Welcome to today's Commercial Metals Company first quarter 2009 earnings conference call. (Operator Instructions) Your host for today's call is Murray McClean, Chairman, President and Chief Executive Officer of Commercial Metals Company.

Good morning, and welcome to CMC's first quarter conference call. With me today is Bill Larson, our Chief Financial Officer. I'll begin the call with a brief overview of the first quarter and then call on Bill to provide further details. Finally, I'll comment on the outlook. For the first quarter, as mentioned in the press release, we gave a guidance of $0.35 to $0.45 per share assuming a $50 million pre tax LIFO income. The result was $0.54 per share with pre tax LIFO income at $114 million. The quarter started well with a good month in September, however our markets turned down sharply in October and November with prices and shipments dramatically falling. The global financial crisis led to both a lack of confidence and a lack of demand. Liquidity became the major focus for most companies during the period whether they be customers, suppliers and was no exception for ourselves. Extensive destocking occurred in most markets across the supply chain from raw materials and scrap to steel at the steel mills to end use customers, fabricators, etc. In the U.S. we cut production significantly at our steel mills. Steel shipments were down roughly 20% to 35% depending on the product line. We saw major market claims, price renegotiations, cancellations of orders during this period of rapid decline in the market. I will now ask Bill to provide details on the first quarter.

Let me call to your attention the detailed safe harbor statement included in our press release and our August 31, 2008 10-K that in summary says that in spite of management's good faith current opinions on various forward-looking matters, circumstances can change and not everything we think will happen always happens. In addition we've given guidance regarding our outlook for the second quarter of fiscal 2009 in our press release. Subsequent to this call we will not be under any obligation to update our outlook. In accordance with Regulation G of the Securities and Exchange Commission, you are aware of non-GAAP financial measures. Some of these have derived fairly straightforward from our financial statements or in common business use can be the subject of our discussions today and in our investor visits. Our web site has additional information at cmc.com, but there are other items that may be outside of our ability for discussion and you may need to be patient with us if we defer comment. Commercial Metals remains financially strong in these trying times. As discussed in our press release, our working capital is converting into cash as expected, but the abrupt downturn in material flow starting in October as well as the usual payment of year end obligations has delayed a larger amount of cash. I believe you will see more significant amounts converted in the second quarter. Our $400 million contractual revolver remains substantially unused. There are some small amounts of stand by letters of credit outstanding and our accounts receivable securitization program had $120 million of unused capacity at November 30, 2008. This particular program issues asset backed commercial paper which carries the Treasuries guarantee. Recently, borrowing rates have been under 1%. We have two debt covenants and EBITDA to interest coverage and a debt…

In terms of the outlook, in the global steel markets we anticipate destocking to continue into early calendar 2009. Some markets still have high levels of inventory. A good example is in China with spot on ore is still around 53 million tons at the ports. This is down from about 60 million to 70 million tons so it is dropping. In the Middle East, in Dubai and United Arab Emirates, it's still very high inventories of rebar and billets. In particular, billets is an issue in that part of the world. Rebar inventories are dropping. Other markets in Poland and Central Eastern Europe comparatively low levels of inventory in particular rebar so that is a positive going forward. However, the continuing credit squeeze remains a real concern. We mentioned in our comments on the press release and the outlook, particularly for the private sector and when this will ease, obviously time will tell, but it is a concern for the next two to three months at least. Credit and confidence certainly must be restored before any significant recovery occurs and we believe the global stimulus packages announced around the world are likely to take three to twelve months before they have any impact. The Chinese package of $580 billion roughly, stimulus package may have an impact or have some positive signs after the Chinese New Year. So after February/March period we may see some positive signs. Clearly there's been some firming of prices in China in the last two or three weeks but it's too early to say if that's a positive sign going forward. So we would anticipate after the Chinese New Year to see any signs there. Here in the U.S., obviously there's been a lot of discussion about what the infrastructure package may be, but most likely even once it's announced in detail it could well take six to nine months before any significant impact is felt. We'll clearly continue to reduce the size of our businesses to match market conditions and as we mentioned in our outlook statement December to February period is our winter quarter, and is always the weakest quarter for our and certainly this year is no exception. We anticipate this quarter to be particularly weak. Finally, we are hopeful of some recovery and signs of that in the first quarter, calendar quarter of next year as I mentioned, February/March period, will be a critical period to watch. So with those comments, I would like to open up the conference for questions.

