UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMERCIAL METALS COMPANY

(Exact Name of registrant as specified in its charter)

Delaware		75-0725338
(State or other Jurisdiction of incorporation of organization)		(I.R.S. Employer Identification Number)

6565 N. MacArthur Blvd.
Irving, Texas 75039

(Zip Code)

(214) 689-4300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes o No þ

As of January 8, 2009, there were 112,323,049 shares of the Company’s common stock issued and outstanding excluding 16,737,615 shares held in the Company’s treasury.

 

 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE NO.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) — November 30, 2008 and August 31, 2008			3
Consolidated Statements of Earnings (Unaudited) — Three months ended November 30, 2008 and 2007			4
Consolidated Statements of Cash Flows (Unaudited) — Three months ended November 30, 2008 and 2007			5
Consolidated Statement of Stockholders’ Equity (Unaudited) — Three months ended November 30, 2008			6
Notes to Consolidated Financial Statements (Unaudited)			7-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17-26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			26
Item 4. Controls and Procedures			27
PART II — OTHER INFORMATION
Items 1 — 6			27-29
Signatures			30
Index to Exhibits			31

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

		November 30,				August 31,
(in thousands, except share data)		2008				2008
Assets
Current assets:
Cash and cash equivalents		$	91,479			$	219,026
Accounts receivable (less allowance for collection losses of $24,750 and $17,652)			1,111,946				1,369,453
Inventories			1,226,416				1,400,332
Other			249,061				228,632
Total current assets			2,678,902				3,217,443
Property, plant and equipment:
Land			83,803				84,539
Buildings and improvements			430,202				462,186
Equipment			1,266,983				1,292,832
Construction in process			293,867				256,156
			2,074,855				2,095,713
Less accumulated depreciation and amortization			(935,130	)			(941,391	)
			1,139,725				1,154,332
Goodwill			73,068				84,837
Other assets			271,156				289,769
		$	4,162,851			$	4,746,371
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade		$	541,738			$	838,777
Accounts payable-documentary letters of credit			189,558				192,492
Accrued expenses and other payables			409,626				563,424
Income taxes payable and deferred income taxes			—				156
Notes payable			25,853				31,305
Current maturities of long-term debt			109,546				106,327
Total current liabilities			1,276,321				1,732,481
Deferred income taxes			66,019				50,160
Other long-term liabilities			100,940				124,171
Long-term debt			1,169,393				1,197,533
Total liabilities			2,612,673				3,104,345
Minority interests			2,967				3,643
Commitments and contingencies
Stockholders’ equity
Capital stock:
Preferred stock			—				—
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 112,185,288 and 113,777,152 shares			1,290				1,290
Additional paid-in capital			371,880				371,913
Accumulated other comprehensive income (loss)			(12,922	)			112,781
Retained earnings			1,519,895				1,471,542
			1,880,143				1,957,526
Less treasury stock 16,875,376 and 15,283,512 shares at cost			(332,932	)			(319,143	)
Total stockholders’ equity			1,547,211				1,638,383
		$	4,162,851			$	4,746,371

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

		Three Months Ended
		November 30,
(in thousands, except share data)		2008				2007
Net sales		$	2,372,830			$	2,116,004
Costs and expenses:
Cost of goods sold			2,106,146				1,855,380
Selling, general and administrative expenses			153,510				149,999
Interest expense			26,083				12,425
			2,285,739				2,017,804
Earnings from continuing operations before income taxes and minority interests			87,091				98,200
Income taxes			30,766				33,357
Earnings from continuing operations before minority interests			56,325				64,843
Minority interests (benefit)			46				(128	)
Earnings from continuing operations			56,279				64,971
Earnings from discontinued operations before taxes			9,113				6,450
Income taxes			3,386				2,257
Earnings from discontinued operations			5,727				4,193
Net earnings		$	62,006			$	69,164
Basic earnings per share:
Earnings from continuing operations		$	0.50			$	0.55
Earnings from discontinued operations			0.05				0.04
Net earnings		$	0.55			$	0.59
Diluted earnings per share:
Earnings from continuing operations		$	0.49			$	0.54
Earnings from discontinued operations			0.05				0.03
Net earnings		$	0.54			$	0.57
Cash dividends per share		$	0.12			$	0.09
Average basic shares outstanding			113,004,524				117,568,366
Average diluted shares outstanding			114,473,163				120,372,272

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Cash flows from (used by) operating activities:
Net earnings		$	62,006			$	69,164
Adjustments to reconcile net earnings to cash from (used by) operating activities:
Depreciation and amortization			41,308				31,522
Minority interests (benefit)			46				(128	)
Provision for losses on receivables			8,784				605
Share-based compensation			4,109				4,206
Net gain on sale of assets and other			(214	)			(189	)
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable			172,402				(29,337	)
Decrease in accounts receivable sold			4,397				38,715
(Increase) decrease in inventories			80,621				(31,923	)
Decrease in other assets			(2,081	)			(1,324	)
Decrease in accounts payable, accrued expenses, other payables and income taxes			(356,366	)			(111,415	)
Increase (decrease) in deferred income taxes			9,087				(25,368	)
Increase (decrease) in other long-term liabilities			(20,107	)			13,003
Net cash flows from (used by) operating activities			3,992				(42,469	)
Cash flows from (used by) investing activities:
Capital expenditures			(86,654	)			(69,189	)
Proceeds from the sale of property, plant and equipment and other			798				299
Acquisitions of other businesses, net of cash acquired			(906	)			(18,757	)
Net cash used by investing activities			(86,762	)			(87,647	)
Cash flows from (used by) financing activities:
Decrease in documentary letters of credit			(2,934	)			(7,060	)
Short-term borrowings, net change			(4,021	)			34,359
Repayments on long-term debt			(292	)			(1,473	)
Stock issued under incentive and purchase plans			65				337
Treasury stock acquired			(18,514	)			(51,191	)
Cash dividends			(13,653	)			(10,671	)
Tax benefits from stock plans			518				881
Net cash used by financing activities			(38,831	)			(34,818	)
Effect of exchange rate changes on cash			(5,946	)			1,465
Decrease in cash and cash equivalents			(127,547	)			(163,469	)
Cash and cash equivalents at beginning of year			219,026				419,275
Cash and cash equivalents at end of period		$	91,479			$	255,806

See notes to unaudited consolidated financial statements.

														Accumulated
		Common Stock								Additional				Other								Treasury Stock
		Number of								Paid-In				Comprehensive				Retained				Number of
(in thousands, except share data)		Shares				Amount				Capital				Income (Loss)				Earnings				Shares				Amount				Total
Balance, September 1, 2008			129,060,664			$	1,290			$	371,913			$	112,781			$	1,471,542				(15,283,512	)		$	(319,143	)		$	1,638,383
Comprehensive income (loss):
Net earnings for three months ended November 30, 2008																			62,006												62,006
Other comprehensive income (loss):
Foreign currency translation adjustment, net of taxes ($12,423)															(130,939	)															(130,939	)
Unrealized gain on derivatives, net of taxes ($947)															5,236																5,236
Comprehensive loss																															(63,697	)
Cash dividends																			(13,653	)											(13,653	)
Treasury stock acquired																							(1,752,900	)			(18,514	)			(18,514	)
Issuance of stock under incentive and purchase plans											(4,660	)											161,036				4,725				65
Share-based compensation											4,109																				4,109
Tax benefits from stock plans											518																				518
Balance, November 30, 2008			129,060,664			$	1,290			$	371,880			$	(12,922	)		$	1,519,895				(16,875,376	)		$	(332,932	)		$	1,547,211

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTE 1 — QUARTERLY FINANCIAL DATA

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) on a basis consistent with that used in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended August 31, 2008, and include all normal recurring adjustments necessary to present fairly the consolidated balance sheets and statements of earnings, cash flows and stockholders’ equity for the periods indicated. These notes should be read in conjunction with such Form 10-K. The results of operations for the three month period are not necessarily indicative of the results to be expected for a full year.

