UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2009

Commission File Number 1-4304

COMMERCIAL METALS COMPANY

 

(Exact Name of registrant as specified in its charter)

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

6565 N. MacArthur Blvd.
Irving, Texas 75039

(Address of principal executive offices)
(Zip Code)

(214) 689-4300

(Registrant’s telephone number, including area code)

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

Yes þ      No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o

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

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

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

Yes o      No þ

As of January 5, 2010, there were 112,892,304 shares of the Company’s common stock issued and outstanding excluding 16,168,360 shares held in the Company’s treasury.

 

 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE NO.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) — November 30, 2009 and August 31, 2009			2
Consolidated Statements of Operations (Unaudited) — Three months ended November 30, 2009 and 2008			3
Consolidated Statements of Cash Flows (Unaudited) — Three months ended November 30, 2009 and 2008			4
Consolidated Statements of Stockholders’ Equity (Unaudited) — Three months ended November 30, 2009 and 2008			5
Notes to Consolidated Financial Statements (Unaudited)			6-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			25
Item 4. Controls and Procedures			26
PART II — OTHER INFORMATION
Items 1 - 6			26
Signatures			28
Index to Exhibits			29
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		November 30,				August 31,
(in thousands, except share data)		2009				2009
Assets
Current assets:
Cash and cash equivalents		$	334,030			$	405,603
Accounts receivable (less allowance for collection losses of $39,803 and $42,134)			695,161				731,282
Inventories			663,208				678,541
Other			206,258				182,126
Total current assets			1,898,657				1,997,552
Property, plant and equipment:
Land			104,339				87,530
Buildings and improvements			533,404				502,031
Equipment			1,557,948				1,395,104
Construction in process			238,023				380,185
			2,433,714				2,364,850
Less accumulated depreciation and amortization			(1,052,651	)			(1,013,461	)
			1,381,063				1,351,389
Goodwill			74,636				74,236
Other assets			265,426				264,379
Total assets		$	3,619,782			$	3,687,556
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade		$	325,604			$	344,355
Accounts payable-documentary letters of credit			71,360				109,210
Accrued expenses and other payables			321,751				327,212
Notes payable			3,250				1,759
Current maturities of long-term debt			33,833				32,802
Total current liabilities			755,798				815,338
Deferred income taxes			45,877				44,564
Other long-term liabilities			116,258				113,850
Long-term debt			1,177,227				1,181,740
Total liabilities			2,095,160				2,155,492
CMC stockholders’ equity:
Preferred stock			—				—
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 112,756,203 and 112,573,433 shares			1,290				1,290
Additional paid-in capital			381,200				380,737
Accumulated other comprehensive income			67,456				34,257
Retained earnings			1,393,461				1,438,205
			1,843,407				1,854,489
Less treasury stock 16,304,461 and 16,487,231 shares at cost			(321,172	)			(324,796	)
Stockholders’ equity attributable to CMC			1,522,235				1,529,693
Stockholders’ equity attributable to noncontrolling interests			2,387				2,371
Total equity			1,524,622				1,532,064
Total liabilities and stockholders’ equity		$	3,619,782			$	3,687,556

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended
		November 30,
(in thousands, except share data)		2009				2008
Net sales		$	1,446,858			$	2,372,830
Costs and expenses:
Cost of goods sold			1,335,484				2,106,146
Selling, general and administrative expenses			140,954				153,510
Interest expense			19,451				26,083
			1,495,889				2,285,739
Earnings (loss) from continuing operations before income taxes			(49,031	)			87,091
Income taxes (benefit)			(17,808	)			30,766
Earnings (loss) from continuing operations			(31,223	)			56,325
Earnings from discontinued operations before taxes			—				9,113
Income taxes			—				3,386
Earnings from discontinued operations			—				5,727
Net earnings (loss)		$	(31,223	)		$	62,052
Less net earnings attributable to noncontrolling interests			6				46
Net earnings (loss) attributable to CMC		$	(31,229	)		$	62,006
Basic earnings (loss) per share attributable to CMC:
Earnings (loss) from continuing operations		$	(0.28	)		$	0.50
Earnings from discontinued operations			—				0.05
Net earnings (loss)		$	(0.28	)		$	0.55
Diluted earnings (loss) per share attributable to CMC:
Earnings (loss) from continuing operations		$	(0.28	)		$	0.49
Earnings from discontinued operations			—				0.05
Net earnings (loss)		$	(0.28	)		$	0.54
Cash dividends per share		$	0.12			$	0.12
Average basic shares outstanding			112,495,297				113,004,524
Average diluted shares outstanding			112,495,297				114,473,163

