Thank you, Kat. Good morning, everyone.

I'm Alexandra Deignan, the company's Vice President of Investor Relations. Welcome to Schnitzer Steel's Third Quarter 2015 Earnings Presentation.

Thank you for joining 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 releases of today and in the company's 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 of 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 2015 third quarter conference call.

We'll start this morning with a summary of our consolidated performance and the market trends which impacted the quarter. I'll then discuss our progress on the cost reduction and productivity activities, which we initiated during the third quarter.

After my remarks, Richard will review the financial and operating performance of our business segments and our capital structure, and then we'll open up the call for questions.

But before we begin, let me make a general comment. Without question, the third quarter brought continued challenges.

While not as dramatic as the price volatility that we experienced in the first half of this fiscal year, we continued to experience the headwinds from global steel overproduction, the strong dollar and weak global demand. Operationally, however, our team has performed very well.

And as you'll see in our presentation today, we are taking the actions and executing ahead of schedule on our commitments to reduce our costs and improve our productivity, in other words, focusing on what we can control and delivering improved results from these actions. So I'd like to take a moment and thank the Schnitzer team for your steadfast focus on execution during the past quarter.

So now let's turn to Slide 4.

This morning, we announced a substantial sequential improvement in our third quarter results, led by benefits from the cost reduction and productivity initiatives we announced in early April. All of our businesses delivered higher operating performance versus the second quarter.

On a consolidated basis, we announced breakeven adjusted earnings per share from continuing operations. Included in these results is a significant adverse impact from average inventory accounting.

In aggregate for the third quarter, the impact was $15 million or approximately $0.40 a share. And this was primarily due to the rapid decline in ferrous selling prices in February and the lagging impact of average inventory costs, which carried into the third quarter.

Ferrous pricing was relatively stable for the quarter and has continued to be steady through June. We continued our focus on inventory turns and metal spreads, and we were able to generate $64 million of operating cash flow.

We also continued our uninterrupted record of returning capital to our shareholders through our quarterly dividend. We funded our capital investments, and we reduced our debt to the lowest level since the first quarter of fiscal 2011.

While market conditions continue to be challenging, we are encouraged by the progress we have made to realign our operations to deliver improved results in this weaker market environment, and we are demonstrating that those results can indeed be achieved.

Let's turn now to Slide 5 to take a look at ferrous pricing during the quarter. During the third quarter, ferrous scrap pricing steadied after the severe drop that occurred in February of our second quarter when we saw ferrous prices drop as much as $100 per ton.

On the East Coast, as indicated by the red line on this chart, export prices increased as much as $45 per ton driven primarily by restocking activity in Turkey. On the West Coast, as indicated by the blue line, export prices moved up more moderately.

During June, we've seen export prices generally move sideways while domestic prices have increased. And while absolute prices remained weaker versus a year ago, volatility appears to have decreased.

So now let's turn to Slide 6. During the third quarter, each of our businesses generated higher performance sequentially.

Our Metals Recycling Business and our Auto Parts Business delivered increases in adjusted operating income due to reductions in SG&A and production costs, higher shipped volume, the closing of the 7 auto parts stores that we announced in April and higher seasonal retail activity. Our Steel Manufacturing Business delivered improved results as strong customer demand and continued West Coast nonresidential construction spending offset lower sales prices.

And finally, corporate costs were lower during the quarter.

Let's turn now to Slide 7 to review in more detail the progress on our cost reduction and productivity initiatives. As you'll recall, the goal of the cost reduction and productivity plan that we announced in April is to achieve an annual savings run rate of $60 million.

We originally expected to get to a quarterly run rate of $15 million by the second half of fiscal 2016. We are executing ahead of schedule.

In the third quarter, we achieved $10 million of savings, and we expect to see the full $15 million of savings in the fourth quarter of this 2015 fiscal year.

So let me spend a couple of minutes reviewing this in more detail. The MRB and APB savings are being generated from a combination of SG&A cost savings, lower production costs, benefits from productivity initiatives and the store closings we announced in April.

