Operator: Good day, ladies and gentlemen. And welcome to Schnitzer Steel Second Quarter 2019 Earnings Release Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference Michael Bennett, Investor Relations. You may begin.

Michael Bennett: Thank you, Gigi. Good morning. I am Michael Bennett, the company's Senior Director of Investor Relations.

I'm happy to welcome you to Schnitzer Steel's earnings presentation for the second quarter of fiscal 2019. In addition to today's audio comments, we have issued our press release and posted a set of slides both of which you can access on our Web site at www.schnitzersteel.com or www.schn.com. Before we start, let me call your attention to the detailed Safe Harbor statement on Slide 2, which is also included in our press release and in the company's Form 10-Q, which will be filed later today. As we note in Slide 2, we may make forward-looking statements on our call today, such as our statements about our outlook, targets for growth and future margin expansion. Our actual results may differ materially from those projected in our forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Slide 2, as well as our press release of today and our Form 10-Q. Please note that we will be discussing some non-GAAP measures during our presentation today. We have 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 and Chief of Corporate Operations.

Tamara Lundgren: Thank you, Michael. Good morning, everyone. Thank you all for joining us on our second quarter fiscal 2019 conference call. We appreciate your interest in our company, and we look forward to sharing our results with you this morning. On our call today, I'll review the highlights of our quarterly performance, the macroeconomic and market trends underlying each of our businesses, and the progress on our strategic initiatives.

Richard will then discuss our segment performance and our capital structure. I'll wrap up and then we'll take your questions. Before we get started, however, I'd like to make a few comments about safety at Schnitzer. Safety is at the foundation of everything we do. And we have continued to raise awareness, increase training, and sharpen our focus.

I'm pleased that these efforts have yielded improved safety performance, thanks to the terrific commitment and dedication of our team members across our organization. For example, through the first half of fiscal '19, our total recordable injury rate is lower by 27% versus last year. These are great results and we are all committed to further improvement. There's nothing more important than the health and safety of our employees and of all the visitors to our sites. So now, let's turn to Slide 4 to get started.

Earlier this morning, we announced our fiscal '19 second quarter adjusted earnings per share of $0.48. This is our second best Q2 performance since fiscal '11. Both of our divisions delivered solid operating results, and I'd like to start this morning by mentioning a few of our key achievements in the quarter. First, AMR delivered operating income per ferrous ton of $25, in line with the first quarter despite a lower price environment, weaker export demand, and challenging weather conditions that affected our supply flows. The team did an outstanding job navigating through these headwinds.

In particular, I would call out their strong execution of the major productivity initiatives we announced last quarter and their ability to increase country and customer diversification in the sale of our ferrous and non-ferrous products. Second, CSS achieved operating income of $6 million. This was higher than in Q2 of last year, despite lower finished steel sales volume. Sales volumes at CSS were down 25% year-over-year, primarily due to construction delays caused by prolonged periods of rain in California and colder-than-average temperatures in the Pacific Northwest. And third, our strong operating cash flow enabled us to reduce net debt in the quarter, while returning capital to our shareholders through the repurchase of shares representing approximately 1% of our outstanding stock and the issuance of our hundredth consecutive quarterly dividend.

Let's now turn to Slide 5 to review market trends and conditions in more detail. During most of the quarter, export ferrous prices were on a downward trend, reaching a trough towards the end of January before strengthening in February. Since the end of the quarter, export prices to Turkey have risen approximately $40 per ton from their lows in January as Turkish mills return to the market. During the quarter, we saw similar volatility on the West Coast with stronger prices at the end of the quarter driven by higher finished steel prices in Asia. Turning to the domestic market.