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Cash flows from (used by) operating activities:
Net earnings (loss)		$	(31,223	)		$	62,052
Adjustments to reconcile net earnings to cash from (used by) operating activities:
Depreciation and amortization			43,695				41,308
Provision for losses (recoveries) on receivables			(2,526	)			8,784
Share-based compensation			2,422				4,109
Net gain on sale of assets and other			—				(214	)
Writedown of inventory			12,931				11,592
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable			58,328				172,402
Accounts receivable sold (repurchased), net			(10,456	)			4,397
Decrease in inventories			15,010				69,029
Increase in other assets			(12,155	)			(2,081	)
Decrease in accounts payable, accrued expenses, other payables and income taxes			(37,242	)			(356,366	)
Increase (decrease) in deferred income taxes			(8,933	)			9,087
Increase (decrease) in other long-term liabilities			2,040				(20,107	)
Net cash flows from operating activities			31,891				3,992
Cash flows from (used by) investing activities:
Capital expenditures			(46,514	)			(86,654	)
Proceeds from the sale of property, plant and equipment and other			183				798
Acquisitions, net of cash acquired			(2,448	)			(906	)
Net cash used by investing activities			(48,779	)			(86,762	)
Cash flows from (used by) financing activities:
Decrease in documentary letters of credit			(37,850	)			(2,934	)
Short-term borrowings, net change			1,491				(4,021	)
Repayments on long-term debt			(7,567	)			(292	)
Proceeds from issuance of long-term debt			694				—
Stock issued under incentive and purchase plans			960				65
Treasury stock acquired			—				(18,514	)
Cash dividends			(13,515	)			(13,653	)
Tax benefits from stock plans			705				518
Net cash used by financing activities			(55,082	)			(38,831	)
Effect of exchange rate changes on cash			397				(5,946	)
Decrease in cash and cash equivalents			(71,573	)			(127,547	)
Cash and cash equivalents at beginning of year			405,603				219,026
Cash and cash equivalents at end of period		$	334,030			$	91,479

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (UNAUDITED)

		CMC Stockholders’ Equity
														Accumulated
		Common Stock								Additional				Other								Treasury Stock
		Number of								Paid-In				Comprehensive				Retained				Number of								Noncontrolling
(in thousands, except share data)		Shares				Amount				Capital				Income (Loss)				Earnings				Shares				Amount				Interests				Total
Balance, September 1, 2008			129,060,664			$	1,290			$	371,913			$	112,781			$	1,471,542				(15,283,512	)		$	(319,143	)		$	3,643			$	1,642,026
Comprehensive income (loss):
Net earnings for three months ended November 30, 2008																			62,006												46				62,052
Other comprehensive income (loss):
Foreign currency translation adjustment, net of taxes ($12,423)															(130,939	)															(722	)			(131,661	)
Unrealized gain on derivatives, net of taxes ($947)															5,236																				5,236
Comprehensive loss																																			(64,373	)
Cash dividends																			(13,653	)															(13,653	)
Treasury stock acquired																							(1,752,900	)			(18,514	)							(18,514	)
Issuance of stock under incentive and purchase plans											(4,660	)											161,036				4,725								65
Share-based compensation											4,109																								4,109
Tax benefits from stock plans											518																								518
Balance, November 30, 2008			129,060,664			$	1,290			$	371,880			$	(12,922	)		$	1,519,895				(16,875,376	)		$	(332,932	)		$	2,967			$	1,550,178

		CMC Stockholders’ Equity
														Accumulated
		Common Stock								Additional				Other								Treasury Stock
		Number of								Paid-In				Comprehensive				Retained				Number of								Noncontrolling
(in thousands, except share data)		Shares				Amount				Capital				Income (Loss)				Earnings				Shares				Amount				Interests				Total
Balance, September 1, 2009			129,060,664			$	1,290			$	380,737			$	34,257			$	1,438,205				(16,487,231	)		$	(324,796	)		$	2,371			$	1,532,064
Comprehensive income (loss):
Net earnings (loss) for three months ended November 30, 2009																			(31,229	)											6				(31,223	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of taxes ($720)															33,378																10				33,388
Unrealized gain on derivatives, net of taxes ($57)															329																				329
Defined benefit obligation, net of taxes ($267)															(508	)																			(508	)
Comprehensive income																																			1,986
Cash dividends																			(13,515	)															(13,515	)
Issuance of stock under incentive and purchase plans											(2,716	)											185,690				3,676								960
Share-based compensation											2,474												(2,920	)			(52	)							2,422
Tax benefits from stock plans											705																								705
Balance, November 30, 2009			129,060,664			$	1,290			$	381,200			$	67,456			$	1,393,461				(16,304,461	)		$	(321,172	)		$	2,387			$	1,524,622

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 — QUARTERLY FINANCIAL DATA

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States on a basis consistent with that used in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended August 31, 2009, and include all normal recurring adjustments necessary to present fairly the consolidated balance sheets and statements of operations, cash flows and stockholders’ equity for the periods indicated. These notes should be read in conjunction with such Form 10-K. The results of operations for the three month period are not necessarily indicative of the results to be expected for a full year.

NOTE 2 — ACCOUNTING POLICIES

Share-Based Compensation

See Note 10, Capital Stock, to the Company’s consolidated financial statements for the year ended August 31, 2009 for a description of the Company’s stock incentive plans.

The Company recognizes share-based compensation at fair value in the financial statements. The fair value of each share-based award is estimated at the date of grant using either the Black-Scholes pricing model or a binomial model. Total compensation cost is amortized on a straight-line basis over the vesting period of issued awards. The Company recognized share-based compensation expense of $2.4 million and $4.1 million as a component of selling, general and administrative expenses for the three months ended November 30, 2009 and 2008, respectively. At November 30, 2009, the Company had $7.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the next 33 months. See Note 1, Summary of Significant Accounting Policies, to the Company’s consolidated financial statements for the year ended August 31, 2009 for a description of the Company’s assumptions used to calculate share-based compensation.