(Operator Instructions) Your first question comes from Kuni Chen – Bank of America Securities. Kuni Chen – Bank of America Securities: First off, on the infrastructure stimulus side of the equation, it's helpful that you gave us some time frames there on when you may see some benefits from stimulus. What is you view of whether the public spending side of the equation can at least offset some of the declines we're going to see in the private and commercial construction? I just want to get your view on how those two might net out over the next couple of quarters.

Here in the U.S. non residential on the public side is about 30% of our business and that could expand to 40% plus, so it could be quite significant. Obviously, non residential overall, unless the credit situation eases on the private side, is going to be down substantially in 2009 so public will take up some of the slack but not all of it. Kuni Chen – Bank of America Securities: And how about into 2010? Do you think that 30% to 40% could go towards 50% or higher?

It's obviously - we don't know what the package is, so it's difficult for us to comment but unlikely high. We hope obviously that the credit markets are eased and then the private sectors starting to work. Not back to what it was but to work more efficiently, so there'll be more activity there. Kuni Chen – Bank of America Securities: On scrap, can you give us your views on where you see the market going over the near term? Do you think the domestic mills may be starting to rebuild some inventory or do you think the kind of recent uptick is just more export driven?

The mills have still got down time and this month of December will probably be the lowest level in terms of production activity at the mills, but we see, talking about our mills now, some uptick come January, February time they'll definitely have to buy some scrap. Scrap flows are starting to improve a little bit. They almost dried up completely with the tremendous drop in prices. So it could be in the new calendar year, January, February period a bit of an uptick in scrap but we don't think it will be significant. It depends obviously; you mentioned international markets, if there is increased activity in some of the international markets that would certainly help the situation. Kuni Chen – Bank of America Securities: On Poland, can you share some color on what your production plan is for the quarter going forward, maybe talk about expected operating rates?

Actually, Poland is a bit more optimistic than our mills here in the United States. They're anticipating that their melt shop will run at about 65% capacity, but that the mill including the new Morgan wire rod block will be run at about 95% of capacity, although we're calculating statistics a little bit different. There's probably translation loss there. 90% is about a high as you can get. So they are anticipating with the backlog that they have that they will run with their wire rod mill well in the high 80%. The metal margins are so-so and as long as pricing doesn't get horrendous as it did when it dropped during the first quarter, Poland should probably fare okay. Certainly not extraordinarily, but they ought to do alright.

Your next question comes from Timna Tanners – UBS. Timna Tanners – UBS: I wanted to focus a little bit, as you characterize the different trends that you're seeing in your different products, different segments I should say, if you could help us identify what specific trends are more kind of behind us or will be in the February time frame behind us and what could be kind of persistent. So for example, if we think about backlog, that's a concern going forward, but if we think about the international distribution arm, how much do we think these continuing cancellation of orders will be a problem going forward?

We think most of that will be out; this quarter will shake most of that out. Some of these problems go on for some time unfortunately, but I think the worst should be behind us in this quarter. Certainly by March we should be through the worst of it. Timna Tanners – UBS: Can you give us a little bit more color on how that's transpired and what you've been doing in response?

What happened there was a tremendous drop in prices and customers as I mentioned about the destocking period, there were a lot of cancellations of orders, and a lot of price renegotiations. So that's how you normally settle, you hope to settle commercially. In some cases customers have cancelled outright and in some cases customers quite frankly, their credit lines have been pulled or significantly reduced and there are keeping the material in inventory rather than selling to a customer who may not pay. So there are number of issues there but at the end of the day you take it out of your margin and as I say, it takes two to three, sometimes four months to sort through this period. Timna Tanners – UBS: How can you be sure that won't be a problem going forward, because you're going to be more stringent in the contracts that you sign, or how does that work?

The market tends to solve the problem because when prices drop to the level they are, there's not the same need for customers to try and cancel a price renegotiation. So the market tends to take care of it. You can obviously tighten up contracts and that, but clearly if a customer is going to go bankrupt, it doesn't matter how tight your contact is. It becomes a decision whether you sell to them or keep the material in inventory. Timna Tanners – UBS: To the other question I was asking in general, what things might be behind you, do you think that working down high cost is mostly behind you in the prior quarter, or also into the second quarter will be an issue, if you could talk about that?