Although, domestic prices during the quarter remained stronger than export prices, domestic prices moved downward as a result of softer prices for flat steel products. In March, domestic prices strengthened, reflecting normal seasonality but prices were still below December's levels. Current April reports are reflecting softening demand versus March. As you can see in this chart on the top left of this slide, during the quarter we saw a significant rise in iron ore prices following the recent dam collapse in Brazil and the resulting anticipated impact on iron ore production levels. The scrap to iron ore ratio is currently around 3.5 times and this is significantly lower than the average over the last two years, which was over 4.5 times.

During the quarter, prices for aluminum scrap, such as Zorba, remained at levels, which were substantially lower year-over-year. Prices and demand for Zorba have been primarily influenced by Chinese import restrictions, including tariff and non-tariff barriers, and to a lesser extent softer end product demand including weaker auto sales in China and the rest of Asia. While we have seen a recent uptick in Zorba pricing, the lack of clarity around China's quality and licensing regulations for the imported scrap is creating continued volatility in demand and pricing. Moving to the finished steel market trends in the top right of this slide. Average domestic rebar pricing during the quarter was up 19% year-over-year.

West Coast market demand continues to benefit from robust private construction spending and has the potential to benefit in the longer term from increased state level support for infrastructure projects. And as you can see in the chart on the bottom right, rebar-to-scrap metal spreads continued to remain at the highest levels that we have seen in the past eight years as lower levels of imports continue to benefit domestic utilization rates and pricing. So now, let's turn to Slide 6 to review our ferrous sales activity. Productivity improvements, sales diversification, and volume growth underpin our strategy for our ferrous platform. As Richard will discuss later, our productivity initiatives enabled AMR to maintain operating income per ferrous ton at the same level as in the first quarter despite the headwinds from lower prices, lower export demand, and unusually severe weather.

AMR's financial performance has also benefited from our investments in transportation assets and logistics, which have enabled us to significantly expand our ability to access the domestic market. This flexibility to shift sales to the domestic market as well as to increase sales to additional export markets and to customers in Asia, South and Central America and Europe, have enabled us to offset the recent weakness in Turkish market demand. Our focus on organic ferrous volume growth also continues. Despite the impact from recent shifts in global trade patterns, long-term demand for scrap is underpinned by several trends, including the increased focus on the environmental impact from steel making, the wide ranging objective to lower greenhouse gas emissions, and the economic and environmental benefits of reducing energy consumption. These trends have translated into scrap usage significantly outpacing the growth in steel production in some of the largest steel manufacturing countries, including China, Japan, Russia, and the U.S.

As many of you know, we completed our three-year plan to increase our ferrous volumes by 25% to 30% a year early, reaching 4.3 million tons at the end of fiscal '18. We were able to increase these volumes through a combination of the excellent performance by our team as well as positive market conditions that were stronger than we anticipated when we set these targets. Last year, in stronger market conditions, we accelerated our volume growth target of an additional 700,000 tons based on our retain capacity by 12 months for fiscal '20. While we continue to maintain this 700,000 ton volume growth target, looking at the market dynamics over the last six months, including the change in the non-ferrous market, the extended divergence between domestic and export prices and slower global growth. We are returning to our original timeframe of fiscal '21.

So now let's turn the Slide 7 for an update on our non-ferrous sales and operations. In the first half of fiscal '19, we shipped more than two-thirds of our non-ferrous products to countries other than China. Sell to countries such as India, Japan, South Korea, Malaysia, Taiwan and Thailand, have offset the drop in China's imports of Zorba and related products. Similar to the ferrous market, this demonstrates strong results from our sales diversification strategy and our ability to adapt to changing market dynamics, including changing trade flows and tariff. Assessing China's future import demand, however, is still a bit of a challenge.

As you may recall, at the end of December, the Chinese government announced that effective July 1, 2019, new regulations will re-characterize certain scrap products from solid waste to raw or furnace ready materials and this will permit China to meet its proposed 2020 solid waste import band, while still allowing Chinese industry to import needed clean graze of scrap necessary for their operations. The Chinese government has not yet provided further guidance on the quality requirements, nor how these import regulations will be applied in practice. While the situation remains fluid, our team has positioned us to access alternative markets for our non-ferrous products. And looking forward, we have a well developed and focused strategy to enhance and to grow our non-ferrous platform. Underpinning this strategy are three initiatives; first, improving the efficiency of our processes to enable us to produce quality products on a cost effective basis; second, increasing our throughput and extracting more materials from our shredding process; and third, creating product optionality to meet the evolving needs of our customers.