NOTE 2 — ACCOUNTING POLICIES

Share-Based Compensation

See Note 9, Capital Stock, to the Company’s consolidated financial statements for the year ended August 31, 2008 for a description of the Company’s stock incentive plans.

The Company recognizes share-based compensation in accordance with SFAS No. 123 (R), Share-Based Payments (“SFAS 123 (R)”), which requires compensation cost relating to share-based transactions be recognized at fair value in the financial statements. The Black-Scholes pricing model was used to calculate total compensation cost which is amortized on a straight-line basis over the vesting period of issued awards. The Company recognized share-based compensation expense of $4.1 million ($0.02 per diluted share) and $4.2 million ($0.02 per diluted share) as a component of selling, general and administrative expenses for the three months ended November 30, 2008 and 2007, respectively. At November 30, 2008, the Company had $15.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the next 31 months. See Note 1, Summary of Significant Accounting Policies, to the Company’s consolidated financial statements for the year ended August 31, 2008 for a description of the Company’s assumptions used to calculate share-based compensation.

Combined information for shares subject to options and stock appreciation rights (“SARs”) for the three months ended November 30, 2008 were as follows:

						Weighted
						Average				Price
						Exercise				Range
		Number				Price				Per Share
September 1, 2008
Outstanding			6,221,406			$	19.60			$	3.64 – 35.38
Exercisable			4,057,115				11.96				3.64 – 34.28
Exercised			(302,711	)			4.91				3.64 –   7.78
November 30, 2008
Outstanding			5,918,695			$	20.35			$	3.64 – 35.38
Exercisable			3,756,158				12.54				3.64 – 34.28

Share information for options and SARs at November 30, 2008:

Outstanding																		Exercisable
										Weighted
										Average				Weighted								Weighted
		Range of								Remaining				Average								Average
		Exercise				Number				Contractual				Exercise				Number				Exercise
		Price				Outstanding				Life (Yrs.)				Price				Outstanding				Price
		$	3.64 –  3.78				568,692				1.2			$	3.65				568,692			$	3.65
			4.29 –  5.36				303,292				0.2				4.36				303,292				4.36
			7.53 –  7.78				1,354,192				2.2				7.76				1,354,192				7.76
			12.31 –13.58				716,396				3.6				12.34				716,396				12.34
			21.81 –24.71				562,096				4.4				24.52				361,859				24.52
			31.75 –35.38				2,414,027				6.0				34.76				451,727				34.28
		$	3.64 –35.38				5,918,695				3.9			$	20.35				3,756,158			$	12.54

None of the Company’s previously granted restricted stock awards vested during the three months ended November 30, 2008.

Intangible Assets

The total gross carrying amounts of the Company’s intangible assets that were subject to amortization were $91.9 million and $83.8 million at November 30, 2008 and August 31, 2008, respectively, and are included in other non-current assets. During the three months ended November 30, 2008, the gross carrying value of intangible assets increased due to final purchase price allocations for certain acquisitions acquired in fiscal 2008. There were no other significant changes in either the components or the lives of intangible assets during the three months ended November 30, 2008. Aggregate amortization expense for the three months ended November 30, 2008 and 2007 was $5.0 million and $2.2 million, respectively.

NOTE 3 — SALES OF ACCOUNTS RECEIVABLE

The Company has an accounts receivable securitization program which it utilizes as a cost-effective, short-term financing alternative. Under this program, the Company and several of its subsidiaries periodically sell certain eligible trade accounts receivable to the Company’s wholly-owned consolidated special purpose subsidiary (“CMCRV”). CMCRV is structured to be a bankruptcy-remote entity and was formed for the sole purpose of buying and selling receivables generated by the Company. The Company, irrevocably and without recourse, transfers all applicable trade accounts receivable to CMCRV. CMCRV, in turn, sells an undivided percentage ownership interest in the pool of receivables to affiliates of two third party financial institutions. The agreement with the financial institution affiliates expires on April 24, 2009. CMCRV may sell undivided interests of up to $200 million, depending on the Company’s level of financing needs.

The Company accounts for its transfers of receivables to CMCRV together with CMCRV’s sales of undivided interests in these receivables to the financial institutions as sales in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. At the time an undivided interest in the pool of receivables is sold, the amount is removed from the consolidated balance sheet and the proceeds from the sale are reflected as cash provided by operating activities.

At November 30, 2008 and August 31, 2008, accounts receivable of $368 million and $420 million, respectively, had been sold to CMCRV. The Company’s undivided interest in these receivables (representing the Company’s retained interest) was 78% and 100% at November 30, 2008 and August 31, 2008, respectively. At November 30, 2008, the financial institution buyers owned $80 million in undivided interests in CMCRV’s accounts receivable pool, which was reflected as a reduction in accounts receivable on the Company’s consolidated balance sheet. The sale of receivables to institutional buyers provides the Company with added financial flexibility, if needed, to fund the Company’s ongoing operations. The Company is responsible for servicing the entire pool of receivables, however, no servicing asset or liability is recorded as these receivables are collected in the normal course of business and the collection of receivables related to any sales to third party institutional buyers are normally short term in nature.

In addition to the securitization program described above, the Company’s international subsidiaries in Australia, Europe, Poland and a domestic subsidiary periodically sell accounts receivable without recourse. These arrangements constitute true sales and, once the accounts are sold, they are no longer available to satisfy the Company’s creditors in the event of bankruptcy. Uncollected accounts receivable sold under these arrangements and removed from the consolidated balance sheets were $140.6 million and $229.9 million at November 30, 2008 and August 31, 2008, respectively. The average monthly amounts of international accounts receivable sold

were $150.5 million and $181.9 million for the three months ended November 30, 2008 and 2007, respectively. The Company’s Australian subsidiary entered into an agreement with a financial institution to periodically sell certain trade accounts receivable up to a maximum of AUD 126 million ($82 million). This Australian program contains covenants in which our subsidiary must meet certain coverage and tangible net worth levels, as defined. At November 30, 2008, our Australian subsidiary was in compliance with these covenants.

Discounts on domestic and international sales of accounts receivable were $1.9 million and $2.8 million for the three months ended November 30, 2008 and 2007, respectively. These losses primarily represented the costs of funds and were included in selling, general and administrative expenses.

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the last-in, first-out method (“LIFO”). LIFO inventory reserves were $449.5 million and $562.3 million at November 30, 2008 and August 31, 2008. Inventory cost for international inventories and the remaining inventories are determined by the first-in, first-out method (“FIFO”). The majority of the Company’s inventories are in the form of finished goods, with minimal work in process. At November 30, 2008 and August 31, 2008, $61.4 million and $104.5 million, respectively, were in raw materials.

NOTE 5 — DISCONTINUED OPERATIONS

On August 30, 2007, the Company’s Board approved a plan to sell a division (the “Division”) which is involved with the buying, selling and distribution of nonferrous metals, namely copper, aluminum and stainless steel semi-finished products. The Company expected the sale to be completed in fiscal 2008, however, circumstances changed and the Division was not sold in fiscal 2008 though it did begin the process of curtailing its operations. The Company expects the majority of product lines of this Division to be sold, absorbed by other divisions of the Company or liquidated during fiscal 2009. As a result, the Division will continue to be presented as a discontinued operation in the consolidated statements of earnings. During the first quarter of 2009, the Division recorded LIFO income of $6.2 million as compared to LIFO income of $6.5 million in the first quarter of 2008.

The Division is in the International Fabrication and Distribution segment. Financial information for the Division is as follows:

		November 30,				August 31,
		2008				2008
Current assets		$	67,455			$	83,048
Noncurrent assets			3,024				2,650
Current liabilities			11,229				31,258
Noncurrent liabilities			472				580

		Three Months Ended
		November 30,
		2008				2007
Revenue			56,945				86,863
Earnings before taxes			9,113				6,450

NOTE 6 — CREDIT ARRANGEMENTS

At November 30, 2008, and August 31, 2008, no borrowings were outstanding under our commercial paper program or related revolving credit agreements. The Company was in compliance with these covenants at November 30, 2008.