We think on the scrap side most of that should be out of the way in this month, December, so going forward that should be better. Shipments should pick up. Certainly as the steel mills start to pick up some demand, because as I mentioned earlier, we anticipate our mills to start buying scrap again in January, so I think the recycling, we're seeing signs or will see signs next month start to improve. Timna Tanners – UBS: Anything else that you identify as issues that are behind you and issues that may be going forward continuing to be a problem?

As I mentioned, the credit squeeze is a continuing problem because obviously many of our customers are having their credit lines reduced and so that's a continual concern. And hopefully we'll see some easing in the next three to six months but that is a major concern, and I think none of us know which customers may or may not go bankrupt. We have credit insurance on many of our customers, not all. But even with credit insurance the trends insurance companies are taking a harder line on reducing credit limits. So this situation could go on for a few months.

Your next question comes from Michelle Applebaum – MAR. Michelle Applebaum – MAR: I wanted to ask you, you gave guidance on October 30 and you said that you would do at the low end $0.07 a share before LIFO and you ended up doing a loss of $0.11 a share before LIPO. You only had one month to go, right?

Right and the prices deteriorated in that month just faster than we would have anticipated. It was the inventory write downs. Michelle Applebaum – MAR: You made a comment that was uncharacteristic about your peers not giving guidance on the October conference call, but they were guiding for a full December quarter. Do you want to take it back now?

No.

Michelle it's obviously difficult for anyone to give guidance when you see a dramatic drop in markets. It's just as you know, not a monthly thing, it was a weekly, almost a daily thing. We don't criticize our peers, we just felt we should and clearly we weren't quite as accurate as we though we might have been, but it is extremely difficult.

Michelle as you and I have talked, I think what the market needs and what our investors appreciate is what ever color we can give them and the factors that go into our estimate, if we happen to get some of the factors right and other ones wrong, we're always doing it in good faith as I'm sure our competitors are as well. It is as you know at least as well as I do, kind of an unprecedented set of circumstances right now that makes it tough to be as accurate as you'd like, but you still have to try. Michelle Applebaum – MAR: I'm not criticizing the miss, I'm just suggesting you may not even remember, but you made a comment. Your conference call was after most of the others and most of your peers did not give guidance and you were actually critical of that and you gave guidance, and I was just pointing out that you only had one month to go. They had two months to go or even more because their calls were earlier than yours and you had a little bit of a miss even with a month. So I was just kind of closing a loop on that comment. I wanted to ask, I'm sure you saw that Newcor went out on pricing for January. It's the first month in awhile that there wasn't a decline for most lawn products and it seemed, if you listened to what they said and what others are saying, seem to be indicating a bottom. Do you think that's just a scrap driven bottom or do you think we've taken inventories out enough that we're going to be more eating what we kill kind of thing rather than purging inventories?

We can't really comment too much on Newcor, but as we see it, as I mentioned recycling, we think it has come off the bottom, but other products like rebar is stable now, the prices for January and it depends on shipments. The January, February period, it may increase again, possibly March. So it's possible some products are at bottom or coming off the bottom, and other products may still have room to go down like the merchant bar products is a large premium between the merchant bar price and the rebar price but there's not a great deal of demand for merchant bar. It mainly goes to service. So possibly those prices may come down in the future. It's hard to say. I think definitely on the scrap side, I think it's bounced off the bottom. It all depends, I mentioned earlier how much demand. Even a small pick up in demand in early calendar year will definitely help a lot of products in the supply chain get off the bottom. Michelle Applebaum – MAR: What is your trading side saying about imports?

They are declining significantly and we don't see any pickup virtually in any product in the next three months. Customers as I mentioned earlier are looking for liquidity is number one, destocking wherever they can, buying even from each other, service end is buying from each other. Even our own company, we buy internally where we can. So I think this trend will continue for some time and with imports apart from countries like Mexico, I think the trend will be even lower. You can see rebar imports are only 20,000 tons in November. December will probably be even less than that. We now have 40,000 tons from Turkey arriving in January. That's mixed with wire rod, but we don't know of any other shipments. In the port of Houston, it's down to about 50,000 metric tons now and their shipping out trucks at the rate of about 1,000 tons a day. So inventory levels are getting fairly low on the import side but the offers from Turkey, the major traditional exporter to this market, those prices are not attractive and no one is prepared to take the risk of buying imported material and waiting three to four months for it to arrive in this climate. So we think imports in general will be at the levels they are if not lower in the next three to four months. Michelle Applebaum – MAR: For the products that you trade but you don't sell like beams or sheet and that type of thing, what do you see?

