Thank you, Kevin. Good morning.

I'm Alexandra Deignan, the company's Vice President of Investor Relations. Welcome to Schnitzer Steel's second quarter fiscal 2014 earnings presentation.

We're glad that you're able to join us today.

In addition to today's audio comments, we've prepared a set of slides that you can access on our website at www.schnitzersteel.com or www.schn.com.

Before we get started, let me call your attention to the detailed Safe Harbor statements on Slide 2, which are also included in our press release of today and in the company's most recent Form 10-K and Form 10-Q, which will be filed later today.

These statements, in summary, say that in spite of management's good faith current opinions on various forward-looking matters, circumstances can change, and not everything we think will happen always happens.

Please, note that we will be discussing some non-GAAP measures during our presentation today. We've included a reconciliation of those metrics to GAAP in the Appendix to our slide presentation.

Now let me turn the call over to Tamara Lundgren, our Chief Executive Officer. She will host the call today with Richard Peach, our Chief Financial Officer.

Thanks, Ally. Good morning, everyone, and welcome to our Fiscal 2014 second quarter earnings call.

This morning, I'll review the highlights of our consolidated performance, provide updates on our productivity and cost-savings initiatives and our progress on our strategic priorities, and I'll comment on recent market trends. Then Richard will provide further details on our financial results and the operating performance of our 3 segments.

And after that, we'll open up the call for questions.

So now let's get started and turn to Slide 4. Earlier this morning, we announced second quarter adjusted earnings per share of $0.13, a substantial sequential increase.

I'd like to thank every member of the Schnitzer team for the strong performance. The quarter was not easy, and our team navigated the volatility with a dynamic operational focus in order to meet tight production and shipping schedules and to profitably increase our sales volumes over the previous quarter.

So I would like to acknowledge and thank all of our employees for your dedication, your ingenuity and your tenacity. So far in 2014, the global economy has yet to build on the strong momentum that we saw at the end of 2013.

Numerous winter storms in the U.S., which meant lost days for certain of our facilities, together with financial and political struggles in some of the emerging markets and decelerating growth in China combined to inject an element of uncertainty in the global economic picture. We saw this reflected in prices softening in January, which continued into February.

Although we saw weaker demand from Turkey and China, we also saw the Southeast Asia market gain momentum, and we continued our strong sales into the domestic market. These contrasting market conditions somewhat offset each other, which led to our overall ferrous sales volumes being up 5% versus Q1 and our sales to Asia were up by 22%.

Performance in our Metals Recycling Business improved significantly, generating adjusted operating income of $11 per ton, which is a $10 per ton sequential improvement. Our stronger second quarter results were primarily driven by higher selling prices at the beginning of the quarter, higher sales volumes in both the export and domestic markets, and significant and sustainable benefits from our productivity improvements and other cost-savings initiatives.

Our Auto Parts business experienced seasonally weaker retail sales, which were further impacted by extreme weather conditions in the Midwest and on the East Coast. And our Steel Manufacturing business benefited from stronger prices and production efficiencies.

We are seeing solid and steady demand for construction products on the West Coast.

During the second quarter, we continued to generate positive operating cash flow and were able to incrementally reduce our debt. Our CapEx of $21 million during the first half of the year is 60% lower than the same period a year ago.

Our CapEx spending this fiscal year is primarily related to maintenance, including environmental and safety, and to modest post-acquisition investments in our new auto parts stores and, of course, to continued nonferrous extraction technology.

So let's turn now to Slide 5 for a review of market trends. As you can see on this graph, ferrous volume prices were stronger in the first part of the quarter, which was a continuation of the positive momentum we saw at the end of the 2013 calendar year.

As the quarter progressed, weaker export demand and severe weather conditions in the U.S. led to sharply lower prices for both export and domestic shipments.

In the second half of the quarter, softer market conditions drove average export sales prices down by approximately $30 per ton. However, the combination of shipments contracted at higher selling prices before the market sell, our strong operational focus and benefit from our productivity and cost-reduction programs led to MRB's improved performance in the second quarter.

Although export prices continued to soften in March, reports for April reflects stronger prices on higher demand.

If you turn to Slide 6, we can review our second quarter shipments. Looking at the bar chart on the left, you can see that our total ferrous sales increased 5% as compared to Q1.

Our overall export sales were up 7% sequentially. And as I mentioned earlier, our expert sales to Asia were up 22%, reflecting our broadbased customer reach and the diversity of demand.

We shipped our ferrous and nonferrous products to 14 countries in the second quarter. Our top ferrous export destinations were South Korea, Turkey and Indonesia.

