Unassociated Document

	Three Months Ended						Nine Months Ended
	September						September
	2008			2007			2008			2007
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of Good Sold		73.5	%		67.1	%		73.2	%		64.8	%
Gross Profit		26.5	%		32.9	%		26.8	%		35.2	%

Operating Expenses:
Selling Expenses		1.9	%		0.6	%		1.8	%		0.7	%
General and Administrative Expenses		5.4	%		4.5	%		6.3	%		5.8	%
Total Operating Expense		7.3	%		5.1	%		8.1	%		6.5	%

Operating Income		19.2	%		27.8	%		18.7	%		28.7	%

Interest Income		0.3	%		1.8	%		0.3	%		1.4	%
Interest Expense		-2.8	%		-4.8	%		-4.1	%		-6.1	%
Gain on Derivative Instrument		-0.1	%		0.9	%		0.2	%		1.4	%
Other Income		-0.1	%		0.0	%		0.0	%		0.2	%
Other Expense		0.0	%		0.0	%		-0.1	%		-0.1	%
Total Other Expense		-2.7	%		-2.1	%		-3.7	%		-3.2	%

Income Before Taxes		16.5	%		25.7	%		15.0	%		25.5	%
Provision for Income Taxes		2.3	%		0.0	%		1.7	%		0.0	%

Net Income		14.2	%		25.7	%		13.2	%		25.5	%

Other Comprehensive Income:
Foreign Currency Transactions Adjustment		3.0	%		7.0	%		7.8	%		6.6	%
Change in Fair Value of Derivative Instrument		6.2	%		-11.7	%		1.8	%		-5.8	%

Comprehensive Income		23.3	%		21.1	%		22.8	%		26.3	%

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Comparison of the Three Months Ended September 30, 2008 and 2007

	Three Months Ended September 30,
In Millions	2008		2007		Change
Sales	$	63.82	$	32.01	$	31.81	99.4	%

Sales increased 99.4% over the same quarter one year earlier. 27.2% of this increase was due to the acquisition of Copperweld in October of 2007. The remainder was due to an increase in volume of 2,155 tons sold during the third quarter of 2008 compared to the third quarter of 2007. The increase in volume was driven by internal growth.

Gross Margin

	Three Months Ended September 30,
	2008			2007			Change
Gross Margin (in millions)	$	16.9		$	10.5		$	6.4		60.4	%
As a Percentage of Sales		26.5	%		32.9	%		-6.4	%

Gross margin increased $6.4 million or 60.4% quarter over quarter. The gross margin for the third quarter 2008, as a percentage of net sales declined from 32.9% to 26.5% compared to the third quarter of 2007 due primarily to lower margins contributed by the Fayetteville and Telford facilities acquired in October 2007 as well as a decline in gross margin in Dalian. The cost of good sold increased from 67.1% of net sales for the three months ended September 30, 2007 to 73.5% at September 30, 2008. When the increasing cost of raw materials is passed to the customer in the form of higher prices, gross margin as a percentage of net sales declines.

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Selling Expenses

	Three Months Ended September 30,
(in millions)	2008			2007			Change
Selling Expenses	$	1.2		$	0.2		$	1.0		545.0	%
As a Percentage of Sales		1.9	%		0.6	%		1.3	%

Selling expense increased by $1.0 million or 545.0% for the quarter ended September 30, 2008 compared to the same quarter of 2007 because of the acquisition of Copperweld in October 2007 and an increase in our selling expenses in Dalian associated with the increase in sales at that location. Selling expenses increase primarily because of increases in transportation and travel costs, which include shipping costs, in Dalian resulting from increased sales volume. Selling expenses increased in total, but as a percentage of net sales, increased from 0.6% of net sales for the 2007 quarter to 1.9% of net sales during the third quarter of 2008.

General and Administrative Expenses

	Three Months Ended September 30,
(in millions)	2008			2007			Change
General and Administrative Costs	$	3.4		$	1.4		$	2.0		136.2	%
As a Percentage of Sales		5.4	%		4.5	%		0.8	%

General and administrative expenses increased by $2.0 million or 136.2% during the third quarter of 2008 compared to the third quarter 2007. As a percentage of net sales, general and administrative expenses increased 0.8% to 5.4% from 4.5% for the third quarter of 2007. Professional expense increased over the comparable quarters because general and administrative costs for Copperweld are included in the 2008 quarter but not in the 2007 quarter. Additionally, salaries expense was higher due to an increase in personnel in our Dalian plant required to produce and deliver the increased sales volume at that location. During the third quarter of 2008, non-factory depreciation and amortization of $440,548 and amortization of intangible assets of $98,071 were included in general and administrative expenses, compared with $337,543 during the third quarter of 2007.

Interest Expense

	Three Months Ended September 30,
(in millions)	2008			2007			Change
Interest Income	$	0.2		$	0.6		$	(0.4	)	-68.7	%
Interest Expense	$	(1.8	)	$	(1.5	)	$	0.3		18.2	%
Net Interest Expense	$	(1.6	)	$	(1.0	)	$	0.7		69.5	%
Net Interest Expense as a % of Net Sales		2.5	%		3.0	%		-0.4	%

Net interest expense increased by approximately $700,000 or 69.5% during the third quarter of 2008 compared to the third quarter of 2007 largely as a result of a reduction in interest bearing cash account balances, inclusion of Fayetteville’s working capital line in the 2008 period but not for 2007 and an increase in short term bank loans in Dalian.

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Net Income

	Three Months Ended September 30,
(in millions)	2008			2007			Change
Net Income Before Taxes	$	10.5		$	8.2		$	2.3	27.8	%
Provision for Income Taxes	$	1.5		$	-		$	1.5	1.0	%
Net Income	$	9.0		$	8.2		$	0.8	9.9	%
Net Income as a % of Net Sales		14.2	%		25.7	%			-11.5	%

Net income for the three month period ending September 30, 2008 was $9.0 million compared to $8.2 million for the comparable period in 2007, an increase of approximately $800,000 or 9.9%. Net income as a percentage of net sales declined from 25.7% for the prior period to 14.2% because of increases in selling, and, the provision for income taxes of $1.5 million and because of historically lower gross margins from Fayetteville, Telford and Dalian operations during the period. As is more fully described in the section “Taxation” below, we became liable for PRC income taxes on our Dalian operation during 2008.

Earnings Per Share

	Three Months Ended September
	2008		2007
	Unaudited		Unaudited
Net Income for Basic Earnings Per Share		9,046,950		8,233,326
Basic Weighted Average Number of Shares		27,387,302		22,263,618
Net Income per Share—Basic	$	0.33	$	0.37
Net Income for Diluted Earnings Per Share		8,876,958		8,383,326
Diluted Weighted Average Number of Shares		28,446,786		25,454,871
Net Income per Share—Diluted	$	0.31	$	0.33

Basic and diluted earnings per share (EPS) for the quarter ended September 30, 2008 were $0.33 and $0.31, compared to $0.37 and $0.33 for the third quarter last year.

Shipments by Product

	Three Months Ended September 30,
Tons in Thousands	2008		2007		Change
CCA		7.7		5.1		2.6	51.8	%
CCS		2.2		0.0		2.2	100.0	%
Other		0.2		0.1		0.1	126.6	%
Total		10.1		5.2		4.9	95.1	%

For the three month period ended September 30, 2008, we shipped just under 10,100 tons, an increase of 95.1% over the three month period ended September 30, 2007 as a result of internal growth in shipments from Dalian and from the acquisition of Copperweld.

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Shipments by Industry

	Three Months Ended
	September 30,								Percentage of Total
(Tons in thousands)	2008		2007		Change				2008			2007
Telco		4.5		3.5		1.0	27.6	%		44.8	%		68.5	%
Utility		4.7		1.5		3.1	202.4	%		46.3	%		29.9	%
Auto		0.2		-		0.2	100.0	%		2.0	%		0.0	%
Other		0.7		0.1		0.6	729.6	%		6.8	%		1.6	%
Total		10.1		5.2		4.9	95.0	%		100.0	%		100.0	%

Shipments to telco declined to 44.8% of total shipments for the three months ended September 30, 2008 compared to 68.5% of total shipments for the quarter ended September 30, 2007. However, shipments to telco increased by 27.6% or approximately 1,000 tons during the third quarter of 2008 compared to the third quarter of 2007. Shipments to the utility industry increased to 46.3% of total shipments for the quarter ended September 30, 2008 from 29.9% of total shipments for the quarter ended September 30, 2007. The increase in shipments was a result of increased shipments from Dalian and from the acquisition of Copperweld.