Combined information for shares subject to options and stock appreciation rights (“SARs”) for the three months ended November 30, 2009 were as follows:

						Weighted
						Average				Price
						Exercise				Range
		Number				Price				Per Share
September 1, 2009
Outstanding			5,427,552			$	21.36			$	3.64 --35.38
Exercisable			4,240,734				18.27				3.64 --35.38
Exercised			(210,350	)			6.76				3.64 --12.31
Forfeited			(83,130	)			28.75				12.31 --35.38
November 30, 2009
Outstanding			5,134,072			$	21.84			$	3.64 --35.38
Exercisable			3,972,869				18.77				3.64 --35.38

Share information for options and SARs at November 30, 2009:

Outstanding																Exercisable
								Weighted
								Average				Weighted								Weighted
Range of								Remaining				Average								Average
Exercise				Number				Contractual				Exercise				Number				Exercise
Price				Outstanding				Life (Yrs.)				Price				Outstanding				Price
$	3.64 —   3.78				373,892				0.2			$	3.65				373,892			$	3.65
	7.53 —   7.78				1,178,442				1.2				7.76				1,178,442				7.76
	11.00 — 13.58				769,161				3.1				12.12				643,161				12.34
	21.81 — 24.71				533,060				3.3				24.52				533,060				24.52
	31.75 — 35.38				2,279,517				4.8				34.76				1,244,314				34.59
$	3.64 — 35.38				5,134,072				3.2			$	21.84				3,972,869			$	18.77

None of the Company’s previously granted restricted stock awards vested during the three months ended November 30, 2009.

Intangible Assets

The total gross carrying amounts of the Company’s intangible assets that were subject to amortization were $92.1 million and $93.3 million at November 30, 2009 and August 31, 2009, respectively, and are included in other non-current assets. There were no significant changes in either the components or the lives of intangible assets during the three months ended November 30, 2009. Aggregate amortization expense for the three months ended November 30, 2009 and 2008 was $3.0 million and $5.0 million, respectively.

Subsequent Events

In connection with the preparation of the consolidated financial statements, the Company evaluated subsequent events through January 8, 2010, the date the consolidated financial statements were issued.

Recently Adopted Accounting Guidance

In the first quarter of 2010, the Company adopted accounting guidance on business combinations. The guidance establishes principles for recognizing and measuring the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquired business and goodwill acquired in a business combination. Additionally, the guidance clarifies accounting and disclosure of assets and liabilities arising from contingencies in a business combination. This guidance will be applied to future business combinations.

In the first quarter of 2010, the Company adopted accounting guidance that modifies accounting and reporting for noncontrolling interests. The guidance requires minority interest to be reported as equity on the balance sheet, net earnings (loss) to include both the amounts attributable to the affiliate’s parent and the noncontrolling interest and clarifies the accounting for changes in the parent’s interest in an affiliate. The provisions of the standard were applied prospectively, except for the presentation and disclosure requrements, which were applied restrospectively to all periods presented. As a result, previously reported minority interests were reclassified into the noncontrolling interests portion of stocklholders’ equity as of September 1, 2009 and 2008, respectively, and reported net earnings increased for the three months ended November 2008 to reflect the earnings attributable to the noncontrolling interests.

In the first quarter of 2010, the Company adopted accounting guidance requiring disclosure of the fair value of financial instruments for interim and annual reporting periods. The adoption did not have a material impact on the consolidated financial statements. See Note 10, Fair Value.

NOTE 3 — SALES OF ACCOUNTS RECEIVABLE

On November 25, 2009, the Company renegotiated an existing accounts receivable securitization agreement of $100 million. The agreement extended the maturity date of the facility from December 18, 2009 to November 24, 2010 and modified the covenant structure. The covenants contained in this agreement are consistent with the credit facility fully described in Note 6, Credit Arrangements.

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

The Company accounts for CMCRV’s sales of undivided interests in these receivables to the financial institutions as sales. At the time an undivided interest in the pool of receivables is sold, the amount is removed from the consolidated balance sheet and the proceeds from the sale are reflected as cash provided by operating activities. At November 30, 2009 and August 31, 2009, accounts receivable of $136 million and $141 million, respectively, had been sold to CMCRV. The Company’s undivided interest in these receivables (representing the Company’s retained interest) was 100% at November 30, 2009 and August 31, 2009, respectively. The carrying amount of the Company’s retained interest in the receivables approximated fair value due to the short-term nature of the collection

period. No other material assumptions are made in determining the fair value of the retained interest. The retained interest is subordinate to, and provides credit enhancement for, the financial institutional buyers’ ownership interest in CMCRV’s receivables, and is available to the financial institution buyers to pay any fees or expenses due to them and to absorb all credit losses incurred on any of the receivables. The U.S. securitization program contains certain cross-default provisions whereby a termination event could occur if the Company defaulted under one of its credit arrangements.

