)

9.6

97.7

218.9

166.8

+ Depreciation & Amortization

27.7

33.2

32.1

31.8

31.8

25.0

23.9

21.1

39.2

40.0

EBITDA

143.0

123.3

131.0

67.3

(21.8)

13.3

33.5

118.8

258.1

206.8

+ LIFO expense²

(12.7)

(41.4)

(8.0)

(22.0)

(31.3)

29.4

22.1

273.5

(62.0)

189.3

FIFO EBITDA

130.3

81.9

123.0

45.3

(53.1)

42.7

55.6

392.3

196.1

396.1

- Depreciation & Amortization

27.7

33.2

32.1

31.8

31.8

25.0

23.9

21.1

39.2

40.0

FIFO EBIT

102.6

48.7

90.9

13.5

(84.9)

17.7

31.7

371.2

156.9

356.1

Reconciliation of Certain Non-GAAP Items

Notes:

1    Excludes results of Inland Steel Company operations which were sold in 1998

2    1997–2005 LIFO expense assumed equal to change in LIFO reserve year-over-year

Source:    Company reports; 2001-2005 results restated per 2005 10-K

38

($mm, unless otherwise noted)

1997 ¹

1998 ¹

1999

2000

2001

2002

2003

2004

2005

2006

Revenue

2,804.0

2,782.7

2,763.5

2,862.4

2,243.5

2,096.5

2,189.4

3,302.0

5,780.5

5,908.9

Cost of Goods Sold²

2,178.0

2,156.9

2,131.6

2,292.7

1,891.6

1,729.8

1,830.4

2,810.8

4,893.5

5,050.9

+ Depreciation & Amortization Embedded in COGS³

-

-

-

-

-

-

(12.0)

(10.6)

(19.6)

(20.0)

+ Charge from Change in Method of Applying LIFO

-

-

-

-

-

-

-

-

(9.6)

-

+ LIFO Expense/(Benefit)4

12.7

41.4

8.0

22.0

31.3

(29.4)

(22.1)

(273.5)

62.0

(189.3)

Adjusted FIFO Cost of Goods Sold

2,190.7

2,198.3

2,139.6

2,314.7

1,922.9

1,700.4

1,796.4

2,526.8

4,926.3

4,841.6

FIFO Gross Profit

613.3

584.4

623.9

547.7

320.6

396.1

393.1

775.3

854.2

1,067.3

FIFO Gross Profit Margin (%)

21.9

21.0

22.6

19.1

14.3

18.9

18.0

23.5

14.8

18.1

Inventory:

Inventory

425.7

500.6

543.1

567.9

409.5

493.9

501.1

606.9

834.3

1,128.6

+ LIFO Reserve

112.4

71.0

63.0

41.0

9.7

39.1

61.2

334.7

272.7

504.0

FIFO Inventory

538.1

571.6

606.1

608.9

419.2

533.0

562.3

941.6

1,107.0

1,632.6

FIFO Average Inventory

488.8

554.9

588.9

607.5

514.1

476.1

547.7

752.0

1,024.3

1,369.8

FIFO Inventory Turns (x)5

4.5

4.0

3.6

3.8

3.7

3.6

3.3

3.4

4.8

3.5

Reconciliation of Gross Margin and Inventory Turns

Notes:

1    Excludes results of Inland Steel Company operations which were sold in 1998

2    2001 and 2002 COGS adjusted by $69.8mm and $61.8mm, respectively, due to 2005 restatement

3    Assumed to be 50% of reported D&A

4    1997–2005 LIFO expense assumed equal to change in LIFO reserve year-over-year

5    Calculated

as

cost

of

goods

sold

(adjusted

for

LIFO

impact)

divided

by

the

average

inventory

over

the

period

(adjusted

for

LIFO

reserve)

Source:    Company reports; 2001-2005 results restated per 2005 10-K

39

($mm, unless otherwise noted)