	Three Months Ended September 30, 2008
	Dalian					Fayetteville					Telford
	Tons Shipped		% of Tonnage			Tons Shipped		% of Tonnage			Tons Shipped		% of Tonnage
Telco		3.4		33.4	%		1.1		11.2	%		0.03		0.3	%
Utility		3.8		37.7	%		0.8		7.8	%		0.08		0.8	%
Auto		-		0.0	%		0.2		1.8	%		0.02		0.2	%
Other		0.2		1.6	%		0.5		5.2	%		-		0.0	%
Total		7.3		72.7	%		2.6		26.1	%		0.12		1.2	%

During the third quarter of 2008, Dalian shipped 72.7% of total shipments, Fayetteville 26.1% and Telford 1.2%. Utility became the largest industry segment for Dalian and the company as a whole accounting for 46.3% of total tons shipped. Telco accounted for 44.9% of total tons shipped. (Slight difference may result from rounding)

Nine Months Ended September 30, 2008 and 2007

Net Sales

	Nine Months Ended September 30,
(in millions)	2008		2007		Change
Net Sales	$	180.4	$	79.2	$	101.2	127.6	%

Net sales increased for the first nine months of 2008 by $101.2 million or 127.6% over the level of net sales for the first nine months of 2007. The increase in sales resulted from the acquisition of Copperweld in October 2007 and from continuing growth in the Chinese market. Approximately 72.5% of sales for the first nine months were generated through Dalian with the remainder coming from Fayetteville and Telford.

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Gross Margin

	Nine Months Ended September 30,
(in millions)	2008			2007			Change
Gross Margin	$	48.4		$	27.9		$	20.5	73.6	%
Gross Margin as a % of Net Sales		26.8	%		35.2	%			-8.4	%

Our gross margin increased by $20.5 million or 73.6% during the first nine months of 2008 compared to the same period in 2007 due to the increase in sales. Dalian’s gross margin as a percentage of sales declined from 36.0% for the nine months ended September 30, 2007 to 32.5% of the nine month period ended September 30, 2008. Historically lower margins in Fayetteville are a factor in the reduction of gross margin.

Selling Expenses

	Nine Months Ended September 30,
(in millions)	2008			2007			Change
Selling Expenses	$	3.3		$	0.6		$	2.7	486.0	%
Selling Expenses % Net Sales		1.8	%		0.7	%			1.1	%

Selling costs increased by approximately $2.7 million or 486.0% for the first nine months of 2008 compared to the first nine months of 2007 because of including selling expenses for Copperweld in the most recent nine month period and from increases in shipping and sales costs in Dalian to accommodate greater sales volumes in the PRC. As a percentage of net sales, selling expenses were 1.8% of the first nine months of 2008 compared to 0.7% in 2007.

General and Administrative Expenses

	Nine Months Ended September 30,
(in millions)	2008			2007			Change
General & Administrative Expenses	$	11.3		$	4.6		$	6.7	147.1	%
G&A Expense % of Net Sales		6.3	%		5.8	%			0.1	%

General and administrative expenses increased during the first nine months of 2008 by $6.7 million or 147.1% compared to the same period in 2007. The major factor in the increase during the current period is the acquisition of Copperweld in October 2007 followed by increases in compensation expenses associated with sales growth in Dalian. As a percentage of net sales, general and administrative expenses increased from 5.8% of net sales in the first nine months of 2007 to 6.3% of net sales for 2008. Non factory depreciation of $1.3 million and amortization of intangible assets of $256,722 were included in general and administrative expenses for the nine months ended September 30, 2008, compared to $756,487 and $174,627, respectively, for the same period during 2007.

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Interest Expense

	Nine Months Ended September 30,
(in millions)	2008			2007			Change
Interest Income	$	0.5		$	1.1		$	(0.5	)	50.7	%
Interest Expense	$	(7.4	)	$	(4.8	)	$	2.6		53.9	%
Net Interest Expense	$	(6.9	)	$	(3.7	)	$	3.1		84.0	%
Net Interest Expense as a % of Net Sales		-3.8	%		-4.7	%		0.9	%

Net interest expense increased by $3.1 million or 84% during the nine month period ended September 30, 2008 compared to the similar period during 2007. $2.2 million was the result of accruing for the contingent loss under the Kuhns Brothers’ verdict as described in Note 19 to the financial statements The remainder was the result of a decrease in interest bearing deposits and an increase in short term bank borrowings in Dalian and inclusion of Fayetteville’s working capital line of credit in the 2008 but not in the 2007 period. The increases in borrowings resulted from an increase in accounts receivable, inventories and receivables. As a percentage of net sales, interest expense decreased from 4.7% for the first nine months of 2007 to 3.8% during the comparable period of 2008.

Selected Balance Sheet Data at September 30, 2008 (unaudited) and the year ended December 31, 2007:

	Selected Balance Sheet Data
	30-Sep-08		31-Dec-07
(in millions)	Unaudited				Change
Cash	$	50.0	$	79.9	$	(29.9	)	-37.4	%
Accounts Receivable, net	$	50.0	$	23.6	$	26.4		111.8	%
PP&E	$	107.8	$	87.2	$	20.6		23.6	%
Total Assets	$	294.6	$	246.5	$	48.1		19.5	%
Short Term Debt	$	32.1	$	12.9	$	19.2		149.3	%
Long Term Debt	$	40.0	$	60.0	$	(20.0	)	-33.3	%
Shareholders' Equity	$	198.6	$	144.3	$	54.3		37.6	%

Our financial condition continues to improve as measured by an increase of 37.6% in shareholders’ equity during the first nine months of 2008. Cash decreased 37.4% during the quarter and our accounts receivable increased by 111.8% as a result of increased sales volume. Property, plant and equipment increased by 23.6% during the nine months ended September 30, 2008 compared to the prior year end. Short term debt increased by 149.3% as a result of an increase in short term borrowings and the movement of $5.0 million in long term debt due in July 2009 from long term debt to short term. Long term debt declined by 33.3% because $5.0 million of the $40.0 million in high yield notes becomes due in July 2009, less than one year from the period ended September 30, 2008.

Net Sales by Product

Net sales were $180.4 million during the first nine months of 2008 compared to $79.2 during the first nine months of 2007. Sales growth came primarily from the acquisition of Copperweld as well as from sales growth in Dalian. Tons delivered increased 60.2% in Dalian period over period. Total shipments increased by 16,400 tons or 127.1% during the nine months ended September 30, 2008 compared to the same period of 2007. The majority of CCS shipments are from the Fayetteville and Telford locations.

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	Nine Months Ended September 30,
Tons in thousands	2008		2007		Change
CCA		22.3		12.6		9.7	77.0	%
CCS		6.0		0.0		6.0	100.0	%
Other		0.9		0.3		0.6	200.0	%
Total		29.2		12.9		16.3	126.4	%

Net Sales by Industry

	Nine Months Ended
	September 30,								Percentage of Total
(Tons in thousands)	2008		2007		Change				2008			2007
Telco		14.3		8.2		6.1	75.0	%		49.1	%		63.6	%
Utility		13.0		4.4		8.6	194.4	%		44.3	%		34.2	%
Auto		0.4		-		0.4	100.0	%		1.4	%		0.0	%
Other		1.6		0.3		1.3	441.0	%		5.3	%		2.2	%
Total		29.3		12.9		16.4	127.0	%		100.0	%		100.0	%

We are expanding our sales to the utility market. During the nine month period ended September 30, 2008, our sales to the utility segment increased by 8,600 tons. Shipment to the utility segment increased from 34.2% of total shipments for the nine months ended September 30, 2007 to 44.3% of total shipments for the same period in 2008. Shipments to the telecom segment increased by 75.0% or by 6,100 tons and declined from 63.6% of total shipments to 49.1% when comparing the first nine months of 2007 to 2008.

The following table presents shipments by categories among our facilities:

	Nine Months Ended September 30, 2008
	Dalian					Fayetteville					Telford
Tons in thousands	Tons Shipped		% of Tonnage			Tons Shipped		% of Tonnage			Tons Shipped		% of Tonnage
Telco		10.4		35.7	%		3.8		13.0	%		0.10		0.3	%
Utility		9.5		32.6	%		3.2		10.9	%		0.23		0.8	%
Auto		-		0.0	%		0.3		1.0	%		0.11		0.4	%
Other		0.5		1.7	%		1.1		3.6	%		0		0.0	%
Total		20.5		70.0	%		8.3		28.5	%		0.44		1.5	%

Dalian shipped 70.0% of total tonnage produced during the first nine months of 2008 with shipments to the telecom market contributing 35.7% and sales to the utility market contributing 32.6% of total volume. Fayetteville shipped 28.5% of total tonnage split between telecom at 13.0% and utility with 10.9%. Auto was 1.4% for the first nine months of 2008; however, historically, the majority of sales to this segment have been made during the last quarter of the year. Telford shipped 1.5% of total tonnage split between telecom, utility and auto.