And our top nonferrous customers were located in China, the U.S. and South Korea.

As you can see on the bar chart on the right, for the first half of fiscal 2014, we significantly increased our shipments into the domestic market versus last year by 20%. In the first half of fiscal 2014, we sold 32% of our ferrous volumes into the domestic market, which includes our own mill.

The quarter-to-quarter sources of demand can vary quite a bit. On a long-term basis, however, strong demand for steel in the emerging markets is expected to continue, and we can see these trends if you turn to Slide 7.

Looking on Slide 7 at the chart on the left, you can see that since the 2008 global recession, 80% plus of global GDP growth has come from the emerging markets, and they are expected to continue to be the source of the majority of global GDP growth. And if you look at the chart on the right, by 2017, emerging market infrastructure spending is expected to double from 2012 levels, providing another driver for improving long-term demand for scrap and finished steel products.

If you turn now to Slide 8, we can look at the leading indicators of supply. As many of you know, one of the most significant impacts to our operating margins since the global financial crisis has been the reduced supply of recycled scrap metal.

As the U.S. economy slowed and unemployment increased, our markets experienced a tightening in the availability of end-of-life automobiles, obsolete white goods and scrap from construction and demolition projects.

These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression.

However, the latest manufacturing surveys show a rebound in sentiment after softness from December to February. The purchasing managers index did slow down a bit in March, but overall manufacturing activity improved from January's winter storms.

On the consumer front, a number of indicators and trends are showing signs of improvement, such as strong audit sales and increasing appliance shipments. Generally, consumer spending and consumer confidence are up versus a year ago, although labor market worries are impacting the trajectory of the consumer recovery.

And as I mentioned before, we're seeing the beginning of a recovery in the construction markets on the West Coast. Over time, all of these trends should generate strongest scrap flows into our MRB facilities, more end-of-life vehicles into our Pick-n-Pull stores and demand for long products, which benefits our Steel Manufacturing business.

And while we are encouraged by these improving general economic trends, we are not just waiting for the markets to recover. We are proactively pursuing organic strategies aimed at improving our productivity and generating higher returns.

So turning to Slide 9, I'll review our progress on our efficiency initiatives. At the beginning of our fiscal year, we embarked on a $30 million productivity improvement and cost-reduction program, targeting at least 70% to be achieved by the end of fiscal 2014 and the remainder by the end of fiscal 2015.

We are well ahead of target with $10 million in cost reductions delivered in the first half of fiscal '14. Our second quarter results included $6 million of savings, which equate to an annualized run rate of nearly $25 million.

At this time, the majority of the benefits are coming through in MRB, with the remainder appearing in SMB's results. In light of our strong progress, we are increasing our overall target savings by $10 million through further reductions in SG&A expenses in MRB, APB and corporate.

We anticipate achieving 70% of our increased target by the end of fiscal 2014 with the remainder in fiscal 2015.

On Slide 10, I'll wrap up my remarks with the discussion of our strategic priorities, and then I'll turn it over to Richard for a more detailed discussion of our business segment performance.

productivity improvements; accelerating trends on our 2013 investments; and expanding the synergies between our Metals Recycling and Auto Parts business. In each of our segment, we have targeted productivity improvements, which are already contributing to higher operating margins in MRB and SMB.

We have also now launched similar initiatives in our Auto Parts business, which we anticipate will benefit fiscal 2015 through a combination of revenue enhancements and store level efficiency measures across the entire APB platform.

While we do not break out MRB's regional results, we have seen significant year-over-year improvements in the performance of our Canadian business, and we expect Canada to continue to improve its performance in the second half of this year. We're also seeing bottom line benefits from our focus on increasing synergies between MRB and APB through combining resources, leveraging our assets to maximize returns from processing scrap and cores, and integrating our selling activities for both ferrous and nonferrous materials.

Now I'll turn it over to Richard for an update on our operating segment performance and our capital structure.

Thank you, Tamara. I'll start with a review of our Metals Recycling business on Slide 11.

As Tamara mentioned earlier, both ferrous and nonferrous sales volumes increased sequentially compared to the first quarter. Ferrous sales rose by 5% with the increase mainly driven by higher export volumes, which were up by 7%.

Similarly, nonferrous sales increased by 10% due to a combination of higher levels of production and additional shipments compared to the previous quarter.

Average nonferrous sales prices were lower sequentially by 3% with a decrease more pronounced in the second half of the quarter. MRB's adjusted operating income in the second quarter was $12 million, which represented a substantial increase from the first quarter.