The Company has numerous informal credit facilities available from domestic and international banks. No commitment fees or compensating balances are required under these credit facilities. These credit facilities are used in general to support import Letters of Credit (including accounts payable settled under bankers’ acceptances as described in Note 1. Summary of Significant Accounting Polices in the Company’s consolidated financial statements for the year ended August 31, 2008), foreign exchange and short term advances which are priced on a cost of funds basis.

Long-term debt was as follows:

		November 30,				August 31,
(in thousands)		2008				2008
6.75% notes due February 2009		$	100,000			$	100,000
5.625% notes due November 2013			200,000				200,000
6.50% notes due July 2017			400,000				400,000
7.35% notes due August 2018			500,000				500,000
CMCZ term note due May 2013			58,606				77,037
CMCP term note due August 2013			13,396				17,608
Other, including equipment notes			6,937				9,215
			1,278,939				1,303,860
Less current maturities			109,546				106,327
		$	1,169,393			$	1,197,533

As of November 30, 2008, the Company was in compliance with all debt requirements for these notes. Interest on the notes, except for the CMC Zawiercie (“CMCZ”) and CMC Poland (“CMCP”) notes, is payable semiannually.

CMCZ has a revolving credit facility with maximum borrowings of PLN 100 million ($33.5 million) bearing interest at the Warsaw Interbank Offered Rate (“WIBOR”) plus 0.5% and collateralized by CMCZ’s accounts receivable. This facility expires on June 3, 2009. At November 30, 2008, no amounts were outstanding under this facility. The revolving credit facility contains certain financial covenants for CMCZ. CMCZ was in compliance with these covenants at November 30, 2008. There are no guarantees by the Company or any of its subsidiaries for any of CMCZ’s debt.

CMCZ has a five year term note of PLN 400 million ($134.0 million) with a group of four banks. At November 30, 2008, the notes had an outstanding balance of PLN 175 million ($58.6 million). The note has scheduled principal and interest payments in 15 equal quarterly installments beginning in November 2009. Interest is accrued at WIBOR plus 0.79%. The weighted average rate at November 30, 2008 was 7.2%. There are no guarantees by the Company or any of its subsidiaries for any of CMCZ’s debt.

CMCP owns and operates equipment at the CMCZ mill site. In connection with the equipment purchase, CMCP issued equipment notes under a term agreement dated September 2005 with PLN 13.9 million ($4.7 million) outstanding at November 30, 2008. Installment payments under these notes are due through 2010. Interest rates are variable based on the Poland Monetary Policy Council’s rediscount rate, plus an applicable margin. The weighted average rate at November 30, 2008 was 6.5%. The notes are secured by shredder equipment.

CMCP has a five year term note of PLN 80 million ($26.8 million) with two banks. At November 30, 2008, the notes had an outstanding balance of PLN 40 million ($13.4 million). The note has scheduled principal and interest payments in 17 equal quarterly installments beginning in August 2009. The interest rate is variable based on the WIBOR, plus an applicable margin. The weighted average rate at November 30, 2008 was 7.4%. The term note is guaranteed by Commercial Metals International.

CMC Sisak has current notes to banks with maximum borrowings of HRK 140 million ($24.9 million). At November 30, 2008, the notes had an outstanding balance of HRK 137.7 million ($24.5 million). The interest rate at November 30, 2008 was 6.7%. These notes were repaid on December 9, 2008.

Interest of $2.2 million and $1.1 million was capitalized in the cost of property, plant and equipment constructed in 2009 and 2008, respectively. Interest of $12.9 million and $7.4 million was paid in the three months ended November 30, 2008 and 2007, respectively.

NOTE 7 — INCOME TAXES

The Company paid $6.2 million and $5.9 million in income taxes during the three months ended November 30, 2008 and 2007, respectively.

Reconciliations of the United States statutory rates to the Company’s effective tax rates were as follows:

		Three Months Ended
		November 30,
		2008				2007
Statutory rate			35.0	%			35.0	%
State and local taxes			2.7				1.5
Foreign rate differential			(1.6	)			(1.7	)
Domestic production activity deduction			(1.0	)			(1.0	)
Other			0.4				0.2
Effective rate			35.5	%			34.0	%

On September 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109 (“FIN 48”), for accounting for uncertainty in income taxes recognized in our financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result of the adoption of FIN 48, the Company recognized an asset of $0.8 million and an increase to reserves of $5.8 million related to uncertain tax positions, including $1.6 million in interest and penalties, which were accounted for as a net reduction of $5.0 million to the September 1, 2007 balance of retained earnings.

As of November 30, 2008, the reserve for unrecognized tax benefits was $15.1 million exclusive of interest and penalties. If recognized, $2.5 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes. During the three months ended November 30, 2008, the Company recorded an increase in FIN 48 liabilities of approximately $11.1 million, of which $12.2 was an increase related to the timing of compensation deductions offset by $1.1 million related to transfer pricing. A corresponding benefit of $12.2 million related to the timing of compensation deductions was also recorded as a deferred tax asset in the consolidated balance sheet.

The Company classifies any interest recognized on an underpayment of income taxes as interest expense and classifies any statutory penalties recognized on a tax position taken as selling, general and administrative expense. At November 30, 2008, before any tax benefits, the Company had $6.1 million of accrued interest and penalties on unrecognized tax benefits. During the three months ended November 30, 2008, the Company recognized interest expense of $3.5 million and statutory penalties of $2.0 million.

During the next twelve months, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken by the Company in prior year tax returns or that income tax audits in various taxing jurisdictions could be finalized. As a result, the total amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings up to $3.5 million.

The following is a summary of tax years subject to examination:

U.S Federal — 2005 and forward
U.S. States — 2004 and forward
Foreign — 2001 and forward

The Internal Revenue Service (“IRS”) is examining our federal tax returns for fiscal years 2005 and 2006. We believe our recorded tax liabilities as of November 30, 2008 are sufficient, and we do not anticipate additional adjustments to be made by the IRS upon the completion of their examination.

NOTE 8 — STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

In calculating earnings per share, there were no adjustments to net earnings to arrive at earnings for any years presented. The reconciliation of the denominators of the earnings per share calculations are as follows:

		Three Months Ended
		November 30,
		2008				2007
Shares outstanding for basic earnings per share			113,004,524				117,568,366
Effect of dilutive securities:
Stock based incentive/purchase plans			1,468,639				2,803,906
Shares outstanding for diluted earnings per share			114,473,163				120,372,272

All of the Company’s outstanding stock options and restricted stock were dilutive at November 30, 2008 and 2007 based on the average share price of $16.50 and $30.71, respectively. SARs with total share commitments of 3,676,029 and 1,400,980 were antidilutive at November 30, 2008 and 2007, respectively, and therefore excluded from the calculation of diluted earnings per share. All stock options and SARs expire by 2015.

The Company’s restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic earnings per share calculation until the shares vest.

For the three months ended November 30, 2008, the Company purchased 1,752,900 common shares for treasury. The Company’s board of directors authorized the purchase of an additional 10,000,000 shares on October 21, 2008 and the Company had remaining authorization to purchase 8,259,647 of its common stock at November 30, 2008.

