Thank you. Good morning, everyone.

I'm Alexandra Deignan, the company's Vice President of Investor Relations. Welcome to Schnitzer Steel's Third Quarter Fiscal 2014 Earnings Presentation.

We're glad 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.

Good morning, everyone, and thank you for joining us on our third quarter earnings call. We appreciate your interest in our company.

Before I begin my formal remarks on our performance, I'd first like to thank everyone on the Schnitzer team for another quarter of excellent safety results. Your continuously improving safety performance has occurred while we have experienced increased volumes in APB and SMB and while we have continued to deliver on our productivity initiatives in MRB and across our entire operating platform.

So I want to acknowledge and thank each of you for your continued commitment to working safely and working together to serve our customers, our communities and our shareholders.

This morning, I will review the highlights of our consolidated performance, comment on market trends and update you on the most recent results from our productivity and cost reduction programs and our progress on our strategic priorities. Then Richard will provide further details on our financial results and the operating performance of our 3 segments.

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

So let's now turn to Slide 4, and we'll get started. Earlier this morning, we announced adjusted earnings per share of $0.16 for our third quarter, which reflected improved demand in both our Steel Manufacturing and Auto Parts businesses and steady volumes at our Metals Recycling Business, but weaker commodity prices than we saw in the second quarter.

The following trajectory of commodity prices led to a significant adverse impact from average inventory accounting versus the second quarter, and that more than offset the Q3 increase in volumes in SMB and APB and the benefits from our productivity and cost reduction programs. However, our focus on generating positive cash metal spreads and our focus on disciplined cost and working capital management enabled us to deliver another quarter of strong operating cash flow.

In our Metals Recycling Business, our sales volumes were generally consistent with what we delivered in the second quarter. We saw steady demand for both ferrous and nonferrous metals, although the end market mix differed from what we saw in Q2, as domestic sales and exports off the East Coast both increased significantly.

Ferrous prices for shipments early in the quarter dropped from peak levels in the second quarter before partially recovering and staying within about a 3% to 5% price range for the balance of the quarter. The $10 negative average inventory impact we absorbed in Q3 versus Q2 more than offset the reduction in SG&A and in other costs we were able to achieve in MRB during the quarter.

Both our Auto Parts and Steel Manufacturing Businesses delivered sequential improvements. In our Steel Manufacturing Business, steadily higher seasonal construction activity and increasing nonresidential construction demand on the West Coast resulted in another quarter of sequentially higher profits.

During Q3, our steel metal reached a 72% capacity utilization rate, which is our highest level since 2008, reflecting strengthening demand for our finished steel products.

In our Auto Parts Business, retail sales rebounded after a harsh winter and car purchase volumes reached record levels. APB's third quarter operating margins improved sequentially by approximately 200 basis points to 8%.

While this was below where we had guided in May, the difference was primarily due to timing of shipments, lower nonferrous revenues per car and increased labor due to higher volumes that occurred towards the end of the quarter. Our results this quarter also included some significant tax benefits, which Richard will describe in more detail later in our presentation.

So now, let's turn to Slide 5 for a review of market trends. The narrative on the U.S.

and the global economy continues to reflect a positive, although not a steep trajectory, even as GDP statistics are revised downward. In the U.S., early indications of economic improvement are visible.

Unemployment appears to be improving, the automotive and energy industries are fueling broader market growth and interest rates are expected to remain low.

The key lever for the perspective growth of the global economy is a combination of improving gross prospects in the U.S. and Europe without further major issues developing in China or in the emerging markets.

Trends in industrial production are also showing marked improvement. Both GDP and IP trends support the outlook as steadily increasing demand for steel.

Steel is currently being produced at record level, and the outlook is for finished steel output to continue to increase into 2015 and beyond. As more steel is produced, more scrap will be consumed.

Today, x China, almost 50% of world steel production comes from electric arc furnaces. In the U.S., the number is 60%.