Together, MRB and APB delivered approximately $9 million of savings in the third quarter and are on track to deliver an additional $5 million in the fourth quarter to reach their quarterly run rate of $14 million. Our Corporate shared services division delivered $1 million of savings in the third quarter, primarily from the integration of our MRB and APB divisions.

In aggregate, on a consolidated basis, by the fourth quarter, we expect to reach our targeted quarterly run rate of $15 million in benefits.

Now I'll turn it over to Richard for a more detailed discussion on our segment performance and our capital structure.

Thank you, Tamara. I'll begin on Slide 8, covering our Metals Recycling Business.

Beginning with ferrous, sales volumes of 971,000 tons increased sequentially by 29%. Export shipments contributed 68% of total ferrous sales volumes, which was well up from 55% in the second quarter as we took advantage of higher overseas demand.

Nonferrous sales volumes of 130 million pounds increased by 21% sequentially, including benefits from the resolution of the labor slowdowns at West Coast ports. Compared to the prior year, both ferrous and nonferrous volumes were slightly lower, reflecting the adverse impact of weaker demand and of lower commodity prices on overall supply.

While we did see prices stabilize in the third quarter, average ferrous selling prices declined by 19% sequentially, mainly due to the impact of lower price shipments in the first part of the quarter. Due to weaker global demand, average nonferrous prices also declined by 9% sequentially and by 14% from last year's third quarter.

Turning to Slide 9, I'll now review MRB's financial performance. Adjusted operating income in the third quarter was higher sequentially, up by almost $4 million, reflecting the benefits from productivity initiatives and from the improved sales volumes.

Overall profitability continued to be adversely impacted by average inventory accounting by an estimated $13 million in the quarter or $14 per ton. As current market trends are more stable and as we've now turned our higher-cost inventory, we expect that in our fourth quarter, adverse effects from average inventory accounting will be substantially reduced.

As you can see on the right-hand chart, absent average inventory accounting, our recent trends of operating income per ton have been much improved. It is important to note that this significant increase has been achieved despite lower commodity prices year-over-year, despite weaker demand, which has reduced our ferrous sales volumes by 12% year-to-date, and despite tighter conditions for supply of raw materials.

The reasons we have been able to achieve such improvements include our productivity initiatives, our cost reductions; adjustments to capacity to eliminate fixed costs, and a strong ongoing focus on commercial discipline which ensures we sell to wherever demand is greatest and can quickly adjust our buy program to reflect changes in market conditions.

Assuming stable markets, we expect that our adjusted operating per ton, excluding average inventory accounting, will further expand in the fourth quarter, including $3 million of additional quarterly benefits from productivity initiatives.

Now turning to Slide 10. I'll review APB's third quarter performance.

APB's performance in the third quarter improved significantly over the second quarter due to seasonally higher retail sales and from benefits of cost reductions and productivity initiatives. Operating income of $3 million equated to an operating margin of 5%, which included adverse average inventory costs of $2 million impacting our margins by approximately 350 basis points.

Looking ahead and based on current market trends, we do now anticipate significant impacts from average inventory accounting in our fourth quarter. We also expect to achieve up to $2 million of additional quarterly benefits from our cost reductions and productivity initiatives.

In total, for APB and MRB combined, we anticipate restructuring charges of approximately $1 million in the fourth quarter, which is substantially less than we incurred in the third quarter.

As planned, during the third quarter, we closed 7 retail stores, 1 of which was absorbed into existing nearby locations and the results of the other 6 are included in discontinued operations.

Now let's move to our Steel Manufacturing Business on Slide 11. SMB achieved sequentially higher operating income of just over $4 million.

Benefits from improving demand in West Coast construction markets and a continuing focus on productivity more than offset the adverse impacts of lower average selling prices and the pressure from imports. Sales volumes of 142,000 tons increased by 8% sequentially and by 5% from the prior year quarter.

Reflecting lower cost of scrap, average net sales prices decreased by $36 per ton sequentially and by $71 per ton compared to the prior year's third quarter. Rolling mill utilization of 69% was lower sequentially due to a scheduled maintenance shutdown, which took place during the third quarter.

