UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

Commission file number 1-4304

 

 

Commercial Metals Company

(Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code:

(214) 689-4300

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act. Yes þ  No o

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes o  No þ

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or amendment to this Form 10-K 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):

                                       (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No þ

 

The aggregate market value of the common stock on October 28, 2008, held by non-affiliates of the registrant, based on the closing price of $10.03 per share on October 28, 2008 on the New York Stock Exchange, was approximately $1,113,447,000. (For purposes of determination of this amount, only directors, executive officers, and 10% or greater stockholders have been deemed affiliates.)

 

The number of shares outstanding of common stock as of October 28, 2008, was 113,799,128.

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

Portions of the following document are incorporated by reference into the listed Part of Form 10-K:

 

Registrant’s definitive proxy statement for the annual meeting of stockholders to be held January 22, 2009 — Part III

 

COMMERCIAL METALS COMPANY
TABLE OF CONTENTS

PART I
Item 1:		Business			1
Item 1A:		Risk Factors			10
Item 1B:		Unresolved Staff Comments			17
Item 2:		Properties			17
Item 3:		Legal Proceedings			18
Item 4:		Submission of Matters to a Vote of Security Holders			19
PART II
Item 5:		Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities			19
Item 6:		Selected Financial Data			22
Item 7:		Management's Discussion and Analysis of Financial Condition and Results of Operation			22
Item 7A:		Quantitative and Qualitative Disclosures about Market Risk			38
Item 8:		Financial Statements and Supplementary Data			40
Item 9:		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			68
Item 9A:		Controls and Procedures			68
Item 9B:		Other Information			69
PART III
Item 10:		Directors and Executive Officers of the Registrant			69
Item 11:		Executive Compensation			70
Item 12:		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			70
Item 13:		Certain Relationships and Related Transactions			70
Item 14:		Principal Accountant Fees and Services			70
PART IV
Item 15:		Exhibits, Financial Statement Schedules			70
		Signatures			76
EX-4(i)(g)
EX-12
EX-21
EX-23
EX-31(a)
EX-31(b)
EX-32(a)
EX-32(b)

PART I

ITEM 1. BUSINESS

GENERAL

     We recycle, manufacture, fabricate and distribute steel and metal products and related materials and services through a network of locations throughout the United States and internationally. Effective at the beginning of our 2008 fiscal year we realigned the management of our businesses into two operating divisions — CMC Americas and CMC International. We consider our business to be organized into five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, all operating as part of CMC Americas, with CMC International comprised of two segments, International Mills and International Fabrication and Distribution.

     We were incorporated in 1946 in the State of Delaware. Our predecessor company, a metals recycling business, has existed since approximately 1915. We maintain our executive offices at 6565 MacArthur Boulevard in Irving, Texas, telephone number (214) 689-4300. Our fiscal year ends August 31 and all references in this Form 10-K to years refer to the fiscal year ended August 31 of that year unless otherwise noted. Financial information for the last three fiscal years concerning our five business segments and the geographic areas of our operations is incorporated herein by reference from “Note 14 Business Segments” of the notes to consolidated financial statements which are in Part II, Item 8 of this Form 10-K.

     Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports will be made available free of charge through the Investor Relations section of our Internet website, http://www.cmc.com, as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the Securities and Exchange Commission.

     The Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. This segment operates 48 scrap metal processing facilities with 21 locations in Texas, 8 in Florida, 6 in South Carolina, 2 in each of Alabama, Arkansas, Missouri and Oklahoma and one each in Georgia, Kansas, Louisiana, North Carolina and Tennessee.

     We purchase ferrous and nonferrous scrap metals, processed and unprocessed, from a variety of sources in a variety of forms for our metals recycling plants. Sources of metal for recycling include manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, railroads, refineries, shipyards, ordinance depots, demolition businesses, automobile salvage and wrecking firms. Collectively, small scrap metal collection firms are a major supplier.

     In 2008, our scrap metal recycling segment’s plants processed and shipped approximately 3,391,000 tons of scrap metal compared to 3,220,000 tons in 2007. Ferrous scrap metals comprised the largest tonnage of metals recycled at approximately 3,053,000 tons, an increase of approximately 211,000 tons as compared to 2007. We shipped approximately 305,000 tons of nonferrous scrap metals, primarily aluminum, copper and stainless steel, a decrease of approximately 45,000 tons as compared to 2007. With the exception of precious metals, our scrap metal recycling plants recycle and process practically all types of metal. In addition, one scrap metal recycling facility operated by our Americas Mills segment processed 516,000 tons of primarily ferrous scrap metal for consumption at the adjoining Americas Mills facility during 2008.

     Our scrap metal recycling plants typically consist of an office and warehouse building equipped with specialized equipment for processing both ferrous and nonferrous metal located on several acres of land that we use for receiving, sorting, processing and storing metals. Several of our scrap metal recycling plants use a small portion of their site or a nearby location to display and sell metal products that may be reused for their original purpose without further processing. We equip our larger plants with scales, shears, baling presses, briquetting machines, conveyors and magnetic separators which enable these plants to efficiently process large volumes of scrap metals.

     Two plants have extensive equipment that segregates metallic content from large quantities of insulated wire. To facilitate processing, shipping and receiving, we equip our ferrous metal processing centers with presses, shredders or hydraulic shears to prepare and compress scrap metal for easier handling. Cranes are utilized to handle scrap metals for processing and to load material for shipment. Many facilities have rail access as processed ferrous scrap is primarily transported to consumers by open gondola railcar or barge when water access is available.

     Americas Recycling operates six large shredding machines, four in Texas and one in each of Florida and South Carolina, capable of pulverizing obsolete automobiles or other sources of scrap metal. We have three additional shredders, one operated by our Americas Mill segment and two by our International Mill segment.

     During 2008 this segment also operated a business that purchases and removes rail and other materials from abandoned railroads. Most of the salvaged rail is utilized by our Arkansas minimill. Beginning in 2009 this operation will be included in the Americas Mill segment.

     We sell scrap metals to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers and other consumers. Ferrous scrap metal is the primary raw material for electric arc furnaces such as those operated by our Americas Mill segment and other minimills. Some minimills periodically supplement purchases of ferrous scrap metal with direct reduced iron and pig iron for certain product lines. Our Dallas office coordinates the sales of scrap metals from our scrap metal processing plants to our customers. We negotiate export sales through our network of foreign offices as well as our Dallas office.

     We do not purchase a material amount of scrap metal from one source. One customer represents 15% of our Americas Recycling segment’s revenues. Our recycling segment competes with other scrap metals processors and primary nonferrous metals producers, both domestic and foreign, for sales of nonferrous materials. Consumers of nonferrous scrap metals frequently can utilize primary or “virgin” ingot processed by mining companies instead of nonferrous scrap metals. The prices of nonferrous scrap metals are closely related to, but generally less than, the prices of primary or “virgin” ingot.

AMERICAS MILLS SEGMENT

     We conduct our Americas Mills operations through a network of:

	—		4 steel mills, commonly referred to as “minimills”, that produce reinforcing bar, angles, flats, rounds, small beams, fence-post sections and other shapes;
	—		a copper tube minimill; and
	—		one scrap metal shredder processing facility that directly supports the adjoining steel minimill.

     We operate four steel minimills which are located in Texas, Alabama, South Carolina and Arkansas. We utilize a fleet of trucks that we own and private haulers to transport finished products from the minimills to our customers and our fabricating shops. To minimize the cost of our products, to the extent feasible consistent with market conditions and working capital demands, we try to operate all four minimills near full capacity. Market conditions such as increases in quantities of competing imported steel, production rates at domestic competitors, customer inventory levels or a decrease in construction activity may reduce demand for our products and limit our ability to operate the minimills at full capacity. Through our operations and capital improvements, we strive to increase productivity and capacity at the minimills and enhance our product mix. Since the steel minimill business is capital intensive, we make substantial capital expenditures on a regular basis to remain competitive with other low cost producers. Over the past three fiscal years we have spent approximately $201 million or 29% of our total capital expenditures on projects at the steel minimills operated by our Americas Mills segment.

     The following table compares the amount of steel (in tons) melted, rolled and shipped by our four steel minimills in the past three fiscal years:

		2008				2007				2006
Tons melted			2,396,000				2,121,000				2,324,000
Tons rolled			2,101,000				1,957,000				2,198,000
Tons shipped			2,528,000				2,250,000				2,492,000

     We acquired our largest steel minimill in 1963. It is located in Seguin, Texas, near San Antonio. In 1983, we acquired our minimill in Birmingham, Alabama. As part of the acquisition of Owen Steel Company, Inc. and its affiliates in 1995, we acquired our minimill in Cayce, South Carolina. We have operated our smallest mill since 1987, and it is located near Magnolia, Arkansas.

     The Texas, Alabama and South Carolina minimills each consist of:

	—		melt shop with electric arc furnace that melts ferrous scrap metal;
	—		continuous casting equipment that shape the molten metal into billets;
	—		reheating furnace that prepares billets for rolling;
	—		rolling mill that forms products from heated billets;
	—		mechanical cooling bed that receives hot product from the rolling mill;
	—		finishing facilities that cut, straighten, bundle and prepare products for shipping; and
	—		supporting facilities such as maintenance, warehouse and office areas.

     Descriptions of minimill capacity, particularly rolling capacity, are highly dependent on the specific product mix manufactured. Each of our minimills can and do roll many different types and sizes of products in their range depending on market conditions including pricing and demand. Therefore our capacity estimates assume a typical product mix and will vary with the products actually produced. Our Texas minimill has annual capacity of approximately 1,000,000 tons melted and rolled. Our Alabama minimill’s annual capacity is approximately 700,000 tons melted and 575,000 tons rolled. We have annual capacity at our South Carolina minimill of approximately 750,000 tons melted and 800,000 tons rolled.

     Our Texas minimill manufactures a full line of bar size products including reinforcing bar, angles, rounds, channels, flats, and special sections used primarily in building highways, reinforcing concrete structures and manufacturing. Our Texas minimill sells primarily to the construction, service center, energy, petrochemical, and original equipment manufacturing industries. The Texas minimill primarily ships its products to customers located in Texas, Louisiana, Arkansas, Oklahoma and New Mexico. It also ships products to approximately 22 other states and to Mexico. Our Texas minimill melted 997,000 tons during 2008 compared to 859,000 tons during 2007, and rolled 792,000 tons, an increase of 62,000 tons from 2007.

     The Alabama minimill recorded 2008 melt shop production of 676,000 tons, an increase of 62,000 tons from 2007. The Alabama minimill rolled 430,000 tons, an increase of 5,000 tons from 2007. Our Alabama minimill primarily manufactures products that are larger in size as compared to products manufactured by our other three minimills. Such larger size products include mid-size structural steel products including angles, channels, wide flange beams of up to eight inches and special bar quality rounds and flats. Our Alabama minimill sells primarily to service centers, as well as to the construction, manufacturing, and fabricating industries. The Alabama minimill primarily ships its products to customers located in Alabama, Georgia, Tennessee, North and South Carolina, and Mississippi.

     Our South Carolina minimill manufactures a full line of bar size products which primarily include steel reinforcing bar. The minimill also manufactures angles, rounds, squares, fence post sections and flats. The South Carolina minimill ships its products to customers located in the Southeast and mid-Atlantic areas which include the states from Florida through southern New England. During 2008 the South Carolina minimill melted 723,000 tons and rolled 732,000 tons compared to 649,000 tons melted and 669,000 tons rolled during 2007.

     The primary raw material for our Texas, Alabama and South Carolina minimills is ferrous scrap metal. We purchase the raw material from suppliers generally within a 300 mile radius of each minimill including a substantial amount from the CMC Americas segment. Our Texas minimill runs an automobile shredding facility as a part of the mill operations with that entire shredder’s processed ferrous scrap consumed at the Texas minimill. We believe the supply of ferrous scrap metal is adequate to meet our future needs, but it has historically been subject to significant

price fluctuations which have occurred more rapidly over the last five years. All three minimills also consume large amounts of electricity and natural gas. Although we have not had any significant curtailments and believe that supplies are adequate, the price we pay for both electricity and natural gas has increased substantially during recent years. Regional and national energy supply, demand and the extent of applicable regulatory oversight of rates charged by providers affect the prices we pay for electricity and natural gas.

     The smaller Arkansas minimill does not have a melt shop or continuous casting equipment. The Arkansas minimill manufacturing process begins with a reheating furnace utilizing used rail primarily salvaged from railroad abandonments and excess billets acquired from either our other mills or unrelated suppliers as its raw material. The remainder of the manufacturing process utilizes rolling mill, cooling bed and finishing equipment and support facilities similar to, but on a smaller scale, than those at our other minimills. The Arkansas minimill primarily manufactures metal fence post stock, small diameter reinforcing bar, sign posts and bed frame angles with some flats, angles and squares. At our Arkansas minimill and at our facilities in San Marcos, Texas, Brigham City, Utah, and West Columbia, South Carolina, we fabricate fence post stock into studded “T” metal fence posts. The product is finished at facilities similar to, but smaller than, the other minimills. Since our Arkansas minimill does not have melting facilities, the minimill depends on an adequate supply of competitively priced used rail or billets. The availability of these raw materials fluctuates with the pace of railroad abandonments, rail replacement by railroads, demand for used rail from competing domestic and foreign rail rerolling mills and the level of excess billet production offered for sale at steel producers. We have annual capacity at our Arkansas minimill of approximately 150,000 tons rolled.

     In December 2006, we announced plans to build a new minimill, designated a “micro mill” due to its relatively small estimated capacity of approximately 280,000 tons per year. The estimated cost of the facility is approximately $155 million and will be located at a site in Mesa, Arizona. The micro mill will utilize a “continuous continuous” design where metal flows uninterrupted from melting to casting to rolling. It will be more compact than existing, larger capacity steel minimills taking advantage of both lower initial capital construction costs and ongoing operating efficiencies by focusing on cost-effective production of a limited product range, primarily rebar. This new facility obtained all major environmental and land use permits required in late 2008. Construction is now underway with startup anticipated in early fiscal year 2010.

     Our subsidiary, CMC Howell Metal Company, operates a copper tube minimill in New Market, Virginia, which manufacturers copper tube, primarily water tubing, for the plumbing, air conditioning and refrigeration industries. Both high quality copper scrap and occasionally virgin copper ingot are melted, cast, extruded and drawn into tubing. The minimill supplies tubing in straight lengths and coils for use in commercial, industrial and residential construction and by original equipment manufacturers. Our customers, largely equipment manufacturers, wholesale plumbing supply firms and large home improvement retailers, are located in 44 states and supplied directly from the minimill or four warehouses. The demand for copper tube depends on the level of new apartment, hotel/motel and residential construction and renovation. Copper scrap is readily available, but subject to rapid price fluctuations. The price or supply of virgin copper causes the price of copper scrap to fluctuate rapidly. Our Americas Recycling segment supplies a small portion of the copper scrap. CMC Howell’s facilities include melting, casting, piercing, extruding, drawing, finishing and office facilities. During 2008, the facility produced approximately 47 million pounds of copper tube. CMC Howell has annual manufacturing capacity of approximately 80 million pounds.