The second quarter benefited from our ability to navigate volatile market conditions through our sales activity, tight discipline over our commercial and operational process, productivity improvements and a favorable impact from average inventory accounting. The strong operational performance was a key contributor to MRB's second quarter results.

The productivity improvements and other cost reductions are being achieved through a variety of strategies, which are mainly focused on reducing fixed costs within our production and administrative functions. We have also trimmed our equipment portfolio, which accounts for the asset impairment charge that is included in MRB's reported results.

Now turning to Slide 12, I'll review our Auto Parts business. As expected, Auto Parts experienced a seasonal slowdown in retail business, but the decline was greater than normal in the Midwest and Eastern U.S., which experienced unusually harsh winter weather.

This decrease in part sales and admissions was the main reason for APB's operating margin reducing to 7%, which excludes the performance of new stores acquired or opened in the past 12 months.

Car purchase volumes also decreased sequentially by 7% due to tighter supply flows in the second half of the quarter when commodity prices were lower. These weaker conditions as well as continuing integration contributed to modest operating losses of $800,000 in new stores owned for less than 1 year.

The combination of the weaker market conditions in the second half of the quarter and unusually harsh weather were the primary reasons why APB's performance did not improve over the previous quarter.

Now moving to the Steel Manufacturing business, please, turn to Slide 13. SMB sales volumes were 115,000 tons, which represented an increase of 20% from the prior year quarter.

This year's second quarter volumes benefited from improved market demand for construction products and milder West Coast weather. Last year's second quarter was unusually impacted by generally weaker conditions and lower inventories coming into the quarter.

On a sequential basis, sales volumes were down due to seasonal effects on construction activity. Average net sales prices of $676 per ton represented a slight increase from the first quarter due to the impact of higher average raw material costs on selling prices for finished steel products.

SMB's operating income of $4 million marked another solid quarter of profitability with benefits from higher average sales prices and ongoing productivity improvements more than offsetting the seasonally lower volumes.

Finally, during the third quarter, we have a planned outage from maintenance, which we estimate will impact production costs by around $1 million.

Now turning to Slide 14, I'll move on to cover cash flow and capital structure. In the second quarter, we generated operating cash flow of $20 million, and for the year-to-date, we are positive by $46 million.

This continuing trend reflects our improvement in EBITDA and our strong management and control of working capital.

We invested $7 million in CapEx during the second quarter, which was related to maintenance, environmental and safety projects and some localized growth initiatives. For the year-to-date, our CapEx is $21 million, and we anticipate no more than $50 million for fiscal 2014 as a whole, which is around half the level of the previous fiscal year.

The combination of our positive operating cash flow, more modest levels of investment and a slight increase in cash on hand, all enabled us to maintain net debt leverage of 32%, which supports our balanced capital allocation strategy, including our quarterly dividend.

Now I'd like to turn the presentation back over to Tamara for her summary remarks.

Thank you, Richard. Overall market conditions continue to be uncertain due to the impacts from the unusually severe and lengthy winter season and the political and credit conditions in a number of the emerging markets.

On a longer-term basis, however, demand for steel is expected to continue to increase driven by the construction, industrial and automotive sectors in the emerging economies as well as in the recovering developed economies.

Moreover, the heightened sensitivity to environmental concerns creates a significant opportunity to boost EAF production and recycling activity in the metals sector.

Improving productivity; operating efficiently; meeting our customers' needs; generating synergies between our businesses; and achieving the returns from our capital investments.

Again, I'd like to thank everyone on the Schnitzer team for their significant contributions during the quarter and for making our company a safe and a productive place to work.

Operator, let's open up the call for questions.

The first question I had was just on scrap flows. When we speak with recyclers, something that we hear more and more often now is that the reservoir for scrap is a lot more shallow than it had been.

And when we look at scrap flows over the course of the cycle or looking back like very long term, it seems like they're certainly down over the last couple years from the recent peaks. But they're still relatively healthy relative to the long-term multicycle averages.

So I'm curious as your thoughts on the whole idea that -- is it possible that during the peak market conditions in the last cycle as well as having high prices through the downturn, if we didn't just drain the reservoir to a point where we're consuming more than was being kind of generated, and going forward perhaps, we don't see a snapback to the levels that we had seen over the '04, '05 to, say, 2010, '11, '12 timeframe? Any thoughts on that?

Well, I think that you've hit on the big issues. But fundamentally, history has shown that scrap supply flows improve with higher prices.

And when we see improving industrial production, improving although still low GDP growth, improving consumer activity. All of that generates scrap, but there's going to be a lag effect.

When you see improving construction markets, at the same time, you typically see demolition occur. So higher prices, better economic activity, historically brings more scrap into the market.