In addition to the securitization program described above, the Company’s international subsidiaries in Europe and Australia and a domestic subsidiary periodically sell accounts receivable without recourse. These arrangements constitute true sales, and once the accounts are sold, they are no longer available to satisfy the Company’s creditors in the event of bankruptcy. Uncollected accounts receivable sold under these arrangements and removed from the consolidated balance sheets were $83.2 million and $93.7 million at November 30, 2009 and August 31, 2009, respectively. The Company’s Australian subsidiary has an agreement with a financial institution, which contains financial covenants whereby our Australian subsidiary must meet certain coverage and tangible net worth levels, as defined. At November 30, 2009, our Australian subsidiary was not in compliance with these covenants. Commercial Metals Company provided a guarantee of our Australian subsidiary’s performance resulting in the financial covenants being waived at November 30, 2009. The guarantee will cease to be effective when the Australian subsidiary is in compliance with the financial covenants for two consecutive quarters.

During the three months ended November 30, 2009 and 2008, proceeds from the sale of receivables were $189.7 million and $417.0 million, respectively, and cash payments to the owners of receivables were $200.2 million and $419.4 million, respectively. The Company is responsible for servicing the entire pool of receivables; however, no servicing asset or liability is recorded as these receivables are collected in the normal course of business and the collection of receivables are normally short term in nature. Discounts on domestic and international sales of accounts receivable were $0.8 million and $1.9 million for the three months ended November 30, 2009 and 2008, respectively. These discounts primarily represented the costs of funds and were included in selling, general and administrative expenses.

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the last-in, first-out method (“LIFO”). LIFO inventory reserves were $224.4 million and $241.7 million at November 30, 2009 and August 31, 2009. Inventory cost for international inventories and the remaining domestic inventories are determined by the first-in, first-out method (“FIFO”). The majority of the Company’s inventories are in the form of finished goods, with minimal work in process. At November 30, 2009 and August 31, 2009, $47.1 million and $52.9 million, respectively, were in raw materials.

NOTE 5 — DISCONTINUED OPERATIONS

On August 30, 2007, the Company’s Board approved a plan to offer for sale a division (the “Division”) which was involved with the buying, selling and distribution of nonferrous metals, namely copper, aluminum and stainless steel semifinished products. At August 31, 2009, all inventory of this Division had been sold or absorbed by other divisions of the Company and the minimal amount of remaining assets and liabilities were transferred to another division effective September 1, 2009.

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

		August 31,
(in thousands)		2009
Current assets		$	555
Noncurrent assets			1,494
Current liabilities			6,543
Noncurrent liabilities			—

		Three Months Ended
		November 30,
		2008
Revenue			56,945
Earnings before taxes			9,113

NOTE 6 — CREDIT ARRANGEMENTS

On November 24, 2009, the Company renegotiated its revolving credit facility of $400 million by extending the maturity date from May 23, 2010 to November 24, 2012 and adjusting the covenant structure. The new agreement requires the Company to maintain a minimum interest coverage ratio on a rolling twelve month average of not less than 1.50 to 1.00 for the quarters ending November 30, 2009, February 28, 2010, and May 31, 2010 and 2.50 to 1.00 thereafter. At November 30, 2009, the Company’s interest coverage ratio was 1.78. The agreement also requires the Company to maintain liquidity of at least $300 million (cash, investments, and accounts receivable securitization capacity combined) through May 31, 2010. The agreement did not change the existing debt to capitalization ratio covenant which requires the Company to maintain a ratio not greater than 0.60 to 1.00. At November 30, 2009, the Company’s debt to capitalization ratio was 0.47.

At November 30, 2009, and August 31, 2009, no borrowings were outstanding under the commercial paper program or the revolving credit facility. The availability under the revolving credit agreement is reduced by $26.9 million of stand-by letters of credit issued as of November 30, 2009.

The Company has numerous uncommitted credit facilities available from domestic and international banks. No commitment fees or compensating balances are required under these credit facilities. These credit facilities are used, in general, to support import Letters of Credit (including accounts payable settled under bankers’ acceptances as described in Note 1. Summary of Significant Accounting Polices in the Company’s consolidated financial statements for the year ended August 31, 2009), foreign exchange transactions and short term advances which are priced on a cost of funds basis.

Long-term debt was as follows:

		November 30,				August 31,
(in thousands)		2009				2009
5.625% notes due November 2013		$	200,000			$	200,000
6.50% notes due July 2017			400,000				400,000
7.35% notes due August 2018			500,000				500,000
CMCZ term note due May 2013			101,054				104,945
Other, including equipment notes			10,006				9,597
			1,211,060				1,214,542
Less current maturities			33,833				32,802
		$	1,177,227			$	1,181,740

Interest on the notes, except for the CMCZ notes, is payable semiannually.

CMCZ has a five year term note of PLN 280 million ($101.1 million) with a group of four banks. The term note is used to finance operating expenses of CMCZ and the development of a rolling mill. The note has scheduled principal and interest payments in 15 equal quarterly installments which began in November 2009. The weighted average rate at November 30, 2009 was 6.31%. The term note contains certain financial covenants for CMCZ. At November 30, 2009, CMCZ was not in compliance with these covenants which resulted in a guarantee by Commercial Metals Company becoming effective. As a result of the guarantee, the financial covenant requirements became void; however, all other terms of the loan remain in effect, including the payment schedule. The guarantee will cease to be effective when CMCZ is in compliance with the financial covenants for two consecutive quarters.