     No single customer purchases 10% or more of our Americas Mills segment’s production. Due to the nature of certain stock products we sell in the Americas Mills segment, we do not have a long lead time between receipt of a purchase order and delivery. We generally fill orders for stock products from inventory or with products near completion. As a result, we do not believe that backlog levels are a significant factor in the evaluation of these operations. Backlog for our four domestic steel mills at August 31, 2008 was approximately $311 million as compared to $296 million at August 31, 2007.

AMERICAS FABRICATION AND DISTRIBUTION SEGMENT

     We conduct our Americas fabrication operations through a network of:

	—		steel plants that bend, cut, weld and fabricate steel, primarily reinforcing bar and angles;
	—		warehouses that sell or rent products for the installation of concrete;

	—		plants that produce special sections for floors and ceiling support;
	—		plants that produce steel fence posts; and
	—		plants that treat steel with heat to strengthen and provide flexibility.

     Steel Fabrication. Our Americas fabrication group operates 51 facilities that we consider to be engaged in the various aspects of steel fabrication. Most of the facilities engage in general fabrication of reinforcing and structural steel with eight locations specializing in fabricating joists, special beams and decking for floor and ceiling support and four facilities fabricating only steel fence post. We obtain steel for these facilities from our own minimills, purchases from other steel manufacturers through our distribution business and directly from unrelated steel vendors. In 2008, we shipped 1,726,000 tons of fabricated steel, an increase of 131,000 tons from 2007.

     We conduct steel fabrication activities in facilities located in Texas at Beaumont, Buda, Corpus Christi, Dallas, Fort Worth, Harlingen, Houston (3), Melissa, San Marcos, San Antonio, Seguin, Victoria, Waco and Waxahachie; Louisiana at Baton Rouge, Keithville and Slidell; Arkansas at Little Rock, Magnolia and Hope; Utah in Brigham City; Florida at Fort Myers, Jacksonville, Kissimmee; South Carolina at Cayce, North Charleston, Columbia, Taylors and West Columbia; in Georgia at Atlanta and Lawrenceville; Virginia at Farmville (2), Fredericksburg and Norfolk; California at Bloomington, Emeryville, Etiwanda, Fresno, San Marcus and Stockton; Arizona at Chandler; Oklahoma at Oklahoma City and Tulsa; Ohio at Cleveland; New Mexico at Albuquerque; and Mississippi at Lumberton. During 2008 we expanded our reinforcing steel fabrication capacity and geographic coverage with acquisitions of the assets of additional fabrication facilities operating in Fort Worth, and Waxahachie, Texas; Brighton and Denver, Colorado; Kankakee, Illinois; Fontana, Tracy and Claremont, California; two locations in Las Vegas, Nevada and acquired sole ownership of previously partially owned operations in Nashville, Tennessee and Gastonia, North Carolina. The acquired operations also expanded the scope of services offered to include epoxy coating of reinforcing bar and post-tensioning cable.

     Fabricated steel products are used primarily in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial plants, power plants, highways, bridges, arenas, stadiums, and dams. Generally, we sell fabricated steel in response to a bid solicitation from a construction contractor or the project owner. Typically, the contractor or owner of the project awards the job based on the competitive prices of the bids and does not individually negotiate with the bidders.

     Our joist manufacturing operations headquartered in Hope, Arkansas, manufacture steel joists for roof supports. The joist manufacturing operations fabricate joists from steel obtained primarily from our Americas Mill at facilities in Hope, Arkansas; Starke, Florida; Cayce, South Carolina; Fallon, Nevada; Iowa Falls, Iowa; New Columbia, Pennsylvania; and Juarez, Mexico. We manufacture steel deck, a companion product for joist sales, at facilities in South Plainfield, New Jersey; Peru, Illinois; and Rock Hill, South Carolina. Our typical joist and deck customer is a construction contractor or large chain store owner. Joists are generally made to order and sales may include custom design, fabrication and painting. Deck is often sold in combination with joists. We obtain our sales primarily on a competitive bid basis. We also manufacture and sell castellated and cellular steel beams. These beams, recognizable by their hexagonal or circular pattern of voids, permit greater design flexibility in steel construction, especially floor structures. We fabricate these beams at a facility adjacent to our Hope, Arkansas, joist manufacturing plant.

     Construction Services. We sell and rent construction related products and equipment to concrete installers and other construction businesses. We have 45 locations in Texas, Louisiana, Mississippi, South Carolina, Florida, Colorado, Arkansas, Arizona, New Mexico, Oklahoma, Utah, Idaho and California where we store and sell these products which, with the exception of a small portion of steel products, are purchased for resale from unrelated suppliers.

     Heat Treating. Our subsidiary, AHT, Inc. operates plants in Chicora, Pennsylvania, Struthers, Ohio and Pell City Alabama that heat treat steel products for special applications. AHT works closely with our Alabama minimill, other steel mills and our distribution business that sell specialized heat-treated steel for customer specific use. Such steel is primarily used in original or special equipment manufacturing where special hardening or flexibility is required. We have annual operating capacity in our heat treating operation of approximately 125,000 tons. We also operate a warehousing and distribution operation known as CMC Impact Metals which distributes not only the specialized products provided by AHT, but also similar products obtained from other similar specialty processors located around the world.

     CMC Dallas Trading. Our Americas division distribution business consists of our CMC Dallas Trading operation. CMC Dallas Trading markets and distributes steel semi-finished long and flat products into the Americas which it purchases from a diverse base of international and domestic sources. During the past year, CMC Dallas Trading sold approximately 800,000 thousand tons of steel products through and with the assistance of our offices in Irving, Texas and Mexico City, Mexico. Our network of offices in the International Fabrication and Distribution segment works closely with CMC Dallas Trading to share information regarding supply and demand for the products sold and assists with locating and maintains relationships with sources of supply.

     Backlog in our steel fabrication operations was approximately $784 million at August 31, 2008 as compared to $783 million at August 31, 2007. Other backlogs in the Americas Fabrication and Distribution segment are not considered material. No single customer accounts for 10% or more of our Americas Fabrication and Distribution segment’s sales.

CMC INTERNATIONAL DIVISION OPERATIONS

INTERNATIONAL MILLS SEGMENT

     Our Swiss subsidiary, CMC International AG owns two steel minimills — CMC Zawiercie S.A. (CMCZ) with operations at Zawiercie, Poland and CMC Sisak d.o.o. (CMCS) with operations at Sisak, Croatia. These two mills constitute the International Mills segment.

     We purchased 71% of the outstanding shares of CMCZ in December 2003 and subsequently have become the sole shareholder by completing the acquisition of the remaining outstanding shares. CMCZ is a steel minimill with equipment similar to our domestic steel minimills, but also includes a second rolling mill which produces wire rod. We own all or substantial interest in several smaller metals related operations, including ten scrap metals processing facilities in Poland that directly support CMCZ with approximately one-half of its scrap requirements.

     CMCZ has annual melting capacity of approximately 1,870,000 tons with annual rolling capacity of approximately 1,100,000 tons. During 2008, the facility melted 1,502,000 tons of steel compared to 1,458,000 tons the prior year; rolled 1,100,000 compared to the prior year’s 1,130,000 tons and shipped 1,434,000 tons compared to 1,366,000 tons during 2007. Principal products manufactured include rebar and wire rod as well as smaller quantities of merchant bar. CMCZ is a significant manufacturer of rebar and wire rod in Central Europe selling rebar primarily to fabricators, distributors and construction companies. Principal customers for wire rod are meshmakers, endusers and distributors. CMCZ’s products are generally sold to customers located within a market area of 400 miles of the mill. The majority of sales are to customers within Poland with the Czech Republic, Slovakia, Hungary and Germany being the major export markets. Ferrous scrap metal is the principal raw material for CMCZ and is generally obtained from scrap metal processors and generators within 400 miles of the mill. Ferrous scrap metal, electricity, natural gas and other necessary raw materials for the steel manufacturing process are generally readily available although subject to periodic significant price fluctuations. A large capacity scrap metal shredding facility similar to the largest automobile shredder we operate in the United States is located at CMCZ and supplies CMCZ with a portion of its scrap metal requirements.

     During 2008 we had two significant expansions underway at CMCZ. Installation of a new wire rod block at a cost of approximately $40 million was nearing completion at year end. This addition will increase capacity approximately 100,000 tons and enhance CMCZ’s product range. We also began installation of a new rolling mill at an estimated cost of $190 million. The new mill, designed to allow efficient and flexible production of an increased medium section product range, will complement the facility’s existing rolling mill dedicated primarily to rebar production. The new mill will have a rolling capacity of approximately 716,000 tons of rebar, merchant bar and wire rod. The new mill, expected to be commissioned during the autumn of calendar year 2009, is in addition to CMCZ’s two existing rolling mills.

     In September 2007, we acquired from the Croatian Privatization Fund all outstanding shares of Valjaonica Cijevi Sisak which we subsequently renamed CMCS. We agreed to invest not less than $38 million in capital expenditures and increase working capital by approximately $39 million. CMCS is an electric arc furnace steel pipe mill. Current melting capacity at CMCS is approximately 80,000 tons. We have announced plans to replace the

existing 34 short ton electric arc furnace with a larger 67 short ton furnace and add a ladle furnace. These modifications will increase capacity to approximately 500,000 tons when completed in the autumn of calendar year 2009. CMCS operates three rolling mills — a seamless pipe mill, a welded pipe mill and cold processing mill.

     CMCS has an annual capacity of about 330,000 short tons of steel pipe. Prior to our purchase the mill had been operating at minimal production rates due to inadequate financing, poorly maintained equipment and poor employee morale. We commenced what amounted to a restart of the facility during the year, employing new key managers, reviewing and revising operating, maintenance and safety procedures, staffing requirements and analyzing potential capital improvements to increase productivity. CMCS melted 34,000 tons, rolled 67,000 tons and shipped 58,000 tons in 2008.

INTERNATIONAL FABRICATION AND DISTRIBUTION SEGMENT

     Our international distribution operations buy and sell primary and secondary metals, fabricated metals and other industrial products. During the past year, the international distribution facilities sold approximately 2 million tons of steel products. We market and distribute these products through a network of offices, processing facilities and joint venture offices located around the world. We purchase steel, nonferrous metals including copper and aluminum coil, sheet and tubing, chemicals, industrial minerals, ores, metal concentrates and ferroalloys from producers in domestic and foreign markets. Occasionally, we purchase these materials from suppliers, such as trading companies or industrial consumers, who have a surplus of these materials. We utilize long-term contracts, spot market purchases and trading or barter transactions to purchase materials. To obtain favorable long term supply agreements, we occasionally offer assistance to producers by arranging structured finance transactions to suit their objectives. Our exposure to these structured finance transactions is negligible to our business. See discussion in Note 11, Commitments and Contingencies, to our consolidated financial statements.

     We sell our products to customers, primarily manufacturers, in the steel, nonferrous metals, metal fabrication, chemical, refractory and transportation businesses. We sell directly to our customers through and with the assistance of our offices in Fort Lee, New Jersey; Arcadia, California; Sydney, Perth, Melbourne, Brisbane and Adelaide, Australia; Singapore; Zug, Switzerland; Sandbach, United Kingdom; Dublin, Ireland; Kohl, Germany; Temse, Belgium and Hong Kong, Beijing, Guangzhou and Shanghai China. We have a representative office in Moscow. We have agents or joint venture partners in additional offices located in significant international markets. Our network of offices share information regarding demand for our materials, assist with negotiation and performance of contracts and other services for our customers, and identify and maintain relationships with our sources of supply.

     In most transactions, we act as principal by taking title and ownership of the products. We are also designated as a marketing representative, sometimes exclusively, by product suppliers. We utilize agents when appropriate, and on occasion we act as a broker for these products. We buy and sell these products in almost all major markets throughout the world where trade by American-owned companies is permitted.

     We market physical products as compared to companies that trade commodity futures contracts and frequently do not take delivery of the commodity. As a result of sophisticated global communications, our customers and suppliers often have easy access to quoted market prices, although such price quotes are not always indicative of actual transaction prices. Therefore, to distinguish ourselves we focus on value added services for both sellers and buyers. Our services include actual physical market pricing and trend information in contrast to more speculative metal exchange futures market information, technical information and assistance, financing, transportation and shipping (including chartering of vessels), storage, warehousing, just-in-time delivery, insurance, hedging and the ability to consolidate smaller purchases and sales into larger, more cost efficient transactions. These services are performed in the normal course of business and the majority are included in the transaction price as there is no separate revenue stream for each service. We attempt to limit exposure to price fluctuations by offsetting purchases with concurrent sales. We also enter into currency exchange contracts as economic hedges of sales and purchase commitments denominated in currencies other than the United States dollar or, if the transaction involves our Australian, United Kingdom or German subsidiaries, their local currency. We do not, as a matter of policy, speculate on changes in the markets.

     We have previously made investments to acquire approximately 11% of the outstanding stock of a Czech Republic steel mill and 24% of a Belgium business that processes and pickles hot rolled steel coil. These investments allow us to expand our marketing and distribution activities by selling a portion of the products they produce and on occasion supplying a portion of their raw material requirements.

     Our Australian operations are believed to be the largest marketer of imported steel in Australia. We utilize warehouse facilities at several Australian ports to facilitate distribution, including just-in-time delivery and logistic management. Our CMC Coil Steels Group is a major distributor and processor of steel sheet and coil products

predominately procured from Australian sources and has recently expanded into distribution of long products including reinforcing bar. Coil Steels operates processing facilities in Brisbane, Sydney and Melbourne, warehouses in Adelaide and Perth and smaller regional sales outlets including Darwin and Toowoomba. The Australian operations also operate an industrial products distribution business supplying metals related industries including steel mills, foundries and smelters. Late in 2008, we acquired the assets of a small Sydney based ferrous and non-ferrous recycling facility.

     Our International Fabrication operations have expanded downstream captive uses for a portion of the rebar manufactured at CMCZ with construction of a reinforcing bar fabrication facility at CMCZ and the acquisition of rebar fabrication facilities in Rosslau, Germany as well as having commenced construction of a new fabrication facility near Warsaw. These rebar fabrication facilities are similar to those operated by our domestic fabrication facilities and sell fabricated rebar to contractors for incorporation into construction projects generally within 150 miles of each facility. In June 2008 we acquired Nike S.A. located in Dąbrowa Górnicza, Poland. Nike is a producer of welded steel mesh, cold rolled wire rod and cold rolled reinforcing bar with total production capacity of approximately 99,000 tons of steel products annually. This acquisition enables our International Fabrication operations to supplement sales of fabricated reinforcing bar by also offering wire mesh to customers including metals service centers as well as construction contractors.

     In January 2008 we acquired a majority interest in a joint venture operating a recycling facility in Singapore. The facility is similar to those operated by the Recycling segment of CMC Americas but on a smaller scale. In April we acquired sole ownership of the venture which is operated as part of the International Fabrication and Distribution segment due to its oversight by managers in this segment.