To support these strategic objectives, we have a capital investment program underway to implement advanced metal recovery technologies at our major shredder facilities. As we discussed last quarter, we expect the aggregate investment to be in the range of $40 million to $50 million, split over fiscal '19 and '20. Once implemented, we expect the short payback well in excess of our cost of capital, and we plan to provide a more detailed update when we announce our third quarter results at the end of June. Now, I'll turn the presentation over to Richard who will provide the update on our productivity initiatives, our segment performance and our capital structure. Richard?

Richard Peach: Thank you, Tamara and good morning.

I'll start off with an update on our productivity initiatives. We are targeting annual benefits of $55 million, which are split $27 million in AMR, $5 million in CSS and $3 million in corporate. We expect that 80% of the benefits will be in cost of goods sold and the remainder in SG&A and retail sales. As the top left hand chart shows, the components of our productivity initiatives are well balanced between different areas. In AMR, we're achieving production cost efficiencies, enhanced asset management, reducing outside services, optimizing use of logistics and improving our retail yields.

Of the AMR total, 80% is in cost of goods sold and 20% in SG&A and increased retail sales. In CSS, all the benefits of the cost of goods sold through use of analytics and maintenance practices, improving yields, and enhancing product quality. And in corporate, the SG&A savings are coming from lower professional fees and reducing outside services. As Tamara mentioned earlier, we have made strong progress in the execution of these productivity measures as of tracking a hand of the scheduled that we originally set. Since we began implementing the new initiatives, we've achieved consolidated benefits of $11 million fiscal year-to-date, including approximately $8 million in AMR, $2 million in CSS and $1 million in corporate.

Overall, we expect to achieve at least 75% of the targeted annual benefits in fiscal '19 with the full run rate expected to be delivered in fiscal '20. Now, let's move to Slide 9 and discuss Auto and Metals recycling. In the second quarter, AMR's adjusted operating income was $22 million, which represented adjusted operating income per ferrous ton of $25. Despite challenging markets and severe weather conditions, on a sequential basis, AMR was able to offset the adverse impact from a decline in ferrous volumes and weaker ferrous selling prices with benefits from strong execution of productivity initiatives and lower SG&A expense. Average inventory accounting had an adverse impact in the second quarter of $1 million compared to a neutral impact in the first quarter of fiscal '19, and a benefit of $4 million in the prior year second quarter.

AMR's ferrous sales volumes decreased 4% year-over-year and 7% sequentially due to the weaker price environment and the adverse impact on supply flows, including lower car purchases from the severe winter weather. Non-ferrous sales volumes were up 9% compared to the second quarter of last year, mainly due to the timing of shipments, but were down 8% sequentially impacted by the lower supply growth. Average ferrous net selling prices in the second quarter were down 9% year-over-year and down 6% sequentially. Export prices fell sharply in the middle of the quarter before rebounding in February, which narrowed the gap to domestic prices. Average of non-ferrous selling places decreased 19% year-over-year and by 2% sequentially.

The primary driver of the non-ferrous price weakness is the continued impact of Chinese tariffs and import restrictions, which started last spring. Over the last four quarters, we have shipped our ferrous and non-ferrous products to 26 countries. The flexibility of our operating platform also enables us to increase the percentage of ferrous sales to the domestic market when advantageous to do so. As a result of the premium on domestic prices, in the second quarter, we increased our sales to the domestic market to 40% of the AMR sales volumes compared to 27% in the second quarter of last year. Looking ahead to the third quarter, we anticipate AMR's ferrous sales volumes to increase sequentially in the range of 5% to 10%.