And I just think that you haven't seen that on a sustained basis. Fundamentally, since the global financial crisis, and -- but I think that looking in the very short term, we probably will expect a bounceback from the harsh winter that we've achieved -- or that we have the experienced, but we don't know how quickly that will bounce back.

But the stronger -- the strong economy should generate more activity coming through end-of-life vehicles, coming through manufacturing, and it's coming through general consumer activity. So I'm not sure I would conclude that we've drained the scrap pool because it's a a pool that is always being replenished as the economy moves forward.

It just seems like even during the pricing cycles these days or last couple of years, that even when prices do come up, it just seems like it generates a lot less scrap being -- pulls from, I guess, you call it the reservoir, whether it's old equipment sitting on manufacturing lots or farms or whatnot. It just seems to be like there's just less out there to pull from, so we see less of an elasticity in terms of pricing when we see those periods of strength?

Well, I think what you're seeing since the financial crisis with price volatility is that you're seeing that impact because customers are keeping generally low inventories. So when there's a small stepup in inventories, you see an outsized pickup in price activity that isn't reflecting the fundamental scrap generation flow.

and I think that's why you haven't seen the scrap supply flows move in the same trajectory as you've seen in the price volatility.

Okay. And then just secondly, in terms of the shredder capacity that's out there.

Results for the entire sector in the rear [ph] recycling have been pretty challenging here over the last 1 or 2 years, even. I'm surprised we're not seeing more of a shakeout in terms of shredders closing down by some of the smaller companies out there.

And I just wanted to -- you guys are starting to do, well, not starting, you've been doing now for some time now some cost-cutting efforts, why do you think we haven't seen a bigger shakeout in capacity? Do you feel like you're more just catching up from a cost perspective to some of the smaller private companies that are out there?

Or I guess, what's keeping this capacity alive?

Well, I think you are starting to see a market rationalization, and you're seeing that with a number of shredders being idled or closed. I think you're beginning to see smaller multigenerational companies closed down or get into financial difficulties and go bankrupt.

But I think, fundamentally, we didn't see as quick a, what -- to use your term, shakeout in the industry immediately after the global financial crisis because people came into the crisis in this industry without debt, and that's what you had seen in previous consolidations in this industry where people are getting weighed down by debt. But I think that the extended period of lower profitability is pressuring some of the smaller operations.

And I do -- we are seeing signs of rationalization and consolidation.

Okay. One last question, if I could.

Rich, you've said last quarter that you thought the inventory holding impact could be 0 to 6 positive swing over the first quarter? How accurate was your forecast?

I think we were pretty accurate. We had a small positive benefit from average inventory accounting in the second quarter, and that was one of a basket of factors that contributed to the strong MRB results.

So sequentially, something north of $6?

It was something just around -- within that range, just above.

If you took this quarter and split it in 2, you had some momentum and export activity in the first part of it and then, obviously, you kind of came off in the back half. Could you give us a feel for how margins were trending between the 2 halves of the quarter, what the range sort of looked like?

Well, I'm not sure we would break down margins over the course of the quarter because, fundamentally, it depends on our shipping schedules and our volumes from month-to-month. But I think you're exactly right in saying that the quarter had 2 parts.

And interestingly, it was opposite from the first quarter. In the second quarter, we had stronger prices in the first half, and weaker prices and lower demand and the severe weather in the second half.

But the performance in our MRB business was due to a combination of factors. We had higher selling prices.

We had higher volumes. Our shipments to Asia were up 22%.

We had strong benefits from our productivity initiatives, which benefited costs as well as cost reductions in SG&A. And then as Richard just mentioned, we had some benefits from average inventory costing.

But that was really driven by a strong operational performance.

Okay. Well, and then, I guess, when you look at volumes, and obviously, domestic has been relatively stronger.

And Tamara, I'd just be kind of curious to your thoughts, I mean, I know the Deepwater facilities aren't exactly arranged to address domestic demand, but are there some more low capital-intensive ways you could kind of look to serve the domestic market more efficiently or to a broader scale with the existing asset base you have?

There are, and our team really performed in this way this quarter and showed some great potential. As I mentioned in my remarks, we sold 32% of our material into the domestic markets.

And if you look, for examples, at the utilization rates, and I'll just point to our steel mill as an example, and we sold, obviously, domestic to not just our steel mill but to many others. But if you look at our steel mill, we operated at 67% capacity utilization.

So there -- as the economy improves and we see the West Coast demand get stronger, we will be able to sell even more domestically into our own steel mill. And that corresponds to third parties as well.

There is upside [ph] on domestic if they continue to stay strong.