Same thing, and even the ones that were strong like OCTG, we see a big decline there, a more significant decline in imports, China being the main exporter of those products, but that really came off the last few weeks. Michelle Applebaum – MAR: And you don't see any change with China's shift in terms of their export tax situation?

Not really. Typically that we're in, China has already reduced its exports so we don't see any immediate change.

Your next question comes from Fritz von Carp – Sage. Fritz von Carp – Sage: I was wondering in reference to the stimulus plans that people have been discussing, do highways use a lot of rebar. Is there a lot of rebar in the highway? And remind me how much of your mix is rebar.

There's a lot of rebar. It depends on the type of highway. Obviously all bridge work regardless of the type of highway, there's a lot of rebar. Asphalt highways, not so much rebar clearly, but all the concrete highways, the new highways actually use more rebar than the older concrete highways. The states of Florida, Texas, California, these are mainly concrete highway states so they use a lot of rebar.

A rough rule of thumb, but it's very rough is that a mile, a single lane of highway would use about 100 plus or minus tons of rebar every mile. Fritz on Carp – Sage: 100 tons you said?

Yes, each lane. So if you have four lanes, it's 400 tons.

You have to anticipate this infrastructure package when it comes through, a lot of highways have to divert in and around the cities of the U.S. and a lot of these are built up, and that uses a lot more rebar than the normal highways which are not built up. So for us, any stimulus package will be very positive. Fritz von Carp – Sage: How much of your mix has historically been rebar and how much in general has gone into the highway sector?

Typically about 45% or so over a period of time is rebar. 55% would be the various merchant shapes include billets and of that right now, although typically 30% would have been the number, probably now it's more like 40% of our rebar will end up in infrastructure projects.

Your next question comes from Sal Tharani – Goldman Sachs. Sal Tharani – Goldman Sachs: When is your revolver expiring?

May of 2010. Sal Tharani – Goldman Sachs: I wanted to get some more color on your comment earlier that LIFO will be a small part of your 2Q guidance. Is that correct that I heard that?

There are two pieces of it. There's very little LIFO in the guidance, and to the extent that we have upside it will clearly be coming from the LIFO. Sal Tharani – Goldman Sachs: Can you remind us of the way you do LIFO? I think you have a little different method than other companies where you take quarterly LIFO rather than a yearly view.

Right. Just a quick lesson, there are two ways to do it. The way we do it is, we try to attempt as comprehensive a calculation each quarter as we can. There are some estimates involved in that so it's nowhere near as strident as it is at year end. And whatever the answer is, we book at 100% of the answer. The other alternative which we used to do three years ago is we estimate what the charge for the year, or the income for the year would be, divide that by four in the first quarter, re-estimate in the second, divide that answer by three, and just kind of keep going along. What we found is that as no surprise to my followers here, I wasn't very good. If you don't think I'm very good estimating LIFO for just a quarter, you can imagine if I'm looking a year out and what happened is that the fourth quarter ended up having the most bizarre LIFO result imaginable because it was what it took to balance to get to the right answer. So we square up every quarter so if for some reason Commercial Metals packed up its tent at the end of that quarter that would be answer. Nothing left outstanding. Sal Tharani – Goldman Sachs: If I look at your LIFO progression last year, every quarter came back going up and significantly up in the third and fourth quarter. I'm surprised. Why was the first quarter LIFO so low? You took $325 million of LIFO.

I'll tell you why. Our marketing and distribution units had rather significant inventories on the water and one of the units actually had a small LIFO expense, so that's also the answer to the next question you ask, is why cash flow didn't come in quite as strong as I would have thought. In transit inventories in marketing and distribution, this is from a period of time, remember what the lead time is on this. Sometimes it's three and four months so these were inventories that were contracted when times were still good before the earth stood still, and they are just now coming into port. So it had the two affects of masking otherwise drops in inventories and causing kind of a negative offset into LIFO income. Sal Tharani – Goldman Sachs: I think you have about a $27 million of LIFO charge in that distribution business, correct?