Key influences on volumes over the remainder of the quarter include the strength of seasonal increases in supply flows and the impact of any changes in the export market on short-term demand and supply. Non-ferrous sales volumes are expected to approximate the second quarter, which included benefits from the timing of sales. On our first quarter earnings call in January, I noted that compared to last year, the combination of lower Zorba prices, the domestic price premium over export and narrower spreads on end of life vehicles, were impacting our AMR margins by $15 to $20 per ton compared to our average for fiscal 2018 of $45 per ton. At that time, we also identified that the levers we are pulling, including our productivity initiatives, should provide the opportunity for our AMR performance to exceed $30 per ton, absent any significant changes in market dynamics. Our third quarter outlook shows we are executing on this objective as we expect AMR's operating income per ton to be higher by approximately 20% sequentially on seasonal improvements to supply flows and to retail sales.

Now let's move to Slide 10 and discuss Cascade steel and scrub. CSS's second quarter operating income was $6 million, an improvement year-over-year. Operating results benefited from expanded spreads for finished steel and higher benefits from productivity initiatives, partially offset by the impact of lower finished steel sales volumes, increased cost of consumables and higher production costs associated with planned downtime and maintenance during the quarter. Compared to the first quarter, operating income was lower by $6 million, primarily driven by lower sales volumes and the impact on production costs of the planned downtime and maintenance. Our finished steel sales volumes were 25% lower year-over-year and by 21% sequentially, primarily due to weather related construction delays in our West Coast markets.

Rolling mill utilization was 76% in the quarter, a reduction from 83% in the second quarter of fiscal '18, primarily due to additional days of planned annual downtime falling into the second quarter, which last year had taken place in the first quarter. Average selling prices for finished steel were 19% higher year-over-year, reflecting the steady West Coast market environment, reduced pressure from imports and the higher cost of raw materials and other steelmaking inputs, including natural gas, graphite electrodes and alloys. Sequentially, average selling prices decreased by 1%. Looking ahead to the third quarter, we expect finished steel sales volumes to increase by approximately 35% compared to the second quarter as a result of seasonally higher demand. Operating income in the third quarter is expected to be approximately $2 million higher sequentially when benefits from increased volumes partly offset by the impact of high beginning inventory costs due to the lower production in the second quarter.

Compared to last year's third quarter, operating income for CSS is expected to be lower, primarily due to increases in beginning inventory costs and higher operating expenses for electrodes, alloys and natural gas, including a greater than $1 million impact from an extraordinary spike in gas prices during March. Moving on, let's proceed to Slide 11 to review our capital structure. Operating cash flow in the second quarter was $35 million, driven mainly by profitability. For the first half of our fiscal year, operating cash flow is now ahead of last year at the same stage. Looking ahead, we expect to generate positive operating cash flow, again during the fourth quarter.

Capital expenditures in the second quarter totaled $14 million and included a combination of spend on maintaining the business, replacing mobile equipment and environmental capital projects. For the year-to-date, our capital expenditures have totaled $41 million. In fiscal '19 as a whole, we current expect to invest up to $100 million in capital expenditures with almost $60 million in the second half of the fiscal year. The second half spend is higher than the first, because it includes completion of major environmental projects, which are easier to progress and better spring and summer weather. Our strong operating cash flow enabled us to reduce debt by $7 million in the second quarter, while also returning capital to shareholders through the issuance of our quarterly dividend and the repurchase of almost 1% of our expanding stock.