     Many of our mills and fabrication facilities’ customers are in the construction business. Due to the increase in construction during the spring and summer months, our sales are generally higher in the third and fourth quarters than in the first and second quarters of our fiscal year.

     Our Americas Mills compete with regional, national and foreign manufacturers of steel and copper. We do not produce a significant percentage of the total domestic output of most of our products. However, we are considered a substantial supplier in the markets near our facilities. We compete primarily on the price and quality of our products and our service. See “Risk Factors - Risks Related to Our Industry.”

     We believe that CMCZ is the second largest supplier of wire rod and the second largest supplier of reinforcing bar in the Polish market. It competes with several large manufacturers of rebar and wire rod in central and eastern Europe, primarily on the basis of price and product availability.

     Our Americas fabrication business competes with regional and national suppliers. We believe that we are among the largest fabricators of reinforcing bar in the United States, and our joist facilities are the second largest manufacturer of joists in the United States, although significantly smaller than the largest joist supplier. We believe that we are the largest manufacturer of steel fence posts in the United States.

     We believe our Americas Recycling segment is one of the largest entities engaged in the recycling of nonferrous scrap metals in the United States. We are also a major regional processor of ferrous scrap metal. The scrap metal recycling business is subject to cyclical fluctuations based upon the availability and price of unprocessed scrap metal and the demand for steel and nonferrous metals. Buying prices and service to scrap suppliers and generators are the principal competitive factors for the recycling segment. The price offered for scrap metal is the principal competitive factor in acquiring material from smaller scrap metals collection firms, while industrial generators of scrap metal may also consider the importance of other factors such as supplying appropriate collection containers, timely removal, reliable documentation including accurate and detailed purchase records with customized reports, the ability to service multiple locations, insurance coverage, and the buyer’s financial strength.

     Our distribution business is highly competitive. Our products in the distribution business are standard commodity items. We compete primarily on the price, quality and reliability of our products, our financing alternatives and our additional services. In this business, we compete with other domestic and foreign trading

companies, some of which are larger and may have access to greater financial resources. In addition, some of our competitors may be able to pursue business without being restricted by the laws of the United States. We also compete with industrial consumers who purchase directly from suppliers, and importers and manufacturers of semi-finished ferrous and nonferrous products. Our CMC Coil Steels Group, a distributor of steel sheet and coil in Australia, is believed to be the third largest distributor of those products in Australia.

     A significant factor in our business is our compliance with environmental laws and regulations. See “Risk Factors — Risks Related to Our Industry” below. Compliance with and changes in various environmental requirements and environmental risks applicable to our industry may adversely affect our results of operations and financial condition.

     Occasionally, we may be required to clean up or take certain remediation action with regard to sites we formerly used in our operations. We may also be required to pay for a portion of the costs of clean up or remediation at sites we never owned or on which we never operated if we are found to have treated or disposed of hazardous substances on the sites. The United States Environmental Protection Agency, or EPA, has named us a potentially responsible party, or PRP, at several federal Superfund sites. The EPA alleges that we and other PRP scrap metal suppliers are responsible for the cleanup of those sites solely because we sold scrap metal to unrelated manufacturers for recycling as a raw material in the manufacturing of new products. We contend that an arms length sale of valuable scrap metal for use as a raw material in a manufacturing process that we have no control of should not constitute “an arrangement for disposal or treatment of hazardous substances” as defined under Federal law. In 2000 the Superfund Recycling Equity Act was signed into law which, subject to the satisfaction of certain conditions, provides legitimate sellers of scrap metal for recycling with some relief from Superfund liability under Federal law. Despite Congress’ clarification of the intent of the Federal law, some state laws and environmental agencies still seek to impose such liability. We believe efforts to impose such liability are contrary to public policy objectives and legislation encouraging recycling and promoting the use of recycled materials and we continue to support clarification of state laws and regulations consistent with Congress’ action.

     New Federal, state and local laws, regulations and the varying interpretations of such laws by regulatory agencies and the judiciary impact how much money we spend on environmental compliance. In addition, uncertainty regarding adequate control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions impact our future expenditures in order to comply with environmental requirements. We cannot predict the total amount of capital expenditures or increases in operating costs or other expenses that may be required as a result of environmental compliance. We also do not know if we can pass such costs on to our customers through product price increases. During 2008, we incurred environmental costs including disposal, permits, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of approximately $25 million. In addition, we estimate that we spent approximately $3 million during 2008 on capital expenditures for environmental projects. We believe that our facilities are in material compliance with currently applicable environmental laws and regulations. We anticipate capital expenditures for new environmental control facilities during 2009 of approximately $28 million.

     As of August 2008, we had 15,276 employees. The Americas Mills segment employed 2,123 people, the Americas Recycling segment employed 2,164 people, the Americas Fabrication and Distribution segment employed 6,112 people, the International Mills segment employed 3,491 people and the International Fabrication and Distribution segment employed 926 people. We have 460 employees providing services to our divisions and subsidiaries in general corporate administration and management. Production employees at one metals recycling plant and two fabrication facilities are represented by unions for collective bargaining purposes. Approximately one half of International Mills’ employees are represented by unions. We believe that our labor relations are generally good to excellent and our work force is highly motivated.

ITEM 1A. RISK FACTORS

     Before making an investment in our company, you should be aware of various risks, including those described below. You should carefully consider these risk factors together with all of the other information included in this annual report on Form 10-K. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial may also materially and adversely affect our business, financial condition, results of operations or cash flows. If any of these risks actually occur, our business, financial condition, results of operations or cash flows could be materially adversely affected and you may lose all or part of your investment.

RISKS RELATED TO OUR INDUSTRY

OUR INDUSTRY IS AFFECTED BY CYCLICAL AND GLOBAL ECONOMIC FACTORS INCLUDING THE RISK OF A RECESSION AND OUR CUSTOMERS’ ACCESS TO CREDIT FACILITIES.

     Our financial results are substantially dependent upon the overall economic conditions in the United States and the European Union. A recession in the United States, the European Union, or globally — or the public perception that a recession is likely — could substantially decrease the demand for our products and adversely affect our business. Many of our products are commodities subject to cyclical fluctuations in supply and demand in metal consuming industries and construction. Metals industries have historically been vulnerable to significant declines in consumption and product pricing during prolong periods of economic downturn. Likewise the pace of construction has historically slowed significantly during economic downturns. Many of our customers rely on access to credit to adequately fund their operations or to finance construction projects. The inability of our customers to access credit facilities will adversely affect our business by reducing our sales, increasing our exposure to accounts receivable bad debts and reducing our profitability. Our geographic concentration in the southern and southwestern United States as well as Central Europe, Australia and China exposes us to the local market conditions in these regions. Economic downturns in these areas or decisions by governments that have an impact on the level and pace of overall economic activity in a particular region could also adversely affect our sales and profitability.

     Our business supports cyclical industries such as commercial and government construction, energy, metals service center, petrochemical and original equipment manufacturing. These industries may experience significant fluctuations in demand for our products based on economic conditions, energy prices, consumer demand and decisions by governments to fund infrastructure projects such as highways, schools, energy plants and airports. Many of these factors are beyond our control. As a result of the volatility in the industries we serve, we may have difficulty increasing or maintaining our level of sales or profitability. If the industries we serve suffer a prolonged downturn, then our business may be adversely affected. Although the residential housing market is not a significant factor in our business, related commercial and infrastructure construction activities, such as shopping centers and roads could be impacted by a prolonged slump in new housing construction.

     Our industry is characterized by low backlogs, which means that our results of operations are promptly affected by short-term economic fluctuations.

A SIGNIFICANT REDUCTION IN CHINA’S STEEL CONSUMPTION OR INCREASED CHINESE STEEL PRODUCTION SUBSTANTIALLY EXCEEDING LOCAL DEMAND MAY RESULT IN CHINA BECOMING A LARGE EXPORTER OF STEEL AND DISRUPTION TO WORLD STEEL MARKETS.

     Chinese economic expansion has affected the availability and heightened the volatility of many commodities that we market and use in our manufacturing process, including steel. It is reported that in calendar year 2007 China produced approximately 489 million metric tons of crude steel, representing 37% of world production. China’s estimated consumption was approximately 434 million metric tons and was a net exporter of approximately 46 million tons in 2007. Expansions and contractions in China’s economy can have major effects on the pricing of not only the price of our finished steel products but also many commodities that affect us such as secondary metals, energy, marine freight rates, steel making supplies such as ferroalloys and graphite electrodes and materials we market such as iron ore and coke. Should Chinese demand weaken or Chinese steel production be allowed to expand unchecked to the point that it significantly exceeds the country’s consumption, prices for many of the products that we both sell to and export from China may fall causing erosion in our gross margins and subjecting us to possible renegotiation of contracts or increases in bad debts. Significant exports from China of steel in the product lines we manufacture in the United States would cause selling prices in the United States to decline and negatively impact our gross margins.

RAPID AND SIGNIFICANT CHANGES IN THE PRICE OF METALS COULD NEGATIVELY IMPACT OUR INDUSTRY.

     Prices for most metals in which we deal have experienced large increases accompanied with increased volatility over the last several years. More recently steel prices have begun to sharply decline from their peaks but are at still relatively high levels. With a few exceptions, our markets have thus far been able to adapt to this changing pricing environment. However, should metals prices experience further substantial rapid decreases, increases or be subjected to sudden increases it would impact us in several ways. Some of our operations, the fabrication operations for example, may benefit from rapidly decreasing steel prices as their material cost for previously contracted fixed price work declines. Others, such as our Americas Mills and International Mills segments, would likely experience reduced margins and may be forced to liquidate high cost inventory at reduced margins or losses until prices stabilized. Sudden increases could have the opposite effect. Overall, we believe that rapid substantial price changes, should they continue to occur, will not be to our industry’s benefit. Our customer and supplier base would be impacted due to uncertainty as to future prices. A reluctance to purchase inventory in the face of extreme price decreases or sell quickly during a period of rapid price increases would likely reduce our volume of business. Marginal industry participants or speculators may attempt to participate to an unhealthy extent during a period of rapid price escalation with a substantial risk of contract default should prices suddenly reverse. Risks of default in contract performance by customers or suppliers as well as an increased risk of bad debts and customer credit exposure would increase during periods of rapid and substantial price changes.

EXCESS CAPACITY IN OUR INDUSTRY COULD INCREASE THE LEVEL OF STEEL IMPORTS INTO THE U.S. RESULTING IN LOWER DOMESTIC PRICES WHICH WOULD ADVERSELY AFFECT OUR SALES, MARGINS AND PROFITABILITY.

     Steel-making capacity exceeds demand for steel products in some countries. Rather than reducing employment by rationalizing capacity with consumption, steel manufacturers in these countries (often with local government assistance or subsidies in various forms) have traditionally periodically exported steel at prices significantly below their home market prices and which may not reflect their costs of production or capital. This supply of imports can decrease the sensitivity of domestic steel prices to increases in demand or our ability to recover increased manufacturing costs.

COMPLIANCE WITH AND CHANGES IN ENVIRONMENTAL AND REMEDIATION REQUIREMENTS COULD RESULT IN SUSTANTIALLY INCREASED CAPITAL REQUIREMENTS AND OPERATING COSTS.

     Existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, may have a material adverse effect on our results of operations and financial condition. Compliance with environmental laws and regulations is a significant factor in our business. We are subject to local, state, federal and international environmental laws and regulations concerning, among other matters, waste disposal, air emissions, waste and storm water effluent and disposal and employee health. New facilities that we may build, especially steel minimills, are required to obtain several environmental permits before significant construction or commencement of operations. Delays in obtaining permits or unanticipated conditions in such permits could delay the project or increase construction costs or operating expenses. Our manufacturing and recycling operations produce significant amounts of by-products, some of which are handled as industrial waste or hazardous waste. For example, our minimills generate electric arc furnace dust (EAF dust), which the EPA and other regulatory authorities classify as hazardous waste. EAF dust requires special handling, recycling or disposal.

     In addition, the primary feed materials for the shredders operated by our scrap metal recycling facilities are automobile hulks and obsolete household appliances. Approximately 20% of the weight of an automobile hulk consists of unrecyclable material known as shredder fluff. After the segregation of ferrous and saleable non-ferrous metals, shredder fluff remains. We, along with others in the recycling industry, interpret Federal regulations to require shredder fluff to meet certain criteria and pass a toxic leaching test to avoid classification as a hazardous waste. We also endeavor to remove hazardous contaminants from the feed material prior to shredding. As a result, we believe the shredder fluff we generate is not normally considered or properly classified as hazardous waste. If the laws, regulations or testing methods change with regard to EAF dust or shredder fluff, we may incur additional significant expenditures.

     Although we believe that we are in substantial compliance with all applicable laws and regulations, legal requirements are changing frequently and are subject to interpretation. New laws, regulations and changing interpretations by regulatory authorities, together with uncertainty regarding adequate pollution control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions are all factors that may increase our future expenditures to comply with environmental requirements. Accordingly, we are unable to predict the ultimate cost of future compliance with these requirements or their effect on our operations. We cannot predict whether such costs can be passed on to customers through product price increases. Competitors in various regions or countries where environmental regulation might not be so restrictive, subject to different interpretation or generally not enforced, may enjoy a competitive advantage.

     We may also be required to conduct additional clean up at sites where we have already participated in remediation efforts or to take remediation action with regard to sites formerly used in connection with our operations. We may be required to pay for a portion of the costs of clean up or remediation at sites we never owned or on which we never operated if we are found to have arranged for treatment or disposal of hazardous substances on the sites.

RISKS RELATED TO OUR COMPANY

POTENTIAL LIMITATIONS ON OUR ABILITY TO ACCESS CREDIT FACILITIES MAY NEGATIVELY IMPACT OUR BUSINESS

     Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities (see the discussion at page 34 of our liquidity), 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 refused to honor their contract commitments or ceased lending. 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 commercial paper program is ranked in the second highest category by Moody’s Investors Service (P-2) and Standard & Poor’s Corporation (A-2). Our senior unsecured debt is investment grade rated by Standard & Poor’s Corporation (BBB) and Moody’s Investors Service (Baa2). In determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors. These factors include earnings, fixed charges such as interest, cash flows, total debt outstanding, off balance sheet obligations and other commitments, total capitalization and various ratios calculated from these factors. The rating agencies also consider predictability of cash flows, business strategy and diversity, industry conditions and contingencies. Lower ratings on our commercial paper program or our senior unsecured debt could impair our ability to obtain additional financing and will increase the cost of the financing that we do obtain.

WE HAVE INITIATED IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING SYSTEM WHICH, IF NOT EFFECTIVELY MANAGED AND CONTROLLED, COULD THREATEN THE ACHIEVEMENT OF OPERATION AND FINANCIAL GOALS.