It was mainly the steel import business. Sal Tharani – Goldman Sachs: So that means that your fab business did wonderful if you add that back to the fab side.

That is correct. You expect that. I'm sure the investors were tired of listening to us talking about margin compression, but now you have the best of both worlds. You've got LIFO coming back and you've got these jobs. And rebar fabrication, we should make a little bit of a distinction here. Unlike in some marketing and distribution that Murray was discussing earlier where Mr. Raymond used to say that at times like this, they test the ethics of our customers and suppliers and not everybody passes. You usually don't get that in rebar fabrication. There are no market claims. There are no renegotiations. The end customer is typically a city or a state or perhaps its the Federal government and so those contracts that were let six, seven months ago at relatively high prices are now being fulfilled by very lower cost steel than what we estimated and so besides LIFO, they've got the expansion in margin compression and will continue for the next quarter as the higher prices backlog rolls off. Sal Tharani – Goldman Sachs: You mentioned Stanley, Stanley used to always say watch the copper as a leading indicator. Do you have any view why copper and base metal prices are back to 2002 levels and steel still is probably hovering around 2005, 2006, 2007 levels and hasn't come down. What is helping us, and then in consolidation in many industries also, but why particularly steel has been holding up so well?

If you look globally, the tremendous cutbacks ion production, I think every steel producer and ourselves in particular will try to match the inventory levels with shipping levels, etc., with production CapEx. So I think that of major significance. With copper, we dabble in that as you know. We see significant production cut backs from some major producers but it's a terminal market. There are high inventories on the LME. China obviously is the big driver in terms of demand and they are off as everyone knows. But there may be some positive signs particularly with the stimulus package in China, because with public housing will be stimulated as well as infrastructure projects and also the Chinese helping the white goods manufacturers with extensive tax rebates. There could be a slight pick up of copper demand in China and that will help the global markets, so I think the two markets, steel and copper in particular are quite different. But you're right. Copper is a bell weather of economic times and clearly demand is down. Even at $1.40 a pound, it's not the end of the earth and probably the trend over the next few months for copper may actually rise from that level. Sal Tharani – Goldman Sachs: On your numbers, particularly in production of the actual steel melted and steel rolled, apparently your production is down or the melting is down more than your shipments, so is that the process inventory you're using and how large is that inventory and how fast is it coming down?

It is, and all the inventories are coming down. We're tracking this weekly at all of the mills and fabrication shops. We've seen in overall tonnage improvements each week, but sometimes it comes is scrap, sometimes it comes in billets, sometimes that comes in finished goods. So I wouldn't necessarily read a whole lot into that other than the trend is down.

Your next question comes from Michael Willemse – CIBC World Markets. Michael Willemse – CIBC World Markets: On the LIFO assumption for the next quarter, it just seems odd to forecast a small LIFO credit given how much prices have come down and if it is a small LIFO credit next quarter, should we expect a large LIFO credit the following quarter?

As you know, LIFO is contingent upon two things; pricing and quantities. I have anticipated that we'll drive the quantities down a little bit more which would lead me to my slight LIFO credit. Pricing, we've talked about the trend in scrap pricing being stable to a slight upward indication and one would suspect that the finished goods may follow that, so I just don't see that dramatic decline still coming. Obviously, I could be wrong. The one area that I can be wrong and could be wrong by a fairly substantial amount is if these trading inventories that are in transit actually land and are sold and are out of the inventory by 2/28. That's the upside I was talking about that's out there. Michael Willemse – CIBC World Markets: Did you say that public infrastructure is about 40% of your business?

It is now. It's not that the absolute tonnage went up, but the denominator, the fraction which is the total tons, it went down because as Murray indicated, the non res is weakened so much that as a percentage of a smaller pie, the infrastructure is larger. Michael Willemse – CIBC World Markets: And all public infrastructure, that's by America, correct? So any increase will still be by American over the next year or two?

The federal work is by America. Some states have that as well. I note that in conversations about this stimulus package which as Murray indicated, we don't know what it's finally going to look like, but they are talking about extending the buy America provision to even a greater range of projects than what is currently applicable, and that would be good. Michael Willemse – CIBC World Markets: Do you have any thoughts yet on how much this could increase your shipment levels in this business, up 10%, 20%, 30%, or is it just way too early to tell?