Okay, great. And then the impairment in MRB -- I'm sorry if I missed this, but could you provide just a little more background there?

And I guess, is there additional charges to look for in future quarters?

Yes. Hi, Brent.

Yes -- as part of our overall productivity and cost-reduction measures, one thing we've been doing is looking to optimize our portfolio, which includes reviewing our assets. And as part of that, we have taken a look at the utilization of certain equipment relative to current volumes.

So there were a couple of pieces of equipment during the quarter that we decided to stop using, not major pieces of equipment. But nevertheless, the impairments we took on these 2 items added up to around $1 million, which is included in MRB's reported results.

Looking forwards as part of our overall cost reduction and productivity improvement strategy, we are continually reviewing our equipment portfolio and our asset utilization. And therefore, if changes are required, we wouldn't hesitate to do so.

Okay, great. And then just one more on the other parts side.

When do you expect those losses to abate for the new sites?

Well, as I mentioned in my scripted remarks, that the loss in the second quarter was around $800,000. So it was fairly modest.

And mainly, that came from a combination of the weather being unusually harsh and these weaker commodity prices in the second half of the quarter. So we are hopeful that in the quarters to come, we get closer towards breakeven and through that side.

So we're working harder on that, and that's certainly our objective.

I had a couple questions as far as just trying to get a feel for the profitability within MRB this quarter. Any way that we could get a feel for the export ferrous profitability, the domestic ferrous profitability and maybe the nonferrous contribution just as -- just from a higher level perspective?

And how we should be thinking about that in the quarter?

We, actually, don't break that down obviously. But what drove our performance in MRB were those 4 baskets that we referred to: Higher selling prices, so we had average higher selling prices from Q2 versus Q1, stronger prices first half, weaker in the second half, but overall, on an average basis, higher; higher volumes, 5% overall, 7% higher in the export market, 22% higher in Asia; the productivity and cost savings, and Richard can spend a little bit more time in discussing that; and then, in an average inventory, accounting benefit, but not -- no one part overwhelmed the others.

So I think that's the best way of looking at it.

Okay. And as far as your Steel business, are you looking at that as a noncore asset to your growth?

And moving forward, how are you viewing it? Certainly, moving in the right direction but doesn't really seem to be part of your growth strategy here.

In our Steel business, we have said we're situated well to return to high levels of profits and cash flow when the U.S. economy improved and when the West Coast markets improved.

And you can see that, number one, it reacted very quickly in terms of leaning out. And it has now disciplined its production to demand.

And that has given it a big boost and a big tailwind as the markets have improved. We do not have any plans to add any mills to our portfolio, obviously.

But it is in a unique geographic position, and it has rebounded very quickly as the market strengthens. And I applaud the team for taking the actions it needed to take in order to put itself in the position to benefit well when the markets have started to rebound.

So it sounds like we should expect it to be part of the portfolio here, the diversification moving forward, at least, as you're saying here today.

Well, we are anticipating continued strong performance from our Steel Manufacturing business.

Okay. And then I just had a couple of smaller ones.

As far as your mix in nonferrous, how much of that should we think about as being things like zorba that moves into China versus maybe some -- maybe things like copper. I was trying to think of how we should think about some of the things that you "produce" out of your nonferrous mix?

Sure. Zorba sales are just one part of our overall picture.

Zorba as a percentage of our nonferrous business is about 1/3, and it's actually been declining due to the technology investments that we've made and that we continue to make that get us closer to an intrinsic product, a pure metal, which is what differentiates us as a producer. We sell our nonferrous products to about a dozen different countries.

And so we're well diversified from a consumer base, both in terms of products that they need and places where they go.

Okay. I appreciate all the color.

I just had one last one. As far as the -- as far as your inventory levels, internally, how should we be thinking about those trending in the back half of the year if you had a view right now?

Yes, I think, Phil, the -- as our operating cash flow track record demonstrates. We have got a very strong grip over working capital management, including inventories, and we expect that discipline to continue.

Based on current market conditions, we're not anticipating significant changes in working capital in the remainder of the year. Inventory levels are reasonably low but still within the range of what we've seen in the past.

I think we'll -- if market conditions did improve and the higher prices and better flows have the potential to lead to a growth in working capital, but we should remember that would be a profitable growth in working capital because generally, improvements in market conditions lead to improved financial performance. And that's what I would say about that one.

So your scrap export volumes have been lower year-on-year for a few quarters now. What are your thoughts on how this trend might stabilize or reverse, and what kind of factors would perk up imported scrap demand in your key markets?