Capacity

The following table summarizes installed capacities and outputs for the nine month period ended September 30, 2008. Capacity is stated on an annual basis while output is the amount of product shipped during the first nine months of 2008. Telford’s production does not include cladding and the numbers reflect CCS that was further processed by Telford during the period.

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	Nine Months Ended September 30, 2008
	Dalian				Fayetteville				Telford
	Capacity		Output		Capacity		Output		Capacity		Output
CCA		34,000		19,975		12,400		2,356				-
CCS		800		12		16,300		5,682		900		341
Other				500				3				101
Total		34,800		20,487		28,700		8,041		900		442

At September 30 2008, we had combined annual production capacity for CCA of 46,400 metric tons and CCS cladding capacity of 17,100 metric tons on an annual basis based on our product mix at September 30, 2008. Installed capacity can increase or decrease based on the size of the rod used in the cladding operation for CCA and on the conductivity engineered into the CCS production. We installed a remanufactured Copperweld CCA clad line in Dalian and began CCA production on the new line at the end of the first quarter 2008. We ordered a new CCA cladding line in April and expect to have the new, additional CCA capacity installed in Dalian during the first quarter of 2009. The decision to purchase a new clad line versus refurbishing an existing line was made on the basis of costs. The estimated cost to refurbish a line from Fayetteville was approximately the same as purchasing a new machine. We plan to have CCS cladding capacity installed in Dalian by the end of 2008. One CCS clad line and two additional drawing machines from Fayetteville have been refurbished and will be shipped to and installed in Dalian with production expected early in 2009. Two CCS drawing machines are installed in Dalian and are ready for the clad lines to begin production. We modified our plan to move two CCS clad lines to Dalian and now plan to retain one CCS clad line in Fayetteville and ship one to Dalian for installation during the first quarter of 2009. The decision to retain one CCS clad line in Fayetteville was based on projected increases in sales to the utility industry based on an agreement with a major supplier to the utility industry and the addition of persons experienced with the utility industry in Europe, the Middle East and North Africa.

Our products are engineered products rather than commodities; therefore, the selling prices of our products are dependent upon diameter, tensile strength, conductivity and other factors specified by each customer. For example, Dalian’s prices may be lower than Fayetteville’s for CCA because our products sold for telecom may require less engineering and fewer manufacturing processes than for products sold in Fayetteville, based on application. Both Dalian and Fayetteville sell a variety of CCA products and the price for each variety varies based on the composition of the product and the amount of manufacturing required and the ratio of copper to aluminum. As with CCA, the average selling price of CCS varies by product type primarily based on the amount of copper in the product and the amount of manufacturing required.

Product Mix

	Percentage of Sales
	Period Ended September 30,
	2008			2008			2007			2007
Based on Tons	Quarter			Nine Months			Quarter			Nine Months
CCA		76.5	%		77.1	%		98.3	%		98.4	%
CCS		21.5	%		20.8	%		0.0	%		0.0	%
Other		2.0	%		2.1	%		1.7	%		1.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

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The chart above illustrates the growth of CCA as a percentage of tons sold comparing the quarters and nine month periods ended September 30 2008 for the combined facilities and 2007 for Dalian only. The demand for our CCA products in the PRC continued to grow during the third quarter and nine months ended September 30, 2008 compared to the same periods in 2007. Our acquisition of Copperweld added CCS production and some additional contribution to CCA shipments during the 2008 period.

Customers

For the nine months ended September 30, 2008, no customer accounted for ten percent (10.0%) or more of sales. During the first nine months of 2008, our largest five customers together accounted for 19.8% of our sales based on tons and 19.0% based on net sales compared to 40.2% based on tons and 27.8% based on net sales during the same period in 2007. Only one customer exceeded 5.0% of sales during the nine months ended September 30, 2008. Our ten largest customers represented 32.0% of tons sold and 30.9% of net sales for the first nine months of 2008. The top ten customers represent 73.5% of net accounts receivable at September 31 2008. Our strategy is to continue to expand and diversify our customer base in future periods. We believe this increased diversification significantly limits our market risk and gives us a stronger base on which to expand. We further believe our overall customer composition and the concentration of our top customers will continue to change as we expand our business and seek to shift our product sales portfolio to higher margin products. However, the loss of, or significant reduction in orders from any of our largest customers may have a material adverse impact on our financial condition and operating results. We are continuing to expand and consolidate the direction of our combined sales and marketing group in order to focus our resources on diversification of our customer base, product mix and geographic presence to mitigate customer concentration risk. Our objective is to focus on expanding our existing business relationships by offering a wider range of products and building new sales relationships throughout the world with our expanded sales organization.

Manufacturing

Our manufacturing activities are determined and scheduled upon both firm orders and projected sales information gathered by our sales personnel from direct contact with our customers. Customers typically submit purchase orders seven to thirty days prior to the requested delivery date. However, depending on the product and the available equipment run schedules, the lead time can be as short as three days. The sales price is determined at the time of purchase based on a formula or a unit price for each product. In either case, the purchase price is a function of the market price of our raw materials at the time of purchase, subject to adjustment at the time of delivery for many of our customers and to the processes required to produce our engineered products. For some customers, we adjust our prices based on the cost of raw materials for the previous month rather that prices at the time of shipment.

Geography

Geographically, a substantial portion of our customers served by our Dalian sales force is based in the PRC. Some of our customers are US based corporations that have established subsidiaries operating inside the PRC. Several of these corporations were former customers of our Fayetteville facility but now place orders through their subsidiaries located in the PRC. We categorize these orders as domestic orders within the PRC. On the other hand, most of our customers served by our Fayetteville and Telford based sales group are located in the Americas, Europe, Africa, Asia, excluding the PRC and the Middle East. We are transferring most of our Asian customers to our PRC based sales group in order to provide more efficient customer service. As a result, we anticipate that most of our net sales will continue to be derived from sales to our Asian customers. We anticipate that our sales growth can continue worldwide because of our working capital base, our combined sales force, our production capacity and our commitment to innovative research and development of our existing products and for developing new products.

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	September 30, 2008		September 30, 2007
	(Unaudited)		(Unaudited)
China	$	125,585,203	$	77,769,677
USA		38,650,665		-
Europe		8,177,409		-
Other countries		7,955,806		1,468,740
Total sales	$	180,369,083	$	79,238,417

Cost of Goods Sold

	Components of Cost of Goods Sold
	Nine Months Ended September 30,
	2008			2007
Cost of Goods Sold		100.0	%		100.0	%
Primary Material Cost		86.4	%		91.7	%
Accessorial material cost		1.5	%		2.1	%
Labor		4.3	%		1.2	%
Manufacturing Overhead		7.8	%		5.0	%

The cost structure changed for the 2008 period compared to the 2007 period with the addition of the Copperweld facilities in the 2008 period. The increase in labor and overhead associated with the historically higher costs in Copperweld reduced the cost of raw materials as a percentage of total cost of goods sold.

	COGS as a % of Net Sales For
	Nine Months Ended September 30,
	2008			2007
Cost of Goods Sold		73.2	%		64.8	%
Primary Material Cost		64.5	%		59.5	%
Accessorial material cost		1.1	%		1.3	%
Labor		3.2	%		0.8	%
Manufacturing Overhead		5.8	%		3.3	%

Cost of goods sold as a percentage of net sales increased almost 10% between the nine month period ended September 30, 2007 and the nine month period ended September 30, 2008, reflecting the increase in raw material costs and higher labor and overhead costs resulting from the acquisition of Copperweld in October 2007. In addition to higher raw material costs, another major change between the two periods is in labor costs.

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Suppliers

Our top five suppliers provided 63.1% of our raw materials for the nine months ended September 30, 2008. Two suppliers each provided more than 10.0% of our purchases. During the nine months ended September 30, 2007, our top five suppliers provided 96.0% of raw materials and two suppliers provided 48.3% or more of our supplies. As of September 30, 2008, our advances to these suppliers were $25,012,572, all of which was current. As of September 30, 2007, our advances to the major five suppliers were $9,877,729. We have numerous suppliers and continually review our purchase practices to assure that we are not relying on too few suppliers. The same review also assures that we are purchasing our raw materials at competitive market prices.