Net debt of $150 million at the second quarter is almost $50 million lower than one year ago and our balance sheet remains strong with leverage of 18% and a net debt to adjusted EBITDA ratio of 0.8x. Turning to corporate items, corporate costs in the first quarter were $8 million, a $9 million decrease compared to the same period of the prior year and a $4 million decrease sequentially, driven primarily by lower accruals for incentive compensation and compared to the prior year, lower expenses for legal and other professional services. Looking ahead to the third quarter, we expect corporate costs to be approximately $3 million lower than the third quarter of the prior year; our effective tax rate in the second quarter was an expense of 22%; our expected tax rate for the second half of the fiscal year is expected to be approximately 24%; although, our actual tax rate will be subject to a level financial performance and other relevant factors. I will now turn the presentation back over to Tamara.

Tamara Lundgren: Thank you, Richard.

As you've heard this morning, in the second quarter we delivered a strong set of financial results despite challenges in both the non-ferrous and ferrous markets. Our performance can be attributed to the steps we've taken over the past several years and steps which are currently underway to continually improve our business performance. With global scrap consumption outpacing crude steel production, the long-term outlook for scrap is strong. We remain focused on our strategic priorities, which include productivity initiatives, major investments in advanced metals recovery technology and volume growth. Our disciplined business model has led to a strong balance sheet, which enables us to continue to invest in our business and return capital to our shareholders.

In closing, I would like to thank our employees, many of whom I know are listening to our call this morning. Our performance is the direct result of your ability to drive best-in-class results without wavering from our core values. I'm also pleased and proud to announce that Schnitzer Steel was recently honored as one of the world's most ethical companies by Ethisphere for a fifth consecutive year. And this award is an acknowledgement of our team's commitments to acting ethically, safely and sustainably every day. Each of you continues to meet our opportunities and challenges with dedication, commitment and resolve, strengthening our company at every turn.

My thanks go to each of you as you've truly demonstrated why we continue to be a leader in our communities and the recycling industry. Now operator, let's open up the call for questions.

Operator: [Operator Instructions] And our first question from Matthew Korn from Goldman Sachs. Your line is now open.

Matthew Korn: So first off, obviously, I really appreciate the additional detail on the investments, the equipment, and also the classifications of the cost savings and booking those out is very helpful, so much appreciated there.

Let me ask you this. As you pointed out, rebar-to-scrap spreads remain wide, they look attractive, rebar prices seem solid, demand in your region seems to be very, very, very good. When you're looking at your capital plans, how do you see the potential for growth on the steel production side? What's keeping you from turning your own hand to the ring and expanding your rebar production?

Tamara Lundgren: We continue to invest in CSS, and you probably heard us talk about this over the last several quarters of investing and improvements to increase our productivity there, and to increase our efficiency and to actually develop specific products that are meeting our customers' evolving needs. We also in the mill do have air permitting capacity to expand that, and that is something that we look at on a continuing basis. So capital investments are continuing to go into the mill to improve its efficiency and to allow us to grow.

Matthew Korn: So for right now, it's about productivity and squeezing more out from what you currently have as your footprint, that's what I'm hearing.

Tamara Lundgren: Yes.

Matthew Korn: And then another question in the scrap market, I know things kind of changed from for quarter-to-quarter when it comes to China and policy. I read, I think this a couple days ago that there's news coming out of China that it can require [ph] -- importers of scrap metals to use some kind of new registration systems, new licenses by July 1. Have you seen or heard anything about this? Is there any sudden shift in buying behavior, is this an opportunity in the short-term or is this just more noise when it comes to this market that's been changing so much?

Tamara Lundgren: Well, as I mentioned in the remarks, China did, in December, issue regulations to redefine their definition of solid waste.

So as to allow material that can be furnace ready or be considered as raw material to come in. And so, we are expecting regulations to clarify the licensing requirements for importers and the quality requirements of the sellers like us of that material. We're expecting clarifications of those regulations to come in shortly, and we would assume that China will issue those so as to avoid shortages in that material or disruption of flows.

Matthew Korn: Okay, we'll continue to watch this space then. Last from me, really the environmental projects that are going to consume a good chunk of the CapEx over the second half, are those discrete in the second half of this year or is some of that going to spill into next year?