Well, I think that higher industrial activity, higher consumer activity, higher nonresidential growth, all of those are leading indicators, and all of those drive stronger steel markets. And with stronger steel markets, that supports stronger scrap markets.

And what you've seen and what I referred to -- I think it was Slide 7 in our materials is that when you take a longer view here, not a quarter-to-quarter view, you see very strong contributions to global GDP growth from the emerging markets. And you see emerging market core infrastructure spending looking to significantly increase over the next 5 years with Asia remaining a key driver of that.

So we're quite encouraged by the longer-term trends. And even when you look at countries like China, where growth is "decelerating," their absolute growth levels are the highest in the world at 7%, 7.5%, and their government is committed to maintaining them there and providing support to fixed-asset investment to move that forward.

So we think the long-term trends are quite positive, and typically, coming out of the winter, we'll see more activity.

And then in terms of your newly upsized efficiency and productivity initiative, could you share some specific examples or anecdotes about the kinds of things you're doing in the metals recycling business that are moving costs slower?

Sure.

Yes. I give -- some examples would be we're really flattening the organization.

We're reducing management layers. We're also consolidating management positions and increasing the use of shared services between regions.

So if you -- that's a big part of it. In addition, reducing the amount of reliance on outside services and contractors, and then we have our major exercise ongoing with our nonscrap procurement activity in terms of things like transportation, fuel disposal costs, that type of thing.

And as I mentioned earlier on, we are also -- been spending a fair bit of time looking at our equipment and asset portfolio, making sure that, that is properly matched to volumes and our resource levels that we utilized or matched to both the volumes and the equipment utilization that we need. And lastly, I would mention that we do have some small noncore activities that we have cut out during this process.

So it's very comprehensive. It's a continuous process which has a tremendous amount of senior management focus and is very specific in terms of the identified targets within our operations.

I wanted to ask you -- I was looking at the last quarter press release and your comments. You mentioned that the trend in the -- during the quarter, and this is the first fiscal quarter, they had changed well.

Things started to move up, and you were expecting pretty significant -- or at least better second quarter, which you did deliver. Some of that came from the quoted inventory accounting.

But, in this quarter, it appears that things have trended the other way. I'm just wondering, is third quarter -- think of it as a weaker quarter now than the first -- second quarter.

I know you don't provide [ph] guidance, but you didn't mention anything that in this virtually [ph] is like last time, that how things are trending.

Right. Well, you made an interesting point because we did have kind of an unusual second quarter because typically, winter weather constrains the availability of scrap and that causes prices to rise.

And this year, in the second quarter, that was negated by weaker export demands, which sent flows back in the domestic market and that led to some weaker prices together with very harsh weather in February and into March. But our ability to -- and I really applaud the team.

They were extremely nimble, and they were able to move metal units very effectively to those markets where price was strongest. And typically coming into the spring weather, we see supply flows improve, and that, in a typical scenario, would lead to stable or weaker prices.

But I think what we're seeing now because the reported April numbers are not out, but the preliminary reports on April numbers reflects strengthening. And I think that is due in part to the fact that inventories at mills are quite low coming into the spring.

And so it's too early in the quarter to quantify what the bounceback will be. But history typically points to stronger activity in the next 3 to 6 months.

Okay. Richard, you have $25 million of run rate of cost savings, about $2.5 million the first quarter.

Should we consider that $5 million charge you have taken as part of it or that's separate from that? I means, did you get benefit of all $12.5 million, or should we subtract $5 million out of it and assume that you got $7.5 million?

Well, the restructuring chargers are one-off items, whereas, the cost savings are sustained benefits that benefit the ongoing run rate of costs going forward. As I think we mentioned earlier, we did achieve $6 million of cost savings in the second quarter, which equates to roughly an annualized run rate of $25 million.

But there's more to go. We have raised our cost-saving targets to $40 million in total.

So clearly, there's more to go, so we should expect, moving forward into the future quarters, some incremental improvement to come. But as far as the $5 million of charges, restructuring charges, these are one-off items.

And if I'm not mistaken, the $30 million initially you had was -- almost all of it was from MRB. Now you have $10 million, which is combination of MRB and APB.

Can you break it down? How much of the $10 million is in MRB and how much is in APB?

[indiscernible] is in there also, I believe.

Let me give some color on how these targets are broken down. Starting with the $40 million in total, MRB is around 2/3 of that, and the remainder is mainly split between Auto Parts and Steel Manufacturing business.

What we've said is that we expect 70% of the $40 million to be achieved in fiscal '14. All that amount we expect around 2/3 of that to be in the cost of goods sold and around 1/3 of it to be in our SG&A [ph].