Taxation

U.S. income tax

Fushi Copperweld, Inc. (formerly Fushi International, Inc.) is incorporated in the State of Nevada, Fushi Holdings is incorporated in the State of Delaware, Copperweld Bimetallics, LLC is chartered in the State of Delaware and Copperweld Bimetallics UK, Ltd., is registered in the United Kingdom. Prior to the acquisition of Copperweld, we conducted substantially all our operations through our PRC operating subsidiaries. With the acquisition of Copperweld, we have a manufacturing facility and administrative offices located in Fayetteville, Tennessee, USA and in Telford, England, UK. We are subject to taxation on our net taxable income in the PRC, the US and the UK. We did not provide for United States income tax liability during the first nine months of 2008 because we have sufficient tax loss carry forwards to offset any taxable income earned during the period. We have a tax loss carry forward asset arising from tax losses because Fushi had US expenses during prior periods but its revenue produced in PRC was not considered taxable income. No provision for US income tax was accrued on the earnings of our non-US operations because the earnings generated from our non-U.S. operating companies are generally subject to United States taxation only when such earnings are repatriated to the United States. Additionally, we believe that we will not generate any significant amount of US income tax liability under the income imputation rules applicable to a United States company that owns "controlled foreign corporations" for United States federal income tax purposes. Therefore, no provision for U.S. federal income taxes or tax benefits on the undistributed earnings and/or losses of our company has been made.

P.R.C. enterprise income tax

During the nine month period ended September 30, 2008, our PRC chartered subsidiaries continued to produce taxable income for PRC tax purposes. PRC enterprise income tax is calculated based on taxable income determined under PRC accounting principles. In accordance with “Income Tax Law of China for Enterprises with Foreign Investment and Foreign Enterprises,” or the Income Tax Law, “Foreign Invested Enterprises”, or FIEs, established in the PRC were generally subject to an “Enterprise Income Tax”, or EIT, rate of 33% prior to January 1, 2008. PRC domestic companies are governed by the Enterprise Income Tax Laws of the PRC and are also generally subject to an EIT.

Effective January 1, 2008, the new EIT Law in PRC imposed a unified income tax rate of 25.0% on all domestic-invested enterprises and FIEs, such as our PRC operating subsidiaries, unless they qualify under certain limited exceptions. But the EIT Law permits companies to continue to enjoy their existing preferential tax treatments until such treatments expire in accordance with their current terms. Any increase in our effective tax rate as a result of the above may adversely affect our operating results

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Fushi International (Dalian) (“FID”), a wholly owned subsidiary of Fushi Holdings, Inc., was incorporated in the PRC as an FIE and is subject to PRC income tax which is computed according to the relevant laws and regulations in the PRC. FID has located its factories in a special economic region in Dalian and is granted certain preferential treatments including a corporate income tax rate of 24%. In September 2005, FID was approved as a wholly foreign owned enterprise. This economic region allowed FID a two-year income tax exemption for the years ended December 31, 2006 and 2007, and a 50% income tax reduction for the following three years ended December 31, 2008, 2009, and 2010. Therefore, during the current fiscal year, our PRC operations are taxed at a rate of 12% subject to appropriate adjustments.

A provision for PRC income taxes was made during the nine month period ended September 30, 2008 in the amount of $4,446,247. No provision was made for the nine month ended September 30, 2007.

U.K. income tax

Copperweld UK is organized as a United Kingdom private company and subject to 20% to 28% statutory taxes on its taxable income. The provision for income tax for the nine months ended September 30, 2008 and 2007 was $0 for both periods.

Net Income

	Nine Months Ended September 30,
(in millions)	2008			2007			Amount			% Change
Net Income Before Taxes	$	27.1		$	20.2		$	6.9			34.0	%
Provision for Income Taxes	$	3.2		$	-		$	3.2			100.0	%
Net Income Before Taxes	$	23.9		$	20.2		$	3.7			18.4	%
Net Income as a % of Net Sales		13.2	%		25.5	%		-12.2	%

Net income for the nine month period ended September 30, 2008 increased approximately $6.9 million from approximately $20.2 million for the period ended September 30, 2007 representing an increase of 34.0%. Net income for the current nine month period was 13.2% of net sales compared to 25.5% for the same period for the prior year. The decline in net margin quarter over quarter results primarily from the provision for income taxes and from the historically lower margins from Fayetteville and Telford.

Earnings Per Share

	Nine Months Ended September
	2008		2007
	Unaudited		Unaudited
Net Income for Basic Earnings Per Share	$	23.9	$	20.2
Basic Weighted Average Number of Shares		27,263,638		21,422,610
Net Income per Share--Basic	$	0.88	$	0.94
Net Income for Diluted Earnings Per Share	$	23.78	$	20.59
Diluted Weighted Average Number of Shares		28,601,237		24,335,426
Net Income per Share--Diluted	$	0.83	$	0.85

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Basic and diluted earnings per share for the nine months ended September 30, 2008 were $0.88 and $0.83 compared to $0.94 and $0.85 for the same period in 2007. The weighted average number of shares outstanding to calculate basic EPS was 27.3 million and 21.4 million for the nine months ended September 30, 2008 and September 30, 2007, respectively. The weighted average number of shares outstanding to calculate diluted EPS was 28.6 million and 24.3 million for the same periods.

Foreign Currency Translation Gains

The value of the USD versus the RMB continued to decline during the first nine months of 2008. As a result of the appreciation of the RMB, we recognized a foreign currency translation gain of $14.1 million for the first nine months of 2008 compared to a gain of $5.3 million for the first nine months of 2007. the same period last year. Given the uncertainty of exchange rate fluctuations, we cannot estimate the effect of these fluctuations on our future business, product pricing, and results of operations or financial condition.

Prior to acquiring Copperweld, materially all of our revenues and a majority of our expenses were denominated in RMB Yuan. For our operations in the PRC, the income statement accounts were translated at 1 RMB Yuan to 0.14625 USD in third quarter, 0.14372 in the second quarter and 0.13977 in first quarter of 2008 and balance sheet amounts with the exception of equity at September 30, 2008 were translated at 1 RMB Yuan to 0.14728 USD.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our operations and capital expenditures principally through private placements of debt and equity offerings, bank loans, and cash provided by operations. At September 30, 2008, the majority of our liquid assets were held in RMB denominations deposited in banks within the PRC. The PRC has strict rules for converting RMB to other currencies and for movement of funds from the PRC to other countries. Consequently, in the future, we may face difficulties in moving funds deposited within the PRC to fund working capital or capital expenditure requirements for our locations outside the PRC. To mitigate the difficulties of moving funds, we plan to maintain and expand our working capital lines for Fayetteville and Telford as necessary as our sales increase and our working capital needs grow, subject to conditions in the lending markets. Further, we believe our sources of liquidity are sufficient to fund current working capital requirements, planned capital expenditures, and other short-term operating and corporate strategies in PRC. Customer demand, competitive market forces, commodities pricing, customer acceptance of our product mix and economic conditions worldwide could affect our ability to continue to fund our future needs from business operations.

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As is customary in the industry, we provide payment terms to most of our customers that exceed terms that we receive from our suppliers. Therefore, the Company’s liquidity needs have generally consisted of working capital necessary to finance receivables and raw material inventory. Capital expenditures have historically been necessary to expand the production capacity of the Company’s manufacturing operations.

In summary, our cash flows were:

	Nine Months Ended September 30,
(in millions)	2008			2007
Net cash provided by operating activities	$	(20.8	)	$	5.2
Net cash used in investing activities	$	(16.4	)	$	(40.6	)
Net cash provided by financing activities	$	2.1		$	59.0
Effect of exchange rate on cash	$	5.3		$	2.0
Cash and cash equivalents at beginning of period	$	79.9		$	20.5
Cash and cash equivalents at end of period	$	50.0		$	46.0

For the nine months ended September 30, 2008, net cash provided by operating activities was a deficit of $20.8 million compared to cash provided of $5.2 during the same period in 2007. The difference in net cash provided was primarily attributable to increases of $25.0 million in accounts receivable, $22.1 in advances to suppliers, and $7.9 million in inventories. These reductions were offset to some degree by earnings of $23.9 million and an increase in accounts payable of $2.5 million.

For the nine months ended September 30, 2008, net cash used in investing activities was $16.4 million, and was primarily attributable to $15.5 million in property and equipment purchases, $3.1 million used as advances for purchase of equipment and $1.7 million used to purchase land use rights. The reduction was partially offset by the sale of marketable securities.

For the nine months ended September 30, 2008, net cash provided by financing activities was $2.1 million, which was primarily attributable to $16.9 million in bank loans and an increase in our revolving line of credit of $2.3 million mostly offset by repayments on bank loans of $17.3 million.

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At September 30, 2008, our cash balance was $50.0 million compared to $79.9 million at December 31, 2007.