Moving to Slide 12. I'll go over our cash flow, our capital expenditures and net debt.

Our third quarter operating cash flow of $64 million enabled reductions in net debt of $51 million and supported our CapEx and our quarterly dividend. Our end of quarter net debt was $254 million, and our net leverage of 32% reflected a sequential decrease of approximately 375 basis points.

The positive operating cash flow continued a strong quarterly trend and was driven by our ongoing focus on cash metal spreads and our disciplined management of working capital. Capital expenditures from maintaining the business, environmental and safety-related projects totaled $7 million in the third quarter.

For fiscal '15 as a whole, we anticipate total CapEx in the range of $30 million to $35 million.

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

Thank you, Richard. In the face of rapid price declines and lower demand, we are taking substantial steps to improve our profitability and to continue our trend of positive cash flow.

lowering our costs, operating efficiently, meeting our customers' needs and generating synergies between our businesses. As a result of these actions, all 3 of our businesses demonstrated improvements in the third quarter.

During Q3, we also made substantial progress on our fiscal '15 strategic actions, which resulted in earlier than anticipated benefits to our operating performance. Furthermore, we are well on our way to completing the integration of our Metals Recycling and Auto Parts businesses into a single division.

We expect the transition will be completed during the fourth quarter.

We continue to deliver on our strong trend of positive cash flow amid soft market conditions. Over the last 4 quarters, we have reduced our debt by more than $100 million while continuing to invest in our businesses and return capital to our shareholders through our quarterly dividend.

In closing, I'd like to thank everyone on the Schnitzer team for the extraordinary commitment and dedication you bring to the job every day. Thank you for working safely and working together to serve our customers, our communities and our shareholders.

And now, operator, let's open up the call for questions.

Had a question on the $10 million in savings that you had achieved in the third quarter. How much of that was SG&A?

And how much of that was cost of goods if we could get an approximation there?

Well, in the third quarter, Phil, our SG&A in total went down by $6 million. So at least half of it was in -- or just -- but that included a $2 million insurance reimbursement.

So I would say, just under half of it was SG&A, and the rest of it was in production costs and cost of goods sold.

So under half in SG&A, so something like $4 million. And how much of the incremental savings going forward is going to be SG&A-related?

I think the same proportion, if you apply the same proportions.

Okay. About 50-50; something like that?

Yes.

The insurance settlement piece, did that flow through the Corporate? Will that have flown through Corporate SG&A?

Yes, that's through Corporate SG&A. That's just a normal recurring reimbursement, and we don't adjust that -- our results, Phil, because we actually incurred those costs originally through our normal recurring numbers.

But we wouldn't expect the insurance reimbursement to repeat in future quarters.

Okay. So you've taken costs associated with it in the past?

So -- okay.

That's correct. So we don't adjust that out.

But that wasn't part of the cost savings, was it?

No, that's not counted -- good question. That's not counted in that cost savings for the quarter.

Okay. And then on the nonferrous pricing move down to $0.74, on a quarter-on-quarter basis, how much did that impact you?

I'm just trying to see how to think about that.

Yes. In the -- even though the MRB results were improved from the second quarter to the third quarter, that was probably net of around about $1 million impact of the lower nonferrous prices.

And in the Auto Parts division, we more than offset weakness in nonferrous prices with improved yields and product -- other productivity savings and labor.

Okay. And then lastly and I'll jump back in the queue, for the MRB division, I heard you say the operating -- the adjusted operating income per ton x the accounting headwinds is going to be likely improved quarter-on-quarter in 4Q.

Yes, we have a very significant effect as we had forewarned of average inventory accounting in the third quarter. So on an adjusted basis, excluding average inventory accounting, we were about $16 per ton in the third quarter.

Looking ahead to the fourth, because we have some incremental cost reductions and cost savings to come, I think we could expect, if the markets are stable, to improve upon that number, excluding the average inventory accounting, if that does not recur.