And of the total $20 million fiscal '14, we expect around 2/3 of that to be in the Metals Recycling business. And just -- and of the remainder, the majority in SMB and the minority portion left split between APB and corporate.

I hope that's a helpful breakdown.

Two quick questions. I just wanted to follow up on the question about the average inventory for the next quarter in terms of you should have had a reverse.

So last time, you were able to give us sort of a -- you sort of gave us the $6 or approximately there. Do you not have a number for next quarter right now based on where things sort of stand?

Or is it zero? Where are we looking at?

It's too early to tell, David. There's too much uncertainty in the remainder of the quarter in terms of where scrap prices will go and remain -- and scrap was [indiscernible] at the quarter, so it's too early to give a number for that.

I mean, I'm sort of confused because I think your earnings -- you gave January last year's when you operated at the same timeframe. That's where I'm a little confused...

Actually, it's still -- we were a little later in January because January prices in the domestic market had already been set when we announced last quarter. And the April numbers aren't out.

So it's just a little early in the quarter.

But if we take what you sort of said preliminary numbers, would that mean it would offset and it would be a flat or -- I'm just trying to get an idea.

We're really not forecasting for the third quarter guidance. We'll provide it later in the quarter.

Okay. My second question is, how is the impact of lower copper prices and things like that impacted?

Should we expect scrap for the nonferrous prices to be down quarter-over-quarter?

Well, right now, nonferrous prices have dropped in March, and those are reported prices and clear. And that drop has occurred for a variety of reasons: China's weakness and the end of CCFDs and credit tightening in the lights [ph] has driven a lot of that.

But this is a spread business, so prices adjust. And we pivot our sales to customers where demand is strongest.

But you can track the nonferrous prices pretty accurately from reported levels. And they have been trending down in March, and they rebounded a little bit recently.

And just one quick final one. We've seen iron ore prices come off from January, end of December.

In January, it was at $130 something, now we're at sort of $115 so down $15 or $20. How does the long-term impact of iron ore prices -- I think it's consensus, but our view is prices are going to be in double -- if not in triple digits to double digits and stuff like that.

How does that impact over time if we start to see like a $90 or $95 iron ore price in terms of substitution to iron ore and things like that?

I think there are a couple of things there. I mean first of all, iron ore doesn't move dollar-for-dollar with scrap because, as you know, scrap is not fully substitutable for iron ore in integrated, and it is necessary for EAFs.

And at the end of the day, scrap is a spread business. So we said for a long time, it's not absolute prices that are so relevant.

It is the spread and the trend that we manage to.

Right. But isn't your main stuff export, which -- I mean, China is not an EAF market.

I mean, the U.S. business side but not the Asian side.

Well, China is about 10% EAFs in terms of the -- what 10% or little less than 10% EAF and what it represents in absolute numbers is actually quite large. The Southeast Asia market is largely EAF.

And even going back to China, the Chinese government has articulated a policy commitment to increasing the amount of scrap. And with their environmental concerns and the like, it will probably create a push environment to increase the proportion of EAF.

So even if you look at our activity in Q2, where you did see significantly falling iron ore prices, you saw -- you didn't see that type of fall within the scrap market. And you saw a quarter-over-quarter 22% increase in our activity sales into Asia.

And that was really Southeast Asia because Chinese demand was pretty nonexistent on the ferrous side in Q2. So I think that you got to look at diversity of demand.

You got to look at the fact that scrap and iron ore aren't fully substitutable. And then you have to look at the fact that it's a spread business and so prices adjust.

Based on your Q2 results for MRB, I'm curious about how you expect scrap flows to Southeast Asia to change going forward. I know a couple quarters ago, you mentioned that a scrap surplus in Japan allowed the country to take some share in supplying ferrous scrap to Southeast Asia.

Have you witnessed a continuation or reversal of this trend? And then from what you've seen how Japanese scrap generation rates compare to U.S.

scrap generation rates in recent quarters.

Well, again, we take -- you have to take sort of a several quarter view, 6 months, 12 months view on this. When you look at sources of scrap supplies, the U.S.

is the largest, Europe is second, and Japan is third. And there's a big gap between the amount that Japan exports versus Europe and then versus the U.S.

So fundamentally, we've always said it's a question not of whether the U.S. is in the queue, it is where you are in the queue.

So currency can impact that. Absolute prices can impact that.

But it's not -- it puts you in a different place in the queue. It doesn't eliminate you from the queue.

Because people come to the U.S. for not just quantity but quality of scrap.