Our long-term financing strategy is principally to rely on internal sources of funds for investing in plant, equipment and acquisitions, although we may elect to leverage our strong balance sheet with debt financing. We believe that our liquidity and financial flexibility are adequate to support both current and future growth. Like all businesses, we are assessing the current financial environment on a daily basis from financial data published in the market place, discussions with our customers regarding their current and future purchasing plans and through discussions with our suppliers and others with some insight within the financial realm in order to develop a better perspective of the future opportunities for our company. At this time, we believe that our sales will continue to grow because of the infrastructure development in the PRC and throughout Asia albeit at a slower rate than anticipated in prior periods. In future periods, as a result of our acquisition of Copperweld, we believe we can realize significant savings on capital expenditures by moving under utilized equipment to locations with a need for that equipment. We anticipate that our working capital requirements may increase as a result of the expanded scale of the combined business, continued increases in sales, potential increases in the price of copper and our other raw materials over the longer term, competition and our relationship with suppliers or customers. We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our revolving credit facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12 to 18 months. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. Considering the current global liquidity shortage, there can be no assurance that such finding will be available when needed, or, if available, that it will be available on terms acceptable to the Company.

On August 5, 2008, a judgment was entered in the Kuhns matter (See Part II, Item 1 Litigation) awarding the plaintiffs $7.2 million and our financial statements were adjusted in the prior period and will be affected in future periods accordingly. We have appealed the decision, and will continue to vigorously defend against these claims which we believe to be without merit; however, we have no assurance that we will prevail in our appeal. Should we ultimately be required to pay the plaintiffs the amount of the judgment, the payment will have an impact upon our liquidity and working capital. We believe that the payment, should it be required, will not adversely affect our ability to fund our working capital needs or to fund our capital expenditure needs.

On January 24, 2007, the Company and Citadel Equity Fund Ltd. ("Citadel") entered a Notes Purchase Agreement (the “Notes Purchase Agreement”). Pursuant to the terms of the Notes Purchase Agreement, the Company offered and sold and Citadel purchased (a) $40,000,000 of the Company’s Guaranteed Senior Secured Floating Rate Notes due between July 2009 to January 2012 (the “HY Notes”), of which, $5 million will due on July 24, 2009 and become current liability as of September 30, 2008 and (b) $20,000,000 of the Company’s 3.0% Senior Secured Convertible Notes due 2012 (the “Convertible Notes” and collectively with the HY Notes, the "Notes"). The details of the indentures are available in the Company’s Current Report on Form 8-K filed with the Commission on January 26, 2007. The Convertible Notes allow the holder to convert the debt to common stock at a conversion rate of $7.00 for each share. On January 8, 2008, Citadel converted $15.0 million in debt to 2,142,857 shares of our common stock.

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On January 16, 2008, Copperweld, Copperweld Bimetallics International Holdings, LLC (“International Company”), International Manufacturing Equipment Suppliers, LLC (“IMES”), all of which are wholly-owned U.S. subsidiaries of the Company (collectively, “Subsidiaries”), entered a Settlement Agreement and a number of ancillary agreements with Tongling Jingda Special Magnet Wire Co., Ltd. (“TJS”) and Tongling Copperweld Bimetallics Co. Ltd. (“JV Company”), both of which are companies organized under the laws of the People’s Republic of China, in order for International Company to withdraw as a joint venture partner in the JV Company, to terminate certain contractual relationships between the JV Company and IMES, and to resolve all disputes that may exist among the Subsidiaries and/or TJS and the JV Company as a result of these transactions.

Pursuant to the terms of the Settlement Agreement and related ancillary agreements:

(1) The International Company transferred its equity interest in the JV Company to Hong Kong Heavy Trade Co., Ltd (“HK Company”), a limited liability company organized under the laws of Hong Kong, for a purchase price of $2.7 million. Of the $2.7 million purchase price, the HK Company will pay $2.08 million to the JV Company on behalf of IMES as part of the refund of the down payment specified in (2) below, and the International Company will waive the remaining $620,000 in consideration of the JV Company’s entering into and performance of its obligations set forth in the agreement specified in (3) below.

(2) IMES and the JV Company agreed to fully terminate and cancel the three equipment purchase contracts entered pursuant to which IMES had agreed to manufacture and deliver to the JV Company CCA clad line (Contract No. CPW061206/1), CCA Annealing Furnace (Contract No. CPW061206/2), and CPS Plating Line and Drawing Machine (Contract No. CPW061206/3) (collectively, “Equipment Contracts”), and IMES agreed to refund the down payment paid by the JV Company under the Equipment Contracts in the total amount of $3,137,019. Of the down payment to be refunded, the JV Company had previously paid $200,000 to the JV Company’s current account, Copperweld agreed to pay, on behalf of IMES, $857,019 to the JV Company, and the HK Company agreed to pay the JV Company the balance of $2.08 million pursuant to the arrangement described in (1) above.

(3) To resolve all remaining disputes among the parties as a result of International Company’s withdrawal from the JV Company, Copperweld agreed to purchase from the JV Company a CCA rod breakdown machine, CPS rectifiers and a Metallographic Microscope for a total purchase price of $230,000.

In consideration for the Subsidiaries’ entering into and performing the Settlement Agreement and related ancillary agreements, TJS, the JV Company and the HK Company each also agreed to (1) fully and completely release International Company from its obligation to contribute $1.22 million to the JV Company’s capital account under the Sino-foreign equity joint venture contract dated September 30, 2006 between TJS and the International Company, and (2) waive all claims that any of them may have against any of the Subsidiaries for damages or for specific performance under any and all causes of action, including but not limited to causes of action under any and all oral or written agreements entered into by the parties prior to the Settlement Agreement.

The cost to close the Tongling joint venture totaled $977,519 in addition to the cost of the equipment in paragraph (3) above. A claim was duly filed against an escrow account establish by the Seller at the time we purchased Copperweld. We agreed to settle our claim against the escrow in the amount of $900,000. The remainder of our cost was expensed during the reporting period.

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On June 1, 2008, John Christopher “Chris” Finley’s resignation as Chief Operating Officer was accepted and an agreement was reached where Mr. Finley will consult with the Company for a period of twelve months. Mr. Finley’s duties included oversight of manufacturing operations, global sales and research and development. As of September 30, 2008, no one had been named to replace Mr. Finley as Chief Operating Officer. General and production managers of our manufacturing facilities have assumed responsibility for manufacturing operations and Dwight Berry was employed as Vice President for Commercial Development where he oversees global sales and research and development. Other duties have been assumed by President Wenbing Chris Wang. We may choose to name a Chief Operating Officer at some future date; however, presently all responsibilities are effectively assumed by other managers within the company.

During the third quarter of 2008, Three of the companies acquired on October 29, 2007 were dissolved:

1. Copperweld Holdings, LLC a North Carolina limited liability company. This company had no liabilities and its only asset was the ownership of Copperweld Bimetallics, LLC, which the ownership rights were transferred to Fushi Copperweld, Inc. on October 29, 2007

2. Copperweld Bimetallics International Holdings, LLC a Delaware limited liability company was established to hold the partnership interest in the Tongling joint venture which has been dissolved. This company was a shell company with no assets or liabilities at the time the joint venture was dissolved.

3. International Manufacturing Equipment Suppliers, LLC a North Carolina limited liability company. This company was not an affiliate of the Copperweld companies. This company was formed by the prior owner of Copperweld Bimetallics to facilitate the transfer of equipment to the Tongling joint venture. As noted above, the Tongling joint venture has been dissolved. This company had no assets or liabilities at the time of the dissolution.

Critical Accounting Policies

There have been no changes in our critical accounting policies or significant accounting estimates as disclosed in our 2007 Annual Report on Form 10-K Note 2 in the Notes to the Consolidated Financial Statements.

Recent Accounting Pronouncements

In June 2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF 07-5”). This Issue is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early application is not permitted. Paragraph 11(a) of Statement of Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. The Company believes adopting this statement will have a material impact on the financial statements because among other things, any option or warrant previously issued and all new issuances denominated is US dollars will be required to be carried as a liability and marked to market each reporting period.

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On October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective on October 10, 2008, and its adoption did not have a material impact on our financial position or results for the quarter ended September 30, 2008.

Off-balance sheet arrangement

None

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

Certain raw materials used by us are subject to price volatility caused by supply conditions, political and economic variables and other unpredictable factors. The primary purpose of our commodity price management activities is to manage the volatility associated with purchases of commodities in the normal course of business. We do not speculate on commodity prices.

We are primarily exposed to price risk related to our purchase of copper used in the manufacture of our products. Our copper price management strategy involves the use of natural techniques, where possible, such as purchasing copper for future delivery at fixed prices. We did not have any commodity price derivatives or hedging arrangements outstanding at September 30, 2008 and did not employ any commodity price derivatives during the quarter ended September 30, 2008.

Foreign Exchange Risk

While our reporting currency is the US dollar, a substantial percentage of our revenues and costs are denominated in RMB and a significant portion of our assets and liabilities are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between US Dollar and RMB. If the RMB depreciates against the US Dollar, the value of our RMB revenues and assets as expressed in our US Dollar financial statements will decline.