Richard Peach: We have a combination, Matthew, of projects we expect will complete in the second half of this fiscal year and some that will fall into next year.

Our capital program every year includes an environmental capital component, and you can expect that going forward.

Operator: Thank you [Operator instructions]. And our next question is from Phil Gibbs from KeyBanc Capital Markets. Your line is now open.

Phil Gibbs: Richard, on the steel side, I think you had pointed to some carrying of fixed costs headwinds into the third quarter.

Any assistance in terms of what that could be in terms of magnitude. And then secondarily, you had mentioned a spike in natural gas prices in March, certainly, not something we're seeing in the hub. So, I don't know if that's a regional phenomenon that I may have missed. But maybe just some clarification on those two pieces would be helpful.

Richard Peach: In the second quarter, because we had planned maintenance that took place, it means that our production was lower and that's one of the reasons why our utilization was lower year-over-year.

When your production volumes are lower, it means that you are spreading your fixed costs over a lower number of tons, and what that does is it increases your inventory costs. So as we enter the third quarter, we have that higher beginning inventory costs to work through. In terms of how much that is, something in the range of $1 million to $2 million type range to work through on that one, but that will eventually work itself out. In terms of the gas price situation, the spike, there's been in the Pacific Northwest over the last few months, the working through and addressing of a gas pipeline rupture that happened last October and that pipeline has been getting checked and utilization of the pipeline has been steadily increasing. But in March, early March what happened was we had this combination over a three-day period where very cold weather increased demand at the same time as scheduled maintenance, which reduced supply.

And during this three-day event, prices spiked $150 per MMbtu. Now thankfully, prices since then have gone down to single-digit levels, but that three day event and its own cost us more than $1 million related to our expected Q3 results.

Phil Gibbs: And this is largely to your point on regional issue?

Richard Peach: Yes…

Phil Gibbs: And the Pacific North West, okay maybe just moving over to AMR. I mean, I know that the last quarter had a much heavier mix of domestic business than export than we're using to seeing. Is that mix going to perhaps normalize as we move into the third quarter or is that mix of business is going to stay, and that sounds, just trying to get a feel for what you're seeing on the international side moving forward? Because I know, Tamara, you had talked about some softening demand in April domestically.

Tamara Lundgren: What you've seen actually I think for probably about the last year is so is at least a third to 40% of our material is going domestic as the domestic market has strengthened and you've see for at least the last six to nine months a more extended period of domestic premium to export. So it is likely that as that phase current that you will see that proportion of anywhere from probably a third to 40% of our material going domestic.

Phil Gibbs: And as you look out to your long-term ferrous shipment goals in scrap, and I know you have talked about pushing those out a little bit. Can you just remind us what those were prior to your, prior to rolling out the operating leverage increase and then where we're right now and where you expect to be? I am just trying to understand where we are in the spectrum right now.

Richard Peach: In fiscal '18, we achieved ferrous volumes of 4.3 million tons.

Now, that was actually a million ton increase over where we had been in fiscal '16 or midway through and fiscal '16 and on that basis. So we had grown our volumes by good 30%. During fiscal '18, because things are going so well and we have the falling end of the market, we accelerated our expectation that we could grow our volumes ultimately 5 million tons, we thought based on new build conditions that 5 million was possible to achieve by the end of fiscal '20 as of fiscal '21, which had been our original target. But given the market dynamics have changed, we now determined that fiscal '21 is a more appropriate target. So that means that over the next 2.5 years, we expect to grow our volumes by 700,000 tons over that period.

In terms of operating leverage that may create, based on our views for every additional and 100,000 tons that we can add, we believe we should be able to increase our operating income per ton across all tons by about $1. So, that 700,000 ton extra has the potential to increase our margins by around $7 per ton.

Operator: Our next question is from Piyush Sood from Morgan Stanley. Your line is now open.

Piyush Sood: So year-to-date, used car purchase volumes are down about 13% but ferrous shipments are up about 5%.