Although in China, only 10% of its steel is produced in electric arc furnaces, 10% means about 70 million tons, which is higher than what is currently being produced in EAF mills in the U.S. And China's usage of scrap in basic oxygen furnaces is significantly below that of the U.S.

China's Premier Li has continued to reaffirm China's commitment to reduce pollution as a cornerstone of their country's social and economic policies. Consistent with that is the statement in China's 12th Five-Year Plan to increase annual scrap usage by 5%, which, based on today's current production, translates to an additional 35 million tons of scrap demand.

As China's war against pollution gains traction, we therefore expect that their demand for scrap will rise significantly and be filled by a combination of domestic and imported materials. It is these trends in statistics that underpin the demand side of the scrap equation and the long-term fundamentals for the industry.

If we turn to Slide 6, we can take a look at supply trends. A number of leading indicators for scrap generation are showing strength, and we have just begun to see some of the strengths reflected in a slowly improving increase in supply.

Auto production and increased appliance sales have shown improving levels. Both are important as they provide a significant source of feedstock to the scrap industry.

In addition, the Architectural Billings Index improved noticeably in May, reflecting an increase in architectural design activity after 2 months of declining levels. May marks the highest reading in 8 months, which should eventually lead to improved levels of nonresidential construction.

All of these signs are encouraging and can serve to offset margin compression in the future as these are the fundamental trends that can drive increased scrap flows.

So now, let's turn to Slide 7. As you can see on this graph, which represents general market selling prices, ferrous export prices dropped at the start of the quarter before partially recovering towards the end of the quarter.

Domestic prices began the quarter higher than export prices, but toward the end of the quarter, driven by stronger spring scrap flows, domestic prices softened and reached equilibrium with export prices.

In June, we saw some downward pressure on domestic prices as the overhang of shred, which was generated after the harsh winter, was absorbed by the market. This overhang has now pretty much disappeared.

Both the East Coast and -- the West Coast export markets improved during June and reached parity with the domestic market.

So now, let's turn to Slide 8 to take a look at our shipments during the quarter. Ferrous sales during Q3 were in line sequentially, driven by an increase in exports off the East Coast and higher domestic shipments.

Our domestic sales were up 5% sequentially and exports off the East Coast increased by 24%. Exports off the West Coast were in line with the sales levels we saw in the first quarter.

During the third quarter, we shipped our ferrous and nonferrous products to 16 countries. Our top ferrous export destinations were Turkey, Egypt and Malaysia.

Our top nonferrous customers continue to be in China, the U.S. and South Korea.

As you can see on the bar chart on the right, we shipped higher volumes into the domestic market in the first 9 months of fiscal '14 as compared to the prior year. Including shipments to our own steel mill, in fiscal '14 year-to-date, domestic shipments represent 1/3 of our total ferrous volumes, up 16% versus the same period in fiscal '13.

Our ability to flex our domestic and export shipments to take advantage of the strongest markets at any point in time reflects the nimbleness of our platform, our extensive customer relationships and our transportation and logistics expertise.

Now let's turn to Slide 9, and let me take a final moment to touch on our strategic priorities before I turn the call over to Richard for more details on the quarterly performance. As we've articulated in the past, our 3 major strategic initiatives are focused on productivity improvements, accelerating returns on our major capital investments and generating synergies between our Auto Parts and Metals Recycling Businesses to increase profitable scrap supply.

We are currently implementing a $40 million productivity improvement and cost reduction program, and we expect to achieve 70% of these savings by the end of fiscal 2014, with the remainder by the end of fiscal 2015. Our pace is on target, and we have delivered nearly $20 million in cost reductions in the first 9 months of fiscal 2014.

Our third quarter results included $9 million of savings, with the majority of the benefits generated in our Metals Recycling Business and the bulk of the remainder attributable to SMB. We have also commenced a productivity initiative within 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.

In Canada, we are seeing a steady trend of improving operational performance. Our Canadian ferrous sales are up over 7% versus fiscal '13, and our nonferrous sales have increased by 30%.

We expect that by year end, the bulk of our initiatives will be fully executed in this region, enabling higher contributions, as we move forward.