The RMB is currently freely convertible under the “current account”, which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account”, which includes foreign direct investment. In addition, commencing on July 21, 2005, China reformed its exchange rate regime by changing to a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Under the managed floating exchange rate regime, the RMB is no longer pegged to the US Dollar. The exchange rate of the RMB against the US Dollar was adjusted to 8.11 RMB per US Dollar as of July 21, 2005, representing an appreciation of about 2%. The People’s Bank of China will announce the closing prices of foreign currencies such as the US Dollar traded against the RMB in the inter-bank foreign exchange market after the closing of the market on each business day, and will make such prices the central parity for trading against the RMB on the following business day. On May 19, 2007, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices against the U.S. dollar in the inter-bank spot foreign exchange market from 0.3% to 0.5%. While the international reactions to the RMB revaluation and widening of the RMB’s daily trading band have generally been positive, with the increased floating range of the RMB’s value against foreign currencies, the RMB may appreciate or depreciate significantly in value against the U.S. dollar or other foreign currencies in the long term, depending on the fluctuation of the basket of currencies against which it is currently valued.

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To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. We recognized a foreign currency translation adjustment of approximately $1.9 million for the quarter and $14.1 million for the nine months ended September 30, 2008.

Interest Rate Risk

We are primarily exposed to interest rate risk arising from 6 months LIBOR rate on which the interest rate for our Guaranteed Senior Secured Floating Rate Notes due 2012 (HY Notes) totaling $40 million or 48% of our total debt, is based. If there was a hypothetical 1% change in the 6-month LIBOR interest rate, the net impact to earnings would be approximately $0.4 million on an annualized basis.

In order to mitigate our exposure to volatility in interest rates and foreign currency exchange rates associated with the HY Notes, on April 10, 2007, the Company entered into a cross currency swap transaction (the Swap) with Merrill Lynch Capital Services, Inc. (“MLCS”). The Swap, with a notional principal value of $40 million, converts the LIBOR + 7% per annum USD variable interest rate to an 8.3% per annum RMB fixed interest rate. The agreement was deemed effective January 24, 2007. The Swap requires semi-annual payments in arrears on July 24 and January 24 and matures earlier of (1) cash settlement defined as early termination; or (2) January 24, 2012, at which point the Swap requires an exchange of RMB and USD based principals. Under the terms of the cross currency swap, the Company receives variable interest rate payments in USD and makes fixed interest rate payments in RMB with settlement netted in USD, thereby creating the equivalent of fixed-rate debt. The Company uses this derivative instrument only to hedge exposures in the ordinary course of business and does not invest in derivative instruments for speculative purposes.

The fair value of the Swap is determined on an annual basis with the assistance of third party provided calculations which reflect the present values of the difference between estimated future variable-rate receipts in USD and future fixed-rate payments in RMB. For the fiscal year ended December 31, 2007, changes in fair value of the Swap designated and effective as cash flow hedge resulted in an increase in the liability and a loss to other comprehensive income of $8.5 million, net of taxes. For the quarter ended and the nine month period ended September 30, 2008, the Swap resulted in a liability of $5.3 million and a gain to other comprehensive income of $3.9 million and $3.2 million, respectively. On July 24, 2008, the most recent interest payment date, the Company received cash in the amount of $235,180 from MLCS, which was recorded as a gain from derivative transactions. As of September 30, 2008, the Company had a cross currency hedge receivable amounting to $55,322. For the quarter and nine month period ended September, 2008, there were no amounts recorded in the consolidated statement of income in relation to this interest rate swap related to ineffectiveness.

The Company accounts for this interest rate swap in accordance with FAS No. 133, “Accounting for Derivatives Instruments and Hedging Activity,” which requires all derivatives to be carried on the balance sheet at fair value and to meet certain documentary and analytical requirements to qualify for hedge accounting treatment. The above derivative qualifies for hedge accounting under FAS 133 and, accordingly, changes in the fair value is reported in accumulated other comprehensive income, net of related income tax effects.

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The Company also has outstanding senior convertible notes that may be converted into the Company’s common stock. On January 8, 2008, the convertible notes holder elected to convert $15.0 million of the $20 million convertible notes into common shares. The Company cannot estimate the possibility of the conversion of the $5 million convertible Notes outstanding as of September 30, 2008. If the $5 million Convertible Notes outstanding as of September 30, 2008 are not converted at maturity, January 24, 2012, the Company will have to repay the principle of $5 million and an additional redemption cost of $5,305,158.

Under SFAS 157, the Company used Level 2 inputs for its valuation methodology for the $40 million HY note and $5 million convertible notes payable and outstanding, and their fair values are determined using cash flows discounted at relevant market interest rates in effect at the period close. The estimated fair value of the Company’s outstanding HY notes and convertible notes was $39.3 million at September 30, 2008.

Changes in the market value of the Company’s debt do not affect the reported results of operations unless the Company is retiring such obligations prior to their maturity. This analysis did not consider the effects of a changed level of economic activity that could exist in such an environment and certain other factors. Further, this sensitivity analysis assumes no changes in the Company’s financial structure.

Credit Risk

We have not experienced significant credit risk, as most of our customers are long-term customers with excellent payment records. We review our accounts receivable on a regular basis to determine if the allowance for doubtful accounts is adequate at each quarter-end. We only extend 30 to 90 day trade credit to our largest customers, which tend to be well-established and large businesses, and we have not seen any major customer’s accounts receivable go uncollected beyond 90 days or experienced any material write-off of accounts receivable in the past.

Inflation Risk

Prior to 2007, China had not experienced significant inflation, and thus inflation did not have a material impact on our results of operations; however, the Consumer Price Index (CPI) in China has experienced significant growth in both 2007 and 2008. According to the National Bureau of Statistics of China (NBS) (www.stats.gov.cn), the change in CPI in China was 3.9%, 1.8%, 1.5%, and 4.8% in 2004, 2005, 2006 and 2007, respectively. In the first three quarters of 2008, according to NBS, CPI rose significantly by 7.0% (4.6% growth in September and its month-on-month change down by 0.3%), 2.9% higher than that in the same period last year, and was, however, 0.9% lower than that in the first half of this year. Inflationary factors, such as increases in the cost of our products and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of sales revenue if the selling prices of our products do not increase with these increased costs.

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Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15e and 15d-15e) as of the end of the period covered by this report (the “Evaluation Date”), have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

(b) Changes in internal controls. During the fiscal quarter covered by this quarterly report, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or intentional circumvention of the established process.

PART II

Item 1. Legal Proceedings

On August 5, 2008, a judgment was entered in a matter filed by Kuhns Brothers, Inc., Kuhns Brothers Securities Corp. and Kuhns Brothers & Co. Inc. in the United States District Court of the District of Connecticut awarding the plaintiffs $7.2 million, and our financial statements were adjusted in the prior period accordingly. We have appealed the decision, and will continue to vigorously defend against these claims which we believe to be without merit; however, we have no assurance that we will prevail in our appeal. Should we ultimately be required to pay the plaintiffs the amount of the judgment, the payment will have an impact upon our liquidity and working capital. We believe that the payment, should it be required, will not adversely affect our ability to fund our working capital needs or to fund our capital expenditure needs.

Item 1A. Risk Factors

Political and economic factors may adversely affect our business and financial results

Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. When there is a slowdown in the economy, construction spending and interest rates may decrease with a corresponding impact on our businesses. Customers may react to worsening conditions by reducing their spending on projects using our products. The availability of financing, even to borrowers with the highest credit ratings, may limit our flexibility to access short-term debt markets to meet liquidity needs. In addition, certain types of investments may not be available to us or become too risky for us to invest, which may reduce the interest we earn on company funds. If any of these circumstances remain in effect for an extended period of time, there could be a material adverse effect on our financial results and liquidity.

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Disruptions in world financial markets and the resulting governmental action of the United States and other countries could have a material adverse impact on our ability to obtain financing, our results of operations, financial condition and cash flows and could cause the market price of our common shares to decline.

The United States and other countries are experiencing deteriorating economic trends and may be entering into a recession. For example, the credit markets worldwide and in the United States have experienced significant contraction, de-leveraging and reduced liquidity, and the United States government and foreign governments have either implemented or are considering a broad variety of governmental action and/or new regulation of the financial markets. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements.

Recently, a number of financial institutions have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions. The uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide and inability of many parties to obtain trade finance, including letters of credit. Major market disruptions and the current adverse changes in global market conditions, and the regulatory climate in the United States and worldwide, may adversely affect our business or impair our ability to borrow funds as needed. The current market conditions may last longer than we anticipate. These recent and developing economic and governmental factors may have a material adverse effect on our results of operations, financial condition or cash flows and could cause the price of our common stock to decline significantly.