Okay; and then, there's a follow-up from a big picture standpoint. Given the likelihood that Chinese steel producers might favor electric arc ferrous production for a buildout of incremental steelmaking capacity, what's the likelihood that China joins the list of your top 3 ferrous export destinations at some point in years to come?

Well, China has been in our top 3 for most of the last 5 years or so. They're typically in our top 3.

They weren't in our top 3 this quarter. And that has happened from time to time.

But, again, if you took a long-term historical view, going back 5 years and even going back, I think, Q1 they were in our top 3 ferrous export destinations. So it's likely that they will stay in there after the long term.

I have a couple of things. Just the first one real quick.

The effective tax rate, which, I guess you're looking at 39% now for the year. What -- how should I think about the tax rate going forward into fiscal '15?

Should I model something similar? Or is there something that topped it up this year that's not going to continue in the future?

Yes, I think, Tom, you should look at where our tax rate has been historically -- if I was looking ahead into fiscal '15, I might be modeling something more along the lines of what has been historical, which would be in the 34%, 35% type of range. This year is really impacted by the expected mix of profits in the year today and our projections for the rest of the year.

And one thing to notice is that the amount of absolute dollars involved in taxes when the rate changes is not that significant at current levels of profitability. So it's not -- the percentage alone is not the major factor.

It's the knowing [ph] of absolute tax dollars as well. But looking forward, I would be looking at something at around the mid-30s because that's been our historical run rate.

Okay. That make sense.

The other question is on Auto Parts business. And I apologize if you went over some of this earlier and I missed it, but I'm trying to get a sense of going forward.

What does it take to get vehicle purchase volumes per -- per store back up to something more aligned with historical levels? And also, getting the gross margins back up, and obviously, we know what you're paying for those vehicles would be a significant piece of that?

What do you need to do? And how quickly do you think you can get there?

Well, one thing I start out with this, we don't really look at vehicle purchases per store because our -- and the size of our stores vary quite dramatically depending upon the region and the related stores around them, but your question about when -- how do we see increased car purchase volumes rolling out? I think they're -- the leading indicators are giving us a sense of improving trends.

I'm sure that you've seen us write and talk about the fact that the average miles driven right now on -- for cars on the road is at an all-time high and the average age is 11-plus years. And so eventually, those cars are going to come off the road, and while in the past, they may have had several stops before they came to our facilities and became an end-of-life vehicle, that lag effect may be shorter.

It's generally going to be driven by improving economic environment that supports people turning over their cars. And so we are seeing leading indicators that are supporting that.

But there's going to be a lag when you see new auto sales increase, there's still a lag before you see [indiscernible] vehicles come into our facilities. And looking -- near term, historically, we see margins, admissions, and car purchases increase in the second half of our fiscal year for the Auto Parts business due to fundamentally seasonality, and we've got no reason to believe this year will be any different from that.

Okay. That make sense.

I just want to make sure, I understand what you're saying about it being difficult to compare apples-to-apples from one store to the next. My concern was that there's some sort of diminishing returns on the new stores that you've opened in terms of vehicle purchases in those stores kind of being at a lower rate either because they're smaller or whether there's something else going on there or whether it's just a question of ramping those stores up to full operation.

There are really 2 things going on there. There's -- one, it's ramping up and just developing the retail base in those new areas.

Secondly, a number of our stores are greenfield-s. And so that -- those take also a longer ramp-up than just a pure acquisition where we take over operations and create a Pick-n-Pull brand.

So you've got 2 factors there. And then, obviously, a number of our new -- of our acquisitions were in the Midwest and in the Northeast.

And those were particularly hard hit by weather this past quarter.

It makes sense. Just -- and then, finally, just real quick.

The increasing integration between Auto Parts and the Recycling business in terms of cost savings, how will we see that manifesting itself in results going forward? Qualitatively, not numbers-wise so much?

Well, on a qualitative basis, one of the things that you're seeing and you'll continue to see is that they are growing together. And that's really important because as we grow that auto parts platform and we grow it along with where our MRB facilities are, we get some really big inherent synergies.

So growing together is something to watch for. We are integrating our selling activities for both ferrous and nonferrous metals, and so that helps -- I mean, that gets us to best-in-class in terms of our ability to sell broadly and to move metal units to the strongest buyers.

And then, we're leveraging our assets, our shredding assets to maximize returns from processing scrap and cores. And as Richard mentioned earlier, we're combining our resources so that we can leverage shared services in a much more efficient way as opposed to duplicating some of those activities.

So that's how you'll really see the synergies and the integration hit our performance.

Thank you, everyone, for joining us on our call, and for your interest in our company. We look forward to speaking with you again in June when we announce our third quarter results.

Thank you.