And finally, as I noted last quarter, we are already generating benefits from our focus on integrating our purchasing and selling activities for both ferrous and nonferrous materials, increasing synergies between MRB and APB through combining resources and leveraging our assets to maximize returns from processing scrap and cores. As APB continues to leverage the growth inherent in its new storage expansion over the last 2 years, we will continue to benefit from the increased supply flows through our Metals Recycling operations, as well as higher retail activity.

So now, let me turn it over to Richard for an update on our operating segment performance and our capital structure.

Thank you, Tamara. I'll start with our Metals Recycling Business on Slide 10.

As mentioned earlier, our ferrous volumes were in line sequentially despite the sharp decline in selling prices for shipments early in the third quarter. Maintaining our volumes in these market conditions reflected our business platform, which enabled us to export off the East and West Coast or sell domestically wherever our margin opportunities are the greatest.

Average ferrous selling prices were $346, down $19 or 5% compared to the second quarter. This reduction in average prices was not as much as the peak-to-trough drop because we took some sales orders before the fall in the export market and made domestic shipments at relatively high prices.

While nonferrous market conditions were also weaker during the third quarter, our forward sales strategy allowed us to avoid the dips in the market while keeping average nonferrous sales prices in line with the second quarter, as well as increasing our volumes by 2% sequentially. MRB operating income in the third quarter was $4 million or $4 per ton, which represented a sequential decrease of $7 per ton.

When prices fell, we reduced our cash purchase prices for scrap, but the average inventory costs lagged on the way down, creating a negative accounting impact. Compared to a positive effect in the second quarter, this created an adverse sequential change of $10 per ton, which was by far the major reason for the lower third quarter result.

However, we partially offset this with additional productivity improvements, which contributed an extra $2 per ton compared to the second quarter. Now standing back, following ferrous and nonferrous sales prices over the past year has masked the benefits of our productivity initiatives, which are included within our significant cost savings.

Of the $20 million consolidated savings year-to-date, $15 million of that is within MRB. Of that amount, over half is visible in MRB's SG&A expense, which for the year-to-date is $9 million less than last year, a reduction of 13%.

The remainder is in MRB's cost of goods sold, which includes a combination of raw material costs and production expenses. Although we do not separate out these 2 categories, a good indicator of overall savings is that we've achieved a 12% reduction in MRB headcount over the past 12 months.

Now turning to Slide 11. I'll move on to review our Auto Parts Business.

As expected, Auto Parts experienced a strong seasonal uplift in retail sales, which, together with higher car volumes, more than offset the effects of a lower commodity price environment. Car purchase volumes of 98,000 represents a quarterly record and was a sequential increase of 15%.

The operating margin of 8% was also a sequential increase of approximately 200 basis points and was driven by the higher car volumes and the seasonally higher activity through our network of retail stores.

Although the sequential performance was up, the operating margin percent was less than our guidance due to a roughly equal combination of timing of shipments, lower nonferrous revenues per car and higher labor costs associated with processing the additional car volumes. The new productivity project in Auto Parts includes a focus on labor operating efficiency and the nonferrous yields per car, both of which we anticipate will produce future benefits.

Now moving to the Steel Manufacturing Business. Please turn to Slide 12.

Improved West Coast demand led to SMB sales volumes of 135,000 tons, representing a third quarter record since 2008, an increase of 17% sequentially and 8% year-to-date. SMB's third quarter utilization rate of 72% was also the highest since the market peaked in 2008.

Average net sales prices of $686 per ton were up slightly from the second quarter, driven mainly by the improved demand.

Operating income of $5 million reflected the benefits from higher sales volumes and from productivity initiatives that we implemented earlier. The benefits from these productivity initiatives can be clearly seen in the operating income of $10 million year-to-date, which is more than double last year, even though sales volumes were up by 8% in the same period.

Now turning to Slide 13. I'll summarize our cash flow, net debt and taxes.