     In 2006 we began planning and design of a new enterprise resource planning system which continued through 2007 with phased implementation having commenced during 2008 and currently scheduled to continue through 2010 prior to completion. This is a significant project with expenditures thus far of approximately $172 million of which $83 million has been capitalized. There are risks that the effort may not result in a successful implementation resulting in resources being inappropriately diverted, untimely completion, substantial cost overruns, or inadequate information to manage our businesses and prepare accurate financial information. Should the project not be successfully completed the capitalized cost for this project might have to be expensed resulting in an unanticipated reduction in profitability.

SOME OF OUR CUSTOMERS MAY DEFAULT ON THE DEBTS THEY OWE TO US.

     Should the recent constraints on access to credit continue for a prolonged period some of our customers may struggle or fail to meet their obligations, especially if they in turn experience defaults on receivables due from their customers. A recession could result in our incurring bad debt costs in excess of our expectations and prior experience. In certain markets we have experienced a consolidation among those entities to whom we sell. This

consolidation, along with higher metals and other commodity prices, has resulted in an increased credit risk spread among fewer customers often without a corresponding strengthening of their financial status. We have expanded our use of credit insurance for accounts receivable in our businesses. While we believe the insurance companies with whom our accounts receivable are insured are capable of meeting their contract obligations, it is possible that we may not be capable of recovering all of our insured losses should they experience significant losses threatening their viability. Additionally, credit insurance policies typically have relatively short policy periods and require pre-approval of customers with maximum insured limits established by customer. Should credit insurers incur large losses the insurance may be more difficult to secure and when available likely only at increased costs with decreased coverage. While in many international sales transactions we require letters of credit from financial institutions which we believe to be financially secure we may be at risk in the event the financial institution subsequently fails and the customer is unable to pay for the products we sold. A substantial amount of our accounts receivable are considered to be open account uninsured accounts receivable. We regularly maintain a substantial amount of accounts receivable, at year end $1.4 billion. We charged off accounts receivable of $10.1 million during the past fiscal year offset by recoveries of $5 million and at year end our allowance for collection losses was $17.7 million.

THE AGREEMENTS GOVERNING THE NOTES AND OUR OTHER DEBT CONTAIN FINANCIAL COVENANTS AND IMPOSE RESTRICTIONS ON OUR BUSINESS.

     The indenture governing our 6.75% notes due 2009, 5.625% notes due 2013, 6.50% notes due 2017 and 7.35% notes due 2018 contains restrictions on our ability to create liens, sell assets, enter into sale and leaseback transactions and consolidate or merge. In addition, our credit facility contains covenants that place restrictions on our ability to, among other things:

	—		create liens;
	—		enter into transactions with affiliates;
	—		sell assets;
	—		in the case of some of our subsidiaries, guarantee debt; and
	—		consolidate or merge.

     Our credit facility also requires that we meet certain financial tests and maintain certain financial ratios, including a maximum debt to capitalization and interest coverage ratios.

     Other agreements that we may enter into in the future may contain covenants imposing significant restrictions on our business that are similar to, or in addition to, the covenants under our existing agreements. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.

     Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any of these restrictions could result in a default under the indenture governing the notes or under our other debt agreements. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be due and payable, together with accrued and unpaid interest. If we were unable to repay debt to our secured lenders or if we incur secured debt in the future, these lenders could proceed against the collateral securing that debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on the notes.

FLUCTUATIONS IN THE VALUE OF THE UNITED STATES DOLLAR RELATIVE TO OTHER CURRENCIES MAY ADVERSELY AFFECT OUR BUSINESS.

     Fluctuations in the value of the dollar can be expected to affect our business. In particular major changes in the rate of exchange of China’s Renminbi or the value of the Euro to the U.S. Dollar could negatively impact our business. A strong U.S. dollar makes imported metal products less expensive, resulting in more imports of steel products into the U.S. by our foreign competitors while a weak U.S. dollar may have the opposite impact on

imports. With the exception of exports of non-ferrous scrap metal by our Americas Recycling segment we have not recently been a significant exporter of metal products from our United States operations. Economic difficulties in some large steel producing regions of the world resulting in lower local demand for steel products have historically encouraged greater steel exports to the U.S. at depressed prices and can be exacerbated by a strong dollar. As a result, our products which are made in the U.S., may become relatively more expensive as compared to imported steel, which has had and in the future could have a negative impact on our sales, revenues, profitability and cash flows.

     A strong U.S. dollar hampers our international marketing and distribution business. Weak local currencies limit the amount of U.S. dollar denominated products that we can import for our international operations and limits our ability to be competitive against local producers selling in local currencies.

OPERATING INTERNATIONALLY CARRIES RISKS AND UNCERTANTIES WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.

     We have our heaviest concentration of manufacturing facilities in the United States but also have significant facilities in Europe and Australia. Our marketing and trading offices are located in most major markets of the world with our suppliers and our customers located throughout the world. Our marketing and distribution segment relies on substantial international shipments of materials and products in the ordinary course of its business. Our stability, growth and profitability are subject to a number of risks inherent in doing business internationally in addition to the currency exchange risk discussed above, including:

	•		political, military, terrorist or major pandemic events;
	•		legal and regulatory requirements or limitations imposed by foreign governments (particularly those with significant steel consumption or steel related production including China, Brazil, Russia and India) including quotas, tariffs or other protectionist trade barriers, adverse tax law changes, nationalization or currency restrictions;
	•		disruptions or delays in shipments caused by customs compliance or government agencies; and
	•		potential difficulties in staffing and managing local operations.

WE RELY ON THE AVAILABILITY OF LARGE AMOUNTS OF ELECTRICITY AND NATURAL GAS FOR OUR MINIMILL OPERATIONS. DISRUPTIONS IN DELIVERY OR SUBSTANTIAL INCREASES IN ENERGY COSTS, INCLUDING CRUDE OIL PRICES, COULD ADVERSLY AFFECT OUR FINANCIAL PERFORMANCE.

     Minimills melt steel scrap in electric arc furnaces and use natural gas to heat steel billets for rolling into finished products. As large consumers of electricity and gas, often the largest in the geographic area where our minimills are located, we must have dependable delivery of electricity and natural gas in order to operate. Accordingly, we are at risk in the event of an energy disruption. Prolonged black-outs or brown-outs or disruptions caused by natural disasters such as hurricanes would substantially disrupt our production. While we have not suffered prolonged production delays due to our inability to access electricity or natural gas several of our competitors have experienced such occurrences. Prolonged substantial increases in energy costs would have an adverse affect on the costs of operating our minimills and would negatively impact our gross margins unless we were able to fully pass through the additional expense. Our finished steel products are typically delivered by truck. Rapid increases in the price of fuel attributable to increases in crude oil prices will have a negative impact on our costs and many of our customers’ financial results which could result in reduced margins and declining demand for our products. Rapid increases in fuel costs may also negatively impact our ability to charter ships for international deliveries at anticipated freight rates thereby decreasing our margins on those transactions or causing our customers to look for alternative sources.

IF WE LOSE THE SERVICES OF KEY EMPLOYEES WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR OPERATIONS AND MEET OUR STRATEGIC OBJECTIVES.

     Our future success depends, in large part, on the continued service of our officers and other key employees and our ability to continue to attract and retain additional highly qualified personnel. These employees are integral to our success based on their expertise and knowledge of our business and products. We compete for such personnel with

other companies including public and private company competitors who may periodically offer more favorable terms of employment. While we have an employment agreement with our Chief Executive Officer, we typically do not have employment agreements with other key employees. The loss or interruption of the services of a number of our key employees would reduce our ability to effectively manage our operations due to the fact that we may not be able to find in a timely manner, appropriate replacement personnel should the need arise.

WE MAY HAVE DIFFICULTY COMPETING WITH COMPANIES THAT HAVE A LOWER COST STRUCTURE OR ACCESS TO GREATER FINANCIAL RESOURCES.

     We compete with regional, national and foreign manufacturers and traders. Consolidation among participants in the steel manufacturing and recycling industries has resulted in fewer competitors but several which are significantly larger. Some of our larger competitors have greater financial resources and more diverse businesses than us. Some of our foreign competitors may be able to pursue business opportunities without regard for the laws and regulations with which we must comply, such as environmental regulations. These companies may have a lower cost structure, more operating flexibility and consequently they may be able to offer better prices and more services than we can. We cannot assure you that we will be able to compete successfully with these companies.

OUR STEEL MINIMILL BUSINESS REQUIRES CONTINUOUS CAPITAL INVESTMENTS THAT WE MAY NOT BE ABLE TO SUSTAIN.

     We must make regular substantial capital investments in our steel minimills to lower production costs and remain competitive. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary substantial capital expenditures in the future. The availability of external financing depends on many factors outside of our control, including capital market conditions and the overall performance of the economy. If funding is insufficient, we may be unable to develop or enhance our minimills, take advantage of business opportunities and respond to competitive pressures.

SCRAP AND OTHER SUPPLIES FOR OUR BUSINESSES ARE SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS, WHICH MAY ADVERSELY AFFECT OUR BUSINESS.

     We depend on ferrous scrap, the primary feedstock for our steel minimills and other supplies such as graphite electrodes and ferroalloys for our steel minimill operations. Although we believe that the supply of scrap is adequate to meet future needs, the price of scrap and other supplies have historically been subject to significant fluctuation. Our future profitability will be adversely affected if we are unable to pass on to our customers increased raw material and supplies costs. We may not be able to adjust our product prices to recover the costs of rapid increases in material prices, especially over the short-term and in our domestic fabrication segment’s fixed price fabrication contracts.

     The raw material used in manufacturing copper tubing is copper scrap, supplemented occasionally by virgin copper ingot. Copper scrap has generally been readily available, and a small portion of our copper scrap comes from our metal recycling yards. However, copper scrap is subject to rapid price fluctuations related to the price and supply of virgin copper. Price increases for high quality copper scrap could adversely affect our business. Finally, our Arkansas mill does not have melting capacity, so it is dependent on an adequate supply of competitively priced used rail. The availability of used rail fluctuates with the pace of railroad abandonments, rail replacement by railroads in the United States and abroad and demand for used rail from other domestic and foreign rail rerolling mills. Price increases for used rail could adversely affect our business.

UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR SHUTDOWNS.

     Interruptions in our production capabilities will adversely affect our production costs, steel available for sales and earnings for the affected period. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. Our manufacturing processes are dependent upon critical pieces of steel-making equipment, such as our furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment may, on occasion, be out of service as a result of unanticipated failures. We have experienced and may in the future experience material plant shutdowns or periods of reduced production as a result of such equipment failures.

HEDGING TRANSACTIONS MAY EXPOSE US TO LOSS OR LIMIT OUR POTENTIAL GAINS.

     Our product lines and worldwide operations expose us to risks associated with fluctuations in foreign currency exchange, commodity prices and interest rates. As part of our risk management program, we use financial instruments, including commodity futures or forwards, foreign currency exchange forward contracts and interest rate swaps. While intended to reduce the effects of the fluctuations, these transactions may limit our potential gains or expose us to loss. Should our counterparties to such transactions or the sponsors of the exchanges through which these transactions are offered, such as the London Metal Exchange, fail to honor their obligations due to financial distress we would be exposed to potential losses or the inability to recover anticipated gains from these transactions.

     We enter into the foreign currency exchange forwards as economic hedges of trade commitments or anticipated commitments denominated in currencies other than the functional currency to mitigate the effects of changes in currency rates. Although we do not enter into these instruments for trading purposes or speculation, and although our management believes all of these instruments are economically effective as hedges of underlying physical transactions, these foreign exchange commitments are dependent on timely performance by our counterparties. Their failure to perform could result in our having to close these hedges without the anticipated underlying transaction and could result in losses if foreign currency exchange rates have changed.

WE ARE INVOLVED AND MAY IN THE FUTURE BECOME INVOLVED IN VARIOUS ENVIRONMENTAL MATTERS THAT MAY RESULT IN FINES, PENALTIES OR JUDGMENTS BEING ASSESSED AGAINST US OR LIABILITY IMPOSED UPON US WHICH WE CANNOT PRESENTLY ESTIMATE OR REASONABLY FORESEE AND WHICH MAY HAVE A MATERIAL IMPACT ON OUR EARNINGS AND CASH FLOWS.

     Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, called CERCLA, or similar state statutes, we may have obligations to conduct investigation and remediation activities associated with alleged releases of hazardous substances or to reimburse the EPA (or state agencies as applicable) for such activities and to pay for natural resource damages associated with alleged releases. We have been named a potentially responsible party at several federal and state Superfund sites because the EPA or an equivalent state agency contends that we and other potentially responsible scrap metal suppliers are liable for the cleanup of those sites as a result of having sold scrap metal to unrelated manufacturers for recycling as a raw material in the manufacture of new products. We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time may contest, our liability at the sites. In addition, we have received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites.

     Although we are unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with various environmental matters or the effect on our consolidated financial position, we make accruals as warranted. Due to inherent uncertainties, including evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors, the amounts we accrue could vary significantly from the amounts we ultimately are required to pay.

WE ARE SUBJECT TO LITIGATION WHICH COULD ADVERSELY AFFECT OUR PROFITABILITY.

     We are involved in various litigation matters, including regulatory proceedings, administrative proceedings, governmental investigations, environmental matters and construction contract disputes. The nature of our operations also expose us to possible litigation claims in the future. Although we make every effort to avoid litigation, these matters are not totally within our control. We will contest these matters vigorously and have made insurance claims where appropriate, but because of the uncertain nature of litigation and coverage decisions, we cannot predict the outcome of these matters. These matters could have a material adverse affect on our financial condition and profitability. Litigation is very costly, and the costs associated with prosecuting and defending litigation matters could have a material adverse effect on our financial condition and profitability. Although we are unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with litigation matters, we make accruals as warranted. However, the amounts that we accrue could vary significantly from the amounts we actually pay, due to inherent uncertainties and the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors.

OUR SYSTEM OF INTERNAL CONTROLS MUST BE AUDITED ANNUALLY AND THE OCCURRENCE OF A MATERIAL WEAKNESS MAY NEGATIVELY IMPACT OUR BUSINESS REPUTATION, CREDIT RATINGS AND PARTICIPATION IN CAPITAL MARKETS

     Under the Sarbanes-Oxley Act management must now assess the design and functioning of our system of financial internal control. Our registered independent accountants must then certify the effectiveness of our internal controls. Discovery and disclosure of a material weakness, by definition, may have a material adverse impact on our financial statements. Such an occurrence may discourage certain customers or suppliers from doing business with us, may cause downgrades in our debt ratings leading to higher borrowing costs, and may affect how our stock trades. This may in turn negatively affect our ability to access public debt or equity markets for capital.

ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. PROPERTIES

     Our Texas steel minimill is located on approximately 600 acres of land that we own. Our Texas minimill facilities include several buildings that occupy approximately 807,000 square feet. Our Alabama steel minimill is located on approximately 70 acres of land, and it includes several buildings that occupy approximately 531,000 square feet. We utilize our facilities at the Texas and Alabama steel minimills for manufacturing, storage, office and other related uses. Our South Carolina steel minimill is located on approximately 112 acres of land, and the buildings occupy approximately 706,000 square feet. Our Arkansas steel minimill is located on approximately 135 acres of land, and the buildings occupy approximately 234,000 square feet. We lease approximately 30 acres of land at the Alabama minimill and all the land at the Arkansas and South Carolina minimills in connection with revenue bond financing or property tax incentives. We may purchase the land at the termination of the leases or earlier for a nominal sum. Howell Metal Company owns approximately 76 acres of land in New Market, Virginia, with buildings occupying approximately 407,000 square feet.

     Our Americas Recycling segment’s plants occupy approximately 544 acres of land that we own in Beaumont, Clute, Corpus Christi, Dallas, Fort Worth, Galveston, Houston, Lubbock, Lufkin, Odessa, Victoria and Vinton, Texas; Apopka, Gainesville, Jacksonville, Lake City, Ocala, Palm Bay, and Tampa, Florida; Shreveport, Louisiana; Chattanooga, Tennessee; Springfield and Joplin, Missouri; Burlington, North Carolina; Frontenac and Independence, Kansas; Miami and Tulsa, Oklahoma; and Lonoke, Arkansas. The recycling segment’s other scrap metal processing locations are on leased land.

     The facilities of our Americas fabrication operations utilize approximately 1,448 acres of land which we own and lease approximately 91 acres of land at various locations in Texas, Louisiana, Arkansas, Utah, South Carolina, Florida, Virginia, Georgia, North Carolina, Nevada, Ohio, Iowa, California, Pennsylvania, Mississippi, Arizona, Alabama, New Mexico, Colorado, Oklahoma and Juarez, Mexico. Our International fabrication operations utilize approximately 136,000 square meters of land which is either owned or subject to a perpetual usufruct.

     CMCZ’s steel manufacturing operations are located in Zawiercie in south central Poland about 40 kilometers from Katowice. CMCZ and subsidiaries lease approximately 98% of the 2 million square meters of land utilized by the principal operations with a small balance owned. The land is leased from the State of Poland under contracts with 99 year durations and are considered to create a right of perpetual usufruct. The leases expire beginning in 2089 through 2100. The principal operations are conducted in buildings having an area of approximately 234,000 square meters. The 7 major buildings in use have all been constructed on or after 1974. The real estate is also developed with approximately 133 other buildings including warehouses, administrative offices, workshops, garage, transformer stations, pumping stations, gas stations, boiler houses, gate houses and contains some structures leased to unrelated parties, CMCZ subsidiaries and affiliated companies. Other much smaller tracts of land are leased or owned in nearby communities including those utilized by 6 affiliated scrap processing facilities.

     CMCS is located on approximately 882 square meters at Sisak in central Croatia, approximately 30 miles southeast of Zagreb. The principal operations are conducted in buildings having an area of approximately 179,000 square meters.

     We own two warehouse buildings which our operations in Australia utilize, one of which is located on leased real estate. We lease the other warehouse facilities located in Australia as well as our Australian headquarters, marketing and administration offices.

     We lease the office space occupied by our corporate headquarters as well as that occupied by all of our marketing our distribution offices.

     The leases on the leased properties described above will expire on various dates and with the exception of the CMCZ leases described above, generally over the next nine years. Several of the leases have renewal options. We have had little difficulty renewing such leases as they expire. We estimate our minimum annual rental obligation for real estate operating leases in effect at August 31, 2008, to be paid during fiscal 2009, to be approximately $18 million. We also lease a portion of the equipment we use in our plants. We estimate our minimum annual rental obligation for equipment operating leases in effect at August 31, 2008, to be paid during fiscal 2009, to be approximately $16 million.

ITEM 3. LEGAL PROCEEDINGS

     On September 18, 2008, subsequent to the end of our 2008 fiscal year, we were served with a class action antitrust lawsuit alleging violations of Section 1 of the Sherman Act, brought by Standard Iron Works of Scranton, Pennsylvania, against nine steel manufacturing companies, including Commercial Metals Company. The lawsuit, filed in the United States District Court for the Northern District of Illinois, alleges that the defendants conspired to fix, raise, maintain and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products. The lawsuit, which purports to be brought on behalf of a class consisting of all purchasers of steel products directly from the defendants between January 1, 2005 and the present, seeks treble damages and costs, including reasonable attorney fees and pre- and post-judgment interest. Since the filing of this lawsuit, additional plaintiffs have filed class action lawsuits naming the same defendants and containing allegations substantially identical to those of the Standard Iron Works complaint. We believe that the lawsuits are entirely without merit and plan to aggressively defend the actions.

     We have received notices from the EPA or state agencies with similar responsibility that we and numerous other parties are considered potentially responsible parties, or PRPs, and may be obligated under the Comprehensive Environmental Response Compensation and Liability Act of 1980, or CERCLA, or similar state statute to pay for the cost of remedial investigation, feasibility studies and ultimately remediation to correct alleged releases of hazardous substances at 13 locations. We may contest our designation as a PRP with regard to certain sites, while at other sites we are participating with other named PRPs in agreements or negotiations that we expect will result in agreements to remediate the sites. The EPA or respective state agency refers to these locations, none of which involve real estate we ever owned or conducted operations upon, as the Sapp Battery Site in Cottondale, Florida, the Interstate Lead Company Site in Leeds, Alabama, the Ross Metals Site in Rossville, Tennessee, the Li Tungsten Site in Glen Cove, New York, the American Brass site in Headland, Alabama, the Delatte Metals site in Ponchatoula, Louisiana, the Palmetto Recycling site in Columbia, South Carolina, the Peak Oil Site in Tampa, Florida, the R&H Oil Site in San Antonio, Texas, the SoGreen/Parramore Site in Tifton, Georgia, the Stoller Site in Jericho, South Carolina, the Jensen Drive site in Houston, Texas, and the Industrial Salvage site in Corpus Christi, Texas. We have periodically received information requests from government environmental agencies with regard to other sites that are apparently under consideration for designation as listed sites under CERCLA or similar state statutes. Often we do not receive any further communication with regard to these sites. We do not know if any of these inquiries will ultimately result in a demand for payment from us.

     The EPA notified us and other alleged PRPs that under Sec. 106 of CERCLA we and the other PRPs could be subject to a maximum fine of $25,000 per day and the imposition of treble damages if we and the other PRPs refuse to clean up the Peak Oil, Sapp Battery, SoGreen/Parramore and Stoller site as ordered by the EPA. We are presently participating in PRP organizations at these sites which are paying for certain site remediation expenses. We do not believe that the EPA will pursue any fines against us if we continue to participate in the PRP groups or if we have adequate defenses to the EPA’s imposition of fines against us in these matters.

     In 1993, the Federal Energy Regulatory Commission entered an order against our wholly-owned subsidiary CMC Oil Company, or CMC Oil, which has been inactive since 1985. As a result of the order, CMC Oil is subject to a judgment which the Federal District Court upheld in 1994 and the Court of Appeals affirmed in 1995. The order found CMC Oil liable for overcharges constituting violations of crude oil reseller regulations from December 1977

to January 1979. The alleged overcharges occurred in connection with our joint venture transactions with RFB Petroleum, Inc. The overcharges total approximately $1,330,000 plus interest calculated from the transaction dates to the date of the District Court judgment under the Department of Energy’s interest rate policy, and with interest thereafter at the rate of 6.48% per annum. Although CMC Oil accrued a liability on its books during 1995, it does not have sufficient assets to satisfy the judgment. No claim has ever been asserted against us as a result of the CMC Oil litigation. We will vigorously defend ourselves if any such claim is asserted.

     We are unable to estimate the ultimate dollar amount of any loss in connection with the above-described legal proceedings, environmental matters, government proceedings, and disputes that could result in additional litigation, some of which may have a material impact on earnings and cash flows for a particular quarter. Management believes that the outcome of the suits and proceedings mentioned, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on our business or consolidated financial position.

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

     Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PURCHASES OF STOCK

(c ) Total

(d) Maximum

Number of

Number (or Approximate

Shares (or Units)

Dollar Value) of

Purchased

Shares (or Units) that

As Part of

May Yet Be

Publicly

Purchased

(a) Total Number of

(b) Average

Announced

Under the

Shares (or Units)

Price Paid

Plans or

Plans or

Period

Purchased

Per Share (or Unit)

Programs

Programs (1)

June 1, 2008 - June 30, 2008

0

0

0

812,547

July 1, 2008 - July 31, 2008

17,122

$

30.43

0

812,547

August 1, 2008 - August 31, 2008

0

$

25.95

800,000

12,547

Total

17,122

$

26.04

800,000

12,547

MARKET AND DIVIDEND INFORMATION

     The table below summarizes the high and low sales prices reported on the New York Stock Exchange for our common stock and the quarterly cash dividends we paid for the past two fiscal years.

PRICE RANGE
OF COMMON STOCK

2008
FISCAL
QUARTER		HIGH				LOW				CASH DIVIDENDS
1st		$	35.89			$	27.18			9 cents
2nd			33.35				20.85			12 cents
3rd			36.98				27.13			12 cents
4th			39.80				24.63			12 cents

2007
FISCAL
QUARTER		HIGH				LOW				CASH DIVIDENDS
1st		$	29.27			$	18.40			6 cents
2nd			30.00				24.60			9 cents
3rd			36.00				25.71			9 cents
4th			37.15				24.58			9 cents

     Since 1982, our common stock has been listed and traded on the New York Stock Exchange. From 1959 until the NYSE listing in 1982, our common stock was traded on the American Stock Exchange. The number of shareholders of record of our common stock at October 2, 2008, was 4,233.

EQUITY COMPENSATION PLANS

     Information about our equity compensation plans as of August 31, 2008 that were either approved or not approved by our stockholders is as follows:

A.

B.

C.

NUMBER OF SECURITIES

REMAINING FOR FUTURE

NUMBER OF SECURITIES

ISSUANCE UNDER EQUITY

TO BE ISSUED

WEIGHTED-AVERAGE

COMPENSATION PLANS

UPON EXERCISE OF

EXERCISE PRICE OF

(EXCLUDING SECURITIES

OUTSTANDING OPTIONS,

OUTSTANDING OPTIONS,

REFLECTED IN COLUMN

PLAN CATEGORY

WARRANTS AND RIGHTS

WARRANTS AND RIGHTS

(A))

Equity

Compensation plans approved by security holders

6,221,406

$

19.60

2,896,360

Equity

Compensation plans not approved by security holders

0

0

0

TOTAL

6,221,406

$

19.60

2,896,360

 

STOCK PERFORMANCE GRAPH

 

The following graph compares the cumulative total return of our common stock during the five year period beginning September 1, 2003 and ending August 31, 2008 with the Standard & Poor’s 500 Composite Stock Price Index also known as the “S&P 500” and the Standard & Poor’s Steel Industry Group Index also know as the “S&P Steel Group.” Each index assumes $100 invested at the close of trading August 31, 2003, and reinvestment of dividends.

 

 

ITEM 6. SELECTED FINANCIAL DATA

     The table below sets forth a summary of our selected consolidated financial information for the periods indicated. The per share amounts have been adjusted to reflect two-for-one stock splits in the form of stock dividends on our common stock paid June 28, 2002, January 10, 2005 and May 22, 2006.

FOR THE YEARS ENDED AUGUST 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

		2008				2007				2006				2005				2004
Net Sales *		$	10,427,378			$	8,329,016			$	7,212,152			$	6,260,338			$	4,568,728
Net Earnings			231,966				355,431				356,347				285,781				132,021
Diluted Earnings Per Share			1.97				2.92				2.89				2.32				1.11
Total Assets			4,746,371				3,472,663				2,898,868				2,332,922				1,988,046
Stockholders’ Equity			1,638,383				1,548,567				1,220,104				899,561				660,627
Long-term Debt			1,197,533				706,817				322,086				386,741				393,368
Cash Dividends Per Share			0.45				0.33				0.17				0.12				0.09
Ratio of Earnings to Fixed Charges			4.78				11.16				14.80				12.43				7.30

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     This annual report on Form 10-K 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, liquidity and access to capital markets, 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;
	•		extent of government intervention and its effect in capital markets;
	•		construction activity;
	•		decisions by governments affecting the level of steel imports, including tariffs and duties;
	•		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 credit availability;
	•		currency fluctuations;
	•		interest rate changes;
	•		scrap metal, energy, insurance and supply prices; and
	•		the pace of overall economic activity.

     See the section entitled “Risk Factors” in this annual report for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this annual report are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, we cannot assure you that the actual results or developments we anticipate will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, we caution prospective investors not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

     This Management’s Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with our consolidated financial statements and the accompanying notes contained in this annual report.

     We recycle, manufacture, market and distribute steel and metal products through a network of over 200 locations in the United States and internationally.

     Our business is organized into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, International Mills and International Fabrication and Distribution. Our domestic and international distribution business activities consist only of physical transactions and not speculation.

Americas Recycling Operations

     We conduct our recycling operations through metal processing plants located in the states of Texas, Oklahoma, Kansas, Louisiana, Alabama, Arkansas, Missouri, Georgia, Tennessee, Florida, South Carolina, and North Carolina.

Americas Mills Operations

     We conduct our domestic mills operations through a network of:

	•		steel mills, commonly referred to as “minimills,” that produce reinforcing bar, angles, flats, rounds, fence post sections and other shapes; and
	•		a copper tube minimill. Our copper tube minimill is aggregated with the Company’s steel minimills because it has similar economic characteristics.

Americas Fabrication and Distribution Operations

     We conduct our domestic fabrication operations through a network of:

	•		steel fabrication and processing plants that bend, weld, cut, fabricate, distribute and place steel, primarily reinforcing bar and angles;
	•		warehouses that sell or rent products for the installation of concrete;
	•		plants that produce special sections for floors and support for ceilings and floors;

     Additionally, our domestic distribution consists of our CMC Dallas Trading division which markets and distributes semi-finished long and flat steel products into the Americas from a diverse base of international and domestic sources.

     International Mills includes our Polish (“CMCZ”) and Croatian (“CMCS”) mills and have been presented as a separate segment because the economic characteristics of the market and the regulatory environment in which our international mills operate is different from our domestic minimills. We conduct our international mill operations through:

	•		a rolling mill that produces primarily reinforcing bar and some merchant products;
	•		a rolling mill that produces primarily wire rod;
	•		our scrap processing facilities that directly support the CMCZ minimill; and
	•		an electronic arc furnace based steel pipe manufacturer.

     We conduct our international fabrication operations through three steel fabrication plants in Europe primarily for reinforcing bar and mesh. Additionally, we market and distribute steel, copper and aluminum coil, sheet and tubing, ores, metal concentrates, industrial minerals, ferroalloys and chemicals through our network of marketing and distribution offices, processing facilities and joint ventures internationally. Our customers use these products in a variety of industries.