So is there a change of mix for scrap sources or is there some destocking going on in the background? Or is this because maybe an expected softness in ferrous shipments in 3Q? So that's the first one.

Richard Peach: It's a good point you're making here. What we see with our car purchase volumes is that when the market prices for scrap go own, it takes longer for the prices, the purchase prices for end-of-life vehicles to adjust to changes in scrap market compared to what happens with ferrous volumes and that creates a lag, which then flows into the amount of cars that are purchased. However, what we're beginning to see now is a catch up you all have noticed that the sequential drop in the second quarter in car purchase volumes was not quite as much as the sequential drop in AMR's ferrous volumes. And that is evidence of the catch up beginning to take holes.

And when you look ahead to the third quarter, we would expect that to continue and our car purchase volumes will improve sequentially in the range of 5% to 10%, which is roughly the same or as the same range as our ferrous outlook for volumes. So we're seeing that catch up and the lag continuing.

Piyush Sood: And another quick one, is there a maximum mix you target for your domestic business for ferrous scrap and just an extension as volumes grow over the next two years. Would that make stay the same or do you think there is volumes ceiling to domestic shipments in millions of tons?

Tamara Lundgren: So I don't think that there is a cap on our domestic shipments. I mean what we look at is customer demand, logistics price and we optimize ourselves to align with demand and profitability.

Our investments over the last few years in transportation assets and in logistics is one of the foundational elements in terms of why we've been able to increase our domestic sales as much as we've been able to. And then obviously over the last year or so, the stronger domestic demand and stronger domestic prices have accelerated the amount of tons that have gone into the market. But our overall strategy and philosophy is to stay nimble and to be able to access demand wherever it is greatest at any point in time.

Piyush Sood: And when you look at the relative margins in the export versus domestic, is there one that always that's better than the other or do these margins move around quite a bit?

Tamara Lundgren: The margins move around quite a bit depending upon end price logistics, and volume and product mix.

Operator: Thank you.

Our next question is from Tyler Kenyon from Cowen. Your line is now open.

Tyler Kenyon: So I think, Richard, you mentioned just realizing some timing benefits on the non-ferrous shipments in the second quarter. And it sounds like you expect that to continue into the third. So, wondering if you could just elaborate a bit on what you're seeing there.

Are you seeing any unusual influx from customers in China or globally ahead of these measures expected to be adopted in July?

Richard Peach: As far as the second quarter goes, yes, we had some benefits regarding the timing of shipments and this is related to revenue recognition, but we're not expecting that to repeat itself in the third quarter. We're actually expecting third quarter non-ferrous volumes to approximate the second quarter and they're not increasing, because the second quarter had that timing benefit and they're not expecting to repeat. Our outlook, in terms of China, our outlook for the third quarter reflects our views as to the volumes we can achieve in non-ferrous in the third quarter and we're very comfortable with our outlook.

Tyler Kenyon: And then just last one for me, any help you could provide us just on how to think about the timing of the realization of the remaining benefits just from the productivity initiatives as we move through the remainder of the year and the early part is of fiscal '20. Thank you.

Richard Peach: So our overall target is $35 million, as you know, and originally we had expected that we could two-thirds of that in fiscal '19, and then the full amount in fiscal '20. Our execution is running ahead of schedule and we achieved $9 million in the second quarter, which is a very near to -- or through, or around, or even better than a full quarterly run rate. So now we believe that if we can produce either the same type of run rate in Q3 and Q4 or in that range that we will deliver at least three quarters of the benefit in fiscal '19 and the full amounts in fiscal '20.

Operator: Thank you. At this time, I am showing no further questions.

I would like to turn the call back over to Tamara Lundgren, CEO, for closing remarks.

Tamara Lundgren: Thank you, Operator. And thank you all for joining us on our call today, and for your interest in our company. We look forward to speaking with you again in June when we will be reporting our third quarter fiscal '19 results. Thank you.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.