CMC Poland (“CMCP”) owns and operates equipment at the CMCZ mill site. In connection with the equipment purchase, CMCP issued equipment notes under a term agreement dated September 2005 with PLN 7.0 million ($2.5 million) outstanding at November 30, 2009. Installment payments under these notes are due through 2010. Interest rates are variable based on the Poland Monetary Policy Council’s rediscount rate, plus an applicable margin. The weighted average rate at November 30, 2009 was 4.1%. The notes are secured by the shredder equipment.

CMC Sisak (“CMCS”) has a five year note of EUR 40 million ($60 million) which allows for disbursements as funds are needed. The loan will be used to finance operating expenses of CMCS and upgrades to the melt shop and caster. At November 30, 2009, no amounts were outstanding under this note.

Interest of $2.1 million and $2.2 million was capitalized in the cost of property, plant and equipment constructed for the three months ended November 30, 2009 and 2008, respectively. Interest of $8.6 million and $12.9 million was paid for the three months ended November 30, 2009 and 2008, respectively.

NOTE 7 — INCOME TAXES

The Company paid $6.3 million and $6.2 million in income taxes during the three months ended November 30, 2009 and 2008, respectively.

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

		Three Months Ended
		November 30,
		2009				2008
Statutory rate			35.0	%			35.0	%
State and local taxes			4.3				2.7
Foreign rate differential			(1.1	)			(1.6	)
Domestic production activity deduction			—				(1.0	)
Other			(1.9	)			0.4
Effective rate			36.3	%			35.5	%

As of November 30, 2009, the reserve for unrecognized tax benefits relating to the accounting for uncertainty in income taxes was $1.9 million exclusive of interest and penalties. If recognized, $1.6 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. During the three months ended November 30, 2009, the Company recorded an increase in liabilities of $0.2 million.

The Company classifies any interest recognized on an underpayment of income taxes as interest expense and classifies any statutory penalties recognized on a tax position taken as selling, general and administrative expense. At November 30, 2009, before any tax benefits, the Company had $0.3 million of accrued interest and penalties on unrecognized tax benefits. During the three months ended November 30, 2009, the Company recognized an immaterial amount of interest expense and statutory penalties.

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

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

U.S Federal — 2006 and forward
U.S. States — 2005 and forward
Foreign — 2002 and forward

The federal tax returns for fiscal years 2006 to 2008 are under examination by the Internal Revenue Service. However, we believe our recorded tax liabilities as of November 30, 2009 sufficiently reflect the anticipated outcome of these examinations upon the completion of their examination.

NOTE 8 — STOCKHOLDERS’ EQUITY AND EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO CMC

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

		Three Months Ended
		November 30,
		2009				2008
Shares outstanding for basic earnings (loss) per share			112,495,297				113,004,524
Effect of dilutive securities:
Stock based incentive/purchase plans			—				1,468,639
Shares outstanding for diluted earnings (loss) per share			112,495,297				114,473,163

For the three months ended November 30, 2009, no stock options, restricted stock or SARs were included in the calculation of dilutive shares because the Company reported a loss from continuing operations. For the three months ended November 30, 2008, all stock

options and restricted stock were dilutive based on the average share price of $16.50. SARs with total share commitments of 3,676,029 were antidilutive and therefore excluded from the calculation of diluted earnings per share at November 30, 2008. All stock options and SARs expire by 2016.

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

The Company purchased no shares during the first quarter of 2010 and had remaining authorization to purchase 8,259,647 shares of its common stock at November 30, 2009.

NOTE 9 — DERIVATIVES AND RISK MANAGEMENT

The Company’s worldwide operations and product lines expose it to risks from fluctuations in metals commodity prices, foreign currency exchange rates and natural gas prices. The objective of the Company’s risk management program is to mitigate these risks using futures or forward contracts (derivative instruments). The Company enters into metal commodity futures and forward contracts to mitigate the risk of unanticipated declines in gross margin due to the volatility of the commodities’ prices, enters into foreign currency forward contracts which match the expected settlements for purchases and sales denominated in foreign currencies and enters into natural gas forward contracts to mitigate the risk of unanticipated changes in operating cost due to the volatility of natural gas prices. Also, when sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to minimize the effect of the volatility of ocean freight rates.

The following tables provide certain information regarding the foreign exchange and commodity financial instruments discussed above.

Gross foreign currency exchange contract commitments as of November 30, 2009 (in thousands):

Functional Currency						Contract Currency
Type		Amount				Type		Amount
AUD			278			EUR			166
AUD			45			GBP			25
AUD			162,432			USD			145,979
EUR			19,486			PLN			81,069
EUR			29,685			USD			44,189
GBP			3,925			EUR			4,330
GBP			2,300			USD			3,817
HRK*			27,695			EUR			3,688
HRK*			23,017			USD			4,500
PLN			190,583			EUR			45,785
PLN			96,282			USD			32,566
SGD**			4,167			USD			3,000
USD			39,039			EUR			26,001
USD			21,966			GBP			13,300
USD			138			JPY			13,695
USD			47			PLN			130
USD			361			SGD**			500

Commodity contract commitments as of November 30, 2009:

Commodity		Long/Short		Total
Aluminum		Long		1,850 MT
Copper		Long		1,119 MT
Copper		Short		7,385 MT
Zinc		Long		25 MT
Natural Gas		Long		40,000 MMBtu

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the three months ended November 30, 2009. Certain of the foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

The following tables summarize activities related to the Company’s derivative instruments and hedged (underlying) items recognized within the statements of operations (in thousands):

Derivatives Not Designated as Hedging						Three Months Ended
Instruments		Location				November 30, 2009
Commodity		Cost of goods sold				$	1,176
Foreign exchange		Net sales					264
Foreign exchange		Cost of goods sold					84
Foreign exchange		SG&A expenses					(1,181	)
Gain recognized into operations before taxes						$	343

The Company’s fair value hedges are designated for accounting purposes with gains and losses on the hedged item (underlying) items offsetting the gain or loss on the related derivative transaction. Hedged (underlying) items mainly relate to firm commitments on commercial sales and purchases and capital expenditures.

Derivatives Designated as Fair Value Hedging						Three Months Ended
Instruments		Location				November 30, 2009
Foreign exchange		SG&A expenses				$	(8,687	)
Loss recognized into operations before taxes						$	(8,687	)

Hedged (Underlying) Items Designated as Fair						Three Months Ended
Value Hedging Instruments		Location				November 30, 2009
Foreign exchange		Net sales				$	61
Foreign exchange		SG&A expenses					8,622
Gain recognized into operations before taxes						$	8,683

Effective Portion of Derivatives Designated as		Three Months Ended
Cash Flow Hedging Instruments		November 30, 2009
Commodity		$	60
Foreign exchange			325
Gain recognized in accumulated other comprehensive income (loss), net of taxes		$	385

Effective Portion of Derivatives Designated as						Three Months Ended
Cash Flow Hedging Instruments		Location				November 30, 2009
Commodity		Cost of goods sold				$	(28	)
Foreign exchange		SG&A expenses					(30	)
Interest rate		Interest expense					114
Gain reclassified from accumulated other comprehensive income (loss) into operations, net of taxes						$	56

The Company’s derivative instruments were recorded at their respective fair values as follows on the consolidated balance sheet (in thousands):

Derivative Assets		November 30, 2009				August 31, 2009
Commodity — designated		$	31			$	13
Commodity — not designated			1,309				2,948
Foreign exchange — designated			778				3,823
Foreign exchange — not designated			1,730				4,678
Derivative assets (other current assets)*		$	3,848			$	11,462

Derivative Liabilities		November 30, 2009				August 31, 2009
Commodity — designated		$	5			$	35
Commodity — not designated			5,653				8,895
Foreign exchange — designated			2,686				6,421
Foreign exchange — not designated			2,345				1,420
Derivative liabilities (accrued expenses and other payables)*		$	10,689			$	16,771

*		Derivative assets and liabilities do not include the hedged (underlying) items designated as fair value hedges.

During the twelve months following November 30, 2009, $0.5 million in gains related to commodity hedges and capital expenditures are anticipated to be reclassified into net earnings (loss) as the related transactions mature and the assets are placed into service. Also, an additional $0.5 million in gains will be reclassified as interest income related to an interest rate lock.

As of November 30, 2009, all of the Company’s derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months.

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

NOTE 10 — FAIR VALUE

The following table summarizes information regarding the Company’s financial assets and financial liabilities that are measured at fair value. The Company does not have any nonfinancial assets or liabilities that are measured at fair value.

						Fair Value Measurements at Reporting Date Using
						Quoted Prices in
						Active Markets for				Significant Other				Significant
		November 30,				Identical Assets				Observable Inputs				Unobservable Inputs
(in thousands)		2009				(Level 1)				(Level 2)				(Level 3)
Cash equivalents		$	287,384			$	287,384			$	—			$	—
Derivative assets			3,848				1,309				2,539				—
Nonqualified benefit plan assets *			56,498				56,498				—				—
Derivative liabilities			10,689				5,653				5,036				—
Nonqualified benefit plan liabilities *			100,304				100,304				—				—
		August 31,
		2009
Cash equivalents		$	357,723			$	357,723			$	—			$	—
Derivative assets			11,462				2,948				8,514				—
Nonqualified benefit plan assets *			55,596				55,596				—				—
Derivative liabilities			16,711				8,895				7,876				—
Nonqualified benefit plan liabilities *			96,904				96,904				—				—

The Company’s long-term debt is predominantly publicly held. The fair value was approximately $1.16 billion at November 30, 2009 and $1.17 billion at August 31, 2009. Fair value was determined by indicated market values.

NOTE 11 — COMMITMENTS AND CONTINGENCIES

See Note 12, Commitments and Contingencies, to the consolidated financial statements for the year ended August 31, 2009 relating to environmental and other matters. There have been no significant changes to the matters noted therein. In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. Management believes that adequate provision has been made in the consolidated financial statements for the potential impact of these issues, and that the outcomes will not significantly impact the results of operations or the financial position of the Company, although they may have a material impact on earnings for a particular quarter.