In the third quarter, our positive EBITDA was the main contributor to operating cash flow of $27 million, leading to a year-to-date total of $73 million. This was our sixth consecutive quarter of positive operating cash flow, and we are trending towards another strong full year outcome.

The key driver of this positive trend is our robust business model, which puts an emphasis on maximizing positive cash spreads between sales and purchase prices, together with a culture of disciplined management of working capital. We invested $8 million in CapEx during the third quarter, which was spent on maintaining the business and environmental and safety projects.

For the year-to-date, our CapEx is $29 million, and we anticipate no more than $40 million for the fiscal year as a whole. This is less than half the level of last fiscal year, the main difference being lower growth-related CapEx as we completed our major equipment installations in Canada and Puerto Rico during fiscal '13.

The combination of positive operating cash flow and lower levels of investment enabled us to reduce our net debt leverage ratio to 31%.

Now turning to tax. Our third quarter results included just over $2 million of discrete tax benefits related to tax basis adjustments to certain fixed assets.

These tax benefits represented $0.08 of our third quarter earnings per share and appear in both our adjusted and reported results.

As the mix of our actual operating results included a greater-than-expected contribution from foreign tax jurisdictions, thus changed the tax rate in our reported results and reduced additional tax benefits compared to our guidance. But note, these additional tax benefits are not applicable to our adjusted results.

Finally, our full year tax rate for fiscal 2014 is anticipated to be approximately 29%.

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

Thank you, Richard. Demand for steel and scrap is trending higher, driven by the recovering construction and industrial sectors, as well as by the robust automotive and energy markets.

Our own steel mill has begun to demonstrate strong leverage to the domestic market recovery, and we believe each of our businesses will similarly benefit as broad economic factors continue to improve.

Our focus is on operational excellence and continuous improvement on our productivity initiatives, on improving returns from our previous investments and on driving synergistic growth between our Auto Parts and Metals Recycling Businesses. Our ability to generate strong operating cash flow enables us to execute on our balanced capital strategy, which is directed to both investments in our business and return of capital to our shareholders.

I'd again like to thank everyone on the Schnitzer team for your ability to respond nimbly and quickly to these challenging markets and for your contributions to making our company a safe and productive place to work each and every day.

So operator, let's open up the call for questions. But I understand from my team that we have 6 minutes left before kickoff for the World Cup U.S.-Germany match.

So if any of you on the phone have to drop off, we understand, and Richard and Ally will be available later today and tomorrow for follow-up. So operator, let's open up the call and see if anybody's left on the line.

Yes, Tamara, utilization to steel mill, a nice healthy increase here from last year. As you look at the order books or other internal measures, is this trend looking sustainable into the summer?

It is. We're seeing that our customers are having stronger order books, and we're feeling very good about the sustainable and positive trajectory of the demand curve.

Okay. And then on the scrap side, could you provide some insight in terms of what you're seeing for bulk freight rates?

I know one of the major indexes has been under pressure this year. Just curious what you're seeing there.

Yes. Bulk freight rate levels -- bulk freight levels have been stable to trending slightly downward.

But as you know, for our export business, it's essentially a pass-through.

Great, okay. And then as we're coming up on year end here, could you comment on capital spending initiatives for next year or should we sort of anticipate something similar to fiscal '14?

Well, we'll talk about that at our October call. But right now, I mean, we don't have big growth projects on the board.

So it should be similar, and we'll continue to invest in technology for our nonferrous extraction and in growth projects for APB. So it should be similar.

I want to ask a question, maybe [indiscernible] about the inventory accounting impact. I mean, you are in a business where you always have a lag between the inventory and order then shipping, and scrap metal stays stable it could either go up or down.

And I was wondering are you internally looking at it -- or should we look at it that we add or subtract this number every quarter, so we just get a net effect? Or is it just your report so there would be an idea, but you really don't, just internally -- that number for your -- for your way of thinking or what the profitability of the business is?

We don't adjust the results for the average inventory accounting because it's part of our standard calculation. However, what we do, Sal, is focus on a kind of transparent reconciliation of our Metals Recycling results.