     The following are important accounting policies, estimates and assumptions that you should understand as you review our financial statements. We apply these accounting policies and make these estimates and assumptions to prepare financial statements under accounting principles generally accepted in the United States (“GAAP”). Our use of these accounting policies, estimates and assumptions affects our results of operations and our reported amounts of assets and liabilities. Where we have used estimates or assumptions, actual results could differ significantly from our estimates.

     Revenue Recognition We recognize sales when title passes to the customer either when goods are shipped or when they are received based on the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectibility is reasonably assured. When we estimate that a contract with one of our customers will result in a loss, we accrue the calculated loss as soon as it is probable and estimable. We account for large fabrication projects in accordance with Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts.

     Contingencies 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.

     Inventory Cost We determine inventory cost for most domestic inventories by the last-in, first-out method, or LIFO. We estimate our interim LIFO reserve by using quantities and costs at quarter end and recording the resulting LIFO expense in its entirety. Inventory cost for international and remaining inventories is determined by the first-in, first-out method, or FIFO. We record all inventories at the lower of their cost or market value.

     Property, Plant and Equipment Our domestic and international mills, fabrication and recycling businesses are capital intensive. We evaluate the value of these assets and other long-lived assets whenever a change in circumstances indicates that their carrying value may not be recoverable. Some of the estimated values for assets that we currently use in our operations utilize judgments and assumptions of future undiscounted cash flows that the assets will produce. If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer’s different viewpoint of future cash flows. Also, we depreciate property, plant and equipment on a straight-line basis over the estimated useful lives of the assets. Depreciable lives are based on our estimate of the assets’ economically useful lives and are evaluated annually. To the extent that an asset’s actual life differs from our estimate, there could be an impact on depreciation expense or a gain/loss on the disposal of the asset in a later period. We expense major maintenance costs as incurred.

     Other Accounting Policies and New Accounting Pronouncements See Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements.

Consolidated Results of Operations

		Year ended August 31,
(in millions except share data)		2008				2007				2006
Net sales *		$	10,427			$	8,329			$	7,212
Net earnings			232.0				355.4				356.3
Per diluted share			1.97				2.92				2.89
EBITDA			531.4				671.0				659.2
International net sales			4,937				3,397				2,726
As % of total sales			47	%			41	%			38	%
LIFO** effect on net earnings			209.1				33.3				50.6
Per diluted share			1.78				0.27				0.41

In the table above, we have included a financial statement measure that was not derived in accordance with 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 for the years ended August 31:

(in millions)		2008				2007				2006
Net earnings		$	232.0			$	355.4			$	356.3
Interest expense			59.5				37.3				29.6
Income taxes			104.8				171.0				187.9
Depreciation and amortization			135.1				107.3				85.4
EBITDA		$	531.4			$	671.0			$	659.2
EBITDA (loss) from discontinued operations			3.2				(3.3	)			(8.1	)
EBITDA from continuing operations		$	528.2			$	674.3			$	667.3

EBITDA does not include interest expense, income taxes and depreciation and amortization. Because we have borrowed money in order to partially 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 financial impact during 2008 as compared to 2007 or are significant for our future operations:

	1.		We reported our highest net sales ever for the fifth straight year.
	2.		We recorded after-tax LIFO expense of $209.1 million ($1.78 per diluted share) compared to $33.3 million ($0.27 per diluted share) in 2007.
	3.		We experienced favorable foreign exchange rates during 2008 as compared to 2007 which resulted in an increase in net sales of approximately 4%.
	4.		Net sales of the Americas Recycling segment increased 22% and adjusted operating income increased 29% driven by higher scrap prices, primarily ferrous scrap.
	5.		Net sales of the Americas Mills segment increased 28% but adjusted operating income decreased 20% primarily caused by LIFO expense of $109.8 million during 2008 as compared to expense of $27.3 million during 2007.
	6.		Our Americas Fabrication and Distribution segment’s results were impacted by escalating steel prices and a margin compression due to fixed price contracts which resulted in an adjusted operating loss of $67.5 million including LIFO expense of $197.4 million and job loss reserves of $26.7 million.
	7.		Our International Mills segment reported adjusted operating income of $96.8 million in 2008 as compared to $112.4 million in prior year. Our Polish mill experienced an increase in adjusted operating profit of 9% offset by losses at our mill in Croatia which continued to be saddled with start-up costs.
	8.		Our International Fabrication and Distribution segment set an all-time record for adjusted operating profit of $124.3 million, a 69% increase from prior year, driven by strong pricing internationally.
	9.		Seven acquisitions with a total purchase price of $231.5 million were completed during 2008.
	10.		Expense of $53.7 million and capital expenditures of $49.9 million were recorded during 2008 as compared to expense of $33.8 million and capital expenditures of $22.3 million recorded during 2007 related to the global implementation of SAP.
	11.		Treasury shares purchased by the Company during 2008 increased diluted earnings per share by $0.05.
	12.		Our overall effective tax rate decreased to 31.1% as compared to 31.9% in 2007 due to shifts in profitability among tax jurisdictions.

Segments

Unless otherwise indicated, all dollars below are 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 14, 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:

		Year ended August 31,
(in millions)		2008				2007				2006
Net sales:
Americas Recycling		$	2,189			$	1,801			$	1,503
Americas Mills			1,966				1,540				1,558
Americas Fabrication and Distribution			2,875				2,587				2,328
International Mills			1,156				777				571
International Fabrication and Distribution			3,781				2,762				2,315
Corporate			(2	)			11				24
Eliminations/Discontinued operations			(1,538	)			(1,149	)			(1.087	)
Adjusted operating profit (loss):
Americas Recycling			145.8				113.0				124.9
Americas Mills			207.8				259.4				267.7
Americas Fabrication and Distribution			(67.5	)			100.0				110.1
International Mills			96.8				112.4				53.1
International Fabrication and Distribution			124.3				73.7				55.4
Corporate			(99.5	)			(72.0	)			(31.0	)
Eliminations/Discontinued operations			0.1				(7.6	)			7.1

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								Twelve Months Ended
		August 31,								August 31,
(in thousands)		2008				2007				2008				2007
Americas Recycling		$	5,094			$	9,292			$	(16,894	)		$	(407	)
Americas Mills			(40,152	)			135				(109,809	)			(27,324	)
Americas Fabrication and Distribution			(100,945	)			3,124				(197,435	)			(11,479	)
International Fabrication and Distribution*			(3,893	)			(3,743	)			2,398				(11,983	)
Consolidated increase (decrease) to adjusted profit before tax		$	(139,896	)		$	8,808			$	(321,740	)		$	(51,193	)

2008 Compared to 2007

Americas Recycling This segment had record sales and adjusted operating profit in 2008 which was driven by higher scrap prices, primarily ferrous. The record adjusted operating income of $145.8 million was strong enough to overcome LIFO expense of $16.9 million in 2008 compared to $0.4 million in 2007. Spurred by ferrous price increases, our ferrous scrap operations accounted for three-fourths of the segment’s profitability. The average ferrous scrap sales price increased 56% and shipments increased 7% compared to 2007. Although lower than ferrous scrap, the average sales price of nonferrous scrap increased 4% but shipments decreased 13% due to

continued weak residential markets and lower manufacturing output. We exported 31% of our nonferrous scrap during the year.

     The following table reflects our recycling segment’s average selling prices per short ton and tons shipped (in thousands) for the years ended August 31:

										Increase (Decrease)
		2008				2007				Amount				%
Average ferrous selling price		$	346			$	222			$	124				56	%
Average nonferrous selling price		$	3,037			$	2,920			$	117				4	%
Ferrous tons shipped			3,053				2,842				211				7	%
Nonferrous tons shipped			305				350				(45	)			(13	%)
Total volume processed and shipped			3,391				3,220				171				5	%

     Americas Mills We include our four domestic steel minimills and our copper tube minimill in this segment. While 2008 resulted in record sales for this segment, adjusted operating profit decreased 20% from 2007 resulting from a significant increase in LIFO expense due to spiking ferrous scrap prices. This segment had LIFO expense of $109.8 million, an increase of $82.5 million over 2007.

     Within the segment, adjusted operating profit for our four domestic steel minimills was $195.3 million for 2008 as compared to $239.8 million for 2007. The decrease in adjusted operating profit was mainly due to additional LIFO expense of $102.1 million recorded during 2008 as compared to 2007. Metal margins were 2% higher as weighted average sales prices barely stayed ahead of rapidly increasing ferrous scrap prices. The price of ferrous scrap consumed rose 50% compared to 2007. The increase in ferrous scrap prices drove the average selling price up $125 per ton while the average selling price for finished goods increased $136 per ton. Margins were negatively impacted by a 77% increase in alloys and electrodes and a 31% increase in energy cost during 2008 as compared to 2007. Combined, these two costs accounted for an increase of $65 million. Sales volumes increased 12% to 2.5 million tons, an all-time record, while tonnage rolled increased 7% to 2.1 million tons. We have invested $63 million of the expected $155 million total cost for our micro mill project in Arizona.

     The table below reflects domestic steel and ferrous scrap prices per ton for the year ended August 31:

										Increase
		2008				2007				Amount				%
Average mill selling price (finished goods)		$	723			$	587			$	136				23	%
Average mill selling price (total sales)			691				566				125				22	%
Average cost of ferrous scrap consumed			350				233				117				50	%
Average FIFO metal margin			341				333				8				2	%
Average ferrous scrap purchase price			329				211				118				56	%

     The table below reflects our domestic steel minimills’ operating statistics for the year ended August 31:

										Increase
(short tons in thousands)		2008				2007				Amount				%
Tons melted			2,396				2,121				275				13	%
Tons rolled			2,101				1,957				144				7	%
Tons shipped			2,528				2,250				278				12	%

     Our copper tube minimill experienced continued strength from commercial markets while residential markets remained weak. Adjusted operating profit decreased 36% to $12.5 million primarily due to an increase in LIFO expense for 2008 of $7.7 million. Pounds shipped, including sales of steel pipe, a new product line in 2008, remained flat as compared to 2007. The average copper selling price increased 7% to $4.34 per pound and the metal margin increased 5% to $1.12 per pound overcoming average copper scrap purchase price increases of $0.29 to $3.38 per pound. The decline in the residential housing market coupled with the extraordinary high price of copper has reduced the demand for copper plumbing tube across the U.S.

     The table below reflects our copper tube minimill’s prices per pound and operating statistics for the year ended August 31:

										Increase (Decrease)
(pounds in millions)		2008				2007				Amount					%
Pounds shipped			52.3				52.5				(0.2	)			—
Pounds produced			46.8				50.4				(3.6	)			(7	%)
Average copper selling price		$	4.34			$	4.06			$	0.28				7	%
Average copper scrap production cost		$	3.22			$	2.99			$	0.23				8	%
Average copper metal margin		$	1.12			$	1.07			$	0.05				5	%
Average copper scrap purchase price		$	3.38			$	3.09			$	0.29				9	%

     Americas Fabrication and Distribution During 2008, this segment reported adjusted operating loss of $67.5 million as compared to adjusted operating income of $100.0 million in the prior year due primarily to rapidly increasing prices which caused massive LIFO charges and margin compression on fixed price contracts. LIFO expense was $197.4 million for 2008 as compared to $11.5 million in the prior year. We also recorded job loss reserves of $26.7 million during 2008 based on our estimate of fixed rate contracts. The composite average selling price increased 13%, however, the overall job mix represented by the backlog did not have sufficient time to rollover to higher prices to match the increase in steel finished goods. These negative results were offset by an $8.6 million litigation settlement we received during the third quarter of 2008 related to costs incurred on a large structural fabrication job in an operating unit we sold several years ago. Driven by pipe, tubular goods and merchant products, our domestic distribution operation had excellent sales volumes and profits during 2008.

     The table below shows our average fabrication selling prices per short ton and total fabrication plant shipments for the years ended August 31:

										Increase
Average selling price*		2008				2007				Amount					%
Rebar		$	909			$	831			$	78				9	%
Joist			1,309				1,184				125				11	%
Structural			2,697				2,364				333				14	%
Post			834				720				114				16	%
Deck			1,324				N/A	**			N/A				N/A

* Excluding stock and buyout sales.
** Average sales price not presented as deck operation represents minimal activity during 2007.

										Increase (Decrease)
Tons shipped		2008				2007				Amount					%
Rebar			1,061				1,014				47				5	%
Joist			244				340				(96	)			(28	%)
Structural			90				84				6				7	%
Post			106				103				3				3	%
Deck			225				54				171				317	%

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

										Increase (Decrease)
		2008				2007				Amount				%
Tons melted			1,502				1,458				44				3	%
Tons rolled			1,100				1,130				(30	)			(3	%)
Tons shipped			1,434				1,366				68				5	%
Average mill selling price (total sales)		1,698		PLN*		1,575		PLN*			123				8	%
Averaged cost of ferrous scrap production cost		1,039		PLN			876	PLN			163				19	%
Average metal margin			659	PLN			699	PLN			(40	)			(6	%)
Average ferrous scrap purchase price			905	PLN			780	PLN			125				16	%
Average mill selling price (total sales)		$	744			$	542			$	202				37	%
Average cost of ferrous scrap production cost		$	441			$	302			$	139				46	%
Average metal margin		$	303			$	240			$	63				26	%
Average ferrous scrap purchase price		$	396			$	268			$	128				48	%

     Net sales for 2008 increased 49%, impacted by favorable foreign exchange rates which resulted in an increase in net sales of approximately 19%. Adjusted operating profit for 2008 decreased 14% mainly due to continued start-up costs at our CMCS mill which was acquired in the first quarter of 2008. During 2008, adjusted operating profit at our mill in Poland increased 8.6% to $122.1 million. Average mill selling price increased 8% and the average ferrous scrap production cost increased 19% resulting in a decrease in the average metal margin of 6% to 659 PLN.

     We are near completion, with startup expected in October of 2008, of our new finishing end to our wire rod block which will enable us to roll higher value products. Also, during 2008, we began the installation of a completely new rolling mill in Zawiercie designed to allow efficient and flexible production of an increased medium section product range. This major strategic expansion captures the full advantage of the underutilized melting capacity of CMCZ’s two existing electric arc furnaces.

     CMCS reported an adjusted operating loss of $25.3 million during 2008 due to start-up costs and regaining customer acceptance. During 2008, CMCS melted 34 thousand tons, rolled 67 thousand tons and shipped 58 thousand tons.

     International Fabrication and Distribution Net sales for 2008 increased 37%, impacted by favorable foreign exchange rates which resulted in an increase in net sales of approximately 5%. Adjusted operating income increased 69% to $124.3 million, this segment’s all-time record, driven by strong pricing in the Middle East, North Africa, and Central Europe, and with the German economy growing at its fastest rate in a decade. Our Australian operations performed well as the domestic economy remains strong and commodity prices remain high. Our raw materials division set a record for sales and operating profit in 2008. With China reducing export tonnages, prices in Southeast Asia have risen and profits in inter-Asian trade remained positive.