Okay. So less in headwinds from that plus the productivity savings.

Okay.

Yes.

In Metals Recycling, it says that the first in several quarters where domestic ferrous volumes declined relative to prior year levels and, to a greater extent, in export volumes. Is that related to any particular assets or regions in the platform?

Or was it kind of broadly across that segment?

We just misheard the first part of your question, Brent. I'm sorry.

Can you repeat it?

Well, the domestic ferrous volumes had a pretty consistent record of growth there in the last several quarters and fell a bit this quarter. I was curious if that was related to any particular regions or kind of across the segment.

Oh, well, we flex the proportion of domestic and export sales depending upon the strength of the markets, so I wouldn't focus it regionally. I think that you saw in Q3 that we saw a significant rebound in Turkey driven primarily by restocking.

And that's what directed for stronger prices that flow. And so I think you could expect going forward to see similar movements between export and domestic just depending upon where markets are stronger at any point in time.

And I actually think it is one of the things that is driving our improved performance versus -- elsewhere in the market is the diversification of our platform. The geographic diversification is very critical in the weaker global economic environment that we're seeing.

Okay. And then on Steel Manufacturing.

From a year-on-year comparison, average selling prices sell less than scrap prices, and your shipment volumes are higher, but the operating profits of the segment was kind of flat for the quarter relative to last year. Are there any other moving parts?

I know you mentioned maintenance. Was maintenance there last year that might have impacted that profitability before?

Yes. Hi, Brent.

It's Richard. Yes, it's really down to product mix.

The reason -- the answer to your question is product mix in that we had a higher proportion of rebar sales in the quarter and a lower proportion of sales in other products that we sell and the changes in pricing and volumes of them both was the reason why the comparison is the way it is.

Okay. And is there any maintenance planned in this quarter?

Or is it behind you?

It's behind us.

Okay. And then just lastly, you continue to take down debt here pretty rapidly.

Is there a definitive leverage target or ratio you want to get the company to?

No. There's not a definitive ratio.

We've been very pleased with our ability to generate operating cash flow and drive our debt levels down, continue to invest in our business and continue to support our dividend. So I think we're very happy with that cash generation.

And then going forward, the additional places that we look to allocate cash is stock repurchases and acquisitions that make sense from a price and synergy and diversification perspective.

I wanted to drill down a little bit. You've talked a lot in the last several quarters about productivity initiatives and cost reductions.

And at least in the MRB Business, it's a highly variable cost business driven by what you pay for scrap and what you sell scrap for. So can you just give a little bit more meat to that productivity initiatives?

I don't know what that means in your business. So do you have any more concrete examples of the types of things that you're doing and can continue to do?

Yes, that's -- Hi, Timna. It's Richard here.

You're correct that there's a combination of variable and fixed costs, and the key variable elements are scrap costs and labor. From a productivity point of view, on the labor side, we look very closely at the amount of ores it takes to produce a ton and/or process a ton in that business and look to improve that ratio over time because that's a permanent saving and -- when you can improve that productivity.

We've also looked very closely at our structures. So we've merged -- integrated departments together.

We've delayered that business, so there's less, less management layers. And from a fixed cost point of few, we actually, as you know, adjusted capacity last quarter in the Northeast and in Canada and in Puerto Rico.

And as a consequence, we took some fixed costs out of our business. So we continue to be very focused on permanent productivity savings, taking out fixed costs and adjusting our variable costs very nimbly to reflect volumes.

Okay. That's helpful.

In the scrap business, we're hearing a lot more talk about permanent closures and rationalization finally after this challenging environment. Can you give us any thoughts on the time frame of getting to a more balanced market or a market where you might have some pricing power again?

Well, I think that we're going to see consolidation activity occur or capacity just come out of the market due voluntarily or due to bankruptcies. I think we're going to see a steady pace of that over the next 12 to 24 months.

I think that we're beginning to see that get reported out steadily, and what we see in the market will continue that. And that's probably a silver lining, if you will, in the event that pricing weakness continues.

Okay. All right.