NOTE 12 — BUSINESS SEGMENTS

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

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

The Americas Recycling segment consists of the scrap metal processing and sales operations primarily in Texas, Florida and the southern United States including the scrap processing facilities which directly support the Company’s domestic steel mills. The Americas Mills segment includes the Company’s domestic steel minimills, its micromill, and the copper tube minimill. The copper tube minimill is aggregated with the Company’s steel mills because it has similar economic characteristics. The Americas Fabrication and Distribution segment consists of the Company’s rebar and joist and deck fabrication operations, fence post manufacturing plants, construction-related and other products facilities. Additionally, the Americas Fabrication and Distribution consists of the CMC Dallas Trading division which markets and distributes steel semi-finished long and flat products into the Americas from a diverse base of international and domestic sources. The International Mills segment includes the minimills in Poland and Croatia and subsidiaries in Poland which have been presented as a separate segment because the economic characteristics of their markets and the regulatory environment in which they operate are different from that of the Company’s domestic mills. International Fabrication and Distribution includes international operations for the sales, distribution and processing of both ferrous and nonferrous metals and other industrial products in addition to rebar fabrication operations in Europe. The domestic and international distribution operations consist only of physical transactions and not positions taken for speculation. Corporate contains expenses of the Company’s corporate headquarters, expenses related to its deployment of SAP software, and interest expense relating to its long-term public debt and commercial paper program.

The financial information presented for the International Fabrication and Distribution segment includes its copper, aluminum, and stainless steel import operating division. This division has been classified as a discontinued operation in the consolidated financial statements for the three months ended November 30, 2008. Net sales of this division have been removed in the eliminations/discontinued operations column in the table below to reconcile net sales by segment to net sales in the consolidated financial statements. See Note 5, Discontinued Operations, for more detailed information.

Effective December 1, 2009, the Company implemented a new organizational structure. As a result, the Company will structure the business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mills (comprised of all mills, recycling and fabrication operations located outside of the U.S.) and International Marketing and Distribution (comprised of all marketing and distribution operations located outside the Americas as well as CMC Cometals and CMC Dallas Trading). This new organizational structure will be reported beginning in the second quarter of fiscal 2010.

The Company uses adjusted operating profit (loss) to measure segment performance. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following is a summary of certain financial information by reportable segment:

		Three Months Ended November 30, 2009
		Americas												International
										Fabrication								Fabrication
										and								and
(in thousands)		Recycling				Mills				Distribution				Mills				Distribution				Corporate				Eliminations				Consolidated
Net sales-unaffiliated customers		$	242,924			$	177,190			$	339,551			$	115,571			$	568,063			$	3,559			$	—			$	1,446,858
Intersegment sales			46,589				112,003				2,256				55,283				4,352				—				(220,483	)			—
Net sales			289,513				289,193				341,807				170,854				572,415				3,559				(220,483	)			1,446,858
Adjusted operating profit (loss)			94				(1,619	)			(17,345	)			(18,875	)			24,949				(20,204	)			4,208				(28,792	)
Goodwill			7,467				95				58,878				987				7,209				—				—				74,636
Total assets			252,900				567,911				893,833				684,614				598,817				621,707				—				3,619,782

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

The following table provides a reconciliation of consolidated adjusted operating profit (loss) to net earnings (loss) attributable to CMC:

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Net earnings (loss) attributable to CMC		$	(31,229	)		$	62,006
Noncontrolling interests			6				46
Income taxes			(17,808	)			34,152
Interest expense			19,451				26,448
Discounts on sales of accounts receivable			788				1,918
Adjusted operating profit (loss)		$	(28,792	)		$	124,570
Adjusted operating profit from discontinued operations			—				9,478
Adjusted operating profit (loss) from continuing operations		$	(28,792	)		$	115,092

The following represents the Company’s external net sales by major product and geographic area:

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Major product information:
Steel products		$	899,585			$	1,658,469
Industrial materials			184,625				338,914
Nonferrous scrap			150,609				134,408
Ferrous scrap			100,101				88,664
Construction materials			52,501				81,977
Non-ferrous products			34,023				52,441
Other			25,414				17,957
Net sales*		$	1,446,858			$	2,372,830

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Geographic area:
United States		$	689,784			$	1,467,482
Europe			287,451				491,280
Asia			267,605				145,169
Australia/New Zealand			147,334				190,270
Other			54,684				78,629
Net sales*		$	1,446,858			$	2,372,830

Excludes a division classified as discontinued operations for the three months ended November 30, 2008. See Note 5.

NOTE 13 — RELATED PARTY TRANSACTIONS

One of the Company’s international subsidiaries has a marketing and distribution agreement with a key supplier of which the Company owns an 11% interest. The following presents related party transactions:

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Sales		$	76,300			$	101,687
Purchases			81,733				98,812

		November 30,				August 31,
(in thousands)		2009				2009
Accounts receivable		$	34,898			$	12,664
Accounts payable			21,174				17,012

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

This Management’s Discussion and Analysis should be read in conjunction with our Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended August 31, 2009.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are not different from the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K filed with the SEC for the year ended August 31, 2009 and are, therefore, not presented herein.