1997 ¹

1998 ¹

1999

2000

2001

2002

2003

2004

2005

2006

FIFO EBIT²

102.6

48.7

90.9

13.5

(84.9)

17.7

31.7

371.2

156.9

356.1

Tax-Effected FIFO EBIT³

66.7

31.7

59.1

8.8

(55.2)

11.5

20.6

241.3

102.0

231.5

Average Period Short-Term Debt

0.0

0.0

0.0

48.5

48.5

0.0

0.0

0.0

0.0

0.0

Average Period Current Portion of Long-Term Debt

4.2

3.2

0.0

71.3

71.3

0.0

0.0

0.0

176.1

176.1

Average Period Long-Term Debt

260.1

257.0

257.9

179.8

100.7

160.5

243.4

396.3

525.6

865.8

Average Period Minority Interest

58.7

58.7

29.4

-

-

-

-

-

-

-

Shareholders' Equity:

Shareholders' Equity

427.5

563.6

697.8

661.7

554.6

409.1

386.6

439.6

547.8

650.4

LIFO Reserve

112.4

71.0

63.0

41.0

9.7

39.1

61.2

334.7

272.7

504.0

+ Tax-Effected LIFO Reserve³

73.1

46.2

41.0

26.7

6.3

25.4

39.8

217.6

177.3

327.6

FIFO Shareholders' Equity

500.6

609.8

738.8

688.4

560.9

434.5

426.4

657.2

725.1

978.0

Average Period FIFO Shareholders' Equity

473.1

555.2

674.3

713.6

624.6

497.7

430.4

541.8

691.1

851.5

Average Period FIFO Invested Capital

796.1

874.0

961.5

1,013.1

845.0

658.2

673.8

938.0

1,392.8

1,893.4

FIFO Return on Invested Capital (%)

8.4

3.6

6.1

0.9

(6.5)

1.7

3.1

25.7

7.3

12.2

Reconciliation of Return on Invested Capital

Notes:

1    Excludes results of Inland Steel Company operations which were sold in 1998

2    Reconciliation located on page 37   

3    Based on assumed 35% tax rate

Source:    Company reports; 2001-2005 results restated per 2005 10-K

40

Business model

Profit drivers and impact

Profit drivers 

Impacted by

Volume 

(tonnage)

Manufacturing economy

2 types of customers

50%-60% OEMs—agreements

40%-50% transactional—spot pricing

Gross margins 

(gross profit/ton)

Market conditions

Buy and sell negotiations

Selling prices

Material costs

Operating expenses

(operating

expense/ton)

Volume

60% fixed costs/40% variable

Labor productivity

Logistics and transportation

Inflation

Space utilization

Corporate overhead, incl. IT and legacy costs

Assets 

(asset turns)

Working capital Inventory is the largest component

Service network

41

Hypothetical LIFO vs. FIFO-

Where is the value during a rising price environment?

ANSWER: SAME FUNDAMENTALLY

LIFO-

Lower income, higher reserve

FIFO-

Higher income, no reserve

Material

Cost

Material

Cost

Gross

Profit

LIFO Methodology

Period 1

Period 2

Period 1

Period 2

Material

Cost

Material

Cost

Gross

Profit

FIFO Methodology

800

800

200

400

1,000

1,200

0

200

400

600

800

1,000

1,200

1,400

+$200

Average Selling Price

Average Selling Price

800

1,000

200

200

1,000

1,200

0

200

400

600

800

1,000

1,200

1,400

Average Selling Price

Average Selling Price

+$0

LIFO Reserve    $300                                            

$500

42

Recent jumps in metal prices

Stainless and Aluminum

Source: Purchasing Magazine

*Spot prices include raw materials' surcharges starting in 1st Quarter 2001

Hot Rolled, Cold Rolled and Plate Prices

Source: Purchasing Magazine

*Spot prices include raw materials' surcharges starting in 1st Quarter 2001

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

Stainless

Aluminum

150

250

350

450

550

650

750

850

Hot Rolled

Cold Rolled

Carbon Plate