     In August 2007, CMC’s Board approved the plan to offer to sell a division which is involved with the buying, selling and distribution of nonferrous metals. The sale has not been completed as of August 31, 2008, however, we expect the majority of product lines of this division to be sold and the remaining product lines to be absorbed by our other divisions in 2009. See Note 5, Discontinued Operations and Impairments, to the consolidated financial statements.

     Corporate Our corporate expenses for 2008 increased $27.5 million over the prior year due primarily to an increase of $19.9 million in costs incurred for our investment in the global installation of SAP software.

     Discontinued Operations Adjusted operating profit for our division classified as a discontinued operation increased to $2.9 million from adjusted operating loss of $3.5 million in 2007. The change primarily resulted from LIFO income of $2.4 million recorded in 2008 as compared to expense of $12.0 million during 2007.

     Consolidated Data On a consolidated basis, the LIFO method of inventory valuation decreased our net earnings by $209.1 million and $33.3 million ($1.78 and $0.27 per diluted share) for 2008 and 2007, respectively. Our overall selling, general and administrative (“SG&A”) expenses increased by $124.0 million (21%) for 2008 as compared to 2007. SG&A expense in 2008 includes $53.7 million expense associated with our investment in the

global deployment of SAP software. In addition, salaries and discretionary incentive compensation increased because of company growth, including acquisitions.

     Our interest expense increased by $21.9 million during 2008 as compared to 2007 primarily due to the issuance of $500 million in senior unsecured notes in August 2008, the issuance of $400 million in unsecured notes in July 2007 and increased debt outstanding internationally during 2008.

     Our effective tax rate for the year ended August 31, 2008 decreased to 31.1% as compared to 31.9% in 2007 due to shifts in profitability among tax jurisdictions.

     Outlook Fiscal 2009 will be a challenge to many businesses, including CMC. The turmoil in global financial markets, the uncertainty of the effects of government intervention, the imminent change in the U.S. administration and a loss of confidence by both consumers and investors clouds our outlook. In the short-term we will face headwinds until such time as confidence and credit/liquidity issues are stabilized. Prices for our metals products have recently declined, some sharply. In periods of declining prices, customers typically withhold orders waiting to see signals that the market has bottomed. This will translate into lower volumes in most segments. We will adjust our production to meet demand, manage inventories, and maintain metal margins; downtime will be devoted to maintenance and upgrades. There are bright spots — fabrication operations will benefit from lower finished goods prices, easing their margin compression. Forward order books for certain Distribution operations should result in good profitability. Long-term we continue to see strong demand for steel and related products as the emerging economies urbanize/industrialize. Global infrastructure projects should continue to be a key driver of demand.

2007 Compared to 2006

     Americas Recycling Fiscal 2007 had record sales but adjusted operating profit in 2007 was 9% lower as compared to 2006 as margins were squeezed. The average selling price of ferrous scrap remained strong with a 6% increase over 2006. The average selling price of nonferrous for 2007 increased 18% over 2006 prices. Volume was also up in 2007 with a 6% increase in ferrous tons shipped and a 6% increase in nonferrous tons shipped. For 2007, Recycling posted pre-tax LIFO expense of $0.4 million compared with an expense of $12.6 million in the previous year. The following table reflects our recycling segment’s average selling prices per short ton and tons shipped (in thousands) for the year ended August 31:

										Increase
		2007				2006				Amount				%
Average ferrous selling price		$	222			$	210			$	12				6	%
Average nonferrous selling price		$	2,920			$	2,467			$	453				18	%
Ferrous tons shipped			2,842				2,671				171				6	%
Nonferrous tons shipped			350				331				19				6	%
Total volume processed and shipped			3,220				3,028				192				6	%

     Americas Mills We include our four domestic steel minimills and our copper tube minimill in this segment. While 2006 set many benchmarks, record average selling prices and increased metal margins at the mills in 2007 helped to produce our second best year ever. Metal margins (the difference between the average selling price and cost of scrap consumed) for the segment increased in 2007 as compared to 2006 because increases in selling prices at our domestic steel mills more than offset the increases in scrap purchase and other input costs. Despite record high sales prices, increases in the scrap purchase cost and lower sales volume reduced our metal margins at our copper tube minimill. LIFO expense for 2007 was $27.3 million as compared $28.7 million for 2006.

     Within the segment adjusted operating profit for our four domestic steel minimills was $239.8 million for the year ended August 31, 2007 as compared to $230.7 million for 2006. Selling prices and metal margins increased in 2007 as compared to 2006; however slowing market conditions in the fourth quarter compelled the mills to curtail production in order to lower finished goods inventories. Higher selling prices did not fully offset lower tons shipped resulting in sales slightly decreasing in 2007 versus 2006.

     Average scrap purchase costs were higher than last year as the world demand for ferrous scrap remained strong. The table below reflects domestic steel and ferrous scrap prices per ton for the year ended August 31:

										Increase
		2007				2006				Amount				%
Average mill selling price (finished goods)		$	587			$	530			$	57				11	%
Average mill selling price (total sales)			566				513				53				10	%
Average cost of ferrous scrap consumed			233				214				19				9	%
Average FIFO metal margin			333				299				34				11	%
Average ferrous scrap purchase price			211				191				20				10	%

The table below reflects our domestic steel minimills’ operating statistics for the year ended August 31:

										Decrease
(short tons in thousands)		2007				2006				Amount				%
Tons melted			2,121				2,324				(203	)			(9	%)
Tons rolled			1,957				2,198				(241	)			(11	%)
Tons shipped			2,250				2,492				(242	)			(10	%)

     Overall, our domestic steel minimills recorded $27.3 million pre-tax LIFO expense in 2007 as compared to $15.3 million in 2006. Our utility expenses fell by $15.7 million (16%) in 2007 as compared to 2006. Electricity prices started the year high, but dropped during the first three quarters of the fiscal year. Prices rose significantly in the fourth quarter almost back to the prices registered at the beginning of the year. On a full year basis, electricity costs decreased by $6.4 million (10%) and natural gas costs decreased by $9.3 million (28%). Year-over-year costs for ferroalloys, graphite electrodes and other supplies increased, while transportation rates rose significantly. Electrode costs per ton were up 16% with the largest increase at CMC Steel South Carolina.

     Our copper tube minimill’s adjusted operating profit was $19.6 million for the year ended August 31, 2007 compared to $37.0 million for 2006. While selling prices set another record high, our results were adversely impacted by lower shipment volumes and lower metal margins compared to 2006. The decline in housing starts coupled with the extraordinary high price of copper reduced the demand for copper plumbing tube across the U.S. We matched production and inventory levels to coincide with order intake levels. We were able to increase the average selling price for the year to $4.06 per pound, a historical high, however metal spreads narrowed to $1.07 per pound due to the increase in the cost of copper scrap and lower production volumes. The table below reflects our copper tube minimill’s prices per pound and operating statistics for the year ended August 31:

										Increase (Decrease)
(pounds in millions)		2007				2006				Amount				%
Pounds shipped			52.5				65.7				(13.2	)			(20	%)
Pounds produced			50.4				63.3				(12.9	)			(20	%)
Average copper selling price		$	4.06			$	3.35			$	0.71				21	%
Average copper scrap purchase cost		$	3.09			$	2.29			$	0.80				35	%
Average copper metal margin		$	1.07			$	1.39			$	(0.32	)			(23	%)

     Our copper tube minimill recorded $21 thousand pre-tax LIFO income for the year ended August 31, 2007 as compared to $13.4 million expense in 2006.

     Americas Fabrication and Distribution Sales increased 11% compared to 2006; however, tons shipped decreased 3% and adjusted operating profit decreased 9% because the cost of steel increased resulting in margin squeeze. Additionally, our CMC Dallas Trading division contributed to the increase in sales of this segment and increased divisional sales by 17% as compared to 2006. The segment recorded $11.5 million pre-tax LIFO expense for the year ended August 31, 2007 as compared to $24.9 million expense in 2006.

     During 2007, we acquired the operating assets of Nicholas J. Bouras, Inc. and its affiliates. This acquisition did not significantly impact our 2007 adjusted operating profit; however, the acquisition establishes CMC as a manufacturer of steel deck and expands CMC’s geographic markets into the northeast. See Note 2, Acquisitions, to the consolidated financial statements. The table below shows our average fabrication selling prices per short ton and total fabrication plant shipments for the years ended August 31:

										Increase
Average selling price*		2007				2006				Amount				%
Rebar		$	831			$	771			$	60				8	%
Joist			1,184				1,115				69				6	%
Structural			2,364				1,962				402				20	%
Post			720				696				24				3	%

										Increase(Decrease)
Tons shipped		2007				2006				Amount				%
Rebar			1,014				1,076				(62	)			(6	%)
Joist			340				357				(17	)			(5	%)
Structural			84				87				(3	)			(3	%)
Post			103				125				(22	)			(18	%)
Deck			54				—				54				—

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

										Increase
		2007				2006				Amount				%
Tons melted			1,458				1,283				175				14	%
Tons rolled			1,130				1,121				9				1	%
Tons shipped			1,366				1,250				116				9	%
Average mill selling price (total sales)		1,575		PLN*		1,388		PLN			187				13	%
Averaged cost of ferrous scrap consumed			876	PLN			728	PLN			148				20	%
Average metal margin			699	PLN			660	PLN			39				6	%
Average ferrous scrap purchase price			780	PLN			629	PLN			151				24	%
Average mill selling price (total sales)		$	542			$	437			$	105				24	%
Average cost of ferrous scrap consumed		$	302			$	229			$	73				32	%
Average metal margin		$	240			$	208			$	32				15	%
Average ferrous scrap purchase price		$	268			$	197			$	71				36	%

     Our International Mills segment includes CMCZ and its related scrap operations. CMCZ achieved record sales and adjusted operating profits. Our operating results were positively impacted by favorable foreign exchange rates during 2007 as compared to 2006 and resulted in an increase in net sales of approximately 9%. Metal margins increased 6% over 2006 driven by increases in prices but partially offset by increases in the ferrous scrap cost. Operating levels and shipments were also up compared to 2006, including a 9% increase in shipments. A strong Polish zloty encouraged steel imports and made exports difficult. Steel imports were particularly high in the second half of the year.

     During fiscal 2007 our new scrap mega-shredder in Zawiercie was very successful and enabled us to sustain higher melt shop yields and lower melt shop costs.

     In March of 2007, we purchased all the shares of CMCZ owned by the Polish Ministry of State Treasury (approximately 26.4% of the outstanding shares). CMC holds 99.8% of all CMCZ shares outstanding. See Note 2, Acquisitions, to the consolidated financial statements.

     We continued engineering our previously announced wire rod block, the new finishing end which will enable us to roll higher value products. In the fourth quarter, we announced the future installation of a completely new rolling mill in Zawiercie designed to allow efficient and flexible production of an increased medium section product range. This major strategic expansion captures the full advantage of the underutilized melting capacity of CMCZ’s two existing electric arc furnaces.

     International Fabrication and Distribution Our adjusted operating profit increased $18.3 million, or 33%, as compared to last year. Our operating results were positively impacted by favorable foreign exchange rates during 2007 as compared to 2006 and resulted in an increase in net sales of approximately 7%. LIFO expenses were essentially flat as compared to last year’s. Market conditions varied by product and geography, but overall were favorable. Steel tonnage increased in most of our markets, especially sales into the U.S., although sales dollars were mixed in various markets.

     U.S. steel import volumes and operating profits were strong although varied by product line. International steel markets remained vibrant with increased pricing from the prior year. The increase in Chinese exports gave us additional sourcing opportunities in inter-Asia carbon steel products. European imports were strong and our sales of aluminum, copper, brass and stainless steel semis were steady. Our value-added downstream and processing businesses continued to perform well.

     During 2007, we received a dividend of 223 million CZK ($10.9 million) from Trinecke Zelezarny, a Czech steel mill in which we own 11% of the outstanding shares as compared to a dividend of 89.2 million CZK ($4.1 million) received in 2006.

     Corporate Our corporate expenses for 2007 increased $37.8 million over the prior year due primarily to $33.8 million in costs incurred for our investment in the global installation of SAP software. The increase in total assets of $307 million is due primarily to the increased sale of receivables from the business segments to the Company’s wholly-owned subsidiary, CMCRV, and capitalization of $16.5 million of software development costs. We recognized income of $8.2 million on investment assets in our segregated trust for our benefit restoration plan during the year ended August 31, 2007, as compared to $4.0 million for 2006. See Note 10, Employees’ Retirement Plans, to the consolidated financial statements.

     Consolidated Data On a consolidated basis, the LIFO method of inventory valuation decreased our net earnings by $33.3 million and $50.6 million ($0.27 and $0.41 per diluted share) for the years ended August 31, 2007 and 2006, respectively. Our overall SG&A expenses increased by $103.5 million (22%) for the year ended August 31, 2007 as compared to 2006. SG&A expense in 2007 includes $33.8 million expense associated with our investment in the global deployment of SAP software. In addition, salaries, discretionary incentive compensation and profit sharing expense increased because of company growth, including acquisitions.

     Our interest expense increased by $7.1 million during 2007 as compared to 2006 primarily due to the issuance of $400 million in senior unsecured notes due in July 2017, an increase in letters of credit fees in the International Fabrication and Distribution segment and an increase in bank fees incurred as our average outstanding balance of commercial paper increased in 2007.

     Our effective tax rate for the year ended August 31, 2007 decreased to 31.9% as compared to 33.9% in 2006 due to shifts in profitability among tax jurisdictions.

2008 Liquidity and Capital Resources

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

     Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities 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 refused to honor their contract commitments or ceased lending. 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 August 31, 2008 (dollars in thousands):

		Total Facility				Availability
Commercial paper program*		$	400,000			$	372,425
Domestic accounts receivable securitization			200,000				200,000
International accounts receivable sales facilities			342,935				120,010
Bank credit facilities – uncommitted			1,483,910				655,498
Notes due from 2009 to 2018			1,294,645				**
Trade financing arrangements			**			As required
CMCZ revolving credit facility			44,020				44,020
Equipment notes			9,215				—

     Certain of our financing agreements, both domestically and at CMCZ, include various covenants, of which we were in compliance at August 31, 2008. There are no guarantees by the Company or any of its subsidiaries for any of CMCZ’s debt. The CMCS and CMC Poland 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 metals commodity prices. See Note 7, Financial Instruments, Market and Credit Risk, to the consolidated financial statements.

     During 2008, we used $43.5 million of net cash flows from operating activities as compared to generating $461.3 million in 2007. This change is primarily the result of a decrease in net earnings adjusted for non-cash items of $95.5 million and an increase in cash used for working capital of $409.3 million. The increase in cash used for working capital mainly relates to the following:

	•		increased accounts receivable – increased sales and increased ferrous prices as compared to the same period last year and fewer sales of accounts receivable;
	•		increased inventories – increased inventory on hand and higher inventory costs primarily due to increased ferrous prices; and
	•		increased accounts payable and accrued expenses – provided a source of cash as these current liabilities increased due to higher volume.