It's way too early to tell. You'd have to figure a minimum of 10% but as Bill mentioned, some of that is going to be offset by the decline in the private sector. We're anxious as I mentioned earlier for the credit markets to ease and for the private sector to be stimulated with credit. Michael Willemse – CIBC World Markets: On shipping costs, how much does it cost to import steel from Turkey or China today relative to June last year, and also how much would it cost to export scrap to those markets today versus June of last year on a per ton basis?

From Turkey now to the U.S. steel shipments, you can get $22 to $25 a ton freight, so it's very low. That's less than half of what it was a year ago. A year ago it was probably $55 to $65 a ton so the freight rates are really low, not just the size but the panamax's, the handisize, the handimax, everything has come down significantly so the freight markets are now back to 2003 type levels. Michael Willemse – CIBC World Markets: Is it the same with the scrap, the $20 to $25 a ton?

Scrap, we're not a big exporter in bulk scrap, but I assume it will be similar. We import raw materials from China and the panamax is at $30 a ton or less now. Michael Willemse – CIBC World Markets: On long term scrap pricing, when you look at where scrap prices are now and when you look at where iron ore and coal prices are now, I know you trade iron ore and coal, so I'm just wondering your thoughts on how much iron ore and coal pricing have to come down to take out the average charge on the market on the materials.

Coal in particular is coming down and you know and iron ore, ironically iron ore prices seem to have bottomed. The spot prices in China seem to bottom around $65 a ton, have moved up to $72 and just in the last two or three days $75 and $78 a ton. The benchmark from Brazil is around $84 and in Australia, I think its $98. So spot is getting closer to the benchmark prices but still the spot market is a much smaller market than the benchmark, so looking forward, our view is benchmark prices could drop in 2009 30%, maybe 40%. But still it's still lower than the 2007 prices because of the huge increases in 2008. I think iron ore and coal prices would have to drop significantly more to offset scrap, where scrap is. Mind you, scrap is coming back up again, so at this point in time I think your question is leading on to the competitiveness of electric arc furnace produces versus integrated, I think the electric arc furnaces producers are clearly more competitive at this point in time.

Your next question comes from [Barry Logo – Barry Logo & Associates] [Barry Logo – Barry Logo & Associates]: You talking about possibly break even in Croatia in the new year, and yet you had a pretty decent loss in the first quarter. Is that off the table in your opinion?

Not off the table, but the probabilities are less than they were before. This has probably less to do with our plans in Croatia and a whole lot more to do with the decline in pricing. They took some significant write downs not on their seamless per se, but they also have a welded and a drawn tube mill there and the raw materials that go into that, one of which is hot roll coil, they took a beating on as everybody did who's of FIFO. I would say that operationally from the plans that we have in place, they are going to continue to pan out the way we'd expected but we had not anticipated this inventory write down. [Barry Logo – Barry Logo & Associates]: I noticed you had phenomenal metal margins in the quarter, I guess it was all time record metal margins.

Yes sir. [Barry Logo – Barry Logo & Associates]: I know it happened because of discipline of producers and obviously a lack of competition from imports coming into the United States, what do you think is happening today in terms of the metal margins? Do you think that they can hold at the very high levels for the balance of the year?

Rebar metal margins are certainly dropping. When you look at what scrap is doing, the bottom has shredded scrap and rebar prices have dropped. It will be stable through January but that metal margin you can anticipate for rebar will drop into maybe the low 300's per ton. It won't keep at that level and most likely merchant bar as well. [Barry Logo – Barry Logo & Associates]: But if you can accomplish low 300's or anywhere near that, based on history, that's phenomenal metal margins.

Absolutely. [Barry Logo – Barry Logo & Associates]: I noticed that the corporate and eliminations number was extraordinarily high on your press release at $42 million. Can you tell us what happened there and is that reversed?

I can tell you exactly what happened. The difference is predominantly in three things. One is in the SAP expenses. Recall that we are now depreciating or amortizing is more technically correct, the amounts that we capitalized in the past couple of years because more units are coming on board so part of that increase is the amortization of SAP. A second piece is professional services dealing with SAP and some other projects that we're undertaking. The third is, this is going to get a little on the technical side but there is an accounting pronouncement known as FIN 48 that deals with income taxes, and it says if you have an exposure, anything kind of above remote, you need to put an expected liability along with anticipated interest and penalties, and we had an issue arise. The irony of it all is that if things pan out the way that we anticipate this amount will reverse in the second quarter. But nonetheless, you have to square up each quarter. So you've got three things; SAP amortization, a little bit of rise in professional services and some interest in the penalties on a tax issue which we hope will reverse next quarter. [Barry Logo – Barry Logo & Associates]: Bottom line is, you had $113 million on that line item in fiscal '08. I have been using a slightly lower number because I thought the SAP expenses might add a little bit in fiscal '09 versus fiscal '08 and obviously I didn't know about these other issues. Can you give us a ball park figure of corporate eliminations for the year?