And then just switching round quick onto the Auto Parts Business, I'm an old-time writer [ph], I guess I'm thinking back to when this was supposed to be a really fantastic growth story, and now we're shutting stores. So where do you see this business longer term?

Is this structurally not so interesting? Or are there still opportunities on a selective basis?

Or how do you think about this going into the next several years?

Well, we still think it is a terrific business. So our views haven't changed because it really does create a differentiated buying platform for us.

We routinely review up our sites across all of our businesses to review their profitability, their outlook and the like. So over the course of the last 10 years that I've been here, we have routinely looked at sites, closed them, expanded them, merged them.

And so the 7 stores that we announced, 1 of them obviously was merged into stores that we had nearby; 6 were closed. But as we continue to improve performance in that sector, I would look to continue to invest in that because it does have excellent synergies with MRB and is one of the reasons why we're managing the 2 divisions, hopefully beginning -- we should be reporting out on that beginning fourth quarter.

A quick question on the impact from inventory headwinds in APB. It seems like it was supposed to be more initially when you had talked about it in the prior quarter.

I guess, what differed between the actual results and what you were previously expecting?

Yes. That's just adjustments to the cost of cars during the quarter, which really ended up changing the amount of the average inventory effect.

I would comment here, Martin, that we reported out a 5% operating margin in that business. The average inventory accounting had about a 300 basis point effect.

So if that doesn't recur and then we have additional productivity initiatives to come, we can see a route back to a double-digit margin in that business.

Okay. And looking forward, it still seems like there's going to be some inventory cost headwinds, although, I guess, from your commentary, it seems like it's a little bit more focused in MRB as opposed to APB in the upcoming quarter.

Any kind of guidance as far as what the impact would be in MRB per ton?

Yes. I just want to clarify here.

We've actually -- in MRB, we've turned all of the higher cost inventory. So assuming more stable market conditions in our fourth quarter, we do not expect a recurrence of the headwinds in the fourth quarter.

And as we said in our commentary, we'd expect the effect of adverse average inventory accounting to be substantially reduced in the MRB segment in the fourth quarter. And as far as the Auto Parts Business goes, we've also turned all of the higher cost inventory in that business.

And although it was only $2 million in the third quarter, we still expect a reduction of average inventory effects in the fourth quarter in that business as well. So overall, substantially reduced effects of average inventory accounting in the fourth quarter.

So when I think about that, I should think about something closer to 0 as opposed to any material impact on the fiscal fourth quarter.

Correct.

You delivered a nice sequential pickup in rebar shipments in the quarter. Could you give us a sense as to how much of this is related to seasonality versus what might be a more sustainable improvement in demand for rebar?

And then could you provide some commentary as to just kind of how you're seeing nonres construction activity trending along the West Coast?

Well, we have seen a continued improvement in demand for rebar off the West Coast now for the last couple of years, and that's primarily nonresidential construction and some private infrastructure. But we have not yet seen any pickup in public infrastructure and obviously look forward to, hopefully, an infrastructure bill being passed, if not by the current administration, by the next administration in 2016.

And so it is almost exclusively nonres, and it's been a steady improvement. Our customer sentiment is very positive.

Demand is very good. And while we do see some impact from imports, we've seen steadily improving demand and positive sentiment from our customers.

Okay. That's great color.

And then to change gears, we saw a pretty sizable downtick in your average selling prices for nonferrous scrap after they had been relatively steady over the last couple years. Could you comment about how you've seen the product mix of your nonferrous shipment volumes change over time?

Are there any trends worth mentioning here? And what was the key driver of that lower nonferrous average selling price in the quarter?

The nonferrous weakness in pricing is really aluminum, which is the primary nonferrous material in our mix. So -- and that's been driven really by the same weaknesses, if you will, or same drivers of weakness that we see in ferrous, which is excess production, the strong dollar, and the additional impact is the drawdown of LME warehouse inventories.

Thank you, operator, and thank you for joining us on our call today and for your interest in our company. We look forward to speaking with you when we announce our fiscal 2015 year end results in October.

Thank you.