NOTE 9 — DERIVATIVES AND RISK MANAGEMENT

The Company’s worldwide operations and product lines expose it to risks from fluctuations in foreign currency exchange rates, natural gas and metals commodity prices. The objective of the Company’s risk management program is to mitigate these risks using futures or forward contracts (derivative instruments). The Company enters into metal commodity forward contracts to mitigate the risk of unanticipated declines in gross margin due to the volatility of the commodities’ prices, enters into natural gas forward contracts to mitigate the risk of unanticipated increase of operating cost due to the volatility of natural gas prices and enters into foreign currency forward contracts which match the expected settlements for purchases and sales denominated in foreign currencies. Also, when its sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to minimize the effect of the volatility of ocean freight rates. The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the statements of earnings, and there were no components excluded from the assessment of hedge effectiveness for the three months ended November 30, 2008 and 2007.

Certain of the foreign currency and commodity, and all of the natural gas and freight contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges. All of the instruments are highly liquid and none are entered into for trading purposes.

The following table shows the impact on the consolidated statements of earnings of the changes in fair value of these economic hedges included in determining net earnings for the three months ended November 30. Settlements are recorded within the same line item as the related unrealized gains (losses).

		Three Months Ended
		November 30,
		2008				2007
(in thousands)		Earnings (Expense)
Net sales (foreign currency instruments)		$	8,126			$	212
Cost of goods sold (commodity instruments)			(2,702	)			(246	)

The Company’s derivative instruments were recorded as follows on the consolidated balance sheets:

		November 30,				August 31,
(in thousands)		2008				2008
Derivative assets (other current assets)		$	59,551			$	28,379
Derivative liabilities (accrued expenses and other payables)			44,906				28,447

The following table summarizes activities in other comprehensive income related to derivatives classified as cash flow hedges held by the Company during the three months ended November 30, 2008 (in thousands):

Change in market value (net of taxes)		$	5,535
Gain reclassified into net earnings, net			(299	)
Other comprehensive income—unrealized gain on derivatives		$	5,236

During the twelve months following November 30, 2008, $0.8 million in losses related to commodity hedges and capital expenditures are anticipated to be reclassified into net earnings as the related transactions mature and the assets are placed into service, respectively. Also, an additional $0.5 million in gains will be reclassified as interest expense related to an interest rate locks.

All of the instruments are highly liquid and none are entered into for trading purposes.

NOTE 10 — FAIR VALUE

On September 1, 2008, the Company adopted SFAS 159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”), which permits entities to choose to measure certain financial assets and liabilities at fair value. The adoption of SFAS 159 had no impact on the consolidated financial statements because the Company did not elect the fair value option for any financial assets or financial liabilities that were not already recorded at fair value.

On September 1, 2008, the Company adopted SFAS 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. The adoption of SFAS 157 did not have a material impact on our consolidated financial statements. In February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities. The Company is currently evaluating the potential impact of SFAS 157 as it relates to nonfinancial assets and nonfinancial liabilities on the consolidated financial statements which is effective for the first quarter of fiscal 2010.

SFAS 157 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement.

The following table summarizes information regarding the Company’s financial assets and financial liabilities that are measured at fair value:

						Fair Value Measurements at Reporting Date Using
						Quoted Prices in
						Active Markets for				Significant Other				Significant
		November 30,				Identical Assets				Observable Inputs				Unobservable Inputs
(in thousands)		2008				(Level 1)				(Level 2)				(Level 3)
Cash equivalents		$	38,910			$	38,910			$	—			$	—
Derivative assets			59,551				—				59,551				—
BRP plan assets *			48,043				—				48,043				—
Derivative liabilities			44,906				—				44,906				—
BRP plan liabilities *			76,630				—				76,630				—

NOTE 11 — COMMITMENTS AND CONTINGENCIES

See Note 11, Commitments and Contingencies, to the consolidated financial statements for the year ended August 31, 2008 relating to environmental and other matters. There have been no significant changes to the matters noted therein. In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. Management believes that adequate provision has been made in the consolidated financial statements for the potential impact of these issues, and that the outcomes will not significantly impact the results of operations or the financial position of the Company, although they may have a material impact on earnings for a particular quarter.

Guarantees The Company has entered into guarantee agreements with certain banks in connection with credit facilities granted by the banks to various suppliers of the Company. The fair values of the guarantees are negligible. The guarantees listed in the table below reflect the Company’s exposure as of November 30, 2008:

				Maximum		Maximum
Origination		Guarantee		Credit		Company
Date		With		Facility		Exposure
May 2006		Bank		$15 million		$0.5 million
February 2007		Bank		80 million		4.0 million

NOTE 12 — BUSINESS SEGMENTS

The Company’s reportable segments are based on strategic business areas, which offer different products and services. These segments have different lines of management responsibility as each business requires different marketing strategies and management expertise.

The Company structures the business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, International Mills and International Fabrication and Distribution.

The Americas Recycling segment consists of the scrap metal processing and sales operations primarily in Texas, Florida and the southern United States including the scrap processing facilities which directly support the Company’s domestic steel mills. The Americas Mills segment includes the Company’s domestic steel minimills and the copper tube minimill. The copper tube minimill is aggregated with the Company’s steel minimills because it has similar economic characteristics. The Americas Fabrication and Distribution segment consists of the Company’s rebar and joist and deck fabrication operations, fence post manufacturing plants, construction-related and other products facilities. Additionally, the Americas Fabrication and Distribution consists of the CMC Dallas Trading division which markets and distributes steel semi-finished long and flat products into the Americas from a diverse base of international and domestic sources. The International Mills segment includes the minimills in Poland and Croatia and subsidiaries in Poland which have been presented as a separate segment because the economic characteristics of their markets and the regulatory environment in which they operate are different from that of the Company’s domestic minimills. International Fabrication and

Distribution includes international operations for the sales, distribution and processing of both ferrous and nonferrous metals and other industrial products in addition to rebar fabrication operations in Europe. The domestic and international distribution operations consist only of physical transactions and not positions taken for speculation. Corporate contains expenses of the Company’s corporate headquarters, expenses related to its deployment of SAP, and interest expense relating to its long-term public debt and commercial paper program.

The financial information presented for the International Fabrication and Distribution segment includes its copper, aluminum, and stainless steel import operating division. This division has been classified as a discontinued operation in the consolidated financial statements. Net sales of this division have been removed in the eliminations/discontinued operations column in the table below to reconcile net sales by segment to net sales in the consolidated financial statements. See Note 5 for more detailed information.

The Company uses adjusted operating profit to measure segment performance. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The following is a summary of certain financial information by reportable segment:

		Three Months Ended November 30, 2008
		Americas												International
										Fabrication								Fabrication								Eliminations/
										and								and								Discontinued
(in thousands)		Recycling				Mills				Distribution				Mills				Distribution				Corporate				Operations				Consolidated
Net sales-unaffiliated customers		$	216,675			$	236,579			$	913,085			$	170,800			$	918,075			$	(25,439	)		$	(56,945	)		$	2,372,830
Intersegment sales			43,775				150,905				3,652				53,271				12,518				—				(264,121	)			—
Net sales			260,450				387,484				916,737				224,071				930,593				(25,439	)			(321,066	)			2,372,830
Adjusted operating profit (loss)			(27,953	)			118,700				66,628				(16,735	)			14,885				(20,880	)			(10,075	)			124,570
Goodwill			7,467				—				58,503				863				6,235				—				—				73,068
Total assets			217,243				561,131				1,559,486				459,388				1,057,007				308,596				—				4,162,851

		Three Months Ended November 30, 2007
		Americas												International
										Fabrication								Fabrication								Eliminations/
										and								and								Discontinued
(in thousands)		Recycling				Mills				Distribution				Mills				Distribution				Corporate				Operations				Consolidated
Net sales-unaffiliated customers		$	369,262			$	281,089			$	637,800			$	166,737			$	741,813			$	6,166			$	(86,863	)		$	2,116,004
Intersegment sales			56,103				121,721				9,063				1,441				15,579				—				(203,907	)			—
Net sales			425,365				402,810				646,863				168,178				757,392				6,166				(290,770	)			2,116,004
Adjusted operating profit (loss)			16,877				69,213				30,436				(577	)			26,559				(14,281	)			(8,430	)			119,797
Goodwill			7,467				—				29,051				—				2,053				—				—				38,571
Total assets			317,849				552,490				1,094,862				460,999				789,135				345,634				—				3,560,969