I think the run rate will lessen. That's my best guess. [Barry Logo – Barry Logo & Associates]: Obviously the $42 million in the first quarter, $100 million looks like its way too low.

I show $31 million. [Barry Logo – Barry Logo & Associates]: Maybe I'm reading it wrong. On your quarterly and annual segment data, I believe it says corporate eliminations $42,351,000.

Mine would say it was $31 million. [Barry Logo – Barry Logo & Associates]: As far as the inventory turning into cash, you were quoted as saying hundreds of millions of dollars will probably occur this year. Hundreds is a big number.

Hundreds is a very large number. [Barry Logo – Barry Logo & Associates]: And the inventories dropped from the fourth quarter to the first quarter by $170 million and I know your accounts payable dropped by $297 million. Can you give us a better handle now rather than using the words hundreds of millions, give us a better handle now that you know what has happened during this last four months.

No. But it will still be hundreds of millions and it will come though by way of both inventories and receivables but the payables part of it I think has run its course. [Barry Logo – Barry Logo & Associates]: So the fact that the payables has run its course, you won't have that as an offset and will add more cash to the balance sheet.

Right. [Barry Logo – Barry Logo & Associates]: Do you have a number for interest expense net for the year?

My best shot on that would be just, you've got one quarter and I'd say if I had to take a guess now, go 23 each quarter from here on out. [Barry Logo – Barry Logo & Associates]: As far as your stock buy back program, I was encouraged that you did buy back some shares at those prices and I know you've said liquidity is very important, etc., but would we be right in assuming that you would be opportunistic buyer as things sort out here and liquidity improves and business improves?

I think we would be opportunistic. I think though you put your finger on it. We're going to play safe to begin with and then take advantage of the opportunities that are staring at us including the stock buy back. [Barry Logo – Barry Logo & Associates]: On inventory write downs, you talked about Croatia, and you talked about Poland, can you give us an idea of what the inventory write downs which were probably sort of non recurring for Poland and Croatia in the quarter?

Don't have the exact number, but as I recall it was well in excess of $10 million for Poland. Remember there's some translation involved in that number too, and I think it was $6 million to $7 million Croatia, but I may be a little off on that number.

Your next question comes from Charles Bradford – Bradford Research. Charles Bradford – Bradford Research: Can you talk a bit about the status of the micro mill? How far along is the construction and can you update us on expected start up time?

The construction is going very well and we anticipate September of next year as commissioning. Charles Bradford – Bradford Research: What are you seeing these days as far as electrode costs? Graphtec on their last conference call said they hadn't been actually finalizing any contracts yet. I'm assuming that they are by now and even though you may not be buying from them, I'm sure you're hearing from others as well. What are you hearing?

We don't buy from Graphtec, but the number is well up. Bill's got the numbers here.

It's one of these dependent upon size type things, but I would anticipate a range of 40% to 50%. Charles Bradford – Bradford Research: In regard to SAP, what are you looking for in the second quarter as far as the expense including the amortization?

A little bit lower. I would think maybe $10 million plus or minus.

Your next question comes from Bob Richard – Longbow Research. Bob Richard – Longbow Research: Concerning your write downs in Poland, they're a little more humble than what I had thought taking into consideration your loss over there. Your metal margins seem to be pretty healthy over there. Was that a utilization issue and some fixed cost absorption? Is that the way we should look at it?

Yes, plus you had a bit of a distraction. They finished the Morgan wire rod block there and it started production just in the last week of November so there were some other costs associated with it that are running through there. Bob Richard – Longbow Research: That should be behind us?

Yes. In fact, that ought to be one of the reasons why they're margins, whatever their going to be will be sustained by it because it's going to put out a higher quality product in both wire rod and coil rebar, so they're going to be able to upgrade the product line with the use of it. Bob Richard – Longbow Research: On America's mills, the income $75 million much greater than in the America's recycling. I would imagine that scrap prices is what came down the most in the quarter. It probably isn't steel whip on your America's mills. Can we infer from that that you're carrying more scrap on your mill side than recycling?