CONSOLIDATED RESULTS OF OPERATIONS

		Three Months Ended
		November 30,								Decrease
(in millions)		2009				2008				%
Net sales*		$	1,446.9			$	2,372.8				(39	%)
Net earnings (loss) attributable to CMC			(31.2	)			62.0				(150	%)
EBITDA			14.2				163.9				(91	%)

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

		Three Months Ended								Increase
		November 30,								(Decrease)
(in millions)		2009				2008				%
Net earnings (loss) attributable to CMC		$	(31.2	)		$	62.0				(150	%)
Interest expense			19.5				26.4				(26	%)
Income taxes (benefit)			(17.8	)			34.2				(152	%)
Depreciation and amortization			43.7				41.3				6	%
EBITDA		$	14.2			$	163.9				(91	%)
EBITDA from discontinued operations			—				9.5				(100	%)
EBITDA from continuing operations		$	14.2			$	154.4				(91	%)

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

The following events and performances had a significant impact during our first quarter ended November 30, 2009:

•

In response to price declines, demand destruction, and a global liquidity and credit crisis, we recorded the following consolidated expenses during the first quarter: lower of cost or market inventory adjustments of $12.9 million, other charges relating to contractual noncompliance and job loss reserves of $7.4 million and severance costs of $2.2 million offset by bad debt recoveries of $2.5 million.

	•		We recorded pre-tax LIFO income of $17.3 million (after tax of $0.10 per share) for the first quarter of 2010 compared to pre-tax LIFO income of $113.6 million (after tax of $0.65 per diluted share) for the first quarter of 2009.
	•		Net sales of the Americas Recycling segment increased 11% and adjusted operating profit (loss) increased to breakeven compared to adjusted operating loss of $28 million in the prior year’s first quarter primarily due to price and volume increases during the quarter.
	•		Net sales of the Americas Mills segment decreased 25% from the prior year’s first quarter due to a significant decline in average selling prices. Adjusted operating profit (loss) decreased $120.3 million from the prior year’s first quarter primarily due to margin compression, pre-tax LIFO expense of $3.5 million compared to pre-tax LIFO income of $75.3 million recorded in last year’s first quarter and $11.3 million of operating losses resulting from the start-up phase of operations at our micromill in Arizona during the quarter.
	•		Our Americas Fabrication and Distribution segment showed a 63% decrease in sales and an $84.0 million decrease in adjusted operating profit (loss) due to continued decline in market demand and average selling prices from the prior year’s first quarter.
	•		Our International Mills segment showed a 24% decline in net sales and a $2.1 million increase in adjusted operating loss compared to the prior year’s first quarter due primarily from price declines and metal margin compression offset by higher shipments and cost containment efforts.
	•		Our International Fabrication and Distribution segment showed a 38% decline in net sales but a $10.1 million increase in adjusted operating profit compared to the prior year’s first quarter due to margin expansion as many our divisions in this segment began recovering from the financial crisis.

SEGMENT OPERATING DATA

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

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

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Net sales:
Americas Recycling		$	289,513			$	260,450
Americas Mills			289,193				387,484
Americas Fabrication and Distribution			341,807				916,737
International Mills			170,854				224,071
International Fabrication and Distribution			572,415				930,593
Corporate			3,559				(25,439	)
Eliminations/Discontinued Operations			(220,483	)			(321,066	)
		$	1,446,858			$	2,372,830

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Adjusted operating profit (loss):
Americas Recycling		$	94			$	(27,953	)
Americas Mills			(1,619	)			118,700
Americas Fabrication and Distribution			(17,345	)			66,628
International Mills			(18,875	)			(16,735	)
International Fabrication and Distribution			24,949				14,885
Corporate			(20,204	)			(20,880	)
Eliminations/Discontinued Operations			4,208				(10,075	)

LIFO Impact on Adjusted Operating Profit (Loss) 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 operations. In periods of declining prices it has the effect of eliminating deflationary losses from operations. In either case the goal is to reflect economic profit. The table below reflects LIFO income or (expense) representing decreases or (increases) in the LIFO inventory reserve. International Mills is not included in this table as it uses FIFO valuation exclusively for its inventory:

		Three Months Ended
		November 30,
(in thousands)		2009				2008
Americas Recycling		$	531			$	24,729
Americas Mills			(3,534	)			75,259
Americas Fabrication and Distribution			20,228				7,425
International Fabrication and Distribution*			44				6,201
Consolidated increase to adjusted profit before tax		$	17,269			$	113,614

Americas Recycling During the first quarter of 2010, scrap prices, metal margins and shipments increased. This segment had slightly above breakeven adjusted operating profit compared to an adjusted operating loss of $28 million in last year’s first quarter. These results were enough to overcome a decrease in LIFO income of $24.2 million compared to the first quarter of fiscal 2009. Ferrous and nonferrous average pricing and margins increased over last year’s first quarter, which witnessed the beginning of the economic crisis for steel. We exported 20% of our ferrous tonnage and 40% of our nonferrous tonnage during the quarter.

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

		Three Months Ended
		November 30,								Increase
		2009				2008				Amount				%
Average ferrous sales price		$	216			$	213			$	3				1	%
Average nonferrous sales price		$	2,366			$	2,252			$	114				5	%
Ferrous tons shipped			525				498				27				5	%
Nonferrous tons shipped			59				59				—				0	%
Total volume processed and shipped			588				563				25				4	%