Item 6. Exhibits

(a) Exhibits

31.1 – Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 – Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 – Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

- 65 -

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

	FUSHI COPPERWELD, INC.

Date: November,14, 2008	BY:
		Wenbing Chris Wang
		Chief Financial Officer

- 66 -

INDEX TO EXHIBITS

EXHIBIT NUMBER		DESCRIPTION

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Nevada		13-3140715
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

			Page
Part I - Financial Information

Item 1 - Financial Statements			2

Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007			2

Consolidated Statements of Income and Other Comprehensive Income for the six months ended September 30, 2008 and 2007 (unaudited)			3

Consolidated Statements of Cash Flows for the six months ended September 30, 2008 and 2007 (unaudited)			4

Notes to the Consolidated Financial Statements (unaudited)			5

Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition			36

Item 3 Quantitative and Qualitative Disclosure about Market Risk			61

Item 4 Controls and Procedures			64

Part II

Item 1 Legal Proceeding			64

Item 1A Risk Factor			64

Item 6 Exhibits			65

Signature Page			66

	September 30,		December 31,
	2008		2007
	Unaudited
ASSETS
CURRENT ASSETS:
Cash	$	50,043,410	$	79,914,758
Marketable securities		-		2,977,699
Restricted cash		1,000,000		1,000,000
Accounts receivable, trade, net of allowance of bad debt $498,205 and $135,418 as of September 30,2008 and December 31, 2007		50,018,459		23,611,186
Inventories		20,444,709		12,308,295
Notes receivables		370,149		816,905
Other receivables and prepaid expenses		496,762		997,979
Advances to suppliers		25,046,960		2,341,839
Cross currency hedge receivable		55,322		706,170
Deposit in derivative hedge		1,000,000		-
Total current assets		148,475,771		124,674,831

PLANT AND EQUIPMENT, net		107,816,898		87,228,600

OTHER ASSETS:
Advances to suppliers, noncurrent		17,946,939		18,204,775
Prepaid land use right		-		4,559,760
Intangible asset, net of accumulated amortization		12,617,273		5,832,721
Deferred loan expense, net		3,612,387		3,115,930
Deferred tax assets		4,147,286		2,852,000
Total other assets		38,323,885		34,565,186

Total assets	$	294,616,554	$	246,468,617

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable, trade	$	5,685,839	$	3,028,823
Revolver line		9,410,373		7,168,524
Short term bank loans		17,673,600		5,703,360
Current portion of long term debts		-		10,968,000
Current portion of notes payable		5,000,000		-
Other payables and accrued liabilities		3,118,409		5,791,597
Customer deposits		570,990		-
Taxes payable		2,083,686		1,005,259
Total current liabilities		43,542,897		33,665,563

LONG TERM LIABILITIES:
Notes payable, noncurrent		40,000,000		60,000,000
Fair value of derivative instrument		5,305,993		8,515,396

Total liabilities		88,848,890		102,180,959

COMMITMENTS AND CONTINGENCIES		7,197,794		-

SHAREHOLDERS' EQUITY:
Preferred stock,$0.001 par value, 5,000,000 shares authorized, none issued or outstanding		-		-
Common stock,$0.006 par value, 100,000,000 shares authorized, September 30, 2008: 27,503,885 shares issued and 27,403,885 outstanding December 31, 2007: 25,311,304 shares issued and 25,211,304 outstanding		164,424		151,268
Restricted common stock in escrow		600		600
Additional paid in capital		90,741,609		77,665,064
Statutory reserves		8,321,726		8,321,726
Retained earnings		78,031,362		54,133,070
Accumulated other comprehensive income		21,310,149		4,015,930
Total shareholders' equity		198,569,870		144,287,658

Total liabilities and shareholders' equity	$	294,616,554	$	246,468,617

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
	Unaudited			Unaudited			Unaudited			Unaudited

REVENUES	$	63,823,927		$	32,014,592		$	180,369,083		$	79,238,417

COST OF GOODS SOLD		46,931,400			21,481,175			131,996,263			51,367,707

GROSS PROFIT		16,892,527			10,533,417			48,372,820			27,870,710

OPERATING EXPENSE
Selling expenses		1,223,087			189,625			3,274,048			558,735
General and administrative expenses		3,418,704			1,447,530			11,335,948			4,588,010
Total operating expense		4,641,791			1,637,155			14,609,996			5,146,745

INCOME FROM OPERATIONS		12,250,736			8,896,262			33,762,824			22,723,965

OTHER INCOME (EXPENSE)

Interest income		176,830			565,383			529,651			1,074,837
Interest expense		(1,800,738	)		(1,523,343	)		(7,386,274	)		(4,800,554	)
Gain (loss) on derivative instrument		(32,482	)		286,245			322,708			1,088,768
Other income (expense)		(65,305	)		14,077			(30,600	)		188,693
Other expense		(6,348	)		(5,298	)		(149,055	)		(84,992	)

Total other expense, net		(1,728,043	)		(662,936	)		(6,713,570	)		(2,533,248	)

INCOME BEFORE INCOME TAXES		10,522,693			8,233,326			27,049,254			20,190,717

INCOME TAXES
Deferred income tax benefit		(106,390	)					(1,295,285	)
Current income tax expense		1,582,133			-			4,446,247			-

Total income tax expense		1,475,743			-			3,150,962			-

NET INCOME		9,046,950			8,233,326			23,898,292			20,190,717

OTHER COMPREHENSIVE INCOME
Unrealized gain on marketable securities		-						22,301
Foreign currency translation adjustment		1,899,163			2,250,423			14,062,515			5,266,973
Change in fair value of derivative instrument		3,940,908			(3,738,571	)		3,209,403			(4,610,090	)

COMPREHENSIVE INCOME	$	14,887,021		$	6,745,178		$	41,192,511		$	20,847,600

EARNINGS PER SHARE:
BASIC	$	0.33		$	0.37		$	0.88		$	0.94
DILUTED	$	0.31		$	0.33		$	0.83		$	0.85

WEIGHTED AVERAGE NUMBER OF SHARES:
BASIC		27,387,302			22,263,618			27,263,638			21,422,610
DILUTED		28,446,786			25,454,871			28,601,237			24,335,426

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	23,898,292		$	20,190,717
Adjustments to reconcile net income to cash
(used in) provided by operating activities:
Bad debt expense		355,293			-
Reserve for obsolete inventory		401,646			-
Depreciation		4,728,235			2,029,646
Amortization of intangibles		256,722			174,627
Amortization of loan commission		2,525,756			491,178
Amortization of stock option compensation		1,437,557			887,080
Interest penalty		710,544			-
Gain on derivative instrument		(322,708	)		(1,088,768	)
Investment loss on marketable securities		16,158			-
Change in operating assets and liabilities:
Accounts receivable		(24,965,036	)		(5,426,757	)
Inventories		(7,885,132	)		(5,175,451	)
Other receivables and prepayments		(395,449	)		(1,306,764	)
Notes receivables		487,946			(104,512	)
Advance to suppliers		(22,061,823	)		(5,600,003	)
Deferred tax assets		(1,295,286	)		-
Accounts payable		2,521,359			(58,813	)
Other payables and accrued liabilities		(2,737,772	)		570,231
Customer deposits		528,731			(198,848	)
Taxes payable		960,752			(177,576	)
Net cash (used in) provided by operating activities		(20,834,215	)		5,205,987

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities		2,983,842			-
Payment for investment deposit		-			(3,000,000	)
Proceeds from derivative instrument		973,556			802,523
Purchase of land use right		(1,687,468	)		-
Advance for land use right		-			(4,109,757	)
Purchase of property and equipment		(15,540,210	)		(8,613,889	)
Advances for equipment purchases		(3,148,802	)		(25,724,917	)
Net cash used in investing activities		(16,419,082	)		(40,646,040	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to shareholders		-			(3,985,698	)
Net borrowings on revolver line		2,279,289			-
Proceeds from bank loans		16,908,000			11,546,600
Payments on bank loans		(17,268,032	)		(12,507,240	)
Net proceeds from notes payable		-			56,400,000
Proceeds from exercise of stock warrants		139,394			7,541,346
Net cash provided by financing activities		2,058,651			58,995,008

EFFECT OF EXCHANGE RATE ON CASH		5,323,298			1,984,326

(DECREASE) INCREASE IN CASH		(29,871,348	)		25,539,281

CASH, beginning of period		79,914,758			20,493,551

CASH, end of period	$	50,043,410		$	46,032,832

	Carrying As of September 30, 2008		Fair Value Measurements at September 30, 2008 Using Fair Value Hierarchy
Liabilities			Level 1	Level 2	Level 3
Notes payable	$	45,000,000			$	39,378,954
Derivative Instrument	$	5,305,993			$	5,305,993