     During 2008, we used $581.8 million of net cash flows from investing activities as compared to $430.9 million in 2007. We invested $355.0 million in property, plant and equipment during 2008, an increase of $148.8 million. The significant capital expenditures in 2008 related to the construction of the new micro mill in Arizona, the installation of a new wire rod block and rolling mill at CMCZ and capitalization of cost associated with the global implementation of SAP. Additionally, we spent $228.4 million for the acquisitions of businesses, an increase of $64.4 million. In comparison, during 2007 we used $62.1 million of cash to acquire the minority shares of CMCZ from the Polish government and other minority shareholders.

     Net cash flow from financing activities provided $423.8 million for 2008 as compared to $207.2 million for 2007. The increase was mainly driven by an increase in documentary letters of credit and proceeds from short-term borrowings and long-term debt. We issued $500 million of long-term notes in 2008 as compared to $400 million in 2007. During 2008, we used $172.3 million to purchase 6.2 million shares of our common stock as part of our stock repurchase program, an increase of $113.1 million over 2007. Additionally, we increased our dividend rate to 12 cents per share during 2008 which resulted in an increase of cash used of $12.8 million over 2007.

     Our contractual obligations for the next twelve months of $2.0 billion are typically expenditures with normal revenue processing 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 August 31, 2008 (dollars in thousands):

		Payments Due By Period*
						Less than												More than
Contractual Obligations:		Total				1 Year				1-3 Years				3-5 Years				5 Years
Long-term debt(1)		$	1,303,860			$	106,327			$	53,245			$	44,253			$	1,100,035
Notes payable			31,305				31,305				—				—				—
Interest(2)			681,415				86,116				158,983				150,998				285,318
Operating leases(3)			167,886				33,561				54,692				35,260				44,373
Purchase obligations(4)			1,942,557				1,770,209				130,993				18,170				23,185
Total contractual cash obligations		$	4,127,023			$	2,027,518			$	397,913			$	248,681			$	1,452,911

Other Commercial Commitments

     We maintain stand-by letters of credit to provide support for certain transactions that our customers or suppliers request. At August 31, 2008, we had committed $39.6 million under these arrangements. All commitments expire within one year.

Contingencies

     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.

Environmental and Other Matters

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

     General We are subject to federal, state and local pollution control laws and regulations. We anticipate that compliance with these laws and regulations will involve continuing capital expenditures and operating costs.

     Our original business and one of our core businesses for over nine decades is metals recycling. In the present era of conservation of natural resources and ecological concerns, we are committed to sound ecological and business conduct. Certain governmental regulations regarding environmental concerns, however well intentioned, are contrary to the goal of greater recycling. Such regulations expose us and the industry to potentially significant risks. We believe that recycled materials are commodities that are diverted by recyclers, such as us, from the solid waste streams because of their inherent value. Commodities are materials that are purchased and sold in public and private markets and commodities exchanges every day around the world. They are identified, purchased, sorted, processed and sold in accordance with carefully established industry specifications.

     Environmental agencies at various federal and state levels classify certain recycled materials as hazardous substances and subject recyclers to material remediation costs, fines and penalties. Taken to extremes, such actions could cripple the recycling industry and undermine any national goal of material conservation. Enforcement, interpretation, and litigation involving these regulations are not well developed.

     Solid and Hazardous Waste We currently own or lease, and in the past owned or leased, properties that have been used in our operations. Although we used operating and disposal practices that were standard in the industry at the time, wastes may have been disposed or released on or under the properties or on or under locations where such wastes have been taken for disposal. We are currently involved in the investigation and remediation of several such properties. State and federal laws applicable to wastes and contaminated properties have gradually become stricter over time. Under new laws, we could be required to remediate properties impacted by previously disposed wastes. We have been named as a potentially responsible party (“PRP”) at a number of contaminated sites.

     We generate wastes, including hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act (“RCRA”) and comparable state and/or local statutes where we operate. These statutes, regulations and laws may have limited disposal options for certain wastes.

     Superfund The U.S. Environmental Protection Agency (“EPA”) or an equivalent state agency notified us that we are considered a PRP at thirteen sites, none owned by us. We may be obligated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) or a similar state statute to conduct remedial investigation, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time we may contest, our liability at the sites. In addition, we have received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Because of various factors, including the ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and cleanup costs and the extended time periods over which such costs may be incurred, we cannot reasonably estimate our ultimate costs of compliance with CERCLA. At August 31, 2008, based on currently available information, which is in many cases preliminary and incomplete, we had $2.2 million accrued for cleanup and remediation costs in connection with eight of the thirteen CERCLA sites. We have accrued for these liabilities based upon our best estimates. We are not able to reasonably estimate an amount for the five other CERCLA sites. The amounts paid and the expenses incurred on these thirteen sites for the years ended August 31, 2008, 2007 and 2006 were not material. Historically, the amounts that we have ultimately paid for such remediation activities have not been material.

     Clean Water Act The Clean Water Act (“CWA”) imposes restrictions and strict controls regarding the discharge of wastes into waters of the United States, a term broadly defined. These controls have become more stringent over time and it is probable that additional restrictions will be imposed in the future. Permits must generally be obtained to discharge pollutants into federal waters; comparable permits may be required at the state level. The CWA and many state agencies provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants. In addition, the EPA has promulgated regulations that may require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge, we may be liable for penalties and costs.

     Clean Air Act Our operations are subject to regulations at the federal, state and local level for the control of emissions from sources of air pollution. New and modified sources of air pollutants are often required to obtain permits prior to commencing construction, modification and/or operations. Major sources of air pollutants are subject to more stringent requirements, including the potential need for additional permits and to increased scrutiny in the context of enforcement. The EPA has been implementing its stationary emission control program through expanded enforcement of the New Source Review Program. Under this program, new or modified sources are required to construct what is referred to as the Best Available Control Technology. Additionally, the EPA is implementing new, more stringent standards for ozone and fine particulate matter. The EPA recently has promulgated new national emission standards for hazardous air pollutants for steel mills which will require all major sources in this category to meet the standards by reflecting application of maximum achievable control technology. Compliance with the new standards could require additional expenditures.

     In 2008, we incurred environmental expenses of $24.9 million. The expenses included the cost of environmental personnel at various divisions, permit and license fees, accruals and payments for studies, tests, assessments, remediation, consultant fees, baghouse dust removal and various other expenses. During 2008, $3.2 million of our capital expenditures related to costs directly associated with environmental compliance. At August 31, 2008, $14.7 million was accrued for environmental liabilities of which $6.8 million was classified as other long-term liabilities.

Business Interruption Insurance Claims

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

Dividends

     We have paid quarterly cash dividends in each of the past 176 consecutive quarters. We paid dividends in 2008 at the rate of $0.09 per share for the first quarter and $0.12 per share for the last three quarters.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

     Approach to Minimizing Market Risk See Note 7, Financial Instruments, Market and Credit Risk, to the consolidated financial statements for disclosure regarding our approach to minimizing market risk. Also, see Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements. The following types of derivative instruments were outstanding at August 31, 2008, in accordance with our risk management program.

     Currency Exchange Forwards We enter into currency exchange forward contracts as economic hedges of international trade commitments denominated in currencies other than the functional currency of the Company or its subsidiaries. No single foreign currency poses a primary risk to us. Fluctuations that cause temporary disruptions in one market segment tend to open opportunities in other segments.

     Commodity Prices We base pricing in some of our sales and purchase contracts on forward metal commodity exchange quotes which we determine at the beginning of the contract. Due to the volatility of the metal commodity indexes, we enter into metal commodity forward or futures contracts for copper, aluminum, nickel and zinc. These forwards or futures mitigate the risk of unanticipated declines in gross margins on these contractual commitments. Physical transaction quantities will not match exactly with standard commodity lot sizes, leading to small gains and losses from ineffectiveness.

     Natural Gas We enter into natural gas forward contracts as economic hedges of the Company’s Americas Mills operations based on anticipated consumption of natural gas.

     Interest Rates If interest rates increased or decreased by one percentage point, the effect on interest expense related to our variable-rate debt and the fair value of our long-term debt would be approximately $1.0 million and $66 million, respectively.

The following table provides certain information regarding the foreign exchange and commodity financial instruments discussed above.

Gross Foreign Currency Exchange Contract Commitments as of August 31, 2008:

Functional Currency						Foreign Currency								U.S.
		Amount						Amount				Range of		Equivalent
Type		(in thousands)				Type		(in thousands)				Hedge Rates*		(in thousands)
AUD			1,250			EUR			743			0.5806 – 0.6088		$	1,114
AUD			129			GBP			62			0.4718 – 0.4818			123
AUD			137			NZD**			168			1.2283			129
AUD			386,094			USD			348,741			0.8406 – 0.9628			348,741
EUR			122,194			USD			181,890			1.4657 – 1.5804			181,890
GBP			9,092			EUR			11,424			0.7896 – 0.8005			17,143
GBP			18,292			USD			33,900			1.8176 – 1.9815			33,900
PLN			250,319			EUR			69,798			3.2050 – 3.8055			104,739
PLN			15,745			GBP			3,773			4.1730			7,509
PLN			27,561			USD			12,133			2.2615 – 2.2960			12,133
USD			12,164			EUR			8,193			1.4730 – 1.5609			12,164
USD			504			JPY			54,692			107.8700 – 108.7000			504
															720,089
Revaluation as of August 31, 2008, at quoted market															743,223
Unrealized gain														$	9,693

As of August 31, 2007 (in thousands):
Revaluation at quoted market		$	383,525
Unrealized gain		$	57

Gross Metal Commodity Contract Commitments as of August 31, 2008:

Range or

Total Contract

Amount of

Value at

Long/

# of

Standard

Total

Hedge Rates

Inception

Terminal Exchange

Metal

Short

Lots

Lot Size

Weight

Per MT/lb.

(in thousands)

London Metal Exchange (LME)

Aluminum

Long

356

25

MT

8,900

MT

$

2,592.50 – 3,285.00

$

24,456

Aluminum

Short

422

25

MT

10,550

MT

2,700.43 – 3,354.00

31,367

Copper

Long

83

25

MT

2,075

MT

7,255.00 – 8,510.00

15,633

Copper

Short

89

25

MT

2,225

MT

7,662.00 – 8,337.00

17,715

Nickel

Long

40

6

MT

240

MT

30.00

4

Nickel

Short

3

6

MT

18

MT

18,590.00 – 26,075.00

387

Zinc

Long

1

55,000

lbs.

55,000

lbs.

2,305.00 – 2,435.00

65

Natural Gas

Long

3

10,000

MMBtu

30,000

MMBtu

10.56

317

Range or

Total Contract

Amount of

Value at

Long/

# of

Standard

Total

Hedge Rates

Inception

Terminal Exchange

Metal

Short

Lots

Lot Size

Weight

Per MT/lb.

(in thousands)

New York Mercantile Exchange

Copper

Long

178

25,000

lbs.

4,450,000

lbs.

326.30 – 365.50

15,387

Commodities Division (Comex)

Copper

Short

709

25,000

lbs.

17,725,000

lbs.

323.00 – 404.65

63,481

168,812

Revaluation as of August 31, 2008, at quoted market

160,478

Unrealized gain

$

6,019

As of August 31, 2007 (in thousands):
Revaluation at quoted market		$	133,935
Unrealized gain		$	1,839

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

     Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of August 31, 2008. Deloitte & Touche LLP has audited the effectiveness of the Company’s internal control over financial reporting; their report is included on page 41 of this Form 10-K.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Commercial Metals Company
Irving, Texas

We have audited the accompanying consolidated balance sheets of Commercial Metals Company and subsidiaries (the “Company”) as of August 31, 2008 and 2007, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended August 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Commercial Metals Company and subsidiaries at August 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of August 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 30, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Dallas, Texas
October 30, 2008

Commercial Metals Company and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS

		Year ended August 31,
(in thousands, except share data)		2008				2007				2006
Net sales		$	10,427,378			$	8,329,016			$	7,212,152
Costs and expenses:
Cost of goods sold			9,325,724				7,167,989				6,138,134
Selling, general and administrative expenses			707,786				583,810				480,282
Interest expense			58,263				36,334				29,232
			10,091,773				7,788,133				6,647,648
Earnings from continuing operations before income taxes and minority interests			335,605				540,883				564,504
Income taxes			103,886				172,769				191,217
Earnings from continuing operations before minority interests			231,719				368,114				373,287
Minority interests			538				9,587				10,209
Net earnings from continuing operations			231,181				358,527				363,078
Earnings (loss) from discontinued operations before taxes			1,706				(4,827	)			(10,011	)
Income taxes (benefit)			921				(1,731	)			(3,280	)
Net earnings (loss) from discontinued operations			785				(3,096	)			(6,731	)
Net earnings		$	231,966			$	355,431			$	356,347
Basic earnings (loss) per share:
Earnings from continuing operations		$	2.01			$	3.04			$	3.08
Loss from discontinued operations			0.01				(0.03	)			(0.06	)
Net earnings		$	2.02			$	3.01			$	3.02
Diluted earnings (loss) per share:
Earnings from continuing operations		$	1.96			$	2.95			$	2.94
Loss from discontinued operations			0.01				(0.03	)			(0.05	)
Net earnings		$	1.97			$	2.92			$	2.89

See notes to consolidated financial statements.

Commercial Metals Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS

		August 31,
(in thousands)		2008				2007
Assets
Current assets:
Cash and cash equivalents		$	219,026			$	419,275
Accounts receivable (less allowance for collection losses of $17,652 and $16,495)			1,369,453				1,082,713
Inventories			1,400,332				874,104
Other			228,632				82,760
Total current assets			3,217,443				2,458,852
Property, plant and equipment:
Land			84,539				54,387
Buildings and improvements			462,186				321,967
Equipment			1,292,832				1,095,672
Construction in process			256,156				118,298
			2,095,713				1,590,324
Less accumulated depreciation and amortization			(941,391	)			(822,971	)
			1,154,322				767,353
Goodwill			84,837				37,843
Other assets			289,769				208,615
		$	4,746,371			$	3,472,663

		August 31,
(in thousands, except share data)		2008				2007
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade		$	838,777			$	484,650
Accounts payable-documentary letters of credit			192,492				153,431
Accrued expenses and other payables			563,424				425,410
Income taxes payable and deferred income taxes			156				4,372
Notes payable			31,305				—
Current maturities of long-term debt			106,327				4,726
Total current liabilities			1,732,481				1,072,589
Deferred income taxes			50,160				31,977
Other long-term liabilities			124,171				109,813
Long-term debt			1,197,533				706,817
Total liabilities			3,104,345				1,921,196
Minority interests			3,643				2,900
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 113,777,152 and 118,566,381 shares			1,290				1,290
Additional paid-in capital			371,913				356,983
Accumulated other comprehensive income			112,781				64,452
Retained earnings			1,471,542				1,296,631
			1,957,526				1,719,356
Less treasury stock 15,283,512 and 10,494,283 shares at cost			(319,143	)			(170,789	)
Total stockholders’ equity			1,638,383				1,548,567
		$	4,746,371			$	3,472,663