The following table provides a reconciliation of consolidated adjusted operating profit to net earnings:

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Net earnings		$	62,006			$	69,164
Minority interests			46				(128	)
Income taxes			34,152				35,614
Interest expense			26,448				12,378
Discounts on sales of accounts receivable			1,918				2,769
Adjusted operating profit		$	124,570			$	119,797
Adjusted operating profit from discontinued operations			9,478				6,801
Adjusted operating profit from continuing operations		$	115,092			$	112,996

The following presents external net sales by major product and geographic area for the Company:

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Major product information:
Steel products		$	1,658,469			$	1,328,753
Industrial materials			338,914				237,637
Nonferrous scrap			134,408				207,656
Ferrous scrap			88,664				163,110
Construction materials			81,977				73,617
Non-ferrous products			52,441				78,119
Other			17,957				27,112
Net sales*		$	2,372,830			$	2,116,004

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Geographic area:
United States		$	1,467,482			$	1,249,192
Europe			491,280				441,115
Asia			145,169				182,087
Australia/New Zealand			190,270				148,808
Other			78,629				94,802
Net sales*		$	2,372,830			$	2,116,004

NOTE 13 — RELATED PARTY TRANSACTIONS

One of the Company’s international subsidiaries has an agreement with a key supplier of which the Company owns an 11% interest. Net sales to this related party were $101 million and $85 million for the three months ended November 30, 2008 and 2007, respectively. Total purchases from this supplier were $99 million and $102 million for the three months ended November 30, 2008 and 2007, respectively. Accounts receivable from the affiliated company were $41 million and $47 million at November 30, 2008 and August 31, 2008, respectively. Accounts payable to the affiliated company were $30 million and $35 million at November 30, 2008 and August 31, 2008, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis should be read in conjunction with our Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended August 31, 2008.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are not different from the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K filed with the SEC for the year ended August 31, 2008 and are, therefore, not presented herein.

CONSOLIDATED RESULTS OF OPERATIONS

										Increase
		Three Months Ended								(Decrease)
		November 30,								%
(in millions)		2008				2007
Net sales*		$	2,372.8			$	2,116.0				12	%
Net earnings			62.0				69.2				(10	%)
EBITDA			163.9				148.7				10	%

In the table above, we have included a financial statement measure that was not derived in accordance with accounting principles generally accepted in the United States (“GAAP”). We use EBITDA (earnings before interest expense, income taxes, depreciation and amortization) as a non-GAAP performance measure. In calculating EBITDA, we exclude our largest recurring non-cash charge, depreciation and amortization. EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. Tax regulations in international operations add additional complexity. Also, we exclude interest cost in our calculation of EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use EBITDA as one guideline to assess our unleveraged performance return on our investments. EBITDA is also the target benchmark for our long-term cash incentive performance plan for management. Reconciliations to net earnings are provided below:

										Increase
		Three Months Ended								(Decrease)
		November 30,								%
(in millions)		2008				2007
Net earnings		$	62.0			$	69.2				(10	%)
Interest expense			26.4				12.4				113	%
Income taxes			34.2				35.6				(4	%)
Depreciation and amortization			41.3				31.5				31	%
EBITDA		$	163.9			$	148.7				10	%
EBITDA from discontinued operations			9.5				6.9				38	%
EBITDA from continuing operations		$	154.4			$	141.8				9	%

Our EBITDA does not include interest expense, income taxes and depreciation and amortization. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and our ability to generate revenues. Because we use capital assets, depreciation and amortization are also necessary elements of our costs. Also, the payment of income taxes is a necessary element of our operations. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is appropriate to consider both net earnings determined under GAAP, as well as EBITDA, to evaluate our performance. Also, we separately analyze any significant fluctuations in interest expense, depreciation and amortization and income taxes.

The following events and performances had a significant impact during our first quarter ended November 30, 2008:

	•		We reported our highest net sales ever for the first quarter.
	•		We recorded a quarterly record of pre-tax LIFO income of $113.6 million (after tax of $0.65 per diluted share) compared to pre-tax LIFO income of $4.3 million (after tax of $0.02 per diluted share) for the first quarter of 2008.
	•		We recorded inventory valuation adjustments on FIFO inventories of $23.4 million resulting from significant declines in pricing during the first quarter of 2009.
	•		Net sales of the Americas Recycling segment decreased 39% compared to the prior year’s first quarter and this segment experienced an adjusted operating loss of $28.0 million primarily due to declines in ferrous scrap prices and shipments as market demand decreased during the quarter.
	•		Adjusted operating profit of the Americas Mills segment increased 71% to a quarterly record of $118.7 million primarily due to $75.3 million of pre-tax LIFO income resulting from the decline in the price of ferrous scrap. Even though the average selling price increased during the quarter, net sales decreased 4% due to a decline in shipments of 27%.
	•		Our Americas Fabrication and Distribution segment showed strong results during the first quarter of 2009 as net sales and adjusted operating profit rose 42% and 119%, respectively, over the prior year’s first quarter mainly due to margin expansion from the deflation in material costs coupled with a 25% increase in average selling prices.
	•		Our International Mills segment showed a 33% increase in net sales compared to the prior year’s first quarter but reported an adjusted operating loss of $16.7 million caused primarily from rapidly declining prices in Poland and continued high production costs in Croatia.
	•		Our International Fabrication and Distribution segment showed a 23% increase in net sales compared to the prior year’s first quarter but reported a 44% decrease in adjusted operating profit compared to the prior year due to reductions in market demand and inventory valuation adjustments due to declining prices.
	•		Expense of $12.7 million and capital expenditures of $12.2 million were recorded during the first quarter of 2009 as compared to expense of $10.3 million and capital expenditures of $16.7 million during the first quarter of 2008 related to the global implementation of SAP.

SEGMENT OPERATING DATA

Unless otherwise indicated, all dollar amounts below are calculated before minority interests and income taxes. Financial results for our reportable segments are consistent with the basis and manner in which we internally disaggregate financial information for making operating decisions. See Note 12, Business Segments, to the consolidated financial statements.

We use adjusted operating profit (loss) to compare and evaluate the financial performance of our segments. Adjusted operating profit is the sum of our earnings before income taxes and financing costs. Adjusted operating profit is equal to earnings before income taxes for Americas Mills and Americas Fabrication and Distribution segments because these segments require minimal outside financing. The following table shows net sales and adjusted operating profit (loss) by business segment:

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Net sales:
Americas Recycling		$	260,450			$	425,365
Americas Mills			387,484				402,810
Americas Fabrication and Distribution			916,737				646,863
International Mills			224,071				168,178
International Fabrication and Distribution			930,593				757,392
Corporate			(25,439	)			6,166
Eliminations/Discontinued Operations			(321,066	)			(290,770	)
		$	2,372,830			$	2,116,004

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Adjusted operating profit (loss):
Americas Recycling		$	(27,953	)		$	16,877
Americas Mills			118,700				69,213
Americas Fabrication and Distribution			66,628				30,436
International Mills			(16,735	)			(577	)
International Fabrication and Distribution			14,885				26,559
Corporate			(20,880	)			(14,281	)
Eliminations/Discontinued Operations			(10,075	)			(8,430	)

LIFO Impact on Adjusted Operating Profit LIFO is an inventory costing method that assumes the most recent inventory purchases or goods manufactured are sold first. This results in current sales prices offset against current inventory costs. In periods of rising prices it has the effect of eliminating inflationary profits from net income. In periods of declining prices it has the effect of eliminating deflationary losses from net income. In either case the goal is to reflect economic profit. The table below reflects LIFO income or (expense) representing decreases or (increases) in the LIFO inventory reserve. International Mills is not included in this table as it uses FIFO valuation exclusively for its inventory:

		Three Months Ended
		November 30,
(in thousands)		2008				2007
Americas Recycling		$	24,729			$	(1,832	)
Americas Mills			75,259				3,863
Americas Fabrication and Distribution			7,425				(4,307	)
International Fabrication and Distribution*			6,201				6,538
Consolidated increase to adjusted profit before tax		$	113,614			$	4,262

Americas Recycling Driven by a decrease in scrap prices coupled with a significant decline in market demand, this segment had a decrease in net sales of 39% and recorded an adjusted operating loss of $28.0 million during the first quarter of 2009. Pre-tax LIFO income for the quarter was $24.7 million compared to pre-tax LIFO expense of $1.8 million from the prior year’s first quarter. The average ferrous sales price during the first quarter of 2009 declined 9% as compared to the first quarter of 2008 and 53% as compared to the fourth quarter of 2008. With the financial crisis eroding the economy, customers withdrew from the market and this segment directed material to our mills and reduced purchases. In addition to declines in the price of ferrous scrap, ferrous shipments decreased 29% to 498 thousand tons. The average nonferrous scrap sales price for the first quarter of 2009 decreased 22% to $2,252 per ton and nonferrous shipments were 22% lower at 59 thousand tons as compared to last year’s first quarter. The total volume of scrap processed equaled 563 thousand tons against 787 thousand tons in the prior year’s first quarter. We exported 32% of our nonferrous scrap during the quarter.

The following table reflects our Americas Recycling segment’s average selling prices per ton and tons shipped (in thousands):

		Three Months Ended
		November 30,								Decrease
		2008				2007				Amount				%
Average ferrous sales price		$	213			$	234			$	(21	)			(9	%)
Average nonferrous sales price		$	2,252			$	2,901			$	(649	)			(22	%)
Ferrous tons shipped			498				706				(208	)			(29	%)
Nonferrous tons shipped			59				76				(17	)			(22	%)
Total volume processed and shipped			563				787				(224	)			(28	%)

Americas Mills We include our four domestic steel minimills and our copper tube minimill in our Americas Mills segment. While this segment had a decrease in net sales of 4% during the first quarter of 2009 as compared to the prior year’s first quarter, it recorded an increase in adjusted operating profit of 71% to $118.7 million, a record for any quarter. The increase in adjusted operating profit was driven by pre-tax LIFO income of $75.2 million as compared to pre-tax LIFO income of $3.9 in the prior year’s first quarter resulting from a decline in ferrous scrap prices.

Within the segment, adjusted operating profit for our four domestic steel minimills increased 54% to $101.3 million during the first quarter of 2009 as compared to 2008. Our mills ran at 69% of capacity which was achieved from a strong September offset by weakening demand the remainder of the quarter. Net sales were comparable to last year’s first quarter resulting from higher average selling prices against a reduction in sales volume. Pre-tax LIFO income was $66.5 million in the first quarter of 2009 as compared to pre-tax LIFO income of $2.9 million in 2008. Metal margins increased 36% to $460 per ton as the backlog from the summer’s record pricing was shipped. Margins were also positively impacted by an 8% decrease in alloys and electrodes and a 9% decrease in energy costs. Combined, these two costs resulted in an increase of $3.6 million to gross margin. The average selling price increased 36% to $796 per ton. Sales volumes decreased 27% to 432 thousand tons and tonnage rolled decreased 25% to 366 thousand tons. We have invested $88.5 million of the expected $155 million total cost for our micro mill project in Arizona.

The table below reflects steel and ferrous scrap prices per ton:

		Three Months Ended
		November 30,								Increase
		2008				2007				Amount				%
Average mill selling price (finished goods)		$	822			$	615			$	207				34	%
Average mill selling price (total sales)			796				585				211				36	%
Average cost of ferrous scrap consumed			336				246				90				37	%
Average FIFO metal margin			460				339				121				36	%
Average ferrous scrap purchase price			263				231				32				14	%

The table below reflects our domestic steel minimills’ operating statistics (short tons in thousands):

		Three Months Ended
		November 30,								Decrease
		2008				2007				Amount				%
Tons melted			398				566				(168	)			(30	%)
Tons rolled			366				487				(121	)			(25	%)
Tons shipped			432				594				(162	)			(27	%)

Our copper tube minimill’s adjusted operating profit was $17.4 million for the first quarter of 2009 as compared to $3.3 million for 2008. The increase in adjusted operating profit primarily resulted from an increase in pre-tax LIFO income of $8.7 million over the prior year and inventory hedges during the quarter which protected against the exposure of declining copper prices. The average selling price declined 12% to $3.77 per pound from the prior year’s first quarter due to continued decline in residential construction and weakening commercial construction. Although the average selling price declined during the quarter, the average metal margin increased 39% to $1.43 per pound. Our shipments for the first quarter of 2009 decreased 8% as compared to 2008.

The table below reflects our copper tube minimill’s prices per pound and operating statistics:

		Three Months Ended
		November 30,								Increase (Decrease)
(pounds in millions)		2008				2007				Amount				%
Pounds shipped			10.8				11.7				(0.9	)			(8	%)
Pounds produced			10.0				11.6				(1.6	)			(14	%)
Average copper selling price		$	3.77			$	4.29			$	(0.52	)			(12	%)
Average copper scrap production cost		$	2.34			$	3.26			$	(0.92	)			(28	%)
Average copper metal margin		$	1.43			$	1.03			$	0.40				39	%
Average copper scrap purchase price		$	2.94			$	3.28			$	(0.34	)			(10	%)

Americas Fabrication and Distribution For the first quarter of 2009, this segment reported net sales and adjusted operating profit of $916.7 million and $66.6 million, an increase of $269.9 million and $36.2 million, respectively, over last year’s first quarter. These results were driven by deflation in material costs which resulted in margin expansion, a reversal of LIFO reserves from prior quarters and lower reserves for anticipated job losses of $24.5 million. This segment recorded pre-tax LIFO income of $7.4 million as compared to pre-tax LIFO expense of $4.3 million in the prior year’s first quarter. Rebar, structural, construction-related products, joist, deck and post were all profitable during the first quarter of 2009. Rebar fabrication operations were positively impacted by recent acquisitions of CMC Coating and CMC Regional Steel resulting in an increase in average selling prices and volume of rebar. Shipments from our fabrication plants totaled 427 thousand tons, which was comparable to tons shipped during the prior year’s first quarter. The average fabrication selling price increased 25% to $1,274 per ton.

The tables below show our average fabrication selling prices per short ton and total fabrication plant shipments:

		Three Months Ended
		November 30,								Increase
Average selling price*		2008				2007				Amount				%
Rebar		$	1,116			$	849			$	267				31	%
Joist			1,505				1,296				209				16	%
Structural			3,417				2,246				1,171				52	%
Post			1,131				730				401				55	%
Deck			1,564				1,297				267				21	%

		Three Months Ended
		November 30,								Increase (Decrease)
Tons shipped (in thousands)		2008				2007				Amount				%
Rebar			289				262				27				10	%
Joist			59				81				(22	)			(27	%)
Structural			27				18				9				50	%
Post			12				19				(7	)			(37	%)
Deck			40				48				(8	)			(17	%)

International Mills Net sales increased 33% to $224.1 million while adjusted operating loss increased to $16.7 million for the first quarter of 2009. The increase in adjusted operating loss primarily resulted from rapidly declining prices in Poland, continued high production costs in Croatia and a strengthening United States dollar. The Polish zloty fell 28% against the United States dollar during the quarter. CMC Zawiercie (“CMCZ”) suffered an adjusted operating loss of $8.1 million as pricing fell throughout the quarter requiring market valuation adjustments for inventory held at quarter end. As a result, CMCZ focused on reducing inventory levels, which resulted in a 10% increase in shipments to 295 thousand tons from 268 thousand tons. Additionally, sales were aided by customer avoidance of imports in declining markers having longer lead times and the anticipation of possible price increases in January 2009. The average mill selling price increased 15% to PLN 1,714 per ton as compared to the prior year’s first quarter, however, this represented a decrease of 18% as compared to the fourth quarter of 2008.