As we said, in this quarter, compared to quarter 2, we had a $10 negative impact. Now that was a combination of 2 factors.

One was that we had a sharp drop in prices at the start of the quarter. So in this quarter, we had a negative effect.

In the previous quarter, in quarter 2, we actually had a positive. So the net effect of the 2 was $10.

Looking at our absolute results for quarter 2 and our absolute results for quarter 3, the size of the positive in the second quarter and the size of the negative in the third quarter were all roughly equal proportions.

Got you. So in the end, it balances out if we look at over a longer period of time in general.

Yes, it does. When the market is stable, there shouldn't be any difference between the cash purchase prices for scrap and the average inventory cost.

And this feature of negative or positive effects is directly related to the volatility in the market. So if the market in the fourth quarter is stable, we should see a flat effect in the fourth quarter, which, relative to the third quarter, would be a small upside because the third quarter had a negative.

Great. And Tamara, one question on the scrap price versus iron ore.

We -- there was this industry conference last week, and there were a bunch of presentations. And to my surprise, the scrap guys were a little more bullish that even if the iron ore goes towards $80 and stays there, scrap has bottomed and it cannot go further down.

I always thought that scrap is an iron unit and if that doesn't happen, then you are putting minimals at a structural disadvantage for iron ore. Now I know that in your case, it's not the price the spread mostly works on, and you made more money at a lower scrap price.

But how do you feel about this relationship between scrap and iron ore?

Well, you're right. Scrap, at the end of the day, is a spread business.

But fundamentally, and we've gotten a fair number of questions on this, is this -- the scrap-iron ore ratio has happened before, and it wasn't that long ago when this ratio differential, the spot market, the people we're talking about at the conference last week, occurred. I think it was September of 2012.

You saw the same scrap ratio that you're seeing in the spot market right now between iron ore and scrap. And yes, I think I do believe that the correction will be in iron ore because at the levels where iron ore is right now, it is more likely than not that they can't stay at these very low levels before capacity comes out of the market.

At which point, you would expect to see, and the historical ratio shows that it comes back into that, into what is the more normal scrap-iron ore ratio. But at the end of the day, Sal, scrap is holding up because its entire supply is in iron ore.

And it's a necessary raw material for 60% of U.S. production and 50% of world production x China and 30% of world production including China.

So if it's in tighter supply, it's going to hold up against iron ore, which looks to be in an oversupply situation.

So just a bunch of things I wanted to run through just for clarification for nothing else. If you were to see everything the same into the fourth quarter, you should anticipate, what, a $14 EBIT per ton in your scrap business in MRB?

No, I don't think that's the way to look at it because the $10 average inventory effect is a sequential between quarter 2, which had an upside, and quarter 3 that had a negative of roughly equal proportions. So if it was a flat market in the fourth quarter, yes, it will be upside, but it would be in the range of up to half of the sequential effect.

I see. Okay.

Thank you for clarifying that. All right.

And then I guess, I wanted to just understand, on APB, I know you're not giving guidance here. But you talked about a big improvement, which we had already guided to, so we expected that.

But as you point out, the margin was lighter than what you had guided to. And I think I understood some of the reasons but they don't seem like short-term reasons.

They seem like more complicated than one quarter. So if we think about going forward, does that mean that the margins should be kind of more similar to this May quarter?

Or do we think 9% to 10% is that number to aspire to?

Yes. I think there's near-term and longer-term matters at play here.

Firstly, on the near term, the reason that the actual operating margin was less than what we had guided was down to 3 roughly equal components. One was -- 1/3 of it was about timing of shipments, 1/3 was lower nonferrous revenues per car and 1/3 of it was just higher labor costs than we had expected due to processing of high car volumes.

Even though the volumes were high, you're correct that the operating margin is still in single digit, and the reason for that is really twofold: one is that ferrous and nonferrous commodity prices are still relatively weak and over half of Auto Parts revenues comes from sales of scrap and of nonferrous materials. And the second thing is that despite the higher volumes, they're still relatively tight supply situation, which impacts on car costs.