No. I think what you're seeing there is that the recyclers, they went scorched earth to be quite honest during October, November to drive inventories down to the point where they were still accepting inflow from their industrial customers, but on the margin they were not taking any additional ferrous or non ferrous from other sources. And they were only selling, it's difficult to talk in absolutes, but what the word was, was that they should sell to the mills and the mills would only buy from them in order to drive inventories down. So you might have seen, and maybe this is responsive to your question, but you might have seen the inventory shifted from the recyclers to the mills while we were doing this kind of fraternal transfer. But I think you're going to see it coming out the other side pretty soon.

Rebar prices did drop significantly in that period to about $380 short term from September so it was pretty significant.

Your next question comes from Leo Larkin – Standard Floors. Leo Larkin – Standard Floors: Can you remind us what capital spending will be for '09 and any indications for '10?

None for 2010. The anticipation will be fractionally over $400 million, always on the look out in case liquidity goes in a different direction than we would anticipate, but it's those four projects I mentioned earlier; Arizona, Poland, Croatia and SAP. Leo Larkin – Standard Floors: Even directionally, could 2009 maybe be a plateau for CapEx?

If you don't pin me down to a specific number, yes, I would agree, because here you're going to have, the Arizona mill will be done. A substantial part of the Polish mill will have been expended. Croatia will be done by the end. SAP will substantially be done by the end of this fiscal year. So unlike 2009 where we had a lot, the train had left the station on a lot of these projects at 8/31/08 so there was like carryover in 2009. You would not anticipate that into 2010.

Your next question comes from [Gregory McCosco – Lord Abbott] [Gregory McCosco – Lord Abbott]: With regard to SAP, you've talked a lot about it. When do you expect the expense to be complete and what do you expect in total spending on the SAP?

We really haven't given out the total spending figure, but I would anticipate that, I'll throw a couple of numbers out there. We may spend about $75 million on it in total this year, and next year would be under $20 million, so this is the last year of significant expenditures, and probably the last year that I even give you any detail on it because it should simply roll into normal operations where if we buy somebody, we put them on SAP and just kind of become part of the day to day blocking and tackling here. [Gregory McCosco – Lord Abbott]: Give me some sense of what the value of what you see it delivering in terms of profitability or inventory turns or whatever.

The payback is a minimum of 20%. There are some estimates out there, our own internal estimates that would have that as high as 25% to 30%. It manifests itself in several ways. One obvious one is, and I'm going to sound like an SAP consultant here because I've listened to this stuff for so long hopefully I haven't gone to the dark side, but what you end up having is supply chain management where you have total visibility from your recyclers into your mills and into the fabricators. Here's an easy example. Right now the fabricators probably every one of our shops has a safety stock of 400 to 500 tons of rebar or merchant that they just hold just in case the mill doesn't get there on time or there is some unforeseen circumstance. When you have total visibility up and down the food chain, you can drive those safety stocks out, have one central warehouse or pick one fabrication shop in a geographic area to hold the safety stock. You can set the mills rolling schedule based upon what the fabricators backlog looks like over an extended period of time. It also of course has the ability to aggregate costs and then go to vendors for more significant discounts. [Gregory McCosco – Lord Abbott]: When do we expect those, just the order of magnitude. Have we already been feeling those?

You would expect to see the beginnings of that in 2010. You have to have a significant amount of the units on SAP and the other two big mills in the United States are going in early 2009. We will be rolling on the recycling units a lot of them in 2009 as well, so you don't have the opportunity yet for the benefits until more of the units are on it.

Your next question comes from Sal Tharani – Goldman Sachs. Sal Tharani – Goldman Sachs: Can you tell us what your maintenance CapEx is generally based on your current?

Including Poland it's probably $70 million to $75 million. Sal Tharani – Goldman Sachs: And would the macro mill would probably increase a little bit?

Yes but very little. That thing is a self contained unit that I would not anticipate to have much in the way of capital expenditures for a few years.

At this time there are no more questions. Mr. McClean, I'll turn the call back to you for closing remarks.

Thank you everyone for your attendance. I just wish everyone a happy and safe holiday.