The table below reflects CMCZ’s operating statistics (in thousands) and average prices per short ton:

		Three Months Ended
		November 30,								Increase (Decrease)
		2008				2007				Amount				%
Tons melted			290				294				(4	)			(1	%)
Tons rolled			237				242				(5	)			(2	%)
Tons shipped			295				268				27				10	%
Average mill selling price (total sales)			1,714	PLN			1,489	PLN			225	PLN			15	%
Average ferrous scrap production cost			947	PLN			866	PLN			81	PLN			9	%
Average metal margin			767	PLN			623	PLN			144	PLN			23	%
Average ferrous scrap purchase price			689	PLN			753	PLN			(64	) PLN			(8	%)
Average mill selling price (total sales)		$	683			$	570			$	113				20	%
Average ferrous scrap production cost		$	357			$	332			$	25				8	%
Average metal margin		$	326			$	238			$	88				37	%
Average ferrous scrap purchase price		$	269			$	288			$	(19	)			(7	%)

PLN — Polish zlotys

CMC Sisak (“CMCS”) reported an adjusting operating loss of $8.6 million for the first quarter of 2009 as compared to an adjusted operating loss of $4.5 million in the first quarter of 2008. CMCS produced 18,100 tons and sold 17,700 tons during the first quarter as compared to 4,900 tons produced and 9,400 tons sold during the prior year’s first quarter. We are currently scaling back production to match reduced demand. The turnaround at CMCS is contingent upon the successful completion of our capital expenditure programs for a replacement furnace and improvements to the continuous caster.

International Fabrication and Distribution This segment’s net sales increased 23% to $931 million including unfavorable foreign exchange rates which resulted in a decrease to net sales of approximately 3%. Adjusted operating profit decreased 44% to $14.9 million for the first quarter of 2009 as compared to 2008 primarily due to reductions in market demand and inventory valuation adjustments of $14.5 million as pricing fell throughout the quarter. The global financial crisis drove reductions in order intake and noncompliance with contracts. Additionally, demand was negatively impacted as customers were not willing to be exposed to lead times for imported material in the volatile pricing environment. Pre-tax LIFO income of $6.2 million in the quarter is comparable to the prior year’s first quarter pre-tax LIFO income of $6.5 million. Our Australian operations had near record profitability and increased market share, but our European operations recorded significant reserves for possible losses. Our fabrication shops in Poland and Germany incurred losses as higher priced, older material was used on newer lower priced jobs. Our Asian recycling operation incurred losses as ferrous scrap prices plunged and inventory valuation adjustments were recorded.

Corporate Our corporate expenses for the first quarter of 2009 increased $6.6 million over the prior year’s first quarter due to an increase of $2.4 million in costs incurred for our investment in the global installation of SAP software and increased salaries from company growth.

Discontinued Operations Adjusted operating profit for our division classified as a discontinued operation increased to $9.5 million from adjusted operating profit of $6.8 million in the first quarter of the prior year. The increase primarily resulted from gains on commodity hedges during the first quarter of 2009. The division recorded pre-tax LIFO income of $6.2 million which is comparable to the amount recorded in last year’s first quarter. This division is included in our International Fabrication and Distribution segment.

Consolidated Data On a consolidated basis, the LIFO method of inventory valuation increased our net earnings on a pre-tax basis by $113.6 million and $4.3 million (after tax of $0.65 and $0.02 per diluted share) for the first quarter of 2009 and 2008, respectively. Our overall selling, general and administrative expenses increased by $3.5 million, or 2%, for the first quarter of 2009 as compared to 2008 primarily from the increased expenses related to the implementation of SAP. In addition, salaries increased because of company growth, including acquisitions.

Our interest expense increased by $14.0 million, or 113%, for the first quarter of 2009 as compared to 2008 primarily due to the issuance of $500 million in senior unsecured notes in the fourth quarter of 2008 and increased debt outstanding internationally during the first quarter of 2009.

Our effective tax rate for the first quarter of 2009 increased to 35.5% as compared to 34.0% in the first quarter of 2008 due mainly to a an increase in pre-tax profits in domestic jurisdictions subject to state taxes.

OUTLOOK

Our second quarter is historically our weakest quarter encompassing the winter months which is now exacerbated by the worldwide recession. Customers will continue destocking to manage balances and awaiting more definitive signs that pricing is at the bottom. Backlogs are not refilling at the same rate as shipments. Market and inventory downward adjustments are likely to continue. We estimate that our Americas steel mills will operate at 55% to 65% of capacity. We expect highway work, particularly in Texas, to remain strong and there is optimism regarding the announced infrastructure stimulus. We anticipate second quarter LIFO diluted earnings per share to be near breakeven.

Due to the current market conditions, we must execute our working capital plans to exit this downturn stronger than when we entered. We are reducing costs and will accelerate our cost reduction programs. We remain committed to our capital expenditure projects for the year: the micro mill in Arizona, the new flexible rolling mill in Poland, our melt shop caster upgrade in Croatia, and the rollout of SAP, but always with contingency plans.

LIQUIDITY AND CAPITAL RESOURCES

See Note 6 — Credit Arrangements, to the consolidated financial statements.

We believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities, however, we could be adversely affected if our banks, the buyers of our commercial paper or other of the traditional sources supplying our short term borrowing requirements refuse to honor their contract commitments, cease lending or declare bankruptcy. While we believe the lending institutions participating in our credit arrangements are financially capable, recent events in the global credit markets, including the failure, takeover or rescue by various government entities of major financial institutions, have created uncertainty of credit availability to an extent not experienced in recent decades.

Our sources, facilities and availability of liquidity and capital resources as of November 30, 2008 (dollars in thousands):

		Total
Source		Facility				Availability
Commercial paper program*		$	400,000			$	373,100
Domestic accounts receivable securitization			200,000				120,000
International accounts receivable sales facilities			303,978				163,383
Bank credit facilities — uncommitted			1,187,730				558,794
Notes due from 2009 to 2018			1,272,002				**
Trade financing arrangements			**				As required
CMCZ revolving credit facility			33,489				33,489
Equipment notes			6,937				—

Certain of our financing agreements, both domestically and at CMCZ and CMC Poland (“CMCP”), include various covenants, of which we were in compliance at November 30, 2008. There are no guarantees by the Company or any of its subsidiaries for any of CMCZ’s debt. The CMCS and CMCP notes are guaranteed by Commercial Metals International.

Off-Balance Sheet Arrangements For added flexibility, we may secure financing through securitization and sales of certain accounts receivable both in the U.S. and internationally. See Note 3, Sales of Accounts Receivable, to the consolidated financial statements. We may sell accounts receivable on an ongoing basis to replace those receivables that have been collected from our customers. Our domestic securitization program contains certain cross-default provisions whereby a termination event could occur should we default under another credit arrangement, and contains covenants that conform to the same requirements contained in our revolving credit agreement.

Cash Flows Our cash flows from operating activities primarily result from sales of steel and related products, and to a lesser extent, sales of nonferrous metal products. We also sell and rent construction-related products and accessories. We have a diverse and generally stable customer base. We use futures or forward contracts as needed to mitigate the risks from fluctuations in foreign currency exchange rates and nonferrous metals commodity prices.

During the first quarter of 2009, we generated $4.0 million of net cash flows from operating activities as compared to using $42 million in the prior year’s first quarter. This change is primarily the result of an increase in net earnings adjusted for non-cash items of $10.9 million and a decrease in cash used from operating cash flows for working capital of $35.6 million.