But I would point to 2 factors that will help going forward. One will be -- or 3 factors that will help moving forward: one will be, as commodity prices improved, we will get a benefit; secondly, as supply conditions continue to loosen, that will help us expand the margins; and the third is our new productivity initiative in Auto Parts and -- but we have not an outstanding target for that yet, and it's not in our $40 million target, so that's going to have a significant focus on labor operating efficiency and on our nonferrous yields per car.

So we do expect some benefits of that. So we do see a good 3 reasons going forward why our margins will get back into double digit.

Okay, that's helpful. So that's more of a medium term versus a short term, it sounded like, no?

Yes.

Okay. And I just want to ask 2 more.

So as you pointed out, margins are tight on, but nonferrous, you said, still being low price. But we are definitely seeing aluminum prices and stainless prices improving.

So I kind of wanted to understand how will Schnitzer respond or how can Schnitzer benefit maybe from some of this nonferrous pricing improvement, if at all.

Well, we did benefit. We are a full-service nonferrous platform.

So we deal with the mixed metal, zorba, copper, aluminum and stainless are our primary products, with aluminum being a big proportion of it. Obviously, a lot of different grades of aluminum used for lots of different products.

But this is a part of our business that we have been growing very consistently. And we will continue to grow in order to participate.

Okay. And then finally, your comments on the war on pollution are not new, I get it.

The scrap used in China was something that came out years ago in their Five-Year Plan. So I was kind of trying to understand, is there something that's driving you to talk about those factors, boosting Chinese demand that's new because if anything, Chinese consumption of scrap has actually declined over the last several years?

Are you seeing anything to reverse that trend in your recent dialogue with your customers over there, or is there something driving that commentary?

Sure. Well, first of all, I'm not sure that China's use of scrap has declined over the past few years.

They are -- they have continued to increase their use of scrap in EAF. Their rate of growth of blast furnaces has further increased.

But I'm not sure that -- I'm not sure I believe with -- I agree with the underlying premise that they're utilizing less scrap. They arbitrage, they're in and out of the market, but they continue to push on making environmental improvements a priority or cornerstone for their policies.

So it takes a while for it to translate, but I think that their usage of scrap continues to grow, and I think that we will continue to see that. I mean, they haven't been a big buyer out of the U.S.

but they have imported, I think, over 1 million tons in the first 4, 5 months of this year. So they're still using scrap, but they arbitrage it.

Okay. So I just wondered why the Chinese consumption from the U.S.

has steadily declined over the last couple of years. That's what I was referring to but you're saying they've got it elsewhere, I guess, right?

That's correct, that's correct. There's currency and freight at play.

I was planning on giving you guys a hard time on costs, but Richard already anticipated my question and broke it out in the prepared remarks, so thanks for that. It sounds like for the most part, the cost -- you're making progress on the cost side, but the spreads and just what's going on with pricing is more than offset so far this year.

So just to be clear, though, $20 million in total savings so far achieved, how much of that is SG&A?

Well, of the $20 million so far, just under 1/2 of that is SGA, and the main component of that is in MRB. As you can see, as I mentioned, for the first 9 months of fiscal '14, MRB's SGA is $9 million less that it was last year for the same period, and then just over 1/2 of it's in the cost of goods sold.

Okay. And I'll be just quick with one last one.

The -- on the CapEx side, I know you didn't want to give guidance per se into next year. But to the extent that you do invest in some further nonferrous sorting technology or other things, is that -- if you did some of that next year, would that result in a higher number?

Or were you saying that you could spend about what you're spending this year and invest in some of those things? And that's it.

Basically, in the range. I mean, we're -- what I was trying to make a differentiation about is the big capital investments that you saw us undertake in '12 and '13 are not on the boards for '15.

And we'll give more precise guidance in our October call.

Thank you very much for joining us on our call today. As I have mentioned earlier, Richard and Ally will be available for follow-up later today.

And we look forward to speaking with all of you again in October when we announce our fourth quarter and fiscal year end results. Thank you very much.