	Estimated Useful Life
Buildings		20-39.5 years
Machinery and equipment		7-15 years
Other equipment		3-5 years
Transportation equipment		3-5 years

	September 30, 2008			December 31, 2007
	(Unaudited)
Trade accounts receivable	$	50,516,664		$	23,746,604
Allowance for bad debts		(498,205	)		(135,418	)
Trade accounts receivable, net	$	50,018,459		$	23,611,186

Allowance for doubtful accounts at December 31, 2007	$	135,418
Additional reserves		355,293
Accounts receivable write off		(9,426	)
Effect of foreign currency translation		16,920
Allowance for doubtful accounts at September 30, 2008	$	498,205

Allowance for obsolete inventory at December 31, 2007	$	63,594
Additional reserves		401,646
Allowance for obsolete inventory at September 30, 2008	$	465,240

Deferred tax asset at December 31,2007	$	2,852,000
Additions to deferred tax asset		1,295,286
Deferred tax asset at September 30,2008	$	4,147,286

Name of lender	September 30, 2008		December 31, 2007
	(Unaudited)
Bank of China, Xinghaiwan Branch, due March 28, 2008, annual interest at 7.227% secured by the Company’s land use right and building.	$	-	$	2,687,160

Bank of China, Xinghaiwan Branch, due February 15, 2008,and was renewed to May 15, 2008 annual interest at 7.029%, secured by the Company’s land use right and building.		-		3,016,200

Guangdong Development bank, Dalian Stadium branch, due February 25, 2009, annual interest at 8.96%,secured by the Company’s land use right and building.		8,836,800		-

Guangdong Development bank, Dalian Stadium branch, due March 9, 2009, annual interest at 8.96%, secured by the Company’s land use right and building.		2,945,600		-

Guangdong Development bank, Dalian Stadium branch, due March 19, 2009, annual interest at 8.96%, secured by the Company’s land use right and building.		1,472,800		-

Guangdong Development bank, Dalian Stadium branch, due March 26, 2009, annual interest at 8.96%, secured by the Company’s land use right and building.		4,418,400		-

Total Short Term Bank Loan		17,673,600		5,703,360

Wells Fargo Bank revolving credit line, annual interest at 6.25%, mature in 2010, secured by all present and future account receivables, equipment, inventory and other goods, documents of title, general intangibles, investment property, and real estate of Copperweld.		9,410,373		7,168,524
Total	$	27,083,973	$	12,871,884

Accumulated other comprehensive income:	Amount
Balance, December 31, 2007	$	4,015,930
Unrealized loss on marketable securities		22,301
Foreign currency translation gain		14,062,515
Change in fair value of derivative instrument		3,209,403
Balance, September 30, 2008	$	21,310,149

	Three months ended September 30,					Nine months ended September 30,
	2008			2007		2008			2007
	(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)
Net income for basic earnings per share	$	9,046,950		$	8,233,326	$	23,898,292		$	20,190,717
Add: Interest expense for convertible note		24,750			150,000		77,399			400,000
Deduct: Loan issuance cost		(194,742	)		-		(194,742	)		-
Net income for diluted earnings per share	$	8,876,958		$	8,383,326	$	23,780,949		$	20,590,717

Weighted average shares used in basic computation		27,387,302			22,263,618		27,263,638			21,422,610
Diluted effect of warrants, option and convertible note		1,059,484			3,191,253		1,337,599			2,912,816
Weighted average shares used in diluted computation		28,446,786			25,454,871		28,601,237			24,335,426

Earnings per share
Basic	$	0.33		$	0.37	$	0.88		$	0.94
Diluted	$	0.31		$	0.33	$	0.83		$	0.85

Date issued/ granted	Nature	Excise price	Shares excluded for three months diluted EPS calculation	Shares excluded for nine months diluted EPS calculation	Reason for exclusion
10/23/2007	Common stock held in escrow		100,000	100,000	Common stock issued under the Company's name
11/30/2007	Warrants	16.80	100,000		Anti-diluted
10/29/2007	Options	17.94-20.94	148,750	148,750	Anti-diluted
10/29/2007	Options	16.44	81,250		Anti-diluted
11/13/2007	Options	16.36	10,000		Anti-diluted
4/10/2008	Options	15.04	17,000		Anti-diluted
5/21/2008	Options	20.04	50,000	50,000	Anti-diluted
6/25/2008	Options	23.25	84,000	84,000	Anti-diluted

	September 30, 2008			December 31, 2007
	(Unaudited)
Raw materials	$	13,487,483		$	5,965,306
Work in process		3,309,765			2,260,015
Finished goods		4,083,362			4,120,559
Packaging materials		29,339			7,984
Low cost consumables		-			18,025
Totals		20,909,949			12,371,889
Less allowance for obsolete inventory		(465,240	)		(63,594	)
Totals	$	20,444,709		$	12,308,295

	September 30, 2008			December 31, 2007
	(Unaudited)
Land	$	100,726		$	100,726
Buildings and improvements		43,616,824			32,846,156
Transportation equipment		4,158,860			3,193,995
Machinery and equipment		51,857,663			24,111,971
Office furniture		1,078,817			833,474
Construction in progress		23,004,390			36,880,809
Totals		123,817,280			97,967,131
Less accumulated depreciation		(16,000,382	)		(10,738,531	)
Totals	$	107,816,898		$	87,228,600

Outstanding Warrants					Exercisable Warrants
Exercise Price	Number		Average Remaining Life (years)		Average Exercise Price		Number		Average Remaining Life (years)

$3.11		332,124		3.25	$	3.11		332,124		3.25
$16.80		100,000		3.17	$	16.80		100,000		3.17

	(1)	27,503,885 shares of common stock, including 100,000 shares in escrow, par value $0.006.
	(2)	Warrants purchasing 332,124 shares of common stock with exercise prices of $3.11 per share, expiring December 2011.

	Number of Warrants Outstanding			Number of Warrants Exercisable			Weighted -Average Exercise Price		Average Remaining Contractual Life
Balance, January 1, 2007		2,480,944			2,480,944		$	3.57		5.00 years
Granted		-			-
Forfeited		-			-
Exercised		(2,056,015	)		(2,056,015	)	$	3.67
Balance, at September 30, 2007		424,929			424,929		$	3.11		4.25 years
Granted		100,000			100,000		$	16.80
Forfeited		-			-			-
Exercised		(47,877	)		(47,877	)	$	3.11
Balance, at December 31, 2007		477,052			477,052		$	5.98		4.00 years
Rounding adjustments		(55	)		(55	)
Granted		-			-			-
Forfeited		-			-			-
Exercised		(44,873	)		(44,873	)	$	3.11
Balance, at September 30, 2008		432,124			432,124		$	6.28		3.25 years

	Expected		Expected			Dividend			Risk Free			Grant Date
	Life		Volatility			Yield			Interest Rate			Fair Value
Executives		2.0 yrs		50	%		0	%		1.84% - 4.57	%	$	3.08 - $5.33
Independent Directors		2.0 yrs		50	%		0	%		2.41% - 4.57	%	$	3.64 - $5.84
Employees		0.5 yrs		50	%		0	%		2.82	%	$	4.11

	Number of Options Outstanding			Weighted-Average Exercise Price		Aggregate Intrinsic Value
Balance, January 1, 2007		-			-		-
Granted		775,000			12.4		-
Forfeited		-			-		-
Exercised		-			-		-
Balance, at September 30, 2007		775,000			12.4	$	1,201,250
Granted		335,000		$	18.6		-
Forfeited		-			-		-
Exercised		-			-		-
Balance, December 31, 2007		1,110,000		$	14.3	$	12,075,850
Granted		151,000			21.3		-
Forfeited		(186,667	)	$	16.3		-
Exercised		-			-		-
Balance, September 30, 2008		1,074,333		$	14.9		-

Outstanding Option					Exercisable Options
Exercise Price	Number		Average Remaining Contractual Life		Average Exercise Price		Number		Weighted Average Exercise Price
$12.30		408,333		0.64 years	$	12.30		333,333	$	12.30
$11.75		150,000		0.68 years	$	11.75		107,805	$	11.75
$13.70		125,000		0.99 years	$	13.70		125,000	$	13.70
$16.44 - $20.94		230,000		1.08 years	$	18.69		149,253	$	16.40
$16.36		10,000		1.12 years	$	16.36		9,372	$	16.36
$23.25		84,000		0.25 years	$	23.25		43,111	$	23.25
$15.04		17,000		0.53 years	$	15.04		8,033	$	15.04
$20.04		50,000		1.64 years	$	20.04		19,247	$	20.04
Total		1,074,333						795,154