Significant fluctuations in working capital were as follows:

	•		Decreased accounts receivable — decreased sales and prices during November 2008;
	•		Decreased inventories — decreased inventory on hand and lower inventory costs; and
	•		Decreased accounts payable— more cash was used in the first quarter of 2008 as these current liabilities increased at the end of 2008 due to higher volume.

During the first quarter of 2009, we used $86.8 million of net cash flows from investing activities as compared to $87.7 million in the first quarter of 2008. We invested $86.7 million in property, plant and equipment during 2009, an increase of $17.5 million over 2008. This was offset by a $17.9 million reduction in cash used for acquisitions.

We expect our total capital spending for 2009 to be approximately $425 million, including $105 million for the continued construction of the micro mill in Mesa, Arizona, $180 million to complete installation of a new flexible section mill in CMCZ and $54 million for melt shop and caster upgrades at CMCS. We continuously assess our capital spending and reevaluate our requirements based upon current and expected results.

During the first quarter of 2009, we used $38.8 million of net cash flows from financing activities as compared to $34.8 million in the first quarter of 2008. The increase in cash used was primarily due to repayments of short term borrowings and long-term debt in the first quarter of 2009 as compared to proceeds in the prior year’s first quarter. During 2009, we used $18.5 million to purchase 1.8 million shares of our common stock as part of our stock repurchase program, a decrease of $32.7 million as compared to 2008. Additionally, we increased our dividend rate to 12 cents per share in the second quarter of 2008 which resulted in an increase of cash used of $3.0 million over the prior year’s first quarter.

Our contractual obligations for the next twelve months of $1.5 billion are typically expenditures with normal revenue producing activities. We believe our cash flows from operating activities and debt facilities are adequate to fund our ongoing operations and planned capital expenditures.

CONTRACTUAL OBLIGATIONS

The following table represents our contractual obligations as of November 30, 2008 (in thousands):

		Payments Due By Period*
						Less than												More than
		Total				1 Year				1-3 Years				3-5 Years				5 Years
Contractual Obligations:
Long-term debt(1)		$	1,278,939			$	109,546			$	40,386			$	228,975			$	900,032
Notes payable(1)			25,853				25,853				—				—				—
Interest(2)			634,469				62,419				155,349				149,415				267,286
Operating leases(3)			234,641				53,638				80,956				49,777				50,270
Purchase obligations(4)			1,389,205				1,265,365				100,198				10,533				13,109
Total contractual cash obligations		$	3,563,107			$	1,516,821			$	376,889			$	438,700			$	1,230,697

(1)		Total amounts are included in the November 30, 2008 consolidated balance sheet. See Note 6, Credit Arrangements, to the consolidated financial statements.
(2)		Interest payments related to our short-term debt are not included in the table as they do not represent a significant obligation as of November 30, 2008.
(3)		Includes minimum lease payment obligations for non-cancelable equipment and real estate leases in effect as of November 30, 2008.
(4)		Approximately 67% of these purchase obligations are for inventory items to be sold in the ordinary course of business. Purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement. Agreements with variable terms are excluded because we are unable to estimate the minimum amounts.

Other Commercial Commitments We maintain stand-by letters of credit to provide support for certain transactions that our insurance providers and suppliers request. At November 30, 2008, we had committed $29.5 million under these arrangements. All of the commitments expire within one year.

See Note 11 — Commitments and Contingencies, to the consolidated financial statements regarding our guarantees.

CONTINGENCIES

See Note 11 — Commitments and Contingencies, to the consolidated financial statements.

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and government investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of these matters. While we are unable to estimate precisely the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals as warranted. The amounts we accrue could vary substantially from amounts we pay due to several factors including the following: evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, and the uncertainties involved in litigation. Accordingly, we cannot always estimate a meaningful range of possible exposure. We believe that we have adequately provided in our consolidated financial statements for the estimable probable impact of these contingencies. We also believe that the outcomes will not significantly affect the long-term results of operations or our financial position. However, they may have a material impact on earnings for a particular quarter.

We are subject to federal, state and local pollution control laws and regulations in all locations where we have operating facilities. We anticipate that compliance with these laws and regulations will involve continuing capital expenditures and operating costs.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, with respect to our financial condition, results of operations, cash flows and business, and our expectations or beliefs concerning future events, including net earnings, economic conditions, credit availability, product pricing and demand, currency valuation, production rates, energy expense, interest rates, inventory levels, acquisitions, construction and operation of new facilities and general market conditions. These forward-looking statements can generally be identified by phrases such as we or our management “expects,” “anticipates,” “believes,” “plans to,” “ought,” “could,” “will,” “should,” “likely,” “appears,” “projects,” “forecasts,” “outlook” or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. Variances will occur and some could be materially different from our current opinion. Developments that could impact our expectations include the following:

	•		solvency of financial institutions and their ability or willingness to lend;
	•		success or failure of governmental efforts to stimulate the economy including restoring credit availability and confidence in a recovery;
	•		construction activity;
	•		decisions by governments affecting the level of steel imports, including tariffs and duties;
	•		ability to integrate acquisitions into operations;
	•		litigation claims and settlements;
	•		difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes;
	•		unsuccessful implementation of new technology;
	•		metals pricing over which we exert little influence;
	•		increased capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing;
	•		court decisions;
	•		industry consolidation or changes in production capacity or utilization;
	•		global factors including political and military uncertainties;
	•		currency fluctuations;
	•		interest rate changes;
	•		scrap metal, energy, insurance and supply prices; and
	•		the pace of overall economic activity, particularly China.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required hereunder for the Company is not materially different from the information set forth in Item 7a. Quantitative and Qualitative Disclosures about Market Risk included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2008, filed with the Securities Exchange Commission and is, therefore, not presented herein.

Additionally, see Note 9 — Derivatives and Risk Management, to the consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods, including controls and disclosures designed to ensure that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, and they have concluded that as of that date, our disclosure controls and procedures were effective.

During the first quarter of 2009, the Company implemented SAP at certain domestic fabrication divisions in connection with the Company-wide rollout of SAP. The implementation resulted in modifications to internal controls over the related accounting and operating processes at these locations. We evaluated the control environment as affected by the implementation and believe our controls remained effective. We intend to implement SAP globally to most business segments within the next two years. Other than the changes mentioned above, no other changes to our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to the information incorporated by reference from Item 3. Legal Proceedings in the Company’s Annual Report on Form 10-K for the year ended August 31, 2008, filed October 30, 2008, with the Securities and Exchange Commission.

ITEM 1A. RISK FACTORS

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

										Total
										Number of				Maximum
										Shares				Number of
										Purchased				Shares that
										As Part of				May Yet Be
		Total								Publicly				Purchased
		Number of				Average				Announced				Under the
		Shares				Price Paid				Plans or				Plans or
		Purchased				Per Share				Programs				Programs
As of September 1, 2008															12,547	(1)
September 1- September 30, 2008			0				0				0
October 1 - October 31, 2008			0				0				0				10,000,000	(3)
November 1 - November 30, 2008			104,896	(2)		$	10.50				1,752,900				8,259,647	(4)
As of November 30, 2008			104,896	(2)		$	10.50				1,752,900				8,259,647	(4)

(1)		Shares available to be purchased under the Company’s Share Repurchase Program publicly announced November 5, 2007.
(2)		Shares tendered to the Company by employee stock option holders in payment of the option purchase price due upon exercise.
(3)		Shares authorized to be purchased under the Company’s Share Repurchase Program publicly announced October 21, 2008.
(4)		Shares available to be purchased under the Company’s Share Repurchase Program publicly announced October 21, 2008.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not Applicable.

ITEM 5. OTHER INFORMATION

     Not Applicable.

ITEM 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K:

31.1		Certification of Murray R. McClean, Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1		Certification of Murray R. McClean, Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

SIGNATURES

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

INDEX TO EXHIBITS

Exhibit No.		Description of Exhibit
31.1		Certification of Murray R. McClean, Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1		Certification of Murray R. McClean, Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).